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Home My WebLink About9/7/2005 - STAFF REPORTS (42) l V N * k n� * ' * ry�knORkTE City Council Staff Report I DATE: SEPTEMBER 7, 2005 NEW BUSINESS SUBJECT: APPROVAL OF A SUBLEASE TO BUSINESS LEASE PSL-236 (AGUA CALIENTE RESERVATION) WITH UNITED CONDOMINIUMS CORPORATION, A CALIFORNIA CORPORATION, FOR A 1.77 ACRE PARCEL AT THE SOUTHWEST CORNER OF AMADO ROAD AND CALLE ALVARADO FOR THE PURPOSE OF FUTURE CONVENTION CENTER EXPANSION, INCLUDING TURNAROUND AND DROP-OFF AREAS, OUTDOOR SEATING AND SCUPTURE AREAS, AND PRESERVATION OF THE MOUNTAIN VIEW FROM: David H. Ready, City Manager BY: Community & Economic Development Department SUMMARY: This Sublease to Business Lease PSL-236 for a 1.77 acre parcel at the southwest corner of Amado Road and Calle Alvarado gives the City control over the parcel immediately across the street from the new front door of the Convention Center. United Condominiums Corporation (UCC) is the Master Lessee and the developer of the Plaza 'Villas condominiums. They had proposed in late 2002 and early 2003 to construct the final phase of the condominiums, 34 units, which was allowed under the terms of their lease and by right of zone. Given the Convention Center project, however, and the new orientation of the center toward the downtown, UCC made an offer to the City to acquire the sublease on the parcel for the Convention Center project. Since the final phase of the project would be nearly identical to the other three phases (already 102 condominiums) and two stories tall, the City felt that the opportunity to ever have a dramatic front plaza at the Convention Center, with the potential for outdoor, park-like seating areas and/or drop-off areas, would be lost. Staff began negotiating with UCC in the summer of 2003, though the negotiations were temporarily suspended while UCC obtained the allottees' signatures on an amendment which added an additional 25 years to the lease as well as modified the allowed uses under the lease to include Convention Center and ancillary uses. All allottee signatures on the lease amendment have been received and UCC and the City can now go forward with the Sublease. Item No. 5 . C . t I I jUCC Sublease to Business Lease PSL-236 September 7,2005 t Page 2 I CITY COUNCIL RECOMMENDATION: I 1. Adopt Resolution No. , "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING A SUBLEASE TO BUSINESS LEASE PSL-236 WITH UNITED CONDOMINIUMS CORPORATION, A CALIFORNIA CORPORATION, FOR A 1.77 ACRE PARCEL AT THE SOUTHWEST CORNER OF AMADO ROAD AND CALLE ALVARADO FOR CONVENTION CENTER AND ANCILLARY USES, COMMENCING UPON APPROVAL BY THE SECRETARY OF THE INTERIOR AND TERMINATING JUNE 1, 2068, IN A FORM ACCEPTBALE TO THE CITY ATTORNEY. 2. Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING A MEMORANDUM OF UNDERSTANDING WITH UNITED CONDOMINIUMS CORPORATION, A CALIFORNIA CORPORATION, FOR A 1.77 ACRE PARCEL AT THE SOUTHWEST CORNER OF AMADO ROAD AND CALLE ALVARADO FOR CONVENTION CENTER AND ANCILLARY USES, PROVIDING FOR AN UPFRONT PAYMENT OF $1,260,000 FOR THE DISCOUNTED CASH FLOW SAVINGS OF THE LEASE TERM, REIMBURSEMENT FOR DESIGN AND LEGAL EXPENSES, RELINQUISHING DEVELOPMENT RIGHTS TO THE PROPERTY, AND ALLOWING EARLY ENTRY TO THE PROPERTY FOR THE PURPOSE OF WEED ABATEMENT AND LANDSCAPING. 13. Adopt Resolution No. "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING A LOAN FROM THE CITY'S DIVERSION FACILITY FUND, A SPECIAL REVENUE FUND, TO THE CITY'S GENERAL FUND IN THE AMOUNT OF $1,260,000. STAFF ANALYSIS: This Sublease to Business Lease PSL-236 for a 1.77 acre parcel at the southwest corner of Amado Road and Calle Alvarado gives the City control over the parcel immediately across the street from the new front door of the Convention Center. United Condominiums Corporation (UCC) is the Master Lessee and the developer of the Plaza Villas condominiums. UCC had proposed in late 2002 and early 2003 to construct the final phase of the condominiums, 34 units, which was allowed under the terms of their lease and by right of zone. Given the City's significant investment in the Convention Center project, however, and the new orientation of the center toward the downtown, UCC made an offer to the City that would allow it to acquire the sublease on the parcel for the Convention Center project. Since the final phase of the condo project would be nearly identical to the other three phases (102 condominiums) and two stories tall, the City felt that the opportunity to ever have a dramatic front plaza at the Convention Center, with the potential for outdoor, park-like seating areas and/or drop-off areas, would be lost if UCC constructed the condominiums. Staff began negotiating with UCC i I I I jUCC Sublease to Business Lease PSL-236 September 7,2005 Page 3 I in the summer of 2003, during which the City appraised the property to determine an appropriate annual lease payment as well as a supportable up-front payment, and the I parties reached a basic agreement on terms; the negotiations, however, were temporarily suspended while UCC obtained the allottees' signatures on an amendment which added an additional 25 years to the lease as well as modified the allowed uses under the lease to include Convention Center and ancillary uses. Therefore, the upfront payment of $1,200,000 was negotiated based on the discounted cash flow calculations prepared by the City's appraiser, Mackenzie Wagner & Associates in 2003 as part of an appraisal commissioned in August 2003. The discounted cash flow figures were used in the original September 17, 2003 Letter of Intent to Enter Sublease and the October 16, 2003 revision. The discounted cash flow value in the lease actually calculates the value of obtaining the opportunity to lease the parcel (presupposing you cannot purchase the property) on the relatively favorable economic terms in the BIA lease. By "favorable," it means that the adjustment method for CPI under the contract, with a maximum of 15% in any five year period would be more favorable over time to the lessee (the City) than an assumed annual adjustment based on either actual CPI or a fixed increase (such as 3%, which is the amount used in the model.) Over time, the City would pay substantially less in annual lease payments under the contract terms than in a market-based alternative. The annual savings, then, are discounted to a present value. The Lessor in this case had sought to be compensated for the potential lost profit of forgoing the condominium project, which they were not entitled to. However, the Lessor is entitled to the discounted cash flow savings contained within the lease for giving up the economic opportunity to develop 34 condominiums. Additionally, the $40,800 annual lease payment is entirely passed through to the allottees, so the Lessor (which is actually the Sublessor) receives all of its compensation through the up-front payment. Considering UCC needed to go back to the allottees for approval of another 25 years on the lease as well as the change in allowable uses to accommodate the City's desire, and that none of the basic economic terms of the lease or sublease changed (in a rapidly rising land market), the City did well in the negotiation and should appreciate the cooperation of the other parties. Factoring in the City's acute need for the parcel for the public use of the Convention Center, it was reasonable for the Lessor to assume the City could have used its eminent domain authority to acquire a sublease. This negotiated agreement avoided any formal condemnation proceedings. FISCAL IMPACT: The final negotiated amount was $1,200,000 in discounted cash flow, plus $60,000 to reimburse UCC for design and costs already incurred as part of the condo development project. The annual lease would then commence at $40,800 per year for the first five I I I i UCC Sublease to Business Lease PSL-236 I September 7,2005 Page 4 years. The lease expires on June 1, 2068. The City will borrow the up-front amount of $1,260,000 from the Recycling Fund's Diversion Facility Fund, to be repaid annually by the General Fund. hnn Ray Director of David H. Ready, �yMarga�rity & E nomic Developments Attachments: 1. Resolutions (3) 2. Sublease to PSL-236 3. Memorandum of Understanding 4. Loan Agreement RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING A SUBLEASE TO BUSINESS LEASE PSL-236 WITH UNITED CONDOMINIUMS CORPORATION, A CALIFORNIA CORPORATION, FOR A 1.77 ACRE PARCEL AT THE SOUTHWEST CORNER OF AMADO ROAD AND CALLE ALVARADO FOR CONVENTION CENTER AND ANCILLARY USES, COMMENCING UPON APPROVAL BY THE SECRETARY OF THE INTERIOR AND TERMINATING JUNE 1, 2068, IN A FORM ACCEPTBALE TO THE CITY ATTORNEY NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Palm Springs that a Sublease to Business Lease PSL-236 with United Condominiums Corporation, a California Corporation,for a 1.77 acre parcel atthe southwest corner of Amado Road and Calle Alvarado for Convention Center and ancillary uses commencing upon approval by the Secretary of the Interiorand Terminating June 1, 2068 in a form acceptable to the City Attorney, is hereby approved. ADOPTED this day of 2005. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA A Municipal Corporation By City Clerk City Manager REVIEWED & APPROVED SUBLEASE TO BUSINESS LEASE PSL-236 AGUA CALIENTE (PALM SPRINGS) RESERVATION ARTICLE 1. PARTIES THIS LEASE, in sextuplicate, is made and entered into this _ day of August, 2005, by and between the parties duly identified below as "Lessor" and "Lessee': LESSOR: UNITED CONDOMINIUMS CORPORATION, a California corporation Attn: Aftab Dada, General Manager Palm Springs Hilton Resort 400 E. Tahquitz Canyon Way Palm Springs, CA 92262 LESSEE: CITY OF PALM SPRINGS c:/o City Manager 3200 Tahquitz Canyon Way Palm Springs, CA 92262 Lessor is the owner of a leasehold estate under Business Lease No. PSL-236 by and between LISA BLELIE, PS-28B, PAULA B. BELKNAP, (PS-28B), LUCILLE BOW,( PS- 30B), DIANA BOW, (PS-30B), RENONA PENNINGTON, (PS-41),AND NANCY B. SOZA, (PS-76), (collectively "Master Lessor"), and approved by the Area Director Sacramento Office, Bureau of Indian Affairs,on June 2, 1978. The parties entered into Amendment No. 1 to PSL-236 which was approved by the Bureau of Indian Affairs on _ day of , 2005. Lease PSL-236 shall be referred to as the Master Lease and this Sublease shall be referred to as the "Lease". The Master Lease covers real property described in EXHIBIT "A" attached hereto and incorporated herein by reference. ARTICLE 2. LAND DESCRIPTION A. For and in consideration of the rents and agreements hereinafter set out,the Lessor hereby leases to the Lessee the lands described in EXHIBIT "B" attached hereto and incorporated by reference. Said lands are a part of the Aqua Caliente (Palm Springs) Reservation situated in Riverside County, California, and subject to any prior,valid existing easements and rights of way. ("Leased Premises") KA 2212A/LEASE.7MS/92/05/3:06 pm ARTICLE 3. DEFINITIONS A. "Approved encumbrance" herein shall mean an encumbrance and any addition or extension thereto approved by the Secretary. "Encumbrancer" herein shall mean the owner and holder of an approved encumbrance. B. "Acquirer" shall mean an Encumbrancer who acquires the interest of the Lessee and/or Sublessor by foreclosure or assignment in lieu of foreclosure. C. "Balance of Encumbrance" shall mean the amount of principal remaining unpaid on a note secured by a trust deed or mortgage or an interest in this lease or a sublease created under this lease; provided that to such principal shall be added accrued interest thereon past due and expenses incurred by the lender in connection with foreclosure of such trust deed or mortgage and note together with all necessary expenditures made by the lender to maintain said leasehold interest valid and in good standing during the process of foreclosure. Said expenditures shall include but not be limited to fire insurance premiums,title insurance expenses, recording fees, appraisal fees, attorneys' fees, credit reports and any tax reporting services and additional expenditures paid by the lender on additions, betterment and rehabilitation of improvements on the property encumbered, pursuantto plans approved bythe Secretaryand necessaryto place the improvements in marketable condition. Such adjusted principal to be amortized over the term and in accordance with the schedule set forth in said note, the interest rate on the unpaid balance thereto to be set forth in said note. D. "Secretary" means the Secretary of the United States Department of the Interior or his authorized representative. ARTICLE 4. TERM The term of this Lease shall be from the date it is approved by the Secretary to June 1, 2068. ARTICLE 5. PURPOSE OF THIS LEASE Lessee shall use the Leased Premises for the following specific purposes: For use by Lessee for its Convention Center, including parking, vehicle ingress and egress, landscaping, an open air plaza, a small office building, and other ancillary uses related to the Convention Center. ARTICLE 6. RENTALS A. The Lessee, in consideration of the foregoing, agrees to pay in lawful money of the United States of America a guaranteed minimum annual rental ("GMAR") of $40,800.00 per year payable in advance except as provided below. After the third year of K/12212.MLEASE.IMS/9/2/05/3 06 pm 2 the Lease, the GMAR shall be payable in four equal installments on a quarterly basis due on the first day of each quarter. The first quarter shall commence with the first day of the fourth year of this Lease. B. In addition, the GMAR shall be adjusted upward at the end of the first five 1:5) years of the within term and adjusted upward at the end of each five (5) year period thereafter by the same percentage as the cost of living index has changed during the said five (5) year period with a maximum 15% increase and a minimum of 10% for any adjustment period, provided that in no event shall the adjusted minimum rental be less than the original GMAR provided for herein. The cost of living index to be used is that reflected by the Revised Consumer Price Index for Urban Wage Earners and Clerical Workers, all items, Los Angeles -Anaheim - Riverside, California (1982-84 = 100) published by the Bureau of Labor Statistics of the U.S. Department of Labor. If, for any reason whatsoever, there is any change in the method of calculation or formulation of said price index, or if that index shall no longer be published, then another index generally recognized as authoritative shall be substituted by agreement. In any event, the base used by any new index shall be reconciled to the 1982-84 Index. It is agreed for the purposes of this Lease, that the base index shall be the month of May 2005. C. If the Leased Premises are used a for purpose other than those outlined in Article 5, the parties agree they will negotiate in good faith to establish on applicable percentage rent. If they are unable to agree, the matter shall be arbitrated under Article 27, ARBITRATION. ARTICLE 7. PAYMENT OF RENTS After the third year, GMAR shall be paid quarterly in advance. All rents shall be paid without prior notice or demand and shall be deemed "past clue" if not paid within fifteen (15) days of its due date. Past due rental shall bear interest at ten percent (10%) per annum from the due date until paid, but this provision shall not be construed to relieve the Lessee from his obligation to make timely rental payments. In addition to interest, past due rentals shall have a late charge of five percent (5%) assessed. ARTICLE 8. PLANS AND DESIGNS Within one hundred eighty(180) days after the approval of this Lease, the Lessee shall submit to the Lessor and the Secretary for review and approval two sets of a general plan and architect's design for the complete development of the entire leased premises. IF the general plan and design are approved by the Lessor and Secretary, one set will be returned to the Lessee with evidence of approval noted thereon. If the plan and design are not approved by the Lessor or Secretary, the Lessee will be so notified in writing within thirty (30) days of receipt of the plan and design from the Lessee. Before beginning any construction whatsoever on the leased premises, the Lessee shall submit to the Lessor and the Secretary for approval comprehensive plans and specifications for the K/12212.4/LEASE JMS/9/2/05/3 06 pm 3 improvements then proposed. The Secretary and Lessor shall approve them if they conform to the general development plan, but the United States and the Lessor do not assume any responsibility whatsoever for design of any structure or any improvement or for any construction being in compliance with any applicable state, county, or city laws or ordinances. The Secretary and Lessor shall either approve or state reasons for not approving the plans and specifications within thirty (30) days after receipt thereof from Lessee. No substantial change will be made in plans or specifications after their approval without the consent of the Lessor and Secretary. Lessee is responsible for obtaining licenses and permits required or necessary for the construction of any structures or improvements on the leased premises orfor performance of any work required hereunder. ARTICLE 9. IMPROVEMENTS AND COMPLETION OF DEVELOPMENT Lessee agrees that construction of the buildings and improvements will be completed in accordance with plans and designs approved under Article 8, PLANS AND DESIGNS, hereof, within three (3) years of commencement of this Lease, subject to the provisions of Article 41, FORCE MAJEURE. Subject to other provisions of this Lease, if the Lessee fails to complete improvement, development and construction within such period, the Lessor may at Lessor's sole option elect, at the end of each Lease year, to either: A. Modify the Lease to exclude that portion of the leased premises that has not been developed, to which Lessee hereby guarantees ingress and egress for development thereof; or B. Require that GMAR payable under this Lease increase ten percent (10%) at the beginning of the next Lease year, and foreach Lease year thereafter that the Lessee fails to complete such full improvement, development and construction, GMAR shall be increased an additional two percent(2%). Notwithstanding the date of completion of such full improvement, development and construction, or change in option selection by Lessor under this Article, the rent calculated hereunder shall not be decreased; or C. Require that the GMAR payable under this Lease shall be increased by the amount that the fair annual rental value of the undeveloped portion of the leased premises has increased, as determined by a current appraisal approved by the Lessor, since the effective date of this Lease. If this option is selected by the Lessor, the GMAR payable under this Lease shall be similarly increased at the end of every five (5) year period thereafter until the full improvement, development and construction is accomplished. ARTICLE 10. NON-RESPONSIBILITY NOTICES Priorto the commencement of construction of improvements on the leased property as provided in Article 9, the Lessee shall give the Lessor ten (10) days advance notice in writing of intention to begin said activity, in order that non-responsibility notices may be posted and recorded as provided by state and local laws. K/12212 4/LEASE.JMS/9/2/05/3:06 pm 4 ARTICLE 11. PUBLIC LIABILITY INSURANCE At all times during the term of this Lease, Lessee shall carry a public liability insurance policy in amounts not less than ONE MILLION DOLLARS($1,000,000.00)/TWO MILLION DOLLARS($2,000,000.00)for personal injuryand FIFTYTHOUSAND DOLLARS ($50,000.00) for property damage, said policy to be written jointly to protect Lessee, Lessor, Master Lessor and THE BUREAU OF INDIAN AFFAIRS. Evidence, acceptable to the Lessor, of such coverage or a change in coverage shall be furnished the Lessor. Lessee shall notify the Lessor without delay of any occurrence which might precipitate the filing of a claim against the insured. ARTICLE 12. FIRE AND DAMAGE INSURANCE Lessee shall, from the date of commencement of any construction on the Leased Premises, carry fire insurance with extended coverage endorsements, to include vandalism,jointly in the names of the Lessee, Lessor and Master Lessor, covering the full insurable value of all improvements on the Leased Premises. Evidence, acceptable to the Lessor, of such coverage or a change in coverage shall be furnished the Lessor. Lessee Shall notify the Lessorwithout delay of any occurrence which might require filing of a claim with the insurer. Lessee shall pay all premiums and other charges for such insurance and shall deposit with the Lessor evidence, acceptable to the Lessor, that said premiums or other charges have been paid. Lessee hereby agrees that damage to or destruction of any building or improvement on the Leased Premises at any time by fire or any other casualty whatsoever shall not cause termination of this Lease or authorize the Lessee or those claiming by, through, or under it to quit or surrender possession of said lands or any part thereof, and shall not release the Lessee in anyway from its liabilityto pay Lessorthe rents hereinabove provided for or from any other agreements, covenants, or conditions of this Lease. In the event of damage to any improvement on the leased premises, the Lessee shall reconstruct the improvement in compliance with applicable laws and building regulations and in accordance with plans to be approved pursuant to Article 8, PLANS AND DESIGNS, hereof. Such reconstruction shall commence within one(1)year afterthe damage occurs and shall be pursued diligently. Insurance proceeds shall be deposited in escrow with an institution approved by the Lessor. The Lessee shall also deposit in said escrow as needed all additional funds required to reconstructthe damaged improvement. Escrow instructions shall include provisions that all funds so deposited shall be used to reconstruct the damaged improvements, and funds shall be disbursed during the progress of reconstruction on proper architect's, engineer's or contractor's certificates. If Lessee has not defaulted under this Lease, all money in escrow after reconstruction has been completed shall be paid to Lessee. If a default has taken place, K/12212.4/LGASH 1M9/9/2/05/3 06 pm 5 said money shall remain in escrow as security for performance by Lessee until said default is corrected, after which, funds remaining shall be paid to Lessee. If Lessee does not correct the default, said funds shall be paid to the Lessor. An Encumbrancer may be named as a beneficiary under the insurance mentioned herein, and in the event of loss or damage to the buildings on the leased property while an Approved Encumbrance remains unpaid, the proceeds of such insurance (but not Exceeding the amount of the unpaid balance of the Approved Encumbrance) shall be paid to the Encumbrancer. If such amount paid to the Encumbrancer is sufficient to repair the loss or damage with respect to which it was paid, or if insufficient to repair the loss or damage, and Lessor or Lessee shall within three (3) months after such payment by the insurerto the Encumbrancer deposit with the Encumbrancer enough moneyto completely repair the loss or damage when added to the amount paid by the insurer to the Encumbrancer, the Encumbrancer shall, upon written order of Lessor and Lessee, pay such monies for such repair, and it shall not be deemed a payment or credit on the encumbrance. However, if prior to the expiration of such three (3) month period, the Lessor or Lessee shall not so deposit money with the Encumbrancer, the said sum so paid by the insurer to the Encumbrancer shall be applied and credited upon the Approved Encumbrance. ARTICLE 13. INDEMNIFICATION Neither the Lessor, the Master Lessor, nor the United States, nor their officers, agents, and employees shall be liable for any loss, damage or injury of any kind whatsoever to the person or property of the Lessee or sublessees or any other person whomsoever, caused by any use or condition of the leased premises, or by any defect in any structure erected thereon, or arising from any accident, fire, or other casualty on or about said premises or from any other cause whatsoever, including any such claim or cause whether or not alleged to be or as a result of Lessor's own negligence. Lessee hereby releases and waives all claims against Lessor and the United States and agrees to indemnify and hold Lessor and the United States free and harmless from and to defend them against any death, loss or damage of whatsoever kind or nature including any claim or liability whether due to, or claimed to be due to, negligence by the Lessor, for any loss, damage or injury arising from the use or condition of the premises, together with all costs and expenses in connection therewith. ARTICLE 14. REMOVAL OF IMPROVEMENTS All buildings and improvements, excluding removable personal property, furniture, fixtures, and equipment, on the Leased Premises shall remain on said property after termination of this Lease and shall thereupon become the property of the Lessor. The term"removable personal property,furniture,fixtures and equipment"as used in this Article shall not include property which normally would be attached or affixed to the buildings, improvements or land in such a way that it would become a part of the realty, regardless of whether such property is in fact so placed in, or on, or affixed to the buildings, improvements or land in such a way as to legally retain the characteristics of personal K./12212.4/LBASH.IMS/9/2/05/3:06 pin 6 property. Personal property and trade fixtures may be removed by the Lessee at any time (luring the term of this Lease or within ninety (90) days after termination of this Lease or within such other reasonable time after the termination of this Lease as may be agreed upon between the parties hereto. The Lessee, at his own expense, shall repair any and all damages to the buildings and improvements resulting from or caused by such removal. If Lessee fails to remove the same within ninety(90) days after termination of this Lease, or such other reasonable time as may be agreed upon between the parties hereto, said fixtures and property shall be deemed abandoned and shall become the property of the Lessor. Lessee expressly waives all provisions of state and local law pertaining to improvements affixed to the land by any person acting in good faith and erroneously believing, because of a mistake either of law or fact, that he has a right to affix them, and also, all provisions of state and local law providing for removal of such improvements. Any dispute arising underthis Article which cannot be resolved by the parties shall be arbitrated pursuant to Article 27, ARBITRATION, hereof. ARTICLE 15. CONSTRUCTION, ALTERATION AND ADDITIONS All improvements placed on the leased premises shall be constructed in a good and workmanlike manner and in compliance with applicable laws and building codes. All parts of buildings exposed to perimeter properties shall present a pleasant appearance and all service areas shall be screened from public view. Subject to Article 10, NON- RESPONSIBILITY NOTICES, the Lessee shall have the right at any time during the term of this Lease to make alterations and additions to any improvement on the premises in an amount not to exceed $300,000.00. This amount shall be adjusted by the provisions of Article 6, paragraph C. Removal or demolition of any improvements or alterations, additions or repairs to any improvements in excess of the above amount shall not be made without the prior written consent of the Secretary. The Lessee shall, at all times during the berm of this Lease and at the Lessee's sole cost and expense, maintain the premises and all improvements thereon in good order and repair and in a neat, sanitary and attractive condition and in compliance with applicable law, ordinance or regulation. ARTICLE 16. PERFORMANCE BOND Before beginning construction required by Article 8, Lessee agrees to provide security to guarantee completion of the improvement and payment in full of claims of all persons for work performed on or materials furnished for construction. Lessee may provide said security by either: A. Posting a corporate surety bond in an amount equal to the cost of each building or other improvement, said bond to be deposited with the Lessor and to remain in effect until the improvement is satisfactorily completed. Said bond shall be conditioned upon the faithful performance of Lessee and give all claimants the right of action to recover upon said bond in any suit brought to foreclose mechanics'or materialmen's liens against the property; or KA2M 4/LEASE.]MS/9/2/05/3 06 pm 7 B. Depositing in escrow with an institution acceptable to the Lessor, negotiable United States Treasury Bonds or cash, in an amount sufficient to pay the entire cost of construction of each building or other improvement then to be erected or installed on the premises. The escrow instructions shall include provisions for disbursement in installments upon certification of Lessee's architect,engineer,or contractor as construction progresses. fhe Lessor and Secretary shall have access to all information relative to the disbursement of funds through said escrow. The escrow instructions shall also provide:that not less than fifteen percent(15%) of such funds shall be withheld by the escrow holder until the period fixed by law for the filing of all mechanics' or materialmen's liens on such improvement shall have expired or until a reputable title company issues a title insurance policy which, in substance, insures the Lessor and Secretary against any loss they shall sustain by reason of any statutory liens for labor or material arising out of any work or improvement described in said escrow instructions; that if mechanics' or materialmen's liens are filed, the funds so withheld shall then be used to discharge such liens; and that if no such liens are filed within the statutory period for filing, the withheld funds shall be then disbursed to the Lessee. If U.S. Treasury Bonds are provided, Lessee agrees to make up any deficiency in the value deposited which might occur due to a decrease in the value of the bonds. Interest on said bonds shall be paid to the Lessee; or C. Entering into a building loan agreement with a financial institution, which building loan agreement and the amount of the equity of the Lessee in the improvements to be constructed with the proceeds of the loan shall be subject to the approval of the Lessor; or D. Providing an irrevocable letter of credit in a minimum amount equal to the cost of each improvement. ARTICLE 17. COMPANIES BONDING AND INSURING All corporate surety bonds provided by Lessee in compliance with this Lease shall be furnished by companies holding certificates of authority from the Secretary of the Treasury as acceptable sureties on federal bonds. Insurance policies shall be furnished and maintained by such responsible companies as are rated A Plus- Class XI or better in the current edition of Best's Insurance Guide. ARTICLE 18. SUBLEASE, ASSIGNMENT, TRANSFER A. Sublease, The Lessee shall not, unless otherwise expressly authorized herein, sublease any right to or interest in this Lease or any of the improvements on the leased premises, without the written approval of the Lessor and the Secretary and sureties, if required. No such sublease shall be valid or binding without the said consent and approval, and then only upon the condition that sublessee has agreed in writing that in the event of conflict between the provisions of this Lease and of said sublease, the provisions of this Lease shall govern. No sublease shall release the Lessee from any obligation under his Lease KA2212 4/LEASEJMS/9/2/05/3:06 pm 8 or substitute the sublessee for the Lessee hereunder. Any sublease made, except as aforesaid, shall be deemed a breach of this Lease. B. Assignment or Transfer. The Lessee shall not, unless otherwise expressly authorized herein, assign or transfer all or any part of Lessee's interest in this Lease without the written consent of the Lessor and sureties and approval of the Secretary; provided, that the requirements for approvals of any assignment or transfer necessary for the Lessee to secure an encumbrance on a leasehold interest shall be governed by the provisions of Article 22, APPROVED ENCUMBRANCE. No such assignment or transfer shall be valid or binding without said consent and approval, and then only upon the condition that assignee or other :successor in interest, excepting an approved Encumbrancer under conditions herein set forth, shall agree in writing to be bound by each and all of the covenants and conditions of this Lease. Any such assignment or transfer, except as aforesaid, shall be deemed a breach of this Lease, excepting that an Encumbrancer, as herein set forth, may enforce his rights in the manner hereinafter provided. If a proposal to assign this Lease to a qualified assignee or other successor-in- interest is submitted while a default in this Lease exists, neither the Secretary nor the Lessor will be obligated to consider said proposal until the Lease is restored to good standing. ARTICLE 19. STATUS OF SUBLEASES Termination of the Master Lease, by cancellation or otherwise, shall not serve to cancel this Lease, but shall operate as an assignment to the Master Lessor of any and all rights and liabilities of this Lease. Master Lessor agrees to recognize and be bound by this Lease. ARTICLE 20. AGREEMENTS FOR UTILITY FACILITIES Lessee shall have the right to enter into agreements with public utility companies and the State of California or any of its political subdivisions to provide utility services including, but not limited to,gas,water,electricity,telephone,television and sewer faciIities, necessary to the full enjoyment of the leased premises and the development thereof in accordance with the provisions of this Lease, which agreement shall be binding upon any sublessee or other occupant of the leased premises; provided, that no such agreement shall cover land not included in this Lease. Upon entering into such agreement or agreements, the Lessee shall furnish the Lessor and the Secretary executed copies thereof together with a plat or diagram showing the true location of the utility lines to be constructed in accordance therewith. ARTICLE 21. RIGHTS OF WAY FOR STREETS AND UTILITY FACILITIES K/12212 4/LEASE JMS/9/2/05/3:06 pm 9 Lessor hereby consents to the granting of rights-of-way for streets and utility facilities necessary to the full enjoyment of the leased premises and development thereof. Such rights-of-way are to be granted by the Secretary in accordance with the approved general development plan and pursuant to the Act of February 5, 1948, 62 Stat. 17, and any amendments thereto, as implemented by regulations of the Secretary applicable thereto. ARTICLE 22. APPROVED ENCUMBRANCE A. This Lease, or any right to or interest in this Lease, or any of the improvements on the leased premises, may be encumbered with the written approval of the Lessor and the Secretary("Approved Encumbrance"). No such encumbrance or any addition thereto or extension thereof shall be valid without said approval. B. An encumbrance must be confined to the leasehold interest of Lessee and shall not jeopardize in any way the Master Lessor's interest in the land. Master Lessor hereby consents to any such Deed of Trust subject to its approval by the Secretary. Lessee agrees to furnish as requested any financial statements or analyses pertinent to the encumbrance that the Secretary may deem necessary to justify the amount, purpose, and terms of said encumbrance. Lessee further agrees to authorize an Encumbrancer to furnish the Secretary, upon written request from the Secretary, any specific information regarding the status of the encumbrance at any time during the term of this Lease. C. In the event of default by the Lessee underthe terms of an Approved Encum- brance, the Encumbrancer may exercise any rights provided in the agreement or by law fordischarging said encumbrance, provided that before any sale of the leasehold,whether under power of sale or foreclosure, the Encumbrancer shall give to the Secretary and Lessor notice of the same character and duration as is required to be given to Lessee by such encumbrance and/or the laws of the State of California. D. If any sale under the Approved Encumbrance occurs, whether by power of sale or foreclosure, the purchaser at such sale shall succeed to all of the rights, title and interest of the Lessee in the leasehold estate covered by said Approved Encumbrance. It is further agreed that, if the purchaser at such sale is the Encumbrancer, the Encumbrancer may sell and assign the leasehold interest without any further consent, provided that the assignee shall agree in writing to be bound by all the terms and conditions of this Lease including the payment of rent. If the Encumbrancer is the purchaser, it shall be required to comply with all the covenants and conditions of this Lease, including the payment of rent, only so long as it retains title to this leasehold. If a sale under the Approved Encumbrance occurs and the purchaser is a party other than the Encumbrancer, said purchaser, as successor-in-interest to the Lessee, shall be bound by all the terms and conditions of this Lease. Kd12212 4/LEASE,JMS/9/2/05/3 06pm 10 E. Noncurable Defaults. An acquirer of the interests of Lessee in this Lease shall not be required to cure any type of default which can be construed to be noncurable or which, because of its nature, may not be feasible or practical to cure. An Encumbrancer who acquires the interest of the Lessee in this Lease shall be relieved of any obligation under Article 8, PLANS AND DESIGNS, and under Article 9, IMPROVEMENTS AND COMPLETION OF DEVELOPMENT, of this Lease to complete construction of improvements for two (2) years after foreclosure or assignment in lieu of foreclosure. F. Notice. Lessor agrees to give Encumbrancer notice of any default of the payment of rental by the Lessee when said rent becomes forty-five (45) days past due. The mortgage or trust deed executed by Lessee may provide that failure to pay rent or perform the other covenants of the Lease is a default under said mortgage or trust deed. If a notice of default is filed under any mortgage or trust deed encumbering this leasehold or any fractional portion thereof, the Encumbrancer shall within fifteen (15) days of receipt of notice be obligated to pay any past due or current rent to Lessor. G. Bankruptcy. Bankruptcy, receivership, or insolvency of Lessee shall not obligate any Encumbrancer to pay any monies to cure or terminate the bankruptcy, receivership or insolvency, and the Encumbrancer shall be required to do no more than is required of said Encumbrancer by the terms of this Lease. H. Elections Under the Bankruptcy Code. Lessor acknowledges and agrees that (i) any right of election arising under Section 365(h)(1) of the Bankruptcy Code shall be exercised by Encumbrancer and not by Lessee; (ii) without limiting the generality of the foregoing, Lessee shall not,without Encumbrancer's priorwritten consent, electto treat the Lease as terminated or to remain in possession of the Leased Premises under Section 365(h)(1) of the Bankruptcy Code, 11 U.S.C. § 365(h)(1); and (iii) any exercise or attempted exercise by Lessee of such right of election in violation of the preceding clauses shall be void. I. Rejection; Termination. Any rejection of the Lease by Lessee, by Lessee as debtor-in-possession, or by any trustee of Lessee pursuant to Section 365(h) of the Bankruptcy Code, shall not terminate the Lease. The Lease shall not be treated as terminated under Subsection 365(h)(1)of the Bankruptcy Code, and it shall continue in full force and effect in accordance with its terms, except that Lessee and Encumbrancer shall have all of the rights conferred under Subsection 365(h)(2)of the Bankruptcy Code. In no event shall any Deed of Trust, the lien of any Deed of Trust, the security interests of any Deed of Trust, or any note secured by any Deed of Trust be affected or impaired by any rejection of the Lease pursuant to Section 365(h) of the Bankruptcy Code. J. Rejection; Possession. Lessor acknowledges and agrees that, if Lessee, Lessee as debtor-in-possession, or any trustee of Lessee shall reject the Lease pursuant to Section 365(h)of the Bankruptcy Code: (a) Lessee shall without further act or deed be deemed to have elected under Section 365(h)(1) of the Bankruptcy Code to remain in possession of the Leased Premises for the balance of the term of the Lease and E=ncumbrancer shall have the right to exercise any one or more of the extension options provided for in the Lease (if any); and (b) any exercise or attempted exercise by Lessee K 112212.4/LEASE.]MS/9/2/05/3.06 pm I I of any right to treat the Lease as terminated under Subsection 365(h)(1)of the Bankruptcy Code shall be void. K. Possession; Sublease; Sub-Sublease. For the purposes of Section 365(h) of the Bankruptcy Code, the term 'possession' as used herein shall mean the right to possession of the leased premises granted to Lessee under the Lease, whether or not all or any part of the Leased Premises has been subleased. L. Rejection by Lessee. Should Lessee reject or attempt to reject the Lease pursuant to Section 365(a) of the Bankruptcy Code, Lessor shall give Encumbrancer written notice of such rejection,together with a statement of all sums at the time due under the Lease (without giving effect to any acceleration), and of all other defaults under the Lease then known to Lessor. Encumbrancer shall have the right, but not the obligation, to give written notice to Lessor within ten (10) days after receipt of the rejection notice provided for in the preceding sentence (but not later than ten (10) days following the Bankruptcy Courts approval of such rejection), that Encumbrancer has elected to: (i)enter into a new Lease with Lessor, or shall assume the Lease, and (ii) cure all such defaults outstanding thereunder by concurrently curing such monetary defaults at the date of assumption and by curing such other defaults within a reasonable period of time after the date of such assumption, except for defaults of the type specified in Subsection 365(b)(2) of the Bankruptcy Code. If Encumbrancer gives the written notice provided for in clause (b) of the preceding sentence, then, as between Lessor and Encumbrancer: (1) the rejection of the Lease by Lessee shall not constitute a termination of the lease; (2) Encumbrancer may assume the obligations of Lessee under the Lease without any instrument of assignment or transfer from Lessee; (3) Encumbrancer's rights under the Lease shall be free and clear of all rights, claims and encumbrances of or in respect to Lessee; (4) Encumbrancer shall consummate the assumption of the Lease and the payment of the amounts payable by it to Lessor pursuant to this paragraph at a closing to tie held at the office of Lessor at the address set forth herein or such other place as such parties may mutually agree upon, on the tenth (10th) business day after Encumbrancer shall have given the written notice hereinabove provided for; and (5)upon any assignment of the Lease by Encumbrancer, Encumbrancer shall be relieved of all obligations and liabilities arising from and after the date of any such assignment." M. Assignment in Lieu. Acquisitions of the interest of Lessee by Encumbrancer by assignment in lieu of foreclosure shall confer upon Encumbrancer the same rights as if Encumbrancer had acquired title by foreclosure action such as a Trustee's Sale. ARTICLE 23. LIENS, TAXES, ASSESSMENTS, UTILITY CHARGES Lessee shall not permit to be enforced against the leased premises, or any part thereof, any liens arising from any work performed, materials furnished, or obligations incurred by Lessee, and Lessee shall discharge or post bond against all such liens before any action is brought to enforce same. Lessee shall pay, when and as the same become due and payable, all taxes, assessments, licenses, fees and other like charges levied during the term of this Lease upon or against the leased land, all interests therein and property thereon for which either the Lessee or the Lessor may become liable. Upon K/12212.4/LEASE 1MS/9/2/05N.06 pm 12 written request,the Lessee shall furnish the Secretary written evidence, duly certified, that any and all taxes required to be paid by Lessee have been paid, satisfied, or otherwise discharged. Lessee shall have the right to contest any claim, tax, or assessment against the property by posting bond to prevent enforcement of any lien resulting therefrom, and Lessee agrees to protect and hold harmless the Lessor, the United States and the leased premises and all interesttherein and improvements thereon from any and all claims,taxes, assessments and like charges and from any lien therefor or sale or other proceedings to enforce payment thereof, and all costs in connection therewith. Lessor shall execute and file any appropriate documents with reference to real estate tax exemption of the land when requested by Lessee. In addition to the rents, taxes and other charges herein described, Lessee shall pay all charges for water, sewage, gas, electricity, telephone, and other utility services supplied to said premises as they become due. Lessee hereby acknowledges that the recordation of this Lease at the Office of the County Recorder of Riverside County and,with the exception of non-responsibility notices, the recordation of any document relating to this Lease, is not the responsibility of the Lessor or the Secretary. The Secretary hereby reserves the right to notify the County of Riverside of the existence of this Lease upon its approval. ARTICLE 24. LESSOR'S PAYING CLAIMS Lessor shall have the option to pay any lien or charge payable by Lessee underthis Lease, or settle any action therefor, if the Lessee after written notice from Lessor or Secretary fails to pay or to post bond against enforcement. All such sums paid by Lessor as well as all costs and other expenses incurred by Lessor in so doing shall be paid to Lessor by Lessee upon demand with interest at the rate of ten percent (10%) per annum from date of payment until repaid. Failure to make such repayment on demand shall constitute a breach of the covenants of this Lease. ARTICLE 25. UNLAWFUL USE The Lessee agrees not to use or cause to be used any part of the leased premises for any unlawful conduct or purpose. ARTICLE 26. EMINENT DOMAIN If, at anytime during the term of this Lease, the leased premises or any part thereof is taken or condemned under the laws of the eminent domain, then, and in every such case, the leasehold estate and interest of the Lessee in the premises so taken shall forthwith cease and terminate. All compensation awarded by reason of the taking of the leased premises shall be awarded to the Lessee and the Lessor as their interests appear at the time of such taking, unless an encumbrance of the leasehold has been approved, in which case the compensation or award, only insofar as it is awarded for damages to the improvements on the leased property, to the extent of the unpaid balance of any Approved Encumbrance, shall be paid to the Encumbrancer. As between Lessor and Lessee or K/12212.4/LEASE.7MS/9/2/058 06 pm 13 sublessor and sublessee, as the case may be, such amount shall be deemed paid to the Lessee or sublessee and if such amount exceeds the amount to which Lessee or sublessee is entitled under the other terms of this Lease, Lessee or sublessee shall pay any such excess to Lessor or sublessor, as appropriate. The rental thereafter payable hereunder for the remainder of the term of this Lease shall be adjusted by agreement of the parties subject to the approval of the Secretary. If after condemnation, continuation of this Lease is no longer feasible, the Lease may be terminated by agreement of the parties, subject to the approval of the Secretary. Any disputes arising under this Article which cannot be resolved by the parties, shall be arbitrated pursuant to Article 27, ARBITRATION, hereof. ARTICLE 27. ARBITRATION If the parties hereto are unable to resolve a dispute regarding an interpretation of the terms of this lease, such dispute shall be settled by arbitration by eitherof the following: (1) If the parties agree in writing, a three-member Arbitration Board shall be established, one member to be selected by the Lessor and one member to be selected by the Lessee with the two members thereafter to select a third member, or otherwise (2) a demand for arbitration may be submitted to the American Arbitration Association or a comparable entity by either Lessor or Lessee. The costs of such arbitration or Arbitration Board shall be shared equally by the Lessee and the Lessor. The Secretary shall be expected to accept decisions reached by an Arbitrator or Arbitration Board, but the Secretary shall not be bound by any decision that might be conflict with federal law, and the Secretary shall not be bound by any decision that the Secretary determines is adverse to the long-range best interests of the Lessors. ARTICLE 28. DEFAULT Time is of the essence of this Lease. A. In the event of default by Lessee in any of the covenants or conditions of this Lease, Lessee shall be given notice citing the defaults in the Lease and allowing Lessee thirty (30) days from receipt of said notice to show cause why this Lease should not be canceled. Lessor may grant an extension of time beyond said thirty (30) days, at its discretion, if Lessee so requests. B. If Lessee fails to show cause to the satisfaction of Lessor and the Secretary why this Lease should not be canceled, the Lessor may proceed as follows: If Lessee has defaulted in any payment of monies, as required by the terms of this Lease, and if such default shall continue uncured for the period of thirty (30) days after written notice thereof by Lessor to Lessee, or if Lessee has breached any other covenant K/12212.4/LEASE JMS/9/2/05H[06 pin 14 of this Lease, and if the breach of such other covenant shall continue uncured for a period of sixty(60) days after written notice thereof by the Lessor to the Lessee, then the Lessor may either: (1) Proceed by suit or otherwise to enforce collection orto enforce any other provision of this Lease; or (2) Re-enter the premises and remove all persons and property therefrom, excluding the persons and property belonging to authorized sublessees, and either: (a) Relet the premises without terminating this Lease, as the agent and for the account of Lessee, but without prejudice to the right to terminate the Lease thereafter, and without invalidating any right of Lessor or any obligation of Lessee hereunder. Terms and conditions of such reletting shall be at the discretion of Lessor, who shall have the right to alter and repair the premises as they deem advisable, and to reletwith orwithout any equipment orfixtures situated thereon. If a sufficient sum is not thus realized to liquidate the total amount due, including attorneys'fees and real estate commis- sion paid, Lessee shall pay to Lessor monthly, when due, any deficiency, and Lessor may sue thereafter as each monthly deficiency shall arise; or (b) Terminate this Lease at any time even though Lessor has exercised rights as outlined in (1) and (2) above, in which case the Lessee shall quit and surrender the leased premises to Lessor but shall remain liable for any obligations not discharged by such termination. C. Any action taken or suffered by Lessee as a debtor under any insolvency or bankruptcy act shall constitute a breach of this Lease. In such event the Lessor and the :secretary shall have the options set forth in subarticle (2)(a) and (b) above. D. At least sixty(60)days priorto the termination of this Lease fordefault bythe Lessee, the Lessor shall give notice in writing to the Encumbrancer, in the form of a copy of the first notice to Lessee following the thirty (30) day notice expressing intention to terminate and briefly describing said default or breach. When the default or breach can be cured by the payment or expenditure of money, this Lease will not be terminated if the Encumbrancer will promptly notifythe Lessor of its intent to cure and,within sixty(60)days after receipt of said written notice to terminate, the Encumbrancer shall cure the default or breach. Whenever the Encumbrancer exercises any right on a default situation, the E=ncumbrancer shall be bound to comply with all of the obligations and conditions of the Lease. When the default or breach cannot be cured by the payment or expenditure of money, this Lease will not be terminated if the Encumbrancer shall promptly notify the Lessor of its intent to foreclose and within the said sixty (60) day period initiate, and thereafter diligently pursue to completion, proceedings for foreclosure and sale under and K/12212 MLEASE 1M5/9/2/05H:06 pm 15 pursuant to the terms of the Approved Encumbrance. However, during and until the completion of such foreclosure proceedings,the Encumbrancer shall pay the rents due and payable by the Lessee under this Lease; shall maintain all insurance as required by the Lease; shall pay all taxes due and unpaid on the taxable property covered by the Lease; shall begin the cure of any other default or breach not curable by payment or expenditure of money which can reasonably be undertaken by the Encumbrancer; and shall diligently prosecute the said cure of such default or breach until the leasehold is either sold upon foreclosure pursuant to the terms of the Approved Encumbrance or released or reconveyed thereunder. In case a default or breach on the part of the Lessee occurs preceding, during, or due to the bankruptcy, receivership, or insolvency of the Lessee, and the Encumbrancer, prior to the receipt of the notice of intent to terminate described herein or within sixty(60) days after the receipt thereof, shall have filed in the court having jurisdiction over such bankruptcy, receivership or insolvency, a petition for permission to foreclose, the filing of such petition shall be deemed to be the beginning of foreclosure proceedings for the purpose of this paragraph. E. No waiver of a breach of any of the covenants of this Lease shall be construed to be a waiver of any succeeding breach of the same or any other covenant. ARTICLE 29. ATTORNEYS' FEES If action be brought by Lessor in unlawful detainer for rent or any other sums of money due under this Lease, or if action is brought by Lessor or Lessee to enforce performance of any of the covenants and conditions of this Lease, the losing party shall pay reasonable attorneys'fees of the prevailing party, to be fixed by the Court as a part of the costs in any such action. ARTICLE 30. HOLDING OVER Holding over by the Lessee after the termination or expiration of this Lease shall not constitute a renewal or extension thereof or give the Lessee any rights hereunder or in or to the leased premises. Rental for any hold over period shall be 200% of the previous GMAR. Lessee agrees to remove all property removable underthe terms of this Lease prior to the date of termination or expiration of the Lease or within ninety (90) days thereafter or as provided in Article 14, REMOVAL OF IMPROVEMENTS, hereof. ARTICLE 31. NO PARTNERSHIP; OPERATION OF BUSINESS Lessee and Lessor are not joint venturers or in partnership. Lessee is not and shall not be deemed to be an agent or representative of Lessor. K A 2212 4/LEASE JMS/9/2/05H:06 pm 16 Lessee agrees that upon completion of construction and at all times thereafter, it will diligently attempt to keep the leased premises and all parts thereof actively used. ARTICLE 32. TERMINATION OF FEDERAL TRUST Nothing contained in this Lease shall operate to delay or prevent a termination of federal trust responsibilities with respect to the land by the issuance of a fee patent or otherwise during the term of the Lease; however, such termination shall not serve to abrogate the Lease. The owners of the land, the Lessor and the Lessee and its surety or :sureties and Encumbrancer or Encumbrancers shall be notified of any such change in the ;status of the land. ARTICLE 33. PAYMENTS AND NOTICES All notices, payments and demands shall be sent to the parties hereto at the addresses herein recited or to such addresses as the parties may hereafter designate in writing. Notices and demands shall be delivered in person or sent by certified or registered mail, return receipt requested. Service of any notice or demand shall be deemed complete ten (10)days after mailing or on the date actually received,whichever occurs first. Copies of all notices and demands shall be sent to the Secretary in care of the Palm Springs Agency of the Bureau of Indian Affairs. ARTICLE 34. INSPECTION Subject to giving Lessee forty-eight(48) hours written notice, the Secretary and the Lessor and their authorized representatives shall have the right, at any reasonable times (luring the term of this Lease, to enter upon the leased premises, or any part thereof, to inspect the same and all buildings and other improvements erected and placed thereon. ARTICLE 35. DELIVERY OF PREMISES At the termination or expiration of this Lease, Lessee will peaceably and without legal process deliver up the possession of the leased premises, in good condition, usual wear and acts of God excepted. ARTICLE 36. LEASE BINDING This Lease and the covenants,conditions and restrictions hereof shall extend to and be binding upon the successors, heirs, assigns, executors and administrators of the parties hereto. ARTICLE 37. INTEREST OF MEMBER OF CONGRESS K/12212.4/LEASEIMS/9/2/05/3 06 pm 17 No member of, or delegate to, Congress, or Resident Commissioner, shall be admitted to any share or part of this contract orto any benefit that may arise therefrom, but this provision shall not be construed to extend to this contract if made with a corporation or company for its general benefit. ARTICLE 38. VALIDITY This Lease, and any modification of or amendment to this Lease, shall not be valid or binding upon either party hereto until approved by the Secretary. ARTICLE 39. APPROVAL BY LESSOR AND/OR SECRETARY Whenever underthe terms of this Lease the acceptance, consent or approval of the Lessor and/or the Secretary is required, said acceptance, consent or approval shall not be unreasonably withheld. ARTICLE 40. TAX IMMUNITY Nothing contained in this Lease shall be deemed to constitute a waiverof applicable laws providing tax immunity to trust or restricted Indian property or any interest or income therefrom. I ARTICLE 41. FORCE MAJEURE I i If any party is rendered unable, wholly or in part, by force majeure to carry out its I obligations under this agreement, other than the obligation to indemnify or make money payments or furnish surety or provide the necessary bond, that party shall give to all other parties prompt written notice of the force majeure with reasonably full particulars ! concerning it; thereupon the obligations of the party giving the notice, so far as they are affected by the force majeure, shall be suspended during, but no longer than, the continuance of the force majeure.The term"force majeure,"as here employed,shall mean i an act of God, strike, lockout, or other industrial disturbance, act of the public enemy, war, blockade, public riot, lightning, fire, storm, flood or other act of nature, explosion, restraint or inaction, unavailability of equipment, and any other cause, whether of the kind i specifically enumerated above or otherwise, which is not reasonably within the control of ! the party claiming suspension. The affected party shall use all reasonable diligence to remove the force majeure situation as quickly as practicable. Any question of fact, or disputes, arising under this Article, which cannot be resolved by the parties, shall be arbitrated pursuant to Article 27, ARBITRATION. I ARTICLE 42. ENVIRONMENTAL PROTECTION REQUIREMENTS I ' 18 K/122120./LGASE.IMS/9/2/05/3:06 pm The Lessee shall comply with the 40 CFR, Parts 1500 through 1508, Council on Environmental Quality Regulations and all other regulations applicable to Environmental Protection Requirements on federal lands. No ground disturbing activities under this Lease shall occur until National Environmental Policy Act ("NEPA") Compliance has been met and the Lease has been approved by the Secretary or his authorized representative. No hazardous substance, as defined by Federal and State of California law can be stored or placed on the subject property. ARTICLE 43. ARCHAEOLOGICAL, CULTURAL AND HISTORIC RESOURCES PROTECTION Lessee agrees that in the course of construction on the leased premises involving ground disturbing activities, a qualified archaeologist(specified at 43 CFR 7.8)will monitor the construction site to insure that if archaeological or historical resources are uncovered, the construction activity shall immediately be halted and the involved area evaluated regarding the significance of the discovered resource. Within 12 hours of the discovery, the Superintendent, Bureau of Indian Affairs, Palm Springs Agency, shall immediately be notified by the Lessee's archaeologist. Upon notification of the discovery, the Superintendent, or his designee, will initiate a preliminary resource assessment. At the completion of the assessment,the Bureau of Indian Affairs will initiate consultation with the State Historic Preservation Officer and the Advisory Council on Historic Preservation pursuant to the required procedures at 36 CFR 800 (Protection of Historic Properties) and specifically at 36 CFR 800.11 (Properties discovered during implementation of an undertaking)to determine the disposition of the resource. The Lessee will comply with any mitigation measures determined appropriate as a result of the consultation completed pursuant to 36 CFR 800.11. The cost of any required archaeological evaluation, mitigation, analysis, and curation shall be borne by the Lessee. ARTICLE 44. SALE OF PREMISES BY LESSOR If Lessor sells, exchanges or assigns this Lease, Lessor shall be and is hereby entirely free and relieved of all liability under this Lease and under any and all covenants and obligations contained in or derived from this Lease which accrue after the notice to Lessee that such sale, exchange or assignment has been consummated and after express assumption of all prior, current and future liabilities and obligations hereunder by the transferee or assignee. ARTICLE 45. HAZARDOUS MATERIALS I Definition of Hazardous Materials. For purposes of this Lease,the term"Hazardous Materials" shall include, without limitation, asbestos, petroleum, petroleum products, storage tanks, substances defined as "hazardous substances," "hazardous waste" and/or "toxic substances" in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et sec., Hazardous materials Transportation Act, 49 U.S.C. Section 1801, Resource Conservation and Recovery Act, I 19 K:/12212.4/LEASEJMS/9/2/05/306pm 42 U.S.C. Section 6901, et sec., and/or any other applicable federal or local laws, statutes, mules, ordinances, orders and/or requirements related to hazardous materials, hazardous waste and/or toxic substances, and any publications promulgated pursuant thereto. A. Notification. The parties shall immediately advise each other in writing as :soon as they become aware of (1) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened pursuant to any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous (Material affecting the Premises("Hazardous Materials Laws"); (2)any and all claims made or threatened by third parties claiming or regulating damage, contribution, cost recovery compensation, loss or injury as a result of Hazardous materials on or emanating from the (Premises (the matters set forth in clauses (1) and (2) above are hereinafter referred to as "Hazardous materials Claims"); and (3) all occurrences or conditions on any real property adjoining or in the vicinity of the Premises that could cause the Premises or any part thereof to be classified as"border zone property" under the provisions of California Health and Safety Code, Sections 25220, et se ., or any regulation adopted in accordance therewith, or to be otherwise subject to any restrictions on the ownership, occupancy, transferability or use of the Leased premises under any Hazardous Materials Laws. B. Indemnity. Lessor shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims regardless of whether Lessor is legally liable or responsible therefor, and, if lessee is liable or responsible therefor pursuant to this paragraph, Lessor's reasonable attorneys' fees in connection therewith shall be paid by Lessee. Lessee shall be solely responsible for, and shall indemnify and hold harmless Lessor, the Secretary, employees, agents successors and assigns from and against, any loss, damage, cost, expense or Viability directly or indirectly arising out of or attributable to the Lessee's use, generation, :storage, release, threatened releases, discharge, disposal, or presence of Hazardous materials on, under or about the Leased Premises during the term of the Lease, including, without limitation: (a) all foreseeable consequential damages; (b)the cost of any required or necessary repair, cleanup or detoxification of the Leased Premises, and the preparation and implementation of any closure, remedial or other required plans; and (c)all reasonable costs and expenses incurred by lessor in connection with clauses(a)and (b), including but not limited to reasonable attorneys' fees. The various rights and remedies reserved to Lessor herein, including those not specifically described herein, shall be cumulative, and, except as otherwise provided by California law in force and effect at the time of the execution hereof, Lessor may pursue anyorall of such rights and remedies,whetherat the same time or otherwise. The foregoing indemnity shall further apply to any residual contamination on or under the Leased Premises, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the Lessee's generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with applicable laws, regulations, codes and ordinances. C. Remediation. Without Lessor's prior written consent, which shall not be unreasonably withheld, Lessee shall not take any remedial action in response to the K./12212 4/LEASE IMS/9/2M/3 06 pm 20 presence of any Hazardous materials on, under, or about the Leased Premises, nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Material Claims, which remedial action, settlement, consent or compromise might, in Lessor's reasonable judgment impair the value of Lessor's interest hereunder; provided, however, that Lessor's prior consent shall not be necessary in the event that the presence of Hazardous materials on, under, or about the Premises either poses an immediate threat to the health, safety or welfare of any individual or is of such a nature that an immediate remedial response is necessary and it is not possible to obtain Lessor's consent before taking such action, provided that in such event Lessee shall notify Lessor as soon as practicable of any action so taken. Lessor agrees not to withhold its consent, where such consent is required hereunder, if either (1) a particular remedial action is ordered by a court of competent jurisdiction, or(2) Lessee establishes to the reasonable satisfaction of Lessorthat there is no reasonable alternative to such remedial action which would result in less impairment of Lessor's security hereunder. D. Lessor's Covenants and Obligations. Lessor shall not cause, nor permit its agents, employees, or contractors to bring upon, keep, or use on or about the Leased Premises, any Hazardous Materials except in a manner that complies with all laws, ordinances,and regulations regulating any such Hazardous material so brought upon, kept or used in or about the Leased Premises. If Lessor breaches the obligations stated in the preceding sentence and contamination of the premises occurs and results thereby, or if contamination of the Leased Premises by Hazardous Material otherwise occurs for which Lessor is legally liable, then Lessor shall (1) promptly take all actions, at its expense, as may be necessary to return the Leased Premises to substantially the same condition existing prior to the introduction of any such Hazardous Material, and (2) indemnify, defend, and hold Lessee harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities, or losses which arise as a result of such contamination. ARTICLE 46. GENERAL PROVISIONS A. No Merger. There shall be no merger of this Lease, nor of the Leasehold Estate created by this Lease, with the fee estate in the Land or with the interest or estate of any Leasehold Mortgage by reason of the fact that this Lease or any such Leasehold Estate may be held, directly or indirectly, by or for the account of any person or persons who shall own a beneficial interest in the Land, or shall hold any Leasehold Mortgage. No such merger shall occur unless and until all persons at the time holding the estates or interests to be merged shall join in a written instrument affecting such merger and shall duly record the same. B. Entire Agreement. This Lease sets forth all of the agreements, conditions and understandings between Lessor and Lessee relative to the leasing of the Premises, and there are no promises, agreements, conditions, understanding, warranties or representations, oral orwritten, expressed or implied, between them other than as set forth or as referred to herein. C. No Oral Modification. No statement, action or agreement hereafter made shall be effective to change, amend, waive, modify, discharge, terminate or effect an K/12212.4/E.E.ASE 1MS/9/2/05/3:06 pm 21 abandonment of this lease in whole or in part unless such agreement is in writing and signed by the party against whom such change, amendment, waiver, modification, discharge, termination of abandonment is sought to be enforced. D. Headings. The Table of Contents and Article headings are inserted herein only for convenience and are in no way to be construed as part of this Lease, or as indicative of the meaning of the provisions of this Lease or the intention of the parties, or as a limitation in the scope of the particular Clauses to which they refer. E. Severability; Invalidity of Particular Provisions. If any term or provision of this Lease, or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby, and each other term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. F. Time of the Essence. Except as otherwise specifically provided in this Lease, time is of the essence in this Lease and in each and every provisions hereof on Lessor's and Lessee's part to be performed. G. Construction. The parties agree that each party has reviewed and revised this lease and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in their interpretation of this Lease or any amendments or exhibits thereto. H. Governing Law. This Lease shall be governed exclusively by the provisions hereof and by the laws of the United States and to the extent applicable, California law. I. Lessor's Rights to Defend. Notwithstanding anything to the contrary in this Lease, Lessor shall have the right to undertake and continue to defend, at Lessee's reasonable costs and expense, any claim, action or proceeding which is brought against Lessor and which Lessee is obligated underthis Lease to defend, if following ten(10)days notice to Lessee, Lessee has failed to diligently defend. J. Lessee's Rights to Defend. Notwithstanding anything to the contrary in this Lease, Lessee shall have the right to undertake and continue to defend, at Lessor's reasonable costs and expense, any claim, action or proceeding which is brought against Lessee and which Lessor is obligated under this Lease to defend, if following ten (10)days notice to Lessor, Lessor has failed to diligently defend. K. Quiet Enjoyment. Lessor covenants and agrees that upon Lessee's paying the rent reserved herein and timely performing and observing all of the covenants and provisions of this Lease on Lessee's part to be performed and observed, Lessee shall peaceably and quietly enjoy the Leased Premises without disturbance by Lessoror anyone claiming by, through or under Lessor. K/12212 4/LEASE JMS/92/05/3 06 pm 22 L. No Third Party Beneficiary. The covenants and obligations set forth in this Lease are to benefit any the parties hereto, and the Approved Encumbrance as specified in this Lease, and shall not be for the benefit of any third party. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands. SEE SIGNATURE PAGES ATTACHED HERETO K:/12212.4/LEASE 7MS/9/2M/3.06 pm 23 SIGNATURE PAGE SUBLEASE TO PSL-236 LESSEE: CITY OF PALM SPRINGS, a California Municipal Corporation By: DAVID READY, Its City Manager STATE OF CALIFORNIA ) ss. COUNTY OF RIVERSIDE ) On this _ day of 2005, before me, the undersigned, a Notary Public in and for said State, personally appeared DAVID READY, personally known to me (or proved to me on the basis of satisfactory evidence)to be the person whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. NOTARY PUBLIC K/12212.4/LEASE.]MS/9/2/05/3:06 pm 24 SIGNATURE PAGE SUBLEASE TO PSL-236 LESSOR: UNITED CONDOMINIUMS CORPORATION, a California Corporation By Its By Its STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) On this _ day of 2005, before me, the undersigned, a Notary Public in and for said State, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence)to be the person whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. NOTARY PUBLIC STATE OF CALIFORNIA ) ) ss. (AUNTY OF RIVERSIDE ) On this day of 2005, before me, , the undersigned, a Notary Public in and for said State, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence)to be the person whose name is subscribed to the within instrument, and acknowledged to me that he executed the same in his authorized capacity, and that by his signature on the instrument the person or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. NOTARY PUBLIC Kd12212.4/LEASE IMS/92X5/3:06 pm 25 K./12212.4/LCASG.JMS/9/2/05/3 06 pm 26 UNITED STATES DEPARTMENT OF THE INTERIOR BUREAU OF INDIAN AFFAIRS PALM SPRINGS AGENCY APPROVAL OF SUBLEASE The within Sublease To PSL-236, in favor of CITY OF PALM SPRINGS, a California Municipal Corporation, Lessee, consisting of pages 1 through 25 and EXHIBITS A and B is hereby approved. Superintendent Palm Springs Agency Bureau of Indian Affairs K/12212 4/LEASE.IMS/9/2/05/3 06 pm 27 SUBLEASE TABLE OF CONTENTS LESSEE: CITY OF PALM SPRINGS Lease No. PSL- a California Municipal Corporation Cont. LESSOR: UNITED CONDOMINIUMS CORPORATION, a California Corporation PAGE ARTICLE 1. PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,ARTICLE 2. LAND DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,ARTICLE 3. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ,ARTICLE 4. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 5. PURPOSE OF THIS LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 6. RENTALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ,ARTICLE 7. PAYMENT OF RENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ,ARTICLE 8. PLANS AND DESIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ,ARTICLE 9. IMPROVEMENTS AND COMPLETION OF DEVELOPMENT . . . . . . . . . . . . . . 4 ,ARTICLE 10. NON-RESPONSIBILITY NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 11. PUBLIC LIABILITY INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ,ARTICLE 12. FIRE AND DAMAGE INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 �K'/12212.4/LEASE]MS/9/2/05/3:06 pin 1 ARTICLE 13. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 14. REMOVAL OF IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE 15. CONSTRUCTION, ALTERATION AND ADDITIONS . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 16. PERFORMANCE BOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 17. COMPANIES BONDING AND INSURING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 18. SUBLEASE, ASSIGNMENT, TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE 19. STATUS OF SUBLEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 20. AGREEMENTS FOR UTILITY FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ,ARTICLE 21. RIGHTS OF WAY FOR STREETS AND UTILITY FACILITIES . . . . . . . . . . . . . 9 ,ARTICLE 22. APPROVED ENCUMBRANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ,ARTICLE 23. LIENS, TAXES, ASSESSMENTS, UTILITY CHARGES . . . . . . . . . . . . . . . . . 12 ,ARTICLE 24. LESSOR'S PAYING CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 25. UNLAWFUL USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 26. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 27. ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 28. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 K/12212 4/LEASE IMS/9/2/05/3:06 pm ll ARTICLE 29. ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 30. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ,ARTICLE 31. NO PARTNERSHIP; OPERATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 32. TERMINATION OF FEDERAL TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 33. PAYMENTS AND NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 34. INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 35. DELIVERY OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 36. LEASE BINDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 37. INTEREST OF MEMBER OF CONGRESS . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 38. VALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 39. APPROVAL BY LESSOR AND/OR SECRETARY . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 40. TAX IMMUNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 41. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 42. ENVIRONMENTAL PROTECTION REQUIREMENTS . . . . . . . . . . . . . . . . . . 18 ARTICLE 43, ARCHAEOLOGICAL, CULTURAL AND HISTORIC RESOURCES PROTECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I . . . . . . . . . . . . . . . . . . . . I . . . . . . 18 K:/12212.4/LEASE JMS/9/2/05/3M pm lll ARTICLE 44. SALE OF PREMISES BY LESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE 45. HAZARDOUS MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE 46. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 K/12212.4/LEASE AM5/9/2/05/3 06 pm 1V EXHIBIT "A" EXHIBIT "A" EXHIBIT "B" EXHI$IT "B" RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, APPROVING A MEMORANDUM OF UNDERSTANDING WITH UNITED CONDOMINIUMS CORPORATION, A CALIFORNIA CORPORATION, FOR A 1.77 ACRE PARCEL AT THE SOUTHWEST CORNER OF AMADO ROAD AND CALLE ALVARADO FOR CONVENTION CENTER AND ANCILLARY USES, PROVIDING FOR AN UPFRONT PAYMENT OF $1,260,000 FOR THE DISCOUNTED CASH FLOW SAVINGS OF THE LEASE TERM, REIMBURSEMENT FOR DESIGN AND LEGAL EXPENSES, RELINQUISHING DEVELOPMENT RIGHTS TO THE PROPERTY, AND ALLOWING EARLY ENTRY TO THE PROPERTY FOR THE PURPOSE OF WEED ABATEMENT AND LANDSCAPING NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Palm Springs that A Memorandum of Understanding with United Condominiums Corporation, a California Corporation, for a 1.77 acre parcel at the southwest corner of Amado Road and Calle Alvarado for Convention Center and ancillary uses, providing for an upfront payment of$1,260,000 for the discounted cash flow savings of the lease term, reimbursement for design and legal expenses, relinquishing development rights to the property and allowing early entry to the property for the purpose of weed abatement and landscaping, is hereby approved. ADOPTED this day of 2005. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA A Municipal Corporation By City Clerk City Manager REVIEWED & APPROVED MEMORANDUM OF UNDERSTANDING This MEMORANDUM OF UNDERSTANDING ("Agreement") dated 2005 is made by and between the City of Palm Springs, a Charter City and Municipal Corporation ("City"), and United Condominiums Corporation, a California Corporation ("Lessor") with reference to the following facts and agreements: WHEREAS, the City and Lessor have entered into that certain Sublease to Business Lease PSL-236 ("Sublease") dated , 2005 which provides for City to sublease from Lessor a 1.77 acre parcel at the southwest corner of Amado Road and Calle El Segundo for Convention Center and ancillary purposes; and WHEREAS, Lessor suspended the development of a 34-unit condominium phase in favor of negotiating with the City on the Sublease, after preliminary design had been completed, and the parties agree that there are further terms to the economic deal that are not covered by the Sublease but that should be documented in an Agreement; and WHEREAS, the Lessor factored in the City's acute need for the parcel for the public use of the Convention Center, and assumed during the negotiations the City could have used its eminent domain authority to acquire a sublease, and both parties wished to avoid any formal condemnation proceedings; and WHEREAS, the City's construction of the adjacent Convention Center is nearly complete and both parties wish to allow the City access to the parcel for the purposes of clearing weeds and debris to make it as attractive as possible for the Convention Center opening, prior to approval of Sublease by the Secretary of the Interior; and WHEREAS, the City and Lessor wish to clarify their understandings of how the Sublease will be implemented by setting forth those understandings in this Agreement as follows: 1. Pavment For Transfer of Leasehold Interest. City agrees to pay Lessor the amount of $1,200,000 upon approval of Sublease by the Secretary of the Interior or his/her designee, for the purpose of compensating Lessor for lost economic value in subleasing to City on an exclusive basis for the duration of the Lessor's interest in such leasehold, This compensation shall be considered full payment for such transfer 2. Reimbursement for Desiqn and Legal Costs. The City agrees to pay Lessor the amount of $60,000 as reimbursement for design costs on the Lessor's prior condominium project in the amount of$45,000 and for the legal costs incurred as part of the Sublease negotiation in the amount of $15,000. Such payment shall be considered full reimbursement for such costs and Lessor agrees to release any actual or future claims against City for such. 3. Acccess for Public Improvements Construction. Upon execution of this Agreement by both parties, Lessor shall grant City access to the Parcel for the purposes of cleaning the site and removing any fencing, weeds, debris, or landscaping not 01003/0013139106.01 considered necessary for the ultimate use of the parcel by City. City shall consult with Lessor to ensure that any underground utilities remain undisturbed, and that any landscaping irrigation removed and replaced by the City does not damage Lessor's other condominium phases, including but not limited to all such condominium units that may be contigous to the Parcel. Lessor shall not be responsible for any of the costs incurred by City during the clearing process nor any damages that may result from any such actions by the City under this paragraph. Should the Sublease fail to be approved by any party, City shall leave property in a clean condition. 4. Release of Development Riqhts. As a consideration for the payments made to Lessor under the terms of the Sublease, as well as Sections 1. and 2. of this Agreement, Lessor agrees to release and assign its rights to develop the parcel to the City for the term of the Sublease. However, in the event the City defaults on its obligations under the Sublease and the Sublease terminates, the Lessor shall have all rights and interest to develop such property as existed prior to this Memorandum of Understanding. 5. Attorneys Fees. Notwithstanding the reimbursement for prior legal costs as described in Section 2. above, both parties agree that any action between the parties hereto, seeking enforcement of any of the terms and provisions of this Agreement or the Sublease, or in connection with the Property, the prevailing party in such action shall be entitled, to have and to recover from the other party its reasonable attorney's fees and other reasonable expenses in connection with such action or proceeding, in addition to its recoverable court costs. 6. Notices. Any notice which either party may desire to give to the other party or to the Escrow Holder must be in writing and may be given by personal delivery or by mailing the same by registered or certified mail, return receipt requested, to the party to whom the notice is directed at the address of such party hereinafter set forth, or such other address and to such other persons as the parties may hereafter designate: To Developer: United Condominiums Corporation c/o Palm Springs Hilton Resort 400 East Tahquitz Canyon Way Palm Springs, CA 92262 Attn: General Partner Copy to: Schlecht Shevlin & Shoenberger 901 East Tahquitz Canyon Way Palm Springs, CA 92262 Attn: James Schlecht, Esq. To City: The City of Palm Springs 3200 E. Tahquitz Canyon Way Palm Springs CA 92263 Attn: City Manager 2 01003/0013139106.01 With a copy to: WOODRUFF, SPRADLIN & SMART a Professional Corporation 701 South Parker Street Suite 8000 Orange, California 92868 Attn: Douglas C. Holland, Esq 7. Interpretation: Governinq Law. This Agreement shall be construed according to its fair meaning and as if prepared by both parties hereto. This Agreement shall be construed in accordance with the laws of the State of California in effect at the time of the execution of this Agreement. Titles and captions are for convenience only and shall not constitute a portion of this Agreement. As used in this Agreement, masculine, feminine or neuter gender and the singular or plural number shall each be deemed to include the others wherever and whenever the context so dictates. 8. No Waiver. No delay or omission by either party hereto in exercising any right or power accruing upon the compliance or failure of performance by the other party hereto under the provisions of this Agreement shall impair any such right or power or be construed to be a waiver thereof. A waiver by either party hereto of a breach of any of the covenants, conditions or agreements hereof to be performed by the other party shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions hereof. 9. Modifications. Any alteration, change or modification of or to this Agreement, in order to become effective, shall be made by written instrument or endorsement thereon and in each such instance executed on behalf of each party hereto. 10. Severability. If any term, provision, condition or covenant of this Agreement or the application thereof to any party or circumstances shall, to any extent, be held invalid or unenforceable, the remainder of this instrument, or the application of such term, provisions, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 11. Execution in Counterparts. This Agreement may be executed in several counterparts, and all so executed shall constitute one agreement binding on all parties hereto, notwithstanding that all parties are not signatories to the original or the same counterpart. [END - SIGNATURE PAGE FOLLOWS] 3 01003/0013/39106.01 IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their respective duly authorized representatives, all as of the date first above written. THE CITY OF PALM SPRINGS a charter city and municipal corporation ATTEST: By: City Manager City Clerk APPROVED AS TO FORM: City Attorney UNITED CONDOMINIUMS CORPORATION a California Corporation By: Authorized Signatory 4 01003/0013/39106.01 RESOLUTION NO. OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS,CALIFORNIA,APPROVING A LOAN FROM THE CITY OF PALM SPRINGS' FACILITY DIVERSION FUND TO THE GENERAL FUND IN THE AMOUNT OF ONE MILLION TWO HUNDRED SIXTY THOUSAND DOLLARS ($1,260,000) FOR THE PURCHASE OF A SUBLEASE OF BUSINESS LEASE PSL- 236 FROM UNITED CONDOMINIUMS CORPORATION , A CALIFORNIA CORPORATION ------------------------------------------- WHEREAS, on September 7, 2005, the City of Palm Springs entered into a Sublease of Business Lease PSL-236 ("Sublease") and a Memorandum of Understanding ("MOU") with United Condominiums Corporation, a California Corporation ("Lessor") and WHEREAS, the terms of the MOU require that the City compensate Lessor for a portion of the economic value of the sublease, as well as for sunken design and legal costs; and WHEREAS, the City's Diversion Facility Fund is a Special Revenue Fund of the City's Recycling Fund (Fund 125) and is intended to be used to develop a solid waste diversion facility in the City of Palm Springs; and WHEREAS, the City has executed a "Promissory Note" in the amount of ONE MILLION TWO HUNDRED SIXTY THOUSAND DOLLARS ($1,260,000) with the Diversion Facility Fund; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Palm Springs that a loan for ONE MILLION TWO HUNDRED SIXTY THOUSAND DOLLARS ($1,260,000) from the City's Diversion Facility Fund to the City of Palm Springs for the purpose of entering the Sublease and MOU is hereby accepted in the form of an "Agreement and Promissory Note," as on file in the Office of the City Clerk, and shall be amortized over a twenty year period, due and payable in ten years, and shall accrue compound interest at the rate of 5% per annum and be repayable from the City's General Fund. i ADOPTED this day of 2005. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS, CALIFORNIA A Municipal Corporation By City Clerk City Manager REVIEWE EJD