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HomeMy WebLinkAboutA6641 - PALM SPRINGS PROMENADE LLC - OPERATIONS COVENANT 2016-0334951 08/05/2016 11:37 AM Fee: $ 0.00 Page 1 of 16 Recorded in Official Records RECORDING REQUESTED BY: County of Riverside Peter Aldana CITY OF PALM SPRINGS Assessor-County Clerk-Recorder 1119P'MR&R, 11VINVU11II City of Palm Springs 1 R I a Exam: City Clerk P O Box 2743 Page DA PCOR Misc Long RFD 1st Pg Adtl Pg Cert CC Palm Springs, CA 92263 SIZE NCOR SMF NCHGo T: 11RG cr /I Filing fee EXEMPT per Government Code 6103 A6641 AMENDED AND RESTATED OPERATIONS COVENANT THIS AREA FOR RECORDER'S USE ONLY THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE FOR RECORDING INFORMATION ($3.00 Additional Recording Fee Applies) FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CITY OF PALM SPRINGS 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Attention: City Clerk (Space Above This Line for Recorder's Office Use Only) AMENDED AND RESTATED ��.1 ` OPERATIONS COVENANT L THIS AMENDED AND RESTATED OPERATIONS COVENANT AND DECLARATION OF COVENANTS AND RESTRICTIONS ("Agreement" or "Covenant") is made and entered into this 4th day of May, 2016, by and between the City of Palm Springs, a municipal corporation and charter city ("City") by and through its City Council, and Palm Springs Promenade, LLC, a California limited liability company ("Owner" or"Participant"). RECITALS : A. The City of Palm Springs adopted Chapter 5.26 of its Municipal Code in December, 2007 to provide a Hotel Operations Incentive Program ('Program") for the operation, maintenance and expansion of the inventory of quality and first class hotels within the City that enhance the tourist and travel experience for visitors to the City, maximize the use of the City's Convention Center, provide attractive and desirable visitor serving facilities and experiences, and assist the City in achieving its tourism goals. (Chapter 5.26 of the Municipal Code is incorporated herein by reference and defined terms therein shall, unless otherwise indicated, have the same meanings herein.) B. On December 30, 2014, City and Owner entered into an Operations Covenant for an AC Hotel for Block F on the Site Plan attached hereto as Exhibit "A", and legally described as Parcel 5 on the Legal Description attached hereto as Exhibit `B". The Parties desire to amend this Operations Covenant to transfer the rights and obligations of the Parties for this Operations Covenant from the AC Hotel on Block F to another property within the Site Plan. The Parties further acknowledge this transfer is the one and only time the rights and obligations of the Parties under this Operations Covenant will be transferred from one property to another. C. Owner also holds fee title to certain real property ("Site"), which is depicted as Block B-1 on the Site Plan attached hereto as Exhibit "A", and legally described as Parcel 3 on the Legal Description attached hereto as Exhibit `B". The Site, which is located in the downtown area of the City of Palm Springs, California, is fully entitled for development of a first class new Virgin Hotel to contain approximately 142 hotel rooms ("Hotel" or "Project"). The Parties acknowledge that the Virgin Hotel, as entitled and approved and when completed and under operation, will qualify as a new first class hotel and be entitled to benefits thereof under and pursuant to provisions of Chapter 5.26 of the Municipal Code and this Agreement. 04.14.2016 C. City and Owner now desire to place restrictions upon the use and operation of the Project, in order to ensure that the Project shall be operated continuously as a first class hotel available for short-term rental for the term of this Agreement. D. City and Owner also agree that in return for participation in the Program, Owner shall agree to operate the Project as a hotel; participate in the Palm Springs Convention Center's Committable Rooms Program; and provide City with a minimum of six (6) room-nights per month for official City use; and, City agrees to share a percentage of Transient Occupancy Tax Increment with Owner pursuant to the Program guidelines. E. The City finds that no further environmental review is required in connection with the approval of this Covenant in that in connection with City approval of entitlements, findings were made that the Project would be consistent with the approved Specific Plan and certified EIR and that neither a subsequent EIR, supplemental FIR, or EIR Addendum would be necessary. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Participant hereby conveys to the City the Operating Covenants described herein and City hereby agrees to provide Participant with funds as provided under the Program and as set forth hereinafter. ARTICLE 1 STATEMENT OF OPERATING COVENANTS 1.1. OPERATION AND USE COVENANT. Upon occupancy, Owner covenants to operate, maintain, and use the Virgin Hotel in accordance with this Agreement. All uses conducted on the Site, including, without limitation, all activities undertaken by the Owner pursuant to this Agreement shall, in all material respects, conform to requirements of this Agreement and Palm Springs Municipal Code. 1.2. HOTEL USE. The Owner hereby agrees that the Project is to be owned, managed, and operated as a Virgin Hotel in a first-class manner, and the Project's participation in the Program shall continue in accordance with the terms of the Program, for a term equal to thirty years commencing upon the date Owner first receives from the City the Owner's share of transient occupancy tax revenues pursuant to the Program, or until Owner has received from the City the total sum of fifty million dollars if that occurs prior to the expiration of said thirty years, unless Owner's participation in the Program is terminated prior thereto in accordance with this Agreement (the "Term"). Subject to Palm Springs Municipal Codes Section 5.26.040(a) and Sections 7.9, 7.11, and 7.16 of this Covenant, during the Term, City shall pay to Owner, within thirty days after receipt from Owner of twelve monthly payments made by Owner to the tax administrator per Section 3.24.080 of the Municipal Code, an amount equal to seventy-five percent of the total of such payments. City acknowledges and agrees that City has reviewed proposed development and operational plans for the Hotel and concluded that such plans are in substantial compliance with and will satisfy first class Hotel requirements of the City and Chapter 5.26 of the Municipal Code. OPERATIONS COVENANT jwkimpincenlalpeeiii -2- FOR HOTEL INCEN H VE PROGRAM 1. Housing Uses Prohibited. None of the rooms in the Project will at any time be utilized as a non-transient residential property including dormitory, fraternity or sorority house, rooming house, nursing home, hospital, sanitarium, or trailer court or park without the City's prior consent which consent may be given or withheld in its sole and absolute discretion. 2. Conversion of Proiect. No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Owner take any steps in connection with the conversion to such ownership or uses to condominiums, or to any other form of ownership, without the prior written approval of the City Council which approval may be given or withheld in its sole and absolute discretion. ARTICLE 2 WARRANTIES AND COVENANTS 2.1. WARRANTIES AND COVENANTS. For the Term of this Agreement, the Owner hereby represents, covenants, warrants and agrees as follows: 1. Owner has completed the City's application for the Hotel Operations Incentive Program. Since the Hotel will be a new hotel, City has determined the Transient Occupancy Tax Base to be used to calculate the Transient Occupancy Tax Increment shall be zero, and the Owner accepts such Transient Occupancy Tax Base. 2. Owner hereby agrees to subscribe to the Palm Springs Convention Center's Committable Rooms Program or any similar successor program as identified by the City Manager without being obligated to incur any additional costs or expenses. 3. Upon City's prior request, Owner shall provide the City at no cost six (6) rooms for one (1) night (or 3 rooms for 2 nights) other than Friday or Saturday nights each month for use for City purposes as approved or designated by the City Manager, provided that such use by the City shall be subject to the rooms being available at the time of the City's request. Such accommodations shall include all services and amenities for which the Owner would normally collect transient occupancy taxes but will not include services and amenities that are optional to the transient and for which the transient is not required to pay a transient occupancy taxes. City shall be responsible for any transient occupancy taxes for any occupancy provided to City under the provisions of this paragraph. Notwithstanding anything in this Agreement to the contrary, if the City does not use rooms during any month, then its right to use rooms with respect to that month shall expire at the end of that month and shall not accrue; provided, however, if the City was unable to use rooms solely because Owner's Hotel had no rooms available when the City requested a room in accordance with this Section 2.1.3, then, the City's right to use rooms shall not expire and may be used by the City in a subsequent month. OPERA'I IONS COVENANT jwkimpincentagreeiii -3- FOR HOTEL INCENTIVE PROGRAM ARTICLE 3 MAINTENANCE 3.1. MAINTENANCE. 1. Maintenance Obli ag tion. Owner, for itself and its successors and assigns, hereby covenants and agrees to maintain and repair or cause to be maintained and repaired the Site and all related on-site improvements and landscaping thereon, including, without limitation, buildings, parking areas, lighting, signs and walls in a first class condition and repair, free of rubbish, debris and other hazards to persons using the same, and in accordance with all applicable laws, rules, ordinances and regulations of all federal, state, and local bodies and agencies having jurisdiction, at Owner's sole cost and expense. Such maintenance and repair shall include, but not be limited to, the following: (i) sweeping and trash removal; (ii) the care and replacement of all shrubbery, plantings, and other landscaping in a healthy condition; and (iii) the repair, replacement and restriping of asphalt or concrete paving using the same type of material originally installed, to the end that such paving at all times be kept in a level and smooth condition. In addition, Owner shall be required to maintain the Project in such a manner as to avoid the reasonable determination of a duly authorized official of the City that a public nuisance has been created by the absence of adequate maintenance such as to be detrimental to the public health, safety or general welfare or that such a condition of deterioration or disrepair causes appreciable harm or is materially detrimental to property or improvements within one thousand (1,000) feet of such portion of the Site. The foregoing notwithstanding, Owner shall not be obligated to maintain any street or sidewalk areas, or landscaping therein, which are to be maintained by the City pursuant to a Project Financing Agreement executed by the City (as amended). 2. Parking and Driveways. The driveways and traffic aisles on the Site shall be kept clear and unobstructed at all times. 3. Right of Entry. In the event Owner fails to maintain the Site in the above- mentioned condition, and satisfactory progress is not made in correcting the condition within thirty (30) days from the date of written notice from City (such notice shall reasonably identify the required maintenance), City may, at City's option, and without further notice to Owner, declare the unperformed maintenance to constitute a public nuisance. Thereafter, either City or its employees, contractors, or agents, may cure Owner's default by entering upon the Site and performing the necessary landscaping and/or maintenance in accordance with Section 3.1.1 above. The City shall give Owner, its representative, or the residential manager reasonable notice of the time and manner of entry, and entry shall only be at such times and in such manner as is reasonably necessary to carry out this Agreement. Owner shall pay such costs as are reasonably incurred by City for such maintenance, including attorneys' fees and costs. 4. Lien. If any costs incurred by City under Section 3 above are not reimbursed within thirty (30) days after Owner's receipt of City's written request for reimbursement, the same shall be deemed delinquent, and the amount thereof shall bear OPERATIONS COVENANT )wkimpincemagreeiii -4- FOR 1101 El.INCENTIVE PROGRAM interest thereafter at a rate of the lower of ten percent (10%) per annum or the legal maximum until paid. Any and all delinquent amounts, together with said interest, costs and reasonable attorney's fees, shall be an obligation of Owner as well as a lien and charge, with power of sale, upon the property interests of Owner, and the rents, issues and profits of such property. City may bring an action at law against Owner obligated to pay any such sums or foreclose the lien against Owner's property interests. Any such lien may be enforced by sale by the City following recordation of a Notice of Default of Sale given in the manner and time required by law as in the case of a deed of trust; such sale to be conducted in accordance with the provisions of Section 2924, et seq., of the California Civil Code, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted by law. Any monetary lien provided for herein shall be subordinate to any bona fide mortgage or deed of trust covering an ownership interest or leasehold or subleasehold estate in and to any portion of the Site, and any purchaser at any foreclosure or trustee's sale (as well as any deed or assignment in lieu of foreclosure or trustee's sale) under any such mortgage or deed of trust shall take title free from any such monetary lien, but otherwise subject to the provisions hereof; provided that, after the foreclosure of any such mortgage and/or deed of trust, all other assessments provided for herein to the extent they relate to the expenses incurred subsequent to such foreclosure, assessed hereunder to the purchaser at the foreclosure sale, as owner of the subject Site after the date of such foreclosure sale, shall become a lien upon such Site upon recordation of a Notice of Assessment or Notice of Claim of Lien as herein provided. In the event of any such foreclosure, City (or successor) agrees to and shall recognize and honor any existing commercial (non-transient occupancy) leases in effect with respect to portions of the Project, provided that commercial tenants of such leases agree to subordinate and attorn to City(or successor) as the new landlord with respect to such leases. ARTICLE 4 COMPLIANCE WITH LAWS 4.1. COMPLIANCE WITH LAWS. Owner shall comply with all ordinances, regulations and standards of the City and City applicable to the Site. Owner shall comply with all rules and regulations of any assessment district of the City with jurisdiction over the Site. ARTICLE 5 NONDISCRIMINATION 5.1. NONDISCRIMINATION. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, gender, sexual orientation, gender identity, gender expression, marital status, national origin, ancestry, physical or mental disability, or medical condition in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, nor shall Owner, or any person claiming under or through it, establish or permit any such practice or practices of discrimination OPERATIONS COVENANT ,wkimpmcewap eeiii -5- FOR HOTEL INCENTIVE PROGRAM or segregation with reference to the selection, location, number, use or occupancy of guests or vendees of the Site, or any part thereof. ARTICLE 6 COVENANTS TO RUN WITH THE LAND 6.1. COVENANTS TO RUN WITH THE LAND. Owner hereby subjects the Site to the covenants, reservations, and restrictions set forth in this Agreement. City and Owner hereby declare their express intent that all such covenants, reservations, and restrictions shall be deemed covenants running with the land and shall pass to and be binding upon the Owner's successors in title to the Site; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire. All covenants without regard to technical classification or designation shall be binding for the benefit of the City, and such covenants shall run in favor of the City for the entire term of this Agreement, without regard to whether the City is or remains an owner of any land or interest therein to which such covenants relate. Each and every contract, deed or other instrument hereafter executed covering or conveying the Site or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations, and restrictions, regardless of whether such covenants, reservations, and restrictions are set forth in such contract, deed or other instrument. City and Owner hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that Owner's legal interest in the Site is rendered less valuable thereby. City and Owner hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by the intended beneficiaries of such covenants, reservations, and restrictions, and by furthering the public purposes for which the City was formed. Owner, in exchange for the City entering into this Agreement, hereby agrees to hold, sell, and convey the Site subject to the terms of this Agreement. Owner also grants to the City the right and power to enforce the terms of this Agreement against the Owner and all persons having any right, title or interest in the Site or any part thereof while such party owns the Site. No party shall have any liability or obligation in connection with any breach occurring while such party is not the owner of the Site. Within fifteen (15) business days after request of Owner, City shall execute and provide to Owner an estoppel certificate, in the form approved by the City Attorney of the City, confirming whether or not Owner is in breach of any obligations under this Agreement and identifying any required cure. ARTICLE 7 INDEMNIFICATION 7.1. INDEMNIFICATION. Owner agrees for itself and its successors and assigns to indemnify, defend, and hold harmless City and its respective officers, members, officials, OPERATIONS COVENANT jwkimpincenlal'leein .6- FOR HOTEL INCENTIVE PROGRAM employees, agents, volunteers, and representatives from and against any loss, liability, claim, or judgment to or by any third party relating to development and/or operation of the Project by Owner, excepting only any such loss, liability, claim, or judgment arising solely out of the intentional wrongdoing or gross negligence of City or its respective officers, officials, employees, members, agents, volunteers, or representatives. Owner further agrees for itself, and its successors and assigns to indemnify and defend and hold harmless the City, its respective officers, members, officials, employees, agents, volunteers, and representatives from and against any loss, liability, claims, damages, penalties, losses, costs, expenses, injuries and/or liabilities arising out of claims that Owner's participation in the Program creates a public work for prevailing wage purposes thereby requiring the payment of prevailing wages and this obligation shall apply regardless of whether or not the claim, damage, penalty, loss, cost, expense, injury and/or liability complained of arises out of or relates in any way to any negligence on the part of City. Owner, while in possession of the Site, and each successor or assign of Owner while in possession of the Site, shall remain fully obligated for the payment of property taxes and assessments in connection with the Site. The foregoing indemnification, defense, and hold harmless agreement shall only be applicable to and binding upon the party then owning the Site or applicable portion thereof. 7.2. ATTORNEYS' FEES. In the event that a party to this Agreement brings an action against the other party hereto by reason of the breach of any condition, covenant, representation or warranty in this Agreement, or otherwise arising out of this Agreement, the prevailing party in such action shall be entitled to recover from the other reasonable expert witness fees, and its reasonable attorney's fees and costs. Attorney's fees shall include attorney's fees on any appeal, and in addition a party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, including the conducting of discovery. 7.3. AMENDMENTS. This Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Riverside. 7.4. NOTICE. Any notice required to be given hereunder shall be made in writing and shall be given by personal delivery, certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: City: City of Palm Springs 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Attn: City Manager Copy to: City of Palm Springs 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Attn: City Attorney OPERATIONS COVENANT j%kimpincenragreein -7- FOR HOTEL INCENTIVE PROGRAM Owner: Palm Springs Promenade, LLC 555 South Sunrise Way, Suite 200 Palm Springs, CA 92264 The notice shall be deemed given three (3) business days after the date of mailing, or, if personally delivered, when received. 7.5. SEVERABILITY/WAIVER/INTEGRATION 1. Severability. If any provision of this Agreement or portion thereof, or the application to any person or circumstances, shall to any extent be held invalid, inoperative, or unenforceable, the remainder of the provisions, or the application of such provision or portion thereof to any other persons or circumstances, shall not be affected thereby; provided, that if any material terms or provisions of these Operating Covenants are rendered invalid, void and/or unenforceable, or due to changes in the law such terms or provisions would materially alter the terms of the transactions contemplated herein, the parties agree to meet and negotiate in good faith to attempt to reform these Operating Covenants to accomplish the intent of the parties. 2. Waiver. A waiver by either party of the performance of any covenant or condition herein shall not invalidate this Agreement nor shall it be considered a waiver of any other covenants or conditions, nor shall the delay or forbearance by either party in exercising any remedy or right be considered a waiver of, or an estoppel against, the later exercise of such remedy or right. 3. Integration. This Agreement contains the entire Agreement between the parties and neither party relies on any warranty or representation not contained in this Agreement. 4. Third Parties. No third party beneficiaries are intended, and the only parties who are entitled to enforce the provisions of these Operating Covenants are the City, Mortgagees, Participant and their respective successors and assigns. 7.6. GOVERNING LAW. This Agreement shall be governed by the laws of the State of California and is subject to the provisions of Government Code Section 53083. 7.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute one original and all of which shall be one and the same instrument. 7.8. TERMINATION. This Agreement may be terminated only (i) by and upon expiration of the Term, (ii) by mutual written agreement of the parties, and (iii) by and pursuant to the provisions of Section 7.9 or 7.10 below. In the event of any such termination, Owner (or its successor, as applicable) shall not be obligated to return any amounts previously paid to it by the City pursuant to the Program. 7.9 DEFAULT BY OWNER. If at any time during the Term, City contends that Owner has committed a material default with respect this Agreement, e.g., by failing to operate OPERATIONS COVENANT jwkfmpfnc nlageenf -8- FOR HOTEL INCENTIVE PROGRAM the Hotel as a first class Virgin brand hotel, City shall deliver to Owner written notice of default which specifies in detail all facts alleged by City to constitute such default. For a period of thirty days thereafter, Owner will have the right to commence and complete cure of the alleged default; provided, however, if the alleged default is of such a nature as to reasonably require more than sixty days to cure, and the Parties so agree, Owner will have such addition time as is reasonably necessary to complete such cure. Subject to Section 7.11 below, if Owner fails to timely cure such default, City shall then have the right to terminate this Agreement. (To the extent of any inconsistency between the provisions of this Section 7.9 and the provisions of Section 3.1 above, the provisions of this Section 7.9 shall prevail.) 7.10 DEFAULT BY CITY. If at any time during the Tenn, Owner contends that City has committed a material default with respect this Agreement, Owner may deliver to City written notice of default which specifies in detail all facts alleged by Owner to constitute such default. For a period of thirty days thereafter, City will have the right to commence and complete cure of the alleged default; provided, however, if the alleged default is of such a nature as to reasonably require more than sixty days to cure, and the Parties so agree, City will have such addition time as is reasonably necessary to complete such cure. Subject to Section 7.11 below. if City fails to timely cure such default, Owner shall then have the right to terminate this Agreement or exercise any and all other rights and remedies available at law and in equity, and each of such rights and remedies shall be cumulative and not exclusive. 7.11 MORTGAGE PROVISONS. Anything in this Agreement to the contrary notwithstanding, with respect to any recorded mortgage or deed of trust given in good faith and for value and encumbering the Hotel ("Mortgage"), any bolder thereof that has delivered to City a copy of such recorded Mortgage and current contact information ("Mortgagee") will be entitled rights and benefits in accordance with the following: 1. City acknowledges and agrees that the rights and obligations of Owner under this Agreement may, with or without approval by City, be conditionally assigned by Owner to any Mortgagee as security for performance of Mortgage obligations. 2. While any Mortgage remains in effect, City will not amend or modify this Agreement in any material respect without receiving prior written approval from Mortgagee, which approval may not be unreasonably withheld, delayed or conditioned; provided, however, failure by Mortgagee to provide written approval or disapproval (and if disapproval the reasons therefor) within thirty days of delivery of request therefor shall be deemed to constitute approval by Mortgagee. 3. While any Mortgage remains in effect, in the event City delivers to Owner of any notice of default as referenced in either Section 3.1 or 7.9 above, City shall concurrently deliver a copy thereof to Mortgagee. 4. Delivery of any such notice of default notwithstanding, City will not terminate or initiate or pursue any action to tenninate this Agreement as long as Mortgagee diligently (i) declares a default by Owner under the Mortgage, (ii) pursues foreclosure and/or OPERA I IONS COVENANT' jwkimpina nlagreeni -9- FOR HOTEL INCENTIVE PROGRAM other appropriate actions under the Mortgage, (iii) pays to City all amounts that would otherwise have been payable by Owner to City, and (iv) cures non-monetary defaults. 7.12 Operator Provisions. City acknowledges and agrees that operational obligations of Owner may, with or without consent of City, be assigned by Owner to any entity owned or wholly controlled by Owner or its Members or the Virgin Hotel so long as the hotel remains a Virgin brand hotel, or with the consent of City to a Hotel Operator of Owner's choice, and, in connection therewith, such Hotel Operator may assume all or part of Owner's Hotel operation obligations under this Agreement; provided, however, Owner shall retain ultimate responsibility for such Hotel operation obligations. City agrees that while any Hotel Operator agreement is in effect, and provided that City has been put on notice of such agreement and received contact information for such Operator, in the event City delivers to Owner of any notice of default as referenced in either Section 3.1 or 7.9 above, City shall concurrently deliver a copy thereof to the Operator. 7.13 LIMITATION ON HOTEL DEVELOPMENT. Owner agrees that Owner shall not apply for and Owner shall not be issued a building permit for any hotel within the boundaries of the Downtown Palm Springs Specific Plan, as may be amended from time to time, including without limitation Block K thereof, until a certificate of occupancy has been issued for the first class new Virgin Hotel as provided in this Agreement. 7.14 Cooperation. Each parry agrees to and shall do and perform such other and further acts and properly execute and deliver such other and further documents as may be reasonably necessary, expedient or convenient to implement and/or effectuate the intents and purposes hereof. City and Owner agree tp cooperate with each other and/or with any Mortgagee or proposed Mortgagee, in a manner consistent with concepts and principles of good faith, fair dealing and commercial reasonableness, with respect to consideration, implementation and execution of any modification(s) to this Agreement reasonably requested by the City, Owner, Mortgagee or proposed Mortgagee. 7.15 Reasonable Approvals. Whenever this Agreement requires or calls for the approval or consent of any party hereto, such approval shall not be unreasonably withheld, delayed or conditioned. 7.16 Bindine Arbitration. In the event of any dispute or controversy arising out of or relating to this Agreement, or the breach or performance of it, the parties shall reasonably attempt to resolve such dispute or controversy without resort to third party review or resolution. The parties shall first meet and confer on any such dispute or controversy. Such meeting(s) shall include any principal of the Owner and, at the discretion of the City, may include the City Manager and/or the City Council, either as a whole or through an ad hoc subcommittee designated by the City Council. Upon a determination by the parties that they are or will be unable to resolve the dispute or controversy on their own, then the parties shall submit the dispute, controversy or any remaining unresolved matter to binding arbitration, to be held in the Coachella Valley, and be conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association. OPERATIONS COVENANT jwkimpincentageem FOR HOTEL INCENTIVE PROGRAM 7.17 Incorporation of Recitals and Exhibits. Each of the recitals set forth above and each of the exhibits attached hereto are agreed to and made part of this Agreement. 7.18 Authority. Each party represents and warrants to the other that such party has full right, power and authority to sign, execute and enter into this Agreement. IN WITNESS WHEREOF, the City and Owner have executed this Operations Covenant by duly authorized representatives on the date first written hereinabove. "CITY" THE CITY OF PALM SPRINGS, a municipal corporation and charter city By. yid City Manager ATTEST: APPROVED 6Y CI'f Y COUNCIL A oS�o�i�tot(� 1'G City Clerk �►�(��{ I APPROVED AS TO FORM: WOODRUFF, SP IN & SMART By: 47 Douglas . olland, Esq. City Alt" tt rney "OWNER" PALM SPRINGS PROMENADE, LLC a California Li Liability mpany By: Michael Braun Managing Member By: Name: Title: [END OF SIGNATURES] OPERATIONS COVENANT ,L mPmemag mii FOR 110'I'LL INCENTIVE PROGRAM ACKNOWLEDGMENT OF INSTRUMENT (Cal. Civil Code Section 1181) State of California ) County of Riverside ) ss. City of Palm Springs ) On July 5, 2016, before me, JAMES THOMPSON, CITY CLERK, CITY OF PALM SPRINGS, CALIFORNIA, personally appeared DAVID H. READY, who I personally know is the CITY MANAGER of the CITY OF PALM SPRINGS whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his official and authorized capacity on behalf of the City of Palm Springs, a California Charter City. 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 the official seal of the City of Palm Springs, California, this 5th day of July, 2016. �QF QALM S.. iy c V in HC�II niEO`G 1 O Signature: c°<�FoeN�P MES THOMPSON, CITY CLERK City of Palm Springs, California Title or Type of Document A6641 Amended and Restated Operations Covenant (Council approved 05-04-2016) FORM OF ACKNOWLEDGMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached.and not the truthfulness.accuracy,or validity of that document State of California Countyof eieside- ) On June 2 7II D1!vbe�ftore me, ),a, t L ,5an6m allyt appeared a e who proved to me on the basis of satisfactory evidence to be the person(l)whose name(p is/are subscribed to the within instrument and acknowledged to me that he/she hey executed the same in hisAerltheir authorized capacity0"),and that by his/la"Ahein signatureO on the instrument the person(,or the entity upon behalf of which the person(f)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. JEANETTE L. SANBORN Commission#2037158 WITNESS my hand and official seal. Notary Public -California i Riverside County Signature C flO�}'�iLl � MY Comm.Expire Aug 16,0 7 (Seal) FORM OF ACKNOWLEDGMENT A notary public or other officer completing this certificate verities only the identity of the individual who signed the document to which this certificate is attached,and not the truthfulness,accuracy,or validity of that document State of California ) County of ) On before me, ,personally appeared who proved tome 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 persons)acted,executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal Signature (Seal) 4 i 1 r •, a f r. w � d t. a m Canyons R�r t [r q� • .P r aY { of i}}1 x rv-Inman C-an.yon` Dr EXHIBIT "B" LEGAL DESCRIPTION OF PARCEL 3 (BLOCK B) Parcel 3 as shown on Parcel Map 36446, as per Map recorded in Book 238, Pages 31 through 34 of Maps, records of Riverside County, California. p DOC # 2015-0000803 Reaasdhg ReqMW BY 01/02/2015 01:49 PM Fees: $0.00 RntAnwicaniNleCWOM Page 1 of 15 NftnalCornnnoma SwAces Recorded in Official Records County of Riverside Peter Aldana FREE RECORDING REQUESTED BY Assessor, County Clerk&Recorder AND WHEN RECORDED MAIL TO: "*This document was electronically submitted THE CITY OF PALM SPRINGS to the County of Riverside for recording`" 3200 E. Tahquitz Canyon Way Receipted by:TVERBA Palm Springs, CA 92262 Attention: City Clerk (Space Above This Line for Recorders Office Use Only) OPERATIONS COVENANT NCS- 6 9Z y60 THIS OPERATIONS COVENANT AND DECLARATION OF COVENANTS AND `a ,n RESTRICTIONS ("Agreement" or "Covenant") is made and entered into this 30th day of 1 1 December, 2014, by and between the CITY OF PALM SPRINGS, a municipal corporation and charter city ("City"), and Palm Springs Promenade, LLC, a California limited liability company ("Owner" or"Participant"). t'\ RECITALS : A. The City of Palm Springs adopted Chapter 5.26 of its Municipal Code in December, 2007 to provide a Hotel Operations Incentive Program ("Program") for the operation, maintenance and expansion of the inventory of quality and first class hotels within the City that enhance the tourist and travel experience for visitors to the City, maximize the use of the City's Convention Center, provide attractive and desirable visitor serving facilities and experiences, and assist the City in achieving its tourism goals. (Chapter 5.26 of the Municipal Code is incorporated herein by reference and defined terms therein shall, unless otherwise indicated, have the same meanings herein.) B. Owner holds fee title to certain real property ("Site"), which is depicted as Block F on the Site Plan attached hereto as Exhibit "A", and legally described as Parcel 5 on the Legal Description attached hereto as Exhibit `B". The Site, which is located in the downtown area of the City of Palm Springs, California, is fully entitled for development of a first class new hotel to contain approximately 135 hotel rooms ("Hotel" or "Project"). Owner has applied for the Program and has provided satisfactory documentation confirming that the AC Hotel, as entitled and approved and when completed and under operation, will qualify as a new first class hotel and be entitled to benefits thereof under and pursuant to provisions of Chapter 5.26 of the Municipal Code and this Agreement. C. City and Owner now desire to place restrictions upon the use and operation of the Project, in order to ensure that the Project shall be operated continuously as a hotel available for short-term rental for the term of this Agreement. D. City and Owner also agree that in return for participation in the Program, Owner shall agree to operate the Project as a hotel; participate in the Palm Springs Convention Center's Committable Rooms Program; and provide City with a minimum of six (6) room-nights per 17 n 7014 ReowftgRsquesled By FW Amerlcan7ft Company National Commerolal Services FREE RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: THE CITY OF PALM SPRINGS 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Attention: City Clerk (Space Above This Line for Recorder's Office Use Only) OPERATIONS COVENANT THIS OPERATIONS COVENANT AND DECLARATION OF COVENANTS AND RESTRICTIONS ("Agreement" or "Covenant") is made and entered into this 30th day of December, 2014, by and between the CITY OF PALM SPRINGS, a municipal corporation and charter city ("City"), and Palm Springs Promenade, LLC, a California limited liability company ("Owner" or"Participant"). RECITALS : A. The City of Palm Springs adopted Chapter 5.26 of its Municipal Code in December, 2007 to provide a Hotel Operations Incentive Program ("Program") for the operation, maintenance and expansion of the inventory of quality and first class hotels within the City that enhance the tourist and travel experience for visitors to the City, maximize the use of the City's Convention Center, provide attractive and desirable visitor serving facilities and experiences, and assist the City in achieving its tourism goals. (Chapter 5.26 of the Municipal Code is incorporated herein by reference and defined terms therein shall, unless otherwise indicated, have the same meanings herein.) B. Owner holds fee title to certain real property ("Site"), which is depicted as Block F on the Site Plan attached hereto as Exhibit "A", and legally described as Parcel 5 on the Legal Description attached hereto as Exhibit `B". The Site, which is located in the downtown area of the City of Palm Springs, California, is fully entitled for development of a first class new hotel to contain approximately 135 hotel rooms ("Hotel" or "Project"). Owner has applied for the Program and has provided satisfactory documentation confirming that the AC Hotel, as entitled and approved and when completed and under operation, will qualify as a new first class hotel and be entitled to benefits thereof under and pursuant to provisions of Chapter 5.26 of the Municipal Code and this Agreement. C. City and Owner now desire to place restrictions upon the use and operation of the Project, in order to ensure that the Project shall be operated continuously as a hotel available for short-term rental for the term of this Agreement. D. City and Owner also agree that in return for participation in the Program, Owner shall agree to operate the Project as a hotel; participate in the Palm Springs Convention Center's Committable Rooms Program; and provide City with a minimum of six (6) room-nights per f2.r7.zoia month for official City use; and, City agrees to share a percentage of Transient Occupancy Tax Increment with Owner pursuant to the Program guidelines. E. The City finds that no further environmental review is required in connection with the approval of this Covenant in that in connection with City approval of entitlements, finding were made that the Project would be consistent with the approved Specific Plan and certified EIR and that neither a subsequent EIR, supplemental EIR, or EIR Addendum would be necessary. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Participant hereby conveys to the City the Operating Covenants described herein and City hereby agrees to provide Participant with funds as provided under the Program and as set forth hereinafter. ARTICLE 1 STATEMENT OF OPERATING COVENANTS 1.1. OPERATION AND USE COVENANT. Upon occupancy, Owner covenants to operate, maintain, and use the AC Hotel in accordance with this Agreement. All uses conducted on the Site, including, without limitation, all activities undertaken by the Owner pursuant to this Agreement shall, in all material respects, conform to requirements of this Agreement and Palm Springs Municipal Code. 1.2. HOTEL USE. The Owner hereby agrees that the Project is to be owned, managed, and operated as a hotel in a first-class manner, and the Project's participation in the Program shall continue in accordance with the terms of the Program, for a term equal to thirty years commencing upon the date Owner first receives from the City the Owner's share of transient occupancy tax revenues pursuant to the Program, or until Owner has received from the City the total sum of fifty million dollars if that occurs prior to the expiration of said thirty years, unless Owner's participation in the Program is terminated prior thereto in accordance with this Agreement (the "Term"). Subject to Palm Springs Municipal Codes Section 5.26.040(a) and Sections 7.9, 7.11, and 7.16 of this Covenant, during the Term, City shall pay to Owner, within thirty days after receipt from Owner of each monthly payment made by Owner to the tax administrator per Section 3.24.080 of the Municipal Code, an amount equal to seventy-five percent of each such payment. City acknowledges and agrees that City has reviewed proposed development and operational plans for the Hotel and concluded that such plans are in substantial compliance with and will satisfy first class Hotel requirements of the City and Chapter 5.26 of the Municipal Code. I. Housing Uses Prohibited. None of the rooms in the Project will at any time be utilized as a non-transient residential property including dormitory, fraternity or sorority house, rooming house, nursing home, hospital, sanitarium, or trailer court or park without the City's prior consent which consent may be given or withheld in its sole and absolute discretion. greeiii OPERATIONS COVENANT jwkimpi¢centa -2- FOR HOTEL INCENTIVE PROGRAM 2. Conversion of Project. No part of the Project will at any time be owned by a cooperative housing corporation, nor shall the Owner take any steps in connection with the conversion to such ownership or uses to condominiums, or to any other form of ownership, without the prior written approval of the City Council which approval may be given or withheld in its sole and absolute discretion. ARTICLE 2 WARRANTIES AND COVENANTS 2.1. WARRANTIES AND COVENANTS. For the Term of this Agreement, the Owner hereby represents, covenants, warrants and agrees as follows: 1. Owner has completed the City's application for the Hotel Operations Incentive Program. Since the Hotel will be a new hotel, City has determined the Transient Occupancy Tax Base to be used to calculate the Transient Occupancy Tax Increment shall be zero, and the Owner accepts such Transient Occupancy Tax Base. 2. Owner hereby agrees to subscribe to the Palm Springs Convention Center's Committable Rooms Program or any similar successor program as identified by the City Manager without being obligated to incur any additional costs or expenses. 3. Upon City's prior request, Owner shall provide the City at no cost six (6) rooms for one (1) night (or 3 rooms for 2 nights) other than Friday or Saturday nights each month for use for City purposes as approved or designated by the City Manager, provided that such use by the City shall be subject to the rooms being available at the time of the City's request. Such accommodations shall include all services and amenities for which the Owner would normally collect transient occupancy taxes but will not include services and amenities that are optional to the transient and for which the transient is not required to pay a transient occupancy taxes. City shall be responsible for any transient occupancy taxes for any occupancy provided to City under the provisions of this paragraph. Notwithstanding anything in this Agreement to the contrary, if the City does not use rooms during any month, then its right to use rooms with respect to that month shall expire at the end of that month and shall not accrue; provided, however, if the City was unable to use rooms solely because Owner's Hotel had no rooms available when the City requested a room in accordance with this Section 2.1.3, then, the City's right to use rooms shall not expire and may be used by the City in a subsequent month. ARTICLE 3 MAINTENANCE 3.1. MAINTENANCE. 1. Maintenance Obligation. Owner, for itself and its successors and assigns, hereby covenants and agrees to maintain and repair or cause to be maintained and repaired the Site and all related on-site improvements and landscaping thereon, including, without limitation, buildings, parking areas, lighting, signs and walls in a first class OPERATIONS COVENANT jwkimpi.mtagmeni -3- FOR HOTEL INCENTIVE PROGRAM condition and repair, free of rubbish, debris and other hazards to persons using the same, and in accordance with all applicable laws, rules, ordinances and regulations of all federal, state, and local bodies and agencies having jurisdiction, at Owner's sole cost and expense. Such maintenance and repair shall include, but not be limited to, the following: (i) sweeping and trash removal; (ii) the care and replacement of all shrubbery, plantings, and other landscaping in a healthy condition; and (iii) the repair, replacement and restriping of asphalt or concrete paving using the same type of material originally installed, to the end that such paving at all times be kept in a level and smooth condition. In addition, Owner shall be required to maintain the Project in such a manner as to avoid the reasonable determination of a duly authorized official of the City that a public nuisance has been created by the absence of adequate maintenance such as to be detrimental to the public health, safety or general welfare or that such a condition of deterioration or disrepair causes appreciable harm or is materially detrimental to property or improvements within one thousand (1,000) feet of such portion of the Site. The foregoing notwithstanding, Owner shall not be obligated to maintain any street or sidewalk areas, or landscaping therein, which are to be maintained by the City pursuant to a Project Financing Agreement executed by the City (as amended). 2. Parking and DrivewaM. The driveways and traffic aisles on the Site shall be kept clear and unobstructed at all times. 3. Right of Entry. In the event Owner fails to maintain the Site in the above- mentioned condition, and satisfactory progress is not made in correcting the condition within thirty (30) days from the date of written notice from City (such notice shall reasonably identify the required maintenance), City may, at City's option, and without further notice to Owner, declare the unperformed maintenance to constitute a public nuisance. Thereafter, either City or its employees, contractors, or agents, may cure Owner's default by entering upon the Site and performing the necessary landscaping and/or maintenance in accordance with Section 3.1.1 above. The City shall give Owner, its representative, or the residential manager reasonable notice of the time and manner of entry, and entry shall only be at such times and in such manner as is reasonably necessary to carry out this Agreement. Owner shall pay such costs as are reasonably incurred by City for such maintenance, including attorneys' fees and costs. 4. Lien. If any costs incurred by City under Section 3 above are not reimbursed within thirty (30) days after Owner's receipt of City's written request for reimbursement, the same shall be deemed delinquent, and the amount thereof shall bear interest thereafter at a rate of the lower of ten percent (10%) per annum or the legal maximum until paid. Any and all delinquent amounts, together with said interest, costs and reasonable attorney's fees, shall be an obligation of Owner as well as a lien and charge, with power of sale, upon the property interests of Owner, and the rents, issues and profits of such property. City may bring an action at law against Owner obligated to pay any such sums or foreclose the lien against Owner's property interests. Any such lien may be enforced by sale by the City following recordation of a Notice of Default of Sale given in the manner and time required by law as in the case of a deed of trust; such sale to be conducted in accordance with the provisions of Section 2924, et seq., of the California OPERATIONS COVENAN"I jwkimpincentameiii -4- FOR HOTEL INCENTIVE PROGRAM Civil Code, applicable to the exercise of powers of sale in mortgages and deeds of trust, or in any other manner permitted by law. Any monetary lien provided for herein shall be subordinate to any bona fide mortgage or deed of trust covering an ownership interest or leasehold or subleasehold estate in and to any portion of the Site, and any purchaser at any foreclosure or trustee's sale (as well as any deed or assignment in lieu of foreclosure or trustee's sale) under any such mortgage or deed of trust shall take title free from any such monetary lien, but otherwise subject to the provisions hereof, provided that, after the foreclosure of any such mortgage and/or deed of trust, all other assessments provided for herein to the extent they relate to the expenses incurred subsequent to such foreclosure, assessed hereunder to the purchaser at the foreclosure sale, as owner of the subject Site after the date of such foreclosure sale, shall become a lien upon such Site upon recordation of a Notice of Assessment or Notice of Claim of Lien as herein provided. In the event of any such foreclosure, City (or successor) agrees to and shall recognize and honor any existing commercial (non-transient occupancy) leases in effect with respect to portions of the Project, provided that commercial tenants of such leases agree to subordinate and attorn to City(or successor) as the new landlord with respect to such leases. ARTICLE 4 COMPLIANCE WITH LAWS 4.1. COMPLIANCE WITH LAWS. Owner shall comply with all ordinances, regulations and standards of the City and City applicable to the Site. Owner shall comply with all rules and regulations of any assessment district of the City with jurisdiction over the Site. ARTICLE 5 NONDISCRIMINATION 5.1. NONDISCRIMINATION. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, gender, sexual orientation, marital status, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site, or any part thereof, nor shall Owner, or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of guests or vendees of the Site, or any part thereof. ARTICLE 6 COVENANTS TO RUN WITH THE LAND 6.1. COVENANTS TO RUN WITH THE LAND. Owner hereby subjects the Site to the covenants, reservations, and restrictions set forth in this Agreement. City and Owner hereby declare their express intent that all such covenants, reservations, and restrictions shall be deemed covenants running with the land and shall pass to and be binding upon the Owner's successors in OPERATIONS COVENANT jwkimpincent gm6ii -5- FOR HOTEL INCENTIVE PROGRAM title to the Site; provided, however, that on the termination of this Agreement said covenants, reservations and restrictions shall expire. All covenants without regard to technical classification or designation shall be binding for the benefit of the City, and such covenants shall run in favor of the City for the entire term of this Agreement, without regard to whether the City is or remains an owner of any land or interest therein to which such covenants relate. Each and every contract, deed or other instrument hereafter executed covering or conveying the Site or any portion thereof shall conclusively be held to have been executed, delivered and accepted subject to such covenants, reservations, and restrictions, regardless of whether such covenants, reservations, and restrictions are set forth in such contract, deed or other instrument. City and Owner hereby declare their understanding and intent that the burden of the covenants set forth herein touch and concern the land in that Owner's legal interest in the Site is rendered less valuable thereby. City and Owner hereby further declare their understanding and intent that the benefit of such covenants touch and concern the land by enhancing and increasing the enjoyment and use of the Project by the intended beneficiaries of such covenants, reservations, and restrictions, and by furthering the public purposes for which the City was formed. Owner, in exchange for the City entering into this Agreement, hereby agrees to hold, sell, and convey the Site subject to the terns of this Agreement. Owner also grants to the City the right and power to enforce the terms of this Agreement against the Owner and all persons having any right, title or interest in the Site or any part thereof while such party owns the Site. No party shall have any liability or obligation in connection with any breach occurring while such party is not the owner of the Site. Within fifteen (15) business days after request of Owner, City shall execute and provide to Owner an estoppel certificate, in the form approved by the City Attorney of the City, confirming whether or not Owner is in breach of any obligations under this Agreement and identifying any required cure. ARTICLE 7 INDEMNIFICATION 7.1. INDEMNIFICATION. Owner agrees for itself and its successors and assigns to indemnify, defend, and hold harmless City and its respective officers, members, officials, employees, agents, volunteers, and representatives from and against any loss, liability, claim, or judgment to or by any third party relating to development and/or operation of the Project by Owner, excepting only any such loss, liability, claim, or judgment arising solely out of the intentional wrongdoing or gross negligence of City or its respective officers, officials, employees, members, agents, volunteers, or representatives. Owner, while in possession of the Site, and each successor or assign of Owner while in possession of the Site, shall remain fully obligated for the payment of property taxes and assessments in connection with the Site. The foregoing indemnification, defense, and hold harmless agreement shall only be applicable to and binding upon the party then owning the Site or applicable portion thereof. OPERAHONS COVENANT jwkimpincenWgreeifi -6- FOR HOTEL INCENTIVE PROGRAM 7.2. ATTORNEYS' FEES. In the event that a party to this Agreement brings an action against the other party hereto by reason of the breach of any condition, covenant, representation or warranty in this Agreement, or otherwise arising out of this Agreement, the prevailing party in such action shall be entitled to recover from the other reasonable expert witness fees, and its reasonable attorney's fees and costs. Attorney's fees shall include attorney's fees on any appeal, and in addition a party entitled to attorney's fees shall be entitled to all other reasonable costs for investigating such action, including the conducting of discovery. 7.3. AMENDMENTS. This Agreement shall be amended only by a written instrument executed by the parties hereto or their successors in title, and duly recorded in the real property records of the County of Riverside. 7.4. NOTICE. Any notice required to be given hereunder shall be made in writing and shall be given by personal delivery, certified or registered mail, postage prepaid, return receipt requested, at the addresses specified below, or at such other addresses as may be specified in writing by the parties hereto: City: City of Palm Springs 3200 E. Tahquitz Canyon Way Palm Springs, CA 92262 Attn: City Manager Copy to: Woodruff, Spradlin & Smart, LLP 555 Anton Boulevard, Suite 1200 Costa Mesa, CA 92626 Attn: Douglas C. Holland, Esq. Owner: John Wessman 555 South Sunrise Way, Suite 200 Palm Springs, CA 92264 The notice shall be deemed given three (3) business days after the date of mailing, or, if personally delivered, when received. 7.5. SEVERABILITY/WAIVER/INTEGRATION 1. Severability. If any provision of this Agreement or portion thereof, or the application to any person or circumstances, shall to any extent be held invalid, inoperative, or unenforceable, the remainder of the provisions, or the application of such provision or portion thereof to any other persons or circumstances, shall not be affected thereby; provided, that if any material terms or provisions of these Operating Covenants are rendered invalid, void and/or unenforceable, or due to changes in the law such terms or provisions would materially alter the terms of the transactions contemplated herein, the parties agree to meet and negotiate in good faith to attempt to reform these Operating Covenants to accomplish the intent of the parties. 2. Waiver. A waiver by either party of the performance of any covenant or condition herein shall not invalidate this Agreement nor shall it be considered a waiver of OPERATIONS COVENANT jwkimpincentagreeiii -7- FOR HOTEL INCENTIVE PROGRAM any other covenants or conditions, nor shall the delay or forbearance by either party in exercising any remedy or right be considered a waiver of, or an estoppel against, the later exercise of such remedy or right. 3. Integration. This Agreement contains the entire Agreement between the parties and neither party relies on any warranty or representation not contained in this Agreement. 4. Third Parties. No third party beneficiaries are intended, and the only parties who are entitled to enforce the provisions of these Operating Covenants are the City, Mortgagees, Participant and their respective successors and assigns. 7.6. GOVERNING LAW. This Agreement shall be governed by the laws of the State of California and is subject to the provisions of Government Code Section 53083. 7.7. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute one original and all of which shall be one and the same instrument. 7.8. TERMINATION. This Agreement may be terminated only (i) by and upon expiration of the Term, (ii) by mutual written agreement of the parties, and (iii) by and pursuant to the provisions of Section 7.9 or 7.10 below. In the event of any such termination, Owner (or its successor, as applicable) shall not be obligated to return any amounts previously paid to it by the City pursuant to the Program. 7.9 DEFAULT BY OWNER. If at any time during the Term, City contends that Owner has committed a material default with respect this Agreement, e.g., by failing to operate the Hotel as a first class hotel, City shall deliver to Owner written notice of default which specifies in detail all facts alleged by City to constitute such default. For a period of thirty days thereafter, Owner will have the right to commence and complete cure of the alleged default; provided, however, if the alleged default is of such a nature as to reasonably require more than sixty days to cure, and the Parties so agree, Owner will have such addition time as is reasonably necessary to complete such cure. Subject to Section 7.11 below, if Owner fails to timely cure such default, City shall then have the right to terminate this Agreement. (To the extent of any inconsistency between the provisions of this Section 7.9 and the provisions of Section 3.1 above, the provisions of this Section 7.9 shall prevail.) 7.10 DEFAULT BY CITY. If at any time during the Term, Owner contends that City has committed a material default with respect this Agreement, Owner may deliver to City written notice of default which specifies in detail all facts alleged by Owner to constitute such default. For a period of thirty days thereafter, City will have the right to commence and complete cure of the alleged default; provided, however, if the alleged default is of such a nature as to reasonably require more than sixty days to cure, and the Parties so agree, City will have such addition time as is reasonably necessary to complete such cure. Subject to Section 7.11 below, if City fails to timely cure such default, Owner shall then have the right to terminate this Agreement or exercise any and all other rights and remedies available at law and in equity, and each of such rights and remedies shall be cumulative and not exclusive. OPERATIONS COVENANT jwkimpincentageeiii -8- FOR HOTEL INCENTIVE PROGRAM 7.11 MORTGAGE PROVISONS. Anything in this Agreement to the contrary notwithstanding, with respect to any recorded mortgage or deed of trust given in good faith and for value and encumbering the Hotel ("Mortgage"), any bolder thereof that has delivered to City a copy of such recorded Mortgage and current contact information ("Mortgagee") will be entitled rights and benefits in accordance with the following: 1. City acknowledges and agrees that the rights and obligations of Owner under this Agreement may, with or without approval by City, be conditionally assigned by Owner to any Mortgagee as security for performance of Mortgage obligations. 2. While any Mortgage remains in effect, City will not amend or modify this Agreement in any material respect without receiving prior written approval from Mortgagee, which approval may not be unreasonably withheld, delayed or conditioned; provided, however, failure by Mortgagee to provide written approval or disapproval (and if disapproval the reasons therefor) within thirty days of delivery of request therefor shall be deemed to constitute approval by Mortgagee. 3. While any Mortgage remains in effect, in the event City delivers to Owner of any notice of default as referenced in either Section 3.1 or 7.9 above, City shall concurrently deliver a copy thereof to Mortgagee. 4. Delivery of any such notice of default notwithstanding, City will not terminate or initiate or pursue any action to terminate this Agreement as long as Mortgagee diligently (i) declares a default by Owner under the Mortgage, (ii) pursues foreclosure and/or other appropriate actions under the Mortgage, (iii) pays to City all amounts that would otherwise have been payable by Owner to City, and (iv) cures non-monetary defaults. 7.12 Operator Provisions. City acknowledges and agrees that operational obligations of Owner may, with or without consent of City, be assigned by Owner to any entity owned or wholly controlled by Owner or its Members or Hotel Operator of Owner's choice, and, in connection therewith, such Hotel Operator may assume all or part of Owner's Hotel operation obligations under this Agreement; provided, however, Owner shall retain ultimate responsibility for such Hotel operation obligations. City agrees that while any Hotel Operator agreement is in effect, and provided that City has been put on notice of such agreement and received contact information for such Operator, in the event City delivers to Owner of any notice of default as referenced in either Section 3.1 or 7.9 above, City shall concurrently deliver a copy thereof to the Operator. 7.13 RESERVED. 7.14 Coo eration. Each party agrees to and shall do and perform such other and further acts and properly execute and deliver such other and further documents as may be reasonably necessary, expedient or convenient to implement and/or effectuate the intents and purposes hereof. City and Owner agree tp cooperate with each other and/or with any Mortgagee OPERATIONS COVENANT jwkimpinuntagmeiii -9- FOR HOTEL INCENTIVE PROGRAM or proposed Mortgagee, in a manner consistent with concepts and principles of good faith, fair dealing and commercial reasonableness, with respect to consideration, implementation and execution of any modification(s) to this Agreement reasonably requested by the City, Owner, Mortgagee or proposed Mortgagee. 7.15 Reasonable Approvals. Whenever this Agreement requires or calls for the approval or consent of any party hereto, such approval shall not be unreasonably withheld, delayed or conditioned. 7.16 Binding Arbitration. In the event of any dispute or controversy arising out of or relating to this Agreement, or the breach or performance of it, the parties shall reasonably attempt to resolve such dispute or controversy without resort to third party review or resolution. The parties shall first meet and confer on any such dispute or controversy. Such meeting(s) shall include any principal of the Owner and, at the discretion of the City, may include the City Manager and/or the City Council, either as a whole or through an ad hoc subcommittee designated by the City Council. Upon a determination by the parties that they are or will be unable to resolve the dispute or controversy on their own, then the parties shall submit the dispute, controversy or any remaining unresolved matter to binding arbitration, to be held in the Coachella Valley, and be conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association. 7.17 Incorporation of Recitals and Exhibits. Each of the recitals set forth above and each of the exhibits attached hereto are agreed to and made part of this Agreement. 7.18 Authority. Each party represents and warrants to the other that such party has full right, power and authority to sign, execute and enter into this Agreement. OPERATIONS COVENANT jwkimpincenWgreeiii -10- FOR HOTEL INCENTIVE PROGRAM IN WITNESS WHEREOF, the City and Owner have executed this Operations Covenant by duly authorized representatives on the date first written hereinabove. "CITY" THE CITY OF PALM SPRINGS, a municipal corporation and charter city a fj�:,n t-q City ATTEST: J APPROVwD BY C1Tf CCUN—W. 1 1�akhleevv- � a�- ityClerk APPROVED AS TO FORM: WOODRUFF, S LIN & SMART By: Dougla C. Holland, Esq. City Attorney "OWNER" f' S�RINGs fkM PRo�rNADE,LiC A- Phu<oR�rl n Li>«,CEo P9Myi..' ry ame: Ilc�hn PSS/Y13n Title: By: Name: Title: [END OF SIGNATURES] OPERATIONS COVENANT jwkimpincenugreeiii -t t- FOR I40TEL INCENTIVE PROGRAM CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. File No: RIW-4765919(SE) STATE OF California )SS APN No: COUNTY OF /__—A coed-5/ G ) On 0&0i ba 30d d l q �before mew, y. YL( &l4 , Notary Public, personally appeared re who proved to me on the basis of satisfactory evidence to be the person hose name(,& i � subscribed to the within instrument and acknowledged to me that(PW/tAy executed the same in i1 Pgr/t�r authorized capacity(09), and that by s Wx tlJur signature% on the instrument the person, or the entity upon Nee of which the person('t¢ acted, executed the instrument. -Irhur c/S 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 CYNTMA A.BERARDI 9 Commission N 2055635 Signature s y Notary Public-CalNornie i Riverside County my Comm.Expires Feb 18.2018 This area for official notarial seal. OPTIONAL SECTION - NOT PART OF NOTARY ACKNOWLEDGEMENT CAPACITY CLAIMED BY SIGNER i Though statute does not require the Notary to fill in the data below, doing so may prove invaluable to persons relgfng on the documents. - " INDIVIDUAL CORPORATE OFFICER(S) TITLE(S) - PARTNER(S) ❑ LIMITED ❑ GENERAL ATTORNEY-IN-FACT TRUSTEE(S) GUARDIAN/CONSERVATOR OTHER SIGNER IS REPR TING: Name of Person or Entity Name of Person or Entity OPTIONAL SECTION - NOT PART OF NOTARY ACKNOWLEDGEMENT Though the data requested here is not required by law, it could prevent fraudulent reattachment of this form. THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW TITLE OR TYPE OF DOCUMENT: k,S Ytzzw NUMBER OF PAGES 1 k'4' DATE OF DOCUMENT lxi' 30 aol SIGNER(S) OTHER THAN NAMED ABOVE Reprotluce0 by First Nneriran mie Carpany 11/2007 CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness,accuracy,or validity of that document. File No: RIW-4765919 (SE) STATE OF California )SS APN No: COUNTY OF X I /Zr5 / C ) On brtembw,r _k�A414f before me, t1 ti n-tk1A A • 17G!!IWl, Notary Public, personally appeared �oV1n �CSS r/1 who proved to me on the basis of satisfactory evidence to be the person hose name i subscribed to the within �in+�str, ument and acknowledged to me that�;,Kjtl W executed the same hi �*/tl)dc authorized capacity(iL�, and that by &r */gwar signatureN on the instrument the person(X), 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 off l sea ` CYNTHIA A.BERARDI Signature C� Commission M 2055635 Z ,-� Notary Pumc-California z Riverside County Comm. rss Feb 16.2018+ This area for official notarial seal. OPTIONAL SECTION - NOT PART OF NOTARY ACKNOWLEDGEMENT CAPACITY CLAIMED BY SIGNER Though statute does not require the Notary to fill in the data below, doing so may prove invaluable to persons relying on the documents. OINDIVIDUAL , CORPORATE OFFICER(S) TITLE(S) _ 0 PARTNER(S) ❑ LIMITED ❑ GENERAt �� ATTORNEY-IN-FACT �..--- 0 TRUSTEES) GUARDIAN/CONSERVATOR 0 0i+iER� SIGNER IS REPRESENTING: Name of Person or Entity Name of Person or Entity OPTIONAL SECTION - NOT PART OF NOTARY ACKNOWLEDGEMENT Though the data requested here is not required by law, it could prevent fraudulent reattachment of this form. THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW TITLE OR TYPE OF DOCUMENT: f)0Qra� 7 -f5 5wkt(44L A NUMBER OF PAGES 1,5}' (' DATE 0�T �ll�yy Jaen �0, dy�y SIGNERS) OTHER THAN NAMSED AB VE Reproduced by First American Me Company 11/2007 ;f. ilk «ia�'i3lIY�1 _ i V a .. .. EXHIBIT B LEGAL DESCRIPTION FOR PARCEL 5 (BLOCK F) Parcel 5 as shown on Parcel Map No. 36446, filed for record on the 15`h day of December, 2014, in Book 238 of Maps, at pages 31-34, inclusive, Official Records of Riverside County, California. Note: It is expected that certain boundaries of said Parcel 5 will be adjusted by a Lot Line Adjustment ("LLA") Application filed with and to be approved by the City of Palm Springs pursuant to Government Code Sections 66412, et seq., and implementing rules, regulations and ordinances of the City. Upon approval and recordation of said LLA, the boundaries of Parcel 5 will be adjusted to be in general conformity with the boundaries of Block F, as indicated on the Site Plan attached as Exhibit A to the Operations Covenant.