HomeMy WebLinkAbout2014-12-09; Public Financing Authority; 46; Ground Lease with Grand Pacific ResortsCARLSBAD PUBLIC FINANCING AUTHORITY
AGENDA BILL
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APPROVE A GROUND LEASE OPTION WITH
GRAND PACIFIC RESORTS FOR THE PROPERTY
KNOWN AS THE CROSSINGS AT CARLSBAD
WEST VIEW LOT 9
DEPT. DIRECTOR
CITY ATTY.
CITY MGR.
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RECOMMENDED ACTION: Adopt Resolution No. 66 ofthe Board of Directors ofthe Carlsbad
Public Financing Authority approving a ground lease option with Grand Pacific Resorts for the property
known as The Crossings at Carlsbad West View Lot 9.
ITEM EXPLANATION: On May 1, 2013, the Carlsbad Public Financing Authority (CPFA) was authorized by
its two member agencies, the City of Carlsbad and the Carlsbad Municipal Water District (CMWD), to
solicit proposals for a long term ground lease on the property known as The Crossings at Carlsbad West
View Lot 9 (Lot 9). The Lot 9 property is comprised of two parcels, a 2.7 acre parcel owned by the city
and a .45 acre parcel owned by CMWD, for a total site area of 3.15 acres. CFPA was additionally
authorized to evaluate and make recommendations to the governing boards of the city and CMWD
regarding proposals submitted for Lot 9.
On May 13, 2013, city staff released the RFP soliciting proposals and provided potential respondents a
two month time period in which to prepare and submit proposals. The RFP was provided to 120
brokers, advertised online, published in several papers and trade publications and sent directly to
numerous interested parties. On the July 8, 2013 submittal deadline date, staff received two proposals,
one from LEGOLAND and the other from Grand Pacific Resorts.
On November 5, 2013, the City Council, the CMWD Board of Directors, and the CPFA Board of Directors
considered both proposals and authorized the CPFA to enter into exclusive negotiations with Grand
Pacific Resorts (GPR) for a ground lease option on Lot 9 (Resolution No. 65, Resolution No. 2013-258, &
Resolution No. 1483).
Since November 2013, city staff has been working with GPR representatives to further refine the project
description and to negotiate the specific deal points ofthe ground lease option (attached as Exhibit 2)
that is now before the CPFA for their review and consideration. The CPFA and the city retain full
discretion to approve or disapprove the project after full environmental review under the California
Environmental Quality Act.
DEPARTMENT CONTACT: Gary T. Barberio 760-434-2822 gary.barberio(a)carlsbadca.gov
FOR CITY CLERK'S USE ONLY.
AUTHORITY ACTION: APPROVED CONTINUED TO DATE SPECIFIC •
DENIED • CONTINUEDTO DATE UNKNOWN •
CONTINUED • COUNCIL RECEIVE THE REPORT •
WITHDRAWN •
Proiect: The project description for the future development on the land that is the subject of the
ground lease option, is as follows:
Phase 1: GPR will initially construct 71 hotel rooms on the western portion of Lot 9 that will be
operationally combined with 129 existing hotel rooms, and the conference center, restaurant, and
lobby area (Buildings 1 & 2) of the adjacent, existing and currently operating Sheraton hotel resort site
and all 200 hotel rooms (129 existing and 71 new) will be rebranded as a Westin hotel. Approximately
concurrent with completion ofthe 71 new hotel rooms, the Westin rebranding, and the opening and
operation ofthe 200 room Westin hotel, the remaining 121 hotel rooms existing on the Sheraton hotel
site (Building 3) will be augmented by the construction of a new additional Sheraton building consisting
of 79 hotel rooms, new lobby area, and associated amenities, which will continue to be branded and
operated as a 200 room Sheraton hotel. The additional Sheraton building may be constructed on a
phased basis and in that event, the first phase ofthe additional Sheraton building (to be completed
approximately concurrent with completion of the 71 new Westin hotel rooms) shall consist of at least
48 hotel rooms, new lobby/reception area, pool and other associated amenities and the second phase
(to be completed no later than 36 months after Phase I is completed) shall consist of at least 31 hotel
rooms.
Starting from the approval date ofthe ground lease option GPR will have 24 months to satisfy all
conditions and receive their development entitlements including environmental review ("contingency
period"; subject to extensions for up to 12 additional months if needed to obtain financing, complete
California Environmental Quality Act review, and obtain all development entitlements and permits).
Following completion of CEQA review, receipt of all development entitlements, satisfaction of all other
conditions and exercise of the ground lease option by GPR, the City of Carlsbad and the CPFA may then
take all necessary actions to approve the lease, at which time the ground lease shall commence. From
the ground lease commencement point GPR will then have 18 months to complete construction ofthe
new 71 hotel rooms and operationally combine those new rooms with the 129 existing hotel rooms,
and the conference center, restaurant, and lobby area ofthe adjacent Sheraton hotel resort site and
rebrand the 200 rooms as a Westin hotel. Lease payments under the ground lease will commence on
the earlier ofthe completion and occupancy ofthe new Westin hotel or 18 months following the
expiration ofthe contingency period.
Phase 11: Development in Phase 11 will be located on the eastern portion of Lot 9 and will consist of one
of the following two construction options: 1) no less than 32 time share vacation units that will be
operationally integrated into the adjacent MarBrisa/Hilton Grand Vacation Resort; or, 2) no less than 32
additional hotel rooms that will be operationally integrated into the new Westin hotel, for a total of at
least 232 hotel rooms branded as a Westin. The election ofwhich option to proceed with in Phase 11 is
at the discretion of GPR. However, GPR must elect which Phase 11 option they will pursue and notify the
city of their election within 42 months of the date rent payments commence under the ground lease
and they must complete construction of the Phase 11 project within 60 months of such date.
9.
Ground Lease: The major deal points of the ground lease are as follows (assuming satisfaction of all
conditions and exercise ofthe ground lease option by GPR):
Term: An initial ground lease term of 65 years, with two, 10-year options;
Annual Rent:
$159,965/year - for years 1 through 5;
• Annual 2% rent escalator starting in year 6 and ending in year 25;
Annual 2.5% rent escalator starting in year 26 and ending in year 55;
Re-appraisal of property and re-setting of rent in year 56, with an annual 2.5% rent escalator
starting in year 57 and ending in year 65;
Re-appraisal of property and re-setting of rent in year 66 and year 76 if options exercised,
with an annual 2.5% rent escalator starting in year 67 and ending in year 75 ifthe first option
is exercised, and starting in year 76 and ending in year 85 ifthe second option is exercised;
Total rent paid in years 1 - 55 $15,460,834;
Full rent commences at completion and occupancy of Phase 1 ofthe new Westin Hotel; and.
Purchase of at least 1,500 golf rounds/year at The Crossings (estimate of at least $108K/year).
Deposit: $100,000 due at ground lease option execution and forfeited by GPR if, after reasonable
satisfaction of all tenant contingencies, GPR fails to obtain financing or elects not to proceed with the
project.
The ground lease also contains numerous provisions including, but not limited to, provisions addressing
use ofthe property, maintenance, insurance, indemnity, improvements, assignment, subletting, and
termination. The full ground lease option (including the ground lease) is attached to this report as
Exhibit 2.
FISCAL IMPACT: Future development of Lot 9 will result in a positive fiscal impact to the City of
Carlsbad and the Carlsbad Municipal Water District. Ground lease revenue of $159,965 will be
generated from the property starting in the first year of the Phase 1 Hotel operations. Starting in year
six and ending in year twenty-five, the lease revenue will escalate 2% annually; starting in year twenty-
six and ending in year fifty-five, the lease revenue will escalate 2.5% annually; generating $15,460,834 in
years one through fifty-five. The project will generate additional revenue from transient occupancy tax
and sales tax collected from room stays and on-site taxable sales. Lease revenue generated from the
Lot 9 ground lease will be apportioned between the CMWD and the City of Carlsbad based upon a per
square foot ownership basis and leasehold interest, with any applicable taxes or fees associated with
the development of the site distributed to the appropriate taxing authority. Property taxes will also be
realized from the development ofthe site and the long-term nature ofthe ground lease.
ENVIRONMENTAL IMPACT: The City of Carlsbad is the lead agency and the CPFA is a responsible
agency under the California Environmental Quality Act ("CEQA") for the project and will conduct the
appropriate environmental review. The ground lease option is not subject to separate review under
CEQA because it is merely an option agreement which can be exercised only ifthe City of Carlsbad
completes and certifies a final EIR or other appropriate CEQA document for the project in compliance
with CEQA. The ground lease option specifically provides that the City of Carlsbad,, as the lead agency,
and the CPFA, as a responsible agency, in their sole and absolute discretion, may certify or not cerfify
the appropriate CECiA document and may approve or not approve the project and may select any
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alternative, including the alternative of not going forward with the project, or may adopt any mitigation
measure or condition which the City of Carlsbad or the CPFA determines is necessary and appropriate to
reduce or avoid any potential environmental impact associated with the project or to comply with any
applicable law or regulation. Accordingly, approval ofthe ground lease option will not constitute a
binding commitment to proceed with the project and the City of Carlsbad and the CPFA reserves their
discretion to approve or disapprove all actions related to the proposed project and retains full
discretion with respect to the environmental review required by CEQA.
EXHIBITS:
1. Resolution No. 66 of the Board of Directors of the Carlsbad Public Financing Authority approving
a ground lease option with Grand Pacific Resorts for the property known as the Crossings at
Carlsbad West View Lot 9.
2. Ground Lease Option between the Carlsbad Public Financing Authority and Grand Pacific Resorts
(including the ground lease).
3. Lot 9 Location Map.
4. Lot 9 Surrounding Properties Map.
5. Lot 9 Aerial Map.
6. Lot 9 Site Map.
EXHIBIT 1
1 RESOLUTION NO. 66
2 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD
PUBLIC FINANCING AUTHORITY APPROVING A GROUND LEASE
OPTION WITH GRAND PACIFIC RESORTS FOR THE PROPERTY
4 KNOWN AS THE CROSSINGS AT CARLSBAD WEST VIEW LOT 9.
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5 WHEREAS, in August 2012, staff presented to a joint meeting of the City of
6 Carlsbad City Council and the Carlsbad Municipal Water District Board of Directors, a group of
underutilized properties for their consideration and direction; and
WHEREAS, included in these properties was a parcel referred to as the Crossings
at Carlsbad West View Lot 9 (Lot 9); and
WHEREAS, Lot 9 is a combination of two adjacent parcels: one a 2.7 acre parcel
12 owned by the City of Carlsbad, and a second 0.45 acre parcel owned by the Carlsbad Municipal
13 Water District, for a total site area of 3.15 acres; and
WHEREAS, the City of Carlsbad and the Carlsbad Municipal Water District are
member agencies of the Carlsbad Public Financing Authority (CPFA), which was created on April
18, 2000, to provide for the financing of public capital improvements for the member agencies
and for other purposes as permitted under the Joint Powers Law as agreed to by the parties;
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developing Lot 9 under a long term ground lease; and
WHEREAS, CPFA evaluated the responses to the request for proposals and on
November 5, 2014, its two member agencies, the City of Carlsbad and the Carlsbad Municipal
20 WHEREAS, CPFA issued proposals to solicit responses from parties interested in
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25 Water District, authorized CPFA to enter into exclusive negotiations with Grand Pacific Resorts
26 for the ground lease of the property known as The Crossings at Carlsbad West View Lot 9; and
27 WHEREAS, the City of Carlsbad conducted negotiations for, and will manage the
ground lease in its capacity as lease manager for CPFA; and 28
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WHEREAS, the City and Grand Pacific Resorts have negotiated mutually
satisfactory terms and conditions for a ground lease and propose to memorialize said terms and
conditions in a ground lease option; and
WHEREAS, the proposed ground lease option provides that the City of Carlsbad,
as the lead agency under the California Environmental Quality Act (CEQA), and the CPFA, as a
responsible agency, in their sole and absolute discretion, may certify or not certify an EIR or
other appropriate environmental document and may select any alternative, including the
alternative of not going forward with the proposed project, or may adopt any mitigation
measure or condition which they determine is necessary and appropriate to reduce or avoid
any potential environmental impact of the proposed project or to comply with any applicable
law or regulation; and
WHEREAS, the potential revenues generated from development of Lot 9 will be
apportioned between the City of Carlsbad and the Carlsbad Municipal Water District, based
upon a per square foot ownership basis and leasehold interest, with any applicable taxes or
fees associated with the development of the site distributed to the appropriate taxing
authority.
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad
Public Financing Authority, as follows:
1. The above recitations are true and correct.
2. CPFA is a responsible agency for the project and will conduct the appropriate
environmental review required by CEQA. The ground lease option is not subject to separate
review under CEQA because it is merely an option agreement which may be exercised only if
the City of Carlsbad, as the lead agency, and the CPFA certify and approve a final EIR or other
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appropriate environmental document for the proposed project in compliance with CEQA and,
therefore, the ground lease option does not constitute a binding commitment to proceed with
the proposed project and the CPFA reserves its discretion to approve or disapprove all actions
related to the ground lease and retains full discretion with respect to the environmental review
required by CEQA.
3. CPFA approves a ground lease option between the Carlsbad Public Financing
Authority and Grand Pacific Resorts for the property known as The Crossings at Carlsbad West
View Lot 9.
4. CPFA has previously designated the City of Carlsbad as the member which will be
the lease manager for the ground lease option of Lot 9.
5. The City of Carlsbad is authorized to administer and manage the ground lease
option, and distribute any revenues generated from the long-term lease of Lot 9 on a per
square foot ownership basis and leasehold interest, with any applicable taxes or fees associated
with the development ofthe site distributed to the appropriate taxing authority.
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PASSED, APPROVED AND ADOPTED at a Special Meeting ofthe Carlsbad Public Financing
Authority held on the 9*^ day of December, 2014, by the following vote to wit:
AYES:
NOES:
ABSENT:
Board Members Hall, Packard, Wood, Schumacher, Blackburn.
None.
None.
MATT HALL, Chairman ofthe Board
ATTEST:
RA ENGL^KciN, Secretary
(SEAL)
OPTION TO LEASE AGREEMENT
TfflS CffiXION TO LEASE AGREEMENT (this, "Agreement") is made and entered
into as of this^day of lz(%(Y)0&y , 2014 (the "Effective Date"), by and between the
THE CARLSBAD PUBLIC FINANCING AUTHORITY, a joint powers authority formed by
the City of Carlsbad and the Carlsbad Municipal Water District ("CPFA"), and GRAND
PACIFIC CARLSBAD LOT 9, L.P., a Delaware limited partnership ("Optionee").
WITNESSETH:
WHEREAS, Optionee desires to obtain an option to lease land which is more particularly
described and delineated in Exhibits "A-l" and "A-2" (the "Premises") to the lease attached
hereto as Exhibit No. "1" ("Lease") and made a part hereof; and
WHEREAS, CPFA is willing to enter into this Option to Lease Agreement ("Agreement") to
lease the Premises to Optionee for the initial development and operation of at least seventy-one
(71) hotel rooms and other improvements on the Premises ancillary to the use and operation of a
Westin hotel resort (the "Hotel Addition"), and for the future development and operation of
either (i) at least thirty-two (32) time share vacation units to be operationally integrated into the
adjacent MarBrisa/Hilton Grand Vacation Resort time share development, or (ii) at least an
additional thirty-two (32) Westin hotel rooms (the "Project").
NOW, THEREFORE, in consideration of the performance and observance of the terms,
covenants and conditions hereafter set forth, the parties hereto mutually agree as follows:
1. GRANT OF OPTION: Subject to the conditions set forth in this Agreement, CPFA
hereby grants Optionee an option to lease the Premises ("Option") for the Term (as
defined in Paragraph 2 below), which lease shall be in accordance with the covenants and
conditions set forth in the Lease.
2. OPTION TERM: Unless otherwise extended by written agreement by the parties, the
term ("Term") of this Option shall commence on the Effective Date, and shall expire on
the date wtdch is twenty-four (24) months thereafter. Optionee anticipates satisi^^g the
Entitlements Condition (as defined below) within sixteen (16) months after the Effective
Date and satisfying both fhe Financmg Condition (as defined below) and the Permit
Condition (as defined below) within eight (8) months after the Entitlements Condition. If
the Entidements Condition is not satisfied within sixteen (16) months after the Effective
Date, the Term may be extended by Optionee on one or more occasions for up to six (6)
months at a time but not beyond the end of the thirty-sixth (36*) month after tiie
Effective Date only if and to the extent needed to satisfy the Entitlement Condition, the
Financing Condition and/or the Permit Condition and, relative to the Entitlement
Condition, only if Optionee has promptiy responded to all City of Carlsbad (the "City")
and Califomia Coastal Commission requests and relative to each of such conditions.
Optionee has used its diligent efforts to cause such conditions to be satisfied. Optionee
shall elect an extension by giving CPFA written notice ("Extension Notice") thereof as
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soon as the necessity for an extension becomes evident and prior to the date which is
sixteen (16) months after the Effective Date or tiie tiien expiration date ofeach additional
six (6) month period, and if CPFA beheves that Optionee does not qualify for such
extension, tiien CPFA shall promptiy so notify Optionee and in such notice indicate the
specific reasons why Optionee is not qualified to exercise such extension. If Optionee
fails to timely deliver such Extension Notice to CPFA, then Optionee's right to exteiid
the Term shall automatically terminate. Notwitiistanding any other provision of this
Agreement, Optionee's right to exercise the Option and execute tiie Lease will temiinate
and be of no further force and effect if tiie conditions set forth in this Agreement are not
timely satisfied, and tiie Option exercised, before tiie expiration of tiie Term, as such may
be extended pursuant to this Paragraph.
3. OPTION CONSIDERATION: The consideration for the Option is the sum of One
Hundred Dollars ($100.00), which sum shall be retained by CPFA as consideration for
the granting of the Option whether or not the Option is exercised and shall not be
refundable to Optionee under any circumstances. If the lull consideration is not received
by CPFA within one (1) business day after the Effective Date, this Agreement shall
automatically temiinate and be of no further force or effect.
4. SECURITY DEPOSIT: Within one (1) business day after the Effective Date, Optionee
shall deliver One Hundred Thousand Dollars ($100,000.00) (tiie "Deposit") to CPFA. If
this Agreement tenninates because of the failure of any of the Conditions Precedent
(defmed below), then CPFA shall retiim the Deposit to Optionee, except if this
Agreement tenninates because (i) the Condition Precedent set fortii in Paragraph 5.g
below pertaining to feasibility and financing is not satisfied, or (ii) any Condition
Precedent is not satisfied because of any default of Optionee under this Agreement, in
which events the Deposit shall be retained by CPFA as liquidated damages (in the case of
(ii) above) and considered additional consideration for the Option (in the case of (i)
above). In addition, if Optionee does not exercise the Option within thirty (30) days after
all Conditions Precedent have been satisfied or waived, then this Agreement shall be
deemed terminated and CPFA shall retain tiie Deposit as additional consideration. Ifthe
Option is exercised, tiien tiie Deposit shall be held by CPFA in accordance with the terms
of the Lease. Landlord shall hold the Deposit in an interest-bearing account, and all
inteiest earned thereon shall become a portion ofthe Deposit.
IN THE EVENT ANY CONDITION PRECEDENT IS NOT SATISFIED DUE TO
ANY DEFAULT OF OPTIONEE OF ITS OBLIGATIONS HEREUNDER
("CONTINGENCY EVENT OF DEFAULT"), THEN AS CPFA'S SOLE AND
EXCLUSrVE REMEDY, CPFA SHALL BE ENTITLED TO TERMINATE THIS
AGREEMENT AND RETAIN THE DEPOSIT, AND ANY INTEREST EARNED
THEREON, AS LIQUIDATED DAMAGES, WfflCH THE PARTIES AGREE IS A
REASONABLE SUM CONSIDERING ALL OF THE CIRCUMSTANCES
EXISTING ON THE DATE OF THIS AGREEMENT, INCLUDING THE
RELATIONSfflP OF THE SUM TO THE RANGE OF HARM TO CPFA THAT
REASONABLY COULD BE ANTICIPATED, AND THE ANTICIPATION THAT
ACTUAL DAMAGES WOULD BE DIFFICULT TO ASCERTAIN AND THAT IT
WOULD BE COSTLY OR INCONVENIENT TO DO SO. SUCH LIQUIDATED
DAMAGES DO NOT CONSTITUTE A PENALTY OR FORFEITURE.
NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE
CONTRARY, CPFA HEREBY FOREVER WAIVES ANY AND ALL OTHER
RIGHTS, RECOURSE OR REMEDIES UNDER THIS AGREEMENT, AT LAW,
OR IN EQUITY FOR SUCH CONTINGENCY EVENT OF DEFAULT,
INCLUDING, WITHOUT LIMITATION, ANY RIGHT OF RECOURSE FOR
ANY OTHER DAMAGES (ACTUAL, CONSEQUENTIAL OR OTHERWISE),
RENTS, COSTS, LOSSES OR EXPENSES, AND ANY RIGHT TO SEEK
SPECIFIC PERFORMANCE OF THIS AGREEMENT AND/OR THE LEASE BY
OPTIONEE. IN PLACING THEIR INITIALS BELOW, EACH PARTY
SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE
ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY
COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED
DAMAGES PROVISION AT THE TIME THAT THIS AGREEMENT WAS
MADE. NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN
THIS PARAGRAPH CONSTITUTES A WAIVER OF OR LIMITATION ON ANY
RIGHTS, REMEDIES OR DAMAGES CPFA MAY HAVE AGAINST OPTIONEE
PURSUANT TO OPTIONEE'S EXPRESS INDEMNITY OBLIGATIONS UNDER
THIS AGREEMENT.
INITIALS OF CPFA INITIALS OF OPTIONEE
CONDITIONS PRECEDENT: Optionee will have no right to exercise the Option
unless and until the conditions set forth below in this Paragraph 5 have been safisfied
(each, a "Condition Precedent", and collectively, "Conditions Precedenf'). Except for
any of Optionee's monetary obligations set forth in this Agreement and subject to
Paragraph 6 below, these Conditions Precedent are not covenants of CPFA or of
Optionee.
a. Compliance with CEOA. By the end of the Term, the City as lead agency, and
CPFA as a responsible agency, shall have complied with the California
Environmental Quality Act ("CEQA") with respect to the Entitlements (as
defined below) subject to the following:
(1) Discretionarv Actions. Optionee acknowledges and agrees that,
notwithstanding the terms and conditions of this Agreement, the City and
CPFA reserve their discretion to approve or disapprove all actions which
require by law the exercise of discretion and which the City and CPFA
cannot lawfully be committed to by contract contemplated hereby and that
nothing in this Agreement will be construed as circumventing or limiting
the City's or CPFA's discretion with respect to the environmental review
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requhed by CEQA. Such reservation of discretion will apply, without
limitation, to all contemplated legislative and quasi-judicial actions
including, without limitation, approval of land use entitlements, CEQA
compliance, the exercise of eminent domain, code enforcement and the
making of findings and determinations required by law.
(2) CPFA Certification. Optionee further acknowledges and agrees that the
City and CPFA may, in their sole and absolute discretion, in accoidance
with applicable law, adopt certain conditions, mitigation measures or
altematives considered in the CEQA environmental document, including
the "No Projecf alternative, and certify or not certify the CEQA
environmental document for tiie proposed Project and approve or not
approve any aspect of the proposed Project based on the CEQA
environmental document or other environmental discretionary fectors.
(3) Risk of Non-Approval. Optionee further acknowledges and agrees that
the City's and CPFA's decision whether or not to certify the CEQA
environmental document and whetiier or not to approve the Project (based
on the CEQA environmental document or other envkonmental
discretionary factoi-s) might be adopted or certified only upon the Cify's
and CPFA's adoption of certain additional conditions, mitigation measures
or alternatives, including the "No Project" alternative. Optionee accepts
the risk tiiat the City or CPFA will not approve, adopt or certify the CEQA
environmental document or approve the Project based on the CEQA
environmental document or otiier environmental discretionary factors, and
the CEQA environmental document and Project might be approved,
adopted or certified subject to the selection of an alternative or the
performance of certain additional conditions or mitigation measures
imposed by the City or CPFA in their sole and absolute discretion, in
accordance with applicable law.
(4) No Claim. Optionee will not have any claun, cause of action (including a
claim or cause of action for breach of the City's or CPFA's obhgations
under this Agreement), or right to compensation or reimbursement from
the City or CPFA or any other person if the CEQA environmental
document is not certified by tiie City or CPFA or the Project is not
approved or adopted by the City or CPFA for any reason related to the
City's or CPFA's environmental review, or if the CEQA environmental
document is adopted or certified subject to the selection of an altemative
or the performance of certain additional conditions or mitigation measures,
includmg the "No Project" altemative.
Soils and Hazardous Materials Due Diligence. Within one hundred twenty (120)
days from the Effective Date, Optionee shall have approved the soils and
hazardous materials condition of the Property.
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Franchise Agreements. Within one hundred eighty (180) days from the Effective
Date, Optionee shall have entered into a 20-year franchise and/or hotel
management agreements with Starwood to (i) rebrand the portion of the currently
existing, adjacent Sheraton Carlsbad Resort & Spa (the "Existing Sheraton")
containing one hundred twenty-nine (129) hotel rooms, reception/lobby area,
conference center, restaurant, pool and other amenities (the "Converted
Improvements") and the Hotel Addition, as a Westin resort upon completion of
the Hotel Addition (such agreement(s), as may be amended from time to time, the
"Westin Franchise Agreement(s)"), and (ii) extend and modify the
franchise/management agreement appUcable to the balance of the Existing
Sheraton (i.e., after removal ofthe Converted Improvements) and the Additional
Sheraton Building (as defmed below) so that it is co-terminus with the Westin
Franchise Agreement(s) (such extended and modified franchise/management
agreement, the "Sheraton Franchise Agreement").
Evidence of Franchise Agreements. Within one hundred eighfy (180) days fxom
the Effective Date, Optionee shall have demonstrated to CPFA's reasonable
satisfaction that Optionee has entered into the Wstin Franchise Agreement and
Sheraton Franchise Agreement.
Discretionarv Approvals and Entitiements. By the end of the Term, Optionee
shall have obtained all discretionary approvals and necessary entitlements for the
Project including without limitation re-zoning of the Carlsbad Municipal Water
Disttict (the "Water District") portion of the Premises and the resolution
establishing that the Lease comphes with the Ordinance (as defined below),
including any necessary Califomia Coastal Commission approval of same
(collectively referred to herein as the "Entitlements"). CPFA shall authorize
Optionee's submittal of any necessary entitiement apphcations. The Condition
Precedent under this Paragraph S.e is referred to herein as the "Entitlements
Condition".
Plan Approval and Building Permhs. By the end of the Term, Optionee shall
have received and obtained, from the City, plan approval and building permits for
(i) the Hotel Addition, and (ii) a new fourth builduig (which wiU not be a part of
the Converted Improvements) initially consisting of at least 48 hotel rooms, new
lobby/reception area, pool and other associated amenities rooms (the "Additional
Sheraton Building"), which, when combined with the existing 121 hotel room
building that is now a part ofthe Existing Sheraton (but which is not a part ofthe
Converted Improvements) will constitute a new Sheraton resort under the
Sheraton Franchise Agreement. As further described in the Lease, the Additional
Sheraton Building will ultimately include 79 hotel rooms in total. CPFA shall
authorize Optionee's submittal of any necessary apphcations. The Condition
Precedent under this Paragraph S.f is referred to herein as the "Permit
Condition".
g. Feasibility/Financing. By the end of tiie Term, Optionee shall have determined
that it is economically feasible to proceed with the Hotel Addition and Additional
Sheraton Building, and Optionee shall have obtauied debt and/or equify financing
to proceed with the Hotel Addition and Additional Sheraton Building (the
'Troject Financing"). The Condition Precedent under this Paragraph S.g is
referred to herein as the "Financing Condition".
h. Evidence of Financing/Construction Contracts. By the end of the Term, Optionee
shall have demonstrated to CPFA's reasonable satisfaction that Optionee has (i)
obtained the Project Financing, and (ii) entered into constiaiction conttacts
required to proceed with consttuction of the Hotel Addition and the Additional
Sheraton Building.
i. Leasehold Insurance. By tiie end of the Term, a title company of Optionee's
choosing shall be committed to issue to Optionee, at Optionee's sole expense, an
ALTA Extended Coverage Leasehold Owner's Policy of Title Insurance (2006
Form) in the amount of Eighteen Million Dollars ($ 18,000,000) upon recordation
of a Memorandum of Lease in accordance with the Lease, subject to all
exceptions to title set forth m Exhibit No. "2" attached hereto and any additional
exceptions caused or permitted by Optionee or any of its officers, owners,
members, partners, affiliates, agents, representatives, employees or contractors.
Optionee's failure or refusal to obtain a survey of the Premises shall not be a basis
for the non-satisfaction ofthis Condition Precedent.
j. Citv Ordinance. Within one hundred twenfy (120) days, an ordinance entitied "An
Ordinance to amend the Carlsbad Municipal Code by adding Chapter 11.02 Lease
of Cify Property and Section 11.02.010 allowmg leases of Cify property for up to
ninety-nine years" (the "Ordinance") shall be in effect.
Optionee shall exercise diligent efforts to satisfy the Conditions Precedent. At CPFA's request
from time to time, Optionee shall keep CPFA infonned of Optionee's progress relatmg to the
Conditions Precedent, ff Optionee determines that any of the Conditions Precedent will not be
satisfied by the apphcable date. Optionee may temiinate this Agreement by giving CPFA written
notice thereof.
6. COVENANTS WITH RESPECT TO CONDITIONS PRECEDENT: Relative to tiie
satisfaction ofthe Conditions Precedent, the parties agree as follows:
a. Optionee shall diUgentiy pui'sue all necessary entitlements and requisite permits
for the Hotel Addition and Additional Sheraton Building at Optionee's sole
expense and economic risk. All proposed development plans must meet the
development standards of the City and be approved by the City and the Calffornia
Coastal Commission (as applicable) through the normal and customary
entitiement process.
-6
b. Optionee shall be responsible for all application and third party costs and
expenses including CEQA/environmental review. CPFA agrees that the Cify
shall serve as lead agency and CPFA as responsible agency in compliance with
CEQA.
c. CPFA shall use reasonable efforts to cause the Water Distiict and the Cify, at no
cost to CPFA, to cooperate with Optionee to accomplish the satisfaction of the
Conditions Precedent, subject to the reservation of discretion by the Cify as set
forth in this Agreement.
d. CPFA shall cause the City to expeditiously process any Entitiement apphcations
submitted to the City and grading and building permit plan reviews request by
Optionee in connection with the Project in accordance with City's rules and
regulations and to submit any Local Coastal Plan Amendment required for the
Project to the California Coastal Commission at the eaiiiest available submittal
period following an approval by the City Council.
e. During the Term, CPFA covenants that neither City, Water Disttict nor CPFA
shall solicit, entertain or negotiate any back-up altemative leases, sales,
development or use of the Premises.
f. During the Term, excepting only any additional exceptions caused or permitted by
Optionee or any of its officers, owners, members, partners, affiliates, agents,
representatives, employees or conttactors, CPFA shall not create or allow any
change in the condition of title to Property from that reflected in Exhibit No. 2
attached hereto.
7. CONDITIONS NOTICES: Optionee is the party benefitted by the conditions set forth
in Paragraph 5 excepting only Paragraphs S.d. and S.h, and CPFA is also the party
benefitted by the condition set forth in Paragraph S.a., d., e., f, h. and j. With regard to
each date set forth above that a condition is requked to be satisfied or waived, the party
benefitted by such condition shaU be required to give written notice (a "Conditions
Notice") to the other party by such date stating (i) that the applicable condition has been
satisfied, (ii) that the apphcable condition has not been satisfied or (iii) that such party
has waived the applicable condition; however, in the case of Paragraphs S.a., e., f, and j.,
the act ofthe City's approval or issuance of the subject matter itself shall constitute such
notice. There shall be no so-called "passive" waivers of conditions under this Paragraph
7. If a party fails to timely give a Conditions Notice and such failure is not cured vwthin
five (S) business days after written notice thereof from the other party, then within
five (5) business days thereafter such other party may terminate this Agreement upon
written notice thereof to the Party failing to give the Conditions Notice, ff such the other
party does not elect to teixninate this Lease, then the subject condition shall be deemed
waived. If the Conditions Notice states that the applicable condition has not been
satisfied and it has not been waived, then such Conditions Notice shall constitute the
benefitted party's determination that such condition has not been satisfied and its election
to terminate this Agreement.
-7-
8. EXERCISE OF OPTION: If at any time before the expiration of the Term or earher
termination of this Agreement, all of the Conditions Precedent have been satisfied or
waived by the dates specified herein (as the same may be extended as permitted herein),
Optionee may exercise the Option by delivering to CPFA written notice of its election to
do so, along with an Optionee executed Lease and Memorandum of Lease and guarantor
executed Completion Guaranty. Promptiy after request from Optionee, CPFA shall
prepare an execution version of (i) the Lease, based on the attached Exhibit No. "1" or
such revised version of Exhibit No. "1" that has been approved by both CPFA and
Optionee (which preparation shall include inserting the information in the blanks such as
the Commencement Date, Outside Completion Date, etc.) and (ii) the Memorandum of
Lease and Completion Guaranty in the forms attached as an exhibit to the Lease.
Promptly after such election and satisfaction of all Conditions Precedent, CPFA shall
execute the Lease and such Memorandum of Lease in duplicate and the Memorandum of
Lease shall be recorded in the real property records of San Diego County in accordance
with the terms ofthe Lease. The "Commencement Date" of the Lease shall be the date
of CPFA's execution and delivery of Lease and Memorandum of Lease and recordation
ofthe Memorandum of Lease. CPFA shall deliver possession of the Premises to Optionee
on the Commencement Date.
9. ENTRY UPON PREMISES: From and after the Effective Date and prior to the
expkation of the Term, Optionee, its agents, employees and conttactors shall have the
right to enter onto the Premises to conduct tests and investigations other than with the
prior written notice to CPFA (but no invasive testing may be done without CPFA's
consent, which consent may not be unreasonably withheld or delayed and, in any event.
Optionee shall have the right without such consent to investigate the subsurface of the
Property for archaeological remains). Prior to any said entty. Optionee shall provide
CPFA with evidence that Optionee has obtained the insurance requked under Paragraph
10 below and shall keep such insurance m force dming all times tiiat Optionee is
conducting such tests or investigations. Optionee shall repak any damage to the Premises
arising from such entty, tests and/or mvestigations and Optionee shall mdemnify, defend
and hold harmless the CPFA Parties, as more fully provided in Paragraph 11 below, from
any damage, liens, loss, cost, expense or liability resulting from such entiy, tests and/or
investigations. The terms of this Paragraph 9 shall survive Optionee's exercise ofthe
Option or any termination of this Agreement.
10. INSURANCE: Optionee shall obtain and keep in force during the Term comprehensive
liability insurance coverage and commercial automobile insurance coverage each with
policy limits in an amount of at least Five Milfion Dollais ($5,000,000) and workers'
compensation insurance coverage as required by law, and witi require any of its
conttactors that will enter the Premises to maintain the same coveiage. The pohcy or
policies shall be stated to be primary and non-contributing with any insurance which may
be carried by CPFA, and shaU insure performance by Optionee of the indemnity
provisions of Paragraph 11 to the extent such indemnities are withm the scope of
coverage under such policies. CPFA, the City and the Water Disttict shall be named as
"Additional Insured" on all ofthe above policies, and the full hmits under such policies
-8-
that are available to Optionee as the named insured shall also be available and applicable
to each of the "Additional Insureds". The insurance required to be carried under tius
Paragraph 10 shall be placed with responsible insurance companies having an A.M. Best
rating of at least A- and an A.M. Best Financial Size Category rating of not less than
Class Vn as shall be selected by Optionee. Optionee shall deliver to CPFA certificates
of said insurance prior to any entry onto the Premises, and of renewals thereof from time
to time promptiy following request therefor from CPFA, and shall obtain the written
commitment ofeach such insurer to provide each additional insured with thirty (30) days
written notice of any cancellation thereof, or amendments witii respect to reductions in
policy lunits or coverages. Further, Optionee releases CPFA, City and Water Disttict for
loss or damage arising out of or incident to perils insured against pursuant to the
comprehensive liability kisurance coverage required under this Paragraph 10, which
perils occur in, on, or about the Premises even if due to the negligence of CPFA, City or
Water District or their agents, employees, contractors, and/or invitees. Optionee shall,
upon obtaining such pohcy oflnsurance required hereunder, give notice to the insurance
canier or carriers that the foregoing waiver is contained in this Agreement and/or obtain a
waiver of subrogation endorsement to such policy. Any insurance required to be
maintained by Optionee may be maintained under a so-caUed "blanket policy" insuring
other parties and other locations so long as the amount of insurance required to be
provided hereunder for the Premises is not thereby diminished.
11. INDEMNITY: Optionee shall, and hereby does, indemnify, protect, defend and hold
CPFA, the City, the Water Disttict and its and their officers, agents, employees,
representatives, officials, administrators, conti-actors and attomeys, and the respective
successors and assigns of each of the foregomg (collectively, "CPFA Parties") and the
Premises free and harmless from and against any and all claims, actions, causes of action,
lawsuits including third party challenges to CEQA relating to tiie Project, proceedings,
losses, costs, expenses (including, without limitation, attorneys' fees and costs),
liabilities, damages and liens of any type or nature arising out of (i) any act or onussion
of Optionee or any of the Optionee's representatives in connection with Optionee's
peiformance of its duties and obligations under this Agreement, including, without
limitation, any activities of Optionee or Optionee's representatives on or about the
Premises, prior to the Optionee's exercise of the Option under this Agreement and
commencement ofthe Lease, and (ii) claims of lien of laborers or materialmen or others
for work performed or materials or supplies fiirnished for Optionee or persons validly
claiming under it. The foregoing obligations of Optionee under this Paragraph 11 shall
not include, and Optionee shall have no obligation to CPFA for, any loss, liabilify, costs
or expenses to the extent directly arising from or directiy related to CPFA's or any CPFA
Party's gross negligence or willftil misconduct. The foregoing obUgations of Optionee
under this Paragraph 11 shall survive the Optionee's exercise of the Option or any
termination of this Agreeraent.
CPFA will promptly notify Optionee of any claim, action, causes of action, lawsuit, or
proceeding subject to this Paragraph 11. CPFA shall have input to litigation-related
decisions, including, but not limited to, settlement or other disposition ofthe matter.
12. RESTRICTIONS ON AGREEMENT TRANSFERS: Optionee acknowledges that
CPFA would not enter into this Agi-eement except in refiance on Optionee's expertise,
reputation, prior experience in developing, constructing, and operating commercial real
property projects, and CPFA's knowledge of Optionee. Therefore, any purported ttansfer
or assignment of this Agreement or any rights or duties hereunder, whetiier by operation
of law or otiierwise, except to an Affiliate, as defined below, without the prior written
consent of CPFA will be void and shall absolutely and conclusively terminate Optionee's
rights hereunder. For tiie purposes of this Paragraph 13, "Affiliate" means (i) a parent or
a wholly-owned subsidiary of Optionee, (ii) any person or entity which controls, is
conttolled by or under the common control with Optionee, (ui) any entify which
purchases all or substantially all of the assets of Optionee, or (iv) any entity into which
Optionee is merged or consoUdated.
13. NOTICES: Notices given or to be given by CPFA or Optionee to the other shall be m
writing and shall be delivered by hand, be sent by registered or certified maiL postage
prepaid, retum receipt requested, or be sent by nationally recognized commercial courier
for next business day delivery, to the addresses set forth below, or to such other addresses
as are specified by written notice given in accordance herewith. All notices, demands or
requests delivered by hand shall be deemed given upon the date so delivered; those given
by mailing as hereinabove provided shall be deemed given on the earlier of actual
delivery as evidenced by retum receipt or three (3) busuiess days after the date of deposit
in the United States Mail; those given by conmiercial courier as hereinabove provided
shall be deemed given on the date of actual delivery as evidenced by the commercial
courier's record of dehvery.
a. AU notices to Optionee shall be given or sent by certified mail to:
Grand Pacific Carlsbad Lot 9, L.P.,
5900 Pasteur Court, Suite 200
Carlsbad, CA 92008
Attn: Timothy J. Stripe, Co-President
With a Copy to:
CGS3 LLP
12750 High Bluff Drive, Suite 250
San Diego, CA 92130
Attn: Dana Schiffrnan
All notices and payments to CPFA shall be given or sent by certified mail to:
The Carisbad PubUc Financing Authority
1200 Carlsbad Village Dr.
Carlsbad, CA 93008
Attn: City Manager
-10-
With a Copy to:
1200 Carlsbad ViUage Dr.
Carisbad, CA 93008
Attn: CityAttomey
14. TIME IS OF THE ESSENCE: Time is of tiie essence of all the express conditions
contained herein, and failure of Optionee to so perform within the time limhs stated shall
automatically terminate Optionee's rights hereunder.
15. PREMISES "AS-IS: Optionee understands and agrees that if Optionee exercises the
Option in accordance witii this Agreement, the Premises will be leased in an "as is,
where-is" condition, in accordance with the terms ofthe Lease.
16. TERMINATION Of OPTION: In tiie event tiiat any Condition Precedent is not
satisfied because ofany default of Optionee of its obligations under this Agreement, tiien
CPFA shall have the right, in its sole and absolute discretion, after notice of such defauh
and Optionee's failure to cure the same withm thkty (30) days thereafter, to terminate
this Option at any time thereafter upon written notice of such termination to Optionee
prior to the curing of such default. In the event Optionee fails to exercise the Option, or in
the event the Option Term expires without having been duly exercised, the Option shall
automatically expke and tenninate without notice to Optionee, and all rights of Optionee
arising out ofthe Option shall immediately cease, except for any of Optionee's rights to a
refund ofthe Deposh as set forth in Paragraph 4, and, subject to the retum of the Deposit
if so requked by the terms of Paragraph 4, Optionee agrees to execute, acknowledge, and
deliver to CPFA within tiikfy (30) days after written request, a Quitclaun Deed or other
recordable document required by a titie insurance company selected by CPFA to remove
any cloud of the Option from the Premises. In addition, upon such termhiation of the
Option, Optionee shall deUver promptly to CPFA all non-proprietary tests, inspections,
studies, surveys and reports (mcluding engineering, soUs, geology, environmental,
gradmg, street and storm drain, sewer, water, landscape, and feasibilify studies or reports)
performed by Optionee or provided to Optionee with respect to the Premises, without any
representations or warranties as to their accuracy.
17. THIRD PARTIES: Nothing m this Agreement, whether expressed or impUed, is
intended to confer any rights or remedies under or by reason of this Agreement on any
persons other than Optionee and CPFA and thek respective pennitted successors and
assigns. Nor is anything in this Agreement intended to relieve or discharge the obligation
or habilify of any third persons to any party to this Agreement.
18. ATTORNEY'S FEES: In the event of any dispute between the parties hereto involving
the covenants or conditions contamed in this Agreement or arising out of the subject
matter of this Agreement, the prevaUing party shall be entitled to recover reasonable
expenses, uicluding (without limitation) attorneys' fees (including for work performed by
in-house attorneys) and costs.
-11 -
19. WAIVER OF CLAIMS AND LIMITATION OF REMEDIES: Optionee
acknowledges and agrees that Optionee's right and ability to exercise the Option, execute
the Lease, and develop the Project is subject to the issuance of the Entitiements,
including, without limitation, environmental review under CEQA. Optionee accepts the
risk that the Entitiements may be witiiheld ki the sole discretion of the approving
party(ies). CPFA wiU have no liability and Optionee will have no claim, cause of action,
or ri^t of compensation against any of the CPFA Parties if Optionee does not obtain, for
any reason whatsoever, any or aU of the Entitiements necessary to exercise the Option or
construct the Project. Optionee hereby waives ks right to seek to recover and will have no
claim or cause of action in equity (including, without limitation, any action seeking
specific performance, injunctive relief, mandamus or other exttaordinary writ), or right of
compensation for damages agakist CPFA as a result of the exercise of discretion by any
govemmental entity resulting in the Entitlements not being obtained by Optionee. In any
suit or action by either party against the other arising from the terms of this Agreement,
neither party shall be entitied to seek or recover consequential damages from the other
party.
20. COMPUTATION OF TIME PERIODS: If any date or time period specified in this
Agreement is or ends on a Saturday, Sunday or federal, state or legal holiday, such date
will automatically be extended until 5:00 p.m., Pacffic Time, of the next day which .is not
a Saturday, Sunday or federal, state or legal holiday.
21. AMENDMENT TO THIS AGREEMENT: The terms of this Agreement may not be
modified or amended except by an instrument in writuig executed by each ofthe parties.
22. NO WAIVER: The waiver or failure to enforce any provision of this Agreement will not
operate as a waiver of such party's right to enforce fiiture breaches of any such provision
or any other provision of this Agreement.
23. APPLICABLE LAW: This Agreement wdll be governed by and constmed and enforced
in accordance with the laws of the State of CaUfomia.
24. ENTIRE AGREEMENT: This Agreement supersedes aU- prior agreements,
negotiations, and communications, oral or wiitten, and contains the entire agreement
between CPFA and Optionee as to the subject matter hereof
25. PARTIAL INVALIDITY: If any portion of tiiis Agreement is declai-ed by any court of
competent jurisdiction to be invalid, illegal or unenforceable, that portion will be deemed
severed from this Agreement and tiie remaining parts of this Agreement will remain in
full force as fully as though the invalid, illegal or unenforceable portion had never been
part of this Agreement.
26. CAPTIONS: All captions to, or headings of, tiie paragraphs or sub-paragraphs of tiiis
Agreement are solely for the convenience ofthe parties, are not a part ofthis Agreement
and will not be used for the interpretation or determination of the validity of this
Agreement or any provision hereof.
-12-
27. AUTHORITY; SIGNATORIES: CPFA and Optionee hereby represent and wanant to
each other that it has the full power, right and authorify to enter into and execute this
Agreement, and that tiiose persons whose signatures are hereinafter evidenced on this
Agreement on behalf of it are duly authorized signatories of it, fuUy empowered to
commk and bind k to those certain tenns, covenants and conditions set forth herein for
the Term of this Agreement.
28. COUNTERPARTS AND SIGNATURE PAGES: For convenience, CPFA and
Optionee may execute this Agreement on separate counterpart pages, which when
attached to this Agreement shaU constitute one fidly-executed complete original
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of tiie day and
the year fkst above written.
- 13-
CPFA: THE CARLSBAD PUBLIC FINANCING
AUTHORITY,
a joint powers authority formed by the City of
Carlsbad and the Carlsbad Municipal Water
Disttict
Name:
Titie:
Approved as to form and legality:
Attest:
Celia Brewer,
Barbara Engel^on, City Clerk
(Seal)
S<^.'-^^^°^V-'%^^
OPTIONEE: GRAND PACIFIC CARLSBAD LOT 9, L.P., a
Delaware limited partnership
By: Grand Pacific Carlsbad Lot 9, Inc.,
a Delaware corporation, its General Partner
By:
By:
David S. Brown, Co-PfC&dent
imothy J. Strii
14
EXHIBIT NO. 1
LEASE
[See attached]
15
GROUND LEASE
By and between
THE CARLSBAD PUBLIC FINANCING AUTHORITY, a joint powers authorify formed
by the Cify of Carlsbad and the Carlsbad Municipal Water District, as Landlord
And
GRAND PACIFIC CARLSBAD LOT 9, L.P,, a Delaware limited partnership, as Tenant
4826.9580-6752.7 12/02/2014
TABLE OF CONTENTS
Page
1. Grant of Lease 2
2. Security Deposh 7
3. Payment of Annual Rent 7
4. Interest "7
5. Use of Premises 8
6. Impositions 8
7. Maintenance, Repairs, Replacements and CompUance with Laws 9
8. Utilkies 10
9. Liens 10
10. Insurance 10
11. Indemnities 12
12. Improvements 13
13. Damage by Fire or Other Casualty 14
14. Condemnation 14
15. Assignment and Subletting 16
16. Intentionally Omitted 18
17. Financing 18
18. Tenant's Pioperty and Ownership at Termination 19
19. Recorded Documents 19
20. Surrender upon Expkation of Term 19
21. Force Maj eure 19
22. Events of Tenant's Defauh 20
23. Landlord's Remedies 20
24. Events of Landlord's Default 22
4826-9580-6752.7 12/2/2014
TABLE OF CONTENTS (cont.)
Page
25. Exculpation of Landlord 22
26. Hazardous Substances 22
27. Brokers 23
28. Options to Extend Tenn 23
29. Expansion 23
30. Storm Water Runoff Compliance 24
31. Water Tank Removal 25
32. Pm-chase of Golf Rounds 25
33. MisceUaneous 25
4826-9580-6752.7 12/2/2014
INDEX
Page^
Additional Sheraton Building 1
Additional Sheraton Building Outside Completion Date 1
AfiBliate 2
Annual Rent 2
Appraisal Award Exhibit C
Approved Institution 2
Approved Plans Exhibit H
Base Index Number 2
Cap Rate Exhibit C
Claims H
Commencement Date 2
Condemnation Proceeds 14
Constant DoUars 2
Converted Improvments 3
Cunent Index Number 2
Dateof Taldng 13
Default Rate 3
Deposit 3
Event of Defauh 18
Expiration Date 3
Fak Market Land Value Exhibit C
Foreclosure Event Exhibit D
Foreclosure Transferee Exhibit D
Guarantied Obligations Exhibit F
Hazardous Substances 21
Hotel Addition 3
Hotel Addition Outside Completion Date 3
Hotel Standard 3
Impositions ^
Improvements 3
Indemnified Party 11
Indemnifying Party 11
Index 2
Interest Notice Exhibit C
Landlord 1
Landlord Parties 11
Laws 7
Lease • 1
Lease Year 4
Leasehold Estate 1
Leasehold Mortgage 17
Lender 4
Loan Document Event of DefauU Exhibit D
Loan Documents Exhibit D
4826-9580-6752.7 12/2/2014
Pagefs)
Market Rent Exhibit C
mechanic's liens 9
Monetary Default 18
New Sheraton Resort 4
Non-Monetary Default 20
Notice and Payment Addresses 4
Notice of Assumption Exhibit D
Occupancy Measurement Period End Date 6
Occupancy Measurement Period Start Date 6
Operating Sublease 16
Option Rent Exhibit C
Option Rent Notice Exhibit C
Partial Taking 14
parties 1
party 1
Pennitted Use 5
person 24
Personalty 17
Premises 5
Proceeding 26
Release Date Exhibit F
Rent 5
Rent Commencement Date 5
Reversionary Estate 1
Selected Arbittator Exhibit C
Sheraton Franchise Agreement 5
Site Plan 5
Substantial Completion Exhibit H
Substantially AU of the Premises 13
Taking 13
Temporary Taldng 14
Tenant 1
Tenant Parties 11
Tenant's Acceptance Exhibit C
Tenant's Work 5
Term • 5
Thkd Arbittator Exhibit C
Time Shaie Addition 22
Time Share Addition Ground Lease 22
Westin Franchise Agreement(s) 5
Westin Hotel 5
worth at the time of award 20
-IV-
4826-9580-6752.7 12/2/2014
GROUND LEASE
This GROUND LEASE (this "Lease") is made as of , 201_, between THE
CARLSBAD PUBLIC FINANCING AUTHORITY, a joint powers authority fonned by the City
of Carlsbad and the Carlsbad Municipal Water District ("Landlord"), and GRAND PACIFIC
CARLSBAD LOT 9, L.P., a Delaware limited partnership ("Tenant"). Landlord and Tenant
may sometimes be individually referred to as a "parfy" and collectively refened to as the
"parties." Based upon the mutual promises contained herein and for good and valuable
consideration, the receipt of which is acknowledged by each party, the parties, intending to be
legally bound, agree as follows:
1. Grant of Lease; Definitions.
1.1 Grant of Lease Landlord leases the Premises to Tenant and Landlord
grants Tenant exclusive rights of possession of the Premises until the expiration of the Term.
Tenant's interest in the Premises and the rights granted to Tenant under this Lease shall be
referred to herein as the "Leasehold Estate." The rights of Landlord in the Premises after giving
effect to the Leasehold Estate shall be refened to herein as the "Reversionary Estate." The
Reversionary Estate includes all of Landlord's rights pursuant to this Lease. Reference is made
to a Grant Deed in favor of the Carlsbad Municipal Water District recorded on July 27, 1962 in
the Official Records of the San Diego County Recorder's Office as Document No. 127706 and
the fact that under such grant deed the Carlsbad Municipal Water District may have certain rights
over the portions of the Premises not owned by it. On behalf of the Carlsbad Municipal Water
District, Landlord agrees that so long as this Lease is in effect, such rights will not be exercised
by Carlsbad Municipal Water District or by Landlord on behalf of the Carlsbad Municipal Water
District in any way in so far as the Premises is concemed and nothing contained in such grant
deed shall prohibit or interfere with the use or development of the Premises in accordance with
the terms of this Lease.
1.2 Definitions. The following are certain definitions applicable to this Lease.
"Additional Sheraton Building" means a new fourth building which will not be a part of
the Converted Improvements initially consisting of at least 79 hotel rooms , new lobby/reception
area, pool and other associated amenities, which shall be constructed by Tenant or a Tenant
Affiliate by no later than the Additional Sheraton Building Outside Completion Date and, when
combined with the" existing 121 hotel room building that is now a part of the Sheraton Carlsbad
Resort & Spa, will constitute the New Sheraton Resort, as shown on the Site Plan. Upon build
out following construction on a phased basis, the Additional Sheraton Building shall consist ofat
least 79 hotel rooms. The Additional Sheraton Building may be constructed on a phased basis
and in that event, the first phase thereof (refened to herein as "Phase 1") shall consist of at least
48 hotel rooms, new lobby/reception area, pool and other associated amenities and the second
phase thereof (refened to herein as "Phase 2") shall consist of at least 31 hotel rooms.
"Additional Sheraton Building Outside Completion Date" means twenty (20) months
following the later of the Commencement Date or the removal pursuant to Section 31 of the
water tank on the Premises, as such twenty (20) month period is extended for each day of delay
caused by matters described in Section 21 below ; provided, however, if the Additional Sheraton
-2-
4826-9580-6752.7 12/02/2014
Building is constmcted on a phased basis, then at least Phase 1 thereof wiU be Substantially
Completed by such date and Phase 2 thereof shall be Substantially Completed no later than
thirty-six (36) months after Substantial Completion of the Phase 1 of the Additional Sheraton
Building. If the Additional Sheraton Building is not constructed on a phased basis then the
phrase "Substantial Completion of the Additional Sheraton Building by the Additional Sheraton
Building Outside Completion Date" and similar phrases shall be inteipreted to mean Substantial
Completion of both Phase 1 and Phase 2 of the Additional Sheraton Building no later than
twenty (20) months following the later of the Commencement Date or the removal pursuant to
Section 31 ofthe water tank on the Premises, ff the Additional Sheraton Building is consttucted
on a phased basis then the phrase "Substantial Completion of the Additional Sheraton Building
by the Additional Sheraton Buildmg Outside Completion Date" and similar phrases shaU be
interpreted to mean Substantial Completion of Phase 1 of the Additional Sheraton Bmlding no
later than twenfy (20) months foUowing the later of the Commencement Date or the removal
pursuant to Section 31 ofthe water tank on the Premises and Substantial Completion of Phase 2
within thirty-six (36) months after Substantial Completion of Phase 1.
"Affiliate" means with respect to a party (i) a parent or a wholly-owned subsidiaiy of
such parfy, (ii) any person or entify which controls, is conttolled by or under the common conttol
with such party, (iii) any entify which purchases all or substantiaUy all of the assets of such
party, or (iv) any entify into which such party is merged or consoUdated.
"Annual Rent" means with respect to the period from the Rent Commencement Date
untU the last day of the fifty-frfth (SS"') Lease Year, the rental amount set forth in Exhibit B
attached hereto. With respect to the period from tiie first day of the fifty-sixtii (56*) Lease Year
for the balance of the initial Term, Landlord shall give Tenant notice of the proposed Annual
Rent for the fifty-sixth (56"') Lease Year not earher than the commencement of the fifty-fifth
(55*) Lease Year or later than nine (9) months prior to the commencement of the fifty-sixth
(56*) Lease Year, ff Tenant does not accept or fails to object to the proposed Annual Rent in
writing to Landlord within thirty (30) days after receipt of Landlord's notice, then the Annual
Rent shall be as determined in the manner set forth in paragraph (iv) of Exhibit C, but in no event
shaU be less than the Annual Rent applicable to the immediately preceding Lease Year. If
Tenant does accept the proposed Armual Rent in writing to Landlord within thirty (30) days after
receipt of Landlord's notice, then the Annual Rent shaft be as set forth in such notice.
Commencing with the first day of the fiffy-seventh (57"*) Lease Year and tiie first day of each
Lease Year thereafter during the initial Term, the Annual Rent shall be increased by two and
one-half percent (2.5%) over the Annual Rent applicable during the prior Lease Year. With
respect to any extended Tenn, the Annual Rent shall be as determined pursuant to Exhibit C
attached hereto.
"Approved Institution" means a savuigs bank, a savings or building and loan
association, a commercial bank or trust company (whether acting individually or in any fiduciary
capacity), a finance company, an insurance company, an educational institution or an
institutional pension or retkement fund or system, a charitable or other eleemosynary institution,
a real estate investment trust or any other person or entity whose businesses include interim,
construction or pennanent lending secured by real estate.
4826-9580-6752 7 12/02/2014
"Commencement Date" means the date of this Lease. Landlord shall dehver possession
of the Premises to Tenant on the Commencement Date.
"Constant Dollars" means the present value of the dollars to which such phase refers.
An adjustment shall be made on each anniversary of the Commencement Date. Constant Dollars
shaU be determined by multiplying the dollar amount to be adjusted by a fraction, the numerator
ofwhich is the Cmrent Index Number and the denominator of which is the Base Index Number.
The "Base Index Number" shaU be the level of the Index for the calendar month in which the
Effective Date occurs; the "Current Index Number" shall be tiie level of the Index for the
calendar month in which the adjustment is to take place; and the "Index" shaU be the Consumer
Price Index - "All Items" for All Urban Consumers in the Los Angeles - Riverside - Orange
County area (1982-84=100) or any successor index thereto as hereinafter provided. If
pubUcation of the Index is discontinued, or if the basis of calculating the Index is materially
changed, then the parties shall substitute for the Index comparable statistics as computed by an
agency ofthe United States Government or, if none, by a substantial and responsible periodical
or publication of recognized authorify closely approximating the result which would have been
achieved by the Index.
"Converted Improvements" means the portion of the currently existing, adjacent
Sheraton Carlsbad Resort & Spa containing one hundi-ed twenty-nine (129) hotel rooms,
reception/lobby area, conference center, restaurant, pool and other amenities which, upon
completion of the Hotel Addition, will be joined with the Hotel Addition and, taken together,
will constitute the Westin Hotel, as shown on the Site Plan.
"Default Rate" means an annual rate of interest equal to the lesser of (i) three (3)
percentage points above the rate of interest announced from time to time by the Bank of
America, Downtown Los Angeles, Main Branch, as the prime or reference rate (or, in the event
said bank ceases to announce a prime or reference rate or is acquked or ceases operations and
there is no successor bank, the largest established and financially secure commercial bank,
havmg a headquarters m Califomia, selected by Landlord), or (u) the highest rate permitted by
law, ff any.
"Deposit" means tiie One Hundred Thousand Dollars ($100,000.00) "Deposit" under the
Option Agreement.
"Expiration Date" means the last day of the 65th Lease Year, subject to extension
pursuant to Section 28.
"Hotel Addition" means at least seventy-one (71) hotel rooms and other unprovements
on the Premises anciUary to use and operation of the Westin Hotel. The initial constmction of
the Hotel Addition may include, at Tenant's election, the consttuction of subterranean parking
spaces that would be needed for the expansion contemplated under Section 29 below. As more
particularly provided herein, the Hotel Addition will be operationally annexed into the Converted
Improvements and become a part of the Westin Hotel, as shown on the Site Plan.
"Hotel Addition Outside Completion Date" means eighteen (18) months following the
later ofthe Commencement Date or the removal pursuant to Section 31 of the water tank on tiie
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4826-9580-6752.7 IZ/02/2014
Premises, as such eighteen (18) month period is extended for each day of delay caused by
matters described in Section 21 below.
"Hotel Standard" means the operation and maintenance standard requked under the
management and/or franchise agreement(s) that governs the Hotel Addition and the Converted
Improvements, which, untU the expkation or termination of the Westin Franchise Agreement,
shall be the operation and maintenance standard requked under the Westki Franchise
Agreement(s). Thereafter, the Hotel Standard shall be equal to or greater tiian the Hotel
Standard under the most recent prior management and/or franchise agreement(s) that govemed
the Hotel Addition and the Converted Improvements.
"Improvements" mean all improvements on and modffications to the Premises.
"Lease Year" means each twelve (12) calendar month period commencing on the Rent
Commencement Date; however, if the Rent Commencement Date is not the fu'st (P') day ofthe
month, the fust Lease Yeai' shall include tiie first partial month and tiie foUowing twelve
(12) calendar months.
"Lender" means any Approved Institution that is the holder of debt from Tenant secured
by an mterest in the Leasehold Estate or any Improvements, fixtures or equipment on the
Premises. Tenant acknowledges that neither Landlord's Reversionary Estate nor fee titie to the
Premises is, or shall be, subordinate to the securify interest ofany Lender.
"New Sheraton Resort" means (i) the portion of the existmg Sheraton Carlsbad Resort
& Spa remaining after the Converted hnprovements along with the Hotel Addition are rebranded
as a Westm resort, together witii (ii) tiie Additional Sheraton Building, as shown on the Site Plan.
"Notice and Payment Addresses" for the parties are as follows:
For Landlord, to: The Carlsbad Pubhc Financing Authority
1200 Carlsbad Village Dr.
Carlsbad, CA 93008
Attn: City Manager
with a copy of notices to:
The Carlsbad Public Financing Authority
1200 Carlsbad Village Dr.
Carlsbad, CA 93008
Attn: CityAttomey
For Tenant, to: Grand Pacific Carlsbad Lot 9, L.P.,
5900 Pasteur Court, Suite 200
Carlsbad, CA 92008
Attn: Timothy J. Stripe, Co-President
with a copy of notices to: CGS3 LLP
12750 High Bluff Drive, Suite 250
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4826-9580-6752.7 12/02/2014
SanDiego, CA 92130
Attn: Dana Schiffman
"Option Agreement" means that certain Option to Lease Agreement dated December ,
2014 by Landlord and Tenant.
"Permitted Use" means the use ofthe Hotel Addition for hotel room rentals and otiier
hotel purposes related to the operation of and use of the Hotel Addition and the Converted
hnprovements as an integrated fiiU-service hotel satisfying the Hotel Standard, together with
related amenities, parking and commercial uses, or such otiier use approved by Landlord in
Landlord's sole and absolute discretion.
"Premises" means the land located in Carlsbad, CaUfomia, as described hi Exhibh "A-l"
and as depicted in the Site Plan, together with aU tenements, hereditaments, appurtenances,
easements, development rights, and other rights and privileges appertaining to the foregoing
described land and all rights of mgress and egress at all times from and to the public streets.
"Rent" means Annual Rent and all other sums payable by Tenant to Landlord hereunder.
"Rent Commencement Date" means the earUer to occur of (i) the Hotel Addition
Outside Completion Date and (ii) tiie date a certfficate of occupancy (or its equivalent) is issued
for the Hotel Addition by the Cify of Carlsbad that permhs the occupancy of the Hotel Addition
for the conduct of business. The parties shall, at tiie election of eitiier party, enter into an
amendment to this Lease to document the Rent Commencement Date.
"Sheraton Franchise Agreement(s)" means franchise and/or hotel management
agreements witii Starwood to extend and modify tiie cunentiy existing franchise/management
agreement applicable to the Carisbad Sheraton Resort & Spa so that it applies to tiie New
Sheraton Resort and is co-terminus with the Westin Franchise Agreement(s) as confirmed
pursuant to the terms of the Option Agreement.
"Site Plan" means the site plan attached to this Lease as Exhibh "A-2".
"Tenant's Work" means the Hotel Addition to be mitially consttucted by Tenant on tiie
Premises.
"Term" means the period beginning on the Rent Commencement Date and ending on the
Expiration Date, as extended or accelerated in accordance with this Lease.
"Westin Hotel" means the Hotel Addhion and the Converted Improvements foUowing
the completion of the Hotel Addition and rebranding the same as a Westm hotel or resort, as
shown on the Site Plan.
"Westin Franchise Agreement(s)" means the franchise and/or hotel management
agreements with Starwood to rebrand tiie Converted Improvements and the Hotel Addition as a
Westin resort upon completion ofthe Hotel Addition as confirmed pursuant to tiie terms ofthe
Option Agreement.
4826-9580-6752.7 12/02/2014
2. Security Deposit. Pursuant to the terms of the Option Agreement, the Deposit has
been delivered to Landlord. The Deposit shall be held by Landlord as security for the
performance by Tenant of its obligation to construct the Hotel Addition. If Tenant defaults with
respect to its obligation to construct the Hotel Addition by no later than the Hotel Addition
Outside Completion Date, and such default is not cured within the applicable notice and cure
period, Landlord may retain the Deposit to compensate Landlord for any loss or damage that
Landlord may suffer by reason of such default, in addition to all other rights and remedies
available to Landlord. If Tenant satisfies its obligation to construct the Hotel Addition by no
later than the Hotel Addition Outside Completion Date, then Landlord shall apply the Deposit to
the first installments of Rent until fully applied. Landlord shall hold the Deposit in an interest-
bearing account, and all interest eamed thereon shall become a portion ofthe Deposit.
3. Payment of Annual Rent. Beginning on the Rent Commencement Date, and
throughout the Tenn, Tenant shall pay Landlord monthly one-twelfth (1/12) of the Annual Rent,
in advance, on the first (1st) day of each calendar month. If the Rent Commencement Date does
not occur on the first (1st) day of a calendar month, then the first monthly installment shall be
prorated based on a fraction, the numerator of which is the number of days in such calendar
month that fall within the Term, and the denominator of which is the total number of days in
such calendar month. Except as otherwise provided herein. Annual Rent shall be payable
without notice or demand and without any deduction, offset or abatement in lawful money ofthe
United States of America to Landlord at the address stated herein or to such other persons or at
such other places as Landlord may designate in writing. In addition to the payment of Annual
Rent, if the Additional Sheraton Building is constructed on a phased basis, then during the period
from the first day of the first full calendar month following the Substantial Completion of Phase
1 thereof (the "Occupancy Measurement Period Start Date") until the last day of calendar
month in which Substantial Completion of Phase 2 thereof occurs (the "Occupancy
Measurement Pepod End Date"), within thirty (30) days after the each anniversary of the
Occupancy Measurement Period Start Date and within thirty (30) days after the Occupancy
Measurement Period End Date, Tenant shall deliver to Landlord a report for the New Sheraton
Resort which provides a detailed computation of the average occupancy and the average standard
room daily rate for the preceding twelve month period (or in the case of an Occupancy
Measurement Period End Date that is not an anniversary of the Occupancy Measurement Period
Start Date, the period from the last anniversary ofthe Occupancy Measurement Period Start Date
until the Occupancy Measurement Period End Date) and pay to Landlord as additional rent the
following amount if the average occupancy for such period equaled or exceeded ninety-eight
percent ) (98%): the annual average daily rate for a standard room muhiplied by fifteen (15),
multiplied by ten percent (10%)) and multiplied by three hundred sixty-five (365) (or in the case
of an Occupancy Measurement Period End Date that is not an anniversary of the Occupancy
Measurement Period Start Date, the number of days from the last anniversary of the Occupancy
Measurement Period Start Date until the Occupancy Measurement Period End Date).
4. Interest: Late Charge. If Tenant shall fail to pay Landlord any Annual Rent
within five (5) days after the date the same is due and payable, or any other amount due by
Tenant to Landlord within ten (10) days after Landlord's notice to Tenant that the payment is
delinquent. Tenant promises to pay to Landlord, in addition to such unpaid amounts, interest
upon such unpaid amounts at the Default Rate from the date immediately following such period
until the date Landlord receives payment. In addition to such interest. Tenant acknowledges that
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4826-9580-6752,7 12/02/2014
late payment by Tenant to Landlord of any amount due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which wUl be exttemely difficuh to
ascertain. Accordingly, if: (a) any Annual Rent is not received by Landlord within five (5) days
after it is due; or (b) any otiier amount due by Tenant to Landlord hereunder is not paid within
ten (10) days after Landlord's notice to Tenant that the payment is delinquent; then Tenant shall
pay to Landlord a late chaige equal to five percent (5%) of such overdue amount. The pai-ties
hereby agree that such late charge represents a fak and reasonable estimate ofthe administrative
costs and foregone mterest and other mcome Landlord will incur and/or suffer by reason ofthe
late payment by Tenant. AcceptMice of such late charge by Landlord shaU in no event constitute
a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder.
5. Use of Premises. Tenant may use the Premises for the Permitted Use and for no
other use without Landlord's consent. Tenant shafi comply with aU laws and ordinances and the
orders, rules, regulations and requirements of all federal, state and municipal governments and
appropriate departments, commissions, boards and officers thereof that are applicable to the
Premises and the Improvements (coUectively, "Laws"). Tenant shall likewise observe and
comply witii the requirements of aU policies of pubhc UabiUty, fire, and all other policies of
insurance at any time in force with respect to the Improvements. Tenant's obligation to compfy
with aU Laws, includes the obligation to alter, maintain and restore the Premises and
Improvements in compliance with aU Laws, even ff the Laws are enacted after the date of this
Lease, even if compUance entails costs to Tenant of a substantial nature, and even ff compliance
requires steuctm*al alterations.
6. Impositions.
6.1 Imposhions in General. Tenant shall pay, before any penalty or interest
may be added thereto for the non-payment thereof, all real and personal property taxes,
assessments, water and sewer charges, and other govemmental charges, general and special,
ordinary and exttaordinary, unforeseen as well as foreseen, of any kind and nature whatsoever
(all of which taxes, assessments, water and sewer charges, and otiier govemmental charges are
hereinafter referred to as "Impositions") that are assessed, levied, imposed or become a lien
upon the Premises and/or the Improvements, or become payable, during the Term ofthis Lease;
provided, however, that if, by law, any such Impositions may at the option of the taxpayer be
paid in installments (whether or not interest shaU accme on the unpaid balance of such
Impositions), Tenant may exercise the option to pay the same (and any accmed mterest on the
unpaid balance of such Impositions) in mstaUments and shaU pay only such mstallments as may
become due durmg tiie Term ofthis Lease as the same respectively become due and before any
penalty or interest may be added thereto, for the non-payment of any such installment and
interest; and provided, further, that any Impositions relating to a fiscal period of the taxing
authority, a part ofwhich period is included withm tiie Term ofthis Lease and a pait ofwhich is
included outside of the Term of this Lease, shall (whether or not such Impositions shall be
assessed, levied, imposed or become a Uen upon the Premises and/or the Improvements, or shall
become payable, during the Term ofthis Lease) be adjusted between Landlord and Tenant as of
the Rent Commencement Date or the expiration of tiie Tem ofthis Lease, as appUcable, so that
Landlord shaU pay that portion of such Impositions (or receive any tax refund or tax credit) that
relates to tiiat part ofthe fiscal period outside of the Term ofthis Lease and Tenant shall pay that
4826-9580-6752.7 12A)2/2014
portion of such Impositions (or receive any tax refiind or tax credit) which relates to the period
during the Term of this Lease. Nothing contained in this Lease shaU requke Tenant to pay any
franchise, corporate, estate, inheritance, succession, caphal levy, stamp tax or transfer tax of
Landlord, or any income, excess profits or revenue tax or any other tax, assessment, charge or
levy upon the Rent payable by Tenant under this Lease, nor shall any tax, assessment, charge or
levy ofthe character hereinabove in this Section described be deemed to be included within the
term "Impositions" as defined in this Section 6.1.
6.2 Pavment. Except when any Law requires otherwise. Tenant shall pay the
Impositions for the period commencing with the Commencement Date to the appUcable
autiiority, before delinquency. Tenant covenants, upon request of Landlord, to furnish to
Landlord for inspection, official receipts of the appropriate taxing authority, or other evidence
satisfactory to Landlord, evidencing the payment of any Impositions.
6.3 Contest. Tenant shaU have the right to contest the amount and/or vahdity,
or to seek a refund, in whole or in part, of any Impositions by appropriate proceedings, and
notwithstanding the provisions of Section 6.1 above, this shall not be deemed or construed in any
way as relieving, modifying or extending Tenant's covenants to pay any such Impositions at the
time and in the manner as provided in this Section 6 except to the extent pemiitted by the
procedures and proceedings by which Impositions may be legally contested.
7. Maintenance, Repairs. Replacements and Compliance with Laws. Tenant, at its
sole expense, shall (i) keep the Improvements and the Premises clean and in fkst class condition
free of accumulations of rubbish, (ii) make aU repaks and replacements necessary to cause the
Improvements to satisfy the Hotel Standard or, if the Permitted Use is no longer the operation of
a hotel, be in a first class condition for the then Permitted Use , and (iii) be solely responsible for
any and all repaks, alterations and/or corrective work to the Improvements as may be required
from time to time to comply with appUcable Laws, including, but not limited to: seismic
upgrades, handicap access, and fire protection systems. For so long as the Permitted Use is the
operation of a hotel. Tenant shall provide for an annual reserve for capital expenditures for
fumiture, fixtures, and equipment for the Improvements, consistent with the requkements ofthe
hotel fi-anchisor or manager. Further, Tenant shall comply with all governmental laws,
ordinances and regulations now in force, or which may hereafter be in force, applicable to the
use ofthe Premises by Tenant and its subtenants and the Improvements consti-ucted by Tenant at
the Premises, all at Tenant's sole expense. In the event of any changes in such laws, ordinances
or regulations, Tenant shaU be obligated to comply with such changes when and ff such
compliance is required under the applicable laws, ordinances and regulations. Without limiting
the foregoing. Tenant shall be responsible for compUance with all requirements of the Americans
With Disabilities Act of 1990 (as it may be amended and as supplemented by further laws from
time to time) as applicable to the Improvements constmcted by Tenant. Landlord shall not be
required to fiirnish any services or faciUties or to make any repairs or alterations to the Piemises
or tiie Improvements and Tenant hereby assumes the ftiU and sole responsibiUfy for the
condition, operation, repair, replacement, maintenance, compliance with law and management of
the Premises and the Improvements. Notwithstanding the foregomg. If Tenant refuses or
neglects to complete repaks required of Tenant hereunder within thirty (30) days after
Landlord's written demand (or ff such repairs cannot with due diligence be wholly completed
within such 30-day period, within a reasonable period of time thereafter), Landlord shall have
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4826-9580-6752.7 12/02/2014
the right, but not the obligation, to make the repairs, and if Landlord makes such repairs. Tenant
shall pay to Landlord on demand, as additional Rent, the reasonable cost thereof (unless Tenant
in good faith disputes such costs or whether the repairs were required of Tenant hereunder), with
interest at the Defauh Rate from the date which is ten (10) days following Tenant's receipt of
Landlord's written request therefor until repaid by Tenant.
8. UtiUties. Tenant is responsible, at its own cost, for supplying utilities to the
Premises, including the payment of hookup fees, deposits and similar charges. Tenant will pay
dkectiy to the appropriate utiUty company or govemmental agency aU bills for gas, water,
sanitary sewer, electticity, telephone and other public or private utilities used by Tenant or
provided to the Premises from and after the Commencement Date.
9. Liens. Tenant shall not suffer or peimit any mechanic's, vendor's, laborer's, or
materialman's statutory or similar liens (collectively "mechanic's liens") to be filed against the
Premises" or the Improvements by reason of work, labor, services or materials supplied or
claimed to have been supplied to Tenant or anyone holding any interest in the Premises and/or
the Improvements or any part thereof through or under Tenant, ff any such mechanic's lien shall
be filed, Tenant shaU, within ninety (90) days after written notice of the filmg tiiereof (but in any
event prior to the entty of a judgment for foreclosure), cause the same to be discharged of record
by payment, deposit, bond, order of a court of competent jurisdiction or otherwise. Subject to
the foregoing provisions, if Tenant shaU fail to cause such lien to be discharged within the
required time period, then, in addition to any otiier right or remedy of Landlord, Landlord may,
but shaU not be obligated to, and foUowing written notice to Tenant of its election to do so,
discharge the same either by paying the amount claimed to be due or by procuring the discharge
of such Uen by deposit or by bonding proceedings. Nothing contained in this Lease shaU be
deemed or consttued in any way as constituting the consent or request of Landlord, express or
imphed by inference or otherwise, to any conttactor, subcontractor, laborer or materialman for
the performance of any labor or the furnishing of any materials for any specific improvements,
alteration to or repak of the Premises or the Improvements or any part thereof
10. Insurance.
10.1 Liability Insurance. Tenant shall obtain and keep in force from and after
the Commencement Date a poUcy or policies of Combined Single Limit Bodily Injury and
Property Damage Insurance, including Personal and Advertising Injuiy, Blanket Conti-actual
Liabilify, Liquor Legal Liability, Garage Liability, Garagekeepers Legal LiabUity, and Non-
Owned Auto LiabUity in an amount not less than Five MUlion Dollars ($5,000,000.00) (in
Constant Dollars) for injury, damages, or death resulting from any one accident or occurrence.
Such policy or policies (i) may provide for a commercially reasonable deductible or self-insured
retention, and (ii) shall insure Tenant and Landlord against liability arising out of the use,
occupancy, or mauitenance of the Premises and the Improvements. The poUcy or poUcies shall
be stated to be primaiy and non-contiibuting with any insurance which may be canied by
Landlord, and shall insure performance by Tenant of the indemnity provisions of Section 11 to
the extent such indemnities are witiiin the scope of coverage under such poUcies. Landlord, the
City of Carlsbad and the Carlsbad Municipal Water Distiict shall be named as "Additional
Insured" on all of the above policies, and the full limits under such pohcies that are available to
Tenant as the named insured shall also be available and applicable to each of the "Additional
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4826-9580-6752.7 12/02/2014
Insureds". The purpose and intent of the parties is that Tenant shall have, during the Term, such
amount of habihty insurance as will be sufficient to protect Landlord from any reasonable
liability with respect to the Premises, ff at any time during the Term, Landlord shall deem the
limits ofthe liability insurance then carried to be insufficient by reason of any reasonable factor
(e.g., inflation; the risk incident to use of the Premises; the nature and amount ofthe awards for
habihties then bemg given), the parties shall endeavor to agree upon the proper and reasonable
Iknits for such insurance then to be carried.
10.2 Property Insurance. Tenant shall obtain and keep in full force from and
after the Commencement Date a poUcy or policies of property insurance covering loss or damage
to the Improvements providing protection against all perils included within the standard
hisurance industty coverage classifications of "special form". The above policy or policies shaU
include a full replacement cost endorsement, debris removal endorsement, a building code
upgrade or ordinance and law endorsement, and insure aU the Improvements and trade fixtm-es
on the Premises, as well as all personal property located on or used in operation ofthe Premises
for one hundred percent (100%) of the then cunent replacement cost. The policy or poUcies
shall be subject to a commercially reasonable deductible.
10.3 Business Interruption Insurance. Tenant shall obtain and keep in force
from and after the Rent Commencement Date a pohcy of rental loss or business intenuption
insurance in an araount at least sufBcient to pay, for a period of twenty-four (24) months
following any applicable loss, the sum of the following: (i) twenty-four (24) months' rent at the
then applicable Annual Rent; (ii) the Impositions provided for in Section 6; and (iii) the
insurance premiums provided for in Section 10.
10.4 Insurance Requirements. The kisurance requked to be carried under
Sections 10.1, 10.2 and 10.3 shall be placed with responsible insurance companies havmg an
A.M. Best rating of at least A- and an A.M. Best Financial Size Category rating of not less than
Class vn as shall be selected by Tenant. Tenant shall deliver to Landlord certificates of said
insurance and of renewals thereof from time to time promptly follovnng request therefor from
Landlord, and shaU obtain the written commitment of each such insurer to provide each
additional insured with thirty (30) days written notice of any cancellation thereof, or amendments
with respect to reductions in pohcy limks or coverages. Any insurance required to be maintained
by Tenant may be maintained under a so-called "blanket policy" insuring other parties and other
locations so long as the amount of insurance required to be provided hereunder for the Premises
is not thereby diminished.
10.5 Application of Proceeds. Unless this Lease is tenninated pursuant to
Section 13, aU policies of property msurance described in Section 10.2 shall provide for payment
of loss in excess of One Million DoUars ($1,000,000.00) (in Constant Dollais) to tiie Lender (or
if there is no Lender, payment of loss shall be to an escrow holder mutually acceptable to
Landlord and Tenant) to be held in trust and appUed to the repak and restoration ofthe Premises,
subject to the conditions set forth m the leasehold mortgage (if applicable) regarding such
application and Sections 13 and 17. When the Improvements have been fully repaked and
restored, any excess shall be paid to Tenant.
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4826-9580-6752 7 12/02/2014
10.6 Waiver of Subrogation. Tenant releases Landlord for loss or damage
arising out of or incident to perils insured against pursuant to Sections 10.1 and 10.2, which
perils occur m, on, or about the Premises even if due to the negligence of Landlord or its agents,
employees, conttactors, and/or invitees. Tenant shall, upon obtaining tiie poUcies of insurance
requked under Section 10.1 and 10.2, give notice to the insurance carrier or carriers tiiat the
foregoing waiver is contained in this Lease.
11. Indemnities.
11.1 Mutual Indemnities. Tenant shaU indemnify, defend and hold Landlord,
tiie City of Carisbad, the Carisbad Municipal Water District and its and thek officers, agents,
employees, officials, admmistrators, representatives and contractors (collectively, "Landlord
Parties") harmless from any and all claims, losses, liens, causes of action, fmes, penalties, costs,
liabUities, damages or expenses, mcludmg attorneys' fees ("Claims"), arising from (i) tiie use or
occupancy of the Premises from and after the Commencement Date by Tenant or any of hs
officers, owners, members, agents, representatives, employees, conttactors, guests, invitees,
licensees and subtenants (collectively, "Tenant Parties" ), (ii) claims of lien of laborers or
materialmen or others for work performed or materials or suppUes fumished for Tenant or
persons validly claimkig under it; and (iii) any defauh on tiie part of Tenant in the perfonnance
of any obhgation to be performed by Tenant pursuant to this Lease; provided, however, that
Tenant's obligations hereunder shaU not apply to any Clauns to the extent caused by or arising
out ofthe gross negUgence or willful misconduct of Landlord or any Landlord Parties. Landlord
shall indenmify, defend and hold Tenant and the Tenant Parties harmless from any and all
Clauns arising from Landlord's or any of tiie Landlord's Parties' gross negUgence or willfiil
misconduct.
11.2 Notification of Claim. A party entitied to indemnification pursuant to
Section 11.1 above (the "Indemnified Parfy") shaU notify the otiier party (tiie "Inderanifymg
Parfy") promptly of any clakn, action or proceeding and cooperate fully m the defense. Upon
receipt of such notification, the Indemnifying Parfy shall assume the defense ofthe claim, action,
or proceeding, including the employment of counsel acceptable to tiie Indemnified Party and tiie
prompt payment of tiie attorneys' fees and costs of such counsel. If the Indemnified Party at any
time reasonably deteimmes that having common counsel would present such counsel with a
conflict of interest, or if the hidemnifying Party fails to promptly assume tiie defense of tiie
claim, action, or proceeding or to promptiy employ counsel acceptable to the Indemnified Party,
then the Indemnified Party may, in its sole discretion, employ separate counsel to represent or
defend the Indemnified Party, and the Indemnffying Party shall pay tiie reasonable attorneys' fees
and costs of such separate counsel within thirty (30) days of receivmg an itemized billing
therefor. At its sole discretion, the Indemnified Party may participate at hs own expense in the
defense of any claim, action or proceeding, but such paiticipation shall not relieve the
hidemnffying Party of any obligation imposed by this Lease. FaUure to promptly defend or
mdemnify tiie Indemnified Party is a material breach which shall entitie the Indenmified Party to
all remedies available under law, includmg but not Iknited to specific performance and clauns
for damages.
11.3 SurvivabUitv. The Indemnifying Paify's obligations to hold harmless,
mdemnify and defend tiie Indemnified Paity shall survive tiie expiration of the Term or eariier
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termination of this Lease with respect to matters occuning prior to such expiration or
termination.
12. Improvements.
12.1 Initial Consttuction of Hotel Addition. Tenant shall, at Tenant's sole cost
and expense, commence promptiy following the later of the Commencement Date and the
removal pursuant to Section 31 of the water tank on the Premises, and thereafter diligentiy
pursue to completion, construction of the Hotel Addition m accordance with the terms arid
conditions provided in this Lease, the Work Letter attached hereto as Exhibh "H". the Westin
Franchise Agreement(s) and in compliance with Law. Tenant shall cause Substantial
Completion (as defined m tiie Work Letter) of the Hotel Addition by no later than the Hotel
Addition Outside Completion Date. Prior to or concurrent with the Substantial Completion of
the Hotel Addition, Tenant shall cause to be recorded an easement agreement, ki form and
substance reasonably acceptable to Landlord, whereby Tenant or its Affiliates grants to Landlord
and hs tenants, successors and assigns, such utility, water, sewer, drainage, access and parkmg
easements over tiie adjacent Westki Resort property or other adjacent property owned by Tenant
or its Affihates as may be required for the use and operation of the Premises during such tunes as
the Premises and such adjacent property are not under common ownership or contiol; provided,
however, paridng easements shall be required only to the extent tiie parking provided on tiie
Premises does not comply with the applicable parkmg requirements of the City for the Hotel
Addition.
12.2 Constiaiction of Additional Sheraton Building. Tenant shaU commence
promptiy foUowkig tiie Commencement Date, and thereafter diligently pursue to completion
constiuction of the Additional Sheraton Building in accordance witii the terms and conditions
provided in the Sheraton Franchise Agreement(s) and m compUance with Law. Tenant shall
cause Substantial Completion ofJhe Additional Sheraton Building by no later than the
Additional Sheraton Buildmg Outside Completion Date.
12.3 Alterations to Hotel Addition. Following the completion of the initial
constmction of tiie Hotel Addition, Tenant may make alterations, repairs, demolitions and
modifications to the Improvements or construct new Improvements as Tenant may deem
desirable for ks Permitted Use of tiie Premises, subject to the following conditions, which Tenant
covenants to observe and perform:
(i) No work shall be undertaken untU Tenant shall have procured and
paid for, so far as the same may be required, from time to time, all municipal and other
governmental permits and autiiorizations of the various mumcipal departments and governmental
subdivisions having jurisdiction and Landlord agiees, at no cost to Landlord, to consent to tiie
application for such pennits or authorizations whenever such action is necessary;
(ii) Any struchiral work shall be engineered under the supervision of
an architect or engineer licensed as such in the State of CaUfomia (who may be an employee of
Tenant) selected by Tenant;
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(iii) All work shall be of such a character tiiat, when completed, the
value and utilify ofthe Improvements shaU be not substantially less than the value and utility of
the Improvements unmediately before any such additional Improvements;
12.4 All work done in connection with any Improvements shall be done in a
good and workmanlike manner and m compliance with all Laws. The work of any
hnprovements shall be prosecuted wdth reasonable dispatch. General liability and property
damage insurance (which may be effected by endorsement, if obtainable, on the insurance
required to be carried pursuant to Section 10 above) with limits of not less than those required to
be canied pursuant to Section 10, shall be mahitained by Tenant at all times when any work is in
process in connection with any Improvements.
12.5 No work involving an expenditure in excess of Two Hundred Fifty
Thousand DoUai-s ($250,000) (in Constant Dollars) shall commence until Tenant shall have
given Landlord ten (10) days prior written notice of such work in order that Landlord may post
and/or file notices of non-responsibility or notices of a simUar nature.
12.6 If the estimated cost of any work shall be in excess of One MiUion Dollars
($1,000,000.00) (in Constant Dollars), Tenant shaU, prior to the commencement of any such
Improvements, deliver to Landlord evidence tiiat Tenant has sufficient funds available to pay for
the anticipated costs of such Improvements, which evidence may include, without Umitation, a
construction loan from a Lender.
13. Damage by Fire or Other Casualty.
13.1 Material Destruction. Subject to Section 13.2 below, in the event of a fire,
earthquake or other casualty, Tenant shall promptly, at Tenant's sole cost and expense, restore,
repair, replace or rebuild the Improvements as nearly as possible to the condition, quality and
class it was in immediately prior to such damage or destmction, or with such changes or
alterations as Tenant shaU elect to make in confomiity with Section 12 above. Such restoration,
repaii-s, replacement or rebuilding shall be commenced promptly and prosecuted with diligence.
13.2 Before/After Last Ten Years. Notwitiistanding the foregoing, if any
damage or destruction occurs withinthe last ten (10) yeais ofthe Term and has a material impact
on Tenant's abiUty to conduct business, this Lease shall terminate at Tenant's option, such option
to be exercised by Tenant giving not less than thirty (30) days' prior written notice to Landlord
sent within ninety (90) days of the damage or destruction. If Tenant elects to tenninate tiie
Lease, Tenant shall raze the damaged Improvements, remove all debris, and restore the Premises
to a safe and clean condition. In tiie event of any casualty occuning more tiian ten (10) years
before the expiration ofthe Term, Tenant shall restore tiie Improvements.
13.3 No Abatement of Rent. Tenant's obligations to pay Rent will contmue
notwithstanding the damage or casualty and Rent wiU not be abated. Tenant hereby waives tiie
provisions of Sections 1932(2) and 1933(4) of tiie Califomia Civil Code and of any otiier stattite
or law now or hereafter in effect contrary to such obligations of the Tenant as set forth m this
Lease, or which relieves Tenant from such obligation.
14. Condemnation.
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14.1 Defmition of Taking and Substantial Taking. A "Taking" means any
condenmation or exercise of the power of eminent domain by any authority vested with such
power or any other taking for pubUc use, including a private purchase in Ueu of condemnation by
an authority vested with the power of eminent domain; the "Date of Taldng" means the earUer
of the date on which titie to the Premises or any portion thereof so taken is vested in the
condemning autiiority or the date on which possession of the Premises or any portion thereof is
taken by the condemning authority; and "Substantially All ofthe Premises" means (i) so much
ofthe Premises or Improvements as, when taken, leaves the un-taken portion unsuhable for the
continued feasible and economic operation of the Premises by Tenant for the same purposes as
unmediately before the Taking, or (ii) so many of the parkmg spaces within the Premises as
reduces the parking ratio below that ratio which is required by the zoning ordinance applicable to
the Premises and Landlord's faUure to provide substantiaUy equivalent altemative parking
reasonably acceptable to Tenant withm sixty (60) days after such Taking.
14.2 Tenant's Rights Upon Taking or Substantial Taking. In the event of a
Taking of Substantially All of tiie Premises, Tenant may, by thirfy (30) days' prior written notice
to Landlord, given no later than nkiefy (90) days followmg the Date of Taking, temunate this
Lease. All Rent shaU be apportioned and paid through and including the Date of Taking, and
neither Landlord nor Tenant shall have any rights in any compensation or damages payable to
the other in connection with such Taking.
14.3 Tenant's Rights Upon Less Than Substantial Taking. In the event of a
Taking that is not a Taking of Substantially AU of tiie Premises ("Partial Taking"), Tenant, at its
sole cost and expense, shall proceed with due dihgence to restore, repair, replace or rebuild the
remaining part ofthe Improvements to substantially its former condition or with such changes or
alterations as Tenant may elect to make in conformity with Section 12 above so as to constitute a
complete project. In the event of a Partial Taking, ttiis Lease shaU terminate as to the portion of
the Premises so taken and the Rent payable for the balance of the Term of this Lease shall be
reduced in the same ratio that the value of Tenant's mterest hi the Premises and Improvements
immediately prior to the Taking is reduced, such reduction to be effective as of the Date of
Taking. Until the amount ofthe reduction of tiie Rent shall have been determined, Tenant shaft
continue to pay to Landlord full Rent, at which time Landlord shaU refund any excess Rent paid
based upon such reduction being effective as ofthe Date of Taking.
14.4 Rights Upon Temporary Taking. If, at any time during the Term, the
whole or any part of the Premises or of the Improvements shall be taken in condemnation
proceedings or by any right of eminent domain for temporary use or occupancy not exceeding
one (1) year (a "Temporary Taking") the foregoing provisions ofthis Section shall not apply
and Tenant shall continue to pay, in the manner at the times specified in this Lease, the full
amounts of the Rent payable by Tenant under this Lease, and, except onfy to the extent that
Tenant may be prevented from so doing pursuant to the terms of the order of the condemning
authority Tenant shall perfonn and observe all of the other terms, covenants, conditions and
obUgations of this Lease upon the part of Tenant to be performed and observed, as though such
Temporary Taldng had not occuned. If any Taking is for one (1) yeai- or more, then the Taking
will be considered a permanent Taking and shall be subject to the provisions of Section 14.1 or
14(b), as appUcable. In the event of any such Temporary Taking, Tenant shall be entitled to
receive the entire amount of the Condemnation Proceeds (as defined below) made for such
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Temporary Taking, whether paid by way of damages, rent or otherwise unless such period of
temporary use or occupancy shall extend beyond the termination of this Lease, in which case the
Condemnation Proceeds shall be apportioned between Landlord and Tenant as of the date of
termination of this Lease.
14.5 Condemnation Proceeds-Termination. In the event of a Taking of
Substantially All ofthe Premises and the termination of this Lease, the award or awards for such
Taldng, less the costs of tiie determination and collection of tiie amount ofthe award or awards
("Condemnation Proceeds"), shaU be distributed as foUows:
(i) Landlord shall first be entitied to receive and retam as its own
propeify, and Tenant hereby assigns to Landlord, such portion of the Condemnation Proceeds as
shall equal the fak market value of the Premises as encumbered by this Lease, exclusive ofthe
Improvements;
(ii) Tenant shaU then be entitied to receive, and Landlord hereby
assigns to Tenant, the balance ofthe Condemnation Proceeds.
14.6 Condemnation Proceeds-No Termination. In the event of a Partial Taldng,
this Lease shaU not terminate or be affected in any way, except as provided in Section 14.3
above, and Landlord shall first be entitled to receive and retain as its own property, that portion
ofthe Condemnation Proceeds applicable to tiie Premises as encumbered by this Lease, equal to
the fair market value of the portion of the Premises as encumbered by this Lease so taken
exclusive of the Improvements. Tenant shaU then be entitied to receive the balance of the
Condemnation Proceeds and the same shall be payable in trust to Tenant for application by
Tenant to the cost of restormg, repairing, replacing or rebuilding the Improvements; however, if
such proceeds are in excess of One Million DoUars ($1,000,000.00) (in Constant Dollars), tiien
such proceeds shall be paid to the Lender (or if no Lender, then to an escrow holder mutually
acceptable to Landlord and Tenant) for disbursement to Tenant for payment of the cost of
restoring, repakkig, replackig or rebuilding the Improvements, subject to the conditions set forth
in the leasehold mortgage (if applicable), with any excess being disbursed to Tenant.
14.7 Waiver. Tenant hereby waives any and all rights it might otherwise have
pursuant to Section 1265.130 ofthe Califomia Code of Civil Procedure, or any other Law, to
seek termination of this Lease in the event ofa Taking.
15. Assignment and Subletting.
15.1 Assignment. Tenant may not assign this Lease prior to the date Tenant
opens the Hotel Addition for buskiess, except to an Affiliate and except that Tenant shaU be
obUgated to assign this Lease and convey the Hotel Addition to the owner of the Westin Hotel
(including the Converted Improvements) not later than the date tiie Hotel Addition opens for
business. Prior to an assignment of this Lease to an Affiliate of Tenant, Tenant shaU provide
notice ofthe assigmnent to Landlord along with evidence reasonably satisfactory to Landlord to
detennine tiiat the assignee is in fact an AffiUate of Tenant. Thereafter, Tenant may only assign
this Lease to a purchaser ofthe Westm Hotel, such that at all times after the opening ofthe Hotel
Addition the Tenant under this Lease is the same person as the owner of the Westin Hotel.
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Landlord's consent shall not be requked for an assignment of this Lease to any purchaser/owner
of the Westin Hotel; any assignment of tiiis Lease to any otiier person shall require Landlord's
consent. Notwithstanding the foregoing, no assignment shaU be effective unless and until there
shall be delivered to Landlord a copy of the instrument or instruments of assignment of this
Lease m recordable form, containing the name and address of the assignee and an assumption by
the assignee of all of Tenant's obligations under this Lease arising from and after the effective
date of the assignment. Upon the effective date of such assignment, the assignor shaU be
released from all obhgations and UabiUty under this Lease first accnung after tiie effective date
of the assignment.
15.2 Sublease. Landlord recognizes that Tenant will rent rooms in the
Improvements to third parties in a manner consistent with its use as a hotel, which room rentals
shall not requke Landlord's consent. In addition. Landlord's consent shaU also not be required
for the subleasing or Ucensing in connection with the hotel use of the Premises and/or time share
and hotel use of adjacent property to retail/commercial subtenants, licensees or operators ofany
retail/commercial use, restaui-ant, spa, lounge, guest services or parking uses (which paridng uses
are exclusively for guests ofthe Westin Hotel and/or the owners (and their guests) of tune share
units located adjacent to the Premises)(each, an "Operating Sublease"), provided tiiat tiie
provisions in clauses (i) - (v) below are complied with. A sublease or license for placement or
use of cellular or other conununications equipment or facUities (a "CeUular Equipment
Agreement") shaU not be an Operating Sublease and shall be pennitted only if such sublease or
license contains an acknowledgement bythe sublessee or licensee (on behalf of hseff and any of
its successors and assigns mcludmg co-locating Ucensees) that (i) the interest ofthe sublessee or
hcensee in the Prenuses shall temiinate upon the expkation or sooner termination ofthis Lease,
(ii) sublessee or licensee is required to remove its equipment and installations following such
termination, (iii) Landlord shall have no obligation to recognise such sublease or license and not
to disturb the sublessee/licensee foUowing such termmation, and (iv) the sublease or license is
subject and subordinate to this Lease and the term of the sublease or Ucense shaft not extend
beyond the Term ofthis Lease. Prior to entering mto any Cellular Equipment Agieement, the
proposed agreement shaU be piovided to Landlord for its confirmation that tiie Cellular
Equipment Agreement contains the above requked acknowledgements of the sublessee/licensee,
such confirmation not to be unreasonably withheld or delayed. Tenant shall mdemnify, defend
and hold Landlord Parties harmless from any and all Claims arismg from such Cellular
Equipment Agi-eement, including, without limitation, tiie faUure of such sublessee or Ucensee to
remove its equipment and instaUations following such termination and/or such sublessee or
licensee asserting that h has a right of recognition and/or non-disturbance from Landlord. All
other subleases or licenses shall require Landlord's consent and, if consented to will also be an
"Operatmg Sublease" provided that the provisions hi clauses (i) - (v) below are compUed vnth.
(i) The term of any Operating Sublease shall not extend beyond the
Term of this Lease.
(ii) Any and aU Operating Subleases shall be subject and subordinate
to this Lease, and any amendments hereto.
(Ui) Each Operating Sublease will provide tiiat (A) tiie Operating
Sublease is subject to tiiis Lease; (B) the Operatmg Sublease does not alter this Lease; (C) the
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Operating Sublease term will not extend beyond the Term of this Lease; and (D) the Operating
Sublease subtenant wiU attom to Landlord, as tiie landlord under the Operating Sublease, if this
Lease is tenninated. Landlord agrees that foUowmg a termination of this Lease, an Operating
Sublease shall automatically become a dkect lease between Landlord and such subtenant
provided the attornment provision thereof shall provide (1) that subtenant's right of possession
pursuant to the teims of tiie Operating Sublease shall not be distm-bed by Landlord (except m the
event of damage, destruction, condemnation, or subtenant is in defauh in the payment of rentals
or otherwise in default under the Operating Sublease beyond applicable cure periods), (2) that
the subtenant shall pay the rent prescribed in tiie Operatmg Sublease to Landlord from the date of
such attornment, (3) that Landlord shall not be responsible to tiie subtenant under the Operating
Sublease except for obligations accruing subsequent to tiie date of such attornment, nor for any
secmity deposits of subtenant except those actually received by or credited to Landlord, and (4)
that the subtenant, ki the event ofthe tennination of this Lease, wiU enter into a new lease witii
Landlord on the same terms and conditions as tiie existing Operatmg Sublease and for the
balance of the teim thereof Each Operating Sublease shall also contain a provision requking
such subtenant to execute any further documents as may be reasonably required by Landlord to
confirm such aiTangements.
(iv) Tenant shall, promptly after execution of each Operating Sublease,
notify Landlord of tiie name and making address of the subtenant. Tenant shall, on demand by
Landlord, permit Landlord to examine and copy the Operating Sublease, however. Landlord wiU
not make any such Operatmg Sublease avaUable to examination by the general pubhc.
(v) Tenant shall not accept, directly or indirectiy, more than one
month's prepaid rent from any subtenant. However, Tenant may accept security deposits or
letters of credh greater than one montii's rent from subtenants.
16. IntentionaUy Omitted.
17. Financing.
17.1 Tenant's Financing. Notwithstanding any otiier provisions of tills Lease,
Tenant may, without Landlord's consent, from time to time, secure financing and grant the
Lenders thereof: (i) a security interest in Tenant's interest in the Improvements, (ii) a security
interest in Tenant's ttade fixtm-es, furnishings, mventory, equipment, and machinery and all other
items of personal property instaUed by Tenant or hs subtenants (collectively, "Personalty"),
(iii) the right to enter the Premises to realize upon any Personalfy so pledged, and (iv) a coUateral
assignment of or leasehold encumbrance in the Leasehold Estate (collectively, "Leasehold
Mortgage"); provided, however, the foregoing shall not (x) constitute a lien against the
Reversionary Estate or encumber the fee title to the Pi-emises at any time, (y) be cross-defaulted
with any other loans to Tenant other than a loan respecting the Westin Hotel and/or the New
Sheraton Resort or a mortgage relating to pooled assets owned by Tenant and/or Tenant's
Affiliates provided that Tenant demonsttates to Landlord's reasonable satisfaction that the loan
to value ratio of such pooled assets does not exceed sevenfy percent (70%) at tiie time the
Leasehold Estate is proposed to be encumbered, and (z) cover any hiterest in real property other
than the leasehold estate created by this Lease (other than tiie Converted Improvements). If
Tenant grants any of the rights described in this Section 17 to a Lender, (A) the provisions of
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Exhibh "D" wUl apply, (B) Tenant shall provide Landlord witii a hue copy of such Leasehold
Mortgage and the name and address ofthe Lender, and (C) immediately after the recording of
any Leasehold Mortgage executed by Tenant, Landlord may at Landlord's own cost and expense
record in the office ofthe County Recorder of San Diego County, California, a written request
executed and acknowledged by Landlord for a copy of any notice of sale under such Leasehold
Mortgage to be maUed to Landlord at the address specified in the request by Landlord.
17.2 Landlord's Financing. Landlord shall have the right to encumber the
Reversionary Estate and the fee titie to the Premises at any time with a mortgage or deed of ttust
provided that the mortgage or deed of ttust shall be and remain at all times subject and
subordinate to (i) this Lease (and all amendments, extensions and renewals) and any new lease
entered into in accordance with Section 7 of Exhibh "D" and (ii) the rights of Tenant under this
Lease (and aU amendments, extensions and renewals) and any new lease entered into in
accordance with Section 7 of Exhibh "D". As a condition to Landlord encumbering the
Reversionary Estate, Landlord shall have delivered to Tenant a subordination and non-
disturbance agreement from the holder of the mortgage or deed of tiust reaffirming the
provisions ofthis Section 17.2 in form and substance reasonably acceptable to Tenant.
18. Tenanf s Propertv and Ownership at Termination. AU of the Improvements shaU
be and remam the property of Tenant during the Term and shall become tiie property of Landlord
upon the expkation of the Term or eariier temiination of tiie Lease. Personalty shall be and
remain tiie property of Tenant at all times, subject to Section 20 below.
19. Recorded Documents. This Lease is not to be recorded, but Landlord and Tenant
shaU execute a Memorandum of Lease in recordable form, in the form of the attached
Exhibh "E", and shall cause h to be recorded in the Official Records, concurrent with entering
mto tills Lease. The provisions of this Lease shall control, however, with regard to any
omissions from, or provisions hereof which may be in conflict with, the Memorandum of Lease.
Tenant shaU be responsible for all recording fees and any documentary ttansfer taxes imposed ki
connection with recordation of the Memorandum of Lease.
20. Sunender upon Expkation of Term. At the expiration of the Term or earUer
termination ofthis Lease, Tenant shall surrender the Premises and Improvements to Landlord in
good condition and repak, subject to Sections 13 and 14. Tenant shaft remove the Personalty
from the Premises and repair any resulting damage. If, after expiration ofthe Term, Tenant faUs
to remove any or all of hs Personalty witiiin thirty (30) days after receiving vmtten notice from
Landlord, Landlord may dispose of such Personalty as Landlord deems appropriate.
21. Force Maieure. Except as otherwise specifically provided in this Lease, in the
event that Landlord or Tenant shall be delayed or hindered in, or prevented from, the
performance ofany act requked hereunder (other than the payment of money) by reason of delay
by the other paify (m excess often days), riots, insurrection, or war or other unforeseeable reason
not the fauh of such party or not within its conttol , then performance of such act shall be
excused for the period of delay, and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay; provided, the party so delayed,
hindered or prevented shaU use hs commercially reasonable efforts to deliver wiitten notice to
the other party as soon as i-easonably practicable following the commencement thereof, which
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written notice shall specify tiie nature ofthe delay, the date of commencement of delay and the
expected period of delay.
22. Events of Tenant's Defauh. Any of the foUowmg occurrences, conditions, or acts
by Tenant constitiites an "Event of Default" under this Lease:
22.1 Tenant's failure to make any payment of Rent to Landlord when due,
which failure is not cured within ten (10) days following Tenant's receipt of written notice
thereof from Landlord ("Monetary Default").
22.2 Tenant's failure to observe or perform any other material provision of this
Lease within thirty (30) days after receipt of written notice from Landlord to Tenant specffying
such default and demanding that tiie same be cured; provided that, if such defauh cannot with
due diligence be whoUy cured withki such 30-day period, Tenant shall have such longer period
as is reasonably necessary to cure the default, so long as Tenant proceeds promptiy to commence
the cvue of same witiiin such 30-day period and diligently prosecutes the cure to completion.
22.3 To the extent permitted by law, (i) tiie making by Tenant of any general
arrangement or general assignment for the benefit of creditors; (ii) Tenant becoming a "debtor"
as defmed m the Bankiuptcy Code unless, m the case of an involuntary petition filed against
Tenant, tiie same is dismissed witiun skty (60) days after fihng; (iii) the appomtment of a trustee
or receiver to take possession of substantiaUy aU of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where possession is not restored to Tenant within sixfy (60) days;
or (iv) the attachment, execution or otiier judicial seizme of substantially all of Tenant's assets
located at the Premises or of Tenant's interest m tiiis Lease, where such seizure is not discharged
within sixty (60) days.
22.4 Abandonment of the Premises. Abandonment is herein defined to be any
cessation of contmuous operation of the Permitted Use on the Premises for more than thirty
continuous (30) days other than as a result of an event described in Section 21 and other tfian
during reconsttuction, refiirbishment and/or remodeling m accordance with Section 12.
22.5 ff Tenant is a corporation, limited liabihty company or a partnership, the
dissolution or liquidation of Tenant.
Any notice required under this Section 22 shall be in lieu of, and not in addition to, any notice
required under California Code of CivU Procedure Section 1161 or any successor Law.
23. Landlord's Remedies.
23.1 While an Event of Defauh exists. Landlord is entitied to aU remedies
available at law or in equify, including, without limitation, the right to:
(i) Continue this Lease in effect by not terminatkig Tenant's right to
possession of the Premises, in which event Landlord shall be entitled to enforce all Landlord's
rights and remedies under this Lease, including the right to recover Rent specified in this Lease
as it becomes due;
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(ii) Terminate this Lease and bring an action to recover from Tenant
fhe amounts set forth in Section 23.3 below and/or to re-enter and retain possession of the
Premises in the manner provided by the laws of unlawfiil detainer in the State of CaUfornia then
in effect
23.2 In the event of any termination and entiy or taking possession of the
Property as provided above. Landlord shall have the right, but not the obligation, to remove from
the Properfy all or any part of the personal property located therem and may place the same in
storage at apublic warehouse at the expense and risk of the owner or owners thereof.
23.3 Should Landlord elect to terminate this Lease under the provisions of
Sections 23.1(ii) above, Landlord may recover from Tenant as damages:
(i) the worth at the time of award of any unpaid Rent which had been
earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the time of award exceeds the amount
of such rental loss Tenant proves could have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the unpaid
Rent for the balance ofthe Term after the time of award exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom; plus
(v) at Landlord's election, such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by the laws of the State of Califomia.
As used in the foregoing provisions, the "worth at the time of award" is computed by
aUowing interest at the Default Rate. As used herein, the "worth at the time of award" is
computed by discounting such amount at the discount rate ofthe San Francisco Federal Reserve
Bank, at the time of award, plus one percent (1%).
23.4 Limitation on Termination for Non-Monetary DefauU.
Notwithstanding an3^thing in Section 23 above or elsewhere in this Lease to the contrary,
if, within ten (10) business days foUowing Tenant's receipt of a notice of default under Section
22.2 above (a "Non-Monetary Default"), Tenant gives Landlord written notice that Tenant
disputes the existence of such Non-Monetaiy Default, then Landlord may not exercise its right to
terminate this Lease on account of such Non-Monetary Default unless (i) the parties have
participated in good faith in mediation of the dispute as provided below, and (ii) following the
conclusion or termination of such mediation, Tenant has failed to cure the alleged Non-Monetary
Default within the time required under Section 22.2 with the 30-day period described thereunder
running from the date of the conclusion or termination of such mediation. In the event of a
dispute regarding the existence of a Non-Monetary Default, the parties shall first attempt to
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resolve the dispute informaUy. In the event the dispute is not resolved informally, prior to and as
a precondition to the initiation of any legal action or proceeding, the parties shall refer the
dispute to mediation before a retired State or Federal judge mutiially selected by the parties. The
dispute shall be mediated through informal, nonbindhig joint conferences or separate caucuses
with an impartial third paity mediator who will seek to guide the parties to a consensual
resolution of tiie dispute. The mediation proceeding shall be conducted within thirty (30) days
(or any mutually agreed longer period) after refenal by Landlord or Tenant, and shall continue
until any party involved concludes, in good faith, that tiiere is no reasonable possibility of
resolving the dispute without resort to a legal action or proceeding. AU costs of the mediation
shaU be shared equally by the parties involved. Each party shall bear its own attorneys' fees and
other costs incurred in connection with the mediation. In the event the paities are unable to
resolve the dispute through mediation, in addition to any other rights or remedies, any party may
institute a legal action.
24. Events of Landlord's Defauh: Tenant's Remedies. Landlord shall not be deemed
to be m default in the performance of any obUgation required to be performed by it under this
Lease until k has failed to perform such obhgation within thirty (30) days after written notice by
Tenant to Landlord specifying the nature of Landlord's defauh; provided, however, that ff the
nature of Landlord's obligation is such that more than thkty (30) days are required for its
performance, tiien Landlord shall not be deemed to be in defauh if it shall commence such
performance within such thirty (30) day period and thereafter diligently prosecute the same to
completion, ff Landlord is in default under this Lease, Tenant shaU have all rights and remedies
avaUable at law or in equity.
25. Exculpation of Landlord. Notwithstanding anything in this Lease to the conttary,
it is expressly understood and agreed that any judgment against Landlord resuhing from any
defauh or other claim under this Lease shall be satisfied only out of the net rents, issues, profits
and other income actuaUy received from or in connection with Landlord's interest in the
Premises, and Tenant shaU, except as otherwise expressly permitted pursuant to this Section 25,
have no clakn agamst Landlord or any of its personal assets, for satisfaction of any judgment
with respect to this Lease.
26. Hazardous Substances.
26.1 Tenant shall comply fiilly with aU laws pertaining to the use, generation,
storage, ttansportation, tteatment, disposal or other handling of Hazardous Substances at the
Premises, excepting those Hazardous Substances that are (i) present at tiie Premises prior to the
Commencement Date or (ii) caused by Landlord or ks agents, employees or conttactors. Tenant
shall not use, generate, store, transport, tteat, dispose or otherwise handle any Hazardous
Substances upon the Premises, except in accordance with all Laws. The term "Hazardous
Substances" shall mean and include, but is not lunited to, all hazardous substances, materials
and wastes Usted by the U.S. Envkonmental Protection Agency, the State of Calffornia, the
County of San Diego or the City of Carlsbad, under the Comprehensive Envkonmental
Response, Compensation and Liabilify Act (CERCLA), the Resource Consei-vation and
Recovery Act (RCRA), the Toxic Substances Conttol Act (TSCA), and the Federal Water
Pollution Conttol Act (FWPCA), and any other statiite, ordinance or rule promulgated by a
government entity or agency thereof.
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26.2 Tenant agrees to defend, indemnify, and hold harmless tiie Landlord
Parties from and agamst any and aU damages, penalties, fines, losses, UabUities, causes of action,
suits, clauns, demands, costs, and expenses (including aU out-of-pocket litigation costs and tiie
reasonable fees and expenses of counsel) (collectively, "Claims") of any natiire, dkectiy or
indirectly, arising out of or in connection with:
(i) The existence, use, generation, migration, storage, release,
tiireatened release, or disposal of Hazardous Materials on, from or under the Premises, except to
the extent caused by Landlord or its agents, employees or conttactors, or to the extent mvolvmg
Hazardous Materials which were present on, in or under tiie Premises prior to tiie
Commencement Date; provided, however, if the Hazardous Materials migrated to the Premises
from other propeify not owned or controUed by Tenant or an Affiliate of Tenant, then the
foregomg indemnity shall be Umited to Claims resulting from Tenant's failure to comply witii the
terms ofany order ofany federal, state or municipal authority havhig regulatoiy authorify over
the presence of such Hazardous Substances on, m or under the Premises; and
(u) Any failure by Tenant to comply with the terms of any order of
any federal, state, or municipal authority having regulatory authority over envkonmental matters
which is appUcable under this Lease to tiie Premises excepting those tiiat pertain to Hazardous
Substances that were (i) present at the Pi-emises prior to the Commencement Date or (ii) caused
by Landlord or its agents, employees or conttactors. Tenant's obhgations under this Section 26
shall survive the temiination of this Lease.
If any claim is made or brought against Landlord which is subject to the mdemnifications
set forth in this Section 26, Tenant shaU defend the same, ff necessary in Landlord's name, by
attomeys reasonably approved by Landlord.
27. Brokers. Landlord and Tenant each represents, warrant, and covenant tiiat it has
not deah with any real estate broker or finder with respect to this Lease, and each party shall hold
tiie other party harmless from all damages, claims, UabiUties or expenses, including reasonable
and actual attorneys' fees (tiurough all levels of proceedings), resulting from any claims that may
be asserted agamst the other party by any real estate broker or finder with whom tiie
indemnifying party either has or is purported to have dealt.
28. Options to Extend Term. Tenant shaU have the right to extend the Term of this
Lease for two (2) separate successive periods of ten (10) years each, upon all the terms,
covenants and conditions contained in Exhibit C attached hereto.
29. Expansion. Within forty-two (42) months after the Rent Commencement Date,
Tenant shall either (i) elect to amend this Lease to reduce the size of tiie Premises, in which
event Landlord and Tenant, or an Affiliate of Tenant, shall enter into a separate ground lease
witii Landlord (the "Tune Share Addition Ground Lease") for the balance of tiie Premises for
tiie purpose of developmg thereon not less than thirty-two (32) time share vacation units tiiat
upon completion wiU be operationally integrated into tiie adjacent MarBrisa/Hilton Grand
Vacation Resort time share development (the "Thne Share Addition") or (h) Tenant shaft
expand the Hotel Addition to not less than one hundred tiiree (103) hotel rooms. Tenant shall,
subject to Section 21, and in accordance witii Section 12, cause Substantial Completion of such
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4826-9580-6752.7 12/02/2014
expansion of tiie Hotel Addition or the Time Share Addition, as applicable, witiiin sixty (60)
months after the Rent Commencement Date. If Tenant elects to proceed witii tiie Time Share
Addition, tiie Thne Share Addition Ground Lease will be upon the same ternis and conditions as
this Lease, with (a) such revisions as necessary to accommodate the operation of a time share
project, (b) provisions stating that, in the event that tiie Thne Share Addition Ground Lease is
terminated due to a tenant default, the rightfiil owners (includmg Landlord) and occupants ofthe
time share unhs wiU have access to, and the use and enjoyment of, all ofthe Common Facilities
and the Road and Parking Facilities (as such terms are defined in that certaki Final Time-Share
Public Report Multi-Site Tune-Share Plan issued on May 13, 2006 by tiie Bureau of Real Estate
of tiie State ofCalifornia under FUe Number 122924HF-A13, as amended), and (c) an expiration
date commensurate witii the Expiration Date hereunder, subject to tiie same extension options.
Prior to or concurrent with the Time Share Addition Ground Lease, Tenant shaU cause to be
recorded an easement agreement, hi form and substance reasonably acceptable to Landlord,
whereby Tenant or its AffUiates giants to Landlord, and ks tenants, successors and assigns, such
utiUfy, water, sewer, drainage, access and parkmg easements over the adjacent MarBrisa/Hilton
Grand Vacation Resort time share development or other adjacent property owned by Tenant or
its Affihates as may be requked for tiie use and operation of the Thne Share Addition premises
durmg such times as such premises and such adjacent property are not under common ownership
or conttol; provided, however, paridng easements shaft be required only to the extent the parking
provided on tiie Thne Share Addition premises does not comply with tiie applicable parking
requkements of tiie City for the Thne Share Addition. The combmed rental under tiie Time
Share Addition Ground Lease and this Lease (as so amended to exclude tiie premises demised
under the Time Share Addition Ground Lease) shaU be tiie same amount tiiat is payable under
tills Lease, witii the amount allocated to each such Lease reflectmg a fak and equitable allocation
between tiiis Lease and the Thne Share Addition Ground Lease as mutually agreed to by tiie
parties. Landlord autiiorizes Tenant to submh appUcations to effect a lot Une adjustinent, and
agrees to enter into such easements and/or otiier agreements tiiat are necessary, to accommodate
the two (2) Leases. Ifthe Time Share Addition Ground Lease is entered kito, then foUowing the
completion of the Tune Share Addition but before tiie first time share unit is sold, the Time
Share Addition Ground Lease shall be assigned to either the association that operates tiie
adjacent MarBrisa/Hilton Grand Vacation Resort time share development or, if requked by the
California Bureau of Real Estate, to an independent time share owners association, subject to the
prior written approval of Landlord.
30. Stoi-m Water Runoff Compliance. Landlord agrees to cause the City of Carlsbad,
tiu-ough tiie grading, drainage and storm water plan review and approval process for the Hotel
Addhion, and as allowable by Law, to cooperate with Tenant (should it be beneficial for the
development of tiie Premises) in utUizmg tiie adjacent land owned by tiie City ofCarisbad for tiie
purpose of complying with and accommodating storm water runoff requirements for the
Premises. If the adjacent land owned by tiie City of Carisbad is utilized for the purpose of
complymg witii and accommodating storm water runoff requkements for the Premises, Tenant
shall indemnify, defend and hold the Landlord Parties harmless from all clauns, costs, liabilify,
damage or expense, including attorneys' fees, arising from any damage or injury to persons or
property as a resuh of such utUization, and from any penalties knposed by the Regional Water
Quality Control Board or other govemmental entity regulating draining and/or water run off
occurring on the Premises during or after installation of tiie storm water improvements on
Landlord's adjacent property by Tenant.
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31. Water Tank Removal. If not removed by Landlord or Tenant prior to the
Commencement Date, then immediately following the Commencement Date but before Tenant is
requked to commence consttuction of the Hotel Addition, Landlord agrees to remove the above
grade portions ofthe water tank located on the Premises (but not the below gi-ade foundation or
water lines) at Landlord's expense. However, if Tenant can complete such work at a lesser cost,
at Landlord's option. Tenant may perform such removal work to Landlord's satisfaction and
requkements, in which event Landlord wfll reimburse Tenant for hs out of pocket costs and
expenses m connection with such work within thkfy (30) days following Landlord's receipt of an
invoice therefor together with reasonable back-up documentation evidencing such costs and
expenses.
32. Purchase of Golf Rounds. Tenant shall, durmg each Lease Year, purchase at least
one thousand five hundred (1,500) rounds of goff from The Crossings Golf Course on the same
conditions, pricmg scale and subject to the same price increases as are currently in place with
respect to the existing Sheraton Carisbad Resort & Spa. ff Tenant has not pm-chased at least one
thousand five hundred (1,500) rounds of golf by tiie end of a Lease Year, then witiim sixty (60)
days thereafter Tenant shaU pay to Landlord an amount equal to of the dtfference between the
cost of one tiiousand five hundred (1,500) rounds of golf and the cost of the actual number of
rounds purchased by Tenant. The foregoing obligation of Tenant to purchase goff rounds is
conditioned on The Crossings Golf Course continuing to be an 18-hole course maintained in
substantially simflar or better condition as of the date ofthis Lease.
33. MisceUaneous.
33.1 Governing Law, Venue and Jurisdiction. This Lease is govemed by and
construed m accordance with the laws of the State of CaUfomia, inespective of Califomia's
choice-of-law principles. All actions and proceedings arising in connection with this Lease must
be ttied and litigated exclusively in the State or Federal courts located m tiie Counfy of San
Diego, State of Califomia, which courts have personal jurisdiction and venue over each of the
parties to this Lease for the purpose of adjudicating aU matters arismg out of or related to this
Lease.
33.2 Further Assurances and Estoppels. Each party to this Lease shall execute
and deUver all instmments and documents and take aU actions as may be reasonably required or
appropriate to carry out the purposes of this Lease (but the foregoing does not imply an
obligation to modify any of the provisions of this Lease). Landlord shall ensure that Tenant's
quiet enjoyment of the Premises tiiroughout the Term is not intenupted by Landlord or anyone
lawfiilly or equitably claiming by, through or under Landlord, subject to Tenant fiilfilling its
obligations hereunder and Landlord's rights and remedies under this Lease. Landlord and Tenant
shall each promptly forward to the other any notice or otiier communication affecting the
Premises received by it from any owner of properfy adjoining, adjacent or nearby to tiie Premises
or from any municipal or govemmental authority, m connection with any hearing or other
administtative procedm-e relating to the use or occupancy of the Premises or any neighbormg
property. Within ten (10) days after notice from the other party to this Lease, Landlord or
Tenant, as applicable, shall execute and deliver to other party's designee, in recordable form, a
certificate stating (i) that this Lease is unmodified and in Ml force and effect, or in full force and
effect as modffied, and statmg aU modifications, (u) tiie then cunent Rent, (ni) tiie dates to which
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Rent has been paid in advance, (iv) the amount of any security deposit, prepaid Rent or other
payment constituting Rent which has been paid, (v) whether or not, to the best knowledge of the
certifying party. Tenant or Landlord is in default under this Lease (and the nature of any such
default) and whether there cunentiy exist any defenses or rights of offset under the Lease, and
(vi) such other matters as the requesting party reasonably requests.
33.3 Prior Understandings. This Lease: (a) contains the entire and final
agreement of the parties to this Lease with respect to the subject matter of this Lease, and
(b) supersedes all negotiations, stipulations, understandings, agreements, representations and
warranties, if any, with respect to such subject matter, which precede or accompany the
execution of this Lease.
33.4 Waivers and Consents. No delay or omission in the exercise of any right
or remedy of Landlord or Tenant in the event of any default by the other shall impair such right
or remedy or be construed as a waiver. The receipt and acceptance by Landlord of delinquent
Rent does not constitute a waiver of any default other than the particular rent payment accepted.
No act or conduct of Landlord, including the acceptance of the keys to the Premises, constitutes
an acceptance by Landlord of the sunender of the Premises by Tenant before the Expiration
Date. Only a written notice from Landlord to Tenant stating Landlord's election to terminate
Tenant's right to possession of the Premises constitutes acceptance of the sunender of the
Premises and accomplishes a termination of this Lease. Landlord's consent to or approval ofany
act by Tenant requiring Landlord's consent or approval may not be deemed to waive or render
unnecessary Landlord's consent to or approval of any other or subsequent act by Tenant.
33.5 Notices. Any notice permitted or required to be given pursuant to this
Lease shall be in writing and shall be delivered by hand, be sent by registered or certified mail,
postage prepaid, retum receipt requested, or be sent by nationally recognized commercial courier
for next business day delivery, to the addresses set forth in Article 1, or to such other addresses
as are specified by written notice given in accordance herewith. All notices, demands or requests
delivered by hand shall be deemed given upon the date so delivered; those given by mailing as
hereinabove provided shall be deemed given on the eariier of actual delivery or three (3)
business days after the date of deposh in the United States Mail; those given by commercial
courier as hereinabove provided shall be deemed given on the date of actual delivery as
evidenced by the commercial courier's record of delivery.
33.6 Interpretation. Whenever the context so requires in this Lease, all words
used in the singular may include the plural (and vice versa) and the word "person" includes a
natural person, a corporation, a firm, a partnership, a joint venture, a trust, an estate or any other
entity. The terms "includes" and "including" do not imply any limitation. Except as otherwise
expressly provided herein, no remedy or election under this Lease is exclusive, but rather, to the
extent permitted by applicable law, each such remedy and election is cumulative with all other
remedies at law or in equity. The paragraph headings in this Lease: (i) are included only for
convenience, (ii) do not in any manner modify or limk any of the provisions of this Lease, and
(iii) may not be used in the interpretation ofthis Lease.
33.7 Partial Invalidity. Each provision of this Lease is valid and enforceable to
the fullest extent permitted by law. If any provision of this Lease (or the application of such
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provision to any person or circumstance) is or becomes invaUd or unenforceable, the remainder
ofthis Lease, and the application of such provision to persons or circumstances other tiian those
as to which h is held invalid or unenforceable, are not affected by such invalidify or
unenforceabiUty.
33.8 Successors-hi-Interest and Assigns. Subject to the provisions of Article
15, this Lease is binding on and inuies to the benefit of the successors-in-interest and assigns of
each party to this Lease.
33.9 Drafting Ambiguities. Each party to this Lease and its legal counsel have
negotiated, reviewed, and revised this Lease. The rule of constmction that ambiguities are to be
resolved against the drafting party or in favor of the party receiving a particular benefit under an
agreement may not be employed in the interpretation of this Lease or any amendment to this
Lease.
33.10 Usury. In the event Landlord receives any sums under this Lease which
constitute mterest in an amount in excess of that permitted by any apphcable Law, then, aU such
sums constitiiting interest m excess of tiiat permitted to be paid under appUcable Law shall, at
Landlord's option, either be credited to the payment of Rent owing hereunder or retumed to the
Tenant.
33.11 No Merger. There shall be no merger of this Lease or any interest m this
Lease or of the Leasehold Estate created by this Lease with the Reversionary Estate in the
Premises by reason ofthe fact that this Lease or such interest tiierem, or such Leasehold Estate
may be directly or indirectiy held by or for the account of any person who holds title to the
Reversionary Estate m the Premises or any interest hi such Reversionary Estate, nor shall there
be any such merger by reason ofthe fact tiiat aU or any part of the Leasehold Estate created by
this Lease may be conveyed or mortgaged in a leasehold mortgage or deed of trust to a
mortgagee or beneficiary who holds titie to the Reversionary Estate or any interest of Landlord
under the Lease.
33.12 As-Is. Except as set forth in this Lease, Landlord hereby disclaims any
wananty, guaranty or representation ofthe nature and condition of the Premises, including (but
not by way of limitation) the soil and geology and suitabihty thereof for any and all activities and
uses which Tenant may elect to conduct thereon at any time during the Term, the manner of
constraction and the conditions and state of repak or lack of repair of aU Improvements located
thereon, and flie nature and extent of tiie rights of others vnth respect to the Premises, whether by
way of easement, right of way, lease, possession, lien, encumbrance, license, reservation,
condition or otherwise.
(i) Tenant acknowledges that neither Landlord nor any of tiie
Landlord Parties has made any representation or wananty as to the suitabUity ofthe Premises for
the erection of the Tenant's Work or for the conduct of Tenant's business except to the extent
expressly set forth in this Lease, and that Tenant accepts them in tiieir present condition, "as is,
"where is," and without any wananty whatsoever, except to the extent expressly set forth in this
Lease, and with no recourse whatsoever to Landlord Parties, except for fraud or breach of an
express representation or warranty.
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(ii) Tenant acknowledges that Tenant has made or will make its own
independent investigation as to the usabUity and suitability of the Premises for the Pennitted
Use; the types of govemmental permits that may be required; tiie nature and extent of applicable
laws, ordmances, regulations, plans, covenants, conditions, and restrictions, that Tenant may be
requked to comply with in order to complete and operate the Premises for the Permitted Use; the
soils, geologic, and seismic conditions existing on the Premises; the presence of any
contammants, hazardous wastes, or toxic substances in, upon, or about the soil or groundwater
kl, upon, under, or about tiie Prenuses and the potential for migiation ofthe same from adjacent
lands; the avaUabihfy and cost of all services that are necessary or deskable to serve the
Premises, includmg, but not limited to, electticity, natural gas, water, sewer, stteets, telephone,
television cable, fire protection, and poUce protection; and the usabilify of the same by Tenant as
the Tenant and occupant of the Premises; aU other physical facts, legal issues, and potential
governmental regulations or actions including, but not limited to, regulatory building
moratoriums by one or more of tiie governmental agencies having jurisdiction ofthe Premises;
all other matters deemed by Tenant to be material to Tenant or of concern to Tenant with respect
to Tenant entering into this Lease and undertaking the erection and consttuction ofthe Tenant's
Work; and Tenant agrees that except to the extent expressly set forth in this Lease, neither
Landlord nor any ofthe Landlord Parties has made any warranties or representations whatsoever
with respect to any of the foregomg. Except as ofhervdse expressly set forth in this Lease,
Tenant hereby releases the Landlord Parties from all future claims, actions, or demands tiiat
Tenant may have or may heremafter have, known and unknown, m any way relatkig to the
quaUty, fitness, or condition of the Premises as existing as of the Commencement Date and
Tenant specifically waives all rights under Califomia CivU Code section 1542 with respect to
such release, which provides as foUows:
"A general release does not extend to clauns which the creditor does not know or suspect
to exist m his or her favor at the time of executing tiie release, which if known by him or
her must have materially affected his or her setflement with the debtor."
33.13 Attorney's Fees. The prevaUing paity in any litigation, reference,
arbitration, bankruptcy, insolvency or other proceedmg ("Proceeding") relating to the
enforcement or interpretation of this Lease may recover from the unsuccessful party aU costs,
expenses, and actual attorney's fees (including expert witness and other consultants' fees and
costs) relating to or arismg out of (i) the Proceeding, and (ii) any post-judgment or post-award
proceedmg including, without limitation, one to enforce or coUect any judgment or award
resulting fr om the Proceeding. All such judgments and awards shall contain a specific provision
for the recovery of aU such subsequently incuned costs, expenses, and actual attomey's fees.
33.14 Approval. Unless provision is made for a different standard or specific
time period, approval or consent requked pursuant to this Lease shall not be unreasonably
withheld or conditioned and response to a request for an approval or consent shaU be given by
the party to whom directed within thkty (30) days of receipt. Each disapproval shaU be in
writing and the reasons shall be clearly stated if the consent or approval may not be unreasonably
withheld. Ifa response is not given withm the required time period, the requested party shall be
deemed to have withheld its approval or consent.
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33.15 Lhnitation on Landlord's LiabiUty. The term "Landlord" as used in this
Lease so far as covenants or obligations on the part of Landlord are concerned shaU be limited to
mean and include only the owner or owners at the time in question of tiie Reversionary Estate
and in the event of any ttansfer or transfers of tiie title to such Reversionai-y Estate, Landlord
herein named (and in case ofany subsequent transfers or conveyances the tiien grantor) shall be
automatically freed and relieved from and after the date of such ttansfer or conveyance from all
obligations on the part of Landlord contained in this Lease to be performed tiiereafter, provided
that any prepaid Rent, security deposh or trust fiinds m the hands of such Landlord or the then
gi-antor at the time of such ttansfer, shall be ttansfened to the grantee or tiansferee, who shall
expressly assume, subject to tiie limitations of this Section 33.15, aU ofthe terms, covenants and
conditions ki this Lease contained on the part of Landlord thereafter to be performed, h being
intended by tiiis Section 33.15 that the covenants and obligations contained in this Lease on the
part of Landlord shaU, subject to tiie provisions of this Section 33.15, be bmding on Landlord, its
successors and assigns, only during and in respect of tiiek respective successive periods of
ownership.
33.16 Landlord's Right of Entrv. Landlord reserves the right at all reasonable
times and upon not less than 48 hours prior written notice to Tenant (except in the case of an
emergency) and subject to tiie rights of Tenant's subtenants and guests, to enter the Premises to
(i) mspect them; (ii) post notices of non-responsibility, and (iu) perform any covenants of Tenant
which Tenant fails to perform (provided Landlord has the right to do so under this Lease and
subject to any notice and/or grace periods contained hi tiiis Lease). Landlord may make any
such entries without the abatement of Rent and may take such reasonable steps as required to
accomplish the stated purposes; provided, however, each such entry shaU be made in reasonable
manner which, to the maximum extent reasonably possible, does not interfere with the business
operations or security systems of Tenant or any of hs subtenants or Ucensees. Further, Tenant or
any of its subtenants shall have the right to accompany Landlord during any such entry (except in
the case of an emergency). Nothing herem contained shaU imply any dufy on the part of
Landlord to do any such work which under any provision of this Lease Tenant is required to do,
nor shaU h constitute a waiver of Tenant's defauh m faiUng to do the same.
33.17 Authority; Signatories. Landlord and Tenant hereby represent and warrant
to each other that it has the fiift power, right and authority to enter into and execute this Lease,
and that those persons whose signatures are hereinafter evidenced on this Lease on behalf of h
are duly authorized signatories of it, fully empowered to commh and bind h to tiiose certain
terms, covenants and conditions set forth herein for the Term ofthis Lease.
33.18 Counterparts and Signatm-e Pages. For convenience. Landlord and Tenant
may execute this Lease on separate counterpait pages, which when attached to this Lease shall
constitute one fufty-executed complete original Lease.
[Remainder of Page Intentionally Left Blank]
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4826-9580-6752.7 12/02/2014
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
LANDLORD: THE CARLSBAD PUBLIC FINANCING
AUTHORITY,
a joint powers authority formed by the City of
Carlsbad and the Carlsbad Municipal Water Distiict
By:_
Name:
Titie:
Approved as to form and legality:
CeUa Brewer, City Attomey
Attest:
Barbara Engelson, City Clerk
(Seal)
TENANT: GRAND PACIFIC CARLSBAD LOT 9, L.P., a
Delaware limited partnership
By: Grand Pacific Carlsbad Lot 9, Inc.,
a Delaware corporation, its general partner
By:
Timothy J. Stripe, Co-President
By:
David S. Brown, Co-President
4826-9580-6752.7 12/02/2014
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EXHIBIT "A-l It**
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN
DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1: APN 211 -023-07 (PORTION)
THAT PORTION OF LOT "H" OF RANCHO AGUA HEDIONDA, IN THE COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO PARTITION MAP NO. 823,
FILED IN THE OFFICE OF THE COUNTY OF RECORDER OF SAN DIEGO NOVEMBER
16, 1896, DESCRIBED AS FOLLOWS:
BEGINNING AT POINT 9 OF LOT "F" AS SHOWN ON SAID PARTITION MAP NO. 823,
SAID POINT 9 BEING A POINT IN THE EASTERLY BOUNDARY COURSES OF SADD
LOT "H" CONNECTING POINTS 13 OF LOT "G" AND POINT 8 OF LOT "F" AS SHOWN
ON SAID MAP NO. 823; THENCE NORTH 0°07'28" EAST ALONG THE SAID EASTERLY
BOUNDARY COURSE OF SAID LOT "H" 110.00 FEET TO THE TRUE POINT OF
BEGINNING; THENCE CONTINUING NORTH 0°07'28" EAST ALONG SAID EASTERLY
BOUNDARY COURSE 160.00 FEET; THENCE LEAVING SAID BOUNDARY COURSE
NORTH 89°52'32" WEST 120.00 FEET; THENCE SOUTH 00°07'28" WEST 160.00 FEET;
THENCE SOUTH 89°52'32" EAST 120.00 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL 2: APN 211-023-07 (PORTION)
THAT PORTION OF LOT "F" OF RANCHO AGUA HEDIONDA, IN THE COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO PARTITION MAP NO. 823,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO, NOVEMBER 16,
1896, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT 9 OF SAID LOT "F" AS SHOWN ON SAUD PARTITION MAP
NO. 823; THENCE ALONG THE BOUNDARY COURSE CONNECTING POINTS 8 AND 9
OF SAID LOT "F" NORTH 00°07'28" EAST (RECORD NORTH 0°31'16" WEST, RECORD
OF SURVEY 5715) 167.78 FEET TO THE TRUE POINT OF BEGINNING; THENCE
CONTINUING NORTH 00°07'28" EAST ALONG SAID BOUNDARY COURSE 67.25 FEET
TO A POINT ON A 58 FOOT RADIUS CURVE CONCAVE WESTERLY, A RADIAL LINE
THROUGH SAID POINT BEARING SOUTH 54°41'40" WEST; THENCE FROM SAID
POINT SOUTHEASTERLY, SOUTHERLY AND SOUTHWESTERLY ALONG SAID
CURVE 71.73 FEET THROUGH AN ANGLE OF 70°51 '37' TO THE TRUE POINT OF
BEGINNING.
PARCEL 3: APN 212-271-02
LOT 9 OF CITY OF CARLSBAD CT 09-03, IN THE CITY OF CARLSBAD, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 15902,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY,
MARCH 4, 2013."
EXHIBIT "A-l"
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4826-9580-6752.7 12/02/2014
**Landlord and Tenant hereby agree to revise this Exhibh A-l to provide for certain lot line
adjustments and exclusive easements which will be finalized during the enthlement process.
Such revised Exhibh A-l, once mutually agreed to by Landlord and Tenant, shall be substituted
for this Exhibh A-l prior to the execution and delivery of the Lease by the parties.
EXfflBIT "A-r
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4826-9580-6752.7 12/02/2014
EXHIBIT "A-2"
SITE PLAN
[See attached]
EXHIBIT "A-2"
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4826-9580-6752.7 12/02/2014
Existing Condition
Sheraton Carlsbad Resort
CAniSBAD. CALIFO r. Nl^
SITE PLAN
M r.\b.i>aslii ;
EXHIBIT "A-2"
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4826-9580-6752.7 12/02/2014
Future Conditton Upon
Completion of Hotel Addition
and Additional Sheraton Building
SHERATON
(7) ADDITIONAL SHERATON BUILDING
(7) CONVERTED IMPROVEMENTS (WESTIN)
(r) WCSTIN HOTEL ^ 200 ROOM RESORT CENTER
@ HOTEL ADOmON
HOrtL ADDITION EXPANSION OR TIMESHARF ADDITION
Westin / Sheraton Carlsbad Resort
SITE PL AN
EXHIBIT "A-2"
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4826-9580-6752.7 12/02/2014
EXHIBIT "B '
ANNUAL RENT SCHEDULE
(Initial Term)
Lease Year Annual Rei
Yearl S 159,965
Year 2 $ 159,965
Year 3 $ 159,965
Year 4 $ 159,965
Years $ 159,965
Years $ 163,164
Year? $ 166,428
Years $ 169,756
Year 9 $ 173,151
Year 10 $ 176,614
Year 11 $ 180,147
Year 12 $ 183,750
Year 13 s 187,424
Year 14 s 191,173
Year 15 $ 194,996
Year 16 $ 198,896
Year 17 $ 202,874
Year 18 $ 206,932
Year 19 $ 211,070
Year 20 $ 215,292
Year 21 $ 219,598
Year 22 $ 223,990
Year 23 $ 228,469
Year 24 $ 233,039
Year 25 $ 237,700
Year 26 s 243,642
Year 27 $ 249,733
Year 28 $ 255,976
Year 29 s 262,376
Year 30 s 268,935
Year 31 $ 275,659
Year 32 s 282,550
Year 33 $ 289,614
Year 34 $ 296,854
Year 35 $ 304,276
Year 36 s 311,882
Year 37 $ 319,680
Year 38 $ 327,671
Year 39 $ 335,863
Year 40 $ 344,260
Year 41 $ 352,866
Year 42 $ 361,688
Year 43 $ 370,730
Year 44 $ 379,998
Year 45 $ 389,498
Year 46 $ 399,236
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Year 47 $ 409,217
Year 48 $ 419,447
Year 49 $ 429,933
Year 50 S 440,682
Year 51 $ 451,699
Year 52 $ 462,991
Year 53 S 474,566
Year 54 $ 486,430
Year 55 $ 498,591
Rent set at $159,965 in years 1-5
Rent escalates and resets at 2%/annum for years
6-25
Rent escalates and resets at 2.5%/annum for
years 26-55
EXHIBIT "B"
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4826-9580-6752.7 12/02/2014
EXHIBIT "C
ANNUAL RENT DURING OPTION TERMS
(i) Tenant has two (2) separate options to extend the Term of this
Lease for two (2) separate successive periods of ten (10) years each, upon all the terms,
covenants and conditions contained m this Lease except that the Annual Rent shall be
determined as set fortii below in this Exhibh C. Each such option shaU be exercisable by Tenant
givmg to Landlord notice of stating that Tenant is interested m exercising the option to extend
(the "Interest Notice") not less than twelve (12) months prior to the expiration date ofthe initial
Term or ofthe then exphation date ofthe Term of this Lease if the Term is theretofore extended
pursuant to this Exhibh C. Notwithstandmg the foregoing, if Tenant shall fail to give the hiterest
Notice withm the aforesaid time limit. Tenant's right to exercise hs option shall nevertheless
continue until thhty (30) days after Landlord shah have given Tenant notice of Landlord's
election to terminate such option (which notice may be given by Landlord at any time after the
expiration ofthe aforesaid twelve-month period) and Tenant may give tiie Interest Notice at any
time unth the expiration of said thirty-day period after Landlord's notice. If Tenant thereafter
timely gives the Interest Notice and exercises any such option pursuant to tiie terms set forth in
paragraph (ii) below, the extended portion of the Term to which such option relates shall
commence or shall be deemed to have commenced at the time h would have commenced if such
notice had been given at the time prescribed in the first sentence of titis paragraph (i).
(ii) Within thirty (3 0) days of Landlord's receipt of the Interest Notice,
Landlord shaU deliver notice ("Option Rent Notice") to Tenant setting forth the proposed
Annual Rent for tiie first year of the option term (the "Option Rent"). If Tenant desires to
exercise such Option, Tenant shall provide Landlord written notice thereof withm thirty (30)
days after receipt ofthe Option Rent Notice ("Tenant's Acceptance") provided, however, upon,
and concurrent with such exercise, Tenant may, at its option, object to the Option Rent contained
in the Option Rent Notice. Tenant's faUure to deliver the Tenant's Acceptance on or before the
dates specified above shall be deemed to constitiite Tenant's election not to exercise the Option.
If Tenant timely provides Tenant's Acceptance, the Term shaU be extended for the Option Term
upon all ofthe terms and conditions set forth in this Lease, except that, subject to the terms of
paragraph (v) below, the Option Rent for the then cuirent option term shaU be as indicated m the
Option Rent Notice unless Tenant, concuixentiy with Tenant's Acceptance, objects to the Option
Rent contained in the Option Rent Notice, in which case tiie parties shall follow the procedure
set fortii in paragraphs (iii) and (iv) below to determine the Option Rent.
(iii) Annual Rent Dming Option Terms. If the Term is extended
pursuant to the above terms ofthis Exhibh C but Tenant objected to the Option Rent proposed by
Landlord in the Option Rent Notice, than tiie Option Rent shaU be equal to tiie "Market Rent"
(defined below), but in no event shall be less tiian the Annual Rent applicable to the immediately
precedmg Lease Year. "Market Rent" as ofany date m question, shaU mean an amount equal to
the product ofthe Cap Rate and tiie Fah- Market Land Value as of the date in question. The
"Cap Rate" shaU mean the hotel land cap rate tiiat is most appropriate to apply to the Premises
by reference and comparison to the cap rates applied or refen-ed to m the most recent comparable
sales of land for hotel development or sales of leased fee interests in land under existing hotels
EXHIBIT "C"
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4826-9580.6752.7 12/02/2014
includmg those disclosed or described in a nationally-pubUshed sui-vey and/or the data bases of
national hospitality consuhing and appraisal frnns. "Fair Marliet Land Value" shall mean the
most probable sale price in terms of money which the Premises (with all easements and rights
appurtenant thereto) should bring in a competitive and open maiket under the conditions
requisite to a fah sale, the buyer and seller, each actmg prudently and knowledgeably. Implicit
m this definition is tiie consummation of a sale as of tiie applicable date of determination of Fair
Market Land Value and the passing of title from seller to buyer under conditions whereby:
(i) the buyer and seUer aie ai-ms-lengfh paities; (ii) botii parties are well informed or well advised
and each acting m what they consider theh own best mterests; (iii) a reasonable time is allowed
for exposure in the open market; (iv) payment is made in terms of cash in U.S. dollars or in terms
of financial arrangements comparable thereto; (v) the price represents the normal consideration
for the property sold unaffected by special or creative financing or sales concessions granted by
anyone associated with tiie sale; (vi) the Premises is vacant, clean and uncontaminated and is free
of all encumbrances except the use and development resttiction terms ofthis Lease appUcable to
the Premises at that time; and (-vii) assuming the then actual uses of the improvements on tiie
Land.
(iv) Detennination of Market Rent. If in Tenant's Acceptance Tenant
objects to the Option Rent, Landlord and Tenant shall attempt to agree upon tiie Market Rent
using their diligent good-faith efforts. If Landlord and Tenant faU to reach agreement within
tiiirty (30) days following Tenant's Acceptance ("Outside Agreement Date"), then each party
shall make a separate determination ofthe Market Rent which shall be submitted to each otiier
and to arbittation in accordance with the following items (1) through (10):
(1) Landlord and Tenant shaU each appoint one arbittator
(each, a "Selected Arbitrator") who shaU by profession be a real estate appraiser who is a
Member ofthe Appraisal Institute (MAI) and who shall have been active over tiie five (5) year
period ending on the date of such appointment m tiie appraisal of fu-st-class hotels in the
Southem California. Each such arbittator shall be appointed within fifteen (15) days after the
Outside Agreement Date. Landlord and Tenant may have developed hs Market Rent (being tiie
product ofthe Cap Rate and Fair Market Land Value) and otherwise consult witii tiieh Selected
Arbitrators prior to appointment and its Selected Arbittator may be favorable to theh respective
positions.
(2) The two Selected Arbittators so appomted shaU be
specifically requhed pursuant to its engagement letter with Landlord or Tenant to muttiaUy
appoint, within thirty (30) days of tiie date of the appointment of the last appomted Selected
Arbittator, a tiurd arbiti-ator ("Third Arbitrator ") who shall be qualified under tiie same criteria
set fortii hereinabove for qualification of tiie two Selected Arbitiators; provided, however,
neither Landlord nor Tenant or eitiier party's Selected Arbitrator may, directly or indirectly,
consuh with the Third Arbitrator regardmg the determuiation of the Fah Market Land Value
prior to his or her appointinent. The Third Arbittator shall be an independent party and shaU not
have been previously engaged by either Landlord or Tenant or theh principals during the five (5)
year period preceding the Thhd Arbitrator's appointment and the Thhd Arbitrator shaU so certify
in its engagement letter or by other means satisfactory to Landlord and Tenant. The Thhd
Arbitrator shall be retahied via an engagement letter jointiy prepared by Landlord and Tenant.
EXHIBIT "C"
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4826-9580-6752.7 12/02/2014
(3) The detemunation of the Thhd Arbitrator shall be limited
solely to the issue of whether Landlord's or Tenant's detennmation of Market Rent submitted
most recentiy but prior to ten (10) days before tiie Outside Agreement Date is the closest to the
actual Market Rent as ofthe Outside Agreement Date, taking into account the assumptions and
requhements set fortii m the definition of "Fair Market Land Value".
(4) Each party shall submh to the other paity's Selected
Arbiti-ator and to the Third Arbittator, such party's determuiation of Market Rent last submitted
to the other party at least ten (10) days prior to the Outside Agreement Date. Each submittal may
include such supporting information that was also made available to the other party at least ten
(10) days prior to the Outside Agreement Date. Such submittal shaU be made concuiTentiy
within five (5) business days after leai-ning of such appointment.
(5) The Third Arbitrator shall within sixty (60) days of his or
her appointment reach a decision as to whether the Landlord's or Tenant's determmation of
Market Rent as submhted pursuant to the above terms is closest to Market Rent as ofthe Outside
Agreement Date as determined by the Thhd Arbitrator in accordance with Exhibh C. The Thhd
Arbittator shall simuUaneously publish a ruling ("Appraisal Award") indicating whether
Landlord's or Tenant's submitted Market Rent as of the Outside Agreement Date is closest to the
Market Rent. The determination of the Thhd Arbitrator may be based on its own appraisal or
investigation and/or its review and evaluation of Landlord's and Tenant's submittal and
discussion of the same with the Selected Arbitrators. FoUowing notification of the Appraisal
Award, Landlord's or Tenant's submitted Market Rent determination, whichever is selected by
the Third Arbittator as being closest to the Market Rent determined as of the Outside Agreement
Date by the Third Aibittator shall become the then applicable Market Rent for tiie subject Option
Term.
(6) The Appraisal Award shall be binding upon Landlord and
Tenant.
(7) The parties hereto agree that untU the Appraisal Award is
issued. Tenant shall continue to pay Annual Rent at the same rate as apphcable just before the
option term. At the time such dispute is resolved, the parties shall make appropriate adjustinents
to any amounts paid by Tenant for the period firom the commencement of the appUcable option
term that were based upon the Annual Rent applicable just before the option term, and to the
extent necessary. Tenant shall within thhty (30) days of tiie resolution of such dispute pay any
and ah amounts then due to Landlord, together with interest, at the Prime Rate plus three percent
(3%) per annum, resulting from an underpayment by Tenant.
(8) If either Landlord or Tenant fail to appoint a Selected
Arbitrator within fifteen (15) days after the applicable Outside Agreement Date, either party may
pethion the presiding judge of the Superior Court of San Diego County to appoint such Selected
Arbitrator subject to the criteria in this Exhibh C, or if he or she refuses to act, either party may
petition any judge having jurisdiction over the parties to appoint such Selected Arbittator.
(9) If the two Selected Arbittators fail to agree upon and
appoint the Thhd Arbitrator or if either party Irusttates tiie engagement of the Third Arbitrator,
EXHIBIT "C"
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4826-9580-6752.7 12/02/2014
then either party may petition the piesidmg judge of the Superior Court of San Diego County to
appoint the Third Arbittator, subject to criteria in this Exhibit C, or if he or she refiises to act,
eitiier party may petition any judge having jurisdiction over the parties to appoint such Third
Ai-bitrator.
(10) Each party shall pay the fees and expenses of the appraiser
appointed by or on behalf of it, and each shaU pay one-half of the fees and expenses ofthe Third
Arbittator, if any.
(v) During each option term, commencing with the first day of the
second Lease Year ofthe option tei-m and the first day of each Lease Year thereafter during the
option term, the Annual Rent shall be increased by two and one-half percent (2.5%) over the
Annual Rent applicable during the prior Lease Year.
EXHIBIT "C"
4826-9580-6752.7 12/02/2014
EXIIIBIT "D"
LENDER'S RIGHTS UNDER THE LEASE
Landlord and Tenant acknowledge and agree that a Lender shall have, in addition to all
rights and remedies provided for in the Lease, all ofthe foUowing rights:
1. Abandonment of Propertv, Notwithstanding any provision in the Lease to the
conttary. Landlord acknowledges and agrees that if Tenant defaults on hs obligations to a Lender
and the Lender undertakes to enforce its security interest in tiie Lease, the hnprovements, or any
collateral constituting personal property and/or trade fixtures, and thereafter prosecutes such
enforcement proceedmg to completion with due dihgence and continuity, then such property
shaU not be deemed abandoned.
2. Lender's Entty onto Propei-tv. For the purpose of curing any defauh by Tenant
under the Lease or under any mstruments executed in favor of a Lender (the "Loan
Documents"), Landlord and Tenant authorize Lender to enter upon the Premises and to exercise
any of the rights and powers granted to Lender under the Lease or the Loan Documents,
provided the latter powers would, if exercised by Tenant, not breach tiie Lease, and provided
further that Lender shaU mdemnify, defend and hold Landlord and tiie other Landlord Parties
harmless fiom all clauns, costs, liabihty, damage or expense, includmg attorneys' fees, arising
from Lender's entry upon the Premises.
3. Lender's Rights to Notice. Landlord agrees tiiat any notice of defauh, termmation
of the Lease or temiination of Tenant's right to possession delivered to Tenant shaU not be vahd
or of any force or effect as to Lender only unless a duplicate copy thereof shaU be dehvered to
the Lender concurrentiy therewith by any method provided for m Section 34.5 ofthe Lease, but
only if Tenant or the Lender previously gave written notice to Landlord ofthe name and address
ofthe Lender; provided, however, m no event shall the failure to deliver such notice to Lender be
appUed to allow a defaulting Tenant to remain in possession of the Prenuses so long as the
enforcement against tiie Tenant does not prejudice Lender's rights hereunder.
4. Removal of Personal Property. Notwithstanding any provision to the conttary
contained in the Lease, in tiie event of Tenant's defauh under the Lease, Lender shall not be
requhed to remove from the Premises any Personalty unless and until Lender has acquhed
possession of the Premises or titie to the Leasehold Estate.
5. Cure of Defaults by Lender.
(a) In the event of any default by Tenant under the provisions ofthis Lease,
any Lender will have the same periods as aie given Tenant for remedying such defauh or causing
h to be remedied, plus, in each case, an additional period of thirty (30) days after the exphation
ofthe initial period or after Landlord has served a notice or a copy of a notice of such default
upon the Lender, whichever is later.
(b) In the event that Tenant shall default under any of tiie provisions of this
Lease, any Lender, without prejudice to hs rights agamst Tenant, shall have tiie right to cure such
EXHIBIT "D"
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4826-9580-6752.7 12/02/2014
defauh within the applicable grace periods provided for in the preceding Section 5(a), above,
whether the same consists ofthe faUure to pay Rent or the failure to perform any other matter or
thing which Tenant is hereby required to do or peiform, and Landlord shall accept such
performance on the part of such Lender as tiiough the same had been done or performed by
Tenant. For such purpose. Landlord and Tenant hereby authorize such Lender to enter upon the
Premises and to exercise any of its rights and powers under this Lease and subject to the
provisions ofthis Lease, provided that Lender shall indemnify, defend and hold Landlord and tiie
other Landlord Parties harmless from all claims, costs, Uability, damage or expense, mcluding
attorneys' fees, arising from Lender's entty upon the Premises.
(c) In the event of any nonmonetary defauh by Tenant that is not reasonably
susceptible of being cured by Lender prior to the exphation of the applicable grace period
specified in Section 5(a) above or which can only be cured by Lender after havhig obtained
possession of the Premises, a Lender shall give Landlord written notice that h intends to
undertake the curing of such default, or to cause the same to be cured, or to exercise its rights to
acquhe the Leasehold Estate by foreclosure or otherwise, and shaU unmediately commence and
then proceed with aU due diligence to do so, whether by peiformance on behalf of Tenant of its
obUgations imder this Lease, or by entty on the Premises and/or the Improvements by
foreclosure or otherwise, and provided that Lender or Tenant shall have cured any prior
monetary defauh and fulfills all of Tenant's monetary obligations under the Lease as they
become due, then Landlord will not terminate or take any action to effect a temiination of this
Lease or re-renter, take possession of or relet the Premises or the Improvements or similarly
enforce performance ofthis Lease in a mode provided by law so long as such Lender is -with aU
due dihgence and in good faith engaged in the curing of such defauh, or effectmg such
foreclosure and aU of Tenant's monetary obligations under the Lease are paid when due;
provided, however, that the Lender shall not be required to conthiue such possession or continue
such foreclosure proceedings if such defauh shall be cured.
6. Termination of Lease. In the event of a termination of this Lease as to Tenant by
reason ofthe bankruptcy of Tenant and rejection of tiiis Lease by tiie trustee in bankruptcy or by
Tenant as debtor hi possession, or by operation of law or for any other reason. Landlord agrees
that titis Lease shall not terminate as to Lender and that this Lease shall, without any fiirther act
or action, automaticaUy continue upon the same terms in favor of Lender as the lessee under this
Lease provided that (i) Lender delivers to Landlord within ten (10) days of such event of
termination written notice ("Notice of Assumption") that it elects to assume this Lease, and (ii)
Lender immediately then cures or engages in good faith to cure any then existing defauh of
Tenant under this Lease which is reasonably susceptible of cure by Lender; and Lender may take
aU appropriate actions necessary to remove Tenant from the Premises and such actions may be
undertalcen in its own name or, if Lender has obtained Landlord's consent and Lender
indemnifies Landlord with respect to such actions, the name of Landlord. If the Lender faUs to
deliver tiie Notice of Assumption within such ten (10) day period, the Lender shall be deemed to
have waived tiie right to assume the Lease pursuant to tiiis Section 6. Without Ihniting the
foregoing, the parties agree to execute such addhional documents as may be reasonably requhed
from time to time to confum or cany out the mtent of tiiis Section, including entering into a new
ground lease if Lender so elects upon the terms described below.
EXHIBIT "D"
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4826-9580-6752.7 12/02/2014
7. New Ground Lease. In the event that Tenant's interest under this Lease shall be
terminated by a sale, assignment or transfer pursuant to the exercise of any remedy of a Lender,
or pursuant to judicial proceedings, or as a result of the rejection of this Lease by reason of
bankruptcy of Tenant or otherwise, and if (i) Lender deUvers to Landlord within ten (10) days of
the date of such temunation written notice that it elects to enter into a new lease ofthe Premises,
and (ii) either, (A) no Rent or other chmges shaU tiien be due and payable by Tenant under this
Lease, or (B) the Lender shall have arranged to tiie reasonable satisfaction of Landlord for the
prompt payment of aU Rent and other charges (less a credit for any income received by Landlord
during such period) due and payable by Tenant under this Lease as of the date of such
termination, together with the Rent and other charges tiiat but for such termination would have
become so due and payable from tiie date of such termmation through the date of execution of a
new lease, and upon payment of all Rent, other charges and expenses, includmg attorneys' fees,
incident thereto, Landlord wiU execute and deliver to such Lender or hs nominee a new lease of
the Premises. If the Lender fails to deUver such notice within such ten (10) day period, tiie
Landlord's obligation to execute a new lease pursuant to this Section 7 shaU terminate and be of
no further force or effect. Such new lease shall be for a term equal to tiie remainder ofthe Term
of this Lease before givmg effect to such termhiation and shaU contam the same covenants,
agreements, terms, provisions and limitations as this Lease, and shall be subject only to the
encumbrances and otiier matters in effect as ofthe recordation of the memorandum of tiiis Lease
and matters done or suffered by Tenant or Lender. Upon tiie execution and deUvery of such new
lease, the new tenant may take aU appropriate actions as shall be necessary to remove Tenant
from the Premises and the Improvements and such actions may be undertaken in hs own name
or, if Lender has obtained Landlord's consent and Lender indemnifies Landlord with respect to
such actions, the name of Landlord, but Landlord shah not be subject to any UabUity for the
payments of fees, includmg reasonable attorneys' fees, costs or expenses hi connection -witii such
removal; and such new tenant shaU pay all such fees, includhig attorneys' fees costs and
expenses or, on demand make reimbursements therefor to Landlord.
8. No Amendment or Surrender. The Lease shaU not be cancelled or surrendered by
agreement between Landlord and Tenant without Lender's sole discretion consent. Landlord
agrees, for the benefit of Lender, that Landlord -will not enter into any agreement witii Tenant to
amend or modify this Lease without the prior written consent of Lender, which consent shall not
be unreasonably withheld, conditioned or delayed, and any such action without Lender's written
consent shall not be bindmg on Lender, hs successors and assigns. Lender shaU respond in
writing to any request by Tenant or Landlord that Lender consent to an amendment or
modification of the Lease witiun thiity (30) days of the Tenant's or Landlord's request for such
consent (which response shaU include, in the case of any denial or withholding of consent by tiie
Lender, the reason(s) that the Lender has denied or witiiheld such consent). In the event the
Landlord does not receive a written response from the Lender to any such request withm such
thirty (30) day period, then Tenant or Landlord may give Lender a second notice requesting such
consent which notice shall prominently identify in bold and all capital type face that such notice
is a second notice and that Lender's faUure to respond witiiin fifteen (15) days shall resuh in
Lender's deemed approval of the proposed amendment or modification. In the event the
Landlord does not receive a written response from the Lender to any such request within such
fifteen (15) day period after such second notice, the Lender shall irrevocably be deemed to have
consented to such amendment or modification of the Lease, and the Tenant and Landlord shall be
free to enter into such amendment or modification ofthe Lease witiiout furtiier notice to Lender.
EXHIBIT "D"
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4826-9580-6752.7 12/02/2014
9. Lender's Performance. In all events. Landlord vwll accept performance of the
obUgations of Tenant under this Lease by or at the instance of Lender as if the same had been
made by Tenant.
10. Participation in Proceedings. Notwithstanding any provisions contained m this
Lease to the contirary, so long as the Loan Documents remain in effect, all policies of insurance
caUed for in this Lease or otherwise in effect for the Leasehold Estate and tiie Improvements
shall, in addition to any provisions required under this Lease, contain a standard mortgagee
protection endorsement. Until such time as any mdebtedness secured by the Loan Documents is
repaid in fiiU, Lender shall be entitied to participate in (and follo-wing a Loan Document Event of
Default, vis-a-vis Tenant, conttol) tiie settiement or adjustment of any losses covered by such
pohcies of msurance and no such settlement or adjustment shall be accepted or approved without
the specific consent m -writmg of Lender, which consent shall not be unreasonably withheld,
conditioned or delayed. In addition, until such time as any indebtedness secured by any Loan
Document is repaid in full. Lender shall have the right to participate in (and following a Loan
Document Event of Default, vis-a-vis Tenant, conttol) any settlement of or stipulation of
judgment with respect to any condemnation proceeding affecting all or any portion of the
Leasehold Estate and Improvements or any agreement to sell all or any portion ofthe Leasehold
Estate and Improvements in heu of condemnation, and no such settlement, stipulation or
agreement shall be made or entered into without Lender's prior written consent, which consent
shall not be unreasonably withheld, conditioned or delayed. Notwithstanding anything to the
conttary contained herein. Lender agrees that (i) all proceeds from poUcies of insurance caUed
for m the Lease or otherwise in effect for the Leasehold Estate and the Improvements and (ii) all
Condemnation Proceeds shaU be received, held, and/or appUed as set forth in the Loan
Documents For the purposes ofthis Section 10, "Loan Document Event of Default" shall mean
an "Event of Default," as defmed in the Loan Documents.
11. Foreclosure Event. Lender may exercise aU of hs rights, benefits, and remedies
under the Loan Documents, including the commencement and consummation of a foreclosure or
conveyance of a deed in lieu of foreclosure under the Leasehold Mortgage (a "Foreclosure
Event"), in accordance with their terms without such actions constituting a default of any kind
under this Lease. For the purposes of this Exhibh D, "Leasehold Mortgage" shaU niean the
deed of ttust which is a part of the Loan Documents. From and after the consummation of a
Foreclosure Event, tiie person that succeeds to the ownership of the Prenuses pursuant to tiie
Foreclosure Event (the "Foreclosure Transferee") shaU be subject to all of the terms and
conditions set forth in the Lease, includmg, without limhation, the provisions of Section 17 of
this LcEise.
12. Liability of Lender and Foreclosure Transferee. Landlord agrees that neither
Lender nor any Foreclosure Transferee has become personally Uable under the terms and
obligations of this Lease and neither Lender nor any Foreclosure Transferee shall become so
liable unless and until (i) a Foreclosure Event is consummated (in which case, liability under the
terms and obhgations of this Lease shall apply only prospectively, to actions taken by the
Foreclosure Tiansferee after the Foreclosure Event, and specifically excluding any UabiUty for
defaults by the Tenant prior to the Foreclosure Event); or (U) Lender or its successors and assigns
assumes said obligations in writing pursuant to Section 6 of this Exhibit D above or enters into a
new lease with Landlord pursuant to Section 7 of tiiis Exhibh D above, and, notwitiistanding any
EXHIBIT "D"
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such assumption or new lease. Lender or any Foreclosure Transferee shall be liable under this
Lease or any such new lease only so long as Lender or such Foreclosure Transferee maintains
ownership of the leasehold interest or estate.
13. No Restiictions On Certain Transfers. Landlord has consented to (or no consent
by Landlord is requhed for) any of the following: (a) any ttansfer, conveyance, assignment, or
encumbrance of the Lender's coUateral interest m this Lease, or any other collateral securing the
Loan otherwise permitted under the applicable Loan Documents; (b) the right to ttansfer the
Lender's interest in this Lease pursuant to a Foreclosure Event; and (c) from and after the
consummation of a Foreclosure Event, the right of the Lender to transfer, convey, and assign its
interest in this Lease without restriction; provided, however, that
(1) with respect to any transfer pursuant to clauses (b) and (c) above such
transfer shall be subject to the following:
(A) the assignor's interest in the Improvements shall be ttansferred to
the assignee concmrently with the Leasehold Estate;
(B) there shaU be deUvered to Landlord (A) a duplicate original ofthe
histrument or instiuments of ttansfer of this Lease and of the assignor's interest in the
Improvements in recordable form, containing the name and address of the transferee and (B) an
insttument of assumption by the tiansferee of all of Tenant's obligations under this Lease arising
from and after the effective date of the transfer;
(C) no such assignment and assumption shall operate or be deemed to
operate as a release of the previous Tenant and/or the liabilities of the previous Tenant (and/or
any guarantor or guarantors of the duties, obligations and liabilities of the previous Tenant) or a
waiver of any of Landlord's rights or remedies against the pre-vious Tenant for any defaults by
the previous Tenant under this Lease prior to the Foreclosure Event;
(D) following the ttansfer, the transferee of this Lease shall be the
same person as the owner of the Westin Hotel including the Converted Improvement;
(2) any encumbrance of this Lease with a Leasehold Mortgage shall be
subject to Section 17 ofthis Lease.
14. Recognition. In each case where a ttansfer, conveyance, or assignment permitted
as provided above results in a change in the identity of the Tenant under this Lease, Landlord
agrees, upon notice of such transfer, to recognize such new Tenant as the "Tenant" under this
Lease, subject to the terms and provisions ofthis Lease.
15. Modifications. Landlord acknowledges that a proposed Lender may review the
provisions of this Exhibh "D" and based upon such review may request changes to or
clarifications of such piovisions. Landlord agrees to make such changes or clarifications
reasonably requested by Lender as a condition to its financing provided the Lender's requested
changes ai-e conunercially reasonable and consistent with the customary leasehold financing
practices of Approved Institutions and do not increase any of Landlord's obligations, or decrease
or adversely affect Landlord's rights and remedies hereunder in any material respect. Tenant
EXHIBIT "D"
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shall reimburse Landlord for Landlord's reasonable attorneys' fees incurred in connection with
reviewhig, negotiating or documenting any such amendment
16. Conflict. If tiiere is any conflict between the provisions of the Lease and the
provisions of this Exhibh "D", the provisions of tius Exhibh "D" shall conttol.
EXHIBIT "D"
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EXHIBIT "E"
RECORDUSIG REQUESTED BY
AND WHEN RECORDED RETURN TO:
Grand Pachic Carlsbad Lot 9, L.P.
5900 Pasteur Court, Suite 200
Carlsbad, CA 92008
Attn: David Bro-wn
(Above Space for Recorder's Use Only)
MEMORANDUM OF LEASE
This MEMORANDUM OF LEASE is made as of . _, 201_, by THE
CARLSBAD PUBLIC FUSlANCBSfG AUTHORITY, a joint powers autiiority formed by the City
of Carlsbad and the Carlsbad Municipal Water District ("Landlord"), and GRAND PACIFIC
CARLSBAD LOT 9, L.P., a Delawaie liniited partnership ("Tenant").
1. Landlord leases to Tenant the real property (the "Property") described m Exhibh
A attached hereto pursuant to tiie Ground Lease between Landlord and Tenant dated as of
, 2014 (the "Lease").
2. The Lease provides for a term commencing on the Rent Commencement Date (as
defmed in the Lease) and expiring sixty-five (65) years thereafter, subject to two (2) options to
extend for ten (10) years each.
3. Reference is made to a Grant Deed in favor of the Carlsbad Municipal Water
District recorded on July 27, 1962 in the Official Records of the San Diego County Recorder's
OfSce as Document No. 127706 and the fact tiiat under such grant deed the Carlsbad Municipal
Water District may have certain rights over the portions of the Premises not o-wned by h. On
behalf of tiie Carlsbad Municipal Water District, Landlord agrees that so long as the Lease is in
effect, such rights wUl not be exercised by Carisbad Municipal Water District or by Landlord on
behalf of the Carisbad Municipal Water District in any way in so far as tiie Premises is
concerned and nothing contained m such grant deed shall prohibh or interfere with the use or
development of tiie Premises in accordance with the terms ofthe Lease.
4. Other terms and conditions pertaining to the Lease are set forth in the Lease, aU of
which are incoiporated into this Memorandum by this reference, ff tiiere is any inconsistency
between the terms and conditions of the Lease and the terms and conditions of this
Memorandum, the terms and conditions of the Lease shaU control.
[Signature page follows; Balance of page intentionally left blank.]
EXHIBIT "E"
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LANDLORD: THE CARLSBAD PUBLIC FD^ANCING
AUTHORITY,
a joint powers authority formed by the City of
Cai-lsbad and the Carlsbad Municipal Water Disttict
By:_
Name:
Titie:
Attest:
Barbara Engelson, City Clerk
(Seal)
Approved as to form and legality:
Ceha Brewer, City Attorney
TENANT: GRAND PACIFIC CARLSBAD LOT 9, L.P., a
Delaware hmited partnership
By: Grand Pacific Carlsbad Lot 9, Inc.,
a Delaware corporation, its general partner
By:
Thnothy J. Sttipe, Co-President
By:_
David S. Brown, Co-President
EXHIBIT "E"
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4826-958(W752.7 12/02/2014
A notary pubUc or other officer complethig this
certificate verifies only the identity ofthe
individual who signed the document to which this
certificate is attached, and not the truthfidness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On , before me.
a Notary Public, personally appeared , who proved to me
on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same m his/her/their
authorized capacity(ies), and that by his/her/theh signature on the instmment, the person(s), or
the entity upon behalf of which the person(s) acted, executed the mstrument.
I certify under PENALTY OF PERJURY under tiie laws of the State of Califomia tiiat
the foregoing paragraph is tme and conect.
WITNESS my hand and ofiicial seal.
Notary Public
EXHIBIT "E"
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4826-9580-6752.7 12/02/2014
A notary public or other officer complethig this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
accuracy, or validity of that document.
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On __, before me, ,
a Notary Public, personally appeared . , who proved to me
on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the
within instrument and acknowledged to me that he/she/they executed the same in his/her/theh
authorized capacity(ies), and tiiat by his/her/theh signature on the histrument, the person(s), or
the entity upon belialf of whichthe person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under tiie laws of the State of Cahfornia that
the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Notary PubUc
EXHIBIT "E"
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4826-9580 6752.7 12/02/2014
EXHIBIT A TO EXHIBIT E
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF SAN
DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCEL 1: APN 211-023-07 (PORTION)
THAT PORTION OF LOT "H" OF RANCHO AGUA HEDIONDA, IN THE COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO PARTITION MAP NO. 823,
FILED IN THE OFFICE OF THE COUNTY OF RECORDER OF SAN DIEGO NOVEMBER
16, 1896, DESCRIBED AS FOLLOWS:
BEGINNING AT POINT 9 OF LOT "F" AS SHOWN ON SAID PARTITION MAP NO. 823,
SAID POINT 9 BEING A POINT IN THE EASTERLY BOUNDARY COURSES OF SAID
LOT "H" CONNECTING POINTS 13 OF LOT "G" AND POINT 8 OF LOT "F" AS SHOWN
ON SAID MAP NO. 823; THENCE NORTH 0°07'28" EAST ALONG THE SAID EASTERLY
BOUNDARY COURSE OF SAID LOT "H" 110.00 FEET TO THE TRUE POINT OF
BEGINNING; THENCE CONTINUING NORTH 0°07'28" EAST ALONG SAID EASTERLY
BOUNDARY COURSE 160.00 FEET; THENCE LEAVING SAID BOUNDARY COURSE
NORTH 89°52'32'; WEST 120.00 FEET; THENCE SOUTH 00°07'28" WEST 160.00 FEET;
THENCE SOUTH 89°52'32" EAST 120.00 FEET TO THE TRUE POINT OF BEGINNING.
PARCEL 2: APN 211-023-07 (PORTION)
THAT PORTION OF LOT "F" OF RANCHO AGUA HEDIONDA, IN THE COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO PARTITION MAP NO. 823,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO, NOVEMBER 16,
1896, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT 9 OF SAID LOT "F" AS SHOWN ON SAID PARTITION MAP
NO. 823; THENCE ALONG THE BOUNDARY COURSE CONNECTING POINTS 8 AND 9
OF SAID LOT "F" NORTH 00°07'28" EAST (RECORD NORTH 0°31'16" WEST, RECORD
OF SURVEY 5715) 167.78 FEET TO THE TRUE POINT OF BEGINNING; THENCE
CONTINUING NORTH 00°07'28" EAST ALONG SAID BOUNDARY COURSE 67.25 FEET
TO A POINT ON A 58 FOOT RADIUS CURVE CONCAVE WESTERLY, A RADIAL LINE
THROUGH SAID POINT BEARING SOUTH 54°41'40" WEST; THENCE FROM SAID
POINT SOUTHEASTERLY, SOUTHERLY AND SOUTHWESTERLY ALONG SAID
CURVE 71.73 FEET THROUGH AN ANGLE OF 70°51 '37' TO THE TRUE POINT OF
BEGINNING.
PARCEL 3: APN 212-271-02
LOT 9 OF CITY OF CARLSBAD CT 09-03, IN THE CITY OF CARLSBAD, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 15902,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY,
MARCH 4, 2013.
EXHIBIT A TO
EXHIBITE
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4826-9580-6752.7 12/02/2014
**Landlord and Tenant hereby agree to revise this Exhibh A to Exhibh E to provide for certain
lot line adjustments and exclusive easements which will be finalized during the entitlement
process. Such revised Exhibit A to Exhibit E, once mutually agreed to by Landlord and Tenant,
shall be substituted for this Exhibit A to Exhibit E prior to the execution and delivery ofthe
Lease by the parties.
EXHIBIT A TO
EXHIBIT E
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4826-9580-6752.7 12/02/2014
EXHIBIT "F"
GUARANTY OF COMPLETION AND LIMITED PAYMENT OBLIGATIONS
THIS GUARANTY OF COMPLETION AND LIMfrED PAYMENT OBLIGATIONS
("Guaranty") is executed as of , 201^ by GRAND PACIFIC CARLSBAD,
L.P., a California limited partnership (the "Guarantor"), in favor of THE CARLSBAD PUBLIC
FINANCING AUTHORITY, a jomt powers authority formed by the City of Caiisbad and the
Carlsbad Municipal Water Disttict ("Landlord"), with reference to the facts set forth below.
RECITALS
Landlord and GRAND PACIFIC CARLSBAD LOT 9, L.P., a Delaware limited
partnership ("Tenant") have entered into that certam Triple-Net Unsubordinated Ground Lease
dated , 201_ (as at any thne amended, modified, or supplemented, the
"Lease"), covering the Premises described in the Lease. CaphaUzed terms not otherwise defined
herein shaU be as defined in the Lease.
The Guarantor is an Affiliate of Tenant, or otherwise expects to benefit from the grant by
Landlord to Tenant of the Lease.
As an essential inducement to Landlord's agreement to grant the Lease to Tenant and in
consideration therefor and at the request of Tenant, the Guarantor has agreed to guaranty the
completion of the Hotel Addition and tiie Additional Sheraton BuUding and the payment ofany
and aU rental obligations under the Lease which accrue prior to the Release Date (as defined
below), subject to the limhations, releases, and other provisiotis provided herem below.
NOW, THEREFORE, in consideration of the premises, and to induce and in
consideration for the granting of the Lease, the Guarantor agrees for the benefit of Landlord, its
successors and assigns, as set forth below.
1. Guaranty.
1.1 Subject to Section 1.2 below, the Guarantor hereby unconditionally and
irrevocably guaranties to Landlord, for a period commencmg on the Commencement Date ofthe
Lease and ending upon the earlier of the termination of the Lease (other than termination by
Landlord for an Event of Default by Tenant under the Lease) or tiie date of Substantial
Completion of tiie Hotel Addition and Substantial Completion of the Additional Sheraton
BuUdmg (such earlier date being the "Release Date"), the fiiU and timely payment and
performance of all rent, charges, indebtedness and obligations, of any nature whatsoever, of
Tenant under the Lease (and any and all amendments, supplements, and modifications thereof,
whether now m existence or hereafter created) which are due and payable by Tenant prior to the
Release Date including, wdthout Ihnitation, (i) the obligation to pay Rent, Imposhions, and other
charges, fees, costs and other amounts due from Tenant under tiie Lease which are due and
payable by Tenant prior to tiie Release Date (ii) the frill and timely payment of aU conttactors,
subcontractors, materialmen, engineers, architects and other pei-sons who have rendered or
fumished services or materials that are or become a part of the hiitial constiuction ofthe Hotel
Addition and/or the Additional Sheraton Building, and (ii) the Substantial Completion of the
EXHIBIT "F"
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4826-9580-6752.7 12/02/2014
Hotel Addition to be completed on the Premises and the Substantial Completion of the
Additional Sheraton Building (all of tiie foregoing obligations coUectively, the "Guarantied
Obligations").
1.2 Notwithstanding any other provision of this Guaranty to the conttary, and
provided no Event of Defauh under the Lease witii respect to any Guarantied Obligations shall
then exist. Guarantor automatically shall be forever released from all UabUity under this
Guaranty, and this Guaranty shall terminate, on the Release Date without necessity of fuitiier
documentation.
1.3 This is a contmumg guaranty until the Release Date relatmg to the Guarantied
Obligations, including, without Ihnitation, obligations and liabilities arismg under successive and
future transactions tiiat either increase, decrease, or continue the Guarantied Obligations, or,
from thne to time, renew Guarantied Obligations that have been satisfied, independent of and m
addition to any guaranty, endorsement, or coUateral now or hereafter held by Landlord, whether
or not fumished by the Guarantor. This Guaranty shall apply and be irrevocable with respect to
any mdebtedness created or incuned even after actual receipt by Landlord ofany written notice
of purported revocation by the Guarantor and the Guarantor waives any right to revoke this
Guaranty and the benefits ofCalifornia CivU Code Section 2815.
2. Independent Obligations.
2.1 Guarantor shall pay to (in immediately available fimds) and perform for the
benefit of Landlord, when due, on demand of Landlord all Guarantied Obligations. This
Guaranty is an absolute guaranty of payment and performance and not of collection. The
Guarantor's obligations under this Guaranty are independent of those of Tenant and of the
obligations of any other guarantor or person, and are not conditioned or contingent upon the
genuineness, validity, regularity, or enforceabiUty of tiie Lease or otiier Guarantied Obligations
or of the obhgations of any other guarantor or person. Landlord may bring a separate action
against the Guarantor without first proceeding against Tenant, any other guarantor, or any otiier
person, or any security held by Landlord, and without pursumg any other remedy. Landlord's
rights under this Guaranty m respect ofthe Guarantied Obligations shall not be exhausted by any
action of Landlord until all ofthe Guarantied Obligations have been fixUy and indefeasibly paid
and performed. Unless otherwise provided herein, this Guaranty and the obligations hereunder
shall survive termination ofthe Lease.
3. Rights of Landlord.
3.1 The Guarantor consents that Landlord may, and authorizes Landlord at any time
m hs discretion without notice or demand to or upon tiie Guarantor or any otiier person and
without affecting tiie indebtedness and liabUities of the Guarantor hereunder to: (i) enter into
agreements with Tenant and renew, extend, amend, waive, restructure, refinance, release,
accelerate, or otherwise change the time for payment of, or otherwise change tiie terms of, the
mdebtedness evidenced by the Lease (mcluding, yvithout Umhation, the Guarantied ObUgations),
mcludmg, without limitation, (a) increase or decrease in tiie Guarantied Obligations and (b) any
amendment of the Guaiantied ObUgations to permh Landlord to extend fiutiier or additional
accommodations to Tenant in any form, mcluding credit by way of loan, lease, sale or purchase
EXHIBIT "F"
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4826-9580-6752.7 12/02/2014
of assets, guarantee, or otherwise, which shall thereupon be Guaranteed ObUgations; (ii) accept
new or addhional documents, instiuments, or agreements relative to the Guarantied ObUgations;
(iii) consent to the change, restioicttire or termination of the individual, partnership, corporate or
other organizational structtire of existence of Tenant, tiie Guarantor or any affiliate of Tenant or
tiie guarantor or any otiier person and con-espondingly resttucture the Guarantied Obhgations;
(iv) accept paitial payments on tiie Guarantied Obligations; (v) take and hold collateral or
additional guai-anties for the Guarantied Obligations and amend, later, exchange, substittite,
ttansfer, enforce, perfect or fail to perfect, waive, subordinate, tenninate, or release any such
collateral or guaranties; (vi) apply any collateral, and dhect the order and manner of sale thereof
as Landlord in its sole discretion may determine; (vii) settle, release on terms satisfactory to
Landlord or by operation of law or otiierwise, compound, compromise, coUect or otherwise
Uquidate the Guarantied Obligations and/or the collateral or any guaranty therefore in any
manner, whetiier m liquidation, reorganization, receivership, bankruptcy, or otherwise;
(viii) release Tenant or any other person for all or any part of tiie Guai-antied Obligations; or
(ix) assign the Guarantied ObUgation or any rights related thereto in whole or in part.
4. Tenant's Financial Condition.
4.1 The Guarantor acknowledges that the Guarantor is relying upon the Guarantor's
own knowledge and is fiilly informed witii respect to Tenant's financial condition. The
Guarantor assumes full responsibility for keeping fiilly mformed of the financial condition of
Tenant and all other chcumstances affecting Tenant's abUity to perfonn hs obligations to
Landlord, and agrees tiiat Landlord wiU have no duty to report to tiie Guarantor any mfoimation
tiiat Landlord receives about Tenant's abUity to perform aU or any portion ofthe Guarantied
Obligations regardless of whether Landlord has reason to beUeve that any such facts matenally
increase the risk beyond that which the Guarantor intends to assume or has reason to believe tiiat
such facts are unknown to the Guarantor or has reasonable opportunity to communicate such
facts to the Guarantor.
5. Exercise of Subrogation Rights: Subordmation.
5.1 The Guarantor agrees that (i) tiie Guarantor shall have no right of subrogation,
rehnbursement or indemnity agamst Tenant or against any collateral for the Guarantied
Obligations unless and until all Guarantied Obligations have been paid and performed m full;
(ii) the Guarantor shall have no right of contribution agamst any other guarantor or person unless
and until all Guarantied Obligations have been paid and performed in full; and (iii) until the
Guarantor is permitted by the terais of this Section to exercise any such right of subrogatton,
rehnbursement, hidemnity or conttibution, tiie Guarantor hereby waives all rights of subrogation,
rehnbursement, mdemnity and contribution and any right to enforce any remedy tiiat the
Guarantor might have against Tenant or any otiier guarantor or person, or to participate in any
security held by Landlord with respect to the Guarantied Obligations, by reason of performance
by tiie Guarantor under this Guaranty, including, without limitation, any such right or any other
right set forth m Sections 2845, 2848, or 2849 of the Calffornia Civil Code.
5.2 Whether or not any or all of the foregoing waivers of rights in respect of
subrogation, reunbursement, hidemnity and contribution are held to be unenforceable: (i) all
existmg and fiitiire obUgations of Tenant to tiie Guarantor (including, without Ihnitation, any
EXHIBIT "F"
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4826-9580-6752.7 12/02/2014 .
obligations arismg by reason of any payment by tiie Guarantor hereunder) are hereby
subordinated to the hill and indefeasible payment and performance of tiie Guarantied
Obligations, and, without the prior written consent of Landlord, such obUgations shaU not be
paid, in whole or in part, nor will the Guarantor accept any payment of or on account ofany such
obUgations; provided, however, that, if Landlord so requests, tiie Guarantor shall enforce and/or
collect such obligations, subject to the following clause (ii); (ii) each payment by Tenant,
whether received in violation of this Guaranty or pursuant to the request of the Guarantor,
Guarantor shall cause the same to be paid to Landlord, immediately upon demand by Landlord,
on account of the Guarantied Obligations; and (iii) no such payment under clause (ii) shall
reduce or affect in any manner tiie liability of the Guarantor under this Guaranty.
6. Impairment of Subrogation and Otiier Rights/Other Waivers.
6.1 Upon the occurrence of any default under tiie Lease or the Guarantied Obligations
or by the Guarantor hereunder (but without hmiting Landlord's right to resort to any other
remedy it may have in respect hereof, under the Lease, with respect to the Guarantied
Obligations, this Guaranty or otherwise). Landlord may elect to foreclose non-judicially or
judicially against any real or personal property security h holds for the Guarantied ObUgations or
any part thereof, or exercise any other remedy against Tenant, any other guarantor or person or
against any security. No such action by Landlord shaU release or limh the hability of the
guarantor, even if the effect of that action is to deprive the Guarantor, or any other person or
guarantor, of the right or abUity to collect reimbursement by means of any security held by
Landlord for the Guarantied Obligations.
6.2 Guarantor waives aU rights and defenses that the Guarantor may have because the
Guarantied Obligations are or may be secured by real property. This means, among other things:
(i) Landlord may coUect from the Guarantor without first foreclosmg on any real or personal
property coUateral pledged by Tenant or otherwise; and (u) if Landlord forecloses on any real
property coUateral (a) the amount of tiie Guarantied Obligations may be reduced only by the
price for which tiiat collateral was sold at the foreclosure sale, even if the collateral is worth
more than tiie sale price; and (b) Landlord may collect from Guarantor even if Landlord, by
foreclosing on the real property collateral, has desttoyed any right the Guarantor niay have to
coUect fixim Tenant or other person. This is an unconditional and irrevocable waiver of any
rights and defenses by real property. These rights and defenses include, but are not limited to,
any rights or defenses based upon Section 580a, 580b, 580d, or 726 of the CaUfornia Code of
CivU Procedure.
6.3 Guarantor waives all rights and defenses arising out of an election of remedies by
Landlord, even though that election of remedies, such as nonjudicial foreclosure witii respect to
security for Guarantied Obligations, has destroyed Guarantor's rights of subrogation and/or
rehnbursement against Tenant or otiier person by the operation of Section 580d ofthe CaUfornia
Code of Civil Procedure or otherwise.
6.4 Guarantor waives all rights and defenses arising out of the operation of Section
580a of the California Code of Civil Procedure, and further waives hs right to a fah value
hearing under such Section 580a to determine the size of a deficiency judgment foUowing any
foreclosure sale on encumbered real property.
EXHIBIT "F"
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6.5 No provision or waiver in this Guaranty shaU be consh-ued as limiting the
generality of any other waiver contained in this Guaranty.
7. Bankruptcy.
7.1 So long as any Guarantied Obligation shall be owing to Landlord, the Guarantor
shaU not, without prior wiitten consent of Landlord, commence, or join -with any otiier person in
commencmg, any bankruptcy, reorganization, or insolvency proceeding against Tenant. The
obUgations of tiie Guarantor under this Guaranty shaU not be altered, limited, or affected by any
proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation, or arrangement of Tenant, or by any defense Tenant may have by
reason of any order, decree, or decision of any court or administiative body resulting from any
such proceedmg. hi fiirtherance ofthe foregoing, the Guarantor agrees that if acceleration of tiie
time for payment of any amount payable by Tenant under the Lease or in respect of the other
Guarantied Obligations is stayed for any reason, all such amounts otherwise subject to
acceleration shall nonetheless be payable by the Guarantor hereunder forthwitii upon demand.
7.2 The Guarantor shaU fUe in any bankruptcy or otfier proceeding in which the ftiing
of claims is required or permitted by law claims that the Guarantor may have against Tenant
relating to any indebtedness of Tenant to the Guarantor, and wdll assign to Landlord all rights of
the Guarantor thereunder. If tiie Guarantor does not file any such claim, then to the extent
allowed by law Landlord, as attomey-in-fact for the Guarantor, is hereby autiiorized to do so in
the name ofthe Guarantor or, m Landlord's discretion, to assign the claim to a nommee, and to
cause such proof of claim to be filed in the name of Landlord's nominee. The foregoing power
of attorney is coupled -witii an interest and is hrevocable untU after the indefeasible payment and
performance m full of all ofthe Guarantied Obligations. Landlord, or its nominee, shall have the
sole right at its election to accept or reject any plan proposed in such proceedings and to take any
other action that a party fiUng a clahn is entitied to do. In all such cases, whether in
administtation, bankruptcy, or otherwise, the person or peisons authorized to pay such claim
shall pay to Landlord all ofthe Guarantor's rights to any such payments or distributions to which
the Guarantor would otherwise be entitled; provided, however, tiiat the Guarantor's obUgations
hereunder shaU not be satisfied except to tiie extent that Landlord receives cash by reason of any
such payment or distribution. If Landlord receives anytiiing hereunder other than cash, the same
shall be held as coUateral for amounts due under this Guaranty.
8. Continuance of Guaranty.
8.1 The liability of tiie Guarantor hereunder shaU be reinstated and continued m
effect, and the rights of Landlord shall continue, with respect to any payment or performance of
the Guarantied Obligations tiiat Landlord shall be requhed to restore or retum or is avoided in
connection with the bankruptcy, insolvency, or reorganization of Tenant of the Guarantor, or
otherwise, all as though such payment or performance has not occurred. The determination as to
whether any such payment or performance must be restored or returned shall be made by
Landlord in hs sole discretion; provided, however, that if Landlord chooses to contest any such
matter, the Guaiantor agrees to indemnify, defend and hold harmless Landlord from all costs and
expenses (mcludmg, without Umitation, reasonable legal fees and disbursements) of such
Utigation. Landlord shall be under no obligation to return or deUver this Guaianty to the
EXHIBIT "F"
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Guarantor, notwdthstanding the payment of the Guarantied ObUgations. If this Guaranty is
nevertheless retumed to the Guarantor or is otherwise released, then the provisions of this
Section 8 and the Guaianty shall survive such retum or release, and the liability of the Guarantor
under this Guaranty shall be reinstated and continued under the chcumstances provided herein
notwithstanding such return or release.
9. Representations and Warranties.
9.1 The Guarantor represents and warrants as of the date of this Guaranty that:
9.1.1 it has aU requisite power and authority to execute, deliver, and be legally
bound by this Guaranty on the terms and conditions herein stated and to ttansact any other
business with Landlord as necessai-y to fiilfill the terms ofthis Guaranty;
9.1.2 this Guaranty has been duly authorized, executed, delivered and no
consent, approval or authorization or any person not heretofore obtained is required in
connection with the valid execution, delivery or performance by the Guarantor ofthis Guaranty
and the obligations hereunder;
9.1.3 the execution, performance and delivery by the Guarantor of this
Guaranty: (i) to Guarantor's knowledge do not and will not violate any provision ofany material
law, rule, or regulation or any order, judgment, -writ, injunction, demand or decree of any court or
agency of govemment, or any indenture, agreement or other instrument to which the Guarantor is
a party or by which the Guarantor or its property is bound; (ii) do not and wdU not result in a
breach of or constitute (wdth notice and/or lapse of time) a default or breach under any
agreement, note, contract, lease, or other instrument to which the Guarantor is a party or by
which it or its properties may be bound of affected; and (iU) do not and -wiU not result in the
creation or imposition of any lien, charge or encumbrance of any nature whatsoever under any
agreement, mortgage, deed of trust, lease, loan agreement, security agreement, partnership
agreement, corporate charter, bylaws or other document, agreement or insttument to which the
Guarantor is a party or by which it or its property or assets may be bound or affected;
9.1.4 this Guaranty has been duly executed by the Guarantor and constitutes the
legal, valid and binding obligation of the Guarantor, enforceable in accordance wdth its terms,
except as enforceabiUty may be limited by applicable bankruptcy, insolvency, and other similar
laws affecting creditors' rights generaUy;
9.1.5 all reports, financial statements, papers and written data and information
given to Landlord by the Guarantor with respect to the Guarantor, the Guarantied Obligations or
otherwise relating thereto are accurate and correct in all materials respects and complete insofar
as completeness may be necessary to give Landlord a ttue and accurate knowledge ofthe subject
matter;
9.1.6 to the best of its Icnowiedge, the Guarantor is not in default in the
performance, observance or fitifilhnent of any of the obligations, covenants or conditions set
forth in any material agreement or instrument to which the Guarantor is the party;
EXHIBIT "F"
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9.1.7 there is not now pending against the Guarantor, nor to the knowledge of
tiie Guarantor is there tiireatened, any action, suh or proceeding at law or in equity or by or
before any admmistrative agencies which, if adversely deternuned, will materially impair or
affect the financial conditions or operations of the Guarantor; and the Guarantor to its knowledge
is not m defauh with respect to any order, wiit, injunction, decree or demand ofany court or any
govemmental authority;
9.1.8 h has filed aU federal, state, provmciaL county, municipal and other
mcome tax retums requhed to have been filed by the Guarantor otiier than those which would
not have a material adverse effect and has paid aU taxes that have become due pursuant to such
returns or pursuant to any assessments received by the Guarantor, and the Guarantor does not
know ofany basis for any material additional assessment against h in respect of such taxes;
9.1.9 no bankruptcy or msolvency proceedings are pending or to the best of the
Guarantor's knowledge contemplated or threatened by or against the Guarantor;
9.1.10 h is not insolvent, and will not be rendered insolvent by the incurrmg of its
obligations hereunder; the Guarantor is not engaged, and is not about to engage, in a business or
transaction for which the Guarantor's assets are unreasonably small in relation thereto; the
Guarantor does not intend to incur, and does not believe tiiat the Guarantor has hicurred or -wiU
incur, debts beyond the Guarantor's ability to pay as they matiire; and the value of the
consideration received and to be received by the Guarantor in connection with the Guarantied
Obligations and tiiis Guaranty is reasonably worth at least as much as tiie UabiUty and
obligations ofthe Guarantor hicurred or arising under this Guaranty;
9.1.11 h has had full and complete access to the Lease and other documents
relatmg to tiie Guarantied ObUgations, has reviewed them and is fully aware ofthe meaning and
the effect of theh contents; h is fully informed of all circumstances which bear upon tiie risks of
executing this Guaranty ofwhich a diligent inquhy would reveal; it has adequate means to obtain
from Tenant on a continuing basis information concemmg Tenant's financial condition, and is
not depending on Landlord to provide such information, now or in the future; and agrees that
Landlord shall not have any obligation to advise or notify tiie Guarantor or to provide tiie
Guarantor with any data or information; and
9.1.12 it has all requisite power and authority to transact any other business -with
Landlord as necessary to fulfiU the terms of this Guaianty.
10. Costs and Expenses.
10.1 The Guarantor agrees to pay, upon Landlord's demand, Landlord's reasonable
out-of-pocket costs and expenses, including (hut not limited to) reasonable legal fees and
disbursements and expert witness's fees and disbursements, incurred m connection with (i) any
effort to coUect or enforce any of the Guarantied Obligations or this Guaranty (includhig the
defense ofany claims or counterclaims asserted against Landlord aiising out ofthis Guaranty or
the ttansactions contemplated hereby), (ii) tiie Guarantor's faUure to perform or observe any of
tiie provisions hereof, and (hi) the representation of Landlord in any insolvency, bankmptcy,
receivership, reorganization or similar proceeding relating to Tenant, the Guarantor, or any
EXHIBIT "F"
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security for the Guarantied Obligations. UntU paid to Landlord, such sums shall bear inteiest
from the date incurred at the applicable rate of interest set fortii in the Lease for past due
obligations. The obUgations of tiie Guarantor under this Section 10 shall include payment of
Landlord's costs and expenses of enforcmg any judgments.
11. Lien: Rights of Setoff.
11.1 In addition to all liens upon, and rights of setoff agamst, the monies, securities or
other property of tiie Guarantor given to Landlord by law, tiie Guai-antor hereby grants to
Landlord a security interest m, all monies, securities and otiier property ofthe Guarantor now or
hereafter in the possession of Landlord, as security for the obligations of tiie Guarantor
hereunder; and every such hen and right of setoff may be exercise without demand upon or
notice to the Guarantor. No lien or right of setoff shall be deemed to have been waived by any
act or conduct on the part of Landlord, or by any neglect to exercise such right of setoff or to
enforce such Uen, or by any delay in domg so; and every right of setoff and lien shall contmue in
fiiU force and effect until such right of setoff or lien is specifically waived or released by an
instrument in wrhing executed by Landlord.
12. Miscellaneous.
12.1 Notice. AU notices, demands and other communications wdth, to, from or upon
the Guarantor and Landlord requhed or permitted hereunder shall be m writing, addressed to tiie
parties at their respective addresses as set fortii on the signature page hereto, or, as to each party,
at such otiier address as shall be designated by such party in a written notice to tiie otiier parties
complying as to deUvery with the tenns ofthis Section 12.1. All such communications shall be
deemed effective upon the earliest of (i) actual delivery if delivered by personal delivery, (ii)
three (3) days foUowing deposh, first class postage prepaid, with tiie United States mail, (hi)
upon the earliest to occur, if sent by certified postage prepaid mail, of three (3) days foUowing
deposh tiiereof m tiie United States mail or receipt (or refusal to accept delivery), or (iv) on tiie
next business day after timely and proper deposh witii an ovemight ah courier witii request for
next business day delivery.
12.2 Agreement Binding. This Guaranty shall be bindhig upon the Guarantor and the
Guarantor's heirs, executors, personal representatives, successors, assigns, and shall inure to the
benefit of, and be enforceable by, Landlord and Landlord's successors and assigns. The term
"Tenanf means botii tiie named Tenant and any other person at any thne assuming or otherwise
becommg primarily Uable for all or any part of the Guarantied ObUgations. The terms
"Landlord" means both Landlord names herein or any futiire owner or holder of the Lease, or
any interest therein.
12.3 SeverabUitv. If any provision of this Guaranty shall be deemed or held to be
invalid or unenforceable for any reason, such provision shall be adjusted, if possible, ratiier than
voided, so as to achieve the mtent of tiie parties to the fiillest extent possible. In any event such
provision shaU be severable from, and shall not be consttued to have any effect on, tiie remainmg
provisions ofthis Guaranty, which shall continue m fuU force and effect.
EXHIBIT "F"
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4826-9580-6752.7 12ra2/2014
12.4 Multiple Obligors. If "Guaiantor" refers to more tiian one person, tiien (i) the
obUgations of each such person shaU be johit and several; (ii) aU references to the "Guarantor"
herein shaU, unless the context otherwise requhes, refer to all such parties jointly and severally;
and (Ui) each such person hereby waives any and aU defenses based upon suretyship or guaranty
or impairment of coUateral, including, without limitation, all rights or defenses that aie or may
become avaUable under California Civil Code Section 2787 to and including 2855, 2899 and
3433. ff the Guarantor is a partiiership, such Guarantor and all general partners therein shaU be
jomtiy and severally liable hereunder. Any married person who executes this Guaranty agrees
that recourse may be had agamst his or her separate and community property. Where the
"Tenant" is more than one person, the word "Tenant" shah mean all and any one or more of
them.
12.5 Goveming Law: Jurisdiction. This Guaianty and the obligations hereunder shall
be govemed by and constiried m accordance with tiie laws of the State of Califomia applicable to
conttacts, between residents thereof, made and to be wholly peiformed within the State of
CaUfornia. The Guarantor hereby irrevocably consents to tiie non-exclusive jurisdiction ofthe
Courts of the State of Califomia and of any Federal Court located in such State m connection
with any action or proceeding arising out of or relating to this Guaranty.
12.6 Assignment bv Landlord. This Guaranty shall be assignable by Landlord to any
assignee of all or any portion of Landlord's rights with respect to the Guarantied Obligations.
12.7 Interpretation. This Guaranty shall be consttued without regard to whether h was
prepared or drafted by one party or of the otiier or either of theh attorneys. As used herem: (i)
tiie terais "mclude," "mcludmg" or form thereof are not exclusive; (U) the term "day" means
calendar day, except as otherwise expressly provided; (iU) the term "person" means any
mdividual, coiporation, partnership, liniited Uability company, ti^ist, governmental entity, or any
other entity ofany kind; (iv) singular words shall connote the plural as weU as tiie singular and
vice versa, as the context requires; and (v) each gender includes any other gender. Time is ofthe
essence in the performance of this Guaranty.
12.8 Rights Cumulative: No Waiver. Landlord's options, powers, rights, privileges,
and immunities specified herein or arising hereunder are in addition to, and not exclusive of,
those otiierwise created or existmg now or at any time, whetiier by conttact, by statute, or by rule
of law. Landlord shall not, by any act, delay, omission or otherwdse, be deemed to haye
modified, discharged, or waived any of Landlord's options, powers, rights or provisions in
respect ofthis Guaranty, and no modification, discharge, or vraiver of any such option, power,
right or pro-vision ofthis Guaranty shall be valid unless set forth in waiting signed by Landlord,
and then only to tiie extent therein set fortii. A waiver by Landlord of any right, remedy or
provision hereunder on any one occasion shall be effective only in the specific instance and for
the specific purpose for which given, and shall not be constiried as a bar to any right or remedy
that Landlord would otherwise have on any other occasion.
12.9 Default. The occurrence of any one of the following events shall, at the election
of Landlord, be deemed an event of defauh by the Guarantor under this Guaranty: (i) the
Guarantor shall faU tt) perfoi-m, keep or observe any term, provision, condition or covenant
contamed m this Guaranty within thiity (30) days following receipt of Landlord's -sviitten notice
EXHIBIT "F"
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4826-9580-6752.7 12/02/2014
tiiereof, however ff Guarantor is not able through the use of commerciaUy reasonable efforts to
cure such failure witiiin such tiihty (30) day period, tiien such failure shall not be deemed to be
an event of defauh hereunder ff Guarantor commences to cure such failure within such initial
thirty (30) day period and thereafter diUgentiy pursues such cure to completion witiiin aii
additional thiity (30) day period following the expiration of tiie initial tiiirty (30) day period; (ii)
the commencement of any liquidation, reorganization, receivership, bankraptcy, assignment for
the benefit of creditors or otiier similar proceeding by or against Tenant or Guarantor-unless
Guarantor is replaced witii a new guarantor acceptable to Landlord in its sole discretion within
forty-five (45) days thereafter; (iii) if any representation or warranty made in this Guaranty shall
be or become false in any material respect; (iv) the occurrence of an Event of Default under the
Lease with respect to any ofthe Guarantied Obligations; (v) tiie death, or legal mcapacity ofthe
Guarantor; or (vi) the Guarantor revokes or attempts to revoke this Guai-anty. Upon the
occmTcnce of an event of default, the Guarantor's obUgations hereunder shall, at the option of
Landlord, be enforceable against tiie Guarantor as such Guarantied Obligations become due and
payable and Landlord may, in its sole discretion, in addition to any otiier right or remedy
provided by law, all of which are cumulative and non-exclusive, proceed to suit against tiie
Guarantor, whetiier suit has been commenced against Tenant.
12.10 Headings. AU headings in this Guaianty are for convenience and reference only
and do not defme or limh the scope of tiie provisions of this Guaranty.
12.11 Entire Agreement. This Guaranty contains tiie entire agreement between the
Guarantor and Landlord with respect to its subject matter, and supercedes all prior
communications relating thereto, including, without Umitation, aU oral statements or
representations. No supplement to or modification of this Guaranty or its provisions shall be
binding unless executed in writing by tiie Guarantor and Landlord.
12 12 Waiver of Rights of Trial by Jury. EACH OF THE GUARANTOR AND
LANDLORD (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY,
KNOWB^GLY, INTENTIONALLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY RIGHT TO HAVE A JURY PARTICn>ATE (INCLUDU^G BY WAY OF JURY TRML)
IN RESOLVING ANY DISPUTE OR LITIGATION (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE GUARANTOR AND
LANDLORD ARISING OUT OF OR RELATED TO THIS GUARANTY, OR THE
GUARANTIED OBLIGATIONS OR ACTIONS OF THE GUARANTOR OR LANDLORD
RELATING TO THIS GUARANTY AND/OR THE LEASE WHICH IS THE SUBJECT OF
THE GUARANTIED OBLIGATIONS. THIS PROVISION AND THE WAFVERS SET
FORTH HEREIN ARE MATERIAL INDUCEMENTS TO LANDLORD TO ENTER INTO
THE LEASE AND WITH RESPECT TO THE GUARANTIED OBLIGATIONS.
[Signature Page Follows]
EXHIBIT "F"
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4826-9580-6752.7 12/02/2014
EST wrrNESS WHEREOF, the Guarantor has executed this Guaranty as ofthe date first
written above.
GUARANTOR:
GRAND PACIFIC CARLSBAD, L.P., a California limited partnership
By: Giand Pacific Development, Inc.,
a Calffornia corporation, its general partner
By:
Timotiiy J. Stripe, Co-President
By: ^
David S. Brown, Co-President
LANDLORD'S ADDRESS FOR NOTICE:
The Carlsbad Pubhc Fmancing Authority
1200 Carlsbad Village Dr.
Carlsbad, CA 93008
Attn: City Manager
With a copy to:
Michael E. Lyon, Esq.
Procopio, Cory, Hargreaves & Savitch LLP
12544 High Bluff Drive, Suite 300
SanDiego, CA 92130
GUARANTOR'S ADDRESS FOR NOTICE:
Gi-and Pacific Carlsbad, L.P.
5900 Pasteur Court, Suite 200
Carlsbad, CA 92008
Facsimile: (760) 828-4239
Email: tsttipe@gpresorts.com and dbrown@gpresorts.com
Athi: Legal Department
EXHIBIT "F"
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EXHIBIT "G»
INTENTIONALLY OMITTED
EXHIBIT "G"
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4826-9S80-6752.7 12/02/2014
EXHIBIT H
WORK LETTER
1. Tenant aclcnowledges and agrees that in order to consttuct the Hotel Addhion,
Tenant is to obtain all necessary developmental plan approvals, entitlements and permits, as well
as comply with all zoning and environmental laws as required by the City of Carlsbad and the
Carlsbad Public Finance Authority and other appUcable governmental authorities with
jurisdiction over the development of the Premises. Tei-ms with caphalized initial letters used
herein witiiout definition have the meanings given them in that certain Triple-Net
Unsubordinated Ground Lease between the Carlsbad Public Financhig Authority, a joint powers
authority formed by the City of Carlsbad and the Carlsbad Municipal Water District, and Grand
Pacific Carlsbad Lot 9, L.P., a Delaware Ihnited partnership ("Lease") to which this Exhibit "H"
is made a part.
2. Tenant shall, at Tenant's sole cost and expense, cause constraction of the Hotel
Addition on the Premises in accordance with the Lease, mcluding this Work Letter, and the plans
and specifications, including elevations and proposed landscape plans previously approved by
the City of Carlsbad in connection with the issuance of a building permit for the Hotel Addition
(the "Approved Plans"). All of Tenant's signage during consttuction shaU be subject to all
applicable ordinances of the City of Carlsbad and any other relevant governmental authority with
jurisdiction over the Premises. The Approved Plans shall be prepared by a licensed architect or
engineer.
3. No stracture or other improvement of any kind shall be erected or maintained on
the Premises, other than the Hotel Addition as shown in the Approved Plans, unless and until the
plans, specifications, elevations and proposed locations of such all structures and improvements
have been approved by the City of Carlsbad and any other applicable governmental authorities
-with jurisdiction over the development of the Premises. Review and approval of the plans for the
Hotel Addition shaU create no liability or responsibility on the part of the City of Carlsbad, the
CarLsbad Municipal Water District or any other relevant reviewing entity for the completeness of
such plans or theh design sufficiency.
4. Tenant's constraction requirements and fees shall include any and all fees
required to obtain construction entitiements and complete the Hotel Addition, including all
excavation, grading, paving, landscaping, signage, utility connections, and the cost of bringmg
utility connections to the Premises. Landlord, the City of Carlsbad or the Carlsbad Municipal
Water District shaU not be responsible for any costs associated with Tenant's construction ofthe
Hotel Addition except as may be otherwise provided in the Lease.
5. Except as permitted under the Option Agreement, no work of any kind shall be
commenced and no buUding or other material shall be delivered for the Hotel Addition, nor shall
any other building or land development work be commenced or buildhig materials be deUvered
on the Premises until after the Commencement Date and at least ten (10) days shall have passed
since Tenant has delivered a -written notice to Landlord of the commencement of such work or
the delivery of such materials. Landlord shaU, at any and all times during the term of the Lease,
EXHIBIT "H"
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4826-9580-6752.7 12/02/2014
have the right to post and maintain on the Premises and to record as required by law, any notice
or notices of non-responsibility provided for by the mechanics' lien law of the State of
California. The work prohibited by this Section until the Commencement Date and prior written
notice of work commencement has been given to Landlord includes, in addition to any actual
construction work^ any site preparation work, installation of utilities, street construction or
improvements work, or any grading or filling of the Premises. All work required in the
construction ofthe Hotel Addition, including any site preparation work, landscaping work, utility
installation work, as well as actual construction work, shall be performed only by competent
contractors duly licensed as such under the laws of the State of Califomia and, if relating to work
having a contract amount of over $500,000, approved by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed.
6. All work performed on the Premises shall be in accordance with all valid laws,
ordinances, regulations and orders of all federal, state, county or local govemmental agencies or
entities having jurisdiction over the Premises. All work performed on the Premises shall be done
in a good, workmanlike and lien-free manner and only with new materials of good quality and
standards. The Project shall be constructed in conformance in all material respects with the
Approved Plans and other requirements set forth in the Lease and this Work Letter.
7. Tenant shall cause Substantial Completion (as defined below) of the Hotel
Addition by the Hotel Addhion Outside Completion Date and Substantial Completion of the
Additional Sheraton Building by the Additional Sheraton Building Outside Completion Date.
Subject to the notice and cure rights of Tenant under the Lease, if Substantial Completion ofthe
Hotel Addition does not occur by the Hotel Addition Outside Completion Date or if Substantial
Completion of the Addhional Sheraton Building does not occur by the Addhional Sheraton
Building Outside Completion Date, then Landlord may exercise its rights and remedies under the
Lease, including, without limitation, termination ofthe Lease and Tenant's right to possession of
the Premises. The term "Substantial Completion" means the point in time when a certificate of
occupancy (or the functional equivalent) is issued and a valid notice of completion is recorded.
Without limiting the foregoing. Substantial Completion of the Hotel Addition shall not be
deemed to have occurred until the Westin Hotel is open for business to the general public as a
Westin branded hotel and Substantial Completion of the Addhional Sheraton Building shall not
be deemed to have occurred until the Additional Sheraton Building is open for business to the
general public as a Sheraton branded hotel. If constraction of the Project is delayed due to force
majeure as provided in Section 21 of the Lease, Tenant will use commercially reasonable efforts
to resume consttuction as promptiy as practicable following such delay.
8. Subject to the limitations set forth in Section 8 above, all remedies of Landlord
provided for herein are not exclusive; they are cumulative and in addition to any and all rights
and remedies provided in the Lease or allowed by law or in equity. The exercise ofany right or
remedy by Landlord hereunder shall not in any way constitute a cure or waiver of default
hereunder or under the Lease or invalidate any act done pursuant to any notice of default or
prejudice Landlord in the exercise of any of its rights hereunder or under the Lease.
EXHIBIT "H"
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EXHIBIT NO. 2
TITLE EXCEPTIONS
[To be attached]
4833-8013-8016,v. 9
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J;\Requests2010Plus\PropEnviron\MuniProp\5148207_13
"1^
SITE MAP
1-
I- I-
PROJECT NAME
The Crossings at Carlsbad West View Lot 9
EXHIBIT
J:\Requests2010Plus\PropEnviron\MuniProp\5148207_13