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HomeMy WebLinkAbout6/25/2008 - AGREEMENTS ESTOPPEL CERTIFICATE RE: Sublease (Hotels I—XI) between The City of Palm Springs, a California charter city and municipal corporation (successor in interest to SENCA Palm Springs, Inc., a California corporation), as sublandlord (the "Sublandlord"); and HHPS (defined below) (successor in interest to AP/APH Palm Springs, L.P., a Delaware limited partnership; successor in interest to The Community Redevelopment Agency of the City of Palm Springs, California), as subtenant, dated December 31, 1984 (as amended, assigned and supplemented, the "Sublease"). TO: (i) HH PALM SPRINGS LLC, a Delaware limited liability company ("HHPS") and its successors and assigns (collectively, the "Subtenant"); (ii) ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership ("Ashford Hospitality"), and each of their respective affiliates (collectively, the "Ashford Entities"); and(iii) each Lender(defined below). The undersigned is the Sublandlord under the above-referenced Sublease of land located at 888 East Tahquitz Canyon Way in Palm Springs, California (the "Property"). The Sublandlord has been advised that: (i) Subtenant, HHC TRS Portsmouth LLC, a Delaware limited liability company (the "Operating Tenant"), and certain of their affiliates are refinancing the loans described in (A) and (B) below (the "Refinancing") with (i) a mortgage loan (the "Mortgage Loan") from Bank of America, N.A., Barclays Bank PLC and Morgan Stanley Bank, N.A. (together with any successors and/or assigns, the "Mortgage Lender") to Subtenant and its affiliates and (ii) one or more mezzanine loans (such loans, the "Mezzanine Loans") from the lenders set forth therein which may or may not include the Mortgage Lender (together with any successors and/or assigns, the "Mezzanine Lenders"; the Mortgage Lender and any and all Mezzanine Lenders and/or any of their respective affiliates or designees, as applicable, individually and/or collectively, as the context may require, together with their respective successors and/or assigns, are referred to herein as "Lender") to certain direct or indirect owners of Subtenant, the Operating Tenant and their affiliates: (A) a loan from Column Financial, Inc. pursuant to that certain Loan Agreement dated March 6, 2015; and (B) certain mezzanine loans to certain direct or indirect owners of HHPS, the Operating Tenant, and/or their affiliates; (ii) In connection with and as part of the Refinancing, Subtenant, as trustor, and the Mortgage Lender, as beneficiary, are entering into a Leasehold Deed of Trust, Assignment of Leases and Rents and Security Agreement, which will encumber, inter alia, the subleasehold estate of the Subtenant under the Sublease and the improvements located on the property (as the same may be modified, amended, supplemented or restated from time to time, the "Deed of Trust"), which Deed of Trust is to be recorded in the Official Records of Riverside County, California; and 1064994041V.4 (iii) In connection with and as part of the Mortgage Loan and the Mezzanine Loans, the Mortgage Lender and the Mezzanine Lenders will be granted security interests in the direct and/or indirect interests in Subtenant, Operating Tenant and certain affiliates thereof(individually and/or collectively, as the context may require,the"Pledges"). As a condition to the Refinancing, and in reliance thereon, HHPS, the Lender, and the Ashford Entities request that the Sublandlord certify to the HHPS, the Lender, and the Ashford Entities, and each of their respective successors and assigns as follows: 1. The Sublease consists of the original agreement and the amendments thereof and supplements thereto that are identified in Exhibit A, and the Sublease, as so identified in Exhibit A, is unmodified and in full force and effect and constitutes the entire agreement between the Sublandlord and HHPS. A true and complete copy of each such Sublease document is attached hereto as part of such exhibit. The Sublandlord acknowledges that HHPS is currently the sole subtenant under the Sublease. 2. The current term of the Sublease commenced on January 1, 1985 and expires on December 30, 2059. Under Section 2 of the Sublease, upon the exercise of the Option to Extend (as defined in the Sublease) the Master Lease (as defined in the Sublease), the Sublandlord and Subtenant shall extend the term of the Sublease by written amendment to that date which is one day prior to the new termination date of the term of the Master Lease, as extended. 3. All rent and any other charges or amounts due under the Sublease, including the most recent payment of $1,072,808.00, have been paid through December 20, 2017, and there are no amounts currently due from HHPS to the Sublandlord that remain unpaid; provided, however, pursuant to Article 6 of the Master Lease, the guaranteed annual rental under the Master Lease should have been adjusted effective as of January 1, 2015, but such adjustment has not been made effective yet. Accordingly, all of HHPS's payments of rent from and after January 1, 2015 through the date hereof, are subject to a true-up after the finalization of the adjustments required by the Master Lease, and when such adjustments have been finalized HHPS will be obligated to pay, on demand, any deficiency between the amount of rent actually paid by HHPS under the Sublease and the amount of rent that should have been paid from and after January 1, 2015 through the date hereof taking into consideration the appropriate adjustment pursuant to the Master Lease and taking into account such adjustments, if any, as may be appropriate pursuant to the Master Lease and the Sublease. 4. There are not, to the Sublandlord's knowledge, any uncured defaults on the part of HHPS under the Sublease beyond any applicable grace period, or any events or conditions now in existence that will, with notice, the passage of time, or both, constitute a default on the part of HHPS under the Sublease. 5. The Sublandlord is not in default of its obligations under that certain Business Lease No. PSL-315 dated February 28, 1984, approved by the United States Department of the Interior, acting, pursuant to delegated authority from such department, through its Bureau of Indian Affairs (such bureau so acting for such department, the "BIA") on July 23, 1984, which approval was modified on August 20, 1984; as amended pursuant to (i) that certain Amendment No. l to PSL-315 dated as of August 10, 1995, approved by the BIA on October 13, 1995; 2 106499404\V-4 (ii)that certain Amendment to Lease dated as of October 28, 1998, approved by the BIA on October 29, 1998; (iii) that certain First Amendment to Business Lease No. PSL-315 dated as of April 7, 2004, approved by the BIA on May 26, 2004; and (iv) that certain Second Amendment to Business Lease No. PSL-315 dated as of February 9, 2006, approved by the BIA on February 9, 2006. 6. The Sublandlord acknowledges that, in accordance with the Refinancing, the Lender is holding the Deed of Trust and/or one or more Pledges, which encumber, among other things, the subleasehold estate of the Subtenant under the Sublease, the sub-subleasehold estate of the Operating Tenant under the Operating Lease, the Improvements, and/or certain direct or indirect interests in the Subtenant, the Operating Tenant, and/or one or more affiliates thereof, and the Sublandlord acknowledges and agrees that each Lender is a "Sublease Encumbrancer" (as defined in the Sublease) entitled to all of the benefits thereof under the Sublease. 7. The Sublandlord agrees to deliver written notice of any default by the Subtenant under the Sublease to the representatives of the Lender (the "Designated Representatives") simultaneously with sending such notice to the Subtenant. All notices to be sent to the Designated Representatives shall be sent to the following addresses (or such other addresses as may be designated by any of the Designated Representative): Bank of America, N.A. Capital Markets Servicing Group 900 West Trade Street, Suite 650 Mail Code:NC 1-026-06-01 Charlotte, North Carolina 28255 Attention: Servicing Manager Facsimile: (704) 317-4501 and Barclays Bank PLC 745 Seventh Avenue New York,New York 10019 Attention: Sabrina Khabie, Esq. and Morgan Stanley Bank,N.A. 1585 Broadway New York,New York 10036 Attention: George Kok Facsimile No. (212) 507-4859 3 I064994041V4 With a copy to: Dentons US LLP 1221 Avenue of the Americas New York,New York 10020-1089 Attention: David S. Hall, Esq. Facsimile No.: (212) 768-6800 To Mezzanine Lender: Bank of America,N.A. Capital Markets Servicing Group 900 West Trade Street, Suite 650 Mail Code: N C 1-026-06-01 Charlotte,North Carolina 28255 Attention: Servicing Manager Facsimile: (704) 317-4501 and Barclays Bank PLC 745 Seventh Avenue New York,New York 10019 Attention: Sabrina Khabie, Esq. and Morgan Stanley Mortgage Capital Holdings LLC 1585 Broadway New York,New York 10036 Attention: George Kok Facsimile No. (212) 507-4859 With a copy to: Dentons US LLP 1221 Avenue of the Americas New York,New York 10020-1089 Attention: David S. Hall, Esq. Facsimile No.: (212) 768-6800 8. Intentionally Omitted. 9. This Certificate is being delivered in connection with the Refinancing, and the Sublandlord understands and agrees that HHPS, the Ashford Entities, and each Lender, and each of their respective successors and assigns will be relying upon this Certificate and that each of them is entitled to do so. The individual executing this Certificate on behalf of the Sublandlord 4 106499404\V-4 is empowered and authorized to do so. This Certificate shall be governed by the laws of the State of California. This Certificate may be executed in any number of counterparts, each of which shall be fully effective as an original and which together shall constitute a single instrument. This Certificate shall be binding upon the Sublandlord and its successors and assigns, and shall inure to the benefit of HHPS, the Ashford Entities, and each Lender, and each of their respective successors and assigns. When used herein, "including" and the like are not limiting, "or" is not exclusive, each gender includes the other genders, the singular includes the plural and vice versa (including in the definitions of terms), a reference to an "Exhibit" means an exhibit hereto, and all exhibits hereto are incorporated herein by the reference thereto. This Certificate is executed effective as of the day of Aoid 2018. SUBLANDLORD: THE CITY OF PALM SPRINGS By. David H. Ready Esq., Ph.D City Manager nAEST: APPROV TO FORM: n� nthony Edward Z. Kotkin City Clerk City Attorney 5 ID64994041V-4 EXHIBIT A Sublease Documents 1. Sublease (Hotels I-XI) dated as of December 31, 1984, between SENCA Palm Springs, Inc., a California corporation ("SENCA-PS"), as sublandlord, and The Community Redevelopment Agency of The City of Palm Springs, California, a public body (the "Agency"), as subtenant. A memorandum of thereof was recorded in the Official Records on December 30, 1985, as Instrument No. 293742. 2. Supplement (for Purpose of Conforming Legal Description) to Sublease dated as of December 3, 1992, between the Sublandlord (successor in interest to SENCA-PS) and the Agency. 3. Amendment of Sublease dated as of November 5, 1998, between the Agency; the Sublandlord; AP/APH Palm Springs, L.P., a Delaware limited partnership ("AP/APH"); and the other parties thereto identified therein, a memorandum of which was recorded in the Official Records on November 5, 1998 as Instrument No. 487613. 4. Assignment and Termination of Sub-subleases dated as of November 5, 1998, between the Agency, AP/APH and the other parties thereto identified therein, recorded in the Official Records on November 9, 1998 as Instrument No. 487611. 5. Assignment of Ground Sublease dated July 14, 2005, between AP/APH, HH Palm Springs LLC, a Delaware limited liability company ("HHPS") and the City of Palm Springs, recorded in the Official records on February 14, 2005 as Instrument No. 2005-0565202. [Copies of the Foregoing Sublease Documents Follow] A-1 106499404\V4 WACHOVIA BANK, NATIONAL ASSOCIATION Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075 Charlotte, North Carolina 28262 February 13, 2008 The City of Palm Springs 3200 E. Tahquitz Canyon Way Palm Springs, CA 92263 Re: Estoppel Certificate dated as of July 17, 2007 (the "Certificate") issued with respect to the sublease affecting 888 East Tahquitz Canyon Way, Palm Springs, CA 92262. Ladies and Gentlemen: Please be advised that Mezzanine D Lender, Mezzanine E Lender, Mezzanine F Lender, Mezzanine G Lender and Mezzanine H Lender (each as defined in the Certificate) have each transferred their respective interests in the Mezzanine Loans (as defined in the Certificate) as set forth below: l. Mezzanine D Lender transferred its interest to GSRE III, Ltd., a Cayman Island exempted company; 2. Mezzanine E Lender transferred its interest to Blackjack Mezz 5 PRISA III LLC, a Delaware limited liability company, having an address at c/o Prudential Investment Management, Inc., 8 Campus Drive, Parsippany, New Jersey 07054 3. Mezzanine F Lender transferred its interest to PIM Ashford Subsidiary II, LLC, a Delaware limited liability company, having an address at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254; 4. Mezzanine G Lender transferred its interest to HIGHLAND SPV A LLC, a Delaware limited liability company, HIGHLAND SPV B LLC, a Delaware limited liability company and HIGHLAND SPV C LLC, a Delaware limited liability company; and 5. Mezzanine H Lender transferred its interest to Goldman Sachs Mortgage Company, a New York limited partnership. USAc[ive 11976842.1 WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association By: Name: Title: P100 V. SCOW Mtmgig Diredor Notice BARCLAYS CAPITAL REAL ESTATE FINANCE INC., a Delaware corporation By. ame, Tit Notice(Me=5) August 3, 2012 AUG 0 8 2012 BY FEDERAL EXPRESS N.albb Each of the entities set forth on Schedule A hereto Re: Palm Springs Ground Lease Ladies and Gentlemen: Reference is made to the estoppel certificate("Estoppel Certificate")more particularly described on Schedule B hereto.This letter shall constitute notice to you that,effective as of the date hereof,the Starwood Property Mortgage,L.L.C.,a Delaware limited liability company(the"Existing Lender")has transferred all of their respective rights,title and interests in and to the Mezzanine B Pledge(as defined in the'Estoppel Certificate)and the related Mezzanine Loan and Loan Documents(as defined in the Mezzanine B Pledge)to the entity set forth on Schedule C hereto(the"Acquirin Lg ende "). For purposes of the Estoppel Certificate and Section 10 of the Sublease (as defined in the Estoppel Certificate), all notices and correspondence which would previously have been delivered to the Mezzanine B Lender should now be sent to the Acquiring Lender at the notice address for the Acquiring Lender set forth on Schedule C. [Signature Pages Follow] Highland Hospitality Mezz 2 Notice of Loan Transfer CHI 6991228v.1 Very truly yours, EXISTING LENDER: STARWOOD PROPERTY MORTGAGE,L.L.C., a 71alimited liability-company B ame:A r w J. ossen Title: A rued Signatory ACQUIRING LENDER: STARWOOD PROPERTY MORTGAGE SUB-]0- A,L.L.laware limited liability company By: Nam . Andre ossen Title: Auth i d Signatory Highland Hospitality Mezz 2 Notice of Loan Transfer Schedule A The City of Palm Springs 3200 East Tahquitz-McCallum Way Palm Springs, California 92263 Highland Hospitality Mezz 2 Notice of Loan Transfer CHI 6991229v.1 Schedule C Acquiring Lenders Notice Addresses 1 Starwood Property Mortgage Sub-10-A, Starwood Property Mortgage Sub-10-A, L.L.C. L.L.C., a Delaware limited liability c/o Starwood Capital Group Global, L.P. 591 West Putnam Avenue company Greenwich, Connecticut 06830 Attention: Andrew J. Sossen Fax: (203)422-8192 With a copy to: Starwood Property Mortgage Sub-10-A, L.L.C. c/o Starwood Capital Group Global,L.P. 591 W. Putnam Avenue Greenwich, Connecticut 06830 Attention: Mary Anne Carlin Fax: (203)485-5105 Starwood Property Mortgage Sub-10-A, L.L.C. c/o Starwood Capital Group Global, L.P. 100 Pine Street, Suite 3000 San Francisco,CA 94111 Attention: Steven A. Rivers, Esq. Telecopy: (415)633-4187 Dechert LLP One Maritime Plaza, Suite 2300 San Francisco, California 94111 Attn: David M. Linder Fax No.: (415) 262-4555 Highland Hospitality Mezz 2 Notice of Loan Transfer CHI 6991228v3 CONTRACTUAL SERVICES AGREEMENT INTE+'RNATIONAL HOTEL AND CONVENTION CENTER MARKETING AND RESERVATION PROGRAM THIS CONTRACTUAL SERVICES,�AGREEMENT (hereinafter "Agreement") is made and entered into, to be effective this I IL-day of June, 3008, by and between the CITY OF PALM SPRINGS, a California Charter City, (hereinafter referred to as "City") and IIH PALM SPRINGS LLC, a Delaware Limited Liability Company, (together with its successors and assigns, hereinafter referred to as "Contractor"). City and Contractor are sometimes hereinafter individually referred to as "Party" and are hereinafter collectively referred to as the "Parties." RECITALS A. City has determined that there is a need for access to and participation in an intemational hotel and convention center marketing reservation program (the "Program") for the hotel property owned by the Contractor ("Contractor's Prupeity") and the City's Convention Center (collectively, the "Property"), B. The Contractor's Property is subject to a Sublease (Hotels I—XI) between the City (successor in interest to SENCA Patin Springs, Inc., a California corporation), as sublandlord, and Contractor (successor in interest to AP/APIf Palm Springs, L.P., a Delaware limited partnership; successor in interest to The Community Redevelopment Agency of the City of Palm Springs, California), as subtenant, dated December 31, 1984 (as amended and supplemented, the "Land Lease"). C. Contractor proposes to provide such a Program for the Property pursuant to the terms of this Agreement. D. Contractor is qualified by virtue of its experience, training, education, reputation, and expertise to acquire and provide these services and has agreed to provide such services as provided herein. E_ City desires to retain Contractor to provide such professional services. NOW, THEREFORE, in consideration of the promises and mutual obligations, covenants, and conditions contained herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: AGREEMENT I. SERVICES OF CONTRACTOR I.I. Scope of Services. Ta compliance with all terms and conditions of this Agreement, Contractor agrees to perform the services set forth in the Scope of Services described in Exhibit "A," which is attached hereto and is incorporated herein by reference (hereinafter referred to as the "Services"). As a material inducement to the City entering into this Agreement, Contractor represents and warrants that Contractor is an experienced owner of 56229a,l 1 MGlNAL BC0 V first class hotels and will provide or may contract for the provision of a Program ol'the highest quality and standards of operation in performing the services required herein. For purposes of this Agreement "highest quality and standards of operation" shall mean those standards of practice recognized as high quality among well-qualified and expeljenced professionals performing similar work under similar CirCram SlanCeS. 1.2 Contract Documents. The Agreement between the Parties shall consist of this Agreement and all Exhibits thereto. 1.3 Com hauce with Law. Contractor warrants that all Services rendered hereunder shall be performed in accordance with all applicable Federal, state, and local laws, statutes, and ordinances and all lawful orders, rules, and regulations promulgated thereunder_ 1.4 Licenses, Permits_,_Fees, and Assessments. Contractor represents and warrants to City that it has or will obtain all licenses, permits, qualifications, and approvals of whatever nature that are legally required to perform the Services required by this Agreement. Contractor represents and warrants to City that Contractor shall, at its sole cost and expense, keep in effect at all times during the term of this Agreement, any license, permit, qualification, or approval that is legally required for Contractor to perform the Services under Ihis Agreement. 1.5 Familiarity with Services. By executing this Agreement, Contractor warrants that Contractor (a) has thoroughly investigated and considered the Scope of Services to be performed, (b) has carefully considered how the Services should be performed, and (c) Fully understands the facilities, difficulties, and restrictions attending performance of the Services under this Agreement. 1.6 Further Responsibilities of Parties. Both Parties agree to use reasonable care and diligence to perform their respective obligations under this Agreement. Both Parties agree to act in good faith to execute all instruments, prepare all documents, and take all actions as may be reasonably necessary to carry out the purposes of this Agreement. 2. COMPENSATiON 2.1 Maximums Contract Amount. For the Services rendered pursuant to this Agreement, Contractor shall be compensated by City in accordance with the Schedule of Compensation, which is attached hereto as Exhibit "B" and is incorporated herein by reference, but not exceeding the Maximum Contract Amount of Three Million Four Hundred Twenty Five Thousand Dollars, ($3,425,000) (hereinafter referred to as the "Maximum Contract Amount"). The method of compensation shall be as set forth in Exhibit "D." The Maximum Contract Amount of City's payment obligation under this section is the amount specified herein. 2.2. Method of Payment. Method of payment is specified in the Schedule of Compensation(Exhibit"B"). 2.3 Changes ink. Any change or changes in the Scope of Services requires the consent of both of the Parties in a written amendment to this Agreement, setting forth with 562291.1 2 particularity all terms of such amendment, including, but not limited to, any additional compensation. 3. SCHEDULE OF PERFORMANCE 3.1 Dili¢ent_ Performance. Contractor shall prosecute diligently the Services provided in this Agreement according to the agreed Schedule of Performance (Exhibit"C"). 3.2 Schedule of Performance. Contractor shall commence the Services pursuant to this Agreement as established in the Schedule of Performance, which is attached hereto as Exhibit "C" and is incorporated herein by reference. When requested, extensions to the times specified in the Schedule of Performance may be approved in writing by the City; however, the City shall not be obligated to grant any extensions. 3.3 'Perm. Unless earlier terminated as provided elsewhere in this Agreement, this Agreement shall commence upon the effective date of this Agreement and continue in full force and effect for the term of twenty-five (25) years. 4. COORDINATION OF WORN 4.1 Representative of Contractor. The following principal of Contractor is hereby designated as being the principal and representative of Contractor authorized to act in its behalf with respect to the Services to be performed under this Agreement and make all decisions in comicction therewith: D. Rick Adams, Senior Vice President, Asset Management. The foregoing principal or his successor shall be responsible during the teen of this Agreement for directing all activities of Contractor and devoting sufficient time to personally supervise the services performed hereunder. The Contractor shall notify the City in writing when the principal changes. 4.2 Contract Officer. The Contract Officer shall be such person as may be designated by the City Manager of City, and is subject to change by the City Manager. It shall be the Contractor's responsibility to ensure that the Contract Officer is kept fully informed of the progress of the performance of the Services, and the Contractor shall refer any decisions which must be made by City to the Contract Officer. Unless otherwise specified herein, any approval of City required hereunder shall mean the approval of the Contract Officer. 4.3 Subcontracting or Assignments. The experience, knowledge, capability, expertise, and reputation of Contractor, was a substantial inducement for City to enter into this Agreement. Therefore, Contractor shall not assign the perfonnance of this Agreement, nor any part thereof, nor any monies due hereunder, voluntarily or by operation of law, without the prior written consent of City; provided, however, that Contractor may assign this Agreement without the consent of the City to any current or future owner, operating lessee, or mortgage or rmezzanine lender of the Contractor's Property on the same terms and under the samme conditions as permitted under the Land Lease. Contractor shall not contract with any other entity to perform the Services required without prior written consent of City provided; however, that Contractor may contract with hotel management companies, brands or franchisors. If Contractor subcontracts any part of this Agreement by City, Contractor shall be responsible to City for the 562291 1 3 acts and omissions of its subcontractor(s) in the same manner as it is for persons directly employed. Nothing contained in this Agreement shall create any contractual relationships between any subcontractor and City. City will deal directly with and will make all payments to Contractor. hi addition, neither this Agreement nor any interest herein may be transferred, assigned, conveyed, hypothecated, or encumbered voluntarily or by operation of law, whether for the benefit of creditors or otherwise, without the prior written consent of City, provided, however, that Contractor may transfer, assign, convey, hypothecate, or encumber this Agreement without the consent of the City to any future owner, operating lessee, or mortgage or mezzanine lender of the Contractor's Property on the same terms and under the sarne conditions as pennitted under the Land Lease. Transfers restricted hereunder shall include the transfer to any person or group of persons acting in concert of more than twenty five percent (25%) of the present ownership and/or control of Contractor, taking all transfers into account on a cumulative basis. hr the event of any such unapproved transfer, including any bankruptcy proceeding, this Agreement shall be void. No approved transfer shall release Contractor or any surety of Contractor from any liability hereunder without the express written consent of City, but any transfer permitted without City consent shall automatically release the transferor- from any liabilities accruing after the date of transfer to a transferee so long as Contractor's obligations hereunder have been fully assigned to, and assumed by, such transferee, for the time period after the date of such transfer. 4.4 Independent Contractor. A. The legal relationship between the Parties is that of an independent contractor, and nothing herein shall be deemed to make Contractor a City employee. During the perfornance of this Agreement, Contractor and its officers, and agents shall act in an independent capacity and shall not act as City officers or employees. The personnel performing the Services under this Agreement on behalf of Contractor shall at all times be under Contractor's direction and control. Neither City nor any of its officers, employees, or agents shall have control over the conduct of Contractor or any of its officers, or agents, except as set forth in this Agreement. Contractor, its officers, or agents shall not maintain an office or any other type of fixed business location at City's offices. City shall have no voice in the selection, discharge, supervision, or control of Contractor's management companies, franchisors, or of their servants, representatives, or agents, or in fixing their number, compensation, or hours of service. Contractor shall pay all amounts due service providers in connection with this Agreement and shall be responsible for all reports and obligations respecting them. City shall not in any way or for any purpose be deemed to be a partner of Contractor in its business or otherwise a joint venturer or a member of any joint enterprise with Contractor. B. Contractor shall not incur or have the power to incur any debt, obligation, or liability against City, or bind City in any manner- C. No City benefits shall be available to Contractor, its officers, or agents in connection with any performance under this Agreement. Except for professional fees paid to Contractor as provided for in this Agreement, City shall not pay salaries, wages, or other compensation to Contractor for the performance of Services under this Agreement. City shall not be liable for compensation or indermufication to Contractor, its officers, or agents, for injury or sickness arising out of performing Services hereunder. If for any reason any court or 5G2M.1 4 governmental agency detennines that the City has financial obligations, other than pursuant to Section 2 and Subsection 1.8 herein, of any nature relating to salary, taxes, or benefits of Contractor's officers, servants, representatives, subcontractors, or agents, Contractor shall indemnify City for all such financial obligations. 5. RESERVED 6. INDEMNIFICATION To the fullest extent permitted by law, Contractor shall indemnify, defend (at Contractor's sole cost and expense), protect and hold harmless City and its officers, council 1-rrelnbers, officials, employees, agents and volunteers and all other public agencies whose approval of the Project is required, (individually "Indemnified Party"; collectively "Indemnified Parties") against any and all liabilities, claims, judgments, arbitration awards, settlements, costs, demands, orders, and penalties (collectively "Claims"), including but not limited to Claims arising from injuries or death of persons (Contractor's employees included) and damage to property, which Claims arise out of, pertain to, or are related to the negligence, recklessness, or willful misconduct of Contractor, its agents, employees, or subcontractors, or arise from Contractor's negligent, reckless, or willful perfornance of or failure to perform any term, provision, covenant, or condition of this Agreement ("Indemnified Claims"), but Contractor's liability for Indemnified Claims shall be reduced to the extent such Claims arse 1iom the gross negligence or willfiil misconduct of the City, its officers, council members, officials, employees, or agents. Contractor shall reimburse the Indemnified Parties for any reasonable expenditures, including reasonable attorneys' fees, expert fees, litigation costs, and expenses that each Indemnified Party may incur by reason of Indemnified Claims. Upon request by an Indemnified Party, Contractor shall de Fend with legal counsel reasonably acceptable to the Iridemnified Party all Claims against the Indemnified Party that may arise out o F, pertain to, or relate to Indemnified Claims, whether or not Contractor is nauned as a party to the Claim proceeding. The determination whether a Claim "may arise out of, pertain to, or relate to Indemnified Claims" shall be based on the allegations made in the Claim and the facts known or subsequently discovered by the Parties. In the event a final judgment, arbitration award, order, settlement, or other final resolution expressly determines that Claims did not arise out of, pertain to, nor relate to the negligence, recklessness, or willful nnisconduct of Contractor to any extent, then City shall reimburse Contractor for the reasonable costs of defending the indemnified Parties against such Claims, except City shall not reimburse Contractor for attorneys' fees, expert fees, litigation costs, and expenses that were incurred defending Contractor or any parties other than Indemnified Parties against such Claims. Contractor's indemnification obligation hereunder shall survive the expiration or earlier termination of this Agreement until all actions against the Indemmnifred Panics for such matters indemnified hereunder are fully and finally barred by the applicable statute of limitations or, if an action is timely filed, until such action is final. This provision is intended for the benefit of third party Indemnnifed Parties not otherwise a party to this Agreement. 7. RESERVED. 562291 1 5 8. ENFORCEMENT OF AGREEMENT 8.1 California Law and Venue. This Agreement shall be construed and interpreted both as to validity and as to performance of the Parties in accordance with the laws of the State of California. Legal actions concerning any dispute, claim, or matter arising out of or in relation to this Agreement shall be instituted in the Superior Court of the County of Riverside, State of California, or any other appropriate court in such County, and Contractor covenants and agrees to submit to the personal jurisdiction of such court in the event of such action. 8.2 Interpretation. This Agreement shall be construed as a whole according to its fair language and common meaning to achieve the objectives and purposes of the Parties. The terms of this Agreement are contractual and the result of negotiation between the Parties. Accordingly, any rule of constriction of contracts (including, without limitation, California Civil Code Section 1654) that ambiguities are to be construed against the drafting party, shall not be employed in the interpretation of this Agreement. The caption headings of the various sections and paragraphs of this Agreement are for convenience and identification purposes only and shall not be deemed to limit, expand, or define the contents of the respective sections or paragraphs. 8.3 Termination. Provided there is no breach under this Agreement as o f the date of termination, either party may terminate this Agreement by written notice thereof to the other party at any time alter the later to occur of(i) the date the Contractor has entering into an agreement with a first class hotel brand (a "Brand") approved by the City (such consent not to be unreasonably withheld, conditioned nor delayed, with Marriott International, Inc., and its affiliates, hereby pre-approved) with a tern of not less than 25 years, and the Brand has commenced "Pre-Opening Marketing and Booking" as defined in Exhibit A attached hereto, (ii) the date the Contractor's Property opens operating under the Brand and (iii) the date the City has made all payments due Contractor under this Agreement. Otherwise, neither the City nor the Contractor may terminate this Agreement except as expressly provided herein. The City or Contractor reserves the right to terminate this Agreement upon a material default by the other party. The effectiveness of this Agreement is contingent upon Contractor obtaining the consent of its lenders to this Agreement, which Contractor agrees to use commercially reasonable efforts to obtain. In the event such consents are not obtained by July 31, 2008, either party may terminate this Agreement until such consents are obtained by written notice thereof to the other. 8.4 Default of City or Contractor. A. City or Contractor's material failure to comply with any material provision of this Agreement shall constitute a default Men express written notice of such failure and the further failure of the City or Contractor to reasonably cure such failure within a reasonable period of time. B. If the City Manager, or his/her designee, or the Contractor, or his/her Representative determines that the City or Contractor is in default in the performance of any of 562291 1 6 the terns or conditions of this Agreement, he/she shall notify the other patty in writing of such default. The party shall have ten (10) days, or such longer period as reasonably necessary or desirable provided the defaulting patty is diligently pursuing a cure, to cure the default by rendering satisfactory performance. In the event the defaulting party fails to cure its default within such period of time, the non-defaulting patty shall have the right, notwithstanding any other provision of this Agreement, to terminate this Agreement upon notice to the defaulting party and without prejudice of any remedy to which it may be entitled at law or in equity, or under this Agrccment. The defaulting party shall be liable for any and all reasonable costs incurred by the non-defaulting party as a result of Such default. Compliance with the provisions of this section shall not constitute a waiver of any City or Contractor right to take legal action in the event that the dispute is not cured. . 8.5 Waiver. No waiver of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the Party against whom enforcement of a waiver is sought. Any waiver by the Parties of any default or breach of any covenant, condition, or term contained in this Agreement, shall not be construed to be a waiver of any subsequent or other default or breach, not- shall failure by the Parties to require exact, Full, and complete compliance with any of the covenants, conditions, or terms contained in this Agreement be construed as changing the terms oF' this Agreement in any manner or preventing the Patties from enforcing the Full provisions hereof. 8.6 Rights and Remedies Cumulative. The rights and remedies of the Parties arc 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 Patty. 8.7 Legal Action. In addition to any other rights or remedies, either Party may take legal action, in law or in equity, to cure, correct, or remedy any default, to recover damages for any default, to compel specific performance of this Agrccment, to obtain declaratory or injunctive relief, or to obtain any other remedy consistent with the purposes of this Agreement. Such legal actions must be instituted in the Superior Court of the County of Riverside, State of California. 8.8 Applicable Law: Interpretation. The laws of the State of California shall govern the interpretation and enforcement of this Agreement. This Agreement has been negotiated at arm's length and between persons sophisticated and knowledgeable in the matters dealt with herein. In addition, each patty has been represented by experienced and knowledgeable legal counsel. Accordingly, any rile of law (including California Civil Code Section 1654) or legal decision that would require interpretation of any ambiguities in this Agreement against the party that has drafted it is not applicable and is waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the purposes of the parties and this Agreement. 8.9 Acceptance of Service of Process. fn the event that any legal action is commenced by the Contractor against the City, service of process on the City shall be made by personal service upon the City Manager or in such other manner as may be provided by law. In the event that any legal action is commenced by the City against the Contractor, service of 562291 1 7 process on the Contractor shall be made by personal service upon the Contractor or in such other manner as may be provided by law and shall be valid whether made within or without the State of California. 8.10 Attornev lees. In the event any dispute between the Parties with respect to this Agreement results in litigation or any non-judicial proceeding, the prevailing Party shall be entitled, in addition to such other relief as may be granted, to recover from the non-prevailing Party all reasonable costs and expenses, including but not limited to reasonable attorney fees, expert Contractor Cees, court costs and all fees, costs, and expenses incurred in any appeal or in collection of any judgment entered in such proceeding. To the extent authorized by law, in the event of a dismissal by the plaintiff or petitioner of the litigation or non-,judicial proceeding within thirty (30) days of the date set for trial or hearing, the other Party shall he deemed to be the prevailing Party in such litigation or proceeding. 9. CITY OFFICERS AND EMPLOYEES: NON-DISCRIMINATION 9.1 Non-liability of City, Officers and Enhplovees. No officer or employee of the City shall be personally liable to the Contractor, or any successor-in-interest, in the event of any default or breach by the City or for any amount which may become due to the Contractor or to its successor, or for breach of any obligation of the terms of this Agreement. 9.2 Connict or Interest. No o fficer or employee of the City shall have any financial interest, direct or indirect, in this Agreement nor shall any such officer or employee participate in any decision relating to the Agreement which effects his/her financial interest or the financial interest of any corporation, partnership, or association in which he/she is, directly or indirectly, interested in violation of any state statute or regulation. Contractor warrants that it has not paid or given and will not pay or give any third party any money or other consideration in exchange for obtaining this Agreement. 9.3 Covenant Against Discrimination. In connection with its per£oiroance under this Agreement, Contractor shall not discriminate against any employee or applicant for employment because of race, religion, color, sex, age, marital status, ancestry, or national origin. Contractor shall ensure that applicants are employed, and that employees are treated during their employment, without regard to their race, religion, color, sex, age, marital status, ancestry, or national origin. Such actions shall include, but not be limited to, the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship- 10. MISCELLANEOUS PROVISIONS 10.1 Notices. All notices or other communications required or permitted hereunder shall be in writing, and shall be personally delivered, sent by registered or certified mail, postage prepaid, return receipt requested, or delivered or sent by facsimile with attached evidence of completed transmission, and shall be deemed received upon the earlier of(i) the date of delivery to the address of the person to receive such notice if delivered personally or by messenger or overnight courier; (ii) five (5) business days after the date of posting by the United States Post Office if by mail; or (iii) when sent if given by facsimile. Any notice, request, demand, 562291.1 8 direction, or other communication sent by facsimile must be confirmed witbin Forty-eight (48) hours by letter mailed or delivered. Other forms of electronic transmission such as e-mails, text messages, instant messages are not acceptable manners ol'notice required hereunder. Notices or other coirununications shall be addressed as follows: To Citv: City of Palm Springs Attention: City Manager P.O. Box 2743 Palm Springs, California 92263 Telephone: (760) 322-8350 Facsimile: (760) 323-8207 With a Copy to: Douglas C. Holland, Esq., City Attorney Woodruff, Spradlin & Smart 555 Anton Boulevard, Suite 1200 Costa Mesa, Cali lornia 92626 Telephone: (714) 415-1042 Facsimile: (714) 415-1142 To Contractor: D. Rick Adams, Senior Vice President Highland Hospitality Corporation 8405 Greensboro Drive, Suite 500 McLean, Virginia 22102 Telephone: (703) 336-4917 Facsimile: (703) 336-4950 With a copy to : JER Partners 1650 Tysons Boulevard, Suite 1600 McLean, Virginia 22102 Attn: Legal Department Telephone: 703-714-8000 Facsimile: 703-714-8102 With a Copy to: Rich Banjo, Vice President JER Partners 1650 Tysons Boulevard, Suite 1600 McLean, Virginia 22102 Telephone: (703) 714-8161 Facsimile: (703) 714-8107 10.2 Entire Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes all prior negotiations, arrangements, agreements, representations, and understandings, if any, made by or among the Parties with respect to the subject matter hereof. No amendments or other modifications of this Agreement shall be binding unless executed in writing by both Parties hereto, or their respective successors, assigns, or grantees. 10.3 Severability. Whenever possible, each provision of this Agreement shall be 56229 i.1 9 interpreted in such a manner as to be effective and valid Linder applicable law, but if any provision of this Agreement shall be detenrined to be invalid by a final judgment or decree of a court of competent jurisdiction, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the reminder of that provision, or the remaining provisions of this Agreement unless the invalid provision is so material that its invalidity deprives either Party of the basic benefit of their bargain or renders this Agreement meaningless. 10.4 Successors in Interest; Subordination. This Agreement shall be binding upon and inure to the benefit of the Parties' successors and assignees. This Agreement is subordinate to any existing or future mortgage or mezzanine loan with respect to the Contractor's Property. 10.5 Third Party Beneficiary. Except as may be expressly provided I'or herein, nothing contained in this Agreement is intended to confer, nor shall this Agreement be construed as conferring, any rights, including, without limitation, any rights as a third-party beneficiary or otherwise, upon any entity or person not a party hereto. 10.6 Recitals. The above-referenced Recitals are hereby incorporated into the Agreement as though fully set forth herein and each Party acknowledges and agrees that such Party is bound, for purposes of this Agreement, by the same. 10.7 Corporate Authority, Each of the undersigned represents and warrants that (i) the Party for which he or she is executing this Agreement is duly authorized and existing, (ii) he or she is duly authorized to execute and deliver this Agreement on behalf of the Party for which he or she is signing, (iii) by so executing this Agreement, the Party for which he or she is signing is formally bound to the provisions of this Agreement, and (iv) the entering into this Agreement does not violate any provision of any other Agreement to which the Party for which he or she is signing is bound. 5G2291.1 10 IN WITNESS WHEREOF, the Parties have executed and entered into this Agreement as of the date first written aho e. "CITY" CITY OF PALM SPRINGS a California Charter Cu. _ c DAVID READY City Manager ATTEST: APPROVED BY CIS'COUNCIL ©Ip .2.S1 Z0C6 I •a. AMC TFIOMPSON AS�R o Czty Clerk APPR VE S TO FORM: Dp GL�S . HOLLAND City Att iey "CONTRACTOR" HH Palm Springs, LLC By: � L '� Name: 4MRA1?nyR.F-1' y Title: MC"I FESmrYv r By: Secretary J 562291 1 1 I EXHIBIT "A" SCOPE OF SERVICES The Contractor shall obtain access to mid participation in an international hotel and convention center marketing and reservation program (the "Program") for the hotel property owned by the Contractor at 888 East Tahquiti Canyon Way, Palm Springs, Calilomia and the Palm Springs Convention Center attached thereto at 275 North Avenida Caballeros, Palm Springs, California (collectively, the "Property"), for a period of twenty-five (25) years from the effective date of this Agreement. The Program shall provide at all times no less than the services set forth and described as follows as of the date hereof, subject to reasonable changes over time consistent with changes made by first class hospitality brands charges in international hotel and convention center marketing and reservation programs: The reservation system must contain the minimum ability to enable Reservation Associates to make reservations at any property within the portfolio of Brands. It is also must have the capacity to incorporate an Inventory & Revenue management system for use by the Revenue Leaders at each property or controlling o ffrce. The reservation system must contain the minimum ability to allow local and worldwide reservations centers as well as travel agencies mid internet users to make reservations at any Brand X hotel world-wide. The reservation system must also be linked directly to the Brand X website. An individual Guest must have the minimalr ability to book/change/cancel reservations and receive email confirmation of their reservations directly through the Internet site. The reservation system must be linked with the global distribution systems (GDS) operated by major airlines and travel organizations, offering real-time availability. Brand X combined with its parent organization,must hold a minirnurn .5% of the worldwide supply of hotel rooms. A guest making a reservation through the reservation system must be able to make and confirn-i reservations up to a minimum of 51 weeks from the current date, provided that the requested hotel has inventory available for the requested dates. The reservation system must also allow for Revenue and/or Inventory Management of each properly to have very accurate control over the rooms & rates available to sell for the next 51 weeks. The reservation system must allow for control of availability of rooms by room pool and/or rate program code, by length of stay restrictions, black out dates, closed-to-arrival and in addition has the functionality to ensure that conflicting restrictions are not in place. The reservation system must contain the minimum ability to create Customer Profiles which can be tracked within the system. A Brand Loyalty program must have memberships tracked giving users access to customers' reservation preferences at a glance. The reservation system must have 562291 1 the profiles I'or these liequent guests in the system to speed the process of making reservations, improving guest service and tracking the &irest's usage. The reservation system must also contain the ability to track travel agency, wholesaler, and preference plus profiles in the system, making the reservation process more efficient. The reservation system must allow for strict control over the rates, availability and up to the minute impact on how to sell the hotel to maximize revenue. For the purpose of this Agreement and this Exhibit "A" to the Agreement, the tern 'Brand X" shall mean a first class hotel approved by the City (such consent not to be unreasonably withheld, conditioned nor delayed, with Marriott International, Inc., and its affiliates, hereby pre- approved), and the term "reservation system" shall not mean the hotel room booking services provided solely by any online travel company, including without limitation, Expedia, '1'ravelocity, Pricetine, or Orbitz. The phrase "Pre-Opening Marketing and Booking" shall mean: • The Contractors Property specific inventory information shall be built and loaded in the Brands Reservation Program with air established inn code that exclusively identifies the Contractors Property within the international hotel reservation program • The Contractors Property target sell date shall be established with the Brand that will allow for reservation booking to occur on or after such target sell date via the Brands Reservation Program • The Contractors Property will appear- on the Brands web site and the web site page for Contractors property shall include specific information about said property and the established sell date • Transient and Group customers will have the ability to use the Reservation Program to book reservations that are within eleven and one-half months into the future; after the Contractors Property opens and is operating under the Brand, Group reservations can be entered Por any future date • A Pre-Opening Sales and Marketing meeting will be conducted with the Brands Sales Team to ensure that the Reservation Program and booking channels are identified mid understood, pricing strategies are communicated, reservations sales lead sharing process and other sales activities are understood and coordinated with the on site management team 562291,1 EXHIBIT "I3" SCHEDULE OF COMPENSATION A payment of $855,000, plus a payment of an additional $445,000 for a total of $1,300,000, would be made upon the completion of the Pre-Opening Marketing and Booking criteria as established in Exhibit A A payment of$855,000 due on December 20, 2008. A payment of$855,000 due on December 20, 2009 The final payment of$415,000 in cash would be paid no later than February 28, 2010. Once the international hotel and convention center marketing and reservation program is placed into service on behalf of the Contractor's Property, if the Program were suspended, terminated, or otherwise ceased operation, the Contractor would pay the City $10,000 COT each Cull month of non-operation or a pro-rated amount for each partial month of non-operation for the period prior to tcrrnination of this Agreement (unless termination is due to breach of this Agreement by Contractor). 5622')1.1 EXHIBIT 4°C" SCHEDULE OF PERFORMANCE Item To Be Performed Time for Estimated Performance Date 1• Contractor executes and delivers On or before July 31, July 31, 2008 Contractual Services Agreement for 2008 an International Hotel and Convention Center Marketing and Reservation Pro ram to Cit _ 2. Contractor executes and delivers On or before July 31, July 31, 2008 Hotel Franchise Agreement with 2008 International Hotel Brand to City Attorney _ 3. Evidence that the Property is permitted to Within 90 days after September commence Pre-Opening Marketing and execution of Contract 30, 2008 Bookin It is understood that the foregoing Schedule of Performance is subject to all of the terms and conditions set forth in the text of the Agreement. The summary of the items of performance in this Schedule of Performance is not intended to supersede or modify the more complete description in the text; in the event of any conflict or inconsistency between this Schedule of Performance and the text of the Agreement, the text shall govern. The time periods set forth in this Schedule of Performance may be altered or amended only by written agreement signed by both Contractor and City. A failure by either party to enforce a breach of any particular time provision shall not be construed as a waiver of any other time provision. The City Manager shall have the authority to approve extensions of time without City Council action not to exceed a cumulative total of 180 days as provided in this Agreement. 562291 1