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HomeMy WebLinkAboutKPHL LLC assignee of Campbell Lodging, Inc. - 2012-01-27i L- Dept. ID ED 14-04 Page 1 of 2 Meeting Date: 1/21/2014 '0 o� � -v CITY OF HUNTINGTON BEACH REQUEST FOR. CITY COUNCIL ACTION MEETING DATE: 1/21/2014 SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Manager PREPARED BY: Kenneth A. Domer, Assistant City Manager SUBJECT: Approve and authorize execution of the Fourth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions with KPHL, LLC for the construction of a 120 to 140-room Hotel to be located 7872 Edinger Avenue Statement of Issue: This is the Fourth Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions with KPHL, LLC for the construction of a 120 to 140-room hotel to be located at 7872 Edinger Avenue. This action extends the timeframe to close escrow. Financial Impact: None. Recommended Action: A) Approve the "Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger Avenue)" with KPHL, LLC Inc.; and, B) Authorize the Mayor and City Clerk to execute the Amendment; and, C) Authorize the City Manager to sign all necessary documents to effectuate this Agreement, including any future amendments or assignments. Alternative Action(s): Do not approve the Amendment and direct staff accordingly. Analysis: On January 27, 2011, the City Council approved the Purchase and Sale Agreement and Joint Escrow Instructions for 7872 Edinger Avenue with Campbell Lodging, Inc. (Campbell Lodging) for development of a 120 to 140-room hotel. On October 2, 2012, Campbell Lodging consented to the transfer of its interest in the project to KPHL, LLC. The purpose of the proposed Amendment is to: • Extend the "Close of Escrow" period to June 30, 2015. • Authorize the City to extend the Pollution Liability Policy Utilizing Seller Funds for Demolition and Remediation Item 13. - 1 KB -216- Dept. ID ED 14-04 Page 2 of 2 Meeting Date: 1/21/2014 The proposed extension would allow additional time to process project entitlements, final parcel map and obtain a Finding of Completion and certified Long Range Property Management Plan from the Department of Finance. Staff recommends approval of the proposed Fourth Amendment. Environmental Status: Not Applicable Strategic Plan Goal: Enhance economic development Attachment(s): 1. "Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger)' HB -217- Item 13. - 2 FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ----_-__---- (7872 Edinger) This FOURTH AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Fourth Amendment") is dated as of January �/ , 2014, and is entered into by and between the City of Huntington Beach ("Seller") and KPHL, LLC, a Nevada limited liability company (assignee of Campbell Lodging, Inc. as to the rights of "Buyer" under the hereinafter defined Purchase Agreement) ("Buyer"). Buyer and Seller may be individually referenced herein as the "Party" and collectively referenced herein as the "Parties." I. [§100] PURPOSE OF FOURTH AMENDMENT Seller and Buyer are parties to that certain Purchase and Sale Agreement and Joint Escrow Instructions dated January 27, 2012, as amended by that certain Amendment to Purchase and Sale Agreement and Joint Escrow Instructions dated January 31, 2012, and further amended by that Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions dated June 25, 2012, and further amended by that Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions dated as of January 25, 2013 (collectively, the "Purchase Agreement") relating to the sale of the Property and development thereon of a high -quality, first- class, four story 120-140 room Hyatt Place Hotel or other brand hotel pursuant to the terms and conditions contained in the Purchase Agreement. Capitalized terms used in this Fourth Amendment shall have the meaning given them in the Purchase Agreement unless specifically provided otherwise herein. The purpose of this Fourth Amendment is to provide for the following revisions to the Purchase Agreement: (1) extend the date for the Close of Escrow to on or before June 30, 2015; (2) extend the date for Buyer to obtain all entitlements and permits necessary for the development of the Project to on or before June 30, 2015; and (3) clarify certain other provisions contained in the Purchase Agreement. II. [§200] EFFECT OF FOURTH AMENDMENT Except as otherwise expressly modified herein, the terms and conditions of the Purchase Agreement, including but not limited to, the Schedule of Performance, remain in full force and effect, enforceable in accordance with its terms, without diminution or waiver of any kind of any right or remedy of the Seller or Buyer thereunder. In the event of a conflict between this Fourth Amendments and the Purchase Agreement, the terms of this Fourth Amendment shall control. 1 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) III. [§300] TERMS AND CONDITIONS. A. Development of Property. 1. Clarifying changes are necessary to Section 4.b. of the Purchase Agreement due to changes regarding the "Lease" (as defined in Section 8.a.(5) of the Purchase Agreement) as of the date of this Fourth Amendment. Accordingly, Section 4.b. of the Purchase Agreement, entitled Demolition of Improvements• Commencement of Construction, is hereby deleted in its entirety and replaced with the following: b. "Buyer shall demolish and remove the Improvements, including, but not limited to all above grade structures or improvements, located on the Property and commence construction of the Hotel Project in accordance with this Agreement and the Scope of Development on or before the time period set forth in the Schedule of Performance. In the event Buyer fails, within the time periods set forth in the Schedule of Performance, to demolish the existing building Improvements and commence construction of the Hotel Project on the Property pursuant to this Paragraph 4, Buyer shall pay to Seller on the first day of each and every month following such failure a fee of $22,445 until such time as Buyer demolishes the existing building Improvements and commences construction of the Hotel Project on the Property in accordance with the terms and conditions of this Agreement. In connection with the demolition activities required herein, Buyer shall contact Seller for the appropriate procedures pertaining to assessment, remediation and cleanup of such demolition." 2. Permits; Entitlements. To correct a clerical mistake, the last sentence in the first paragraph of Section 4.c. of the Purchase Agreement (entitled Permits; Entitlements) is hereby amended to change the word "Seller" to "Buyer". 3. Seller Funds for Demolition and Remediation. Due to the mutual extension by the Parties of the date for the Close of Escrow under the Purchase Agreement as amended, the Environmental Insurance Policy (as defined in Section 4.e.(2) of the Purchase Agreement) needs to be renewed/extended as it is close to its expiration date as of the date of this Fourth Amendment. The Parties agree that the Seller shall endeavor to renew/extend, or endeavor to cause the renewal/extension of, the Environmental Insurance Policy for a 3. The Parties further agree that, to the extent available to be used, Settlement Funds (as defined in Section 4.e.(1) of the Purchase Agreement) in an amount not to exceed twenty five thousand ($25,000.00) shall be used to pay the fees and costs for such first renewal/extension of the Environmental Insurance Policy. Accordingly, Section 4.e. of the Purchase Agreement, entitled Seller Funds for Demolition and Remediation, is hereby deleted in its entirety and replaced with the following: 2 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) "e. Seller Funds for Demolition and Remediation. (1) On or prior to the date set forth in the Schedule of Performance, Seller shall assign to Buyer any rights Seller may have to receive funds in the amount of $114,860.86 (or such amount as may be remaining after the first renewal/extension of the Environmental Insurance Policy (defined below) as described in subsection (2), below) pursuant to that certain Settlement Agreement Regarding HB Auto 1, LLC, et al, dated November 1, 2011, between the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic and HB Auto I, LLC, a California limited liability company (the "Settlement Funds") pursuant to an assignment agreement or equivalent document in a form and substance approved in writing by the City Manager of the City of Huntington Beach or designee (the "City Manager") in his/her absolute discretion. The Settlement Funds shall only be used by Buyer to pay remediation costs and Demolition Costs and for fees and costs for the first renewal/extension of the Environmental Insurance Policy as described in subsection (2), below. The assignment of the Settlement Funds shall not become effective until the Close of Escrow. (2) On or prior to the date set forth in the Schedule of Performance, to the extent permitted by the insurer, Seller shall transfer, or cause to be transferred, to Buyer a Pollution Liability Select Policy issued by American International Specialty Lines Insurance Company Policy No. PLS 15012298 with a policy aggregate limit of $5,000,000 (the "Environmental Insurance Policy") pursuant to a transfer agreement or equivalent document in a form and substance approved in writing by the City Manager in his/her absolute discretion. The transfer of the Environmental Insurance Policy shall not become effective until the Close of Escrow. Seller shall endeavor to renew/extend, or endeavor to cause the renewal/extension of, the Environmental Insurance Policy for a 3 to 5 year period (such period to be determined by the Seller). The Parties agree that, to the extent available to be used, Settlement Funds (as defined above) shall be used to pay the fees and costs for such first renewal/extension of the Environmental Insurance Policy. Buyer shall cause the Environmental Insurance Policy to name the following as additional insureds: City of Huntington Beach, a municipal corporation, and the Successor Agency to the Redevelopment Agency of the City of Huntington Beach, and their respective officers, officials, members, employees, contractors and agents. Funds from the Environmental Insurance Policy shall be used by Buyer to pay for the remediation of any unknown Hazardous Materials on the Property pursuant to the terms of such policy. Buyer shall renew/extend the term of the Environmental Insurance Policy, on the same terms, for an additional five year period after the expiration of the renewed/extended term. B. Close of Escrow. Section 6.b. of the Purchase Agreement, entitled Close of Escrow, as previously amended, is hereby deleted in its entirety and replaced with the following: "b. Close of Escrow. For purposes of this Agreement, "Close of Escrow" shall be defined as the date the Grant Deed, the form of which is attached hereto as Exhibit C (the "Grant Deed") conveying the Property to Buyer, is recorded in the Official Records of Orange County, California. The Close of Escrow shall occur on or prior to June 30, 2015 (the "Closing Date"). Buyer shall deliver to Seller a written notice of the anticipated Close of Escrow (the "Notice to Close 3 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Escrow") no later than one hundred twenty-five (125) days prior to the Close of Escrow." C. Schedule of Performance. 1. Section 1.6. of the Schedule of Performance (Exhibit D), entitled Close Escrow, as previously amended, is hereby deleted in its entirety and replaced with the following: "6. Close Escrow. Buyer shall have On or prior to June 30, 2015." satisfied all conditions precedent to Close of Escrow for the Property as required by the Agreement, including but not limited to obtaining all entitlements and permits necessary to develop the proposed project. 2. Section 2.1. of the Schedule of Performance (Exhibit D), entitled Receipt of Entitlements, as previously amended, is hereby deleted in its entirety and replaced with the following: "1. Receipt of Entitlements. Buyer shall On or prior to June 30, 2015." obtain all entitlements and permits necessary for the development of the Property pursuant to Paragraphs 4.a and 17 of the Agreement. D. Seller's Representations and Warranties. 1. For purposes of this Agreement "Dissolution Act" shall mean AB xl 26 which was signed by the Governor of California on June 28, 2011, making certain changes to the California Community Redevelopment Law and the California Health and Safety Code by adding Part 1.8 (commencing with Section 34161) and Part 1.85 (commencing with Section 34170) ("Part 1.85") to Division 24 of the California Health and Safety Code, as amended by Assembly Bill No. 1484 (Chapter 26, Statutes 2012) which was signed by the Governor of California on June 27, 2012, and as further amended by Assembly Bill No. 1585 which was signed by the Governor of California on September 29, 2012, and as further amended by Senate Bill No. 341 which was signed by the Governor of California on October 13, 2013, and as may be further amended from time to time. Buyer acknowledges and understands that the Property is an "asset" of the Successor Agency to the Redevelopment Agency of the City of Huntington Beach ("Successor Agency") and conveyance of the Property to Buyer and the terms and conditions of this Agreement (and Seller's ability to perform hereunder) are subject to the provisions of the Dissolution Act, including, without imitation, approval of the Oversight Board to the Successor Agency ("Oversight Board") and the State Department of Finance of the terms and conditions of this 4 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Agreement and conveyance of the Property to Buyer. In the event Seller is unable to perform hereunder due to the provisions of the Dissolution Act (including, without limitation, disapproval by the Oversight Board and/or the State Department of Finance of the conveyance of the Property to Buyer as set forth in this Agreement), then the $100,000 Non -Refundable Portion of Buyer Deposit shall be refunded to Buyer and this Agreement shall terminate. Any such inability to perform by Seller shall not constitute a default by Seller. 2. Section 15.b. of the Purchase Agreement, entitled Authorization, is hereby deleted in its entirety and replaced with the following: "b. Authorization. Except as described in Section D.I. of the Fourth Amendment to this Agreement, this Agreement has been duly and validly authorized, executed and delivered by Seller, and no other action is requisite to the execution and delivery of this Agreement by Seller." 3. Section 15.d. of the Purchase Agreement, entitled Third Party Consents; is hereby deleted in its entirety and replaced with the following: "d. Third Party Consents. Except as described in Section D.I. of the Fourth Amendment to this Agreement, no consents or waivers of, or by, any third parry are necessary to permit the consummation by Seller of the transactions contemplated pursuant to this Agreement." IIL [§400] GENERAL TERMS AND CONDITIONS A. Binding on Successors and Assigns. This Fourth Amendment and all of the terms and conditions herein shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of the Parties. B. Purchase Agreement in Full Force and Effect. Except as otherwise expressly modified herein, the terms and conditions of the Purchase Agreement, including, but not limited to the Schedule of Performance and the Scope of Development, shall remain unmodified and in full force and effect. C. Further Assurances. The Parties agree to execute such other documents and to take such other action as may be reasonably necessary to further the purposes of this Fourth Amendment. The City Manager, or designee, is authorized to make such further non -substantive changes to the documents and instruments attached to the Purchase Agreement and to this Fourth Amendment as may be necessary or appropriate to effectuate the Purchase Agreement, as amended by this Fourth Amendment and any earlier Amendments. D. Third Party Beneficiaries. Except as set forth herein, the Parties to this Fourth Amendment acknowledge and agree that the provisions of this Fourth Amendment are for the sole benefit of the Parties, and not for the benefit, directly or indirectly, of any other person or entity. 5 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) E. Effectiveness of this Fourth Amendment. This Fourth Amendment shall not be effective unless and until it has been executed by the Parties. F. Construction and Interpretation of Agreement. The language in all parts of this Fourth Amendment and the Purchase Agreement shall in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any Party. The Parties 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 advised to independently review this Agreement with legal counsel and Buyer has knowingly and willingly waived the right 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 of this Agreement. 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. This Fourth Amendment may be executed in duplicate originals, each of which is deemed to be an original. This Fourth Amendment, when combined with the Purchase Agreement, constitutes the entire understanding and agreement of the Parties and correctly sets forth the rights, duties and obligations of each to the other as of its date. G. Waivers; Amendments. All waivers of the provisions of this Fourth Amendment and all amendments hereto must be in writing and signed by the appropriate authorities of the Seller and Buyer. H. Time of the Essence. Time is of the essence with respect to this Fourth Amendment. I. Authority to Execute. Buyer hereby represents that the person(s) executing this Fourth Amendment on behalf of Buyer has full authority to do so and to bind Buyer to perform pursuant to the terms and conditions of this Fourth Amendment. [remainder of page left intentionally blank] [signatures on following page] 6 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) IN WITNESS WHEREOF, Buyer and Seller have signed this Fourth Amendment as of the dates set forth above. "BUYER' KPHL,LLC Print Name "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Assistant City Manager REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney 7 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) IN WITNESS WHEREOF, Buyer and Seller have signed this Fourth Amendment as of the dates set forth above. "BUYER" "SELLER" KPHL, LLC CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Print Name Print Name Ilk A, D D ROVED: Assistan Manager REVIEWMANI) APPROVED: APPROVED AS TO FORM: City Attorney �/> 7 Fourth Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (7872 Edinger) This THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Third Amendment") is dated as of January 25, 2013, and is entered into by and between the City of Huntington Beach ("Seller") and KPHL, LLC, a Nevada limited liability company (assignee of Campbell Lodging, Inc. as to the rights of "Buyer" under the hereinafter defined Purchase Agreement) ("Buyer"). Buyer and Seller may be individually referenced herein as the "Party" and collectively referenced herein as the "Parties." I. [§ 100] PURPOSE OF THIRD AMENDMENT Seller and Buyer are parties to that certain Purchase and Sale Agreement and Joint Escrow Instructions dated January 27, 2012, as amended by that certain Amendment to Purchase and Sale Agreement and Joint Escrow Instructions dated January 31, 2012, and further amended by that certain Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions dated June 25, 2012 (collectively, the "Purchase Agreement") relating to the sale of the Property and development thereon of a high -quality, first-class, four story, 120-140 room Hyatt Place Hotel or other brand hotel pursuant to the terms and conditions contained in the Purchase Agreement. Capitalized terms used in this Third Amendment shall have the meaning given them in the Purchase Agreement unless specifically provided otherwise herein. The purpose of this Third Amendment is to provide for the following revisions to the Purchase Agreement: (1) extend the date for the Close of Escrow by an additional twelve (12) consecutive months from the date or deadline stated therein; (2) extend the date for Buyer to obtain all entitlements and permits necessary for the development of the Project by an additional twelve (12) consecutive months from the date or deadline stated therein; and (3) acknowledge Buyer's approval, consent and ratification of the transfer by the Seller of the Seller's ownership interests in the Property and any assignment by the Seller of any and all related agreements (including, without limitation, the Purchase Agreement, as may be amended) to the Successor Agency to the Redevelopment Agency of the City of Huntington Beach. IL [§200] EFFECT OF THIRD AMENDMENT Except as otherwise expressly modified herein, the terms and conditions of the Purchase Agreement, including, but not limited to, the Schedule of Performance, remain in full force and effect, enforceable in accordance with its terms, without diminution or waiver of any kind of any right or remedy of the Seller or Buyer thereunder. v4 Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Page 1 of 5 III. [§300] TERMS AND CONDITIONS A. Close of Escrow. Section 6.b. of the Purchase Agreement, entitled Close of Escrow, is hereby deleted in its entirety and replaced with the following: "b. Close of Escrow. For purposes of this Agreement, "Close of Escrow" shall be defined as the date the Grant Deed, the form of which is attached hereto as Exhibit C (the "Grant Deed") conveying the Property to Buyer, is recorded in the Official Records of Orange County, California. The Close of Escrow shall occur within twenty-four (24) months following January 27, 2012 (the "Closing Date"). Buyer shall deliver to Seller a written notice of the anticipated Close of Escrow (the "Notice to Close Escrow") no later than one hundred twenty-five (125) days prior to the Close of Escrow." B. Schedule of Performance. 1. Section 1.6. of the Schedule of Performance (Exhibit D), entitled Close Escrow, is hereby deleted in its entirety and replaced with the following: "6. Close Escrow. Buyer shall have satisfied all conditions precedent to Close of Escrow for the Property as required by the Agreement, including but not limited to obtaining all entitlements and permits necessary to develop the proposed project. Within twenty-four (24) months following January 27, 2012." 2. Section 2.1. of the Schedule of Performance (Exhibit D), entitled Receipt of Entitlements, is hereby deleted in its entirety and replaced with the following: 44 1. Receipt of Entitlements. Buyer shall Within twenty-four (24) months following obtain all entitlements and permits January 27, 2012." necessary for the development of the Property pursuant to Paragraphs 4.a and 17 of the Agreement. C. Consent to Transfer/Assignment.� Buyer acknowledges and agrees that it approves, consents to and ratifies the transfer by the Seller of the Seller's ownership interests in the Property to the Successor Agency to the Redevelopment Agency of the City of Huntington Beach and any assignment by Seller of any and all related agreements (including, without v4 Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Page 2 of 5 limitation, the Purchase Agreement, as may be amended) to the Successor Agency to the Redevelopment Agency of the City of Huntington Beach. By operation of Assembly Bill No. 26 (2011-2012 1st Ex. Sess.) ("AB 26"), the former Redevelopment Agency of the City of Huntington Beach ("Redevelopment Agency") was dissolved on February 1, 2012. Pursuant to AB 26, the City Council of the City of Huntington Beach elected to be the Successor Agency to the former Redevelopment Agency (the "Successor Agency"). Pursuant to AB 26, the Successor Agency is the successor -in -interest to the former Redevelopment Agency. The Successor Agency is a legal entity that exists separate and independent of the City of Huntington Beach. IV. [§400] GENERAL TERMS AND CONDITIONS A. Binding on Successors and Assigns. This Third Amendment and all of the terms and conditions herein shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of the Parties. B. Purchase Agreement in Full Force and Effect. Except as otherwise expressly modified herein, the terms and conditions of the Purchase Agreement, including, but not limited to the Schedule of Performance and the Scope of Development, shall remain unmodified and in full force and effect. C. Further Assurances. The Parties agree to execute such other documents and to take such other action as may be reasonably necessary to further the purposes of this Third Amendment. The City Manager, or designee, is authorized to make such further non -substantive changes to the documents and instruments attached to the Purchase Agreement and to this Third Amendment as may be necessary or appropriate to effectuate the Purchase Agreement, as amended by this Third Amendment. D. Third Party Beneficiaries. The Parties to this Third Amendment acknowledge and agree that the provisions of this Third Amendment are for the sole benefit of Parties, and not for the benefit, directly or indirectly, of any other person or entity. E. Effectiveness of this Third Amendment. This Third Amendment shall not be effective unless and until it has been executed by the Parties. F. Construction and Interpretation of Agreement. The language in all parts of this Third Amendment and the Purchase Agreement shall in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties 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 advised to independently review this Agreement with legal counsel and Buyer has knowingly and willingly waived the right to independently review this Agreement with legal counsel, and that each party has the requisite experience and sophistication to understand, v4 Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Page 3 of 5 interpret, and agree to the particular language of the provisions of this Agreement. 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. This Third Amendment may be executed in duplicate originals, each of which is deemed to be an original. This Third Amendment, when combined with the Purchase Agreement, constitutes the entire understanding and agreement of the Parties and correctly sets forth the rights, duties and obligations of each to the other as of its date. G. Waivers; Amendments. All waivers of the provisions of this Third Amendment and all amendments hereto must be in writing and signed by the appropriate authorities of the Seller and Buyer. H. Time of the Essence. Time is of the essence with respect to this Third Amendment. I. Authority to Execute. Buyer hereby represents that the person(s) executing this Third Amendment on behalf of Buyer has full authority to do so and to bind Buyer to perform pursuant to the terms and conditions of this Third Amendment. [remainder of page left intentionally blank] [signatures on following page] v4 Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Page 4 of 5 IN WITNESS WHEREOF, Buyer and Seller have signed this Third Amendment as of the dates set forth above. "BUYER" KPHL, LLC Print Name Print Name "SELLER" INITIA D AND APPROVED: Director of Economic Development COUNTERPART APPPRRQVED AS TO FORM: r ° l,&A lz�o City Attorney KANE, BALLMER & BERKMAN City Special Counsel v4 Third Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) Page 5 of 5 IN WITNESS WHEREOF, Buyer and Seller have signed this Third Amendment as of the dates set forth above. "BUYER" Print Name "SELLER" City of Huntington Beach City Manager City Clerk INITIATED AND APPROVED: Director of Economic Development APPROVED AS TO FORM: City Attorney KANE, BALLMER &- BERKMAN City Special Counsel, v4 Third Amendment to Purchase and Sale Agreement Z-- and. Joint Escrow Instructions (7872 Edinger) Page 5 of 5 CERTIFIED COPY OF RESOLUTIONS RESOLUTION TO SELL HOTEL PROPERTIES AND TO TERMINATE FRANCHISE / LICENSING AGREEMENTS I, THE UNDERSIGNED GARY HARTUNIAN, do hereby certify that the following is a true, complete and correct copy of the sole member and sole manager of KPHL, LLC, a Nevada Limited Liability Company ("KPHL") of a certain resolution of the Manager of KPHL, which resolution was duly adopted on December 18, 2012, and is set in forth in the minutes of said meeting, that I am the keeper of the minutes and records of KPHL, and that the said resolution has not been rescinded or modified. "RESOLVED that KPHL LLC, organized and existing in the State of Nevada, hereby resolves that KPHL is authorized to sell any of the existing hotels in it's portfolio and to originate or terminate Franchise / Licensing Agreements for any new hotel, either under construction, or under a purchase and sale agreement, or an existing hotel in it's portfolio, as it deems best for the continuation and to the greater success of KPHL. Furthermore, that Gary Hartunian is hereby authorized to sign on behalf of KPHL, and further resolved that Gary Hartunian is authorized and directed to take all steps that he deems necessary and appropriate to carry out this resolution. " IN WITNESS WHEREOF, I have hereunto subscribed my name on this the 18"' of December, 2012. Council/Agency Meeting Held: Deferred/Continued to: P.Ap�v3d_ O��ond�tio�na y �ppro�e�d ❑Denied Council Meeting Date: June 4, 2012 I Department ID Number: CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Manager ED 12-21 PREPARED BY: Bob Hall, Deputy City Manager/Director of Economic Development SUBJECT: Approve and authorize execution of the Second Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions with Campbell Lodging, Inc. for 7872 Edinger Avenue Statement of Issue: Approve the Second Amendment to the Purchase and Sale Agreement and Joint Escrow Instructions for 7872 Edinger Avenue with Campbell Lodging, Inc. for construction of a 120 to 140 room hotel. Financial Impact: Not Applicable Recommended Action: Motion to: A) Approve the "Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions" with Campbell Lodging, Inc. for 7872 Edinger Avenue; and, B) Authorize the Mayor and City Clerk to sign the Amendment; and, C) Authorize the City Manager to sign all necessary documents to effectuate this Agreement. Alternative Action(s): Do not approve the Amendment and direct staff as necessary. HB -75- Item 6. - 1 REQUEST FOR COUNCIL ACTION MEETING DATE: 6/4/2012 DEPARTMENT ID NUMBER: ED 12-21 Analysis: On January 27, 2011, the City Council approved the Purchase and Sale Agreement and Joint Escrow Instructions for 7872 Edinger Avenue with Campbell Lodging, Inc. (Campbell Lodging) for construction of a 120 to 140 room hotel. Upon completing its due diligence review, Campbell's Lodging has requested the following amendments to the Agreement: Adjust sales price from $3,300,000 to $3,100,000 ® Adjust buyer's deposit from $500,000 to $110,000 The requested changes reflect increased development cost and current hotel market conditions. Campbell Lodging is prepared to have its deposit go non-refundable and commence project entitlements upon approval of the Second Amendment. The non- refundable portion of the buyer's deposit shall remain at $100,000. The adjusted sale price of $3,100,000 remains within the appraised value range of the property. Nagasaki & Associates completed a property appraisal on January 9, 2012 and determined the market value of the subject property is in a range from $2,900,000 to $3,500,000. On May 14, 2012, staff presented the proposed Second Amendment changes to the Economic Development Committee. The Committee supports the recommended changes. Environmental Status: The Beach and Edinger Corridors Specific Plan Program EIR was certified in December 2009 and anticipated up to 150 additional hotel rooms on Edinger Avenue. The hotel project will require an Environmental Assessment to further analyze project specific impacts. Strategic Plan Goal: Enhance economic development A►ttachment(s): 1. 1"Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions" for 7872 Edinaer Avenue Item 6. - 2 HB -76- ATTACHMENT i HB -77- Item 6. - 3 SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (7872 Edinger) This SECOND AMENDMENT TO PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Second Amendment") is dated as of , 2012, and is entered into by and between the CITY OF HUNTINGTON BEACH, a municipal corporation (the "Seller") and CAMPBELL LODGING, INC., a California corporation (the "Buyer"). Buyer and Seller may be individually referenced herein as the "Party" and collectively referenced herein as the "Parties." RECITALS A. Seller is the owner of an approximately 1.9 acre square foot site located at 7872 Edinger Avenue in the City of Huntington Beach, California as legally described in Attachment No. 1 attached hereto and incorporated herein by this reference ( the "Property"). B. Seller and Buyer entered into that certain Purchase Agreement and Joint Escrow Instructions dated January 27, 2012 as amended by that certain Amendment to Purchase Agreement and Joint Escrow Instructions (the "Amendment") dated January 31, 2012 (collectively, the "Purchase Agreement") relating to the sale by Seller to Buyer of the Property and Buyer's development thereon of a high -quality, first-class, four story, 120-140 room Hyatt Place Hotel or other brand hotel pursuant to the terms and conditions contained in the Purchase Agreement (the "Project"). C. The estimated cost of developing and constructing the Project has increased from the date the Purchase Agreement was initially executed to the present time. In addition, the health of the hotel industry both overall and in the Huntington Beach market is in less than average condition with slow improvement. D. Nagasaki & Associates completed an appraisal of the Property dated January 9, 2012 (the "Appraisal") which provided that the fair market value of the Property ranges from $2,900,000 to $3,500,000. E. The Parties desire to (i) reduce the current Purchase Price set forth in the Purchase Agreement from $3,300,000 to $3,100,000 (within the fair market value of the Property pursuant to the Appraisal), and (ii) reduce the Buyer's deposit set forth in the Purchase Agreement from $500,000 to $110,000, to reflect the increase in Project development costs and to make the Project more economically feasible in light of the current down turn in the hotel industry. F. Buyer and Seller mutually desire to implement and modify the Purchase Agreement as provided in this Second Amendment, below, to reduce the purchase price, reduce the amount of the Buyer's deposit and take related actions described below. Page 1 K:\CG\HB\Edinger Hotel Parcel\Second Amendment to Purchase and Sale Agreement (execution)(final).doc NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, the Parties agree as follows: 1. Recitals. The Recitals and attachments referenced above are hereby incorporated by reference into this Second Amendment and adopted by the parties to this Second Amendment as true and correct. 2. Defined Terms. Capitalized terms used in this Second Amendment shall have the meaning given them in the Purchase Agreement unless specifically provided otherwise herein. . 3. Reduction in Purchase Price. Section 2.a. of the Purchase Agreement shall be deleted in its entirety and replaced with the following: "a. Purchase Price. The purchase price to be paid by Buyer to Seller for the Property shall be Three Million One Hundred Thousand Dollars no/cents ($3,100,000.00) (the "Purchase Price").' 4. Reduction in Buyer's Deposit. i. Section 3.a. of the Purchase Agreement (Buyer Deposit), as amended by the Amendment, is hereby deleted in its entirety and replaced with the following paragraph: "a. Boer Within the time periods set forth in the Schedule of Performance attached hereto as Exhibit D and incorporated herein by this reference, Buyer shall deposit or cause to be deposited with Seller, in cash or by a certified or bank cashier's check made payable to Seller or a confirmed wire transfer of funds, a deposit in the amount of One Hundred and Ten Thousand Dollars ($110,000.00) (the "Buyer Deposit"). The Parties hereby acknowledge and agree that a portion of the Buyer Deposit in the amount of One Hundred Thousand Dollars ($100,000) (the 1100,000 Non -Refundable Portion of Buyer Deposit") is hereby non-refundable and shall be retained by the Seller as the Seller's property so long as a "Project Denial" (defined below) does not occur. Provided Buyer is not in default of this Agreement, in the event the Planning Commission of the City of Huntington Beach (the "Planning Commission") does not approve all of the applications submitted by Buyer for permits and entitlements necessary for the development of the Hotel Project (the "Application(s) for Permits and Entitlements") Buyer shall be required to appeal such disapproval(s) to the City Council of the City of Huntington Beach (the "City Council Appeal"). In the event (A) the City Council of the City of Huntington Beach (the "City Council") disapproves any of the Applications(s) for Permits and Entitlements during the City Council Appeal prohibiting the development of the Hotel Project, or (B) the City Council disapproves an Application(s) for Permits and Entitlements which is only required to be reviewed by the City Council and not the Planning Commission prohibiting the development of the Hotel Project, and the following conditions/events occur, (1) Buyer does not elect to amend and re -submit such denied application(s), and (2) such City Council disapproval is not due to Buyer's failure to submit plans, specifications and drawings for the Hotel Project which do not satisfy applicable City building, zoning Page 2 K:\CG\HB\Edinger Hotel Parcel\Second Amendment to Purchase and Sale Agreement (execution)(final).doc and design codes and requirements, including, but not limited to the design requirements set forth in the City of Huntington Beach's Beach and Edinger Corridors Specific Plan ( collectively the "Project Denial"), then the $100,000 Non - Refundable Portion of Buyer Deposit shall be refunded to Buyer and this Agreement shall terminate. The Project Denial shall not constitute a default by Seller. The Buyer Deposit shall be retained by Seller and, upon the Close of Escrow, shall be credited towards Buyer's payment of the Purchase Price. Buyer acknowledges and agrees that Seller is under no obligation to place the Buyer Deposit in an interest bearing account and in the event interest is earned or accrued on such funds, such interest shall be retained by Seller as its sole and separate property. Buyer hereby waives and releases any interest, right or claim in and to any interest that may be earned or accrue on the funds constituting the Buyer Deposit." ii. Pursuant to Section 3.a. as it existed prior to this Second Amendment, Buyer has deposited with the Escrow Holder funds in the amount $500,000 as the "original" Buyer Deposit. As amended by this Second Amendment, Section 3.a. now provides that the Buyer Deposit shall be in the amount of $110,000. To adhere to Section 3.a, as amended pursuant to paragraph 4.1. above, upon Seller's approval and execution of this Second Amendment, Buyer shall have the right to withdraw, from the escrow account established with Escrow Holder for the sale of the Property, the total amount of $390,000, so long as a balance of $110,000 of the original funds deposited by Buyer remains in such escrow account pursuant to Section 3.a. of the Purchase Agreement. Seller shall not be responsible for any costs related to the aforementioned Buyer withdrawal. 5. Due Diligence Period. Buyer acknowledges and agrees that the Due Diligence Period set forth in Section 6. a. c. of the Purchase Agreement has hereby expired. 6. Amendment to Legal Description. Due to clerical errors in the legal description of the Property attached to the Purchase Agreement as Exhibit A, the legal description of the Property contained in Exhibit A is hereby deleted in its entirety and replaced with the Amended Legal Description attached hereto as Attachment No. 1 and incorporated herein by this reference. 7. Binding on Successors and Assigns. This Second Amendment and all of the terms and conditions herein shall be binding upon and inure to the benefit of the successors, assignees, personal representatives, heirs and legatees of the parties. 8. Purchase Agreement in Full Force and Effect. Except as otherwise expressly modified herein, the terms and conditions of the Purchase Agreement, including, but not limited to the Schedule of Performance (Exhibit D thereto and incorporated herein by this reference) and the Scope of Development (Exhibit F thereto and incorporated herein by this reference), shall remain unmodified and in full force and effect. 9. Further Assurances. The Parties agree to execute such other documents and to take such other action as may be reasonably necessary to further the purposes of this Second Amendment. The Mayor or designee is authorized to make such further non -substantive changes to the Page 3 K:\CG\HB\Edinger Hotel Parcel\Second Amendment to Purchase and Sale Agreement (execution)(final).doc documents and instruments attached to the Purchase Agreement and to this Second Amendment as may be necessary or appropriate to effectuate the Purchase Agreement, as amended by this Second Amendment. 10. Third Party Beneficiaries. The Parties to this Second Amendment acknowledge and agree that the provisions of this Second Amendment are for the sole benefit of Parties, and not for the benefit, directly or indirectly, of any other person or entity. 11. Effectiveness of this Second Amendment. This Second amendment shall not be effective unless and until it has been executed by the Parties. 12. Construction and Interpretation of Agreement. The language in all parts of this Second Amendment and the Purchase Agreement shall in all cases be construed simply, as a whole and in accordance with its fair meaning and not strictly for or against any party. The parties 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 advised to independently review this Agreement with legal counsel and Buyer has knowingly and willingly waived the right 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 of this Agreement. 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. This Second Amendment shall be executed in three (3) duplicate originals, each of which is deemed to be an original. This Second Amendment, when combined with the Purchase Agreement, constitutes the entire understanding and agreement of the parties and correctly sets forth the rights, duties and obligations of each to the other as of its date. 13. Waivers, Amendments. All waivers of the provisions of this Second Amendment and all amendments hereto must be in writing and signed by the appropriate authorities of the Seller and Buyer. 14. Time of the Essence. Time is of the essence with respect to this Second Amendment. 15. Effective Date. This Second Amendment shall be dated and become effective on the date it is executed by the Seller. 16. Authority to Execute. Buyer hereby represents that the person(s) executing this Second Amendment on behalf of Buyer has full authority to do so and to bind Buyer to perform pursuant to the terms and conditions of this Second Amendment. REMAINDER OF PAGE_INTENTIONALLY BLANK SIGNATURES ON FOLLOWING PAGE Page 4 K:\CG\HB\Edinger Hotel Parcel\Second Amendment to Purchase and Sale Agreement (execution)(final).doc IN WITNESS WHEREOF. Buyer and Seller have signed this Second Amendment as of the dates set opposite their signatures. 'BUYER" CAMPBELL LODGING, INC., a California corporation Martin A. Ca ell Dated Vice -President/ Chief Development Officer "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney KANE, BALLMER & BERKMAN City Special Counsel Jhaila R. Brown Page 5 K:\CG\HB\Edinger Hotel Parcel\Second Amendment to Purchase and Sale Agreement (execution)(final).doc IN WITNESS WHEREOF, Buyer and Seller have signed this Second Amendment as of the dates set opposite their signatures. "BUYER" CAMPBELL LODGING, INC., a California corporation Bv: Martin A. Campbell Dated Vice -President/ Chief Development Officer "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California J,4, Mayor UNDated /. Director of Economic Development APPROVED AS TO FORM: City Attorney KANE, BALLMER & BERKMAN City S c' Counsel JR. Browon� Page 5 K:\CG\HB\Edinger Hotel Parcel\Second Amendment to Purchase and Sale Agreement (execution)(final).doc ATTACHMENT NO. 1 AMENDED LEGAL DESCRIPTION Real Property in the City of Huntington Beach, Orange County, State of California, described as follows: PARCEL A: (APN: 142-081-06) LOTS 19 AND 20 IN TRACT 417, AS SHOWN ON A MAP THEREOF RECORDED IN BOOK 16, PAGE 47, MISCELLANEOUS MAPS, RECORDS OF SAID ORANGE COUNTY. EXCEPTING THEREFROM THE NORTH 20 FEET THEREOF. EXCEPTING THEREFROM ALL WATER AND/OR WATER RIGHTS APPURTENANT TO AND/OR CONNECTED WITH AND/OR UNDER SAID LAND, AS SET FORTH IN AN INSTRUMENT TO BOULEVARD GARDENS WATER COMPANY RECORDED JUNE 2, 1926 IN BOOK 652, PAGE 253, DEEDS. ALSO EXCEPTING ALL OIL, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND AND CHARACTER LYING MORE THAN 500 FEET BELOW THE SURFACE OF SAID LAND, TOGETHER WITH THE RIGHT TO DRILL INTO, THROUGH, AND TO USE AND OCCUPY ALL PARTS OF SAID LAND LYING MORE THAN 500 FEET BELOW THE SURFACE THEREOF FOR ANY AND ALL PURPOSES INCIDENTAL TO THE EXPLORATION FOR AND THEREOF FOR ANY AND ALL PURPOSES INCIDENTAL TO THE EXPLORATION FOR AND PRODUCTION OF OIL, GAS, HYDROCARBON SUBSTANCES OR MINERALS FROM SAID LANDS BUT WITHOUT, HOWEVER, THE RIGHT TO USE EITHER THE. SURFACE OF SAID LAND OR ANY PORTION OF SAID LAND WITHIN 500 FEET OF THE SURFACE FOR ANY PURPOSE OR PURPOSES WHATSOEVER AS RESERVED IN THE DEED RECORDED OCTOBER 24, 1988 AS INSTRUMENT NO. 88-543781, OF OFFICIAL RECORDS. PARCEL B: (APN: 142-081-28) LOTS 21, 22 AND 23 OF TRACT NO. 417, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16, PAGE 47 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT ALL OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES WITHOUT RIGHT OF SURFACE ENTRY THERETO ABOVE A DEPTH OF 500 FEET FROM THE SURFACE THEREOF, AS RESERVED IN THE DEED FROM BEULAH H. FINLEY, RECORDED DECEMBER 14, 1960 IN BOOK 5548, PAGE 385, OFFICIAL RECORDS. PARCEL C: (APNS: 142-081-09, 10, 11 AND 12) LOTS 24, 25, 26, 27 AND 28 OF TRACT NO. 417, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16, PAGE 47, OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPT THEREFROM ALL WATER AND WATER RIGHTS AS CONVEYED TO BOULEVARD GARDENS WATER COMPANY, A CORPORATION, BY DEED RECORDED FEBRUARY 11, 1925 IN BOOK 561, PAGE 287, OF DEEDS. 515 S. FIGUEROA STREET SUITE 1850 LOS ANGELES, CALIFORNIA 90071 TELEPHONE (213) 617-0480 FAX (213) 625-0931 KANE, BALLMER & BERKMAN A LAW CORPORATION WWW.KBBLAW.COM BRUCE D. BALLMER (RETIRED) ROBERT P. BERKMAN (1919-2001) May 18, 2012 Via Overnight Express Luis Gomez, MBA, PE Economic Development Project Manager City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 402 WEST BROADWAY 4TH FLOOR SAN DIEGO, CALIFORNIA 92101 TELEPHONE (619) 567-3450 FAX (619) 567-3448 RE: Proposed Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger) (Second Amendment) Dear Luis: In connection with the above referenced agreement, enclosed please find three (3) original signature pages for the Second Amendment executed by me. If you have any questions or comments, please do not hesitate to contact me. Very truly yours, KANE, BALLMER & BERKMAN /.41arown Encl.(s) Writer: Jhaila Brown jhaila@kbblaw.com Direct (213) 452-0122 Los Angeles Office C(= CAMPBELL LODGING, INC. 1800 E. Imperial Hwy. Suite 120, Brea, California 92821 • (714) 256-2070 S FAX (714) 256-2165 May 18, 2012 VIA FED -EX OVERNIGHT Luis Gomez Economic Development Project Manager City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 RE: SECOND AMENDMENT TO PSA — 7872 EDINGER Dear Luis: Per your email, please find enclosed three (3) executed originals Second Amendments to Purchase & Sale Agreement for 7872 Edinger. Please contact me should you need anything else or have any questions. Thank you. Sincerely, Martin A. Campbell VP, CDO MAC/la City Of Huntington Beach 2000 Main Street ♦ Huntington Beach, CA 92648 (714) 536-5227 ♦ www.huntingtonbeachea.gov Office of the City Clerk Joan L. Flynn, City Clerk June 14, 2012 Campbell Lodging, Inc. Attn: Martin A. Campbell 1800 E. Imperial Hwy., Ste. 120 Brea, CA 92821 Dear Mr. Campbell: Enclosed for your records is a copy of "Second Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger)." Sincerely, JF:pe Enclosure G:fo11owup:agrmt1tr Sister Cities: Anjo, Japan ♦ Waitakere, New Zealand AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (7872 Edinger) This Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (the "Amendment to Purchase Agreement") is dated as of• uLa , 2012 by the CITY OF HUNTINGTON BEACH, a municipal corporation ��` Seller" CA and MPBELL LODGING, INC., a California corporation (the "Buyer"). Seller an Buyer are collectively referred to herein as the "Parties." I. [§100] PURPOSE OF AMENDMENT TO PURCHASE AGREEMENT The Seller and Buyer entered into that certain Purchase and Sale Agreement and Joint Escrow Instructions dated January 27, 2012 (the "Purchase Agreement") relating to the sale by Seller to Buyer of certain real property in the City of Huntington Beach described as set forth in Attachment No. 1 attached hereto and incorporated herein by this reference (the "Property") and Buyer's development thereon of a hotel project in accordance with the terms and conditions contained in the Purchase Agreement. Any capitalized term not defined herein shall have the meaning ascribed to such term in the Purchase Agreement. The purpose of this Amendment to Purchase Agreement is to provide for the following revisions to the Purchase Agreement: (1) reduce the amount of the Buyer Deposit which automatically becomes non-refundable upon Buyer's execution of the Purchase Agreement from ' $10,000" to "$2,500" and amend the time during which such amount becomes non-refundable to ten (10) days after. Buyer's execution of this Amendment to Purchase Agreement ; (2) provide Buyer the right to reasonably determine, without the approval of the City Council of the City of Huntington Beach, whether or not (a) the actual construction costs and fees for the project make the project economically infeasible and (b) the availability of hotel brands from major franchisors are acceptable to Buyer; (3) provide Buyer with a 60 day due diligence period to review all Due Diligence Materials; (4) provide express language allowing Buyer to terminate the Purchase and Sale Agreement and cancel the pending escrow in the event Seller does not terminate the Lease on or prior to the scheduled Close of Escrow, including any extensions thereto; (5) provide express language allowing Buyer to terminate the Purchase and Sale Agreement and cancel the pending escrow, on or prior to the scheduled Close of Escrow, including any extensions thereto, in the event Seller does not vacate or cause the vacation of certain easements listed on the Preliminary Title Report which are detrimental to and prohibit the development of the Hotel Project; (6) permit Buyer to assign its rights and obligations under the Purchase and Sale Agreement prior to the issuance of a permanent certificate of occupancy for the Hotel Project to a Permitted Transfer (as defined below); and (7) clarify and/or update certain other provisions contained in the Purchase Agreement. IL [§200] EFFECT OF AMENDMENT TO PURCHASE AGREEMENT Except as expressly provided otherwise in this Amendment to Purchase Agreement, the Purchase Agreement remains in full force and effect, enforceable in accordance with its terms, without diminution or waiver of any kind of any right or remedy of the Seller thereunder. Page 1 III. [§300] TERMS AND CONDITIONS A. Buyer Deposit. The second sentence of Paragraph 3.a. of the Purchase Agreement (Buyer Deposit) commencing with the words, "A portion of the Buyer Deposit" and ending with the words, "the Close of Escrow contemplated herein occurs," is hereby deleted in its entirety and replaced with the following sentence: "A portion of the Buyer Deposit in the amount of One Hundred Thousand Dollars ($100,000) (the "$100,000 Non -Refundable Portion of Buyer Deposit") shall be non-refundable ($2,500 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable within ten (10) business days of Buyer's execution of the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions and the remaining $97,500 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable sixty (60) days after Seller's execution of this Agreement) and retained by the Seller as the Seller's property whether or not the Close of Escrow contemplated herein occurs." B. Permits; Entitlements. The last paragraph in Paragraph 4.c. of the Purchase Agreement (Permits; Entitlements) is hereby amended to add the following sentence at the end of such paragraph: "Buyer hereby acknowledges and agrees that Buyer's failure to obtain all permits and entitlements necessary for the development of the Hotel Project within the time periods set forth in the Schedule of Performance due to a disapproval of such permits and entitlements by the City Council of the City of Huntington Beach shall not constitute a default by Seller under this Agreement." C. Due Diligence Period. Paragraph 6.a. c. of the Purchase Agreement (Due Diligence Period) is hereby deleted in its entirety and replaced with the following paragraph: " C. Buyer shall have a 60 day period (the "Due Diligence Period") commencing on the date the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions is executed by Buyer, to conduct all due diligence research and inspections as it deems necessary for purposes of approving (1) conditions of title pursuant to Paragraph 7 below, (ii) the Due Diligence Materials, and (iii) to determine, in its reasonable discretion, whether or not (1) the actual construction costs and fees for the development of the Hotel Project are "economically infeasible" or (2) the availability of hotel brands from major franchisors are acceptable to Buyer. In the event Buyer disapproves of any of the items set forth under clauses (i), (ii) or (iii) prior to the expiration of the Due Diligence Period, subject to the terms and provisions set forth in Paragraph 8.a. (2) below, Buyer shall have the right to terminate this Agreement. Buyer shall notify Seller and Escrow Holder of such intent to terminate in writing prior to expiration of the Due Diligence Period. Thereafter, Buyer and Seller shall have no obligation to each other (except as otherwise set forth herein), the Buyer Deposit, excluding $2,500 of the $100,000 Non -Refundable Portion delivered to Seller, shall be returned to Buyer immediately and this Agreement shall terminate. In the event of a cancellation of Escrow, Buyer and Seller shall each bear one-half of any Escrow cancellation fees." Page 2 D. Delivery of Due Diligence Materials/Title. The introductory phrase in Paragraph 8.a. (1) of the Purchase Agreement (Delivery of Due Diligence Materials/Title), commencing with the words, "Buyer and Seller hereby acknowledge," and ending with the words, "extent such items are in Seller's possession:" is hereby deleted in its entirety and replaced with the following phrase, "Within ten (10) business days of Buyer's execution of the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, Seller will deliver to Buyer copies of the following items, if and to the extent such items are in Seller's possession:" E. Review and Approval of Documents and Materials. Paragraph 8.a. (2) of the Purchase Agreement (Review and Approval of Documents and Materials) is hereby amended as follows: 1. The first paragraph is hereby deleted in its entirety and replaced with the following paragraph: "Prior to the expiration of the Due Diligence Period, Buyer shall have the right to review and approve or disapprove, at Buyer's sole cost and expense, any environmental reports, soils inspection, conditions of title, zoning, surveys, all physical inspections of the Property, Due Diligence Materials, and all other reports or inspections as Buyer may deem necessary or appropriate in connection with this Agreement. Failure of Buyer to give written disapproval of the Due Diligence Materials on or before the expiration of the Due Diligence Period shall be deemed to constitute Buyer's approval of all Due Diligence Materials. If Buyer disapproves or conditionally approves any matters of title shown in the preliminary title report, then Seller may, within fourteen (14) business days after its receipt of Buyer's written notice of disapproval of the Due Diligence Materials, elect, with no obligation to do so, to eliminate or ameliorate to Buyer's satisfaction the disapproved or conditionally approved title matters. Seller shall thereupon give Buyer written notice of those disapproved or conditionally approved title matters, if any, which Seller agrees to either eliminate from the Title Policy as exceptions to title to the Property or to ameliorate to Buyer's satisfaction by the Closing Date as a condition to the Close of Escrow. If Seller does not elect to eliminate or ameliorate to Buyer's satisfaction any disapproved or conditionally approved title matters, or if, despite its best commercial efforts, Seller is unable to eliminate or ameliorate to Buyer's satisfaction all such disapproved matters prior to the Closing Date, then Buyer shall have the right to, by a writing delivered to Seller and Escrow Holder: (1) waive its prior disapproval, in which event the disapproved matters shall be deemed approved; or (ii) terminate this Agreement and the Escrow created pursuant thereto, in which event Buyer shall be entitled to the return of all monies previously deposited with Escrow Holder or released to Seller pursuant to this Agreement, and the Escrow and the rights and obligations of the parties hereunder shall thereafter terminate." 2. The last sentence in the second paragraph commencing with the words, " In the event Seller is unable to," and ending with the words, "vacated possession of the Property" is hereby deleted in its entirety and replaced with the following sentence: "In the event Seller is unable to obtain possession of the Property from the Tenant prior to the scheduled Closing Date, the scheduled Closing Date shall automatically extend an Page 3 additional thirty (30) days to permit Seller to terminate and/or cause the termination of the Lease." 3. The second paragraph is hereby amended to add the following sentence to the end of the paragraph: "Seller agrees that if it is unable to deliver title to the Property free of the Lease and that Tenant has not vacated the Property as of the scheduled Closing Date, including any extensions thereto, then Buyer shall have the option by delivering written notice to Seller to cancel the Escrow created pursuant to this Agreement, in which case the entire Buyer Deposit (to the extent such funds have been received by the Seller or delivered into Escrow) shall be immediately refunded to Buyer, including the $2,500 portion considered non-refundable, and the rights and obligations of the parties hereunder shall thereafter terminate per Paragraph 22. a." F. Vacation of Easements. Paragraph 8. a. (6) of the Purchase Agreement (Vacation of Easements) is hereby deleted in its entirety and replaced with the following paragraph: "(6) Vacation of Easements. Seller shall use commercially reasonable efforts to vacate or cause the vacation of those property easements as permitted by the dominant tenement listed on the Preliminary Title Report and identified by Seller in writing which are detrimental to and prohibit the development of the Hotel Project (the "Detrimental Easements"). In the event Seller is unable to deliver title to the Property free of the Detrimental Easements as of the scheduled Closing Date, the scheduled Closing Date shall automatically extend an additional thirty (30) days to permit Seller to vacate or cause the vacation of such Detrimental Easements. Seller agrees that if it is unable to deliver title to the Property free of the Detrimental Easements as of the scheduled Closing Date, including any extensions thereto, then Buyer shall have the option by delivering written notice to Seller to cancel the Escrow created pursuant to this Agreement, in which case the entire Buyer Deposit (to the extent such funds have been received by the Seller or delivered into Escrow) shall be immediately refunded to Buyer, including the $2,500 portion considered non-refundable, and the rights and obligations of the parties hereunder shall thereafter terminate per Paragraph 22 a.." G. Assignment. Paragraph 21 of the Purchase Agreement (Assignment) is hereby amended as follows: 1. Paragraph 21.d is hereby deleted in its entirety and replaced with the following paragraph: "d. Except for a Permitted Transfer (defined below), Buyer represents and agrees for itself and any successor in interest that prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, without the prior written approval of the Seller, there shall be no significant change in the ownership of Buyer or in the relative proportions thereof, or with respect to the identity of the parties in control of Buyer or the degree thereof, by any method or means. The term "Permitted Transfer" used herein shall mean an assignment of this Agreement and all of Buyer's interests in the Property to a limited liability company or limited partnership and Buyer, with Jack B. Campbell, J. Alan Campbell, and Martin A. Page 4 Campbell as the principal owners (collectively the "Principals"), collectively or individually, shall enter into a management agreement, subject to the reasonable written approval of the City Manager or designee for the limited purpose of ensuring compliance with the terms and conditions of this paragraph, with assignee to develop, manage and operate the Hotel Project (the "Management Agreement"); provided, however that such Principals have power and control over management and development of the Hotel Project and further provided that such assignment is memorialized in an assignment and assumption agreement the form and content of which is first approved in writing by the City Manager or designee. The documentation evidencing any such transfer shall be subject to the reasonable approval of the City Manager or designee in accordance with the standards set forth in the respective provisions of this Agreement. Any change in the identity of the management company designated in the Management Agreement, including any amendments thereto, shall be first approved in writing by the City Manager or designee, in the City Manager or designee reasonable discretion." 2. The penultimate sentence of Paragraph 21. e, is hereby amended to add the following, ",except in the event of a Permitted Transfer," to the end of such sentence. H. Legal and Equitable Enforcement of this Agreement. Paragraph 22 of the Purchase Agreement (Legal and Equitable Enforcement of this Agreement) is hereby amended as follows: 1. The first sentence of Paragraph 22. a. is hereby amended to delete all reference to the not to exceed dollar amount of "FIFTY THOUSAND DOLLARS $50,000)" and replace with the not to exceed dollar amount of "ONE HUNDRED AND FIFTY THOUSAND DOLLARS." 2. Paragraph 22 is hereby amended to add the following subparagraph b.l. immediately after the existing Paragraph 22.b.: " b.1. Notice and Cure Periods Prior to Close of Escrow. Prior to the Close of Escrow, if a monetary event of default occurs, prior to exercising any remedies set forth in Paragraphs 22a. and 22 b. above, as applicable, the non -defaulting party shall give the party in default written notice of such default. The party in default shall have a period of ten (10) business days after such notice is given within which to cure the default prior to exercise of the applicable remedies set forth in Paragraphs 22 a. and 22 b. above by the injured party. Prior to the Close of Escrow, if a non -monetary event of default occurs, prior to exercising any remedies set forth in Paragraphs 22a. and 22 b. above, as applicable, the non -defaulting party shall give the party in default written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the party in default shall have such period to effect a cure prior to exercise of remedies by the non -defaulting party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the party in default (1) initiates corrective action within said thirty (30) day period, and Page 5 (ii) 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 non - defaulting party, but in no event shall such period exceed sixty (60) days from the date such notice is received or deemed received. In no event shall the non - defaulting Party be precluded from exercising the remedies set forth in Paragraphs 22 a. and 22 b. above, as applicable, if its security becomes or is about to become materially jeopardized by any failure to cure a default." 3. The introductory heading and phrase of Paragraph 22. c. of the Purchase Agreement (Default by Buyer After the Close of Escrow) shall be deleted in its entirety and replaced with the following: " c. Default After the Close of Escrow. The Parties hereto acknowledge and agree that the following terms and provisions shall apply in connection with an event of default pursuant to this Agreement that occurs after the Close of Escrow:" IV. [§400] NOTICE OF CANCELLATION RESCINDED Buyer acknowledges and agrees that by executing this Amendment to Purchase Agreement, (1) Buyer's purported notice of cancellation of the Purchase Agreement set forth in that certain letter dated January 30, 2012 and addressed to Seller, and (ii) Buyer's proposed Amendment #1 to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger Ave. Huntington Beach) dated January 30, 2012 and attached to such letter, are each hereby immediately rescinded in their entirety and of no further force and effect. V. [§500] DUPLICATE ORIGINALS This Amendment to Purchase Agreement may be signed in counterparts, each of which shall be deemed an original, and all such counterparts shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY BLANK] [SIGNATURES ON FOLLOWING PAGE] Page 6 IN WITNESS WHEREOF, Seller and Buyer have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized on the date set forth above. "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor� Dated Clerk INITIATE AND APPROVED: Director of Economic Development REVI AND APPROVED: Ci Minager AP ROVED AS TO FORM: (C C ty Attomjy KANE, BALLMER & BERKMAN City Special Counsel Jhaila R. Brown [SIGNATURES CONTINUE ON THE FOLLOWING PAGE] Page 7 IN WITNESS WHEREOF, Seller and Buyer have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized on the date set forth above. "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney KANE, BALLMER & BERKMAN COUNTERPART City Special Counsel (114,1� Z Jh ' R. Brown [SIGNATURES CONTINUE ON THE FOLLOWING PAGE] Page 7 "BUYER" CAMPBELL LODGING, INC., a California corporation Martin A. Campbell Vice-President/Chief Development Officer ATTACHMENT NO. 1 LEGAL DESCRIPTION Real property in the City of Huntington Beach, Orange County, State of California, described as follows: Lots 19 and 20 in Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom the North 20 feet thereof APN: 142-081-06 Lots 24, 25, 26, 27 and 28 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom all water and water rights as conveyed to Boulevard Gardens Water Company, a Corporation by Deed recorded February 11, 1925 in Book 561 page 287, of Deeds. APNs: 142-081-09, 142-08I-10, 142-081-11, 142-081-12 Lots 21, 22 and 23 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expect all oil, minerals and other hydrocarbon substances without right of surface entry thereto above a depth of above 500 feet from the surface thereof, as revised in the deed from Beulah H. Finley, recorded December 14, 1960 in book 5548 Page 385, official records. APN: 142-081-28 PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS Address: 7872 Edinger Avenue Huntington Beach, California APN Nos.: 142-081-06,142-081-12, 142-081- 11,142-081-09,142-081-10, and 142-081-28 This AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (Agreement) is made and entered into as of this day of '' 2012, and constitutes an agreement by which the CITY OF HUNTINGTON BEACH, a municipal corporation (Seller), agrees to sell to CAMPBELL LODGING, INC., a California corporation (the "Buyer"), agrees to purchase, on the terms and conditions hereinafter set forth, that certain real property described in the "Legal Description" attached hereto as Exhibit A and incorporated herein by this reference, and shown on the "Property Map" attached hereto as Exhibit B and incorporated herein by this reference, together with all Improvements as hereinafter defined (collectively, the "Property"). The terms and conditions of this Agreement and the instructions to Lawyers Title or any other title company mutually acceptable to the parties (the "Escrow Holder") with regard to the escrow (Escrow) created pursuant hereto are as follows: 1. Property. The Property to be acquired by Buyer from Seller under this Agreement consists of six (6) land parcels approximately 1.9 acres in size located at 7872 Edinger Avenue, Huntington Beach, California and Improvements_ located on the Property, including without limitation a commercial building. Seller currently owns fee title to the Property and all of the Improvements. For purposes of this Agreement, the term "Improvements" shall mean and include all buildings, structures, improvements, pavement, areas improved with asphalt, concrete or similar materials, and fixtures and equipment installed upon or located in or on the Property owned by Seller. For purposes of this Agreement, the term "Property" shall mean and include the above -referenced parcel of land, the Improvements, and all and singular estates, rights, privileges, easements and appurtenances owned by Seller and belonging or in any way appertaining to the Property. 2. Acquisition. a. Purchase Price. The purchase price to be paid by Buyer to Seller for the Property shall be Three Million Three Hundred Thousand Dollars no/cents ($3,300,000.00) (the "Purchase Price"). -1- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (f nal)(2).doc b. Purchase As -Is, Where Is. Buyer expressly acknowledges and agrees, and represents and warrants to Seller, that Buyer is purchasing the Property "AS IS, WHERE IS", and "WITH ALL FAULTS", after such inspection, analysis, examination and investigation Buyer cares to make and expressly without Seller's covenant, warranty or representation as to physical condition, title, leases, rents, revenues, income, expenses, operation, zoning or other regulation, compliance with law, suitability for particular purposes or any other matter whatsoever. Seller has no obligation to make repairs, replacements or improvements to the Property, or to pay any fees, costs or expenses related to the Property. Buyer acknowledges and agrees that, except as expressly provided in Paragraph 15, neither Seller nor any of Seller's agents, contractors, consultants, attorneys or representatives have made, make and specifically negate and disclaim and Buyer is not relying on any representations, warranties, promises, covenants, agreements or guaranties of any kind or character whatsoever, whether express or implied, oral or written, past, present or future, of, as to, concerning or with respect to the Property, including, but not limited to, (a) the value of the Property; (b) the income to be derived from the Property; (c) the suitability of the Property for any and all activities and uses which Buyer may conduct thereon, including the possibilities for development of the Property; (d) the habitability, marketability, merchantability, profitability or fitness for a particular purpose of the Property; (e) the manner, quality, state of repair or lack of repair of the Property; (f) the nature, quality or condition of the Property, including without limitation, soils and geology; (g) the compliance of or by the Property or its operation with any laws, rules, ordinances or regulations of any applicable governmental authority or body; (h) compliance with any environmental protection, pollution or land use laws, rules, regulation, orders or requirements, including but not limited to, Title III of the Americans with Disabilities Act of 1990, California Health and Safety Code, the Federal Water Pollution Control Act, the Federal Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency regulations at 40 CFR part 261, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, the Resources Conservation and Recovery Act of 1976, the Clean Water Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and the Toxic Substance Control Act, as any of the foregoing may be amended from time to time and regulations promulgated under any of the foregoing from time to time; (i) the presence or absence of Hazardous Materials at, on, under, or adjacent to the Property; 0) the content, completeness or accuracy of the Due Diligence Materials or the Preliminary Report; (k) the conformity of the Property to past, current or future applicable zoning or building requirements; (1) deficiency of any drainage or undershoring; (m) that the Property may be located on or near earthquake faults; (xiv) the existence or non- existence of land use, zoning or building entitlements affecting the Property; (n) the land use status of the Property, including, but not limited to, general plan status, specific plan status, zoning status, subdivision status under the California Subdivision May Act or the subdivision ordinances of the City or any other Entitlements; (o) the applicability of the Federal or California endangered species acts and the existence of any species protected thereunder; (p) any non- compliance of the Property or any improvements thereon with California Civil Code Sections 895, et seq.; or (q) any other matter. Buyer further acknowledges and agrees that having been given the opportunity to inspect the Property and having obtained and examined such information and documentation affecting the Property as Buyer has deemed necessary or appropriate, Buyer is relying solely on its own investigations and review, and not on any information provided or to be provided by Seller. As of the date of this Agreement Buyer -2- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc acknowledges, (i) Buyer has conducted such surveys and inspections and (ii) Buyer has had adequate opportunity to make such inspection of the Property as Buyer has, in Buyer's discretion, deemed necessary or advisable as a condition precedent to Buyer's purchase of the Property and to determine the characteristics listed in this Paragraph and all other aspects of the Property. C. No Obligation to Repair. Any reports, repairs or work required by Buyer are the sole responsibility of Buyer, and Buyer agrees that there is no obligation on the part of Seller to make any changes, alterations or repairs to the Property or to cure any violations of law or to comply with the requirements of any insurer. d. No Merger. The provisions of this Paragraph 2 shall survive the Close of Escrow and shall not be deemed merged into any instrument or conveyance delivered at the Close of Escrow. 3. Payment of Purchase Price. The Purchase Price for the Property shall be payable by Buyer as follows: a. BuyerUOSit. Within the time periods set forth in the Schedule of Performance attached hereto as Exhibit D and incorporated herein by this reference, Buyer shall deposit or cause to be deposited with Seller, in cash or by a certified or bank cashier's check made payable to Seller or a confirmed wire transfer of funds, a deposit in the amount of Five Hundred Thousand Dollars ($500,000.00) (the "Buyer Deposit"). A portion of the Buyer Deposit in the amount of One Hundred Thousand Dollars ($100,000) (the 1100,000 Non - Refundable Portion of Buyer Deposit") shall be non-refundable ($10,000 of the $100,000 Non - Refundable Portion of Buyer Deposit shall automatically become non-refundable upon delivery to Seller or deposit with Escrow Holder and the remaining $90,000 of the $100,000 Non - Refundable Portion of Buyer Deposit shall automatically become non-refundable sixty (60) days after Seller's execution of this Agreement) and retained by the Seller as the Seller's property whether or not the Close of Escrow contemplated herein occurs.. In the event the City Council of the City of Huntington Beach does not approve the permits and entitlements necessary for the development of the Hotel Project within twelve (12) months after the execution of this Agreement and such disapproval is not due to an act or failure to act by Buyer, a portion of the Buyer Deposit in the amount of Four Hundred Thousand Dollars ($400,000) shall be refunded to Buyer. The Buyer Deposit shall be retained by Seller and, upon the Close of Escrow, shall be credited towards Buyer's payment of the Purchase Price. Buyer acknowledges and agrees that Seller is under no obligation to place the Buyer Deposit in an interest bearing account and in the event interest is earned or accrued on such funds, such interest shall be retained by Seller as its sole and separate property. Buyer hereby waives and releases any interest, right or claim in and to any interest that may be earned or accrue on the funds constituting the Buyer Deposit. b. Closing Funds. Within five (5) days of written request from Escrow Holder, and in any event no later than three (3) days prior to the Close of Escrow, Buyer shall deposit or cause to be deposited with Escrow Holder, in cash or by a certified or bank cashier's check made payable to Escrow Holder or a confirmed wire transfer of funds, the Purchase Price -3- Purchase & Sale Agreement and Joint Escrow Instructions KAMBB Edinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc less the Buyer Deposit delivered to Seller, plus any additional amounts needed to pay Buyer's share of its Closing Costs as provided in Paragraph I I below. All escrow, recording and title insurance costs shall be paid in accordance with Paragraph I I below. 4. Development of Property. a. Scope of Development. The Property shall be developed by Buyer as a high -quality, four story, 120 to 140-room Hyatt Place hotel or other brand hotel first approved in writing by Seller as specifically described in the Scope of Development attached hereto as Exhibit F. and incorporated herein by this reference (the "Hotel Project"). Buyer shall commence construction of the Hotel Project within the time period set forth in the Schedule of Performance attached hereto as Exhibit D and incorporated herein by this reference. Buyer shall demolition the existing building Improvements pursuant to Paragraph 4.b. below, and complete all remediation of the Property pursuant to Paragraph 17 below. b. Demolition of Improvements; Commencement of Construction. Buyer shall demolish and remove the Improvements, including, but not limited to all above grade structures or improvements, located on the Property and commence construction of the Hotel Project in accordance with this Agreement and the Scope of Development on or before the time period set forth in the Schedule of Performance. In the event Buyer fails, within the time periods set forth in the Schedule of Performance, to demolish the existing building Improvements and commence construction of the Hotel Project on the Property pursuant to this Paragraph 4, Buyer shall pay to Seller monthly payments equal to the minimum rent payable by Tenant as defined in Paragraph 8.a.5. below) (as "Assignee" or "Big O") to Seller (as "Landlord" or "Assignor") pursuant to Section 5 (c) of the Second Amendment (as defined in Paragraph 8.a.5. below). In connection with the demolition activities required herein, Buyer shall contact Seller for the appropriate procedures pertaining to assessment, remediation and cleanup of such demolition. C. Permits; Entitlements. Before commencement of the demolition, remediation, construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Buyer shall, at its own expense, secure or cause to be secured, any and all permits and/or entitlements which may be required by the City of Huntington Beach or any other governmental agency affected by such construction, development or work. Before commencement of construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Buyer shall satisfy all conditions to the issuance of any permit required for the development of the Property. Seller shall obtain all permits and entitlements within the time period set forth in the Schedule of Performance. Buyer and Seller acknowledge and agree that this Agreement shall be void and of no further force and effect in the event Buyer fails to obtain all permits and entitlements necessary for the development of the Hotel Project within the time periods set forth in the Schedule of Performance and Buyer's failure to timely obtain all permits and entitlements necessary for the development of the Hotel Project is not due to an act or failure to act by Buyer but rather due to a -4- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc disapproval of such permits and entitlements by the City Council of the City of Huntington Beach. d. Cost of Demolition and Remediation. The cost of demolishing any Improvements on the Property (the "Demolition Costs") and the cost of remediating any Hazardous Materials located on the Property, including, but not limited to the Release, shall be the sole responsibility of Buyer, without any cost to Seller. e. Seller Funds for Demolition and Remediation. (1) On or prior to the date set forth in the Schedule of Performance, Seller shall assign to Buyer any rights Seller may have to receive funds in the amount of $114,860.86 pursuant to that certain Settlement Agreement Regarding HB Auto 1, LLC, et al, dated November 1, 2011, between the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic and HB Auto I, LLC, a California limited liability company (the "Settlement Funds") pursuant to an assignment agreement or equivalent document in a form and substance approved in writing by the City Manager of the City of Huntington Beach or designee (the "City Manager") in his/her absolute discretion. The Settlement Funds shall only be used by Buyer to pay remediation costs and Demolition Costs. The assignment of the Settlement Funds shall not become effective until the Close of Escrow. (2) On or prior to the date set forth in the Schedule of Performance, to the extent permitted by the insurer, Seller shall transfer to Buyer Seller's Pollution Liability Select Policy issued by American International Specialty Lines Insurance Company Policy No. PLS 15012298 with a policy aggregate limit of $5,000,000 (the "Environmental Insurance Policy") pursuant to a transfer agreement or equivalent document in a form and substance approved in writing by the City Manager in his/her absolute discretion. Buyer shall cause the Environmental Insurance Policy to name the following entity as an additional insured: City of Hunting Beach, a municipal corporation and its officers, officials, members, employees, contractors and agents. Funds from the Environmental Insurance Policy shall be used by Buyer to pay for the remediation of any unknown Hazardous Materials on the Property pursuant to the terms of such policy. The transfer of the Environmental Insurance Policy shall not become effective until the Close of Escrow. Buyer shall re -new the term of the Environmental Insurance Policy, on the same terms, for an additional five year period after the expiration of the exiting term term. f. Schedule of Performance. (1) 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, subject to the extensions of time set forth in Paragraph 25 of this Agreement, and if no such time is provided, within a reasonable time. The Schedule of Performance shall be subject to amendment from time to time upon the mutual written agreement of Buyer and Seller unless otherwise provided herein. The City Manager may, on behalf of Seller -5- Purchase & Sale Agreement and Joint Escrow Instructions K:\CGM\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc and without referring such matter to the governing body of Seller, extend all pending deadlines in the Schedule of Performance. (2) After the Close of Escrow and within the times specified in the Schedule of Performance or within such reasonable extensions of said dates as may be granted by Seller, Buyer shall promptly begin and thereafter diligently prosecute to completion the remediation, demolition and construction of the Hotel Project as required in this Agreement. g. Nondiscrimination. Buyer 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/subconsultng opportunities. Buyer 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. This language shall be incorporated into all contracts between Buyer and any contractor, consultant, subcontractor, subconsultants, vendors and suppliers. h. Local, State and Federal Laws Buyer hereby agrees to carry out development, construction (as defined by applicable law) and operation of the Property, including, without limitation, any and all public works (as defined by applicable law), in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor laws (including, without limitation, any requirement to pay state prevailing wages). Buyer hereby expressly acknowledges and agrees that Seller has never previously affirmatively represented to Buyer or its contractor(s) for the Property in writing or otherwise, in a call for bids or otherwise, that the work to be covered by the bid or contract is not a "public work," as defined in Section 1720 of the Labor Code. Buyer hereby agrees that Buyer 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, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Buyer hereby agrees that Buyer 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. Buyer hereby agrees that Buyer shall have the obligation, at Buyer's sole cost, risk and expense, to obligate any party as may be required by Labor Code Sections 1726, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Buyer shall indemnify, protect, defend and hold harmless Seller and its officers, officials, employees, contractors and agents, with counsel reasonably acceptable to Seller, 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, construction (as defined by applicable law) and/or operation of the Property, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Buyer of any applicable local, state and/or federal law, including, without limitation, any applicable federal and/or state labor laws -6- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc (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 Buyer to provide any required disclosure, representation, statement, rebidding and/or identification which may be required by Labor.Code Sections 1726, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; (5) failure by Buyer 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; and/or (6) failure by Buyer to obligate any party as may be required by Labor Code Sections 1726, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law) of the Property, including, without limitation, any public work (as defined by applicable law), Buyer shall bear all risks of payment or nonpayment of state prevailing wages and/or the implementation of 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 paragraph 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 defense and indemnification obligations shall survive termination of this Agreement and the Close of Escrow and shall continue after the City of Huntington Beach issues a permanent Certificate of Occupancy for the Property. i. Disclaimer of Responsibility by Seller. The Seller neither undertakes nor assumes nor will have any responsibility or duty to Buyer or to any third party to review, inspect, supervise, pass judgment upon or inform Buyer 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. Buyer 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 Buyer or to any third party by the Seller in connection with such matter is for the public purpose of developing the Property, and neither Buyer (except for the purposes set forth in this Agreement) nor any third party is entitled to rely thereon. The Seller shall not be responsible for any of the work of construction, improvement or development of the Property. 5. Use Restrictions. The parties hereto acknowledge and agree that the covenants, conditions and restrictions set forth in the Grant Deed attached hereto as Exhibit C (collectively, "Covenants") are an integral part of this Agreement, and that Seller would not have agreed to sell the Property if such Covenants were not included in said Grant Deed. The parties acknowledge and agree that the Covenants are reasonably related to one or more legitimate objectives of the Seller, including without limitation, Seller's plan to revamp the Hunting Beach corridor at Edinger Avenue and Beach Boulevard in the City of Huntington Beach. Buyer, on behalf of itself, its successors and assigns, agrees to abide by said Covenants, and to include said -7- Purchase & Sale Agreement and Joint Escrow Instructions K:\CGM\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc Covenants, or a reference to the Covenants set forth in the recorded Grant Deed, in all deeds executed by Buyer, its successors and assigns. 6. Escrow. a. Opening of Escrow. For purposes of this Agreement, the Escrow shall be deemed opened on the date Escrow Holder shall have received an executed counterpart of this Agreement from both Buyer and Seller (the "Opening Date"). Escrow Holder shall notify Buyer and Seller, in writing, of the Opening Date and the Closing Date, as defined in paragraph 6.b, below. In addition, Buyer and Seller agree to execute, deliver, and be bound by any reasonable or customary supplemental joint escrow instructions of Escrow Holder, or other instruments as may reasonably be required by Escrow Holder, in order to consummate the transaction contemplated by this Agreement. Any such supplemental instructions shall not conflict with, amend, or supersede any portion of this Agreement. If there is any inconsistency between such supplemental instructions and this Agreement, then this Agreement shall control. b. Close of Escrow. For purposes of this Agreement, "Close of Escrow" shall be defined as the date the Grant Deed, the form of which is attached hereto as Exhibit C (the "Grant Deed") conveying the Property to Buyer, is recorded in the Official Records of Orange County, California. The Close of Escrow shall , occur within twelve (12) months of Seller's execution of this Agreement, unless extended in writing for up to a maximum of six (6) months by the City Manager in the City Manager's reasonable discretion, as long as Buyer is diligently pursuing actions required for closing (the "Closing Date"). Buyer shall deliver to Seller a written notice of the anticipated Close Escrow (the "Notice to Close Escrow") no later than one hundred and twenty (125) days prior to the scheduled Close of Escrow. C. Due Diligence Period. Buyer shall have a 60 day period to conduct all due diligence research and inspections as it deems necessary for purposes of approving (i) conditions of title pursuant to Paragraph 7 below, and (ii) actual construction costs and fees that make the construction and development of the Hotel Project "economically infeasible"; provided, however the economic infeasibility of such actual construction costs and fees shall first be determined in writing by the City Council of the City of Huntington Beach in its reasonable discretion before Buyer can determine such cost "economically infeasible" and subject to Buyer disapproval pursuant to this Paragraph 6.c. Upon Buyer's written notice to Seller within the 60 day period of it's desire not to proceed with the Hotel Project based on Buyer's disapproval of those items listed under clauses (i) and (ii) of the preceding sentence, the Buyer Deposit, excluding $10,000 of the $100,000 Non -Refundable Portion which shall be retained by Seller, shall be returned to Buyer immediately and this contract shall become null and void, and neither party shall have further obligation to the other, except as to those provision which by there terms survive the termination of this Agreement. -8- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc 7. Conditions of Title. It shall be a condition to the Close of Escrow that Seller shall convey good and marketable fee simple title to the Property by the Grant Deed, subject only to the following approved conditions of title (herein the "Approved Condition of Title"): a. A lien to secure payment of real estate taxes, not delinquent. b. Matters affecting the Approved Condition of Title created by or with the written consent of Buyer. C. Exceptions which are disclosed by the Preliminary Title Report described in Paragraph 8. a. (1) hereof and which are approved or deemed approved by Buyer in accordance with Paragraph 8. a. (2) hereof. d. Title to the Property shall be conveyed from Seller to Buyer under this Agreement free and clear of any easement, right of way or any other right whatsoever in Seller to access the Property. e. Seller covenants and agrees during the term of this Escrow, Seller will not cause or knowingly permit title to the Property to differ from the Approved Condition of Title described in this Paragraph 7. Any liens, encumbrances, easements, restrictions, conditions, covenants, rights, rights -of -way, or other matters affecting the Approved Condition of Title which may appear of record or be revealed after the date of the Preliminary Title Report described in Paragraph 8. a. (1) below, shall also be subject to Buyer's approval. Buyer shall have the right to disapprove such matters by delivery of written notice to Seller within five (5) days after the date Buyer receives knowledge of such matters, and Seller shall have the right to elect to cure the same, upon delivery of written notice to Buyer within five (5) days after Seller's receipt of such notification from Buyer. 8. Conditions to Close of Escrow. a. Conditions to Buyer's Obligations. The Close of Escrow and Buyer's obligation to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions for Buyer's benefit on or prior to the dates designated below for the satisfaction of such conditions: (1) Delivery of Due Diligence Materials/Title. Buyer and Seller hereby acknowledge and agree that Seller has already delivered to Buyer copies of the following items, if and to the extent such items are in Seller's possession: (i) a current Preliminary Title Report for the Property and legible copies of all documents, whether recorded or unrecorded, referred to in the Preliminary Title Report; (ii) a copy of the most recent tax bill relating to the Property; (iii) any and all environmental reports relating to the Property, including, but not limited to those certain documents listed on the Document List attached hereto as Exhibit E. and incorporated herein by this reference ; and (iv) copies of any and all material documents that pertain to the physical and/or economic condition of the Property (collectively referred to herein as the "Due Diligence Materials"). -9- Purchase & Sale Agreement and Joint Escrow Instructions KAMI-113Tdinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc (2) Review and Approval of Documents and Materials. Buyer hereby acknowledges that Buyer has had an opportunity to review, at Buyer's sole cost and expense, and hereby approves of, all environmental reports, soils inspection, conditions of title, zoning, surveys, all physical inspections of the Property, the Due Diligence Materials, and all other reports or inspections Buyer has deemed necessary or appropriate in connection with this Agreement, except as provided in Paragraph 6. c. above. Seller represents that the Property is currently being leased by Seller, as successor in interest landlord, to Big O Tires LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation) (the "Tenant"), in accordance with the terms and provisions of that certain Standard Lease Agreement dated for reference purposes April 19, 2004 (the "Standard Lease") and Option Addendum to Standard Lease Agreement (the "Option Addendum" and together with the Standard Lease, the "Original Lease"), as amended by that certain First Amendment to Standard Lease Agreement dated January 23, 2009 (the "First Amendment") and that certain Termination of Sublease and Assignment, Assumption and Amendment of Lease dated December 23, 2010 (the "Second Amendment" together with the First Amendment and the Original Lease, the "Lease"). In the event Seller is unable to obtain possession of the Property from the Tenant prior to the scheduled Closing Date, Seller may extend the Closing Date as necessary such that the Closing Date occurs up to five days after the Tenant has vacated possession of the Property. (3) Representations, Warranties, and Covenants of Seller. Seller shall have duly performed each and every agreement to be performed by Seller hereunder and Seller's representations, warranties, and covenants set forth in Paragraph 15 shall be true and correct as of the Closing Date. (4) No Material Changes. At the Closing Date, there shall have been no material adverse changes in the physical condition of the Property. (5) Inspections and Studies. Buyer hereby acknowledges and agrees that Buyer has approved the results of any and all inspections, investigations, tests and studies (including, without limitation,. investigations with regard to zoning, building codes and other governmental regulations, architectural inspections, engineering tests, economic feasibility studies and soils, seismic and geologic reports) with respect to the Property (including all structural and mechanical systems and leased areas) elected or obtained by Buyer. During the term of this Escrow, Buyer, its agents, contractors and subcontractors, upon at least twenty- four (24) hours written notice, shall have the right to enter upon the Property, at reasonable times during ordinary business hours, to make any and all additional inspections and tests as may be necessary or desirable in Buyer's sole judgment and discretion, except that Buyer needs Seller's written approval for any -10- Purchase & Sale Agreement and Joint Escrow Instructions K:\C&HMEdinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc inspection that could materially alter the physical condition of the property or create any violation of any environment requirements. Buyer shall use care and consideration in connection with any of its inspections. Buyer shall indemnify, defend and hold Seller and the Property harmless from any and all claims, liabilities, damages, costs and expenses (including reasonable attorneys' fees) arising out of, or resulting from the negligence of Buyer's, and/or Buyer's agents, contractors and/or subcontractors directly resulting from such entry or activities upon the Property. In conducting any inspections, tests or studies, Buyer and its authorized agents and representatives shall (a) be insured for not less than $1,000,000.00 insuring without limitation, coverage for bodily injury, property damage, contractual liability and personal injury liability with respect to the Improvements on the Property or arising out of any of Buyer's use, inspection or occupancy of the Property, or arising out of any of the indemnified claims, and shall name Seller as an additional insured, (b) not materially interfere with lawful operation, use, occupancy, and maintenance of the Property, except for normal damage incidental to studies, inspections, investigations and tests, which shall be immediately repaired at Buyer's sole cost to the reasonable approval of Seller,(c) not damage any part of the Property or any personal property owned or held by any third party, (d) not injure or otherwise cause bodily harm to Seller or any of its agents, contractors and employees or any other third party, (e) promptly pay when due the cost of all inspections, tests or studies, and (f) not permit any liens to attach to the Property by reason of the exercise of their rights under this Paragraph 8.a.(5). Seller shall be provided an opportunity to have a representative of Seller present during any testing. Seller's rights to indemnity, defense, to be held harmless and insurance coverage, under this paragraph shall survive the termination of this Agreement and the Close of Escrow. (6) Vacation of Easements. Seller shall use commercially reasonable efforts to vacate or cause the vacation of those property easements as permitted by the dominant tenement listed on the Preliminary Title Report and identified by Seller in writing (the "Dominant Tenement Easements"). Buyer hereby acknowledges and agrees that Seller does not guaranty vacation of such Dominant Tenement Easements, but will use commercially reasonable efforts to vacate or cause the vacation of such easements. (7) Termination of Lease. Seller shall send to Tenant a notice of termination of Lease prior to the Close of Escrow upon Seller's receipt from Buyer of the Notice to Close Escrow pursuant to Paragraph 6.b. above. Seller shall deliver title to the Property to Buyer free and clear of any liens except as otherwise disclosed by the Preliminary Title Report and approved in writing by Buyer and Seller. -11- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc b. Conditions Precedents to Seller's Obli ag tion. For the benefit of Seller, the Close of Escrow shall be conditioned upon the occurrence and satisfaction of each of the following conditions (or Seller's waiver thereof, it being agreed Seller may waive any or all of such conditions): (1) Permits. Buyer shall have delivered to Seller a list of all permits required for any demolition and the construction and use of the Improvements, demonstrating to the satisfaction of the City Manager that all variances (if any), entitlements and approvals have been obtained and that all conditions for the issuance of all necessary permits have been satisfied. In addition, Buyer shall have obtained approval, from the appropriate public agency (e.g., the City of Huntington Beach and Orange County) or utility company, of all plans and permits necessary for Seller's completion of construction of the Hotel Project, environmental remediation work and utility relocation work related to the development and construction of the Hotel Project. (2) Buyerposit. Buyer shall have paid to Seller the Buyer Deposit when and as required pursuant to Paragraph 3.a. above. (3) Buyer's Obligations. Buyer shall have timely performed all of the obligations required by the terms of this Agreement to be performed by Buyer, and (4) Documents. Buyer shall have executed, in recordable form as necessary, and delivered into escrow where appropriate, all of the documents, when and as required herein. (5) Buyer's Representations and Warranties. All representations and warranties made by Buyer to Seller in this Agreement shall be true and correct as of the Close of Escrow. 9. Deposits by Seller. At least one (1) business day prior to the Close of Escrow, Seller shall deposit or cause to be deposited with Escrow Holder the following documents and instruments: a. Grant Deed. The Grant Deed conveying the Property to Buyer duly executed by Seller, acknowledged and in recordable form, substantially similar to Exhibit C. Upon receiving said executed Grant Deed, Escrow Holder is instructed to forward a copy of Grant Deed to Buyer so that an original Certificate of Acceptance can be attached. b. Closing Cam. Seller's share of Closing Costs, if any. C. Settlement Funds. A document evidencing Seller's assignment of the Settlement Funds pursuant to Paragraph 4.e. (1). above. -12- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc d. Environmental Insurance Policy. A document evidencing Seller's transfer of the Environmental Insurance Policy to Buyer in a form approved in writing by the Seller pursuant to Paragraph 4.e. (2) above. 10. Deposits by Buffer. At least three (3) business days prior. to the Close of Escrow, Buyer shall deposit, or cause to be deposited with Escrow Holder, the following: a. Funds. Funds which are to be applied toward the payment of the Purchase Price in the amounts and at the times designated in Paragraph 3 above; and b. Certificate of Acceptance to Grant Deed. An original Certificate of Acceptance, acknowledged and in recordable form, substantially similar to Exhibit C, attached hereto and incorporated herein by this reference. 11. Costs and Expenses. The cost and expense of the Title Policy attributable to ALTA coverage, plus the cost of any endorsements insuring title requested by Buyer, including, but not limited to the costs of an endorsement insuring Buyer's title against any mechanics' liens as of the Closing Date, shall be paid by Buyer. Buyer shall pay any Escrow fees. Buyer shall pay all documentary transfer taxes, if any, payable in connection with the recordation of the Grant Deed.. The amount of such transfer taxes shall not be posted on the Grant Deed, but shall be supplied by separate affidavit. Buyer shall pay the Escrow Holder's customary charges to Buyer and Seller for document drafting, recording, and miscellaneous charges. Each party shall be responsible for their respective legal fees and, except as otherwise provided herein, their respective costs in connection with this transaction. 12. Prorations. Escrow Holder shall prorate all rents, real estate taxes, bonds or assessments (general and special) as of 12:01 a.m. on the date of the Close of Escrow. a. All operating expenses of the Property including, without limitation, utility charges, maintenance charges, management fees, and other costs and expenses shall be prorated between Buyer and Seller as of 12:01 a.m. on the date of Close of Escrow.. Any utility services shall be transferred to the name of the Buyer effective as of the Close of Escrow and Seller shall be relieved of any future liability for such charges incurred after the Close of Escrow. In the event Seller has made any utility deposits, Seller shall be entitled to a refund of such deposits directly from the utility companies and any future deposits shall be paid directly to the utility companies by Buyer; provided, however, that Buyer may elect, in its sole discretion, to require Seller to assign the rights to utility deposits to Buyer in exchange for a credit to Seller through Escrow for the amount of such deposits. b. At least three (3) business days prior to the Closing Date, Seller shall provide to Buyer a schedule of all prorations accompanied by the latest available billings for any operating expenses and statements for rent, if applicable. Buyer and Seller shall agree upon such prorations and notify Escrow Holder on or before two (2) business days prior to the Closing Date. -13- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc C. Seller shall pay all bills incurred with respect to the Property prior to the Close of Escrow; provided, however, with respect to bills not received by Seller before the Close of Escrow, Seller shall pay the portion of such bills attributable to the period prior to the Close of Escrow within ten (10) days after Seller's receipt of same. Said covenant of Seller shall survive the Close of Escrow. Buyer shall pay all bills incurred with respect to the Property following the Close of Escrow. d. In the event that there are any unknown amounts to be prorated as of the Close of Escrow, then Seller and Buyer will prorate the same promptly after the Close of Escrow and outside the escrow. 13. Taxes. a. Property Taxes. Seller shall be liable for all Property taxes affecting the Property until the Close of Escrow. Buyer shall be liable for all Property taxes affecting the Property from and after the Close of Escrow. b. Payment of Taxes. Buyer shall pay all documentary transfer taxes imposed upon the conveyance of the Property to Buyer, if any. 14. Disbursements and Other Actions by Escrow Holder. Upon the Close of Escrow, the Escrow Holder shall promptly undertake all of the following in the manner indicated: a. Prorations. Prorate all matters referenced herein to be prorated by Escrow, based upon the statement delivered into Escrow signed by the parties. b. Recording. Cause the Grant Deed and any other documents which the parties hereto may mutually direct, to be recorded in the Official Records of Orange County, California (the "Official Records"). Escrow Holder is instructed not to affix the amount of documentary transfer tax on the face of the Grant Deed, but to supply same by separate affidavit. C. Funds. (i) From funds deposited by Buyer with Escrow Holder, after payment for all items chargeable to the account of Buyer, disburse the Purchaser Price to Seller; (ii) disburse funds for all items chargeable to the account of Seller in payment of such costs from the Purchase Price payable to Seller; and (iii) disburse the balance of such funds, if any, to Buyer. d. Documents to Buyer. Deliver the Bill of Sale executed by Seller, and, when issued, the Title Policy, to Buyer. e. Pay demands of existing lienholders. Pay all demands of lienholders with valid claims as of the Closing Date. -14- Purchase & Sale Agreement and Joint Escrow Instructions KAMBB Edinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc 15. Seller's Representations and Warranties. In consideration of Buyer entering into this Agreement, and as an inducement to Buyer to purchase the Property, Seller makes the following representations and warranties, each of which is material and is being relied upon by Buyer (and the continued truth and accuracy of which shall constitute a condition precedent to Buyer's obligations hereunder): a. Validly Existing. Seller is a municipal law city, duly formed, validly existing and in good standing under the laws of the State of California. b. Authorization. This Agreement has been duly and validly authorized, executed and delivered by Seller, and no other action is requisite to the execution and delivery of this Agreement by Seller. C. Threatened Actions. There are no actions, suits or proceedings pending against, or, to Seller's actual knowledge, threatened or affecting the Property in law or equity. d. Third Party Consents. No consents or waivers of, or by, any third party are necessary to permit the consummation by Seller of the transactions contemplated pursuant to this Agreement. e. INo Violation of Law. To the Seller's actual knowledge, there is no violation of law or governmental regulation by Seller with respect to the Property. f. Condemnation. There are no pending, or, to the best of Seller's actual knowledge, threatened proceedings in eminent domain or otherwise, which would affect the Property or any portion thereof. g. Compliance with Law. To Seller's actual knowledge, all laws, ordinances, rules, and requirements and regulations of every governmental agency, body, or subdivision thereof bearing on the Property have been complied with by Seller. h. Agreements. Seller is not a party to any agreement (whether oral or written) affecting or relating to the right of any party with respect to the possession of the Property, or any portion thereof, which are obligations which will affect the Property or any portion thereof subsequent to the recordation of the Grant Deed, except as may be reflected in the Approved Condition of Title and the Lease identified in Paragraph 8.a (5) above, which Seller shall terminate prior to the Close of Escrow. i. Documents. To Seller's actual knowledge, all documents delivered to Buyer pursuant to this Agreement are true and complete copies of originals, without any representation or warranty as to the contents or accuracy thereof. j. Occupancy Agreements. Other than the Lease, There are no leases, subleases, occupancies or tenancies in effect pertaining to the Property, and Seller has no -15- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc knowledge of any oral agreements with anyone, including tenants, with respect to the occupancy of the Property. k. Hazardous Materials. Seller makes no representation or warranty, express or implied, regarding any conditions of the Property, except that Seller represents and warrants to Buyer. that Seller has disclosed and provided to Buyer all information; true, correct and complete copies of studies, reports, investigations and contracts; and other obligations concerning or related to the Property which are in Seller's possession or which are known by and available to Seller, including, without limitation, correspondence, studies, reports and investigations concerning the Property's environmental condition and the presence or absence of Hazardous Materials in, on or under the Site and its compliance with environmental laws. For purposes of this Agreement, the term "Hazardous Materials" means any substance, material or waste which is regulated as hazardous/contaminating or potentially hazardous/contaminating 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) lead; (viii) a polychlorinated biphenyl; (ix) 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; (x) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (xi) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Section 6903); (xii) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601); (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, with respect to which any governmental regulations or requirements provide for special handling in its use, transportation, generation, collection, storage, treatment or disposal; (xiv) any substance, product, waste, or other material of any nature whatsoever which may give rise to liability under any of the above statutes or under any statutory or common law theory based on negligence, trespass, intentional tort, nuisance or strict liability or under any reported decisions of a state or federal court; (xv) petroleum or crude oil other than petroleum and petroleum products which are contained within regularly operated motor vehicles; and (xvi) asbestos. 1. Due Diligence Materials. To Seller's knowledge, there are no other reports relating to the physical condition of the Property that are in existence, but not in Seller's possession. Seller's representations and warranties made in this Paragraph 15 shall be continuing and shall be true and correct on and as of the Close of Escrow. The truth and accuracy of Seller's -16- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc representations and warranties made herein shall survive the Close of Escrow or termination of this Agreement for a period of twelve (12) months. 16. Buyer's Representations and Warranties. In consideration of Seller entering into this Agreement, and as an inducement to Seller to sell the Property to Buyer, Buyer makes the following representations and warranties, each of which is material and is being relied upon by Seller (the continued truth and accuracy of which shall constitute a condition precedent to Seller's obligations hereunder): a. Buyer is a corporation, duly formed, validly existing and in good standing under the laws of the State of California. b. Buyer has the full right, power and authority to enter into this Agreement and the instruments referenced herein; and to consummate the transactions contemplated hereby. C. The persons executing this Agreement, the instruments referenced herein, and any other documents executed and delivered on behalf of Buyer have the full right, power and authority to do so and have been duly authorized to do so by Buyer, and no other persons are required to execute this Agreement on behalf of Buyer. d. This Agreement has been, and all documents executed by Buyer under this Agreement which are to be delivered to Seller at the time of Close of Escrow will be, duly authorized, executed, and delivered by Buyer, and is, or as to all documents to be executed by Buyer at the Close of Escrow, will be, legal, valid, and binding obligations of Buyer, and do not, and at the Close of Escrow will not violate any provisions of any agreement or judicial order to which Buyer is a party or to which it is subject. e. The representations and warranties of Buyer set forth in this Agreement shall be continuing and shall be true and correct on and as of the Close of Escrow. 17. Environmental Remediation. a. Seller makes no representation or warranty, express or implied, regarding any conditions of the Property. b. Seller has no responsibility or obligation to remediate any Hazardous Materials on, under or about the Property. Any liability of Seller with respect to any Hazardous Materials on, under or about the Property shall terminate upon the conveyance of the Property to Buyer. Buyer acknowledges and agrees that Seller shall have no responsibility to pay for any remediation costs. To the extent required by any applicable laws, statutes, regulations, or regulatory orders, Buyer shall have sole responsibility to perform any remediation of Hazardous Materials existing on the Property. Buyer agrees to perform such remediation under the oversight of the Orange County Department of Environmental Health (DEH), the City of Huntington Beach Fire Department or another appropriate regulatory agency, including, without limitation, receiving approval of a remedial action plan (or plan of similar effect) prior to construction -17- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc activities. Buyer shall comply with all federal, state and local laws, statutes, regulations and regulatory orders in performing any remediation any Hazardous Materials on, under or about the Property. C. Hazardous Materials have been discovered within the Property (the "Release") as identified in that certain Phase I ( as defined in Exhibit E) and Limited Phase II (as defined in Exhibit E). Buyer, at Buyer's sole cost and expense, shall take all necessary actions to remediate the Release in accordance with all federal, state, and local regulations, including, without limitation, performing any and all required removal action(s), mitigation actions or remedial actions to address the Release pursuant to the Remediation Work Plan (as defined in Exhibit E) and the City Fire Department Additions to Remediation Work Plan (as defined in Exhibit E). Furthermore, Buyer agrees that it shall defend, indemnify, and hold harmless Seller and its employees, agents, attorneys, successors, and assigns from and against any and all claims, liabilities, penalties, fines, judgments, forfeitures, losses, costs, or expenses (including reasonable attorneys' fees, consultants fees, and expert fees) arising from or caused in whole or in part, directly or indirectly, related to the Release or remediation of the Release and from any and all costs incurred in connection with any site investigation and any and all costs for repair, cleanup, detoxification or decontamination, or other remedial action of the Property. d. Seller makes no representations or warranties, express or implied, that the Remediation Work Plan, City Fire Department Additions to Remediation Work Plan or any other remediation plan approved in connection with this Agreement will remediate all Hazardous Materials on, in, under or about the Property. Buyer agrees that it will accept the Property with knowledge that Hazardous Materials may exist on, in, under or about the Property at the time of conveyance, and may also exist following the completion of Buyer's remediation effort. As Buyer will accept the Property with the potential for some residual contamination to remain following remediation, Seller shall have no liability for, and shall not defend or indemnify Buyer with respect to any liability, loss or claim resulting from the existence of Hazardous Materials on, in, under or about the Property. e. Buyer shall be responsible for the continuing remediation of the Release or any other unknown Hazardous Materials on, under or about the Property, in accordance with all applicable laws.and regulations. f. Buyer further agrees, at its sole cost and expense, to properly handle any contaminated media encountered during future development of the Property in accordance with all applicable laws and regulations and in a manner which protects human health and the environment. Buyer also agrees, at its sole cost and expense, to utilize proper health and safety protocols during on -site activities and to implement and maintain appropriate engineering controls to prevent human exposure to contaminated media remaining on the Property. g. Upon completion of any remediation, Buyer (on its own or through an environmental consultant) shall prepare a closure report documenting the remediation that occurred on, under or about the Property and requesting that the regulatory agency providing oversight issue a "No Further Action" letter, or other document of similar effect. Buyer will -18- Purchase & Sale Agreement and Joint Escrow Instructions K:\CGM\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc receive such "No Further Action" letter (or document of similar effect) prior to obtaining its temporary certificate of occupancy. h. Buyer shall defend, indemnify and hold harmless Seller and its officers, representatives, agents, employees, contractors and attorneys from and against any claims, liability, injury, damages, costs and expenses (including, without limiting the generality of the foregoing, the cost of any required remediation of Hazardous Materials and the cost of attorneys' fees) which may be sustained as the result of the presence or remediation of Hazardous Materials on, under or about the Property. The foregoing defense and indemnification obligations shall survive termination of this Agreement and the Close of Escrow. 18. Damage or Condemnation Prior to Closing. a. Material Damage or Destruction. In the event of material damage to or destruction of the Property prior to the Close of Escrow, through no fault of Seller, Buyer shall have the right, but not the obligation, exercisable by giving notice to Seller within fifteen (15) days after receiving written notice of such damage or destruction, either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except that (a) all funds deposited into Escrow or documents in Escrow shall be returned to the party depositing the same, and (b) Buyer and Seller each shall be responsible for one-half of any title or escrow cancellation fee, or (ii) to accept the Property in its then condition and to proceed with the Close of Escrow, in which event upon the Close of Escrow, Buyer shall be entitled to receive an assignment of all of Seller's rights to any insurance proceeds payable by reason of such damage or destruction. If Buyer elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such proceeds without Buyer's prior written consent. b. Eminent Domain. In the event that prior to the Close of Escrow, all or any material portion of the Property is subject to a taking or a threatened taking by a public authority, Buyer shall have the right, but not the obligation, exercisable by giving notice to Seller within fifteen (15) days after receiving written notice of such taking, either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except that (a) all funds deposited into Escrow or documents in Escrow shall be returned to the party depositing the same, and (b) Buyer and Seller each shall be responsible for one-half of any title or escrow cancellation fee, or (ii) to accept the Property in its then condition and to proceed with the Close of Escrow without an abatement or reduction in the Purchase Price, in which case Buyer shall be entitled to receive an assignment of all of Seller's rights to any condemnation award payable by reason of such taking. If Buyer elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such award without Buyer's prior written consent. C. Non -Material Taking or Damage. In the event that prior to the Close of Escrow, .any non -material portion of the Property is damaged, destroyed or subject to a taking or a threatened taking by a public authority, Buyer shall accept the Property in its then condition and proceed with the Close of Escrow without any abatement or reduction in the Purchase Price, in which case Buyer shall be entitled to receive an assignment of all of Seller's rights to (i) any -19- Purchase & Sale Agreement and Joint Escrow Instructions KAMMEdinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc applicable insurance proceeds; and/ or (ii) any condemnation award payable by reason of such taking. In the event of any such non -material damage, destruction or taking, Seller shall not compromise, settle or adjust any claims to such award without Buyer's prior written consent. 19. Notices. Formal notices, demands and communications between Buyer and Seller 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 the Buyer and Seller as set forth below. 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 (delivered during normal business hours) 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. To Buyer: Campbell Lodging, Inc. 1800 East Imperial Highway, Suite 120 Brea, California 92821 Attention: Martin A. Campbell Fax Number: (714) 256-2165 To Seller: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Director of Economic Development With a Copy To: Office of the City Attorney City of Huntington Beach 2000 Main Street Huntington Beach, California 9264 Attention: City Attorney Notice of change of address shall be given by written notice in the manner detailed in this paragraph. Rejection or other refusal to accept, or the inability to deliver because of changed address of which no notice was given, shall be deemed to constitute receipt of the notice, demand, request, or communication sent. 20. Legal Fees. Each party shall be responsible for their respective legal fees and costs in connection with any action or suit against the other party hereunder arising out of this Agreement. -20- Purchase & Sale Agreement and Joint Escrow Instructions K:\MBBTdinger Hotel Parcel\Purchase and Sale Agmt (fmal)(2).doc 21. Assi nment. Buyer shall not be entitled to assign this Agreement without the prior written consent of Seller's City Manager, which consent shall not be unreasonably withheld. a. Prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, Buyer shall not 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 Property, or the Improvements without prior written approval of the Seller's City Manager. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Property. b. In the event Buyer does assign this Agreement or any of the rights herein, or does sell, transfer, convey or assign the Property or the buildings or structures thereon prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project without the written approval of the City Manager, Seller shall have the right to terminate this Agreement. C. In the absence of a specific written agreement by the City Manager no such sale, transfer, conveyance or assignment of this Agreement or the Property (or any portion thereof), or approval by the City Manager of any such sale, transfer, conveyance or assignment, shall be deemed to relieve Buyer or any other party from any obligations under this Agreement. d. Buyer represents and agrees for itself and any successor in interest that prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, without the prior written approval of the Seller, there shall be no significant change in the ownership of Buyer or in the relative proportions thereof, or with respect to the identity of the parties in control of Buyer or the degree thereof, by any method or means. e. Buyer shall promptly notify the Seller of any and all changes whatsoever in the identity of the partners of Buyer, of which Buyer or any of its officers and/or partners have been notified or otherwise have knowledge or information. This Agreement may be terminated by the Seller if there is any significant change (voluntary or involuntary) in partnership, management or control of Buyer (other than such changes occasioned by the death or incapacity of any individual) prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project. The term "control" as used herein shall mean (i) with respect to a corporation or limited liability company is the right to exercise or control, directly or indirectly, 49% or more of the voting rights attributable to the controlled corporation, and (ii) 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. -21- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\FB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc 22. Legal and Equitable Enforcement of this Agreement. a. Default by Seller. In the event the Close of Escrow and the acquisition of the Property by Buyer does not occur by reason of any default by Seller, Buyer shall be entitled to the return of the Closing Funds (i.e, Escrow fees if deposited with Escrow and the refundable portion of the Buyer Deposit if deposited with Escrow or Seller) not including the ONE HUNDRED THOUSAND DOLLAR ($100,000) Non -Refundable Portion of Buyer Deposit, and all of its reasonable out-of-pocket expenses incurred in connection with the transaction in an amount not to exceed FIFTY THOUSAND DOLLARS ($50,000) or, alternatively, shall have the right to pursue specific performance of this Agreement, if filed within one hundred and twenty (120) days after the scheduled Closing Date, and Buyer expressly waives any rights it may have to seek or obtain damages or any other act or thing, of any kind or character, due to the default by Seller in the terms hereof, excluding surviving obligations, if any. Out of pocket expenses shall include, reasonable attorneys' fees and expenses, consultant's fees and expenses, expenses related to inspection and investigation of the Property (including, without limitation, environmental studies and reports and survey fees and expenses) and escrow fees and title fees and expenses. b. Default By Buyer Prior to the Close of Escrow. IN THE EVENT THE CLOSE OF ESCROW AND THE ACQUISITION OF THE PROPERTY BY BUYER DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF A DEFAULT OF BUYER, BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER. THEREFORE BUYER AND SELLER DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT THAT BUYER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY IS AND SHALL BE, AS SELLER'S SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), THE AMOUNT OF ONE HUNDRED THOUSAND DOLLARS ($100,000) (THE "LIQUIDATED DAMAGE AMOUNT"). THE PAYMENT TO SELLER OF THE LIQUIDATED DAMAGE AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE BREACH OF THIS AGREEMENT BY BUYER, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES BEING HEREIN EXPRESSLY WAIVED BY SELLER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. UPON DEFAULT BY BUYER, THIS AGREEMENT SHALL BE TERMINATED AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREi.''".i.-� EXCEPT FOR THE RIGHT OF SELLER TO COLLECT SUCH LIQUIDATED DAMAGES FROM BUYER AND ESCROW HOLDER AND THE SURVIVING OBLIGATIONS HEREUNDE 13yer's Initials Seller's Initials -22- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc c. Default by After the Close of Escrow. The Parties hereto acknowledge and agree that the following terms and provisions shall apply in connection with an event of default by Buyer pursuant to this Agreement that occurs after the Close of Escrow: (1) After the Close of Escrow, if a monetary event of default occurs, prior to exercising any remedies hereunder, the non -defaulting party shall give the party in default written notice of such default. The party in default shall have a period of ten (10) business days after such notice is given within which to cure the default prior to exercise of remedies by the injured party. (2) After the Close of Escrow, if a non -monetary event of default occurs, prior to exercising any remedies hereunder, the non -defaulting party shall give the party in default notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the party in default shall have such period to effect a cure prior to exercise of remedies by the non -defaulting party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the party in default (i) initiates corrective action within said thirty (30) day period, and (ii) 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 non -defaulting party, but in no event shall such period exceed sixty (60) days from the date such notice is received or deemed received. In no event shall the non -defaulting Party be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default. (3) After the Close of Escrow, 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 Orange County, State of California, in any other appropriate court of that county, or in the United States District Court for the Central District of California. (4) In the event that any legal action is commenced by the Buyer against the Seller, service of process on the Seller shall be made by personal service upon the City Manager or in such other manner as may be provided by law. (5) In the event that any legal action is commenced by the Seller against the Buyer, service of process on the Developer shall be made by personal service upon the Buyer (or upon an officer of the Buyer) and shall be valid - 23 -. Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc whether made within or without the State of California, or in such manner as may be provided by law. (6) 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. (7) Subject to the notice and cure provisions of this Paragraph 22 c, if either party defaults with regard to any provisions of this Agreement, the defaulting party shall be liable to the non -defaulting party for any damages caused by such default, and the non -defaulting party may, after such notice and opportunity to cure (but not before) commence an action for damages against the defaulting party with respect to such default. (8) After the Close of Escrow, If either party defaults with regard to any of the provisions of this Agreement and subject to the notice and cure provisions of this Paragraph 22 c., the non -defaulting party, at its option, may, after such notice and opportunity to cure (but not before) commence an action for specific performance of the terms of this Agreement pertaining to such default. (9) The non -defaulting party shall give written notice of default to the party in default, specifying the default complained of by the non -defaulting 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. 23. Miscellaneous. a. Survival of Covenants. The covenants, representations and warranties of both Buyer and Seller set forth in this Agreement shall survive the recordation of the Grant Deed and the Close of Escrow, unless provided otherwise. b. Required Actions of Buyer and Seller. Buyer and Seller agree to execute such instruments and documents and to diligently undertake such actions as may be reasonably required in order to consummate the purchase and sale herein contemplated, and shall use their best efforts to accomplish the Close of Escrow in accordance with the provisions hereof. -24- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc C. Time of Essence. Time is of the essence of each and every term, condition, obligation, and provision hereof. d. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. e. Captions. Any captions to, or headings . of, the paragraphs or subparagraphs of this Agreement are solely for the convenience of the parties hereto, are not a part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. f. No Real Estate Commissions; No Brokerage Fees; Indemnity. Buyer and Seller each represent and warrant to the other party that neither has dealt with or engaged a broker in connection with this transaction, and agrees to indemnify and save harmless the other party from and against all claims, costs, liabilities and expense (including court costs and reasonable attorneys' fees) incurred by the other party as a result of a breach of this representation. Buyer shall indemnify, defend and hold harmless the Seller and its elected and appointed officials, officers, employees, agents, contractors and consultants (individually and collectively, the "Indemnitees") from and against any and all claims, lawsuits, judgments, liability, injury or damage, including without limitation associated and reasonably incurred attorneys' fees and court and litigation costs arising out of the defense of any such claims and/or lawsuits, and actual attorneys' fees and court and litigation costs that may be awarded by the court and required to be paid by the Indemnitees resulting or arising from or in any way connected to the Hotel Project or this Agreement. Buyer shall not be responsible for any liability, loss, damage, cost, or expense (including reasonable attorney's fees and court costs) arising from or as a result of the gross negligence or willful misconduct of the Indemnitees. Seller shall have the sole discretion to select legal counsel to represent the Seller's legal interests in the defense of any such lawsuits, claims or other actions filed against the Seller. The obligation of the Seller to pay any costs in connection with this Agreement shall be a special limited obligation of the Seller payable exclusively from funds paid by the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic (the "Agency") and its successors. Nothing contained herein shall be construed to create any obligation payable from the City of Huntington Beach's general fund. g. No Oblieations to Third Parties. Except as otherwise expressly provided herein, the execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate any of the parties hereto, to any person or entity other than the parties hereto. h. Exhibits and Schedules. The Exhibits and Schedules attached hereto are hereby incorporated herein by this reference. - 25 - Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\FB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc i. Waiver. The waiver or failure to enforce any provision of this Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof. j. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. k. Fees and Other Expenses. Except as otherwise provided herein, each of the parties shall pay its own fees and expenses in connection with this Agreement. 1. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. in. Severability. In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. n. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day Escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, in which case the time shall be extended to the next business day. o. Interpretation. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against any party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. p. Conflicts of Interest. No member, official or employee of the Buyer or the Seller shall have any personal interest, direct or indirect, in this Agreement nor shall any such member, official or employee participate in any decision relating to this Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is, directly or indirectly, interested. q. Gender and Number. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others wherever and whenever the context so dictates. -26- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc 24. Indemnification of Escrow Holder. a. If this Agreement or any matter relating hereto shall become the subject of any litigation or controversy, Buyer and Seller agree, jointly and severally, to hold Escrow Holder free and harmless from any loss or expense, including attorney's fees, that may be suffered by it by reason thereof except for losses or expenses as may arise from Escrow Holder's negligent or willful misconduct. If conflicting demands are made or notices served upon Escrow Holder with respect to this Agreement, the parties expressly agree that Escrow Holder shall be entitled to file a suit in interpleader and obtain an order from the court requiring the parties to interplead and litigate their several claims and rights among themselves. Upon the filing of the action in interpleader, Escrow Holder shall be fully released and discharged from any obligations imposed upon it by this Agreement, and b. Escrow Holder shall not be liable for the sufficiency or correctness as to form, manner, execution, or validity of any instrument deposited with it, nor as to the identity, authority or rights of any person executing such instrument, nor for failure of Buyer or Seller to comply with any of the provisions of any agreement, contract or other instrument filed with Escrow Holder, or referred to herein. Escrow Holder's duties hereunder shall be limited to the safekeeping of all monies, instruments, or other documents received by it as Escrow Holder, and for their disposition in accordance with the terms of this Agreement. 25. Enforced Delay; Extension of Time of Performance. 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 Seller (in any other capacity other than as "Seller" herein) or any other public or governmental agency or entity. 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. -27- Purchase & Sale Agreement and Joint Escrow Instructions R: MHMEdinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc 26. Entire Agreement, Waivers and Amendments. a. This Agreement shall be executed in three (3) duplicate originals each of which is deemed to be an original. This Agreement and its attached Exhibits shall constitute 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 or any interest in) the Property. This Agreement and all documents incorporated herein contain the entire understanding among the parties hereto relating to the transactions contemplated herein and all prior or contemporaneous agreements, understandings, representations, and statements, oral or written. C. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the Buyer and the Seller, and all amendments hereto must be in writing and signed by the appropriate authorities of the parties to be bound thereby. d. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. The signature page of this Agreement may be detached from and added to any counterpart of this Agreement identical in form. [Remainder of Page Intentionally Blank] [Signatures on Following Page] -28- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (fmal)(2).doc IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "SELLER'" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California AND APPROVED: Director of Economic Development APPROVED AS TO FORM: T-n el" aity 9ft KANE, BALLMER & BERKMAN City Special Counsel if.Y / if�iAaVI.K / X Murray O. Katie [Signatures Continue on Following Page] -29- Purchase & Sale Agreement and Joint Escrow Instructions K:ACG\HB\Edinger Hotel ParcelTurchase and Sale Agmt (final).doe "BUYER" CAMPBELL LODGING, INC., a California corporation By: Martin A. Campbejl' , Vice-President/Chief Development Officer -30- Purchase & Sale Agreement and Joint Escrow Instructions K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc EXHIBIT A LEGAL DESCRIPTION [Behind this page] Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT A PROPERTY DESCRIPTION K`.\CGM\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc LEGAL DESCRIPTION Real property in the City of Huntington Beach, Orange County, State of California, described as follows: Lots 19 and 20 in Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom the North 20 feet thereof APN: 142-081-06 Lots 24, 25, 26, 27 and 28 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom all water and water rights as conveyed to Boulevard Gardens Water Company, a Corporation by Deed recorded February 11, 1925 in Book 561 page 287, of Deeds. APNs: 142-081-09, 142-081-10, 142-081-11, 142-081-12 Lots 21, 22 and 23 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expect all oil, minerals and other hydrocarbon substances without right of surface entry thereto above a depth of above 500 feet from the surface thereof, as revised in the deed from Beulah H. Finley, recorded December 14, 1960 in book 5548 Page 385, official records. APN: 142-081-28 EXHIBIT B PROPERTY MAP [Behind this page] Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT B PROPERTY MAP K:\CG\HB\Edinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc Exhibit `B" Property Map Corner of Edinger Avenue and Parkside Lane [ills Mu"s Nyp$'RCO [LW IYI WE ^_---- — — CC",Y .ss[ssw Ilf". ftl*osCs OIK,'. ,R[ aW c1q wells .10 cu.Fw,[[ Is 70 `75 ACfORJCr ,IJG esiL'Ks w1 f I.B/L lit pY Jnl(N L.5[s• 01 !0 B( Rll'RWUCL°. 107-7V p iL fLL BIGRIG P[SCRY[0. IJRYR(6N1 ORIXC.L 'L4/Yi. <i G[s GL>A iCOJ j � £ I BEACH IWAT1.1/pY Brie, 142-08 BOULEVARD h LAW I MARCH 1962 TRACT NO. 417 M.M. 16-47 NOTE — ASSESSOR'S BLOCK 6 ASSESSOR'S MAP I PARCEL MAP P.M. 90-41. 104-44 PARCEL NUMBERS BOOK 142 PACE 08 SHOMN IN CIRCLES COUNTY Of ORANGE EXHIBIT C GRANT DEED FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Administrator MAIL TAX STATEMENTS TO: [insert Grantee entity name & address] (Space Above This Line for Recorder's Office Use Only) (Exempt from Recording Fee per Gov. Code § 6103 & 27383) APN: [insert] GRANT DEED FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged THE CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California, herein called "Grantor," hereby grants to CAMPBELL LODGING, INC., a California corporation, herein called "Grantee", the real property, hereinafter referred to as the "Property", described in Exhibit "A" attached hereto and incorporated herein by this reference. Grantor excepts and reserves: (a) any existing street, dedicated street, or portion of any street or dedicated street lying outside the boundaries of the Property which might otherwise pass with a conveyance of the Property; and (b) (to the extent now or hereafter validly excepted and reserved by the parties named in deeds, leases and other documents of record) all oil, gas, hydrocarbon substances and minerals of every kind and character lying more than 500 feet below the surface, together with the right to drill into, through, and to use and occupy all parts of the Property lying more than 500 feet below the surface thereof for any and all purposes incidental to the exploration for and production of oil, gas, Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 1 KACGFiB\Edinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc hydrocarbon substances or minerals from the Property, but without, however, any right to use or disturb either the surface of the Property or any portion thereof within 500 feet of the surface for any purpose or purposes whatsoever. 2. The Property is conveyed in accordance with and subject to the Purchase and Sale Agreement and Joint Escrow Instructions (the "Purchase Agreement") entered into by and between Grantor ("Seller" therein) and Grantee (`Buyer" therein) as of , 2012. The Purchase Agreement is a public record on file in the offices of the City Clerk of the City of Huntington Beach and is by reference thereto incorporated herein as though fully set forth herein. Any capitalized term not defined herein shall have the meaning ascribed to such term in the Purchase Agreement 3. Grantee hereby covenants and agrees for itself its successors, its assigns, and every successor in interest to the Property that the Grantee, such successors and such assigns, shall develop, maintain, and use the Property only as follows: (a) The Property shall be devoted only to the development permitted and the uses specified in the applicable provisions of Grantor's General Plan, the Purchase Agreement (including the Scope of Development attached to the Purchase Agreement as Exhibit F and incorporated herein by this reference), plans and specifications approved by Grantor and this Grant Deed, whichever document is more restrictive. (b) The Grantee shall use the Property exclusively for the construction of a high - quality four story, 120 to 140-room Hyatt Place hotel or other brand hotel first approved in writing by Grantor as specifically described in the Purchase Agreement and Scope of Development attached thereto as Exhibit F (the "Project Improvements"). The Grantee shall use the Property for such uses and purposes and in accordance with plans and specifications for the development of the Property approved by Grantor. No change in the use of the Property and no new construction or material exterior modification or alteration of any structure on the Property shall be permitted without the prior written approval of Grantor. (c) For not less than 30 years from the date this Grant Deed is recorded in the Official Records of the Recorder's Office of Orange County, Grantee shall use the Property only for the uses specified in this Grant Deed and the Purchase Agreement. No change in the use of the Property and no new construction or exterior modification or alteration of any structure on the Property shall be permitted without the prior written approval of the Grantor. (d) Grantee, its successors and assigns, shall maintain the Improvements on the Property in the same aesthetic and sound condition (or better) as the condition of the Property at the time Grantor issues the Permanent Certificate of Occupancy for the Property, reasonable wear and tear excepted. This standard for the quality of maintenance of the Property shall be met whether or not a specific item of maintenance is listed below. However, representative items of maintenance shall include frequent and regular inspection for graffiti or damage or deterioration or failure, and immediate repainting or repair or replacement of all surfaces, fencing, walls, equipment, etc., as necessary; emptying of trash receptacles and removal of litter; sweeping of public sidewalks Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 2 K:\CG\HB\Edinger Hotel ParcelTurchase and Sale Agmt (frnal)(2).doc adjacent to the Property, on -site walks and paved areas and washing -down as necessary to maintain clean surfaces; maintenance of all landscaping in a healthy and attractive condition, including trimming, fertilizing and replacing vegetation as necessary; cleaning windows on a regular basis; painting the buildings on a regular program and prior to the deterioration of the painted surfaces; conducting a roof inspection on a regular basis and maintaining the roof in a leak -free and weather - tight condition; maintaining security devices in good working order. In the event Grantee, its successors or assigns fails to maintain the Improvements in accordance with the standard for the quality of maintenance, Grantor or its designee shall have the right but not the obligation to enter the Property upon reasonable notice to Grantee, correct any violation, and hold Grantee, or such successors or assigns responsible for the cost thereof, and such cost, until paid, shall constitute a lien on the Property. (e) Grantee shall pay when due all real estate taxes and assessments assessed and levied on or against the Property subsequent to the Close of Escrow. In addition, Grantee shall remove, or shall have removed, any levy or attachment made on title to the Property (or any portion thereof), or shall assure the satisfaction thereof within a reasonable time but in any event prior to a sale of the Property thereunder. Nothing herein contained shall be deemed to prohibit the Grantee from contesting the validity or amount of any tax assessment, encumbrance or lien, nor to limit the remedies available to the Grantee in respect thereto. 4. The Grantee covenants and agrees for itself, its successors, its assigns and every successor in interest to the 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 Property. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph. 5. The Grantee covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that Grantee, its successors and assigns shall refrain from restricting the rental, sale or lease of the Property on the basis of the race, color, creed, religion, sex, sexual orientation, marital status, national origin or ancestry of.any. person. All deeds, leases or contracts shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 3 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc (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. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph. 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. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph." (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 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, Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 4 K:\CGM\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc or vendees of the land. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph." 6. Prior to the issuance of a Permanent Certificate of Occupancy for the Project Improvements by Grantor, Grantee shall not make any sale, transfer, conveyance or assignment of the Property or any part thereof or the buildings or structures thereon, without the prior written approval of Grantor. In the event that Grantee does sell, transfer, convey. or assign any part of the Property or buildings or structures thereon, prior to the issuance of a Permanent Certificate of Occupancy for the Project Improvements by Grantor in violation of this Grant Deed, Grantor shall be entitled to increase the Purchase Price paid by Grantee by the amount that the consideration payable for such sale, transfer, conveyance or assignment is in excess of the Purchase Price paid by Grantee, plus the cost of improvements and development, including carrying charges and costs related thereto. The consideration payable for such sale, transfer, conveyance or assignment to the extent it is in excess of the amount so authorized shall belong and be paid to Grantor and until paid Grantor shall have a lien on the Property and any part involved for such amount. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Property. 7. All conditions, covenants and restrictions contained in this Grant Deed shall be covenants running with the land, and shall, in any event, and without regard to technical classification or designation, legal or otherwise, be, to the fullest extent permitted by law and equity, binding for the benefit and in favor of, and enforceable by Grantor, its successors and assigns against Grantee, its successors and assigns, to or of the Property conveyed herein or any portion thereof or any interest therein, and any party in possession or occupancy of said Property or portion thereof. 8. Except as provided in the next two sentences, every covenant and condition and restriction contained in this Grant Deed shall remain in effect for 30 years from the date this Grant Deed is recorded in the Official Records of the Recorder's Office of Orange County. The covenants against discrimination set forth in paragraphs 4 and 5 of this Grant Deed shall remain in effect in perpetuity. The covenants set forth in Section 6 of this Grant Deed shall terminate and be released upon the issuance of a Permanent Certificate of Occupancy for the Project Improvements to be constructed on the Property by Grantor pursuant to the Purchase Agreement. 9. In amplification and not in restriction of the provisions set forth hereinabove, it is intended and agreed that Grantor shall be deemed a beneficiary of the agreements and covenants provided hereinabove both for and in its own right and also for the purposes of protecting the interests of the community. All covenants without regard to technical classification or designation shall be binding for the benefit of Grantor, and such covenants shall run in favor of Grantor for the entire period during which such covenants shall be in force and effect, without Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 5 K:\CG\HB\Edinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc regard to whether Grantor is or remains an owner of any land or interest therein to which such covenants relate. Grantor shall have the right, in the event of any breach of any such agreement or covenant, to exercise all the rights and remedies, and to maintain any actions at law or suit in equity or other proper proceedings to enforce the curing of such breach of agreement or covenant. 10. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Grant Deed shall defeat or render invalid or in any way impair the lien or charge of any mortgage or deed of trust or security interest permitted by the Purchase Agreement; provided, however, that any subsequent owner of the Property shall be bound by such remaining covenants, conditions, restrictions, limitations, and provisions, whether such owner's title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. 11. The covenants contained in this Grant Deed shall be construed as covenants running with the land and not as conditions which might result in forfeiture of title. [SIGNATURES APPEAR ON FOLLOWING PAGE] Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE K:\CG\I-M\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc IN WITNESS WHEREOF, Grantor and Grantee have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized this _ day of .2012. CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney KANE, BALLMER & BERKMAN City Special Counsel Murray O. Kane Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 7 KACGU-IB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Grant Deed dated as of , 20 from the Grantor, City of Huntington Beach, a municipal corporation in the State of California, granted to CAMPBELL LODGING, INC., a California corporation, Grantee, is hereby accepted by Grantee subject to all of the matters hereinbefore set forth, pursuant to authority conferred by The Grantee hereby consents to recordation of such Grant Deed. "GRANTEE" CAMPBELL LODGING, INC., a California corporation By: Its: By: Its: Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 8 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc EXHIBIT A LEGAL DESCRIPTION OF PROPERTY Real property in the City of Huntington Beach, County of Orange, State of California, described as follows: [to be added] APN: Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 9 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc State of California County of Orange On before me, , a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) State of California County of Orange On before me, a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 10 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc EXHIBIT D SCHEDULE OF PERFORMANCE 1) GENERAL PROVISIONS 1. Execution of Purchase and Sale Agreement and Joint Instructions (Agreement) by Seller. Seller shall hold a public hearing and consider approval of the Agreement 2. Submission of Good Faith Deposit. Buyer shall submit the entire Buyer Deposit to Seller. 3. Open Escrow. Seller shall open Escrow 4. Assignment of Settlement Funds. Seller shall deliver into escrow a document evidencing Seller's assignment of its rights to the Settlement Funds to Buyer pursuant to Paragraph 4.e. (1) of the Agreement. 5. Transfer of Environmental Insurance Policy. To the extent permitted by the insurer, Seller shall deliver into escrow a document evidencing Seller's transfer of the Environmental Insurance Policy to Buyer pursuant to Paragraph 4.e.(2) of the Agreement. 6. Close Escrow. Buyer shall have satisfied all conditions precedent to Close of Escrow for the Property as required by the Agreement, including, but not limited to obtaining all entitlements and permits necessary to develop the proposed project. As soon as feasible after Buyer's execution of Agreement. Within three (3) days after Seller's execution of the Agreement. Concurrently with Seller's execution of the Agreement. At least one (1) business day prior to the Close of Escrow. At least one (1) business day prior to the Close of Escrow. Within twelve (12) months of Seller's execution of the Agreement. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT D SCHEDULE OF PERFORMANCE PAGE 1 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc 2) 2. 3 4 9 DEVELOPMENT Receipt of Entitlements. Buyer shall obtain all entitlements and permits necessary for the development of the Property pursuant to Paragraphs 4.a and 17 of the Agreement. Demolition of Existing Improvements. Buyer shall complete demolish of all existing building Improvements on the Property pursuant to subparagraphs a. and b. of Paragraph 4 of the Agreement. Environmental Remediation of Prop. Buyer shall complete environmental remediation of the Property, prepare a Closure Report and request a "No Further Action Letter" from the applicable regulatory agency, pursuant to Paragraph 4.a and 17 of the Agreement. Commencement of Construction. Buyer shall commence construction of the Hotel Project (as defined in the Agreement), as required by the Agreement. Completion of Construction. Buyer shall complete construction of the Hotel Project (as defined in the Agreement), in accordance with the Agreement. Within twelve (12) months of the Seller's execution of the Agreement. Within sixty (60) days of the Close of Escrow. Within sixty (60) days of completing the demolition of the existing improvements, but in no event no later than one hundred and twenty (120) days from the Close of Escrow unless such time is extended in writing by the City Manager or designee. The Within fifteen (15) days after delivery to Buyer of a "No Further Action Letter" or the equivalent, from the Orange County Department of Environmental Health (DEH), the City of Huntington Beach Fire Department or another appropriate regulatory agency. Within twelve (12) months of the commencement of construction. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT D SCHEDULE OF PERFORMANCE PAGE 2 KAMHMEdinger Hotel ParcelTurchase and Sale Agmt (5na1)(2).doc NOTES: 1. Deadlines set forth in this Schedule of Performance are subject to the enforced delay provisions of Paragraph 25 of the Agreement. 2. Extensions may be approved in writing pursuant to Paragraph 4.f. of the Agreement. 3. Descriptions of items of performance and deadlines in this Schedule of Performance are not intended to supersede more complete descriptions in the text of the Agreement; and in the event of any conflict between the text of the Agreement and this Schedule, the text of the Agreement shall govern. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT D SCHEDULE OF PERFORMANCE PAGE 3 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc EXHIBIT E DOCUMENT LIST 1. Phase I Environmental Site Assessment Report, Project No. 6824, dated April 21, 2008, prepared by Phase One, Inc. (the "Phase I") 2. Limited Phase II Environmental Site Assessment dated May 12, 2008, prepared by Phase One, Inc. (the "Limited Phase II") 2. Site Assessment Report and Soil Remediation Work Plan, prepared by Phase One, Inc. (the "Remediation Work Plan") 3. City of Huntington Beach Fire Department, comments to Site Assessment Report and Soil Remediation Work Plan, dated June 1, 2009 ("City Fire Department Additions to Remediation Work Plan") Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT E DOCUMENT LIST PAGE 1 K:\CG\i-M\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doe EXHIBIT F SCOPE OF DEVELOPMENT This is the Scope of Development attached to the Purchase and Sale Agreement and Joint Escrow Instructions ("Purchase Agreement") by and between the CITY OF HUNTINGTON BEACH, a municipal corporation ("City") and CAMPBELL LODGING, INC., a California corporation ("Buyer"). Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the Purchase Agreement. I. PROJECT DESCRIPTION The Property is located at 7872 Edinger Avenue, Huntington Beach, California. The Project entails the following components, as the same may be amended from time to time in accordance with plans and permits approved by the City of Huntington Beach (but with the understanding that the type of Hotel Project required pursuant to the Purchase Agreement shall in no event be reduced without City's written approval): • The Property shall be developed as a high quality select brand hotel with approximately 120 to 140 rooms as approved by the City in writing. • The Hotel Development shall meet the following minimum criteria: o Nationally recognized brand of hotel, including, but not limited to Hyatt Place or equivalent product, subject to the prior written approval of the City in the City's sole and absolute discretion; o Amenities shall include business center, pool/spa, limited food service, lounge and beverage service; and o Incorporation of sustainable building practices, including the goals of the City regarding Green Building standards, to the extent feasible • The facility design shall incorporate a high level of aesthetic quality in a manner that conforms to the overall theme and intent of the Beach and Edinger Corridors Specific Plan and City codes and regulations. II. IMPROVEMENTS The Hotel Project shall be constructed by Buyer and in accordance with conceptual plans approved by the City of Huntington Beach. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT F SCOPE OF DEVELOPMENT PAGE 1 K:\CG\HB\Edinger Hotel ParcelTurchase and Sale Agmt (final)(2).doc The Hotel Project and all other Improvements constructed by Buyer on the Property shall be constructed in accordance with all federal, state, and/or local development regulations and/or agreements. III. ENVIRONMENTAL REVIEW Buyer shall be responsible for causing the preparation of all California Environmental Quality Act ("CEQA") documents necessary for the entitlements for the Hotel Project and the development of the Improvements on the Property. The City shall be responsible for certification of any CEQA documentation in connection with the approval of the Hotel Project. Buyer shall be responsible for the payment of all CEQA compliance costs and shall fully comply with all mitigation measures set forth in the Hotel Project entitlements. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT F SCOPE OF DEVELOPMENT PAGE 2 K:\CG\HB\Edinger Hotel Parcel\Purchase and Sale Agmt (final)(2).doc Council/Agency Meeting Held:_/ ! -, 0J2., Deferred/Continued to: A p oved C nditional Appr v Denied 'SyClerk'IfSignaVe Council Meeting Date: 1/31/2012 Department ID Number: ED 12-10 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: Amendment to Purchase and Sale Agreement and Joint Escrow Instructions with Campbell Lodging, Inc. for 7872 Edinger Avenue Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: On Friday, January 27, 2011, the City Council approved the Purchase and Sale Agreement and Joint Escrow Instructions for 7872 Edinger Avenue with Campbell Lodging, Inc. for construction of a 120 to 140 room hotel. Since Campbell Lodging has signed the documents, there are minor revisions to the Purchase and Sale Agreement. Funding Source: Not Applicable Recommended Action: Motion to: A). Approve the Amendment to the Purchase and Sale Agreement and Joint Escrow Instruction with Campbell Lodging, Inc. for 7872 Edinger Avenue. B.) Authorize the Mayor and City Clerk to sign the Amendment. C.) Authorize the City Manager to sign to all sign all necessary documents to effectuate this Agreement. Alternative Action(s): Do not approve the Amendment and direct staff as necessary. 41 REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 1/31/2012 DEPARTMENT ID NUMBER: ED 12-10 Analysis: On Friday, January 27, 2011, the City Council approved the Purchase and Sale Agreement and Joint Escrow Instructions for 7872 Edinger Avenue with Campbell Lodging, Inc. for construction of a 120 to 140 room hotel. Since the approval of this Agreement, Campbell Lodging has requested minor revisions to the Purchase and Sale Agreement. The changes proposed are the following: • Reduce the non-refundable buyer deposit from $10,000 to $2,500. • Buyer shall have a 60-day due diligence period. • City shall provide Buyer all environmental documentation relating to the site for review and approval. • If the City cannot provide a title free of any leases (Big O Tire Tenant) or easement detrimental to the proposed hotel development project at closing, Buyer shall have the right to cancel escrow and receive a full reimbursement of its initial deposit. • With City approval, Buyer shall have the ability to transfer or assign its rights to the property prior to Certificate of Occupancy. Strategic Plan Goal: Enhance Economic Development Environmental Status: The Beach and Edinger Corridors Specific Plan Program EIR was certified in December 2009 and anticipated up to 150 additional hotel rooms on Edinger Avenue. The hotel project will require an Environmental Assessment to further analyze -project specific impacts. Attachment(s): -2- 1/30/2012 5:48 PM Agenda Item #1 Attachment #1: Amendment to Purchase and Sale Agreement and Joint Escrow Instructions with Campbell Lodging, Inc. for 7872 Edinger Avenue will be submitted as a Supplemental Communication TO: VIA: FROM: DATE: f •. I".1; Honorable Mayor and Members of the City Council Fred A. Wilson, City Manager Bob Hall, Deputy City Manager/Director of Economic Development (_4V January 31, 2012 SUBJECT: Supplemental Information — City Council Agenda Item #1 Amendment to Purchase and Sale Agreement and Joint Escrow Instructions with Campbell Lodging, Inc. for 7872 Edinger Avenue Attached for City Council consideration is the Amendment to the Purchase and Sale Agreement for 7872 Edinger Avenue. The following summarizes the proposed changes in the Agreement: • Reduce the non-refundable buyer deposit from $10,000 to $2,500. • Buyer shall have a 60-day due diligence period. • City shall provide Buyer all environmental documentation relating to the site for review and approval. • If the City cannot provide a title free of any leases (Big O Tire Tenant) or easement detrimental to the proposed hotel development project at closing, Buyer shall have the right to cancel escrow and receive a full reimbursement of its initial deposit. • With City approval, Buyer shall have the ability to transfer or assign its rights to the property prior to Certificate of Occupancy. • If the City defaults on its contractual obligation (determines that the City does not want a hotel on the site) Campbell Lodging would be entitled to the return of the closing funds and return of its reasonable out-of-pocket expenses incurred in connection with the transaction in an amount not to exceed One Hundred and Fifty Thousand, $150,000. Failure to approve the entitlements for the project does not constitute a default. ® The City and Campbell has a cure process for any unmet obligations. SUPPLEMENTAL COMMUNICATION Supplemental Communication Ccampbell` D8t@.-- - 3/ ` .L__ 1/31/2012 12:29:00 PM Agends Item No. / AMENDMENT TO PURCHASE AND SAFE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (7872 Edinger) This Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (the "Amendment to Purchase Agreement") is dated as of , 2012 by the CITY OF HUNTINGTON BEACH, a municipal corporation ("Seller") and CAMPBELL LODGING, INC., a California corporation (the "Buyer"). Seller and Buyer are collectively referred to herein as the "Parties." I. [§ 100] PURPOSE OF AMENDMENT TO PURCHASE AGREEMENT The Seller and Buyer entered into that certain Purchase and Sale Agreement and Joint Escrow Instructions dated January 27, 2012 (the "Purchase Agreement") relating to the sale by Seller to Buyer of certain real property in the City of Huntington Beach described as set forth in Attachment No. 1 attached hereto and incorporated herein by this reference (the "Property") and Buyer's development thereon of a hotel project in accordance with the terms and conditions contained in the Purchase Agreement. Any capitalized term not defined herein shall have the meaning ascribed to such term in the Purchase Agreement. The purpose of this Amendment to Purchase Agreement is to provide for the following revisions to the Purchase Agreement: (1) reduce the amount of the Buyer Deposit which automatically becomes non-refundable upon Buyer's execution of the Purchase Agreement from "$10,000" to "$2,500" and amend the time during which such amount becomes non-refundable to ten (10) days after Buyer's execution of this Amendment to Purchase Agreement ; (2) provide Buyer the right to reasonably determine, without the approval of the City Council of the City of Huntington Beach, whether or not (a) the actual construction costs and fees for the project make the project economically infeasible and (b) the availability of hotel brands from major franchisors are acceptable to Buyer; (3) provide Buyer with a 60 day due diligence period to review all Due Diligence Materials; (4) provide express language allowing Buyer to terminate the Purchase and Sale Agreement and cancel the pending escrow in the event Seller does not terminate the Lease on or prior to the scheduled Close of Escrow, including any extensions thereto; (5) provide express language allowing Buyer to terminate the Purchase and Sale Agreement and cancel the pending escrow, on or prior to the scheduled Close of Escrow, including any extensions thereto, in the event Seller does not vacate or cause the vacation of certain easements listed on the Preliminary Title Report which are detrimental to and prohibit the development of the Hotel Project; (6) permit Buyer to assign its rights and obligations under the Purchase and Sale Agreement prior to the issuance of a permanent certificate of occupancy for the Hotel Project to a Permitted Transfer (as defined below); and (7) clarify and/or update certain other provisions contained in the Purchase Agreement. II. [§200] EFFECT OF AMENDMENT TO PURCHASE AGREEMENT Except as expressly provided otherwise in this Amendment to Purchase Agreement, the Purchase Agreement remains in full force and effect, enforceable in accordance with its terms, without diminution or waiver of any kind of any right or remedy of the Seller thereunder. Page 1 111. [§300] TERMS AND CONDITIONS A. Buyerposit. The second sentence of Paragraph 3.a. of the Purchase Agreement (Buyer Deposit) commencing with the words, "A portion of the Buyer Deposit" and ending with the words, "the Close of Escrow contemplated herein occurs," is hereby deleted in its entirety and replaced with the following sentence: "A portion of the Buyer Deposit in the amount of One Hundred Thousand Dollars ($100,000) (the "$100,000 Non -Refundable Portion of Buyer Deposit") shall be non-refundable ($2,500 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable within ten (10) business days of Buyer's execution of the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions and the remaining $97,500 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable sixty (60) days after Seller's execution of this Agreement) and retained by the Seller as the Seller's property whether or not the Close of Escrow contemplated herein occurs." B. Permits; Entitlements. The last paragraph in Paragraph 4.c. of the Purchase Agreement (Permits; Entitlements) is hereby amended to add the following sentence at the end of such paragraph: "Buyer hereby acknowledges and agrees that Buyer's failure to obtain all permits and entitlements necessary for the development of the Hotel Project within the time periods set forth in the Schedule of Performance due to a disapproval of such permits and entitlements by the City Council of the City of Huntington Beach shall not constitute a default by Seller under this Agreement." C. Due Diligence Period. Paragraph 6.a. c. of the Purchase Agreement (Due Diligence Period) is hereby deleted in its entirety and replaced with the following paragraph: " C. Buyer shall have a 60 day period (the "Due Diligence Period") commencing on the date the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions is executed by Buyer, to conduct all due diligence research and inspections as it deems necessary for purposes of approving (i) conditions of title pursuant to Paragraph 7 below, (ii) the Due Diligence Materials, and (iii) to determine, in its reasonable discretion, whether or not (1) the actual construction costs and fees for the development of the Hotel Project are "economically infeasible" or (2) the availability of hotel brands from major franchisors are acceptable to Buyer. In the event Buyer disapproves of any of the items set forth under clauses (1), (ii) or (iii) prior to the expiration of the Due Diligence Period, subject to the terms and provisions set forth in Paragraph 8.a. (2) below, Buyer shall have the right to terminate this Agreement. Buyer shall notify Seller and Escrow Holder of such intent to terminate in writing prior to expiration of the Due Diligence Period. Thereafter, Buyer and Seller shall have no obligation to each other (except as otherwise set forth herein), the Buyer Deposit, excluding $2,500 of the $100,000 Non -Refundable Portion delivered to Seller, shall be returned to Buyer immediately and this Agreement shall terminate. In the event of a cancellation of Escrow, Buyer and Seller shall each bear one-half of any Escrow cancellation fees." Page 2 D. Delivery of Due Diligence Materials/Title. The introductory phrase in Paragraph 8.a. (1) of the Purchase Agreement (Delivery of Due Diligence Materials/Title), commencing with the words, "Buyer and Seller hereby acknowledge," and ending with the words, "extent such items are in Seller's possession:" is hereby deleted in its entirety and replaced with the following phrase, "Within ten (10) business days of Buyer's execution of the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, Seller will deliver to Buyer copies of the following items, if and to the extent such items are in Seller's possession:" E. Review and Approval of Documents and Materials. Paragraph 8.a. (2) of the Purchase Agreement (Review and Approval of Documents and Materials) is hereby amended as follows: 1. The first paragraph is hereby deleted in its entirety and replaced with the following paragraph: "Prior to the expiration of the Due Diligence Period, Buyer shall have the right to review and approve or disapprove, at Buyer's sole cost and expense, any environmental reports, soils inspection, conditions of title, zoning, surveys, all physical inspections of the Property, Due Diligence Materials, and all other reports or inspections as Buyer may deem necessary or appropriate in connection with this Agreement. Failure of Buyer to give written disapproval of the Due Diligence Materials on or before the expiration of the Due Diligence Period shall be deemed to constitute Buyer's approval of all Due Diligence Materials. If Buyer disapproves or conditionally approves any matters of title shown in the preliminary title report, then Seller may, within fourteen (14) business days after its receipt of Buyer's written notice of disapproval of the Due Diligence Materials, elect, with no obligation to do so, to eliminate or ameliorate to Buyer's satisfaction the disapproved or conditionally approved title matters. Seller shall thereupon give Buyer written notice of those disapproved or conditionally approved title matters, if any, which Seller agrees to either eliminate from the Title Policy as exceptions to title to the Property or to ameliorate to Buyer's satisfaction by the Closing Date as a condition to the Close of Escrow. If Seller does not elect to eliminate or ameliorate to Buyer's satisfaction any disapproved or conditionally approved title matters, or if, despite its best commercial efforts, Seller is unable to eliminate or ameliorate to Buyer's satisfaction all such disapproved matters prior to the Closing Date, then Buyer shall have the right to, by a writing delivered to Seller and Escrow Holder: (i) waive its prior disapproval, in which event the disapproved matters shall be deemed approved; or (ii) terminate this Agreement and the Escrow created pursuant thereto, in which event Buyer shall be entitled to the return of all monies previously deposited with Escrow Holder or released to Seller pursuant to this Agreement, and the Escrow and the rights and obligations of the parties hereunder shall thereafter terminate." 2. The last sentence in the second paragraph commencing with the words, " In the event Seller is unable to," and ending with the words, "vacated possession of the Property" is hereby deleted in its entirety and replaced with the following sentence: "In the event Seller is unable to obtain possession of the Property from the Tenant prior to the scheduled Closing Date, the scheduled Closing Date shall automatically extend an Page 3 additional thirty (30) days to permit Seller to terminate and/or cause the termination of the Lease." 3. The second paragraph is hereby amended to add the following sentence to the end of the paragraph: "Seller agrees that if it is unable to deliver title to the Property free of the Lease and that Tenant has not vacated the Property as of the scheduled Closing Date, including any extensions thereto, then Buyer shall have the option by delivering written notice to Seller to cancel the Escrow created pursuant to this Agreement, in which case the entire Buyer Deposit (to the extent such funds have been received by the Seller or delivered into Escrow) shall be immediately refunded to Buyer, including the $2,500 portion considered non-refundable, and the rights and obligations of the parties hereunder shall thereafter terminate." F. Vacation of Easements. Paragraph 8. a. (6) of the Purchase Agreement (Vacation of Easements) is hereby deleted in its entirety and replaced with the following paragraph: "(6) Vacation of Easements. Seller shall use commercially reasonable efforts to vacate or cause the vacation of those property easements as permitted by the dominant tenement listed on the Preliminary Title Report and identified by Seller in writing which are detrimental to and prohibit the development of the Hotel Project (the ."Detrimental Easements"). In the event Seller is unable to deliver title to the Property free of the Detrimental Easements as of the scheduled Closing Date, the scheduled Closing Date shall automatically extend an additional thirty (30) days to permit Seller to vacate or cause the vacation of such Detrimental Easements. Seller agrees that if it is unable to deliver title to the Property free of the Detrimental Easements as of the scheduled Closing Date, including any extensions thereto, then Buyer shall have the option by delivering written notice to Seller to cancel the Escrow created pursuant to this Agreement, in which case the entire Buyer Deposit (to the extent such funds have been received by the Seller or delivered into Escrow) shall be immediately refunded to Buyer, including the $2,500 portion considered non-refundable, and the rights and obligations of the parties hereunder shall thereafter terminate." G. Assignment. Paragraph 21 of the Purchase Agreement (Assignment) is hereby amended as follows: 1. Paragraph 21.d is hereby deleted in its entirety and replaced with the following paragraph: "d. Except for a Permitted Transfer (defined below), Buyer represents and agrees for itself and any successor in interest that prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, without the prior written approval of the Seller, there shall be no significant change in the ownership of Buyer or in the relative proportions thereof, or with respect to the identity of the parties in control of Buyer or the degree thereof, by any method or means. The term "Permitted Transfer" used herein shall mean an assignment of this Agreement and all of Buyer's interests in the Property to a limited liability company or limited partnership and Buyer, with Jack B. Campbell, J. Alan Campbell, and Martin A. Page 4 Campbell as the principal owners (collectively the "Principals"), collectively or individually, shall enter into a management agreement, subject to the reasonable written approval of the City Manager or designee for the limited purpose of ensuring compliance with the terms and conditions of this paragraph, with assignee to develop, manage and operate the Hotel Project (the "Management Agreement"); provided, however that such Principals have power and control over management and development of the Hotel Project and further provided that such assignment is memorialized in an assignment and assumption agreement the form and content of which is first approved in writing by the City Manager or designee. The documentation evidencing any such transfer shall be subject to the reasonable approval of the City Manager or designee in accordance with the standards set forth in the respective provisions of this Agreement. Any change in the identity of the management company designated in the Management Agreement, including any amendments thereto, shall be first approved in writing by the City Manager or designee, in the City Manager or designee reasonable discretion." 2. The penultimate sentence of Paragraph 21. e, is hereby amended to add the following, ",except in the event of a Permitted Transfer," to the end of such sentence. H. Legal and Equitable Enforcement of this Agreement. Paragraph 22 of the Purchase Agreement (Legal and Equitable Enforcement of this Agreement) is hereby amended as follows: 1. The first sentence of Paragraph 22. a. is hereby amended to delete all reference to the not to exceed dollar amount of "FIFTY THOUSAND DOLLARS $50,000)" and replace with the not to exceed dollar amount of "ONE HUNDRED AND FIFTY THOUSAND DOLLARS." 2. Paragraph 22 is hereby amended to add the following subparagraph b.l. immediately after the existing Paragraph 22.b.: " b.1. Notice and Cure Periods Prior to Close of Escrow. Prior to the Close of Escrow, if a monetary event of default occurs, prior to exercising any remedies set forth in Paragraphs 22a. and 22 b. above, as applicable, the non -defaulting party shall give the party in default written notice of such default. The party in default shall have a period of ten (10) business days after such notice is given within which to cure the default prior to exercise of the applicable remedies set forth in Paragraphs 22 a. and 22 b. above by the injured party. Prior to the Close of Escrow, if a non -monetary event of default occurs, prior to exercising any remedies set forth in Paragraphs 22a. and 22 b. above, as applicable, the non -defaulting party shall give the party in default written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the party in default shall have such period to effect a cure prior to exercise of remedies by the non -defaulting party. If the default is such that it is not reasonably capable of being. cured within thirty (30) days, and the party in default (1) initiates corrective action within said thirty (30) day period, and Page 5 (ii) 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 non - defaulting party, but in no event shall such period exceed sixty (60) days from the date such notice is received or deemed received. In no event shall the non - defaulting Party be precluded from exercising the remedies set forth in Paragraphs 22 a. and 22 b. above, as applicable, if its security becomes or is about to become materially jeopardized by any failure to cure a default." 3. The introductory heading and phrase of Paragraph 22. c. of the Purchase Agreement (Default by Buyer After the Close of Escrow) shall be deleted in its entirety and replaced with the following: " c. Default After the Close of Escrow. The Parties hereto acknowledge and agree that the following terms and provisions shall apply in connection with an event of default pursuant to this Agreement that occurs after the Close of Escrow:" IV. [§400] NOTICE OF CANCELLATION RESCINDED Buyer acknowledges and agrees that by executing this Amendment to Purchase Agreement, (1) Buyer's purported notice of cancellation of the Purchase Agreement set forth in that certain letter dated January 30, 2012 and addressed to Seller, and (ii) Buyer's proposed Amendment #1 to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger Ave. Huntington Beach) dated January 30, 2012 and attached to such letter, are each hereby immediately rescinded in their entirety and of no further force and effect. V. [§500] DUPLICATE ORIGINALS This Amendment to Purchase Agreement may be signed in counterparts, each of which shall be deemed an original, and all such counterparts shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY BLANK] [SIGNATURES ON FOLLOWING PAGE] Page 6 IN WITNESS WHEREOF, Seller and Buyer have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized on the date set forth above. "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney �I t KANE, BALLMER & BERKMAN City Special Counsel Jhaila R. Brown [SIGNATURES CONTINUE ON THE FOLLOWING PAGE] Page 7 "BUYER" CAMPBELL LODGING, INC., a California corporation Martin A. Campbell Vice-President/Chief Development Officer Page 8 ATTACHMENT NO. 1 LEGAL DESCRIPTION Real property in the City of Huntington Beach, Orange County, State of California, described as follows: Lots 19 and 20 in Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom the North 20 feet thereof APN: 142-081-06 Lots 24, 25, 26, 27 and 28 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom all water and water rights as conveyed to Boulevard Gardens Water Company, a Corporation by Deed recorded February 11, 1925 in Book 561 page 287, of Deeds. APNs: 142-081-09, 142-081-10, 142-081-11, 142-081-12 Lots 21, 22 and 23 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expect all oil, minerals and other hydrocarbon substances without right of surface entry thereto above a depth of above 500 feet from the surface thereof, as revised in the deed from Beulah H. Finley, recorded December 14, 1960 in book 5548 Page 385, official records. APN: 142-081-28 44 AMENDMENT TO PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (7872 Edinger) This Amendment to Purchase and Sale Agreement and Joint Escrow Instructions (the "Amendment to Purchase Agreement") is dated as of� , 2012 by the CITY OF HUNTINGTON BEACH,. a municipal corporation (i eller") a9d CAMPBELL LODGING, INC., a California corporation (the "Buyer"). Seller andyuyer are collectively referred to herein as the "Parties." I. [§100] PURPOSE OF AMENDMENT TO PURCHASE AGREEMENT The Seller and Buyer entered into that certain Purchase and Sale Agreement and Joint Escrow Instructions dated January 27, 2012 (the "Purchase Agreement") relating to the sale by Seller to Buyer of certain real property in the City of Huntington Beach described as set forth in Attachment No. 1 attached hereto and incorporated herein by this reference (the `.`Property") and Buyer's development thereon of a hotel project in accordance with the terms and conditions contained in the Purchase Agreement. Any capitalized term not defined herein shall have the meaning ascribed to such term in the Purchase Agreement. The purpose of this Amendment to Purchase Agreement is to provide for the following revisions to the Purchase Agreement: (1) reduce the amount of the Buyer Deposit which automatically becomes non-refundable upon Buyer's execution of the Purchase Agreement from "$10,000" to "$2,500" and amend the time during which such amount becomes non-refundable to ten (10) days after Buyer's execution of this Amendment to Purchase Agreement ; (2) provide Buyer the right to reasonably determine, without the approval of the City Council of the City of Huntington Beach, whether or not (a) the actual construction costs and fees for the project make the project economically infeasible and (b) the availability of hotel brands from major franchisors are acceptable to Buyer; (3) provide Buyer with a 60 day due diligence period to review all Due Diligence Materials; (4) provide express language allowing Buyer to terminate the Purchase and Sale Agreement and cancel the pending escrow in the event Seller does not terminate the Lease on or prior to the scheduled Close of Escrow, including any extensions thereto; (5) provide express language allowing Buyer to terminate the Purchase- and Sale Agreement and cancel the pending escrow, on or prior to the scheduled Close of Escrow, including any extensions thereto, in the event Seller does not vacate or cause the vacation of certain easements listed on the Preliminary Title Report which are detrimental to and prohibit the development of the Hotel Project; (6) permit Buyer to assign its rights and obligations under the Purchase and Sale Agreement prior to the issuance of a permanent certificate of occupancy for the Hotel Project to a Permitted Transfer (as defined below); and (7) clarify and/or update certain other provisions contained in the Purchase Agreement. II. [§200] EFFECT OF AMENDMENT TO PURCHASE AGREEMENT Except as expressly provided otherwise in this Amendment to Purchase Agreement, the Purchase Agreement remains in full force and effect, enforceable in accordance with its terms, without diminution or waiver of any kind of any right or remedy of the Seller thereunder. Page 1 III. [§300] TERMS AND CONDITIONS A. Buyer Deposit. The second sentence of Paragraph 3.a. of the Purchase Agreement (Buyer Deposit) commencing with the words, "A portion of the Buyer Deposit" and ending with the words, "the Close of Escrow contemplated herein occurs," is hereby deleted in its entirety and replaced with the following sentence: "A portion of the Buyer Deposit in the amount of One Hundred Thousand Dollars ($100,000) (the 1100,000 Non -Refundable Portion of Buyer Deposit") shall be non-refundable ($2,500 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable within ten (10) business days of Buyer's execution of the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions and the remaining $97,500 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable sixty (60) days after Seller's execution of this Agreement) and retained by the Seller as the Seller's property whether or not the Close of Escrow contemplated herein occurs." B. Permits; Entitlements. The last paragraph in Paragraph 4.c. of the Purchase Agreement (Permits; Entitlements) is hereby amended to add the following sentence at the end of such paragraph: "Buyer hereby acknowledges and agrees that Buyer's failure to obtain all permits and entitlements necessary for the development of the Hotel Project within the time periods set forth in the Schedule of Performance due to a disapproval of such permits and entitlements by the City Council of the City of Huntington Beach shall not constitute a default by Seller under this Agreement." C. Due Diligence Period. Paragraph 6.a. c. of the Purchase Agreement (Due Diligence Period) is hereby deleted in its entirety and replaced with the following paragraph: " C. Buyer shall have a 60 day period (the "Due Diligence Period") commencing on the date the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions is executed by Buyer, to conduct all due diligence research and inspections as it deems necessary for purposes of approving (i) conditions of title pursuant to Paragraph 7 below, (ii) the Due Diligence Materials, and (iii) to determine, in its reasonable discretion, whether or not (1) the actual construction costs and fees for the development of the Hotel Project are "economically infeasible" or (2) the availability of hotel brands from major franchisors are acceptable to Buyer. In the event Buyer disapproves of any of the items set forth under clauses (1), (ii) or (iii) prior to the expiration of the Due Diligence Period, subject to the terms and provisions set forth in Paragraph 8.a. (2) below, Buyer shall have the right to terminate this Agreement. Buyer shall notify Seller and Escrow Holder of such intent to terminate in writing prior to expiration of the Due Diligence Period. Thereafter, Buyer and Seller shall have no obligation to each other (except as otherwise set forth herein), the Buyer Deposit, excluding $2,500 of the $100,000 Non -Refundable Portion delivered to Seller, shall be returned to Buyer immediately and this Agreement shall terminate. In the event of a cancellation of Escrow, Buyer and Seller shall each bear one-half of any Escrow cancellation fees." Page 2 D. Delivery of Due Diligence Materials/Title. The introductory phrase in Paragraph 8.a. (1) of the Purchase Agreement (Delivery of Due Diligence Materials/Title), commencing with the words, "Buyer and Seller hereby acknowledge," and ending with the words, "extent such items are in Seller's possession:" is hereby deleted in its entirety and replaced with the following phrase, "Within ten (10) business days of Buyer's execution of the Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, Seller will deliver to Buyer copies of the following items, if and to the extent such items are in Seller's possession:" E. Review and Approval of Documents and Materials. Paragraph 8.a. (2) of the Purchase Agreement (Review and Approval of Documents and Materials) is hereby amended as follows: The first paragraph is hereby deleted in its entirety and replaced with the following paragraph: "Prior to the expiration of the Due Diligence Period, Buyer shall have the right to review and approve or disapprove, at Buyer's sole cost and expense, any environmental reports, soils inspection, conditions of title, zoning, surveys, all physical inspections of the Property, Due Diligence Materials, and all other reports or inspections as Buyer may deem necessary or appropriate in connection with this Agreement. Failure of Buyer to give written disapproval of the Due Diligence Materials on or before the expiration of the Due Diligence Period shall be deemed to constitute Buyer's approval of all Due Diligence Materials. If Buyer disapproves or conditionally approves any matters of title shown in the preliminary title report, then Seller may, within fourteen (14) business days after its receipt of Buyer's written notice of disapproval of the Due Diligence Materials, elect, with no obligation to do so, to eliminate or ameliorate to Buyer's satisfaction the disapproved or conditionally approved title matters. Seller shall thereupon give Buyer written notice of those disapproved or conditionally approved title matters, if any, which Seller agrees to either eliminate from the Title Policy as exceptions to title to the Property or to ameliorate to Buyer's satisfaction by the Closing Date as a condition to the Close of Escrow. If Seller does not elect to eliminate or ameliorate to Buyer's satisfaction any disapproved or conditionally approved title matters, or if, despite its best commercial efforts, Seller is unable to eliminate or ameliorate to Buyer's satisfaction all such disapproved matters prior to the Closing Date, then Buyer shall have the right to, by a writing delivered to Seller and Escrow Holder: (i) waive its prior disapproval, in which event the disapproved matters shall be deemed approved; or (ii) terminate this Agreement and the Escrow created pursuant thereto, in which event Buyer shall be entitled to the return of all monies previously deposited with Escrow Holder or released to Seller pursuant to this Agreement, and the Escrow and the rights and obligations of the parties hereunder shall thereafter terminate." 2. The last sentence in the second paragraph commencing with the words, " In the event Seller is unable to," and ending with the words, "vacated possession of the Property" is hereby deleted in its entirety and replaced with the following sentence: "In the event Seller is unable to obtain possession of the Property from the Tenant prior to the scheduled Closing Date, the scheduled Closing Date shall automatically extend an Page 3 additional thirty (30) days to permit Seller to terminate and/or cause the termination of the Lease." 3. The second paragraph is hereby amended to add the following sentence to the end of the paragraph: "Seller agrees that if it is unable to deliver title to the Property free of the Lease and that Tenant has not vacated the Property as of the scheduled Closing Date, including any extensions thereto, then Buyer shall have the option by delivering written notice to Seller to cancel the Escrow created pursuant to this Agreement, in which case the entire Buyer Deposit (to the extent such funds have been received by the Seller or delivered into Escrow) shall be immediately refunded to Buyer, including the $2,500 portion considered non-refundable, and the rights and obligations of the parties hereunder shall thereafter terminate per Paragraph 22. a." F. Vacation of Easements. Paragraph 8. a. (6) of the Purchase Agreement (Vacation of Easements) is hereby deleted in its entirety and replaced with the following paragraph: "(6) Vacation of Easements. Seller shall use commercially reasonable efforts to vacate or cause the vacation of those property easements as permitted by the dominant tenement listed on the Preliminary Title Report and identified by Seller in writing which are detrimental to and prohibit the development of the Hotel Project (the "Detrimental Easements"). In the event Seller is unable to deliver title to the Property free of the Detrimental Easements as of the scheduled Closing Date, the scheduled Closing Date shall automatically extend an additional thirty (30) days to permit Seller to vacate or cause the vacation of such Detrimental Easements. Seller agrees that if it is unable to deliver title to the Property free of the Detrimental Easements as of the scheduled Closing Date, including any extensions thereto, then Buyer shall have the option by delivering written notice to Seller to cancel the Escrow created pursuant to this Agreement, in which case the entire Buyer Deposit (to the extent such funds have been received by the Seller or delivered into Escrow) shall be immediately refunded to Buyer, including the $2,500 portion considered non-refundable, and the rights and obligations of the parties hereunder shall thereafter terminate per Paragraph 22 a.." G. Assignment. Paragraph 21 of the Purchase Agreement (Assignment) is hereby amended as follows: 1. Paragraph 21.d is hereby deleted in its entirety and replaced with the following paragraph: "d. Except for a Permitted Transfer (defined below), Buyer represents and agrees for itself and any successor in interest that prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, without the prior written approval of the Seller, there shall be no significant change in the ownership of Buyer or in the relative proportions thereof, or with respect to the identity of the parties in control of Buyer or the degree thereof, by any method or means. The term "Permitted Transfer" used herein shall mean an assignment of this Agreement and all of Buyer's interests in the Property to a limited liability company or limited partnership and Buyer, with Jack B. Campbell, J. Alan Campbell, and Martin A. Page 4 Campbell as the principal owners (collectively the "Principals"), collectively or individually, shall enter into a management agreement, subject to the reasonable written approval of the City Manager or designee for the limited purpose of ensuring compliance with the terms and conditions of this paragraph, with assignee to develop, manage and operate the Hotel Project (the "Management Agreement"); provided, however that such Principals have power and control over management and development of the Hotel Project and further provided that such assignment is memorialized in an assignment and assumption agreement the form and content of which is first approved in writing by the City Manager or designee. The documentation evidencing any such transfer shall be subject to the reasonable approval of the City Manager or designee in accordance with the standards set forth in the respective provisions of this Agreement. Any change in the identity of the management company designated in the Management Agreement, including any amendments thereto, shall be first approved in writing by the City Manager or designee, in the City Manager or designee reasonable discretion." 2. The penultimate sentence of Paragraph 21. e, is hereby amended to add the following, ",except in the event of a Permitted Transfer," to the end of such sentence. H. Legal and Equitable Enforcement of this Agreement. Paragraph 22 of the Purchase Agreement (Legal and Equitable Enforcement of this Agreement) is hereby amended as follows: 1. The first sentence of Paragraph 22. a. is hereby amended to delete all reference to the not to exceed dollar amount of "FIFTY THOUSAND DOLLARS $50,000)" and replace with the not to exceed dollar amount of "ONE HUNDRED AND FIFTY THOUSAND DOLLARS." 2. Paragraph 22 is hereby amended to add the following subparagraph b.l. immediately after the existing Paragraph 22.b.: " b.1. Notice and Cure Periods Prior to Close of Escrow. Prior to the Close of Escrow, if a monetary event of default occurs, prior to exercising any remedies set forth in Paragraphs 22a. and 22 b. above, as applicable, the non -defaulting party shall give the party in default written notice of such default. The party in default shall have a period of ten (10) business days after such notice is given within which to cure the default prior to exercise of the applicable remedies set forth in Paragraphs 22 a. and 22 b. above by the injured ply. Prior to the Close of Escrow, if a non -monetary event of default occurs, prior to exercising any remedies set forth in Paragraphs 22a. and 22 b. above, as applicable, the non -defaulting party shall give the party in default written notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the party in default shall have such period to effect a cure prior to exercise of remedies by the non -defaulting party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the party in default (i) initiates corrective action within said thirty (30) day period, and Page 5 (ii) 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 non - defaulting party, but in no event shall such period exceed sixty (60) days from the date such notice is received or deemed received. In no event shall the non - defaulting Party be precluded from exercising the remedies set forth in Paragraphs 22 a. and 22 b. above, as applicable, if its security becomes or is about to become materially jeopardized by any failure to cure a default." 3. The introductory heading and phrase of Paragraph 22. c. of the Purchase Agreement (Default by Buyer After the Close of Escrow) shall be deleted in its entirety and replaced with the following: " c. Default After the Close of Escrow. The Parties hereto acknowledge and agree that the following terms and provisions shall apply in connection with an event of default pursuant to this Agreement that occurs after the Close of Escrow:" IV. [§400] NOTICE OF CANCELLATION RESCINDED Buyer acknowledges and agrees that by executing this Amendment to Purchase Agreement, (1) Buyer's purported notice of cancellation of the Purchase Agreement set forth in that certain letter dated January 30, 2012 and addressed to Seller, and (ii) Buyer's proposed Amendment #1 to Purchase and Sale Agreement and Joint Escrow Instructions (7872 Edinger Ave. Huntington Beach) dated January 30, 2012 and attached to such letter, are each hereby immediately rescinded in their entirety and of no further force and effect. V. [§500] DUPLICATE ORIGINALS This Amendment to Purchase Agreement may be signed in counterparts, each of which shall be deemed an original, and all such counterparts shall constitute one and the same instrument. [REMAINDER OF PAGE INTENTIONALLY BLANK] [SIGNATURES ON FOLLOWING PAGE] Page 6 IN WITNESS WHEREOF, Seller and Buyer have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized on the date set forth above. "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California INITIA` Eb APPROVED: Director off Economic Development APPROVED AS TO FORM: 4Cittorne 6- Liu KANE, BALLMER & BERKMAN City Special Counsel Jhaila R. Brown [SIGNATURES CONTINUE ON THE FOLLOWING PAGE] Page 7 "BUYER" CAMPBELL LODGING, INC., a California corporation By: Martin A. C b Vice-President/Chief Development Officer Page 8 ATTACHMENT NO. 1 LEGAL DESCRIPTION Real property in the City of Huntington Beach, Orange County, State of California, described as follows: Lots 19 and 20 in Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom the North 20 feet thereof APN: 142-081-06 Lots 24, 25, 26, 27 and 28 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom all water and water rights as conveyed to Boulevard Gardens Water Company, a Corporation by Deed recorded February 11, 1925 in Book 561 page 287, of Deeds. APNs: 142-081-09, 142-081-10, 142-081-11, 142-081-12 Lots 21, 22 and 23 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expect all oil, minerals and other hydrocarbon substances without right of surface entry thereto above a depth of above 500 feet from the surface thereof, as revised in the deed from Beulah H. Finley, recorded December 14, 1960 in book 5548 Page 385, official records. APN: 142-081-28 Council/Agency Meeting Held: Deferred/Continued to: )6-Approved ❑ Cn�o,n,ditionally`t Approved ❑ Denied v� � /Ci'E�j Cle`k's Sid ature Council Meeting Date: 1/27/2012 Department ID Number: ED 12-05 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: Approval of Purchase and Sale Agreement and Joint Escrow Instructions with Campbell Lodging, Inc. for 7872 Edinger Avenue Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s) Statement of Issue: The City Council is requested to approve the Purchase and Sale Agreement and Joint Escrow Instruction for 7872 Edinger Avenue at Parkside Lane. The Purchase and Sale Agreement is with Campbell Lodging, Inc. for construction of a 120 to 140 room hotel. Funding Source: The sale of the property will provide $3.3 million to the City. Campbell Lodging, Inc. will pay all escrow fees. The City will assign the HB Auto I, LLC Settlement Agreement in the amount of $114,840.86 to Campbell Lodging for remediation of the site. Recommended Action: Motion to: A). Approve the Purchase and Sale Agreement and Joint Escrow Instruction with Campbell Lodging, Inc. for 7872 Edinger Avenue. B.) Authorize the Mayor and City Clerk to sign the Agreement. C.) Authorize the City Manager to sign to all sign all necessary documents to effectuate this Agreement. Alternative Action(s): Do not approve the Sale Agreement and direct staff as necessary. HB -45- Item 2. - 1 REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 1/27/2012 DEPARTMENT ID NUMBER: ED 12-05 Analysis: As part of the Beach and Edinger Corridor Specific Plan, a market analysis was conducted, that identified the need for one to two limited service hotels, one on Edinger Avenue and the other on Beach Boulevard. The City owns property located at Edinger Avenue and Parkside Lane consisting of six parcels (1.9 acres) which is suitable for the development of a hotel. The City consolidated the parcels in December 2008, to create a site suitable for development. In October 2009, a Request for Proposals (RFP) was sent out seeking qualified hotel developers to acquire and develop the site. Two bids were received, but the City could not come to terms with the bidders. Since 2010, the City has received several offers regarding the development of the site. The City's goal for the site is to have a qualified experience developer which will also provide a national -recognized franchise brand. Campbell Lodging, Inc. is a family -owned business originated in 1983. The Campbell's were part of the California motel business beginning in 1967 with over 55 hotels. Campbell Lodging Inc. currently has 19 hotels encompassing more than 1,500 rooms operating throughout the southwestern United States. Campbell Lodging, Inc. focuses on operating mid -priced nationally -recognized brands such as Holiday Inn Express, Hampton Inn & Suites, Marriott Springhill Suites and Hilton Garden Inn. The Purchase and Sale Agreement includes: • Sale of the Site for the sum of $3,300,000. • City to assign HB Auto 1, LL Settlement Agreement funds in the amount of $114,800 to Developer to complete demolition and remediation of existing Big O Tires building. • City to transfer to Developer its AIG environmental insurance policy in the amount of Five Million Dollars ($5,000,000) for unknown site contamination. • City and Campbell Lodging, Inc. to open escrow and require an initial deposit of $500,000 upon City Council approval of the Purchase and Sale Agreement, of which $100,000 will be non-refundable after a 60-day due diligence period. Campbell Lodging, Inc. to: • Purchase the Site for the sum of $3,300,000. • Demolish the existing building improvements and remediate the known onsite contamination. • Provide an initial deposit of $500,000 upon City Council approval of the Purchase and Sale Agreement, of which $100,000 will be non-refundable after a 60-day due diligence period. -2- Item 2. - 2 1/25/2012 3:52 PM REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 1/27/2012 DEPARTMENT ID NUMBER: ED 12-05 ® Obtain entitlements and building permits within 12 months of City Council approval of the Purchase and Sale Agreement. The City Manager has the authority to extend the time period for up to six (6) months, for exenterating circumstances. ® Demolish existing improvements and initiate construction within 60 days of close of escrow or be subject to monthly in -lieu payments equivalent to the scheduled Big O Tire monthly lease payment. ® Develop a 120 to 140 room Hyatt Place or some other City approved brand and name within 12 months. Based on the appraisal review the land value of the Site is within the range of approximately $2,900,000 and $3,500,000. Strategic Plan Goal: Enhance Economic Development Environmental Status: The Beach and Edinger Corridors Specific Plan Program EIR was certified in December 2009 and anticipated up to 150 additional hotel rooms on Edinger Avenue. The hotel project will require an Environmental Assessment to further analyze project specific impacts. Attachment(s): _3. 1/25/2012 3:52 PM HB -47- Item 2. - 3 sj� Item 2. - 4 xB -48- PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS Address: 7872 Edinger Avenue Huntington Beach, California APN Nos.: 142-081-06,142-081-12, 142-081- 11, 142-081-09,142-081-10, and 142-081-28 This AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS (Agreement) is made and entered into as of this day of , 2012, and constitutes an agreement by which the CITY OF HUNTINGTON BEACH, a municipal corporation (Seller), agrees to sell to CAMPBELL LODGING, INC., a California corporation (the "Buyer"), agrees to purchase, on the terms and conditions hereinafter set forth, that certain real property described in the "Legal Description" attached hereto as Exhibit A and incorporated herein by this reference, and shown on the "Property Map" attached hereto as Exhibit B and incorporated herein by this reference, together with all Improvements as hereinafter defined (collectively, the "Property"). The terms and conditions of this Agreement and the instructions to Lawyers Title or any other title company mutually acceptable to the parties (the "Escrow Holder") with regard to the escrow (Escrow) created pursuant hereto are as follows: 1. Property. The Property to be acquired by Buyer from Seller under this Agreement consists of six (6) land parcels approximately 1.9 acres in size located at 7872 Edinger Avenue, Huntington Beach, California and Improvements located on the Property, including without limitation a commercial building. Seller currently owns fee title to the Property and all of the Improvements. For purposes of this Agreement, the term "Improvements" shall mean and include all buildings, structures, improvements, pavement, areas improved with asphalt, concrete or similar materials, and fixtures and equipment installed upon or located in or on the Property owned by Seller. For purposes of this Agreement, the term "Property" shall mean and include the above -referenced parcel of land, the Improvements, and all and singular estates, rights, privileges, easements and appurtenances owned by Seller and belonging or in any way appertaining to the Property. 2. Acquisition. a. Purchase Price. The purchase price to be paid by Buyer to Seller for the Property shall be Three Million Three Hundred Thousand Dollars no/cents ($3,300,000.00) (the "Purchase Price"). -1- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc b. Purchase As -Is, Where Is. Buyer expressly acknowledges and agrees, and represents and warrants to Seller, that Buyer is purchasing the Property "AS IS, WHERE IS", and "WITH ALL FAULTS", after such inspection, analysis, examination and investigation Buyer cares to make and expressly without Seller's covenant, warranty or representation as to physical condition, title, leases, rents, revenues, income, expenses, operation, zoning or other regulation, compliance with law, suitability for particular purposes or any other matter whatsoever. Seller has no obligation to make repairs, replacements or improvements to the Property, or to pay any fees, costs or expenses related to the Property. Buyer acknowledges and agrees that, except as expressly provided in Paragraph 15, neither Seller nor any of Seller's agents, contractors, consultants, attorneys or representatives have made, make and specifically negate and disclaim and Buyer is not relying on any representations, warranties, promises, covenants, agreements or guaranties of any kind or character whatsoever, whether express or implied, oral or written, past, present or future, of, as to, concerning or with respect to the Property, including, but not limited to, (a) the value of the Property; (b) the income to be derived from the Property; (c) the suitability of the Property for any and all activities and uses which Buyer may conduct thereon, including the possibilities for development of the Property; (d) the habitability, marketability, merchantability, profitability or fitness for a particular purpose of the Property; (e) the manner, quality, state of repair or lack of repair of the Property; (f) the nature, quality or condition of the Property, including without limitation, soils and geology; (g) the compliance of or by the Property or its operation with any laws, rules, ordinances or regulations of any applicable governmental authority or body; (h) compliance with any environmental protection, pollution or land use laws, rules, regulation, orders or requirements, including but not limited to, Title III of the Americans with Disabilities Act of 1990, California Health and Safety Code, the Federal Water Pollution Control Act, the Federal Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency regulations at 40 CFR part 261, the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, the Resources Conservation and Recovery Act of 1976, the Clean Water Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and the Toxic Substance Control Act, as any of the foregoing may be amended from time to time and regulations promulgated under any of the foregoing from time to time; (i) the presence or absence of Hazardous Materials at, on, under, or adjacent to the Property; 0) the content, completeness or accuracy of the Due Diligence Materials or the Preliminary Report; (k) the conformity of the Property to past, current or future applicable zoning or building requirements; (1) deficiency of any drainage or undershoring; (m) that the Property may be located on or near earthquake faults; (xiv) the existence or non-existence of land use, zoning or building entitlements affecting the Property; (n) the land use status of the Property, including, but not limited to, general plan status, specific plan status, zoning status, subdivision status under the California Subdivision May Act or the subdivision ordinances of the City or any other Entitlements; (o) the applicability of the Federal or California endangered species acts and the existence of any species protected thereunder; (p) any non-compliance of the Property or any improvements thereon with California Civil Code Sections 895, et seq.; or (q) any other matter. Buyer further acknowledges and agrees that having been given the opportunity to inspect the Property and having obtained and examined such information and documentation affecting the Property as Buyer has deemed necessary or appropriate, Buyer is relying solely on its own -2- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc investigations and review, and not on any information provided or to be provided by Seller. As of the date of this Agreement Buyer acknowledges, (i) Buyer has conducted such surveys and inspections and (ii) Buyer has had adequate opportunity to make such inspection of the Property as Buyer has, in Buyer's discretion, deemed necessary or advisable as a condition precedent to Buyer's purchase of the Property and to determine the characteristics listed in this Paragraph and all other aspects of the Property. C. No Obligation to Repair. Any reports, repairs or work required by Buyer are the sole responsibility of Buyer, and Buyer agrees that there is no obligation on the part of Seller to make any changes, alterations or repairs to the Property or to cure any violations of law or to comply with the requirements of any insurer. d. No Merger. The provisions of this Paragraph 2 shall survive the Close of Escrow and shall not be deemed merged into any instrument or conveyance delivered at the Close of Escrow. 3. Payment of Purchase Price. The Purchase Price for the Property shall be payable by Buyer as follows: a. Buyer Deposit. Within the time periods set forth in the Schedule of Performance attached hereto as Exhibit D and incorporated herein by this reference, Buyer shall deposit or cause to be deposited with Seller, in cash or by a certified or bank cashier's check made payable to Seller or a confirmed wire transfer of funds, a deposit in the amount of Five Hundred Thousand Dollars ($500,000.00) (the "Buyer Deposit"). A portion of the Buyer Deposit in the amount of One Hundred Thousand Dollars ($100,000) (the 1100,000 Non -Refundable Portion of Buyer Deposit") shall be non-refundable ($10,000 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable upon delivery to Seller or deposit with Escrow Holder and the remaining $90,000 of the $100,000 Non -Refundable Portion of Buyer Deposit shall automatically become non-refundable sixty (60) days after Seller's execution of this Agreement) and retained by the Seller as the Seller's property whether or not the Close of Escrow contemplated herein occurs.. In the event the City Council of the City of Huntington Beach does not approve the permits and entitlements necessary for the development of the Hotel Project within twelve (12) months after the execution of this Agreement and such disapproval is not due to an act or failure to act by Buyer, a portion of the Buyer Deposit in the amount of Four Hundred Thousand Dollars ($400,000) shall be refunded to Buyer. The Buyer Deposit shall be retained by Seller and, upon the Close of Escrow, shall be credited towards Buyer's payment of the Purchase Price. Buyer acknowledges and agrees that Seller is under no obligation to place the Buyer Deposit in an interest bearing account and in the event interest is earned or accrued on such funds, such interest shall be retained by Seller as its sole and separate property. Buyer hereby waives and releases any interest, right or claim in and to any interest that may be earned or accrue on the funds constituting the Buyer Deposit. -3- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and Settings4ritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc b. Closing Funds. Within five (5) days of written request from Escrow Holder, and in any event no later than three (3) days prior to the Close of Escrow, Buyer shall deposit or cause to be deposited with Escrow Holder, in cash or by a certified or bank cashier's check made payable to Escrow Holder or a confirmed wire transfer of funds, the Purchase Price less the Buyer Deposit delivered to Seller, plus any additional amounts needed to pay Buyer's share of its Closing Costs as provided in Paragraph 11 below. All escrow, recording and title insurance costs shall be paid in accordance with Paragraph 11 below. 4. Development of Property. a. Scope of Development. The Property shall be developed by Buyer as a high -quality, four story, 120 to 140-room Hyatt Place hotel or other brand hotel first approved in writing by Seller as specifically described in the Scope of Development attached hereto as Exhibit F. and incorporated herein by this reference (the "Hotel Project"). Buyer shall commence construction of the Hotel Project within the time period set forth in the Schedule of Performance attached hereto as Exhibit D and incorporated herein by this reference. Buyer shall demolition the existing building Improvements pursuant to Paragraph 4.b. below, and complete all remediation of the Property pursuant to Paragraph 17 below. b. Demolition of Improvements; Commencement of Construction. Buyer shall demolish and remove the Improvements, including, but not limited to all above grade structures or improvements, located on the Property and commence construction of the Hotel Project in accordance with this Agreement and the Scope of Development on or before the time period set forth in the Schedule of Performance. In the event Buyer fails, within the time periods set forth in the Schedule of Performance, to demolish the existing building Improvements and commence construction of the Hotel Project on the Property pursuant to this Paragraph 4, Buyer shall pay to Seller monthly payments equal to the minimum rent payable by Tenant as defined in Paragraph 8.a.5. below) (as "Assignee" or "Big O") to Seller (as "Landlord" or "Assignor") pursuant to Section 5 (c) of the Second Amendment (as defined in Paragraph 8.a.5. below). In connection with the demolition activities required herein, Buyer shall contact Seller for the appropriate procedures pertaining to assessment, remediation and cleanup of such demolition. C. Permits; Entitlements. Before commencement of the demolition, remediation, construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Buyer shall, at its own expense, secure or cause to be secured, any and all permits and/or entitlements which may be required by the City of Huntington Beach or any other governmental agency affected by such construction, development or work. Before commencement of construction or development of any buildings, structures or other work of improvement upon any portion of the Property, Buyer shall satisfy all conditions to the issuance of any permit required for the development of the Property. Seller shall obtain all permits and entitlements within the time period set forth in the Schedule of Performance. -4- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc Buyer and Seller acknowledge and agree that this Agreement shall be void and of no further force and effect in the event Buyer fails to obtain all permits and entitlements necessary for the development of the Hotel Project within the time periods set forth in the Schedule of Performance and Buyer's failure to timely obtain all permits and entitlements necessary for the development of the Hotel Project is not due to an act or failure to act by Buyer but rather due to a disapproval of such permits and entitlements by the City Council of the City of Huntington Beach. d. Cost of Demolition and Remediation. The cost of demolishing any Improvements on the Property (the "Demolition Costs") and the cost of remediating any Hazardous Materials located on the Property, including, but not limited to the Release, shall be the sole responsibility of Buyer, without any cost to Seller. e. Seller Funds for Demolition and Remediation. (1) On or prior to the date set forth in the Schedule of Performance, Seller shall assign to Buyer any rights Seller may have to receive funds in the amount of $114,860.86 pursuant to that certain Settlement Agreement Regarding HB Auto 1, LLC, et al, dated November 1, 2011, between the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic and HB Auto I, LLC, a California limited liability company (the "Settlement Funds") pursuant to an assignment agreement or equivalent document in a form and substance approved in writing by the City Manager of the City of Huntington Beach or designee (the "City Manager") in his/her absolute discretion. The Settlement Funds shall only be used by Buyer to pay remediation costs and Demolition Costs. The assignment of the Settlement Funds shall not become effective until the Close of Escrow. (2) On or prior to the date set forth in the Schedule of Performance, to the extent permitted by the insurer, Seller shall transfer to Buyer Seller's Pollution Liability Select Policy issued by American International Specialty Lines Insurance Company Policy No. PLS 15012298 with a policy aggregate limit of $5,000,000 (the "Environmental Insurance Policy") pursuant to a transfer agreement or equivalent document in a form and substance approved in writing by the City Manager in his/her absolute discretion. Buyer shall cause the Environmental Insurance Policy to name the following entity as an additional insured: City of Hunting Beach, a municipal corporation and its officers, officials, members, employees, contractors and agents. Funds from the Environmental Insurance Policy shall be used by Buyer to pay for the remediation of any unknown Hazardous Materials on the Property pursuant to the terms of such policy. The transfer of the Environmental Insurance Policy shall not become effective until the Close of Escrow. Buyer shall re -new the term of the Environmental Insurance Policy, on the same terms, for an additional five year period after the expiration of the exiting term term. f. Schedule of Performance. -5- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsUritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(:) redline.doc (1) 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, subject to the extensions of time set forth in Paragraph 25 of this Agreement, and if no such time is provided, within a reasonable time. The Schedule of Performance shall be subject to amendment from time to time upon the mutual written agreement of Buyer and Seller unless otherwise provided herein. The City Manager may, on behalf of Seller and without referring such matter to the governing body of Seller, extend all pending deadlines in the Schedule of Performance. (2) After the Close of Escrow and within the times specified in the Schedule of Performance or within such reasonable extensions of said dates as may be granted by Seller, Buyer shall promptly begin and thereafter diligently prosecute to completion the remediation, demolition and construction of the Hotel Project as required in this Agreement. g. Nondiscrimination. Buyer 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. Buyer 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. This language shall be incorporated into all contracts between Buyer and any contractor, consultant, subcontractor, subconsultants, vendors and suppliers. h. Local. State and Federal Laws Buyer hereby agrees to carry out development, construction (as defined by applicable law) and operation of the Property, including, without limitation, any and all public works (as defined by applicable law), in conformity with all applicable local, state and federal laws, including, without limitation, all applicable federal and state labor laws (including, without limitation, any requirement to pay state prevailing wages). Buyer hereby expressly acknowledges and agrees that Seller has never previously affirmatively represented to Buyer or its contractor(s) for the Property in writing or otherwise, in a call for bids or otherwise, that the work to be covered by the bid or contract is not a "public work," as defined in Section 1720 of the Labor Code. Buyer hereby agrees that Buyer 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, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Buyer hereby agrees that Buyer 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. Buyer hereby agrees that Buyer shall have the obligation, at Buyer's sole cost, risk and expense, to obligate any party as may be required by Labor Code Sections 1726, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. Buyer shall indemnify, protect, defend and hold harmless -6- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.0utlook\2ID915JK\Purchase and Sale Agmt (fmal)(2) redline.doc Seller and its officers, officials, employees, contractors and agents, with counsel reasonably acceptable to Seller, 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, construction (as defined by applicable law) and/or operation of the Property, including, without limitation, any and all public works (as defined by applicable law), results or arises in any way from any of the following: (1) the noncompliance by Buyer 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 Buyer to provide any required disclosure, representation, statement, rebidding and/or identification which may be required by Labor Code Sections 1726, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law; (5) failure by Buyer 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; and/or (6) failure by Buyer to obligate any party as may be required by Labor Code Sections 1726, 1776 and 1781, as the same may be enacted, adopted or amended from time to time, or any other provision of law. It is agreed by the parties that, in connection with the development and construction (as defined by applicable law) of the Property, including, without limitation, any public work (as defined by applicable law), Buyer shall bear all risks of payment or nonpayment of state prevailing wages and/or the implementation of 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 paragraph 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 defense and indemnification obligations shall survive termination of this Agreement and the Close of Escrow and shall continue after the City of Huntington Beach issues a permanent Certificate of Occupancy for the Property. i. Disclaimer of Responsibility y Seller. The Seller neither undertakes nor assumes nor will have any responsibility or duty to Buyer or to any third party to review, inspect, supervise, pass judgment upon or inform Buyer 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. Buyer 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 Buyer or to any third party by the Seller in connection with such matter is for the public purpose of developing the Property, and neither Buyer (except for the purposes set forth in this Agreement) nor any third party is entitled to rely thereon. The Seller shall not be responsible for any of the work of construction, improvement or development of the Property. -7- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc 5. Use Restrictions. The parties hereto acknowledge and agree that the covenants, conditions and restrictions set forth in the Grant Deed attached hereto as Exhibit C (collectively, "Covenants") are an integral part of this Agreement, and that Seller would not have agreed to sell the Property if such Covenants were not included in said Grant Deed. The parties acknowledge and agree that the Covenants are reasonably related to one or more legitimate objectives of the Seller, including without limitation, Seller's plan to revamp the Hunting Beach corridor at Edinger Avenue and Beach Boulevard in the City of Huntington Beach. Buyer, on behalf of itself, its successors and assigns, agrees to abide by said Covenants, and to include said Covenants, or a reference to the Covenants set forth in the recorded Grant Deed, in all deeds executed by Buyer, its successors and assigns. 6. Escrow. a. Opening of Escrow. For purposes of this Agreement, the Escrow shall be deemed opened on the date Escrow Holder shall have received an executed counterpart of this Agreement from both Buyer and Seller (the "Opening Date"). Escrow Holder shall notify Buyer and Seller, in writing, of the Opening Date and the Closing Date, as defined in paragraph 6.b, below. In addition, Buyer and Seller agree to execute, deliver, and be bound by any reasonable or customary supplemental joint escrow instructions of Escrow Holder, or other instruments as may reasonably be required by Escrow Holder, in order to consummate the transaction contemplated by this Agreement. Any such supplemental instructions shall not conflict with, amend, or supersede any portion of this Agreement. If there is any inconsistency between such supplemental instructions and this Agreement, then this Agreement shall control. b. Close of Escrow. For purposes of this Agreement, "Close of Escrow" shall be defined as the date the Grant Deed, the form of which is attached hereto as Exhibit C (the "Grant Deed") conveying the Property to Buyer, is recorded in the Official Records of Orange County, California. The Close of Escrow shall occur within twelve (12) months of Seller's execution of this Agreement, unless extended in writing for up to a maximum of six (6) months by the City Manager in the City Manager's reasonable discretion, as long as Buyer is diligently pursuing actions required for closing (the "Closing Date"). Buyer shall deliver to Seller a written notice of the anticipated Close Escrow (the "Notice to Close Escrow") no later than one hundred and twenty (125) days prior to the scheduled Close of Escrow. C. Due Diligence Period. Buyer shall have a 60 day period to conduct all due diligence research and inspections as it deems necessary for purposes of approving (i) conditions of title pursuant to Paragraph 7 below, and (ii) actual construction costs and fees that make the construction and development of the Hotel Project "economically infeasible"; provided, however the economic infeasibility of such actual construction costs and fees shall first be determined in writing by the City Council of the City of Huntington Beach in its reasonable discretion before Buyer can determine such cost "economically infeasible" and subject to Buyer disapproval pursuant to this Paragraph 6.c. Upon Buyer's written notice to Seller within the 60 day period of -8- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc it's desire not to proceed with the Hotel Project based on Buyer's disapproval of those items listed under clauses (i) and (ii) of the preceding sentence, the Buyer Deposit, excluding $10,000 of the $100,000 Non -Refundable Portion which shall be retained by Seller, shall be returned to Buyer immediately and this contract shall become null and void, and neither party shall have further obligation to the other, except as to those provision which by there terms survive the termination of this Agreement. 7. Conditions of Title. It shall be a condition to the Close of Escrow that Seller shall convey good and marketable fee simple title to the Property by the Grant Deed, subject only to the following approved conditions of title (herein the "Approved Condition of Title"): a. A lien to secure payment of real estate taxes, not delinquent. b. Matters affecting the Approved Condition of Title created by or with the written consent of Buyer. C. Exceptions which are disclosed by the Preliminary Title Report described in Paragraph 8. a. (1) hereof and which are approved or deemed approved by Buyer in accordance with Paragraph 8. a. (2) hereof. d. Title to the Property shall be conveyed from Seller to Buyer under this Agreement free and clear of any easement, right of way or any other right whatsoever in Seller to access the Property. e. Seller covenants and agrees during the term of this Escrow, Seller will not cause or knowingly permit title to the Property to differ from the Approved Condition of Title described in this Paragraph 7. Any liens, encumbrances, easements, restrictions, conditions, covenants, rights, rights -of -way, or other matters affecting the Approved Condition of Title which may appear of record or be revealed after the date of the Preliminary Title Report described in Paragraph 8. a. (1) below, shall also be subject to Buyer's approval. Buyer shall have the right to disapprove such matters by delivery of written notice to Seller within five (5) days after the date Buyer receives knowledge of such matters, and Seller shall have the right to elect to cure the same, upon delivery of written notice to Buyer within five (5) days after Seller's receipt of such notification from Buyer. 8. Conditions to Close of Escrow. a. Conditions to Buyer's Obligations. The Close of Escrow and Buyer's obligation to consummate the transaction contemplated by this Agreement are subject to the satisfaction of the following conditions for Buyer's benefit on or prior to the dates designated below for the satisfaction of such conditions: -9- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and Settings\fritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc (1) Delivery of Due Diligence Materials/Title. Buyer and Seller hereby acknowledge and agree that Seller has already delivered to Buyer copies of the following items, if and to the extent such items are in Seller's possession: (i) a current Preliminary Title Report for the Property and legible copies of all documents, whether recorded or unrecorded, referred to in the Preliminary Title Report; (ii) a copy of the most recent tax bill relating to the Property; (iii) any and all environmental reports relating to the Property, including, but not limited to those certain documents listed on the Document List attached hereto as Exhibit E. and incorporated herein by this reference ; and (iv) copies of any and all material documents that pertain to the physical and/or economic condition of the Property (collectively referred to herein as the "Due Diligence Materials"). (2) Review and Approval of Documents and Materials. Buyer hereby acknowledges that Buyer has had an opportunity to review, at Buyer's sole cost and expense, and hereby approves of, all environmental reports, soils inspection, conditions of title, zoning, surveys, all physical inspections of the Property, the Due Diligence Materials, and all other reports or inspections Buyer has deemed necessary or appropriate in connection with this Agreement, except as provided in Paragraph 6. c. above. Seller represents that the Property is currently being leased by Seller, as successor in interest landlord, to Big O Tires LLC, a Nevada limited liability company (formerly known as Big O Tires, Inc., a Nevada corporation) (the "Tenant"), in accordance with the terms and provisions of that certain Standard Lease Agreement dated for reference purposes April 19, 2004 (the "Standard Lease") and Option Addendum to Standard Lease Agreement (the "Option Addendum" and together with the Standard Lease, the "Original Lease"), as amended by that certain First Amendment to Standard Lease Agreement dated January 23, 2009 (the "First Amendment") and that certain Termination of Sublease and Assignment, Assumption and Amendment of Lease dated December 23, 2010 (the "Second Amendment" together with the First Amendment and the Original Lease, the "Lease"). In the event Seller is unable to obtain possession of the Property from the Tenant prior to the scheduled Closing Date, Seller may extend the Closing Date as necessary such that the Closing Date occurs up to five days after the Tenant has vacated possession of the Property. (3) Representations Warranties, and Covenants of Seller. Seller shall have duly performed each and every agreement to be performed by Seller hereunder and Seller's representations, warranties, and covenants set forth in Paragraph 15 shall be true and correct as of the Closing Date. (4) No Material Changes. At the Closing Date, there shall have been no material adverse changes in the physical condition of the Property. -10- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc (5) Inspections and Studies. Buyer hereby acknowledges and agrees that Buyer has approved the results of any and all inspections, investigations, tests and studies (including, without limitation, investigations with regard to zoning, building codes and other governmental regulations, architectural inspections, engineering tests, economic feasibility studies and soils, seismic and geologic reports) with respect to the Property (including all structural and mechanical systems and leased areas) elected or obtained by Buyer. During the term of this Escrow, Buyer, its agents, contractors and subcontractors, upon at least twenty- four (24) hours written notice, shall have the right to enter upon the Property, at reasonable times during ordinary business hours, to make any and all additional inspections and tests as may be necessary or desirable in Buyer's sole judgment and discretion, except that Buyer needs Seller's written approval for any inspection that could materially alter the physical condition of the property or create any violation of any environment requirements. Buyer shall use care and consideration in connection with any of its inspections. Buyer shall indemnify, defend and hold Seller and the Property harmless from any and all claims, liabilities, damages, costs and expenses (including reasonable attorneys' fees) arising out of, or resulting from the negligence of Buyer's, and/or Buyer's agents, contractors and/or subcontractors directly resulting from such entry or activities upon the Property. In conducting any inspections, tests or studies, Buyer and its authorized agents and representatives shall (a) be insured for not less than $1,000,000.00 insuring without limitation, coverage for bodily injury, property damage, contractual liability and personal injury liability with respect to the Improvements on the Property or arising out of any of Buyer's use, inspection or occupancy of the Property, or arising out of any of the indemnified claims, and shall name Seller as an additional insured, (b) not materially interfere with lawful operation, use, occupancy, and maintenance of the Property, except for normal damage incidental to studies, inspections, investigations and tests, which shall be immediately repaired at Buyer's sole cost to the reasonable approval of Seller,(c) not damage any part of the Property or any personal property owned or held by any third party, (d) not injure or otherwise cause bodily harm to Seller or any of its agents, contractors and employees or any other third parry, (e) promptly pay when due the cost of all inspections, tests or studies, and (f) not permit any liens to attach to the Property by reason of the exercise of their rights under this Paragraph 8.a.(5). Seller shall be provided an opportunity to have a representative of Seller present during any testing. Seller's rights to indemnity, defense, to be held harmless and insurance coverage under this paragraph shall survive the termination of this Agreement and the Close of Escrow. -11- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local SettingsUemporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc (6) Vacation of Easements. Seller shall use commercially reasonable efforts to vacate or cause the vacation of those property easements as permitted by the dominant tenement listed on the Preliminary Title Report and identified by Seller in writing (the "Dominant Tenement Easements"). Buyer hereby acknowledges and agrees that Seller does not guaranty vacation of such Dominant Tenement Easements, but will use commercially reasonable efforts to vacate or cause the vacation of such easements. (7) Termination of Lease. Seller shall send to Tenant a notice of termination of Lease prior to the Close of Escrow upon Seller's receipt from Buyer of the Notice to Close Escrow pursuant to Paragraph 6.b. above. Seller shall deliver title to the Property to Buyer free and clear of any liens except as otherwise disclosed by the Preliminary Title Report and approved in writing by Buyer and Seller. b. Conditions Precedents to Seller's Obli ag tion. For the benefit of Seller, the Close of Escrow shall be conditioned upon the occurrence and satisfaction of each of the following conditions (or Seller's waiver thereof, it being agreed Seller may waive any or all of such conditions): (1) Permits. Buyer shall have delivered to Seller a list of all permits required for any demolition and the construction and use of the Improvements, demonstrating to the satisfaction of the City Manager that all variances (if any), entitlements and approvals have been obtained and that all conditions for the issuance of all necessary permits have been satisfied. In addition, Buyer shall have obtained approval, from the appropriate public agency (e.g., the City of Huntington Beach and Orange County) or utility company, of all plans and permits necessary for Seller's completion of construction of the Hotel Project, environmental remediation work and utility relocation work related to the development and construction of the Hotel Project. (2) Baer r Deposit. Buyer shall have paid to Seller the Buyer Deposit when and as required pursuant to Paragraph 3.a. above. (3) Buyer's Obligations. Buyer shall have timely performed all of the obligations required by the terms of this Agreement to be performed by Buyer, and (4) Documents. Buyer shall have executed, in recordable form as necessary, and delivered into escrow where appropriate, all of the documents, when and as required herein. -12- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc (5) Buyer's Representations and Warranties. All representations and warranties made by Buyer to Seller in this Agreement shall be true and correct as of the Close of Escrow. 9. Deposits by Seller. At least one (1) business day prior to the Close of Escrow, Seller shall deposit or cause to be deposited with Escrow Holder the following documents and instruments: a. Grant Deed. The Grant Deed conveying the Property to Buyer duly executed by Seller, acknowledged and in recordable form, substantially similar to Exhibit C. Upon receiving said executed Grant Deed, Escrow Holder is instructed to forward a copy of Grant Deed to Buyer so that an original Certificate of Acceptance can be attached. b. Closing Costs. Seller's share of Closing Costs, if any. C. Settlement Funds. A document evidencing Seller's assignment of the Settlement Funds pursuant to Paragraph 4.e. (1). above. d. Environmental Insurance Policy. A document evidencing Seller's transfer of the Environmental Insurance Policy to Buyer in a form approved in writing by the Seller pursuant to Paragraph 4.e. (2) above. 10. Deposits by Buy. At least three (3) business days prior to the Close of Escrow, Buyer shall deposit, or cause to be deposited with Escrow Holder, the following: a. Funds. Funds which are to be applied toward the payment of the Purchase Price in the amounts and at the times designated in Paragraph 3 above; and b. Certificate of Acceptance to Grant Deed. An original Certificate of Acceptance, acknowledged and in recordable form, substantially similar to Exhibit C, attached hereto and incorporated herein by this reference. 11. Costs and Expenses. The cost and expense of the Title Policy attributable to ALTA coverage, plus the cost of any endorsements insuring title requested by Buyer, including, but not limited to the costs of an endorsement insuring Buyer's title against any mechanics' liens as of the Closing Date, shall be paid by Buyer. Buyer shall pay any Escrow fees. Buyer shall pay all documentary transfer taxes, if any, payable in connection with the recordation of the Grant Deed. The amount of such transfer taxes shall not be posted on the Grant Deed, but shall be supplied by separate affidavit. Buyer shall pay the Escrow Holder's customary charges to Buyer and Seller for document drafting, recording, and miscellaneous charges. Each party shall be responsible for their respective legal fees and, except as otherwise provided herein, their respective costs in connection with this transaction. -13- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc 12. Prorations. Escrow Holder shall prorate all rents, real estate taxes, bonds or assessments (general and special) as of 12:01 a.m. on the date of the Close of Escrow. a. All operating expenses of the Property including, without limitation, utility charges, maintenance charges, management fees, and other costs and expenses shall be prorated between Buyer and Seller as of 12:01 a.m. on the date of Close of Escrow. Any utility services shall be transferred to the name of the Buyer effective as of the Close of Escrow and Seller shall be relieved of any future liability for such charges incurred after the Close of Escrow. In the event Seller has made any utility deposits, Seller shall be entitled to a refund of such deposits directly from the utility companies and any future deposits shall be paid directly to the utility companies by Buyer; provided, however, that Buyer may elect, in its sole discretion, to require Seller to assign the rights to utility deposits to Buyer in exchange for a credit to Seller through Escrow for the amount of such deposits. b. At least three (3) business days prior to the Closing Date, Seller shall provide to Buyer a schedule of all prorations accompanied by the latest available billings for any operating expenses and statements for rent, if applicable. Buyer and Seller shall agree upon such prorations and notify Escrow Holder on or before two (2) business days prior to the Closing Date. C. Seller shall pay all bills incurred with respect to the Property prior to the Close of Escrow; provided, however, with respect to bills not received by Seller before the Close of Escrow, Seller shall pay the portion of such bills attributable to the period prior to the Close of Escrow within ten (10) days after Seller's receipt of same. Said covenant of Seller shall survive the Close of Escrow. Buyer shall pay all bills incurred with respect to the Property following the Close of Escrow. d. In the event that there are any unknown amounts to be prorated as of the Close of Escrow, then Seller and Buyer will prorate the same promptly after the Close of Escrow and outside the escrow. 13. Taxes. a. Property Taxes. Seller shall be liable for all Property taxes affecting the Property until the Close of Escrow. Buyer shall be liable for all Property taxes affecting the Property from and after the Close of Escrow. b. Payment of Taxes. Buyer shall pay all documentary transfer taxes imposed upon the conveyance of the Property to Buyer, if any. 14. Disbursements and Other Actions by Escrow Holder. Upon the Close of Escrow, the Escrow Holder shall promptly undertake all of the following in the manner indicated: -14- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JKTurchase and Sale Agmt (final)(2) redline.doc a. Prorations. Prorate all matters referenced herein to be prorated by Escrow, based upon the statement delivered into Escrow signed by the parties. b. Recording. Cause the Grant Deed and any other documents which the parties hereto may mutually direct, to be recorded in the Official Records of Orange County, California (the "Official Records"). Escrow Holder is instructed not to affix the amount of documentary transfer tax on the face of the Grant Deed, but to supply same by separate affidavit. C. Funds. (i) From funds deposited by Buyer with Escrow Holder, after payment for all items chargeable to the account of Buyer, disburse the Purchaser Price to Seller; (ii) disburse funds for all items chargeable to the account of Seller in payment of such costs from the Purchase Price payable to Seller; and (iii) disburse the balance of such funds, if any, to Buyer. d. Documents to Buyer. Deliver the Bill of Sale executed by Seller, and, when issued, the Title Policy, to Buyer. e. Pay demands of existing lienholders. Pay all demands of lienholders with valid claims as of the Closing Date. 15. Seller's Representations and Warranties. In consideration of Buyer entering into this Agreement, and as an inducement to Buyer to purchase the Property, Seller makes the following representations and warranties, each of which is material and is being relied upon by Buyer (and the continued truth and accuracy of which shall constitute a condition precedent to Buyer's obligations hereunder): a. Validly Existing. Seller is a municipal law city, duly formed, validly existing and in good standing under the laws of the State of California. b. Authorization. This Agreement has been duly and validly authorized, executed and delivered by Seller, and no other action is requisite to the execution and delivery of this Agreement by Seller. C. Threatened Actions. There are no actions, suits or proceedings pending against, or, to Seller's actual knowledge, threatened or affecting the Property in law or equity. d. Third Party Consents. No consents or waivers of, or by, any third parry are necessary to permit the consummation by Seller of the transactions contemplated pursuant to this Agreement. e. No Violation of Law. To the Seller's actual knowledge, there is no violation of law or governmental regulation by Seller with respect to the Property. -15- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and Settings1ritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc f. Condemnation. There are no pending, or, to the best of Seller's actual knowledge, threatened proceedings in eminent domain or otherwise, which would affect the Property or any portion thereof. g. Compliance with Law. To Seller's actual knowledge, all laws, ordinances, rules, and requirements and regulations of every governmental agency, body, or subdivision thereof bearing on the Property have been complied with by Seller. h. Agreements. Seller is not a party to any agreement (whether oral or written) affecting or relating to the right of any parry with respect to the possession of the Property, or any portion thereof, which are obligations which will affect the Property or any portion thereof subsequent to the recordation of the Grant Deed, except as may be reflected in the Approved Condition of Title and the Lease identified in Paragraph 8.a (5) above, which Seller shall terminate prior to the Close of Escrow. i. Documents. To Seller's actual knowledge, all documents delivered to Buyer pursuant to this Agreement are true and complete copies of originals, without any representation or warranty as to the contents or accuracy thereof. j. Occupancy Agreement Other than the Lease, There are no leases, subleases, occupancies or tenancies in effect pertaining to the Property, and Seller has no knowledge of any oral agreements with anyone, including tenants, with respect to the occupancy of the Property. k. Hazardous Materials. Seller makes no representation or warranty, express or implied, regarding any conditions of the Property, except that Seller represents and warrants to Buyer that Seller has disclosed and provided to Buyer all information; true, correct and complete copies of studies, reports, investigations and contracts; and other obligations concerning or related to the Property which are in Seller's possession or which are known by and available to Seller, including, without limitation, correspondence, studies, reports and investigations concerning the Property's environmental condition and the presence or absence of Hazardous Materials in, on or under the Site and its compliance with environmental laws. For purposes of this Agreement, the term "Hazardous Materials" means any substance, material or waste which is regulated as hazardous/contaminating or potentially hazardous/contaminating 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) lead; (viii) a polychlorinated biphenyl; -16- Purchase & Sale Agreement and Joint Escrow Instructions CA\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (fnal)(2) redline.doc (ix) 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; (x) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (xi) defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act (42 U.S.C. Section 6903); (xii) defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601); (xiii) any other substance, whether in the form of a solid, liquid, gas or any other form whatsoever, with respect to which any governmental regulations or requirements provide for special handling in its use, transportation, generation, collection, storage, treatment or disposal; (xiv) any substance, product, waste, or other material of any nature whatsoever which may give rise to liability under any of the above statutes or under any statutory or common law theory based on negligence, trespass, intentional tort, nuisance or strict liability or under any reported decisions of a state or federal court; (xv) petroleum or crude oil other than petroleum and petroleum products which are contained within regularly operated motor vehicles; and (xvi) asbestos. 1. Due Diligence Materials. To Seller's knowledge, there are no other reports relating to the physical condition of the Property that are in existence, but not in Seller's possession. Seller's representations and warranties made in this Paragraph 15 shall be continuing and shall be true and correct on and as of the Close of Escrow. The truth and accuracy of Seller's representations and warranties made herein shall survive the Close of Escrow or termination of this Agreement for a period of twelve (12) months. 16. Buyer's Representations and Warranties. In consideration of Seller entering into this Agreement, and as an inducement to Seller to sell the Property to Buyer, Buyer makes the following representations and warranties, each of which is material and is being relied upon by Seller (the continued truth and accuracy of which shall constitute a condition precedent to Seller's obligations hereunder): a. Buyer is a corporation, duly formed, validly existing and in good standing under the laws of the State of California. b. Buyer has the full right, power and authority to enter into this Agreement and the instruments referenced herein; and to consummate the transactions contemplated hereby. C. The persons executing this Agreement, the instruments referenced herein, and any other documents executed and delivered on behalf of Buyer have the full right, power and authority to do so and have been duly authorized to do so by Buyer, and no other persons are required to execute this Agreement on behalf of Buyer. -17- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and Settings\fritzalk\Local SettingsUemporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc d. This Agreement has been, and all documents executed by Buyer under this Agreement which are to be delivered to Seller at the time of Close of Escrow will be, duly authorized, executed, and delivered by Buyer, and is, or as to all documents to be executed by Buyer at the Close of Escrow, will be, legal, valid, and binding obligations of Buyer, and do not, and at the Close of Escrow will not violate any provisions of any agreement or judicial order to which Buyer is a party or to which it is subject. e. The representations and warranties of Buyer set forth in this Agreement shall be continuing and shall be true and correct on and as of the Close of Escrow. 17. Environmental Remediation. a. Seller makes no representation or warranty, express or implied, regarding any conditions of the Property. b. Seller has no responsibility or obligation to remediate any Hazardous Materials on, under or about the Property. Any liability of Seller with respect to any Hazardous Materials on, under or about the Property shall terminate upon the conveyance of the Property to Buyer. Buyer acknowledges and agrees that Seller shall have no responsibility to pay for any remediation costs. To the extent required by any applicable laws, statutes, regulations, or regulatory orders, Buyer shall have sole responsibility to perform any remediation of Hazardous Materials existing on the Property. Buyer agrees to perform such remediation under the oversight of the Orange County Department of Environmental Health (DEH), the City of Huntington Beach Fire Department or another appropriate regulatory agency, including, without limitation, receiving approval of a remedial action plan (or plan of similar effect) prior to construction activities. Buyer shall comply with all federal, state and local laws, statutes, regulations and regulatory orders in performing any remediation any Hazardous Materials on, under or about the Property. C. Hazardous Materials have been discovered within the Property (the "Release") as identified in that certain Phase I ( as defined in Exhibit E) and Limited Phase I1(as defined in Exhibit E). Buyer, at Buyer's sole cost and expense, shall take all necessary actions to remediate the Release in accordance with all federal, state, and local regulations, including, without limitation, performing any and all required removal action(s), mitigation actions or remedial actions to address the Release pursuant to the Remediation Work Plan (as defined in Exhibit E) and the City Fire Department Additions to Remediation Work Plan (as defined in Exhibit E). Furthermore, Buyer agrees that it shall defend, indemnify, and hold harmless Seller and its employees, agents, attorneys, successors, and assigns from and against any and all claims, liabilities, penalties, fines, judgments, forfeitures, losses, costs, or expenses (including reasonable attorneys' fees, consultants fees, and expert fees) arising from or caused in whole or in part, directly or indirectly, related to the Release or remediation of the Release and from any and all costs incurred in connection with any site investigation and any and all costs for repair, cleanup, detoxification or decontamination, or other remedial action of the Property. -18- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsW ritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc d. Seller makes no representations or warranties, express or implied, that the Remediation Work Plan, City Fire Department Additions to Remediation Work Plan or any other remediation plan approved in connection with this Agreement will remediate all Hazardous Materials on, in, under or about the Property. Buyer agrees that it will accept the Property with knowledge that Hazardous Materials may exist on, in, under or about the Property at the time of conveyance, and may also exist following the completion of Buyer's remediation effort. As Buyer will accept the Property with the potential for some residual contamination to remain following remediation, Seller shall have no liability for, and shall not defend or indemnify Buyer with respect to any liability, loss or claim resulting from the existence of Hazardous Materials on, in, under or about the Property. e. Buyer shall be responsible for the continuing remediation of the Release or any other unknown Hazardous Materials on, under or about the Property in accordance with all applicable laws and regulations. f. Buyer further agrees, at its sole cost and expense, to properly handle any contaminated media encountered during future development of the Property in accordance with all applicable laws and regulations and in a manner which protects human health and the environment. Buyer also agrees, at its sole cost and expense, to utilize proper health and safety protocols during on -site activities and to implement and maintain appropriate engineering controls to prevent human exposure to contaminated media remaining on the Property. g. Upon completion of any remediation, Buyer (on its own or through an environmental consultant) shall prepare a closure report documenting the remediation that occurred on, under or about the Property and requesting that the regulatory agency providing oversight issue a "No Further Action" letter, or other document of similar effect. Buyer will receive such "No Further Action" letter (or document of similar effect) prior to obtaining its temporary certificate of occupancy. h. Buyer shall defend, indemnify and hold harmless Seller and its officers, representatives, agents, employees, contractors and attorneys from and against any claims, liability, injury, damages, costs and expenses (including, without limiting the generality of the foregoing, the cost of any required remediation of Hazardous Materials and the cost of attorneys' fees) which may be sustained as the result of the presence or remediation of Hazardous Materials on, under or about the Property. The foregoing defense and indemnification obligations shall survive termination of this Agreement and the Close of Escrow. 18. Damage or Condemnation Prior to Closing. a. Material Damage or Destruction. In the event of material damage to or destruction of the Property prior to the Close of Escrow, through no fault of Seller, Buyer shall have the right, but not the obligation, exercisable by giving notice to Seller within fifteen (15) -19- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsW ritzalk\Local SettingsUemporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc days after receiving written notice of such damage or destruction, either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except that (a) all funds deposited into Escrow or documents in Escrow shall be returned to the party depositing the same, and (b) Buyer and Seller each shall be responsible for one-half of any title or escrow cancellation fee, or (ii) to accept the Property in its then condition and to proceed with the Close of Escrow, in which event upon the Close of Escrow, Buyer shall be entitled to receive an assignment of all of Seller's rights to any insurance proceeds payable by reason of such damage or destruction. If Buyer elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such proceeds without Buyer's prior written consent. b. Eminent Domain. In the event that prior to the Close of Escrow, all or any material portion of the Property is subject to a taking or a threatened taking by a public authority, Buyer shall have the right, but not the obligation, exercisable by giving notice to Seller within fifteen (15) days after receiving written notice of such taking, either (i) to terminate this Agreement, in which case neither party shall have any further rights or obligations hereunder except that (a) all funds deposited into Escrow or documents in Escrow shall be returned to the party depositing the same, and (b) Buyer and Seller each shall be responsible for one-half of any title or escrow cancellation fee, or (ii) to accept the Property in its then condition and to proceed with the Close of Escrow without an abatement or reduction in the Purchase Price, in which case Buyer shall be entitled to receive an assignment of all of Seller's rights to any condemnation award payable by reason of such taking. If Buyer elects to proceed under clause (ii) above, Seller shall not compromise, settle or adjust any claims to such award without Buyer's prior written consent. C. Non -Material Taking or Damage. In the event that prior to the Close of Escrow, any non -material portion of the Property is damaged, destroyed or subject to a taking or a threatened taking by a public authority, Buyer shall accept the Property in its then condition and proceed with the Close of Escrow without any abatement or reduction in the Purchase Price, in which case Buyer shall be entitled to receive an assignment of all of Seller's rights to (i) any applicable insurance proceeds; and/ or (ii) any condemnation award payable by reason of such taking. In the event of any such non -material damage, destruction or taking, Seller shall not compromise, settle or adjust any claims to such award without Buyer's prior written consent. 19. Notices. Formal notices, demands and communications between Buyer and Seller 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 the Buyer and Seller as set forth below. 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 (delivered during normal business hours) followed by delivery of a "hard" copy, shall be deemed delivered upon its transmission; any notice that is personally delivered -20- Purchase & Sale Agreement and Joint Escrow Instructions C:ADocuments and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc (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. To Buyer: Campbell Lodging, Inc. 1800 East Imperial Highway, Suite 120 Brea, California 92821 Attention: Martin A. Campbell Fax Number: (714) 256-2165 To Seller: City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Attention: Director of Economic Development With a Copy To: Office of the City Attorney City of Huntington Beach 2000 Main Street Huntington Beach, California 9264 Attention: City Attorney Notice of change of address shall be given by written notice in the manner detailed in this paragraph. Rejection or other refusal to accept, or the inability to deliver because of changed address of which no notice was given, shall be deemed to constitute receipt of the notice, demand, request, or communication sent. 20. Le ag 1 Fees. Each party shall be responsible for their respective legal fees and costs in connection with any action or suit against the other party hereunder arising out of this Agreement. 21. Assignment. Buyer shall not be entitled to assign this Agreement without the prior written consent of Seller's City Manager, which consent shall not be unreasonably withheld. a. Prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, Buyer shall not 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 Property, or the Improvements without prior written approval of the Seller's City Manager. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Property. -21- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc b. In the event Buyer does assign this Agreement or any of the rights herein, or does sell, transfer, convey or assign the Property or the buildings or structures thereon prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project without the written approval of the City Manager, Seller shall have the right to terminate this Agreement. C. In the absence of a specific written agreement by the City Manager no such sale, transfer, conveyance or assignment of this Agreement or the Property (or any portion thereof), or approval by the City Manager of any such sale, transfer, conveyance or assignment, shall be deemed to relieve Buyer or any other parry from any obligations under this Agreement. d. Buyer represents and agrees for itself and any successor in interest that prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project, without the prior written approval of the Seller, there shall be no significant change in the ownership of Buyer or in the relative proportions thereof, or with respect to the identity of the parties in control of Buyer or the degree thereof, by any method or means. e. Buyer shall promptly notify the Seller of any and all changes whatsoever in the identity of the partners of Buyer, of which Buyer or any of its officers and/or partners have been notified or otherwise have knowledge or information. This Agreement may be terminated by the Seller if there is any significant change (voluntary or involuntary) in partnership, management or control of Buyer (other than such changes occasioned by the death or incapacity of any individual) prior to the issuance of the permanent Certificate of Occupancy by the Seller for the Hotel Project. The term "control" as used herein shall mean (i) with respect to a corporation or limited liability company is the right to exercise or control, directly or indirectly, 49% or more of the voting rights attributable to the controlled corporation, and (ii) 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. 22. Les4al and Equitable Enforcement of this Agreement. a. Default b. Smeller. In the event the Close of Escrow and the acquisition of the Property by Buyer does not occur by reason of any default by Seller, Buyer shall be entitled to the return of the Closing Funds (i.e, Escrow fees if deposited with Escrow and the refundable portion of the Buyer Deposit if deposited with Escrow or Seller) not including the ONE HUNDRED THOUSAND DOLLAR ($100,000) Non -Refundable Portion of Buyer Deposit, and all of its reasonable out-of-pocket expenses incurred in connection with the transaction in an amount not to exceed FIFTY THOUSAND DOLLARS ($50,000) or, alternatively, shall have the right to pursue specific performance of this Agreement, if filed within one hundred and twenty (120) days after the scheduled Closing Date, and Buyer expressly waives any rights it may have to seek or obtain damages or any other act or thing, of any kind or character, due to the default by Seller in the terms hereof, excluding surviving obligations, if any. Out of pocket -22- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\21D915JK\Purchase and Sale Agmt (final)(2) redline.doc expenses shall include, reasonable attorneys' fees and expenses, consultant's fees and expenses, expenses related to inspection and investigation of the Property (including, without limitation, environmental studies and reports and survey fees and expenses) and escrow fees and title fees and expenses. b. Default By Buyer Prior to the Close of Escrow. IN THE EVENT THE CLOSE OF ESCROW AND THE ACQUISITION OF THE PROPERTY BY BUYER DOES NOT OCCUR AS HEREIN PROVIDED BY REASON OF A DEFAULT OF BUYER, BUYER AND SELLER AGREE THAT IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE DAMAGES WHICH SELLER MAY SUFFER. THEREFORE BUYER AND SELLER DO HEREBY AGREE THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER WOULD SUFFER IN THE EVENT THAT BUYER DEFAULTS AND FAILS TO COMPLETE THE PURCHASE OF THE PROPERTY IS AND SHALL BE, AS SELLER'S SOLE AND EXCLUSIVE REMEDY (WHETHER AT LAW OR IN EQUITY), THE AMOUNT OF ONE HUNDRED THOUSAND DOLLARS ($100,000) (THE "LIQUIDATED DAMAGE AMOUNT"). THE PAYMENT TO SELLER OF THE LIQUIDATED DAMAGE AMOUNT SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE BREACH OF THIS AGREEMENT BY BUYER, ALL OTHER CLAIMS TO DAMAGES OR OTHER REMEDIES BEING HEREIN EXPRESSLY WAIVED BY SELLER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677. SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. UPON DEFAULT BY BUYER, THIS AGREEMENT SHALL BE TERMINATED AND NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER EXCEPT FOR THE RIGHT OF SELLER TO COLLECT SUCH LIQUIDATED DAMAGES FROM BUYER AND ESCROW HOLDER AND THE SURVIVING OBLIGATIONS HEREUNDER. Buyer's Initials Seller's Initials c. Default by Buyer After the Close of Escrow. The Parties hereto acknowledge and agree that the following terms and provisions shall apply in connection with an event of default by Buyer pursuant to this Agreement that occurs after the Close of Escrow: (1) After the Close of Escrow, if a monetary event of default occurs, prior to exercising any remedies hereunder, the non -defaulting party shall give the party in default written notice of such default. The party in default shall have a period of ten (10) business days after such notice is given within which to cure the default prior to exercise of remedies by the injured party. - 23 - Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and Settings1ritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc (2) After the Close of Escrow, if a non -monetary event of default occurs, prior to exercising any remedies hereunder, the non -defaulting party shall give the party in default notice of such default. If the default is reasonably capable of being cured within thirty (30) days, the party in default shall have such period to effect a cure prior to exercise of remedies by the non -defaulting party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the party in default (1) initiates corrective action within said thirty (30) day period, and (ii) 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 non -defaulting party, but in no event shall such period exceed sixty (60) days from the date such notice is received or deemed received. In no event shall the non - defaulting Party be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default. (3) After the Close of Escrow, 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 Orange County, State of California, in any other appropriate court of that county, or in the United States District Court for the Central District of California. (4) In the event that any legal action is commenced by the Buyer against the Seller, service of process on the Seller shall be made by personal service upon the City Manager or in such other manner as may be provided by law. (5) In the event that any legal action is commenced by the Seller against the Buyer, service of process on the Developer shall be made by personal service upon the Buyer (or upon an officer of the Buyer) and shall be valid whether made within or without the State of California, or in such manner as may be provided by law. (6) 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. (7) Subject to the notice and cure provisions of this Paragraph 22 c, if either party defaults with regard to any provisions of this Agreement, the -24- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and Settings\fritzalk\Local Settingffemporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc defaulting party shall be liable to the non -defaulting party for any damages caused by such default, and the non -defaulting party may, after such notice and opportunity to cure (but not before) commence an action for damages against the defaulting party with respect to such default. (8) After the Close of Escrow, If either party defaults with regard to any of the provisions of this Agreement and subject to the notice and cure provisions of this Paragraph 22 c., the non -defaulting party, at its option, may, after such notice and opportunity to cure (but not before) commence an action for specific performance of the terms of this Agreement pertaining to such default. (9) The non -defaulting party shall give written notice of default to the party in default, specifying the default complained of by the non -defaulting parry. 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. 23. Miscellaneous. a. Survival of Covenants. The covenants, representations and warranties of both Buyer and Seller set forth in this Agreement shall survive the recordation of the Grant Deed and the Close of Escrow, unless provided otherwise. b. Required Actions of Buyer and Seller. Buyer and Seller agree to execute such instruments and documents and to diligently undertake such actions as may be reasonably required in order to consummate the purchase and sale herein contemplated, and shall use their best efforts to accomplish the Close of Escrow in accordance with the provisions hereof. C. Time of Essence. Time is of the essence of each and every term, condition, obligation, and provision hereof. d. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. e. Captions. Any captions to, or headings of, the paragraphs or subparagraphs of this Agreement are solely for the convenience of the parties hereto, are not a - 25 - Purchase & Sale Agreement and Joint Escrow Instructions C:ADocuments and Settings\fritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any provision hereof. f. No Real Estate Commissions; No Brokerage Fees; Indemnity. Buyer and Seller each represent and warrant to the other party that neither has dealt with or engaged a broker in connection with this transaction, and agrees to indemnify and save harmless the other party from and against all claims, costs, liabilities and expense (including court costs and reasonable attorneys' fees) incurred by the other party as a result of a breach of this representation. Buyer shall indemnify, defend and hold harmless the Seller and its elected and appointed officials, officers, employees, agents, contractors and consultants (individually and collectively, the "Indemnitees") from and against any and all claims, lawsuits, judgments, liability, injury or damage, including without limitation associated and reasonably incurred attorneys' fees and court and litigation costs arising out of the defense of any such claims and/or lawsuits, and actual attorneys' fees and court and litigation costs that may be awarded by the court and required to be paid by the Indemnitees resulting or arising from or in any way connected to the Hotel Project or this Agreement. Buyer shall not be responsible for any liability, loss, damage, cost, or expense (including reasonable attorney's fees and court costs) arising from or as a result of the gross negligence or willful misconduct of the Indemnitees. Seller shall have the sole discretion to select legal counsel to represent the Seller's legal interests in the defense of any such lawsuits, claims or other actions filed against the Seller. The obligation of the Seller to pay any costs in connection with this Agreement shall be a special limited obligation of the Seller payable exclusively from funds paid by the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic (the "Agency") and its successors. Nothing contained herein shall be construed to create any obligation payable from the City of Huntington Beach's general fund. g. No Obligations to Third Parties. Except as otherwise expressly provided herein, the execution and delivery of this Agreement shall not be deemed to confer any rights upon, nor obligate any of the parties hereto, to any person or entity other than the parties hereto. h. Exhibits and Schedules. The Exhibits and Schedules attached hereto are hereby incorporated herein by this reference. i. Waiver. The waiver or failure to enforce any provision of this Agreement shall not operate as a waiver of any future breach of any such provision or any other provision hereof. j. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. -26- Purchase & Sale Agreement and Joint Escrow Instructions CA\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc k. Fees and Other Expenses. Except as otherwise provided herein, each of the parties shall pay its own fees and expenses in connection with this Agreement. 1. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. in. Severability. In the event that any provision of this Agreement or the application thereof becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. n. Computation of Time. The time in which any act is to be done under this Agreement is computed by excluding the first day (such as the day Escrow opens), and including the last day, unless the last day is a holiday or Saturday or Sunday, in which case the time shall be extended to the next business day. o. Interpretation. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against any parry by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. p. Conflicts of Interest. No member, official or employee of the Buyer or the Seller shall have any personal interest, direct or indirect, in this Agreement nor shall any such member, official or employee participate in any decision relating to this Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is, directly or indirectly, interested. q. Gender and Number. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others wherever and whenever the context so dictates. 24. Indemnification of Escrow Holder. a. If this Agreement or any matter relating hereto shall become the subject of any litigation or controversy, Buyer and Seller agree, jointly and severally, to hold Escrow Holder free and harmless from any loss or expense, including attorney's fees, that may be suffered by it by reason thereof except for losses or expenses as may arise from Escrow Holder's negligent or willful misconduct. If conflicting demands are made or notices served upon Escrow Holder with respect to this Agreement, the parties expressly agree that Escrow Holder shall be -27- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc entitled to file a suit in interpleader and obtain an order from the court requiring the parties to interplead and litigate their several claims and rights among themselves. Upon the filing of the action in interpleader, Escrow Holder shall be fully released and discharged from any obligations imposed upon it by this Agreement, and b. Escrow Holder shall not be liable for the sufficiency or correctness as to form, manner, execution, or validity of any instrument deposited with it, nor as to the identity, authority or rights of any person executing such instrument, nor for failure of Buyer or Seller to comply with any of the provisions of any agreement, contract or other instrument filed with Escrow Holder, or referred to herein. Escrow Holder's duties hereunder shall be limited to the safekeeping of all monies, instruments, or other documents received by it as Escrow Holder, and for their disposition in accordance with the terms of this Agreement. 25. Enforced Delay; Extension of Time of Performance. 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 Seller (in any other capacity other than as "Seller" herein) or any other public or governmental agency or entity. 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. 26. Entire Agreement, Waivers and Amendments. a. This Agreement shall be executed in three (3) duplicate originals each of which is deemed to be an original. This Agreement and its attached Exhibits shall constitute 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 or any interest in) the Property. This Agreement and all documents incorporated herein contain the entire understanding among the parties hereto relating - 28 '- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and Settings\fritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc to the transactions contemplated herein and all prior or contemporaneous agreements, understandings, representations, and statements, oral or written. C. All waivers of the provisions of this Agreement must be in writing and signed by the appropriate authorities of the Buyer and the Seller, and all amendments hereto must be in writing and signed by the appropriate authorities of the parties to be bound thereby. d. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument. The signature page of this Agreement may be detached from and added to any counterpart of this Agreement identical in form. [Remainder of Page Intentionally Blank] [Signatures on Following Page] -29- Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "SELLER" CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney KANE, BALLMER & BERKMAN City Special Counsel Murray O. Kane [Signatures Continue on Following Page] -30- Purchase & Sale Agreement and Joint Escrow Instructions C:\Documents and SettingsW ritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JKTurchase and Sale Agmt (final)(2) redline.doc "BUYER" CAMPBELL LODGING, INC., a California corporation M. Martin A. Campbell, Vice-President/Chief Development Officer -31 - Purchase & Sale Agreement and Joint Escrow Instructions CADocuments and SettingsWritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JKTurchase and Sale Agmt (final)(2) redline.doc ATTACHMENT ,C-7X#1B17- 4 LEGAL DESCRIPTION Real property in the City of Huntington Beach, Orange County, State of California, described as follows: Lots 19 and 20 in Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom the North 20 feet thereof APN: 142-081-06 Lots 24, 25, 26, 27 and 28 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expecting therefrom all water and water rights as conveyed to Boulevard Gardens Water Company, a Corporation by Deed recorded February 11, 1925 in Book 561 page 287, of Deeds. APNs: 142-081-09, 142-081-10, 142-081-11, 142-081-12 Lots 21, 22 and 23 of Tract No. 417, as per map recorded in Book 16, Page 47 of Miscellaneous Maps, in the office of the County Recorder of Orange County. Expect all oil, minerals and other hydrocarbon substances without right of surface entry thereto above a depth of above 500 feet from the surface thereof, as revised in the deed from Beulah H. Finley, recorded December 14, 1960 in book 5548 Page 385, official records. APN: 142-081-28 ATTACHMENT 2 0 Exhibit `B" Property Map Corner of Edinger Avenue and Parkside Lane TH 'S MAP WA PREPARED FOR OHANLE COUNTY ASSESSOR DFPT, PURPOSES ONLY THE A55ES50R MANES NO GUARANTEE AS TO ITS ACCURACY NOR ASSUMES ANY IlA6lLITY FOR OTHER OSE5. NOT TO 9E RF°ROOUCED. ALL RIOTS RE SERVEO. m COP RIGHT ORANGE �OUNTv ASSESSOR 2003 g BEACH I I nmr TR C I I I ee I I I Ol I I 118 I 1251 12b1 2 �s ' 11 a 11 e J l 'W • I 6 1 l B 9� 10 I11 1 110 3 ea 8 O 17 � Q ass eU O3 1s i6 Jz W I m a 'o �8� I 27 -------- °----------- — — — — �181 — — — — — ao l>C s ua. 2027----------- a o0 e 31 6 P $5-- 232AO YPPKNbE 0 107-78 v f HUNTIN,TON OEACU i 142-08 1 " — 100' BOULEVARD LANE MARCH 1962 TRACT NO. 417 M.M. 16-47 NOTE — ASSESSOR'S BLOCK s ASSESSOR'S MAP PARCEL MAP P.M. 90-41, 104-44 PARCEL NUMBERS BOOK 142 PAGE 08 SHOWN IN CIRCLES COUNTY OF ORANGE 0I 0 EXHIBIT C GRANT DEED FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CITY OF HUNTINGTON BEACH 2000 Main Street Huntington Beach, CA 92648 Attn: City Administrator MAIL TAX STATEMENTS TO: [insert Grantee entity name & address] (Space Above This Line for Recorder's Office Use Only) (Exempt from Recording Fee per Gov. Code § 6103 & 27383) APN: [insert] GRANT DEED FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged THE CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California, herein called "Grantor," hereby grants to CAMPBELL LODGING, INC., a California corporation, herein called "Grantee", the real property, hereinafter referred to as the "Property", described in Exhibit "A" attached hereto and incorporated herein by this reference. Grantor excepts and reserves: (a) any existing street, dedicated street, or portion of any street or dedicated street lying outside the boundaries of the Property which might otherwise pass with a conveyance of the Property; and (b) (to the extent now or hereafter validly excepted and reserved by the parties named in deeds, leases and other documents of record) all oil, gas, hydrocarbon substances and minerals of every kind and character lying more than 500 feet below the surface, together with the right to drill into, through, and to use and occupy all parts of the Property lying more than 500 feet below the Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 1 CADocuments and SettingsUritzalk\Local Settings\Temporary Internet Files Content.Outlook\21D915JK\Purchase and Sale Agmt (final)(2) redline.doc surface thereof for any and all purposes incidental to the exploration for and production of oil, gas, hydrocarbon substances or minerals from the Property, but without, however, any right to use or disturb either the surface of the Property or any portion thereof within 500 feet of the surface for any purpose or purposes whatsoever. 2. The Property is conveyed in accordance with and subject to the Purchase and Sale Agreement and Joint Escrow Instructions (the "Purchase Agreement") entered into by and between Grantor ("Seller" therein) and Grantee ("Buyer" therein) as of , 2012. The Purchase Agreement is a public record on file in the offices of the City Clerk of the City of Huntington Beach and is by reference thereto incorporated herein as though fully set forth herein. Any capitalized term not defined herein shall have the meaning ascribed to such term in the Purchase Agreement 3. Grantee hereby covenants and agrees for itself, its successors, its assigns, and every successor in interest to the Property that the Grantee, such successors and such assigns, shall develop, maintain, and use the Property only as follows: (a) The Property shall be devoted only to the development permitted and the uses specified in the applicable provisions of Grantor's General Plan, the Purchase Agreement (including the Scope of Development attached to the Purchase Agreement as Exhibit F and incorporated herein by this reference), plans and specifications approved by Grantor and this Grant Deed, whichever document is more restrictive. (b) The Grantee shall use the Property exclusively for the construction of a high - quality four story, 120 to 140-room Hyatt Place hotel or other brand hotel first approved in writing by Grantor as specifically described in the Purchase Agreement and Scope of Development attached thereto as Exhibit F (the "Project Improvements"). The Grantee shall use the Property for such uses and purposes and in accordance with plans and specifications for the development of the Property approved by Grantor. No change in the use of the Property and no new construction or material exterior modification or alteration of any structure on the Property shall be permitted without the prior written approval of Grantor. (c) For not less than 30 years from the date this Grant Deed is recorded in the Official Records of the Recorder's Office of Orange County, Grantee shall use the Property only for the uses specified in this Grant Deed and the Purchase Agreement. No change in the use of the Property and no new construction or exterior modification or alteration of any structure on the Property shall be permitted without the prior written approval of the Grantor. (d) Grantee, its successors and assigns, shall maintain the Improvements on the Property in the same aesthetic and sound condition (or better) as the condition of the Property at the time Grantor issues the Permanent Certificate of Occupancy for the Property, reasonable wear and tear excepted. This standard for the quality of maintenance of the Property shall be met whether or not a specific item of maintenance is listed below. However, representative items of maintenance Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 2 CADocuments and Settings\fritzalk\Local Settings\Temporary Internet Files Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc shall include frequent and regular inspection for graffiti or damage or deterioration or failure, and immediate repainting or repair or replacement of all surfaces, fencing, walls, equipment, etc., as necessary; emptying of trash receptacles and removal of litter; sweeping of public sidewalks adjacent to the Property, on -site walks and paved areas and washing -down as necessary to maintain clean surfaces; maintenance of all landscaping in a healthy and attractive condition, including trimming, fertilizing and replacing vegetation as necessary; cleaning windows on a regular basis; painting the buildings on a regular program and prior to the deterioration of the painted surfaces; conducting a roof inspection on a regular basis and maintaining the roof in a leak -free and weather - tight condition; maintaining security devices in good working order. In the event Grantee, its successors or assigns fails to maintain the Improvements in accordance with the standard for the quality of maintenance, Grantor or its designee shall have the right but not the obligation to enter the Property upon reasonable notice to Grantee, correct any violation, and hold Grantee, or such successors or assigns responsible for the cost thereof, and such cost, until paid, shall constitute a lien on the Property. (e) Grantee shall pay when due all real estate taxes and assessments assessed and levied on or against the Property subsequent to the Close of Escrow. In addition, Grantee shall remove, or shall have removed, any levy or attachment made on title to the Property (or any portion thereof), or shall assure the satisfaction thereof within a reasonable time but in any event prior to a sale of the Property thereunder. Nothing herein contained shall be deemed to prohibit the Grantee from contesting the validity or amount of any tax assessment, encumbrance or lien, nor to limit the remedies available to the Grantee in respect thereto. 4. The Grantee covenants and agrees for itself, its successors, its assigns and every successor in interest to the 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 Property. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph. 5. The Grantee covenants and agrees for itself, its successors, its assigns and every successor in interest to the Property or any part thereof, that Grantee, its successors and assigns shall refrain from restricting the rental, sale or lease of the Property on the basis of the race, color, creed, Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE CADocuments and SettingsUritzalk\Local Settings\Temporary Intemet Files\Content.0utlook\21D915JK\Purchase and Sale Agmt (final)(2) red] ine. doe religion, sex, sexual orientation, marital status, national origin or ancestry 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. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph. 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. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph." (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, Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE CADocuments and Settings1ritzalk\Local SettingsUemporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc 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. With respect to familial status, this paragraph shall not be construed to apply to housing for older persons, as defined in Section 12955.9 of the Government Code. With respect to familial status, nothing in this paragraph shall be construed to affect Sections 51.2, 51.3, 51.4, 51.10, 51.11, and 799.5 of the Civil Code, relating to housing for senior citizens. Subdivision (d) of Section 51 and Section 1360 of the Civil Code and subdivisions (n), (o) and (p) of Section 12955 of the Government Code shall apply to this paragraph." 6. Prior to the issuance of a Permanent Certificate of Occupancy for the Project Improvements by Grantor, Grantee shall not make any sale, transfer, conveyance or assignment of the Property or any part thereof or the buildings or structures thereon, without the prior written approval of Grantor. In the event that Grantee does sell, transfer, convey or assign any part of the Property or buildings or structures thereon, prior to the issuance of a Permanent Certificate of Occupancy for the Project Improvements by Grantor in violation of this Grant Deed, Grantor shall be entitled to increase the Purchase Price paid by Grantee by the amount that the consideration payable for such sale, transfer, conveyance or assignment is in excess of the Purchase Price paid by Grantee, plus the cost of improvements and development, including carrying charges and costs related thereto. The consideration payable for such sale, transfer, conveyance or assignment to the extent it is in excess of the amount so authorized shall belong and be paid to Grantor and until paid Grantor shall have a lien on the Property and any part involved for such amount. This prohibition shall not be deemed to prevent the granting of easements or permits to facilitate the development of the Property. 7. All conditions, covenants and restrictions contained in this Grant Deed shall be covenants running with the land, and shall, in any event, and without regard to technical classification or designation, legal or otherwise, be, to the fullest extent permitted by law and equity, binding for the benefit and in favor of, and enforceable by Grantor, its successors and assigns against Grantee, its successors and assigns, to or of the Property conveyed herein or any portion thereof or any interest therein, and any party in possession or occupancy of said Property or portion thereof. 8. Except as provided in the next two sentences, every covenant and condition and restriction contained in this Grant Deed shall remain in effect for 30 years from the date this Grant Deed is recorded in the Official Records of the Recorder's Office of Orange County. The covenants against discrimination set forth in paragraphs 4 and 5 of this Grant Deed shall remain in effect in perpetuity. The covenants set forth in Section 6 of this Grant Deed shall terminate and be released upon the issuance of a Permanent Certificate of Occupancy for the Project Improvements to be constructed on the Property by Grantor pursuant to the Purchase Agreement. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 5 CADocuments and Settings\fritzalk\Local Settingffemporary Internet FileAContent.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc 9. In amplification and not in restriction of the provisions set forth hereinabove, it is intended and agreed that Grantor shall be deemed a beneficiary of the agreements and covenants provided hereinabove both for and in its own right and also for the purposes of protecting the interests of the community. All covenants without regard to technical classification or designation shall be binding for the benefit of Grantor, and such covenants shall run in favor of Grantor for the entire period during which such covenants shall be in force and effect, without regard to whether Grantor is or remains an owner of any land or interest therein to which such covenants relate. Grantor shall have the right, in the event of any breach of any such agreement or covenant, to exercise all the rights and remedies, and to maintain any actions at law or suit in equity or other proper proceedings to enforce the curing of such breach of agreement or covenant. 10. No violation or breach of the covenants, conditions, restrictions, provisions or limitations contained in this Grant Deed shall defeat or render invalid or in any way impair the lien or charge of any mortgage or deed of trust or security interest permitted by the Purchase Agreement; provided, however, that any subsequent owner of the Property shall be bound by such remaining covenants, conditions, restrictions, limitations, and provisions, whether such owner's title was acquired by foreclosure, deed in lieu of foreclosure, trustee's sale or otherwise. 11. The covenants contained in this Grant Deed shall be construed as covenants running with the land and not as conditions which might result in forfeiture of title. [SIGNATURES APPEAR ON FOLLOWING PAGE] Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 6 CADocuments and SettingsWritzalk\Local SettingsUemporary Internet Files Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc IN WITNESS WHEREOF, Grantor and Grantee have caused this instrument to be executed on their behalf by their respective officers hereunto duly authorized this _ day of .2012. CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California Mayor Dated City Clerk INITIATED AND APPROVED: Director of Economic Development REVIEWED AND APPROVED: City Manager APPROVED AS TO FORM: City Attorney KANE, BALLMER & BERKMAN City Special Counsel Murray O. Kane Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 7 C:ADocuments and Settings1ritzalk\Local Settings\Temporary Internet Files Content.0utlook\21D915JK\Purchase and Sale Agmt (final)(2) redline.doe CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed by the Grant Deed dated as of , 20 from the Grantor, City of Huntington Beach, a municipal corporation in the State of California, granted to CAMPBELL LODGING, INC., a California corporation, Grantee, is hereby accepted by Grantee subject to all of the matters hereinbefore set forth, pursuant to authority conferred by The Grantee hereby consents to recordation of such Grant Deed. "GRANTEE" CAMPBELL LODGING, INC., a California corporation By: Its: By: Its: Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 8 CADocuments and SettingsUritzalk\Local Settings\Temporary Internet FilesContent.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc EXHIBIT A LEGAL DESCRIPTION OF PROPERTY Real property in the City of Huntington Beach, County of Orange, State of California, described as follows: [to be added] . •� Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 9 C:ADocuments and SettingsWritzalk\Local Settings\Temporary Internet Files Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc State of California County of Orange On before me, a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) State of California County of Orange On before me, a Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT C GRANT DEED PAGE 10 CADocuments and SettingsWritzalk\Local Settingffemporary Internet FilesContent.Outlook\21D915JK\Purchase and Sale Agmt (final)(2) redline.doc EXHIBIT D SCHEDULE OF PERFORMANCE 1) GENERAL PROVISIONS 1. Execution of Purchase and Sale Agreement and Joint Instructions (Agreement)by Seller. Seller shall hold a public hearing and consider approval of the Agreement 2. Submission of Good Faith Deposit. Buyer shall submit the entire Buyer Deposit to Seller. 3. Open Escrow. Seller shall open Escrow 4. Assignment of Settlement Funds. Seller shall deliver into escrow a document evidencing Seller's assignment of its rights to the Settlement Funds to Buyer pursuant to Paragraph 4.e. (1) of the Agreement. 5. Transfer of Environmental Insurance Policy. To the extent permitted by the insurer, Seller shall deliver into escrow a document evidencing Seller's transfer of the Environmental Insurance Policy to Buyer pursuant to Paragraph 4.e.(2) of the Agreement. 6. Close Escrow. Buyer shall have satisfied all conditions precedent to Close of Escrow for the Property as required by the Agreement, including, but not limited to obtaining all entitlements and permits necessary to develop the proposed project. As soon as feasible after Buyer's execution of Agreement. Within three (3) days after Seller's execution of the Agreement. Concurrently with Seller's execution of the Agreement. At least one (1) business day prior to the Close of Escrow. At least one (1) business day prior to the Close of Escrow. Within twelve (12) months of Seller's execution of the Agreement. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT D SCHEDULE OF PERFORMANCE PAGE 1 CADocuments and SettingsWritzalk\Local Settings\Temporary Internet FilesContent.Outlook\21D915JK\Purchase and Sale Agmt (final)(2) redline.doc 2) 1 2. 3. 9 5 DEVELOPMENT Receipt of Entitlements. Buyer shall obtain all entitlements and permits necessary for the development of the Property pursuant to Paragraphs 4.a and 17 of the Agreement. Demolition of Existing Improvements. Buyer shall complete demolish of all existing building Improvements on the Property pursuant to subparagraphs a. and b. of Paragraph 4 of the Agreement. Environmental Remediation of Property. Buyer shall complete environmental remediation of the Property, prepare a Closure Report and request a "No Further Action Letter" from the applicable regulatory agency, pursuant to Paragraph 4.a and 17 of the Agreement. Commencement of Construction. Buyer shall commence construction of the Hotel Project (as defined in the Agreement), as required by the Agreement. Completion of Construction. Buyer shall complete construction of the Hotel Project (as defined in the Agreement), in accordance with the Agreement. Within twelve (12) months of the Seller's execution of the Agreement. Within sixty (60) days of the Close of Escrow. Within sixty (60) days of completing the demolition of the existing improvements, but in no event no later than one hundred and twenty (120) days from the Close of Escrow unless such time is extended in writing by the City Manager or designee. The Within fifteen (15) days after delivery to Buyer of a "No Further Action Letter" or the equivalent, from the Orange County Department of Environmental Health (DEH), the City of Huntington Beach Fire Department or another appropriate regulatory agency. Within twelve (12) months of the commencement of construction. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT D SCHEDULE OF PERFORMANCE PAGE 2 CADocuments and Settings4ritzalkTocal Settings\Temporary Internet FileAContent.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc NOTES: 1. Deadlines set forth in this Schedule of Performance are subject to the enforced delay provisions of Paragraph 25 of the Agreement. 2. Extensions may be approved in writing pursuant to Paragraph 4.f. of the Agreement. 3. Descriptions of items of performance and deadlines in this Schedule of Performance are not intended to supersede more complete descriptions in the text of the Agreement; and in the event of any conflict between the text of the Agreement and this Schedule, the text of the Agreement shall govern. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT D SCHEDULE OF PERFORMANCE PAGE 3 C:ADocuments and SettingsWritzalk\Local Settings\Temporary Internet FilesContent.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc EXHIBIT E DOCUMENT LIST 1. Phase I Environmental Site Assessment Report, Project No. 6824, dated April 21, 2008, prepared by Phase One, Inc. (the "Phase I") 2. Limited Phase II Environmental Site Assessment dated May 12, 2008, prepared by Phase One, Inc. (the "Limited Phase II") 2. Site Assessment Report and Soil Remediation Work Plan, prepared by Phase One, Inc. (the "Remediation Work Plan") 3. City of Huntington Beach Fire Department, comments to Site Assessment Report and Soil Remediation Work Plan, dated June 1, 2009 ("City Fire Department Additions to Remediation Work Plan") Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT E DOCUMENT LIST PAGE 1 CA\Documents and Settings\ftitzalk\Local SettingsUemporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc EXHIBIT F SCOPE OF DEVELOPMENT This is the Scope of Development attached to the Purchase and Sale Agreement and Joint Escrow Instructions ("Purchase Agreement") by and between the CITY OF HUNTINGTON BEACH, a municipal corporation ("City") and CAMPBELL LODGING, INC., a California corporation ("Buyer"). Any capitalized term not otherwise defined herein shall have the meaning ascribed to such term in the Purchase Agreement. PROJECT DESCRIPTION The Property is located at 7872 Edinger Avenue, Huntington Beach, California. The Project entails the following components, as the same may be amended from time to time in accordance with plans and permits approved by the City of Huntington Beach (but with the understanding that the type of Hotel Project required pursuant to the Purchase Agreement shall in no event be reduced without City's written approval): • The Property shall be developed as a high quality select brand hotel with approximately 120 to 140 rooms as approved by the City in writing. • The Hotel Development shall meet the following minimum criteria: o Nationally recognized brand of hotel, including, but not limited to Hyatt Place or equivalent product, subject to the prior written approval of the City in the City's sole and absolute discretion; o Amenities shall include business center, pool/spa, limited food service, lounge and beverage service; and o Incorporation of sustainable building practices, including the goals of the City regarding Green Building standards, to the extent feasible The facility design shall incorporate a high level of aesthetic quality in a manner that conforms to the overall theme and intent of the Beach and Edinger Corridors Specific Plan and City codes and regulations. II. IMPROVEMENTS The Hotel Project shall be constructed by Buyer and in accordance with conceptual plans approved by the City of Huntington Beach. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT F SCOPE OF DEVELOPMENT PAGE 1 CADocuments and SettingsUritzalk\Local Settings\Temporary IntemetFiles\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc The Hotel Project and all other Improvements constructed by Buyer on the Property shall be constructed in accordance with all federal, state, and/or local development regulations and/or agreements. III. ENVIRONMENTAL REVIEW Buyer shall be responsible for causing the preparation of all California Environmental Quality Act ("CEQA") documents necessary for the entitlements for the Hotel Project and the development of the Improvements on the Property. The City shall be responsible for certification of any CEQA documentation in connection with the approval of the Hotel Project. Buyer shall be responsible for the payment of all CEQA compliance costs and shall fully comply with all mitigation measures set forth in the Hotel Project entitlements. Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT F SCOPE OF DEVELOPMENT PAGE 2 CADocuments and SettingsUritzalkU.ocal SettingsUemporary IntemetFiles\Content.Outlook\21D915JK\Purchase and Sale Agmt (final)(2) redline.doc ATTACHMENT #2 PROJECT SUMMARY ANALYSIS REPORT on the PURCHASE AND SALE AGREEMENT (THE "AGREEMENT") by and between the CITY OF HUNTINGTON BEACH (THE "CITY") and CAMPBELL LODGING, INC. (THE "DEVELOPER") AS OF JANUARY 27, 2012 INTRODUCTION The following Summary Report ("Report") sets forth certain details of the proposed Purchase and Sale Agreement ("PSA" or "Agreement") by and between the City of Huntington Beach ("City") and Campbell Lodging, Inc ("Campbell" or "Developer") A copy of the Agreement is attached to this Report as Exhibit A. The City and Developer are considering entering into the PSA whereby the Developer will acquire land from the City and develop a 120 to 140-room Hyatt Place or some other City approved brand and name (the "Project"). The hotel will be built on the property located at 7872 Edinger Avenue encompassing assessor parcel numbers 142-081-06, -09, -10, -11, -12, & -28 (the "Site" or "Property"). The Developer will acquire the City -owned 1.9-acre Property, located on the southeast corner of Edinger Avenue and Parkside Lane, for $3,300,000. This Report includes, or references, the following information: I. Summary of the Salient Points of the PSA as Proposed: This section includes a description of the Project and the major responsibilities imposed on the Developer and the City by the PSA. II. Cost and Net Benefit of the PSA to the City: This section details the cost of the PSA to the City. In addition, this section estimates the increase in public revenues to be received by the City from this Project based on the PSA. III. Estimated Value of the Interests to be Conveyed: This section summarizes the estimated value of the interest to be conveyed to the Developer based upon the conditions and covenants required by the PSA. IV. Economic Analysis of Proposed Project: This section describes the total revenue to be received by the City as a result of the PSA. I. SECTION I - SUMMARY OF THE TERMS OF THE PSA A. Project Description The Site is comprised of approximately 1.9 acres encompassing the northwestern portion of the block bounded by Edinger Avenue on the north, Parkside Lane on the west, Aldrich Avenue on the south, and Beach Boulevard on the east. The PSA provides for the construction of the Project consisting of a 120 to 130-room Hyatt Place or some other City approved brand and name. Campbell currently has 14 hotels operating throughout the southwestern United States encompassing more than 1,500 rooms. Campbell focuses on operating mid -priced nationally recognized brands such as Holiday Inn Express, Hampton Inn & Suites, Marriott Springhill Suites and Hilton Garden Inn. B. Proposed Business Terms and Responsibilities The PSA proposes the following major business terms and requires the Developer and City to complete the following activities: The City shall: Offer to sell the Site for the sum of $3,300,000. 2 112512012 Project Summary Analysis Report Campbell (2) Vacate property easements as permitted by the dominant tenement (s). The City does not guarantee vacation of all easements, but will make all commercially reasonable efforts to do so. Assign HB Auto 1 settlement agreement funds in the amount of $114,800 to Developer to complete demolition and remediation of existing Big O Tires building. Transfer to Developer its AIG environmental insurance policy in the amount of Five Million Dollars ($5I000,000) for unknown site contamination. Open escrow and require an initial deposit of $500,000 upon City Council approval of the Purchase and Sale Agreement, of which $100,000 will be non-refundable after a 60-day due diligence period. Transfer ownership and close escrow when Developer obtains all entitlements and building permits necessary to develop the proposed Project. The Developer shall: • Purchase the Site for the sum of $3,300,000. • Demolish the existing building improvements and remediate the known onsite contamination. • Provide an initial deposit of $500,000 upon City Council approval of the Purchase and Sale Agreement, of which $100,000 will be non-refundable after a 60-day due diligence period. • Obtain entitlements and building permits within 12 months of City Council approval of the Purchase and Sale Agreement. • Demolish existing improvements and initiate construction within 60 days of close of escrow or be subject to monthly in -lieu payments equivalent to the scheduled Big O Tire monthly lease payment. • Develop a 120 to 130-room Hyatt Place or some other City approved brand and name. 112512012 Project Summary Analysis Report Campbell (2) II. SECTION II - COST AND NET BENEFIT OF THE AGREEMENT TO THE CITY Per the deal point memo dated January 19, 2012, the City has agreed to assign HB Auto 1 settlement agreement funds in the amount of $114,800 to the Developer to complete demolition and remediation. All other costs to the City are attributed to the cost related to the sale of the Site. As illustrated in the following table, the Site currently has a total assessed value of $5,490,767; however, a recently conducted appraisal review found that the current appraised value is actually far less than the assessed value. Source: Fidelity Title An appraisal review was conducted on January 9, 2012 to assess the most recently prepared appraisal report for the Site with a date of value and report date of March 10, 2011. The appraisal review found that land values have decreased since the time of the March 10, 2011 appraisal report and estimated the value of the Site as ranging between $35 and $42 per square foot. Therefore, based upon the size of the Site as 82,764 square feet, the value of the Site falls within the range of approximately $2,900,000 and $3,500,000. Tierra West utilized the median of this range to estimate the current value of the City's asset to be $3.2 million. As such, the total cost of conveying this City -owned asset is estimated to be $3,314,800 taking into consideration the $114,800 for site demolition, as well as the appraised land value. In consideration of entering into the Agreement, the City will receive $3,300,000 from the Developer for the Site, and will receive sales tax, property tax, and transient occupancy tax on an annual basis. 4 112512012 Project Summary Analysis Report Campbell (2) The financial benefits to the City resulting from the Agreement are discussed in more detail below in Section 4 of this Report; however, the City is projected to receive $3,300,000 for the Site and approximately $11.72 million in sales tax and TOT over a 25 year period upon stabilization, as well as an additional $930,000 in property taxes during the same time period for a total of approximately $12.65 million. III. ESTIMATED VALUE OF THE INTERESTS TO BE CONVEYED DETERMINED AT THE HIGHEST AND BEST USE PERMITTED This section presents an analysis of the fair market value of the property to be conveyed by the City at the highest and best use. The Site is designated as CG, a Commercial zone designation which allows various commercial and service -oriented uses. Under current market conditions it is assumed that a commercial hotel project 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 a Specific Plan or Specific 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 long-term planning goals of the City. Tierra West conducted an analysis of three (3) potential uses for the Site; including an auto dealership, a retail center, and the proposed hotel use. In regards to projected assessed value and revenue generated for the City, it was determined that a hotel use presented the highest and best use by a large margin due principally to the transient occupancy tax which is equal to 10% of all hotel room sales transactions. 112512012 Project Summary Analysis Report -Campbell (2) _rro v s f nWv, , eacCtyHu'� Campbell Loddhng, Inc'ppa Pr "_' sed Pro'ect Related Public Reve ue.Estimate,� SalesTax/TOT Property Tax-9 evenu� 3_ • S e• e Total NPV Total NPV 20-Yrs. $1,705,712 $731,430 $287,421 $134,300 $t;99�,,.133 $865,730 25-Yrs. $2,297,800 $832,561 $378,896 15149,925 ;696 $ 30-Yrs. $2, 951, 512 $908, 553 $479, 892 $161, 665 431 4 r, Total NPV Total NPV 20-Yrs. $1,916,201 $588,176 $280,267 $130,95868., 25-Yrs. $4,252,040 $1,352,191 $369,465 $146,193 $g621.,5 5Ar. „ 98, 30-Yrs. $4,252,040 $920,278 $467,947 $157,642 $4,7 9;987 $1,Q Total NPV Total NPV u � ` `"` °N_PVV 20-Yrs. $8,802,665 $3,939,839 $703,098 $328,530 $-4 �8, 62�' :, r 25-Yrs. $11,724,470 $4,438,899 $926,867 $366,751 �$: 651,337~, , _05, 30-Yrs. $14,950,380 $4,813,902 $1,173,927 $395,471 $16124,306 $5,209, n Source: Tierra West Advisors, Inc. Note: Discount Rate - 8.0% Property Value: Retail Development Auto Development Hotel Development $9,373,702 $7, 767, 764 $19,486, 770 6 112512012 Project Summary Analysis Report Campbell (2) IV. ECONOMIC ANALYSIS OF PROPOSED PROJECT The City utilized the services of Tierra west Advisors to review the terms of the PSA and conduct an independent analysis of the Project. The following financial information is based on the analysis performed by Tierra west Advisors. It is estimated that the Project, as shown in the table below and as proposed in the PSA, may result in an estimated $12.65 million in total public revenues over the next 25 years. The City is estimated to receive approximately $11.72 million in TOT and Sales Tax revenue over the next 25 years from the completion of the Project as well as an additional $930,000 in property taxes during the same time period. Median Assessed Value of Property Cost of Demolition Total Value of Parcel Estimated Cost ($3,200,000) ($114,800) ($3,314,800) Compensation Received from Developer $3,300,000 Net Cost to the City from Land Transaction ($14,800) Projected Transient Occupancy Tax (TOT) Revenue Projected Property Tax Projected Sales Tax Total City Revenue 7 Over the next 25 years $11,659,179 $926,867 $65,291 $12,651,337 Net Present Value @ 6% $4,590,747 $345,848 $24,719 $4,961,314 112512012 Project Summary Analysis ReportCampbell (2) Assuming that the fair market value of the Property ranges from $2.9 million to $3.5 million, Tierra West utilized the median appraised value of $3.2 million for this analysis. Additional costs to the City are the $114,800 in HB Auto 1 settlement agreement funds for demolition of the existing Big O Tires building. The City will be receiving $3,300,000 from the Developer in exchange for the Property resulting in an initial loss of $14,800 at the median appraised value. Any cost to the City resulting from the sale of the Property is expected to be recouped by the City one (1) year of stabilized operation through the collection of TOT, sales tax and property tax. Furthermore, over a 25 year period the City is expected to receive approximately $12.65 million from these revenue sources resulting from the construction of the Project. In addition to the direct financial benefits to the City's General Fund, the City also stands to gain approximately 70 long-term jobs when considering the operation of a 125-room hotel, a restaurant and bar, as well as boutique retail shop. Additional consideration should be given to spending within the City that is expected to occur as a result of approximately 88 rooms per night being occupied by travelers. Gas stations and restaurants will be the uses primarily impacted by this additional client base. Assuming an occupancy rate of 70o and 1.5 people per room ratio, Tierra West estimates approximately 47,900 occupants throughout the course of a year. This does not equate directly to 47,900 additional people within the City as guests are expected to stay for various periods of time and there will be some cannibalization from existing hotels and motels in the direct vicinity of the 405 Freeway and Beach Blvd; however, the construction of the Project as proposed is still expected to have a significant net positive impact on the City, 8 1/25/2012 Project Summary Analysis Report Campbell (2) particularly in the vicinity of the north Beach Blvd and Edinger Avenue interchange. Public Hearing The City Council will consider the conveyance of the Site at a public hearing on January 27, 2012. A copy of the hearing notice is attached as Exhibit C. SUMMARY REPORT WVWTUTM A DRAFT PURCHASE AND SALE AGREEMENT 9 112512012 Project Summary Analysis ReportCampbell (2) SUMMARY REPORT EXHIBIT B APPRAISAL 10 112512012 Project Summary Analysis Report Campbell (2) SUMMARY REPORT EXHIBIT C NOTICE OF JOINT PUBLIC HEARING 11 112512012 Project Summary Analysis Report Campbell (2) F_Bity Cof Huntington Beach INTER -DEPARTMENT COMMUNICATION HUNTINGTON BEACH TO: Honorable Mayor and Members of the City Council VIA: Fred A. Wilson, City Manager FROM: Bob Hall, Deputy City Manager/Director of Economic Development DATE: January 27, 2012 SUBJECT: Supplemental Communication — Item # 2 Attached are two supplemental communication items for Agenda Item #2. Attachment 1 — Exhibit A, Legal Description, of the Purchase and Sale Agreement and Joint Escrow Instructions to be inserted between pages HB-79 and HB-80. Attachment 2 — Exhibit B, Property Map, of the Purchase and Sale Agreement and Joint Escrow Instructions to replace page HB-81. SUPPLEMENTAL COMMUNICATION Supplemental Communication -1- 1/26/2012 10:44:00 AM Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT A PROPERTY DESCRIPTION CADocuments and SettingsWritzalkTocal Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc EXHIBIT B PROPERTY MAP FD2 1,inrl tliio —l Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT B PROPERTY MAP C:\Documents and Settings\fritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JKTurchase and Sale Agmt (final)(2) redline.doc Corner of Edinger Avenue and Parkside Lane THIS MAP WAS PREPAR£0 FOR ORANGE COUNTY ASSESSOR OEPT, PU110119 ONLY. R 142- V THE ASSESSOR MAKES NO GUARANTEE AS TO ACCURACY NOR ASSUMES ANY LIARIL I7Y FOR O711ER USES. NOI TO BE REPROOUCEO. 107_78 �l7$ ALL RLGIITS RESERVED. © COPYRIGHT ORANCC COUNTY ASSESSOR 2008 v w � 1 = 100' BEACH (HUNTINGTON BEACH) BOULEVARD 8 I I v.o "'I+„� I» I I >S I I 1 ;I rRkT \I •e' 4 1 I ro- I I I°0 I ISO I *I i I I I Ipa I I I I I eo I I Ira I I I S I I Ine I I I �P I I I I I I I s°. I I I ICI I I i I I I I I I I I I I H.I431 I '" I l O l 118 25 s.,q 26 122 n I I I I ly H I K�1 I 4 I 125 s sa• »' e »' e A � I I I I I I I I I I I I I I I I I Q I I 1 I I I I I I I I I I I I I I I I I I, Ixp »' I. 1. I. I. I. I. I I 1 I» e I 1 . I. I. 1. I 1 / 2 J q 5 6 7 8 10 II ! a�,u F'•` i IAlI.:ol F-q q JS J6 J JB 39 10 ql q q4 LqJ 16L g7LgBJ49 70 71 7 73 7 7 78 7 78 79 80 87 J q 5 O 0ec R+ 50 9 25 - 44 a O 20 L 86 05 'K iq IJ O O O '"'�. © O 87 104 ss /5 32 1 -. _ 161JI__ I 5 082 3r• +° Q 083 n ° O OI n 081 27 n 29 4 9 102 ^ W I7J0 —__--_—_ —I------------ 53 66 ns' m• 7879 S4 65 30 8 �:.1909L—_-- @ — 12 19 28 as 10 33 6q 17 r„ ss I too ---- V a xao. 00 10 m Wao• 1027---- _— --- O xar 566J ---- <.. 92 99 S Q• 12 0= 14 y sss° 9J 98 4i ---------- 11 57 62 xx �7 25 xx 44 a oAR. I < ' PAR. 2 6] b i5 VI A u N0. lO Y 17 26 y< 3 'a i4s 12 _ 2J 2q%1 --- 10 a es 58 __—'•-- ------------- 34 8 33 59 0 _ _ _� 'eq e0. _ —L — _ _ PAR I c PAR. 2 95 96 12 >•P vv M1 a P. M. 90 41 PARKSIDE LANE MARCH 1962 TRACT NO. 417 M.M. 16-47 NOTE — ASSESSOR'S BLOCK A ASSESSOR'S MAP PARCEL MAP P.M. 90-41, 104-44 PARCEL NUMBERS BOOK 142 PAGE 08 SHOWN IN CIRCLES COUNTY OF ORANGE C Purchase & Sale Agreement and Joint Escrow Instructions EXHIBIT B PROPERTY MAP CADocuments and SettingsWritzalk\Local Settings\Temporary Internet Files\Content.Outlook\2ID915JK\Purchase and Sale Agmt (final)(2) redline.doc 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 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 of general circulation, published in the city of Santa Ana, County of Orange, and which news- paper has been adjudged to be a newspaper of general circulation by the Superior Court of the County of Orange, State of California, under the date of November 19, 1905, Case No. A-21046, that the notice, of which the annexed is a true printed copy, has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to wit: January 17, 23, 2012 "I certify (or declare) under the penalty of perjury under the laws of the State of California that the foregoing is true and correct": Executed at Santa Ana, Orange County, California, on Date: January 2 , 201 The Oranounty Regisl 625 rand Ave. Santa Ana, CA 92701 (714) 796-7000 ext. 3002 PROOF OF PUBLICATION Proof of Publication of CITY OF HUNTINGTON BEACH NOTICE OF A PUBLIC HEARING ON THE SALE OF CITY OWNED PROPERTY R 7872 EDINGEAVENUE (APN9 142.081.06,142.081.12, 142.081.11,142.081- 08,142.081.10,142.081.28) NOTICE IS HEREBY GIVEN that the City Council will hold a public hearing on Friday, January 27, 2012 at 8:00r a.m. or soon thereafter in the Central Library, located at 7111' Talbert Avenue, Huntington Beach, California, to consider the sale of the proper ttyy located at 7872 Edinger Avenue (APNs 142-081-06,142-081-12, 142-081-11,142-081-09,142-081- 10,142-081-28). As required by Health and Safety Code (Section 33433), a report on the sale is available for public inspection in the Department of Economic Development. The report summa- rizes the costs of the agreement to the City, the estimated value of the property to be sold to Ayres Hotels as deter- mined at the highest and best uses permitted under State law, and an explanation of why the sale of the property will, assist in the elimination of blight, with reference to all sup- porting facts and materials relied upon in making this ex- planation. Interested persons may inspect and, upon pay-' ment of the costs of reproduction, obtain copies of the 33433 Report and lease documents. ALL INTERESTED PERSONS are invited to attend said hear - express opinions or submit to the City Clerk written evidence for or against the application as outlined above. If you challenge the City Council action in court, you may be limited to raising only those issues that you or someone 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, i please call Mr. Luis Gomez, Economic Development De -I partment, at (714) 536-5544. Direct your written communk, cation to: JOAN L. FLYNN, CITY CLERK CITY OF HUNTINGTON BEACH 2000 MAIN STREET - 2ND FLOOR HUNTINGTON-BEACH, CALIFORNIA 92648 (714) 536-5227 Publication Dates: January 17, ' 2r 12 and January 23, 2012 ,Publish: Orange County RegisterR-65 9443958