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07-21-2015 C6 Garden Street Terraces Lease Agreement
City of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Michael Codron, Assistant City Manager Prepared By: Lee Johnson, Economic Development Manager SUBJECT: APPROVAL AND AUTHORIZATION TO SIGN THE LEASE AGREEMENT FOR THE GARDEN STREET TERRACES PROJECT AND APPROVE A $500,000 LOAN TO GARDEN STREET SLO PARTNERS L.P. RECOMMENDATION 1) Approve and Authorize the City Manager to sign the Lease Agreement; and 2) Authorize the City Manager to execute the Final Loan Documents for the $500,000 loan from the Parking Fund to the Garden Street Terraces Project, subject to concurrence of the Finance Director and approval as to final form by the City Attorney. DISCUSSION Background The Garden Street Terraces Project (“Project”) has been in development since 2005. The Project has been seen by the Council and the appropriate advisory bodies at various stages along the way. Most recently, the Council approved the final design and the Memorandum of Agreements (MOA) for the lease agreement on March 4, 2014. The final Project, as approved, included 20,542 square feet of retail space, 8 residential units, 64 hotels rooms and 41 private parking spaces. The MOA covers the minimum project components as it relates to hotel rooms, residential units and retail space, as well as the basic terms of the lease, the air space condominium units and the loan. The MOA also covers what is required of both the City and the Developer as the project moves forward into the construction process. The Lease Based on the MOA (Attachment 1), City Staff entered into negotiations to finalize the lease terms. Outside Legal Counsel from the firm of O’Connor Cochran LLP (a firm that specializes in real estate financing, loan enforcement, acquisitions, development and leasing) was retained to assist the City in the negotiations and the drafting of the lease (Attachment 2) and related loan documents. All of the key parameters of the MOA are represented in the lease. Attachment 3 is a comparison of the two documents and tracks the relationship between the key terms. The only remaining item to be determined is the final annual rent. The MOA and the Lease call for the rent to be no less than the net annual (12 month) revenues of the parking lot as of the last day of the last full month, two months prior to the date the lot is taken out of service, or the annual market rent as determined by a qualified appraiser, whichever is greater. Based on the appraisal conducted by Schenberger, Taylor, McCormick & Jenker dated December 17, 2014; JULY 21, 2015 C6 C6 - 1 Garden Street Terraces Lease Agreement and Loan Approval Page 2 the annual market rent is $171,600 1. The estimated rent in the MOA (based on the 2012-13 parking fund revenues and expenses) was $204,379. The final rent will be calculated once Lot #2 is taken out of service. In no situation will it be less than $171,600. The Loan As agreed in the MOA, the Parking fund will provide a market rate loan to the developer of $500,000 based on a 25 year amortization, with full repayment at 10 years. Therefore, a balloon payment is due 10 years after the loan is made. The market rate of the loan is determined based on the Wall Street Journal Prime Lending rate in effect the day the loan is made plus 2%. The draft loan documents (Council Reading File) are being negotiated with the developer. The final documents will be signed by the City Manager based on this authorization from the Council and the concurrence of the City’s Finance Director and City Attorney. Once negotiations conclude, if material changes are made to the loan documents, the loan documents will be brought back to Council for final review. CONCURRENCES Community Development, Public Works and Finance concur with the information provided. FISCAL IMPACT In order to ensure that the Parking Fund is able to meet its long term financial goals, a portion of the annual rent payment will be used to recover the loss of public parking on the site and replace it in a structure. The $1.86 million in replacement cost will be paid over an appropriate period of time to be determined during the financing discussions related to the construction of the Palm Nipomo structure. The financing options for the Palm Nipomo structure cannot be determined at this time as the Financial Advisor needs to work with City to determine if debt based on parking revenues or another source is more appropriate. Any or all of the rent that is not applied to the Parking Fund will be applied to the General Fund since the General Fund originally acquired the property that is now being used for this development. It should be noted that this payment is not a substitution for any in-lieu parking fees required because of a deficiency in on-site parking that is part of the project. The lease requires that the City’s applicable Zoning Code provisions are to be applied at the time the building permits are issued. Repayment of the loan will be made to the Parking Fund. Based on a 25 year amortization, with full repayment at 10 years, the monthly loan payments will equal $2,996.24 and the balloon payment will equal $372,723.36 based on the Wall Street Journal Prime Lending rate as of July 8, 2015. ALTERNATIVE Reject the lease. Because the City has previously committed to entering into the Lease upon the developer’s compliance with conditions, this alternative should only be selected if the Council 1 $14,300 per month. C6 - 2 Garden Street Terraces Lease Agreement and Loan Approval Page 3 finds that the lease is not in compliance with the MOA and direction should be given to staff as to additional provisions required to facilitate execution of the Lease. ATTACHMENTS 1. Signed MOA 2. Ground Lease Final Draft 3. MOA to Lease Comparison 4. Lease Exhibit B- Site Plan of the Property 5. Lease Exhibit G- Approved Garden Street Improvement Plans AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE 1. Draft Loan Documents (Available on City website) t:\council agenda reports\2015\2015-07-21\garden street terraces lease and loan\council agenda report garden street terraces lease.docx C6 - 3 THIS PAGE IS INTENTIONALLY LEFT BLANK C6 - 4 ATTACHMENT 1 C6 - 5 ATTACHMENT 1 C6 - 6 ATTACHMENT 1 C6 - 7 ATTACHMENT 1 C6 - 8 ATTACHMENT 1 C6 - 9 ATTACHMENT 1 C6 - 10 ATTACHMENT 1 C6 - 11 ATTACHMENT 1 C6 - 12 ATTACHMENT 1 C6 - 13 ATTACHMENT 1 C6 - 14 ATTACHMENT 1 C6 - 15 ATTACHMENT 1 C6 - 16 ATTACHMENT 1 C6 - 17 ATTACHMENT 1 C6 - 18 GROUND LEASE by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city (“Landlord”) and GARDEN STREET SLO PARTNERS, L.P. (“Tenant”) Parking Lot 2 between Broad, Garden, Marsh and Higuera Streets San Luis Obispo, California July __, 2015 ATTACHMENT 2 C6 - 19 T:\GST\Ground Lease\Final Word Version 07-02-15.docx TABLE OF CONTENTS Article/Section Page 1. BASIC PROVISIONS ....................................................................................................................... 2 1.1 PREMISES .......................................................................................................................... 2 1.2 DEFINED TERMS ............................................................................................................... 2 1.3 INITIAL TERM ................................................................................................................... 2 1.4 BASE ANNUAL RENT ........................................................................................................ 2 1.5 EFFECTIVE DATE .............................................................................................................. 2 1.6 LEASE YEAR ...................................................................................................................... 3 1.7 RENT COMMENCEMENT DATE ......................................................................................... 3 1.8 TENANT’S APPROVED USE OF THE PREMISES .................................................................. 3 2. THE LEASE ....................................................................................................................................... 3 2.1 THE PREMISES .................................................................................................................. 3 2.2 SIGNS ................................................................................................................................ 4 3. TERM ................................................................................................................................................. 4 3.1 EFFECTIVE DATE .............................................................................................................. 4 3.2 POSSESSION; COMMENCEMENT OF LEASE TERM ............................................................ 4 3.3 CONDITIONS PRECEDENT TO DELIVERY OF POSSESSION ............................................... 4 3.4 DELIVERY AND ACCEPTANCE OF POSSESSION ................................................................ 6 3.5 TERM ................................................................................................................................ 6 3.6 RESERVED USE BY LANDLORD ......................................................................................... 7 3.7 COST AND COMPLETION OF GARDEN STREET IMPROVEMENTS ..................................... 7 3.8 OUTSIDE COMPLETION DATE; EARLY TERMINATION .................................................... 7 4. RENT .................................................................................................................................................. 7 4.1 BASE ANNUAL RENT ......................................................................................................... 7 4.2 ADDITIONAL RENT ........................................................................................................... 9 5. TENANT’S USE ................................................................................................................................ 9 6. HAZARDOUS SUBSTANCES; INDEMNIFICATION ................................................................ 9 6.1 REPORTABLE USES REQUIRE CONSENT .......................................................................... 9 6.2 DUTY TO INFORM LANDLORD .......................................................................................... 9 6.3 TENANT REMEDIATION .................................................................................................... 9 6.4 TENANT INDEMNIFICATION ............................................................................................ 10 6.5 INSPECTION; COMPLIANCE ............................................................................................ 10 7. CONDITION OF THE PREMISES DURING THE TERM ....................................................... 10 7.1 MAINTENANCE AND REPAIRS ......................................................................................... 10 7.2 COMPLIANCE WITH LAWS .............................................................................................. 10 7.3 PREVAILING WAGES ...................................................................................................... 11 7.4 PAYMENT OF LANDLORD’S FEES AND COSTS OF TRANSACTION ................................... 11 8. TENANT’S PERSONAL PROPERTY.......................................................................................... 12 8.1 PERSONALTY .................................................................................................................. 12 8.2 LIEN WAIVERS ............................................................................................................... 12 ATTACHMENT 2 C6 - 20 TABLE OF CONTENTS: Page ii 9. ALTERATIONS AND IMPROVEMENTS .................................................................................. 12 9.1 OWNERSHIP OF IMPROVEMENTS .................................................................................... 12 9.2 ALTERATIONS ................................................................................................................. 12 9.3 MECHANICS LIENS ......................................................................................................... 13 9.4 NOTICES .......................................................................................................................... 13 9.5 TERMINATION OF OBLIGATIONS; SURRENDER OF PREMISES ....................................... 13 10. TAXES .............................................................................................................................................. 14 10.1 TENANT’S PAYMENT OF REAL PROPERTY TAXES ......................................................... 14 10.2 TENANT’S PAYMENT OF OTHER TAXES ......................................................................... 14 10.3 TAXES BEFORE POSSESSION OR AFTER TERM .............................................................. 14 10.4 TAX CONTEST ................................................................................................................. 14 11. INSURANCE AND INDEMNITY ................................................................................................. 14 11.1 EXCULPATION OF LANDLORD ........................................................................................ 14 11.2 RECIPROCAL INDEMNIFICATION .................................................................................... 15 11.3 TENANT’S INSURANCE .................................................................................................... 15 11.4 INSURANCE REQUIREMENTS .......................................................................................... 16 11.5 LANDLORD’S INSURANCE ............................................................................................... 17 11.6 WAIVER OF SUBROGATION ............................................................................................ 17 12. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS .................................................... 17 12.1 DUTY TO RESTORE ......................................................................................................... 17 12.2 DAMAGE NEAR END OF TERM ....................................................................................... 17 13. EMINENT DOMAIN ...................................................................................................................... 18 13.1 TOTAL TAKING ............................................................................................................... 18 13.2 PARTIAL TAKING ............................................................................................................ 18 13.3 CONDEMNATION AWARD ............................................................................................... 18 14. SUBLEASE AND ASSIGNMENT ................................................................................................. 19 14.1 SUBLEASE ....................................................................................................................... 19 14.2 ASSIGNMENT ................................................................................................................... 19 14.3 TRANSFERS ..................................................................................................................... 19 14.4 CHANGE OF USE ............................................................................................................. 19 14.5 CONSENT STANDARDS .................................................................................................... 20 14.6 REQUEST FOR CONSENT ................................................................................................. 20 14.7 CONDITIONS TO CONSENT .............................................................................................. 20 14.8 ATTORNMENT BY SUBTENANTS ...................................................................................... 20 14.9 REQUIRED NOTICE TO AND APPROVAL BY LANDLORD ................................................. 21 15. LEASE FINANCING PROVISIONS ............................................................................................ 21 15.1 MORTGAGEE PROTECTION ............................................................................................ 21 15.2 SUBORDINATION ............................................................................................................. 22 15.3 LANDLORD’S WARRANTIES AND REPRESENTATIONS .................................................... 23 15.4 TENANT’S WARRANTIES AND REPRESENTATIONS ......................................................... 23 15.5 QUIET ENJOYMENT ........................................................................................................ 23 15.6 ESTOPPEL CERTIFICATE ................................................................................................ 23 ATTACHMENT 2 C6 - 21 TABLE OF CONTENTS: Page iii 16. DEFAULT ........................................................................................................................................ 24 16.1 EVENTS OF DEFAULT ...................................................................................................... 24 16.2 LANDLORD'S REMEDIES ................................................................................................. 24 16.3 LANDLORD’S DEFAULT .................................................................................................. 27 16.4 FAILURE TO PAY SENIOR LIEN ...................................................................................... 27 17. TERMINATION; SURRENDER OF DEMISED PREMISES ................................................... 27 17.1 REMOVAL OF PERSONAL PROPERTY ............................................................................. 27 17.2 HOLDING OVER .............................................................................................................. 28 17.3 SURVIVAL OF EXECUTORY OBLIGATIONS ..................................................................... 28 18. AIRSPACE CONDOMIMIUM UNITS ......................................................................................... 28 18.1 CONVEYANCE OF AIRSPACE CONDOMINIUM UNITS ...................................................... 28 18.2 LANDLORD’S RETAINED TITLE ...................................................................................... 29 18.3 FAIR MARKET VALUE .................................................................................................... 29 19. WAIVER OF JURY TRIAL; JUDICIAL REFERENCE ........................................................... 30 19.1 WAIVER OF JURY TRIAL ................................................................................................ 30 19.2 JUDICIAL REFERENCE .................................................................................................... 30 20. LOAN TO TENANT ....................................................................................................................... 31 20.1 LOAN ............................................................................................................................... 31 20.2 USE OF PROCEEDS .......................................................................................................... 31 21. MISCELLANEOUS ........................................................................................................................ 31 21.1 INTENTION OF PARTIES; TRIPLE NET LEASE; COOPERATION ...................................... 31 21.2 TIME OF ESSENCE ........................................................................................................... 32 21.3 GOVERNING LAW ........................................................................................................... 32 21.4 DEFINITIONS, EXHIBITS AND ATTACHMENTS ................................................................ 32 21.5 CONSTRUCTION .............................................................................................................. 32 21.6 TRANSFER OF LANDLORD'S INTEREST ........................................................................... 32 21.7 LANDLORD’S LIABILITY ................................................................................................. 32 21.8 FORCE MAJEURE ............................................................................................................. 32 21.9 SEVERABILITY ................................................................................................................ 33 21.10 INVESTMENT TAX CREDIT ............................................................................................. 33 21.11 FINANCIAL REPORTS ...................................................................................................... 33 21.12 LANDLORD’S FEES .......................................................................................................... 33 21.13 ATTORNEYS’ FEES .......................................................................................................... 33 21.14 MEMORANDUM OF LEASE .............................................................................................. 34 21.15 APPROVALS ..................................................................................................................... 34 21.16 WAIVERS ........................................................................................................................ 34 21.17 INTEREST CHARGES ....................................................................................................... 34 21.18 NOTICES .......................................................................................................................... 34 21.19 BROKERS ........................................................................................................................ 34 21.20 NO OFFER ....................................................................................................................... 34 21.21 COUNTERPARTS; ELECTRONIC SIGNATURES ................................................................ 35 21.22 BINDING ON SUCCESSORS AND ASSIGNS ........................................................................ 35 21.23 ENTIRE AGREEMENT ...................................................................................................... 35 ATTACHMENT 2 C6 - 22 TABLE OF CONTENTS: Page iv EXHIBITS EXHIBIT A LEGAL DESCRIPTION OF THE LAND EXHIBIT B SITE PLAN OF THE PROPERTY EXHIBIT C NON-DISTURBANCE AGREEMENT EXHIBIT D ESTOPPEL CERTIFICATE EXHIBIT E FORM OF MEMORANDUM OF LEASE EXHIBIT F-1 CONFIRMATION OF DELIVERY OF POSSESSION OF PREMISES EXHIBIT F-2 CONFIRMATION OF RENT COMMENCEMENT DATE EXHIBIT G PLANS FOR GARDEN STREET IMPROVEMENTS EXHIBIT H DETERMINATION BY APPRAISER OF FAIR MARKET RENTAL VALUE OF PREMISES. EXHIBIT I EXPENSES INCURRED BY LANDLORD—CALCULATION OF "NET REVENUE" (Section 4.1.1) ATTACHMENT 2 C6 - 23 GROUND LEASE: Page 1 GROUND LEASE THIS GROUND LEASE (the “Lease”) is made and entered into, effective as of July __, 2015 (the “Effective Date”), by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city (“Landlord”), and GARDEN STREET SLO PARTNERS, L.P., a California limited partnership (“Tenant”), and consists of the Basic Provisions set forth in Article 1, below (the “Basic Provisions”), the Standard Terms and Conditions set forth in Articles 2 through 20 which are attached hereto (the “Standard Terms and Conditions”), the definitions set forth in Schedule 1 hereto, and the other exhibits attached hereto, all of which are incorporated herein by this reference. RECITALS: A. Landlord is the owner of the “Premises” identified below (which consist of the “Land” and the existing “Improvements,” as defined in Section 1.1, below), and Tenant is the owner of, or has a controlling interest in, the other adjacent parcels of land that, together with the Premises, are situated in that portion of the City of San Luis Obispo that is generally bounded by Broad Street, Garden Street, Marsh Street, and the Garden Alley (such parcels, as they may be changed with the written approval of Landlord, together with the Premises, collectively are referred to as the "Project Area"). B. Tenant intends to develop and construct in the Project Area a hotel, residential units, restaurants and retail space, along with parking consistent with the Project approvals (the “Project”). C. Landlord and Tenant have previously entered into that certain Amended and Restated Memorandum of Agreements executed in February 2014 (the "Memorandum of Agreements"), which described the basic terms on which Tenant and Landlord were willing to move forward to enter into a long term lease and certain other agreements concerning the development by Tenant of the Project Area , and this Lease is the long term lease contemplated by that Memorandum of Agreements. D. The City has previously found that the Project, as entitled, will have an important revitalization effect on the downtown area in the City. E. The City has previously found that the Project is consistent with key General Plan policies including Land Use Element Policy 4.1, which describes downtown’s role as that of ensuring (1) that downtown is the cultural, social and political center of the City for its residents as well as home for those who live in its historic neighborhoods; (2) that the civic, cultural and commercial portions of downtown should be a major tourist destination; and (3) that downtown visitor appeal should be based on natural, historical and cultural features, retail services, and numerous and varied visitor accommodations, and Land Use Element Policy 4.2.1, together with Housing Element Policy 3.11.2, direct new downtown development, such as the Project, to include dwellings. F. The City has previously found that the Project will support concepts set forth in the Conceptual Physical Plan for the City’s center (the “Downtown Concept Plan”) which are to be considered by the City as set forth in Land Use Element Policy 4.16. G. The City has previously found that negotiations between the City and Tenant for this Lease are appropriate in light of Tenant’s ownership or control of certain of the parcels abutting Parking Lot 2, and because Tenant, in its capacity as developer of the Project, has made significant investment to procure the Project entitlements, and without its participation the Project and the benefits it is expected to confer upon the community could not occur. For this reason, the City previously agreed that this Lease would be accomplished without a competitive bidding process in order to serve substantial revitalization objectives that will be furthered by completion of the Project. ATTACHMENT 2 C6 - 24 GROUND LEASE: Page 2 H. The City has previously found that the utilization of City property and the elimination of on-site City parking is critical to implement the Project as entitled by the City Council on June 1, 2010 and as finally approved on March 4, 2014. I. As the contemplated Project (as altered over time) has been under negotiation between Landlord and Tenant since before July 18, 2006, Tenant has had ample time and access to the Premises prior to the Effective Date to inspect the Premises and all of Landlord’s books and records concerning the Premises; to review all title and other public records concerning the Premises including without limitation the past uses and environmental condition of the Premises; to investigate all aspects of the Premises, including the feasibility of Tenant’s planned use of the Premises and the physical condition of the Premises; and to undertake any and all due diligence concerning the Premises including its environmental condition with the understanding that pursuant to this Lease, Tenant shall take possession of the Premises in its “AS-IS” condition, as detailed in this Lease. J. In order to facilitate Tenant’s construction of the Project, the Landlord has agreed to (i) lease the Premises to Tenant, (ii) permit Tenant to pursue a subdivision of the airspace above the Land, and (iii) convey to Tenant fee ownership of the airspace condominium interests created by the approved final subdivision, while retaining fee ownership of the Land below any subdivided airspace. K. Landlord and Tenant have agreed to execute this Lease in order to memorialize the terms and conditions on which Landlord shall lease the Premises to Tenant. AGREEMENTS: NOW, THEREFORE, the parties hereto, intending to be legally bound, do hereby agree as follows: ARTICLE 1 BASIC PROVISIONS 1.1 PREMISES. The “Premises” consist of the following: 1.1.1 LAND. The real property consisting of approximately 0.635 acres of land commonly identified as Assessor’s Parcel No. 002 424 022, which is situated in the City of San Luis Obispo, County of San Luis Obispo, and State of California, the legal description of which is attached hereto as Exhibit A and incorporated herein by this reference (the “Land”); and 1.1.2 IMPROVEMENTS. The existing improvements situated on the Land, other than the Excluded Fixtures as defined in Schedule 1, and all other Improvements that Tenant hereafter constructs and maintains on the Land. There is attached to this Lease as Exhibit B a site plan depicting the location of Improvements on the Premises as of the Effective Date. 1.2 DEFINED TERMS. All capitalized terms that are set forth in this Lease and are not defined herein shall have the respective meanings set forth in Schedule 1 hereto. 1.3 TERM. Ninety-nine (99) years commencing on the Rent Commencement Date. 1.4 BASE ANNUAL RENT. As used herein, the term “Base Annual Rent” means the annual rent due and payable by Tenant for the use of the Premises hereunder, in the amount calculated pursuant to Section 4.1.1, below, as increased from time to time pursuant to Section 4.1.3, below. 1.5 EFFECTIVE DATE. As used herein, the term “Effective Date” shall have the meaning ascribed thereto in the first paragraph of this Lease, above. ATTACHMENT 2 C6 - 25 GROUND LEASE: Page 3 1.6 LEASE YEAR; STUB PERIOD. 1.6.1 DEFINITIONS. As used herein, the term: (A) "Stub Period" means two periods of time in which partial Lease Years shall occur, the first commencing on the Rent Commencement Date and ending on the last day of the Fiscal Year in which the Rent Commencement Date occurred, and the second commencing on the last day of the Fiscal Year in which the Lease Termination Date is scheduled to occur. (B) “Lease Year” means a period of twelve (12) consecutive months commencing (a) for the initial Lease Year, on the first day of the Fiscal Year next occurring after the Rent Commencement Date and ending on the last day of such Fiscal Year; and (b) for each succeeding Lease Year during the Term of this Lease, the period commencing on the first day of each next occurring Fiscal Year and ending on the last day of such Fiscal Year. 1.6.2 EXAMPLE. Solely for purposes of illustrating the foregoing, if the Rent Commencement Date is on October 1, 2015, then the first Stub Period shall commence on October 1, 2015, and shall end on June 30, 2016; the first Lease Year shall commence on July 1, 2016 and end on June 30, 2017; each successive Lease Year shall commence on the next occurring July 1, and end on the next occurring June 30; and the last Stub Period shall commence on July 1, 2113 and end on September 30, 2114. 1.7 RENT COMMENCEMENT DATE. The “Rent Commencement Date” means the first date as of which Landlord, following delivery of the Tenant's Notice Requesting Possession pursuant to Section 3.4.1, tenders possession of the Premises to Tenant and is the date on which the Term of this Lease begins. 1.8 TENANT’S APPROVED USE OF THE PREMISES. Tenant’s approved use of the Premises (its “Use”) shall be for the development, construction in accordance with the timelines set forth in this Lease and operation in the Project Area (which, for avoidance of doubt, includes both the Premises and additional real property) of the Project, which shall consist of: 1.8.1 HOTEL. The Hotel, which (a) must obtain and maintain a three-star or four-star rating as determined by a mutually agreeable third party reasonably acceptable to Landlord and to Tenant, as confirmed in a writing separate from this Lease executed by both Landlord and Tenant and delivered by each to the other, (b) shall contain not less than forty-five (45) hotel rooms, and (c) also may contain the other uses listed in the definition of the term “Hotel” on Schedule 1 hereto; and 1.8.2 CONDOMINIUMS. The condominium residences, which shall consist of not less than eight (8) such residential units, and 1.8.3 RETAIL SPACE. Retail space, which shall contain not less than 20,000 square feet of retail space; and 1.8.4 PARKING. Parking which shall be consistent with the Project approvals (Article 5), and which in any event shall consist of not less than 147 non-public parking spaces. ARTICLE 2 THE LEASE 2.1 THE PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, in its “AS-IS”, “WHERE-IS” condition, the Premises described in Section 1.1 of the Basic ATTACHMENT 2 C6 - 26 GROUND LEASE: Page 4 Provisions, together with the Improvements. Tenant expressly acknowledges and agrees that it has inspected the Premises and all of Landlord’s books and records concerning the Premises; reviewed all title and other public records concerning the Premises including without limitation the past uses and environmental condition of the Premises; investigated all aspects of the Premises, including the feasibility of Tenant’s planned use of the Premises and the physical condition of the Premises; and undertaken any and all due diligence concerning the Premises including its environmental condition prior to its execution of this Lease. For avoidance of doubt, Landlord shall not be responsible in any way for cleaning, removing, monitoring, cataloguing or otherwise addressing any sub-soil conditions, archeological conditions, hazardous materials or other things that may be found in the Project Area, and the parties agree to execute any additional agreements necessary to ensure that Tenant will assume full responsibility for any such costs that are required in connection with the development, construction, maintenance and operation of the Project. 2.2 SIGNS. Tenant shall have the right to install and maintain upon the Premises signs advertising Tenant’s business and that of its sublessees, including without limitation Tenant’s standard building and free-standing monument sign, provided that such signs shall be in accordance with all applicable Laws; provided further that, Tenant may not affix or maintain any signs in, on or about the Premises, unless: (a) Tenant's sign(s) conform to the existing sign criteria outlined in the municipal and building codes of the City of San Luis Obispo. ARTICLE 3 TERM 3.1 EFFECTIVE DATE. This Lease shall be effective as of the Effective Date. 3.2 POSSESSION; COMMENCEMENT OF LEASE TERM. 3.2.1 POSSESSION. Provided that each and every one of the conditions to delivery of possession of the Premises as described in Sections 3.3.1 and 3.3.2, below, shall have been fully and timely satisfied by Tenant or waived in writing by Landlord, Landlord shall deliver possession of the Premises to Tenant as and when stated in Section 3.4.1. 3.2.2 OUTSIDE DELIVERY DATE. Should any of the conditions to delivery of possession stated in Section 3.3.1, below, not have been fully satisfied or waived in writing by Landlord prior to March 15, 2016 (the “Outside Delivery Date”), (a) upon the request of Tenant and with the approval of the City Manager (which approval shall not be unreasonably withheld, conditioned, or delayed if Tenant has provided to City Manager with its request reasonable evidence that the requested extension was necessitated by delays caused by the City in processing Tenant’s entitlements and permits for the Project), the City and Tenant may agree to extend the Outside Delivery Date for a time period not to exceed one (1) year pursuant to a written agreement amending this Lease to memorialize the date to which the Outside Delivery Date has been extended, and (b) if the City Manager does not deliver that notice prior to the then-scheduled Outside Delivery Date, then Landlord shall have the right to terminate this Lease by giving written notice of its termination to Tenant at any time after the Outside Delivery Date, in which event all rights granted herein by Landlord to Tenant including without limitation all right to the Premises, shall revert to Landlord without any further action being required, this Lease shall be of no further force or effect, other than the provisions which expressly state that they survive expiration or termination shall so survive and remain enforceable. 3.3 CONDITIONS PRECEDENT TO DELIVERY OF POSSESSION. The Landlord shall not be obligated to deliver possession of the Premises, the Rent Commencement Date shall not occur, and the Term of this Lease shall not commence, until and unless: ATTACHMENT 2 C6 - 27 GROUND LEASE: Page 5 3.3.1 PROPERTY-SPECIFIC CONDITIONS. Tenant has satisfied each of the following conditions prior to the Outside Delivery Date at Tenant's sole expense without reimbursement: (A) DESIGN APPROVAL. Tenant shall have obtained final design approval to proceed with the Project in accordance with the City’s normal design review requirements, which shall be subject to the City Council’s final approval. Tenant acknowledges and agrees that Landlord shall not have the right to waive this condition precedent. (B) GARDEN STREET IMPROVEMENTS. Tenant shall have completed the design, obtained and provided Landlord with proof of funding for, and provided, or caused its construction company to provide, to the City a completion bond insuring completion at Tenant’s sole expense of, all physical improvements to Garden Street at Marsh Street, Broad Street and Garden Alley in the City (the “Garden Street Improvements”) that are described in and consistent with the Garden Street Makeover Plan memorialized in that certain set of plans entitled, “Redevelopment Project Architectural Review Commission Garden Street Terraces” (the “Garden Street Improvements Approved Plans”) prepared by Cuningham Group Architecture, Inc. identified as “Project Title: Garden Street Terraces” dated 08-08-2013, a copy of which is attached hereto as EXHIBIT G, which plans have been approved by the City through its Architectural Review Commission 129-13 and Resolution 10504 on March 4, 2014, and which plans, including all data, notes, reference notes, utility reference notes, site plan notes, off-site parking summaries, descriptions of materials and improvements and matrices are incorporated here by reference as if set forth in full herein. In the event of any conflict in the description of the Project as described in the Garden Street Improvements Approved Plans and as described in this Lease, the description of the Project in this Lease will control; however, in the event of any conflict in the description of the Garden Street Improvements between this Lease and the Garden Street Improvements Approved Plans, the description in the Garden Street Improvements Approved Plans shall control. The parties agree that if the Garden Street Improvements Approved Plans are hereafter modified with the written approval of the City, then (a) all references in this Agreement to the Garden Street Improvements Approved Plans" shall be deemed to be references to such modified version thereof and (b) upon the request of either party, each party shall execute an amendment to this Lease to refer expressly to such modified plans. (C) BUILDING PERMITS. Tenant shall have obtained building permits for the Project and for the Garden Street Improvements, consistent with the final design which shall have been approved by the City Council and consistent with the City’s approved phasing plan for the proposed development of the Premises. Any and all changes to the City’s approved phasing plan require the prior written consent of Landlord by its Community Development Director, which may be given or withheld in the sole discretion of Landlord by its Community Development Director. (D) COMMITMENT LETTER FROM LENDER. Tenant shall have obtained from a lender of Tenant’s choice a final, legally binding commitment letter to fund the construction costs of the Project, subject to customary underwriting and due diligence contingencies. (E) IN LIEU PARKING FEES. If the Project shall have failed to provide on- site all parking required for such Project, then Tenant shall have paid to City the generally applicable in lieu parking fee required by the City at the time building permits for the Project are issued. For avoidance of doubt, such in lieu parking fees shall be in addition to the Base Rent required pursuant to this Lease. (F) APPROVED ACCESS PLAN. Tenant shall have provided to Landlord, and Landlord shall have approved in its sole discretion, a plan providing for access during construction of the Project and of the Garden Street Improvements for trash removal and deliveries to the businesses along Higuera Street that currently utilize Parking Lot 2 and the alleyway adjacent to it for these purposes. ATTACHMENT 2 C6 - 28 GROUND LEASE: Page 6 (G) CONSTRUCTION PHASING PLAN. Tenant shall have provided to Landlord, and the City's Community Development Director shall have approved in his reasonable discretion, a construction phasing plan that provides a detailed description of how the construction of the Project and the Garden Street Improvements shall be completed, and over what period of time, including without limitation commercially reasonable milestones. Once such construction phasing plan shall be approved by the City's Community Development Director, Tenant shall satisfy the terms stated in such construction phasing plan, and Tenant's failure to do so timely shall be a default under this Lease, except to the extent such failure is caused by an Unavoidable Delay. Should Landlord so require, such approved construction phasing plan shall be attached to this Lease as an exhibit, and made a part hereof as if set forth in full herein, and Tenant agrees to sign any commercially reasonable amendment to this Lease effectuating the incorporation herein of such construction phasing plan within ten (10) business days of Landlord providing Tenant with such an amendment. 3.3.2 REQUEST AND APPROVAL. Tenant has delivered to Landlord a written notice executed by a duly authorized officer of Tenant certifying to Landlord that all conditions precedent stated in Section 3.3.1 have been satisfied by Tenant or waived by Landlord ("Tenant's Notice Requesting Possession"), and Landlord has provided to Tenant a written notice, which may not be unreasonably withheld, conditioned or delayed, confirming that the conditions set forth in Section 3.3.1, above, have been satisfied (or waiving any requirement that Tenant satisfy such any condition), setting forth the amount of the Base Annual Rent Floor pursuant to Section 4.1.1, below, and stating the date on which Landlord shall deliver possession of City Parking Lot 2 to Tenant in accordance with to Section 3.4.1 (the "Landlord's Approval Notice"). Should the City not agree that all conditions precedent stated in Section 3.3.1 have been satisfied by Tenant or waived by Landlord, then the City shall provide to Tenant in writing a list of the conditions precedent that have not been met, and Tenant shall have the right to satisfy such conditions precedent until the Outside Delivery Date, but if such conditions precedent shall not have been satisfied prior to the Outside Delivery Date, then Section 3.2.2 shall apply. 3.4 DELIVERY AND ACCEPTANCE OF POSSESSION. 3.4.1 DELIVERY OF POSSESSION. Provided that the conditions precedent set forth in Section 3.3.1 shall have been satisfied by Tenant or waived in writing by Landlord before the Outside Delivery Date, and that Landlord shall have delivered to Tenant the Landlord’s Approval Notice, Tenant shall deliver to Landlord Tenant's Notice Requesting Possession together with Tenant's first payment of Base Rent for the first Stub Period pursuant to Section 4.1.2. Provided that Landlord has received from Tenant such first payment of Base Rent pursuant to the immediately preceding sentence and Section 4.1.2, below, Landlord shall tender possession of the Premises to Tenant on or before the thirtieth (30th) day after such notice is effective (the "Possession Delivery Date"), and, pursuant to Section 1.7, such date of delivery shall be the Rent Commencement Date. 3.4.2 ACCEPTANCE OF POSSESSION; "AS-IS". By occupying the Premises, Tenant shall be deemed to have accepted the Premises in their “AS-IS”, “WHERE-IS” condition as of the date of such occupancy. Upon request of Landlord, Tenant shall execute and deliver to Landlord, prior to occupying the Premises, a letter substantially in the form of Exhibit F-1 hereto, confirming that (a) Tenant has accepted the Premises in their “AS-IS”, “WHERE-IS” condition, and (b) that Landlord has performed all of its obligations with respect to the Premises. 3.5 TERM. The Term of this Lease shall (a) commence on the Rent Commencement Date and (b) subject to sooner termination in accordance with the terms of this Lease, shall continue for the Term set forth in Section 1.3 of the Basic Provisions. Upon the request of either party, Landlord and Tenant shall execute a letter substantially in the form of Exhibit F-2 hereto, confirming the Rent Commencement Date and the expiration date of the Term of this Lease. ATTACHMENT 2 C6 - 29 GROUND LEASE: Page 7 3.6 RESERVED USE BY LANDLORD. 3.6.1 RESERVED USE. Subject to Section 3.6.2, Landlord may continue to operate its Parking Lot 2 on the Premises following the Effective Date of this Lease and prior to the delivery of possession of the Premises to Tenant. Landlord shall indemnify, defend, and hold Tenant free and harmless from and against all claims, costs, damages, and expenses arising from or relating to any damage to any property or injury or death to any person arising from or in any way related to Landlord’s reserved use of the Premises pursuant to this Section 3.6.1. 3.6.2 TERMINATION OF RESERVED USE. The parties (a) acknowledge that Tenant will need possession of the Premises in order to commence construction of improvements as part of the Project; (b) therefore agree that between the date of delivery of the Tenant's Notice Requesting Possession and the Possession Delivery Date, Landlord shall have the right, but no obligation, to remove its personal property and the Excluded Fixtures from the Premises prior to delivering possession of the Premises to Tenant, including without limitation any meter heads, back stops, signs, and similar items used in connection with the City’s operation of Parking Lot 2 and any fixtures associated with the public restrooms on the Premises; and (c) on the Possession Delivery Date, Landlord shall cease all reserved use of the Premises and shall deliver possession of the Premises to Tenant free and clear of any reserved uses by Landlord. 3.7 COST AND COMPLETION OF GARDEN STREET IMPROVEMENTS. Tenant at its sole cost and expense (without reimbursement) shall complete the Garden Street Improvements concurrently with completing the Project and within the time periods stated in this Lease, shall maintain the Premises and all property affected by the Garden Street Improvements free from all liens at all times during the construction of the Garden Street Improvements, and shall pay the entire cost of such Garden Street Improvements. Without limitation of the foregoing, Tenant as developer shall assure high levels of maintenance, uniformity of street façade appearance and maintenance, adequate security and compliance with the plans, notes thereon, and conditions stated in the Garden Street Improvement Approved Plans attached as EXHIBIT G. If Tenant fails timely to fulfill its obligations under this Section 3.7, then Landlord may take any and all actions, and spend any amounts needed, to fulfill Tenant's obligations, and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord within ten (10) days after Landlord has invoiced Tenant therefor. 3.8 OUTSIDE COMPLETION DATE; EARLY TERMINATION. If Tenant has not both (a) taken possession of the Premises timely pursuant to Section 3.2.2 and (b) completed construction of the Project on the Land and of the Garden Street Improvements, and satisfied all terms and conditions then due, on or before March 1, 2019 (the "Outside Date of Completion"), then (a) the City Manager shall have the right, but not any obligation, to extend the Outside Date of Completion for a time period not to exceed one (1) year by delivering to Tenant a written notice confirming the date to which the Outside Date of Completion has been extended, and (b) if the City Manager does not deliver that notice prior to the then- scheduled Outside Date of Completion, then Landlord shall have the right to terminate this Lease by giving written notice of its termination to Tenant at any time after the Outside Date of Completion, in which event all rights granted herein by Landlord to Tenant including without limitation all right to the Premises, shall revert to Landlord without any further action being required, this Lease shall be of no further force or effect, other than the provisions which expressly state that they survive expiration or termination shall so survive and remain enforceable. ARTICLE 4 RENT 4.1 BASE ANNUAL RENT. ATTACHMENT 2 C6 - 30 GROUND LEASE: Page 8 4.1.1 AMOUNT. Commencing on the Rent Commencement Date, Tenant shall pay to Landlord during the Term Base Annual Rent in an amount that initially equal to the greater of (x) One Hundred Seventy-one Thousand Six Hundred Dollars ($171,600) (which the parties acknowledge is the amount determined in the Qualified Appraisal to be the total annual market rent for the Premises), or (y) the "Base Annual Rent Floor", which is the amount of Landlord’s annual net revenue from the operation of Parking Lot 2 on the Premises in the period of twelve (12) months ended on the last day of the last full calendar month ended two (2) months prior to the Rent Commencement Date, which annual net revenue shall be stated by Landlord in the Landlord’s Approval Notice. In no event shall the prorated share of Base Annual Rent due for any Stub Period be less than the prorated Base Annual Rent Floor applicable to the number of calendar months in such Stub Period. For purposes of the foregoing, the term “net revenue” means the gross revenue collected from parking fees from users of Parking Lot 2, reduced by all costs and expenses paid or incurred by Landlord, as further described on EXHIBIT H hereto. The amount of Base Annual Rent as determined in accordance with the foregoing provisions of this Section 4.1.1 thereafter shall be subject to periodic increases in accordance with Section 4.1.3, below. 4.1.2 DUE DATE OF PAYMENT. The Base Annual Rent shall be paid annually in advance, without deduction or offset, on (a) for the first Stub Period, the date on which Tenant delivers to Landlord the Tenant's Notice Requesting Possession; and (b) for each subsequent Lease Year or Stub Period, on or before the first day of such subsequent Lease Year or Stub Period. 4.1.3 PERIODIC INCREASES IN BASE ANNUAL RENT. (A) The amount of Base Annual Rent shall be increased as of the first day of each Rent Adjustment Period commencing with the Rent Adjustment Period that begins on the first day of the third (3rd) Lease Year and on the first day of each subsequent Rent Adjustment Period. The Base Annual Rent due for each Lease Year or Stub Year in each such Rent Adjustment Period shall be determined by multiplying (i) the amount of Base Annual Rent that was due and payable during the last Lease Year of the immediately preceding Initial Period or the immediately preceding Rent Adjustment Period, times (ii) a fraction, (x) the numerator of which is the Adjustment Index, and (y) the denominator of which is the Base Index; provided, however, that the amount of Base Annual Rent determined for each Rent Adjustment Period shall not be less than one hundred six percent (106%) of, and shall not be more than one hundred twelve percent (112%) of, the amount of Base Annual Rent that was due and payable during the last Lease Year of the immediately preceding Initial Period or the immediately preceding Rent Adjustment Period. (B) For purpose of the foregoing, the term: (i) “Adjustment Date” shall mean the first day of each Rent Adjustment Period. (ii) “Adjustment Index” shall mean the CPI Index reported for the month that was two (2) months prior to the Adjustment Date. (iii) “Base Index” shall mean (A) the CPI Index figure for the month that was two (2) months prior to the Rent Commencement Date (in the case of the first Adjustment Date to occur after the Rent Commencement Date), and (B) for each subsequent Adjustment Date, the CPI Index figure for the month that was two (2) months prior to the immediately preceding Adjustment Date (in the case of all subsequent Adjustment Dates). (iv) “CPI Index” shall mean the official Consumer Price Index – All Urban Consumers for the Los Angeles-Riverside-Orange County, CA area, 1982-1984=100 Base, as ATTACHMENT 2 C6 - 31 GROUND LEASE: Page 9 published by the United States Department of Labor, Bureau of Labor Statistics. If the CPI Index is no longer published on the Adjustment Date, then appropriate reference figures for the Base Index and the Adjustment Index shall be derived from any reasonably comparable successor index mutually agreed by the parties. If the parties are unable to agree within ten (10) days following the date on which either party delivers to the other party written notice invoking this sentence, then the successor index shall be selected by the then-presiding judge of the Superior Court for San Luis Obispo County, California. (v) “Rent Adjustment Period” shall mean (a) initially, the three (3) year period commencing on the first (1st) day of the third (3rd) Lease Year (for avoidance of doubt, that means after expiration of the first Stub Period and the first two (2) Lease Years only (the "Initial Period"), and (b) subsequently, each successive period of three (3) consecutive Lease Years (and, in the final Rent Adjustment Period, the last Stub Period) commencing on the day immediately following the expiration of the preceding Rent Adjustment Period. 4.2 ADDITIONAL RENT. In addition to paying Base Annual Rent pursuant to the foregoing provisions of this Article 4, all other amounts due from Tenant to Landlord under this Lease shall be treated as rent hereunder, and upon Tenant’s failure to pay any such additional rent when due, Landlord shall have with respect thereto all rights and remedies that are available to Landlord under this Lease and applicable law for Tenant’s failure to timely pay any rent. ARTICLE 5 TENANT’S USE Tenant shall have the right and the obligation to use the Premises for the Use permitted under Section 1.8 of the Basic Provisions. ARTICLE 6 HAZARDOUS SUBSTANCES; INDEMNIFICATION 6.1 REPORTABLE USES REQUIRE CONSENT. Tenant shall not engage in any activity in or on the Premises which constitutes a Reportable Use of any Hazardous Substance, without the express written consent of Landlord and timely compliance (at Tenant’s expense) with all Laws. Notwithstanding the foregoing, Tenant may use any ordinary and customary materials reasonably required to be used in the normal course of the agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.) and common household cleaning materials, so long as such use is in compliance with all Laws, is not a Reportable Use, and does not expose the Premises or neighboring property to any meaningful risk of contamination or damage or expose Landlord to any liability therefor and is and shall be used, kept and stored in a manner that complies with all Laws. In addition, Landlord may condition the consent to any Reportable Use upon receiving such additional assurances as Landlord reasonably deems necessary to protect itself, the public the Premises and/or the environment against damage, contamination injury and or liability, including but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or requiring Tenant to provide a security deposit. 6.2 DUTY TO INFORM LANDLORD. If Tenant knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, other than as previously consented to by Landlord, Tenant shall immediately give written notice of such fact to Landlord, and provide Landlord with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substance. 6.3 TENANT REMEDIATION. Other than as expressly provided in Section 6.1, Tenant shall not cause or knowingly permit any Hazardous Substance to be brought upon, kept, used, spilled or released in, on, under, or about the Premises (including through any plumbing or sanitary sewer system) ATTACHMENT 2 C6 - 32 GROUND LEASE: Page 10 and shall promptly, at Tenant's expense, comply with all Laws and take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring properties, that was caused, permitted, found, or materially contributed to, by Tenant or its invitees or permittees or pertaining to or involving any Hazardous Substance in or on or under the Premises during the term of this Lease, by or for Tenant or its invitees or permittees, whether or not such Hazardous Substances were or should have been known or unknown to Tenant or Landlord or both prior to th e Effective Date of this Lease or thereafter. 6.4 TENANT INDEMNIFICATION. Tenant shall indemnify, defend (with counsel selected by Tenant and reasonably acceptable to Landlord) and hold Landlord, its elected officials, officers, agents, employees, invitees, licensees, successors and assigns (the “Landlord Indemnitees”), harmless from and against any and all loss of rents and/or damages, liabilities, judgment, claims, charges, expenses, penalties, and internal and external attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Tenant, its invitees or permittees, or caused, permitted, found or materially contributed to, by Tenant or its invitees or permittees, or pertaining to or involving any Hazardous Substance in or on or under the Premises during the term of this Lease, by or for Tenant or its invitees or permittees whether or not such Hazardous Substances were or should have been known or unknown to Tenant or Landlord or both prior to the Effective Date of this Lease or thereafter. Tenant's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or knowingly permitted by Tenant, the cost of investigation, removal, remediation, restoration and/or abatement, and all costs described in Section 2.1, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Landlord and Tenant shall release Tenant from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Landlord in writing at the time of such agreement. Tenant’s obligations under this Section 6 shall survive the termination of this Lease. 6.5 INSPECTION; COMPLIANCE. Landlord and Landlord’s consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times after reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying compliance by Tenant with this Lease. The cost of any such inspections shall be paid by Landlord. In addition, Tenant shall provide copies of all relevant material safety data sheets (MSDS) and any other environmental studies or reports to Landlord within 10 days of the receipt of a written request therefor. ARTICLE 7 CONDITION OF THE PREMISES DURING THE TERM 7.1 MAINTENANCE AND REPAIRS. During the Term of this Lease, as the same may be extended, Tenant shall maintain at its expense, all portions of the Premises and all Improvements erected thereon, in good condition and repair, ordinary wear and tear excepted. However, Tenant need not repair, replace or restore the Premises in a situation covered under Articles 12 and 13 of this Lease. Tenant shall also maintain at its expense with attention to uniformity of street façade appearance and cleanliness, and adequate security, the enhancement improvements to the streetscape of Garden Street from Marsh Street to Higuera, including the public property and property not owned or leased by Tenant on such portion of Garden Street. 7.2 COMPLIANCE WITH LAWS. Tenant agrees at its own expense to comply with all Laws affecting Tenant's development, Use or occupancy of the Premises, except that, subject to Section 2.1, Tenant shall have no responsibility to correct or remedy (i) any violations of Laws related in any way to the Premises existing prior to the Rent Commencement Date other than any and all such violations as may be required to be corrected in order for Tenant to build and use the contemplated Project or as are required to be corrected to complete any required environmental mitigations, (ii) any violations of Laws ATTACHMENT 2 C6 - 33 GROUND LEASE: Page 11 caused by the Landlord, its employees, agents or contractors, or (iii) any violations of Laws related to the existence of Hazardous Substances on the Premises except as provided in Article 6 of this Lease. 7.2.1 INDEMNITY. Tenant agrees to indemnify, defend (with counsel selected by Landlord and reasonably satisfactory to Tenant) and hold Landlord harmless from and against any Claims of any violation of any Law occasioned by the neglect, omission, or willful act of Tenant or any other person on the Premises permitted by Tenant, except to the extent such violation or Claim of violation results from an act or omission on the part of Landlord or Landlord's officials, agents, servants, contractors, or employees. 7.2.2 CONTEST. Tenant may at its own expense contest by appropriate legal proceedings the validity of any Law affecting Tenant's use and occupancy of the Premises. If compliance therewith may be legally held in abeyance during such contest without subjecting Landlord or Tenant to liability for failure to comply, Tenant may postpone compliance until the final determination of any such proceedings. Upon Landlord’s request, or without such request if Landlord’s title to the Land may in any way be adversely affected by such legal proceedings, Tenant shall provide a bond to insure its performance should it fail to prevail in such contest. 7.3 PREVAILING WAGES; NOTICE. Tenant shall be responsible for evaluating the applicability of any and all prevailing wage requirements in connection with the work to be done on the Project and the Garden Street Improvements. Tenant agrees at its own expense to comply with any and all prevailing wage requirements which may be applicable to work associated with the Project and the Garden Street Improvements that Tenant will construct, and further Tenant shall hold harmless, indemnify and defend Landlord (with counsel chosen by Landlord) against any Claims, damages, costs and/or liabilities arising out of or related to Tenant's contracting for and construction of the Project and the Garden Street Improvements, including without limitation any claims that Tenant or any affiliate or contractor or subcontractor of Tenant violated any applicable prevailing wage requirement applicable to any public work as set for the in Section 1720 et seq. of the California Labor Code. Tenant acknowledges and agrees that, (a) in compliance with section 1773 of the California Labor Code, the State of California Department of Industrial Relations has established prevailing hourly wage rates for each type of workman, (b) current wage rates may be obtained from the Division of Labor web site: www.dir.ca.gov/DLSR/PWD, (c) the public improvements that are a part of the Project are subject to compliance monitoring and enforcement by the Department of Industrial Relations, and (d) any contractors or subcontractors required to pay prevailing wage must be registered with the Department of Industrial Relations pursuant to Section 1725.5 of the California Labor Code. 7.4 PAYMENT OF LANDLORD’S FEES AND COSTS OF TRANSACTION. Tenant agrees to pay to Landlord upon ten (10) business days of demand all of Landlord’s fees (including internal and external attorneys’ fees and hourly staff costs) and costs incurred in connection with this Lease, the proposed Project and the Garden Street Improvements, including without limitation all fees and costs incurred by Landlord in negotiating and documenting this Lease, in analyzing and approving or disapproving any and all aspects of the Project or the Garden Street Improvements, and in defending against any and all Claims against City, challenges and appeals of any City approvals, disapprovals, entitlements, permits and other actions related thereto. Tenant shall indemnify, defend (with counsel selected by Landlord) and hold Landlord, its elected officials, officers, agents, employees, invitees, licensees, successors and assigns (the “Landlord Indemnitees”), harmless from and against any and all loss of rents and/or damages, liabilities, judgment, claims, charges, expenses, penalties, staff costs, and attorneys' and consultants' fees arising out of or involving any such Claims, challenges and appeals of any City approvals, disapprovals, entitlements, permits and other actions related thereto. ATTACHMENT 2 C6 - 34 GROUND LEASE: Page 12 ARTICLE 8 TENANT’S PERSONAL PROPERTY 8.1 PERSONALTY. 8.1.1 TENANT’S PERSONALTY NOT PART OF PREMISES. Tenant’s Personalty located in or upon the Premises at Tenant's cost, shall not become a part of the Premises unless such Personalty is necessary to the use for its intended purpose of the building in which they are installed or to which they are attached and such Personalty cannot be removed from such building without causing material damage to the building. 8.1.2 TRADE FIXTURES. Tenant’s Personalty shall remain the property of Tenant to the extent such Personalty constitutes removable Trade Fixtures, and Tenant may remove such portion of its Personalty from the Premises at any time prior to the termination of this Lease. Tenant, at its own cost and expense, may install, place, reinstall or replace upon the Premises, or remove from the Premises, any such Personalty. Any replacement Personalty shall not become the property of Landlord but shall remain Tenant’s property the same as the original Personalty. 8.2 LIEN WAIVERS. Landlord waives any statutory landlord’s lien and any attachment for Rent on the Personalty that Landlord may have or may hereafter acquire. Landlord acknowledges and agrees that Tenant’s Personalty may be leased from an equipment lessor or encumbered by Tenant’s lender (jointly “Equipment Lessor”) and that Tenant may execute and enter into an equipment lease or security agreement with respect to such Personalty (“Equipment Lease”). If and to the extent required by any Equipment Lease or Equipment Lessor, Landlord shall execute and deliver to the Equipment Lessor a written consent or acknowledgment, in recordable form and in scope and substance satisfactory to such Equipment Lessor in which Landlord (i) acknowledges and agrees that the Personalty which is the subject of the Equipment Lease constitute the personal property of Tenant, and shall not be considered to be part of the Premises, regardless of whether or by what means they become attached thereto, (ii) agrees that it shall not claim any interest in such Personalty, and (iii) agrees that Equipment Lessor may enter the Premises for the purpose of exercising any right it may have under the provisions of the Equipment Lease, including the right to remove such Personalty, provided that such Equipment Lessor agrees to repair any and all damage resulting from such removal. Such consent or acknowledgment documents also may contain such other provisions as may be common in the equipment leasing or lending industry without objection by Landlord. ARTICLE 9 ALTERATIONS AND IMPROVEMENTS 9.1 OWNERSHIP OF IMPROVEMENTS. The Improvements placed upon the Premises by or on behalf of Tenant shall immediately become real property but shall be and remain the property of Tenant during the Term of this Lease, and shall, without the requirement for any further documentation, become the property of Landlord upon the expiration or earlier termination of this Lease. Tenant shall not be required to remove the Improvements from the Land, and Tenant’s failure to remove any property or Personalty upon the termination of this Lease shall be deemed abandonment thereof and title thereto shall thereupon immediately vest in Landlord without further action or documentation. 9.2 ALTERATIONS. Provided that Tenant first obtains from the City and any and all other applicable governmental agencies through their ordinary review processes all permits, entitlements and permissions required in order to enter into this Lease and to construct the Project, the Garden Street Improvements and all portions thereof, including without limitation all design approvals, environmental approvals, and building permits, Tenant may, without the consent of Landlord, make such improvements, additions or alterations (the “Alterations”) to the Premises and to the Improvements as Tenant may deem necessary or convenient. Tenant shall pay all expenses without reimbursement or offset in connection ATTACHMENT 2 C6 - 35 GROUND LEASE: Page 13 with its Alterations. All construction of new improvements shall be completed by Tenant at its sole expense and in compliance with the Design, Approval and Construction Deadlines for the Project and the Garden Street Improvements set forth in Exhibit G. 9.3 MECHANICS LIENS. Tenant shall keep the Premises free of mechanics and materialmens’ liens and other liens of like nature other than liens created or claimed by reason of any work done by or at the instance of Landlord. Tenant hereby agrees to indemnify, defend (with counsel selected by Landlord and reasonably acceptable to Tenant) and hold Landlord harmless from and against, and defend Landlord (with counsel chosen by Landlord) against, all such liens or Claims that may ripen into such liens and against all internal and external attorney's fees, and other costs and expenses incurred by reason of any such Claims or lien, including providing a bond in the amount required pursuant to applicable statutes to clear such lien from title within ten (10) days of written notice of any dispute affecting Landlord’s title to the Land and Improvements. 9.4 NOTICES. Tenant shall give Landlord not less than 10 days’ notice prior to the commencement of any work in, on or about the Premises, and Landlord shall have the right to post and maintain on the Premises such notices of non-responsibility as may in Landlord's judgment be necessary to protect against any mechanic's and materialmen's liens that are provided for by Law. Tenant may contest the correctness or the validity of any lien. If Tenant does so, then Tenant shall, at its sole expense defend and protect itself, Landlord and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof, and shall, within ten (10) days after written demand by Landlord, procure and record a lien release bond issued by a corporation authorized to issue surety bonds in the State. The bond must be in an amount equal to one and one-half times the amount of the claim of lien or such other amount as may be required by statute. If Landlord elects to participate in any such action, Tenant shall pay Landlord's internal and external attorneys' fees and costs. 9.5 TERMINATION OF OBLIGATIONS; SURRENDER OF PREMISES. Upon the expiration or earlier termination of the Term in accordance with the provisions of this Lease, Tenant shall have no further right to occupy or improve the Premises, and all right, title and interest of Tenant in and to the Premises (including without limitation to any and all improvements to the Premises) under this Lease shall revert to Landlord. Upon the expiration or any earlier termination of the Term of this Lease, Tenant shall surrender the Premises to Landlord, together with the Improvements in good condition, reasonable wear and tear excepted, free of any and all interests of subtenants other than those specifically approved by Landlord in writing, subject to the provisions of Articles 12 and 13 of this Lease. If Tenant fails to surrender the Premises to Landlord free of any and all interests of subtenants, then it will pay within three (3) business days of demand, indemnify and defend Landlord (with counsel chosen by Landlord) from all costs of removing such tenants and their property from the Premises including but not limited to Landlord’s internal and external attorneys’ fees and costs of any unlawful detainer proceedings, related litigations and all relocation payments (including without limitation voluntary relocation payments made to subtenants) and related fees and costs. If this Lease is terminated prior to the expiration of the Term for any reason other than default, this Lease shall be of no further effect and all rights and obligations of the parties hereto shall cease concurrently with the effective date of such termination, other than such rights and obligations that are in provisions of this Lease that expressly state that such provisions survive the Lease. Nothing in this Section shall be construed to relieve any party from its obligations with respect to any matter that occurred prior to the effective date of such termination. This Section 9.5 shall survive the expiration or earlier termination of this Lease. ATTACHMENT 2 C6 - 36 GROUND LEASE: Page 14 ARTICLE 10 TAXES 10.1 TENANT’S PAYMENT OF REAL PROPERTY TAXES. Tenant shall pay all Real Property Taxes levied and assessed against the Land and Improvements and against Tenant’s leasehold estate and interest pursuant to this Lease prior to delinquency. If Landlord is the party receiving the bill on Real Property Taxes, then Landlord shall provide a copy thereof to Tenant at least thirty (30) days prior to the delinquency date. With respect to any assessments that may be levied against or upon the Premises, or that under the Law may be evidenced by improvement or other bonds, or may be paid in annual installments, only the amount of the annual installment (with appropriate proration for any partial year) and interest due thereon shall be included within the computation of Real Property Taxes, payable by Tenant. Tenant acknowledges that the Land has not previously been subject to Real Property Taxes because it has been owned by the City, and that the Land and Improvements and Tenant’s leasehold estate and interest will become subject to such Real Property Taxes upon Landlord’s delivery of possession of the Premises to Tenant. 10.2 TENANT’S PAYMENT OF OTHER TAXES. Tenant shall pay all taxes, assessments, license fees, and public charges levied, assessed or imposed upon Tenant’s business operations or Personalty in or on the Premises prior to delinquency. Nothing in this Article 10 of this Lease shall be construed to include in the taxes payable by Tenant hereunder or to require Tenant to pay any inheritance, estate, succession, transfer, gift, franchise, corporation, income, or net profit tax, or capital or judgment levy, that is or may be imposed on Landlord. 10.3 TAXES BEFORE POSSESSION OR AFTER TERM. Tenant's obligation to pay the taxes pursuant to Sections 10.1 and 10.2 of this Lease reflects the parties' intention that Landlord not be required to pay any Real Property Taxes or other taxes that may be or become a lien upon the Land, Improvements and Personalty during the Term. However, any taxes or assessments that may be levied or assessed for a period that includes a portion of Term, but begins before the Rent Commencement Date or ends after the termination of this Lease, shall be prorated between Landlord and Tenant as of such date or dates. 10.4 TAX CONTEST. Tenant may contest, in good faith and by appropriate and timely legal proceedings, the legality, assessed valuation or amount of any tax or assessment that this Lease obligates Tenant to pay. Landlord shall reasonably cooperate with Tenant in the prosecution of Tenant's contest. Tenant agrees to reimburse Landlord for Landlord's reasonable out-of-pocket expenses of cooperation (including all internal and external attorneys' fees, court and other costs). ARTICLE 11 INSURANCE AND INDEMNITY 11.1 EXCULPATION OF LANDLORD. This Lease is made upon the express condition that Landlord is to be free from all liability to Tenant and to third parties for Claims made by Tenant, its agents, employees, licensees, sublessees, invitees and permittees by reason of any injury to any person and damage to any property (including Tenant's), resulting from any cause whatsoever while in, upon, about, or in any way connected with the Premises or the Improvements during the Term of this Lease, expressly including any known or unknown Claims concerning the presence of hazardous materials on, in or under the Premises, but excluding Claims that are based on or arise out of the gross negligence or intentional misconduct of Landlord or a breach by Landlord of its obligations under this Lease. Accordingly, Tenant releases Landlord from liability for, and covenants to not assert, any Claims against Landlord on account of injuries occurring to persons or to property on or about the Leased Premises, including damage to Tenant's equipment, that are caused by any conditions or occurrences other than the gross negligence or intentional misconduct of Landlord or a breach by Landlord of its obligations under this Lease. Without limitation, Tenant's release of Landlord hereunder, and its indemnification of ATTACHMENT 2 C6 - 37 GROUND LEASE: Page 15 Landlord pursuant to Section 11.2, shall include any Claims concerning or related to any dispute over the use of the Premises or any portion thereof by any third party, and any claim whatsoever by such third party that it has any prescriptive or other right to use the Premises or any part thereof. Each lease, assignment or rental agreement between Tenant and its assignees or sublessees shall require include an exculpation provision comparable to this Section 11.1. 11.2 RECIPROCAL INDEMNIFICATION. Subject to the provisions of Section 11.6, below, (a) Tenant shall indemnify and defend Landlord from and against any and all Claims arising out of the use and occupancy of the Premises by Tenant and its agents, employees, licensees, sublessees, invitees and permittees, and from all Claims from which Landlord is exculpated pursuant to Section 11.1, above, except those Claims for which Landlord is liable due to the gross negligence or intentional misconduct of Landlord or a breach by Landlord of its obligations under this Lease, and (b) Landlord shall indemnify and defend Tenant from and against any and all Claims for injuries to persons or to property to the extent resulting from or attributable to the gross negligence or intentional misconduct of Landlord or a breach by Landlord of its obligations under this Lease, except those Claims for which Tenant is liable due to the negligence or intentional misconduct of Tenant or a breach by Tenant of its obligations under this Lease. 11.2.1 LIMITATIONS OF MUTUAL INDEMNIFICATION OBLIGATIONS. Other than as expressly stated in this Lease, the indemnification obligations of Landlord and Tenant to one another under this Lease shall not extend to or include Claims that are excluded from coverage by the standard ISO Commercial General Liability Coverage Form (CG0001) or its equivalent, if such coverage is actually carried by the party seeking indemnification and if such coverage actually reimburses such party for such Claims, damages and liabilities. 11.2.2 INTENTIONALLY DELETED. 11.2.3 LIMITATION ON LANDLORD’S INDEMNIFICATION OBLIGATIONS. The indemnification obligations of Landlord under this Section 11.2 shall not extend to or include any environmental or other conditions existing on the Property prior to the Rent Commencement Date , whether known or unknown, because the Tenant is leasing the Premises in its AS-IS, WHERE-IS condition. 11.2.4 DEFENSE INCLUDED. Tenant shall appear in and defend at Tenant's expense with counsel reasonably satisfactory to Landlord any Claim commenced against Landlord against which Landlord is entitled to be indemnified by Tenant pursuant to the foregoing provisions of this Section 11.2 or any other provision of this Lease under which Landlord is entitled to indemnification, or any Claim against which Landlord is to insured at Tenant’s expense pursuant to the provisions stated in Sections 11.2.5, 11.2.6, 11.2.7, 11.2.8 and 11.2.9 and any other provisions of this Lease under which Landlord is entitled to be insured by Tenant. Landlord shall appear in and defend at Landlord's expense with counsel reasonably satisfactory to Tenant any Claim commenced against Tenant against which Tenant is entitled to be indemnified by Landlord pursuant to the foregoing provisions of this Section 11.2, above. 11.2.5 TENANT’S INSURANCE. Tenant shall procure and maintain in effect at the times specified in this Section 11.2 at the sole cost and expense of Tenant, the following policies of insurance throughout the Term of this Lease: 11.2.6 COMMERCIAL GENERAL LIABILITY INSURANCE. Tenant shall maintain at its sole cost and expense a standard policy of commercial general liability insurance, naming Landlord as additional insured, with limits of at least Three Million Dollars ($3,000,000.00) combined single limit (bodily injury and property damage) covering occurrences within the Premises or arising out of all business operations, use, maintenance or occupancy of the Premises. Tenant's liability coverage shall ATTACHMENT 2 C6 - 38 GROUND LEASE: Page 16 include all the coverages typically provided by the Broad Form Comprehensive General Liability Endorsement, including broad form property damage coverage (which shall include coverage for completed operations). Tenant's liability coverage shall further include premises-operations coverage, products-completed operations coverage, owners and contractors’ protective coverage, and the broadest available form of contractual liability coverage. It is the parties' intent that Tenant shall be contractually obligated to procure insurance coverage, to the maximum extent available (to the Landlord’s satisfaction), for Tenant's indemnification obligations under this Lease. 11.2.7 COURSE OF CONSTRUCTION INSURANCE. During any alteration, construction, or replacement of the Improvements, or any substantial portion of it, a Builder's All Risk policy with extended coverage with course of construction and completed value endorsements, for an amount at least equal to the full insurable value of the Improvements, and workers' compensation, in statutory amounts, with provision for replacement with the coverage described in Section 11 hereof without gaps or lapsed coverage, for any completed portion of the Improvements. 11.2.8 FIRE & CASUALTY. Policies of fire and casualty insurance upon all improvements located on or appurtenant to the leased premises, insuring against loss or damage by fire and such other risks as are now or hereafter included in an extended coverage endorsement, including vandalism and malicious mischief, and if available, shall provide for or include endorsements insuring against the effects of down-zoning and ordinance changes. Such policies shall cover the costs of demolition and grading, and shall contain a full replacement cost endorsement. Such insurance shall have policy limits equal to one-hundred percent (100%) of the full replacement cost of the insured improvements (exclusive of foundations and excavations), shall not have a deductible in excess of $25,000 and shall have an agreed or stated value endorsement. Tenant shall obtain such other endorsements to its fire and casualty insurance as are customary in the industry for improvements of the size and nature as those situated on the leased premises, in amounts which are one hundred per cent (100%) of the customary industry standard for such endorsements procured by or for a similarly situated insured. 11.2.9 RENT CONTINUATION INSURANCE. Rent continuation insurance insuring that the minimum monthly rent will continue to be paid to Landlord for a period of up to twenty-four (24) months if the Premises are damaged or destroyed by any risk required to be insured against under this Article 11. 11.3 INSURANCE REQUIREMENTS. All insurance required by this Lease shall be issued by an insurance company or companies qualified to do business in the State with a general policyholders rating of A and a financial size of VII or better in the current Best’s Insurance Guide. 11.3.1 ADDITIONAL INSURED. Landlord and any lender of Landlord shall be named by separate endorsement as additional insureds under Tenant's general liability coverage. The separate additional insured endorsement must be on ISO Form CG 20 11 01 96 or an equivalent reasonably acceptable to Landlord. Tenant's general liability policies shall be endorsed as needed to provide cross- liability coverage for Tenant, Landlord, and any lender of Landlord and to provide severability of interests. The coverage afforded to Landlord and any lender of Landlord must be at least as broad as that afforded to Tenant and may not contain any terms, conditions, exclusions, or limitations applicable. 11.3.2 PROOF OF INSURANCE. Tenant at all times during the Term of this Lease shall provide Landlord with certificates evidencing the insurance required by this Lease and proof of payment of the premiums therefore and shall provide Landlord with copies of such policies prior to the Rent Commencement Date and thereafter within 10 days of Landlord’s request therefor. Where a policy obtained by Tenant or Landlord pursuant to this Lease has a normal expiration date during the Term of ATTACHMENT 2 C6 - 39 GROUND LEASE: Page 17 this Lease, written evidence of renewal shall be furnished to Landlord fifteen (15) days prior to such expiration (unless replaced by another policy or policies). Tenant’s insurance will be primary and non- contributory with any insurance carried by Landlord with respect to the Premises. Each policy of insurance procured by Tenant hereunder and each certificate of insurance provided to Landlord shall provide that such policy shall not be cancelled and that no change shall be made in the nature, scope or amount of the coverage afforded thereby without thirty (30) days prior written notice to Landlord. If Tenant fails to comply with the foregoing insurance requirements or to deliver timely to Landlord the certificates or evidence of coverage required herein, then in addition to any other remedy available pursuant to this Lease or otherwise, Landlord, upon not less than five (5) days’ advance written notice to Tenant, may (but shall not be obligated to) obtain such insurance and Tenant shall pay to Landlord on demand the premium costs thereof plus an administrative fee equal to fifteen (15%) of such cost. 11.3.3 ADJUSTMENTS TO COVERAGE. Tenant shall review its insurance coverage with Landlord not more than once every ten (10) years for the purpose of assuring that the protection coverage afforded thereby shall be not less than the protection coverage afforded at the commencement of this Lease. If the parties are unable to agree during any such review upon the scope and amount of Tenant's insurance coverage, then the scope and amount of coverage to be provided by Tenant's carrier shall be adjusted to the nature and amounts of coverage recommended in writing by an independent insurance broker selected by the parties or, if they are unable to agree, to an amount that reflects the increase in the CPI Index published over the preceding ten (10) years, or if such index is not then published, then such successor or comparable index that is mutually acceptable to Landlord and Tenant. 11.4 LANDLORD’S INSURANCE. Landlord shall be entitled at Landlord’s election to procure and maintain a Landlord’s policy of liability insurance policy insuring against those liabilities commonly referred to as “landlord’s risk” in the amount of One Million Dollars ($1,000,000), and Tenant shall reimburse Landlord the amount of the premium for such insurance promptly upon receipt of an invoice therefor. 11.5 WAIVER OF SUBROGATION. Landlord and Tenant waive any rights each may have against the other in connection with any of the damage occasioned to Landlord or Tenant, as the case may be, their respective property, the Premises or its contents, arising from covered causes of loss for which insurance is actually carried pursuant to this Lease. Landlord and Tenant shall obtain for each of their respective insurance policies covering the Premises a clause or endorsement waiving and/or denying to the insurance company any right of subrogation against the other party to the extent those rights have been waived by Landlord and Tenant in this Lease, which clause or endorsement shall be equivalent to the Transfer of Rights of Recovery Against Others clause found in the Insurance Services Office Commercial Property Conditions Form No. 0090 (07-88). Each party shall provide evidence to the other within fifteen (15) days of receipt of a written request therefor that their policies contain such a waiver of subrogation clause or endorsement. ARTICLE 12 DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS 12.1 DUTY TO RESTORE. Subject to the provisions of this Article 11, if the Improvements situated on the Premises suffer any damage or destruction, (a) the Lease shall continue in full force and effect, (b) there shall be no abatement of the obligation to pay Rent and (c) Tenant shall promptly repair and restore the Land and Improvements to the condition that existed immediately prior to such damage or destruction. 12.2 DAMAGE NEAR END OF TERM. Notwithstanding the provisions of Section 12.1, above, if the Premises are damaged by fire or other casualty during the last five (5) years of the Term of this Lease, and the Premises are rendered inaccessible or unusable to Tenant so as to prevent Tenant from ATTACHMENT 2 C6 - 40 GROUND LEASE: Page 18 effectively conducting its business from the Premises, then Tenant may terminate this Lease as of the date of the damage by delivering written notice to Landlord within sixty (60) days after the occurrence of the damage. 12.2.1 If Tenant is required to restore or repair the Premises pursuant to Section 12.1, above, or does not elect to terminate this Lease pursuant to this Section 12.2, then Tenant shall be entitled to any proceeds of insurance and right of recovery against insurers on any policies covering such damage, which Landlord hereby assigns to Tenant. 12.2.2 If Tenant does terminate this Lease pursuant to this Section 12.2, Tenant, without demand from Landlord, shall pay or cause to be paid to Landlord all insurance proceeds, if any, with respect to such damage or destruction attributable to the Improvements, or, if Tenant shall have failed to carry and maintain in effect the insurance provided for pursuant to Section 11.3, an amount equal to the full replacement cost of the improvements to the Premises and the full amount of rent continuation insurance that Tenant is obligated to carry and maintain pursuant to this Lease. Provided that Tenant shall have maintained in effect the insurance required pursuant to Section 11.3, Tenant shall have no obligation to remove any debris from the Premises unless Landlord pays Tenant in advance the reasonable cost of such removal, or to pay or cause to be paid to Landlord the amount of any insurance proceeds attributable to Tenant’s Personalty. ARTICLE 13 EMINENT DOMAIN 13.1 TOTAL TAKING. In the event that the entire Premises is taken as a result of the exercise of the power of eminent domain or under the threat of the exercise of such power (a “Total Taking”), this Lease shall terminate as of the date possession is taken, and this Lease shall be of no further force or effect, other than the provisions of this Lease which expressly state that they survive expiration or termination shall so survive and remain enforceable. 13.2 PARTIAL TAKING. In the event that a portion of the Premises is taken as a result of the exercise of the power of eminent domain or under the threat of the exercise of such power (a “Partial Taking”), and the portion not so taken cannot reasonably be adapted to the continued operation of Tenant’s business, then this Lease shall terminate as of the date possession is taken. 13.2.1 If a Partial Taking that does not result in a termination of this Lease occurs, any obligation of Tenant under this Lease to pay Rent and all of the other provisions of this Lease shall remain in full force and effect, except as hereinafter provided. Within a reasonable time after it is determined by Tenant pursuant to the foregoing provisions that such taking shall not terminate this Lease, Tenant shall proceed with reasonable diligence to restore the Land and the Improvements not taken to as near their former condition immediately prior to the taking as reasonably possible. Landlord shall make available to Tenant up to one hundred percent (100%) of any condemnation award or proceeds, other than so much of the award as is allocable to Landlord's loss of rental income, for the repair and restoration of the Land and Improvements. 13.2.2 The Rent and other sums due under the Lease shall be equitably abated proportionately with the degree which Tenant’s use of the Premises is impaired during such restoration. Upon completion of such restoration, the Rent and other sums due under the Lease provided in this Lease shall be reduced in the same proportion that the amount of area of the Premises taken bears to the total area of the Premises immediately prior to such taking. 13.3 CONDEMNATION AWARD. Subject to Landlord’s obligation to reimburse Tenant pursuant to Section 13.2, all damages awarded and/or consideration paid for any Total Taking or Partial ATTACHMENT 2 C6 - 41 GROUND LEASE: Page 19 Taking shall belong to and be the property of Landlord, whether such damages shall be awarded as compensation for diminution in value of the leasehold estate or for the fee title to the Premises, except that Landlord shall not be entitled to any award made for (a) loss of or damage to Tenant's trade fixtures, furniture, machinery, equipment, exterior and interior signs and any other removable personal property belonging to Tenant, (c) for damages for cessation or interruption of Tenant's business, to the extent such cessation or interruption damages are exclusive of and separate and apart from damages for diminution in value of the leasehold estate. ARTICLE 14 SUBLEASE AND ASSIGNMENT. 14.1 SUBLEASE. Subject to Section 14.9, Tenant (a) may sublet the Premises or any portion thereof to its Affiliates without Landlord’s consent, and (b) may sublease portions of the Premises to unrelated third parties in the ordinary course of business, provided that (i) Tenant is not then in default under this Lease beyond the period of notice and opportunity to cure provided in Section 16.1 of this Lease, (ii) the Uses approved by Landlord in this Lease shall limit the use which may be made of the Premises or portion thereof by any subtenant, and (iii) an executed original copy of each sublease agreement is delivered to Landlord. No sublease shall release Tenant of its obligations under this Lease. 14.2 ASSIGNMENT. Only after Tenant's completion of construction of the Project and Tenant's initial occupancy of the Project have occurred, Tenant (a) may assign this Lease to its Affiliates without Landlord’s consent, and (b) may assign this Lease to others, subject to obtaining Landlord’s prior written approval pursuant to Section 14.9, provided that in either case (a) or (b), (i) Tenant is not then in default under this Lease beyond the period of notice and opportunity to cure provided in Section 16.1 of this Lease, (ii) the proposed assignee agrees in writing to attorn to Landlord and to assume and be bound by all of the terms, covenants and conditions of this Lease, and (iii) an executed original of the assignment and assumption agreement is delivered to Landlord. No such assignment and assumption shall release Tenant of its obligations under this Lease. Under such assignment, Landlord shall not be (1) liable for any previous act or omission of Tenant under this Lease, (2) subject to any counterclaim, offset or defense that such assignee might have against Tenant, (3) bound by any modification of this Lease purportedly made by such assignment, or by any rent or additional rent or advance rent which such assignee might have paid for more than the current month to Tenant, and all such rent shall remain due and owing, notwithstanding such advance payment, (4) bound by any security or advance rental deposit made by such assignee which is not delivered or paid over to Landlord and with respect to which such assignee shall look solely to Tenant for refund or reimbursement, or (5) obligated to perform any work in the Premises whatsoever, and in connection with such attornment, the assignee shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Any assignee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this Section. The provisions of this Section shall be self-operative, and no further actions or instruments shall be required to give effect to this provision. 14.3 TRANSFERS. For ease of reference, subleases and assignments of all or a portion of the Premises (other than sales of airspace condominium units as contemplated by Section 18.1) are referred to herein as “Transfers”. 14.4 CHANGE OF USE. Notwithstanding the provisions of Sections 14.1 and 14.2 of this Lease, any change in use of the Premises from the Use set forth in Section 1.7 of the Basic Provisions shall be subject to Landlord’s prior written consent, which may be withheld, conditioned or delayed in Landlord’s sole and absolute discretion. Tenant shall notify Landlord in writing of any proposed change in use. Landlord shall have ninety (90) days from receipt of such notice to deliver its approval or disapproval thereto to Tenant. If such objections are not received within the aforesaid ninety (90) day ATTACHMENT 2 C6 - 42 GROUND LEASE: Page 20 period, Landlord shall be deemed to have disapproved the proposed change of use as specified in Tenant’s notice to Landlord. 14.5 CONSENT STANDARDS. Other than as to Transfers for which Landlord’s consent is required pursuant to Section 14.9, Landlord shall not unreasonably withhold its consent to any Transfer of the Premises where Landlord’s consent is required, provided that the proposed transferee (1) is creditworthy, (2) has a good reputation in the business community, (3) will use the Premises for one of the permitted Uses; otherwise (including Transfers for which Landlord’s consent is required pursuant to Section 14.9), Landlord may withhold its consent in its sole discretion. In connection therewith, Tenant hereby waives and releases its rights under Section 1995.310 of the California Civil Code or under any similar law, statute or ordinance now or hereafter in effect. Additionally, Landlord may withhold its consent in its sole discretion to any proposed Transfer of any portion of the Premises or this Lease if any Event of Default by Tenant then exists. 14.6 REQUEST FOR CONSENT. If Tenant requests Landlord’s consent to a Transfer, then, at least fifteen (15) business days prior to the effective date of the proposed Transfer, Tenant shall provide Landlord with a written description of all terms and conditions of the proposed Transfer, complete and accurate copies of all of the proposed documentation, and the following information about the proposed transferee: name and address; reasonably satisfactory information about its business and business history; its proposed use of the Premises; banking, financial, and other credit information; and general references sufficient to enable Landlord to determine the proposed transferee’s creditworthiness and character. Concurrently with Tenant’s notice of any request for consent to a Transfer, Tenant shall pay to Landlord a fee of Two Thousand Dollars ($2,000.00) to defray Landlord’s expenses in reviewing such request, and Tenant shall also reimburse Landlord immediately upon request for its reasonable staff and internal and external attorneys’ fees incurred in connection with considering any request for consent to a Transfer. 14.7 CONDITIONS TO CONSENT. If Landlord consents to a proposed Transfer, or if a proposed Transfer is made as to which Landlord’s consent is not required, then the proposed transferee shall deliver to Landlord within thirty (30) days of such Transfer a written agreement whereby it expressly assumes Tenant’s obligations hereunder; however, any transferee of less than all of the space in the Premises shall be liable only for obligations under this Lease that are properly allocable to the space subject to the Transfer for the period of the Transfer. No Transfer shall release Tenant from its obligations under this Lease, but rather Tenant and its transferee shall be jointly and severally liable therefor. Landlord’s consent to any Transfer shall not waive Landlord’s rights as to any subsequent Transfers. If an Event of Default occurs while the Premises or any part thereof are subject to a Transfer, then Landlord, in addition to its other remedies, may collect directly from such transferee all rents becoming due to Tenant and apply such rents against Rent. Tenant authorizes its transferees to make payments of rent directly to Landlord upon receipt of notice from Landlord to do so following the occurrence of an Event of Default hereunder. Tenant shall pay for the cost of any improvements necessitated by a proposed subletting or assignment. 14.8 ATTORNMENT BY SUBTENANTS. Each sublease by Tenant hereunder shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and each subtenant by entering into a sublease is deemed to have agreed that in the event of termination, re-entry or dispossession by Landlord under this Lease, Landlord may, at its option, take over all of the right, title and interest of Tenant, as sublandlord, under such sublease, and such subtenant shall, at Landlord’s election, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not be (1) liable for any previous act or omission of Tenant under such sublease, (2) subject to any counterclaim, offset or defense that such subtenant might have against Tenant, (3) bound by any previous modification of such sublease or by any rent or additional rent or advance rent which such subtenant might have paid for more than the current month to Tenant, and all such rent shall remain ATTACHMENT 2 C6 - 43 GROUND LEASE: Page 21 due and owing, notwithstanding such advance payment, (4) bound by any security or advance rental deposit made by such subtenant which is not delivered or paid over to Landlord and with respect to which such subtenant shall look solely to Tenant for refund or reimbursement, or (5) obligated to perform any work in the subleased space or to prepare it for occupancy, and in connection with such attornment, the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this Section 14.7. The provisions of this Section shall be self-operative, and no further instrument shall be required to give effect to this provision. 14.9 REQUIRED NOTICE TO AND APPROVAL BY LANDLORD. Notwithstanding any provisions to the contrary in this Article 14, Tenant shall not have the right to: 14.9.1 OPERATOR OR MANAGER. Enter into any agreement with an operator or manager for the Hotel that is to be included in the Project, except with an Affiliate of Tenant, until and unless Tenant first provides to the City written notice of the identity of such operator or manager, as applicable; or 14.9.2 ASSIGNMENT OR SUBLEASE. Enter into any sublease to or any master sublessee or any assignment to any assignee of this Lease that is not a Tenant Affiliate until and unless Tenant first obtains Landlord’s written consent to the same, which consent may not be unreasonably delayed, conditioned, or withheld. ARTICLE 15 LEASE FINANCING PROVISIONS 15.1 MORTGAGEE PROTECTION. Tenant shall have the right to mortgage and otherwise encumber its leasehold estate and its Improvements and other property located on the Premises (as well as all other rights and easements granted to Tenant under this Lease), and such mortgage or encumbrance, and any sale, conveyance, or assignment pursuant thereto (whether by foreclosure or conveyance in lieu thereof) shall be deemed permitted assignments of this Lease. If Tenant shall mortgage or encumber its leasehold estate hereunder and the mortgagee or holders of the indebtedness secured by the leasehold mortgage or trust deed shall notify Landlord of the execution of such mortgage or trust deed and the name and place for service of notice upon such mortgagees or holder of indebtedness, then and in such event, Landlord hereby agrees for the benefit of such mortgagees or holders of indebtedness from time to time: 15.1.1 That Landlord shall give to any such mortgagee or holder of indebtedness simultaneously with service on Tenant, a duplicate of any and all notices or demands given by Landlord from time to time. Such notices shall be given in the manner and be subject to the provisions of Section 15.1 of this Lease to such address or addresses as such mortgagee or holder of indebtedness may from time to time specify by notice to Landlord. 15.1.2 Such mortgagee or holder of indebtedness or trustee’s sale purchaser shall have the privilege of performing any of Tenant’s covenants hereunder or of curing any default by Tenant hereunder or of exercising any election, option or privilege conferred upon Tenant by the terms of this Lease, and Landlord agrees to accept such performance and payment with the same force and effect as if performed by Tenant. 15.1.3 That Landlord shall not terminate this Lease or Tenant’s right of possession for any default of Tenant if within a period of ten (10) days after the expiration of the period of time within which Tenant might cure said default under the provisions of this Lease, such mortgagee or holder of ATTACHMENT 2 C6 - 44 GROUND LEASE: Page 22 indebtedness or trustee sale purchaser commences to eliminate the cause of such default and proceeds therewith diligently and with reasonable dispatch. 15.1.4 That no lender shall be liable to Landlord as an assignee of this Lease unless and until such time as such lender shall acquire the rights of Tenant hereunder through exercise of its foreclosure remedies or other appropriate proceedings in the nature thereof, or in lieu thereof, or as a result of any other action or remedy provided for by the Financing Documents or which may otherwise be provided by law. 15.1.5 That if any such lender forecloses its lien encumbering tenant’s leasehold interest under this Lease, then notwithstanding any other provision of this Lease to the contrary (including but not limited to the provisions of Article 14 hereof), such lender shall succeed to all of the rights and duties of Tenant hereunder and thereafter shall have and may exercise all such rights of Tenant hereunder. 15.2 SUBORDINATION. This Lease shall be subject and subordinate to the lien of any and all mortgages or deeds of trust that may be recorded against Landlord’s interest in the Premises after the Effective Date of the Lease (collectively “Future Encumbrance(s)”), provided the mortgagee or beneficiary of any such Future Encumbrance (“Encumbrancer”) executes and delivers to Tenant a Subordination, Non-Disturbance and Attornment Agreement (“SNDA”) that satisfies the requirements of this Section of this Lease. 15.2.1 Upon the written request of Landlord, Tenant shall execute and deliver a SNDA in a form reasonably acceptable to Landlord, Tenant, and Encumbrancer, and subordinating Tenant’s interest in the Premises to Future Encumbrances recorded after the Effective Date of this Lease, subject to satisfaction of the following requirements. 15.2.2 The SNDA must provide that (a) so long as Tenant is not in default beyond the period of notice and opportunity to cure provided in this Lease at the date of any foreclosure or trustee sale, and (b) after any such foreclosure, so long as Tenant attorns to the Encumbrancer and is not in default beyond the period of notice and opportunity to cure provided in this Lease, the following provisions shall apply: (A) This Lease shall not terminate by reason of such foreclosure or trustee sale; (B) Tenant’s possession of the Premises shall not be disturbed; (C) The Encumbrancer, upon foreclosure or the occurrence of a trustee sale, or its successors and assigns, including without limitation any successful bidders at any such foreclosure or trustee sale (“Successors or Assigns”), shall recognize Tenant and all of Tenant’s rights under this Lease and shall be obligated to fully and completely perform Landlord’s duties and obligations under this Lease arising from and after the date of such foreclosure or trustee sale; and (D) The Encumbrancer or its Successors and Assigns upon foreclosure or the occurrence of a trustee sale shall agree that all net proceeds arising from casualty or condemnation loss to the Premises shall be available to Tenant for restoration of the Improvements to the extent provided by and in accordance with the terms of this Lease; and (E) The Encumbrancer shall not name Tenant in any foreclosure proceeding except to the extent required by law to do so and then only for the purpose of satisfying such legal procedural requirements ATTACHMENT 2 C6 - 45 GROUND LEASE: Page 23 15.2.3 As part of the SNDA to be executed by Tenant, Tenant shall agree to provide to the Encumbrancer (simultaneously with notice to Landlord) notice of Landlord’s de faults and the same periods to cure such defaults as those provided to Landlord in Section 16.3 of this Lease. 15.2.4 Additionally, the SNDA may contain such other provisions reasonably acceptable to Tenant as are typically found in SNDAs with institutional lenders, except that Tenant shall not be required to execute an SNDA that waives or alters its rights and entitlements or increase its obligations under this Lease. 15.3 LANDLORD’S WARRANTIES AND REPRESENTATIONS. Landlord represents and warrants as follows: (a) Landlord is the sole owner of the Premises; (b) The Landlord’s interest in the Premises is not encumbered by any mortgage or deed of trust; (c) Landlord is duly organized and validly existing under the laws of the State and has full power and authority to enter this Lease and that each person signing on behalf of Landlord is authorized to do so; (d) there are no judicial, quasi-judicial, administrative or other orders, injunctions, moratoria or pending proceedings against Landlord, the Premises which preclude or interfere with, the construction of the development or the Improvements or the occupancy and use of the Premises for the purposes set forth in this Lease. 15.4 TENANT’S WARRANTIES AND REPRESENTATIONS. Tenant represents and warrants as follows: (a) Tenant is duly organized and validly existing under the laws of the State and qualified to do business in the State, has full power and authority to enter this Lease, has taken all corporate actions needed for it to execute, deliver and implement this Lease and the terms and obligations undertaken by Tenant herein and that each person signing on behalf of Tenant is authorized to do so; and (b) there are no judicial, quasi-judicial, administrative or other orders, injunctions, moratoria or pending proceedings against Landlord, the Premises which preclude or interfere with, the construction of the development or the Improvements or the occupancy and use of the Premises for the purposes set forth in this Lease. Tenant further represents and warrants that neither Tenant nor any of its affiliates, nor any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is, nor will they become, a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not Transfer this Lease to, contract with or otherwise engage in any dealings or transactions or be otherwise associated with such persons or entities. 15.5 QUIET ENJOYMENT. Provided Tenant has performed all of its obligations hereunder, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord or any party claiming by, through, or under Landlord, but not otherwise, subject to the terms and conditions of this Lease. 15.6 ESTOPPEL CERTIFICATE. Each party within fifteen (15) days after receipt of written notice from the other party shall execute and deliver to the other party an estoppel certificate stating that this Lease is unmodified and in full force and effect, or in full force and effect as modified, and stating the modifications and that there are no defaults under the Lease, or stating the default and the nature thereof if defaults are claimed. The estoppel certificate also shall state the amount of Rent and the dates to which the Rent has been paid in advance. Execution of the estoppel certificate shall not constitute a waiver of claims by either party with respect to any default under this Lease if the party executing the estoppel certificate is not aware of the default. A form of estoppel certificate acceptable to Tenant is attached as Exhibit D to this Lease. Tenant agrees to execute the estoppel certificate in the form of Exhibit D to this ATTACHMENT 2 C6 - 46 GROUND LEASE: Page 24 Lease, subject to modification to reflect facts or conditions at variance with the provisions of the estoppel certificate. ARTICLE 16 DEFAULT 16.1 EVENTS OF DEFAULT. An "Event of Default" shall exist if at any time (a) Tenant fails to timely pay any Base Annual Rent when due, or any rent or any other amount due under this Lease, including without limitation any amount owed pursuant to any reimbursement or indemnification provision in this Lease within five (5) days of Landlord's notice specifying such amounts or (ii) Tenant fails to timely pay any amount required to be paid to the holder of any mortgage or deed of trust which is required be paid by Tenant; or (b) Tenant fails to remedy within five (5) business days any breach of its obligations under Article 6; or (c) Tenant fails to remedy within a period of thirty (30) days after receipt of written notice of any breach by Tenant in the performance of any other provisions, covenants or conditions of this Lease or the Declaration required to be kept or performed by Tenant that is susceptible of being cured or, if such default cannot reasonably be cured within a thirty (30) day period, Tenant fails within such 30-day period to commence the actions necessary to cure such the default and to thereafter diligently and in good faith continue to cure the default; or (d) Tenant makes an assignment for the benefit of creditors; or (e) a voluntary or involuntary petition is filed by or against the Tenant under any law having for its purpose the adjudication of the Tenant as bankrupt, or the extension of time of payment, composition, adjustment, modification, settlement or satisfaction of the liabilities of the Tenant, or to which any property of the Tenant may be subject and, if the petition be involuntary, if such petition be granted and not dismissed within sixty (60) days; or (f) a receiver is appointed for the Premises by reason of the insolvency or alleged insolvency of the Tenant and said receiver is not discharged within ninety (90) days, or upon the hearing of a timely filed petition to dismiss, absolve or otherwise terminate the receivership, whichever shall later occur; or (g) any department of the state or federal government, or any officer thereof duly authorized shall take possession of the Premises and the improvements thereon by reason of the insolvency of the Tenant and the taking of possession shall be followed by a legal adjudication of the insolvency, or bankruptcy, or receivership of Tenant, or (h) Tenant abandons (“Abandons” or “Abandonment”) the Premises, or is dispossessed by process of law or otherwise. For purposes of the foregoing, Tenant shall not be deemed to have Abandoned the Premises unless neither Tenant or its sublessees or agents fail to make any use of the Premises for a period of one hundred eighty (180) consecutive days or is dispossessed by process of law or otherwise. 16.2 LANDLORD'S REMEDIES. Upon the occurrence of any Event of Default: 16.2.1 TERMINATION. Landlord may, at Landlord's election, terminate this Lease by giving Tenant (a) ten (10) days’ advance written notice of termination specifying the alleged Event of Default, with respect to any Event of Default involving a failure to pay any Base Annual Rent, or (b) twenty-one (21) days' advance written notice of termination specifying the alleged Event of Default, with respect to any Event of Default involving a failure to pay other rent due hereunder, or (c) thirty (30) days’ advance written notice of termination specifying the alleged Event of Default, for any other Event of Default (i.e., any Event of Default other than a failure to pay any Base Annual Rent or other rent due hereunder). Unless such Event of Default is cured prior to the expiration of such 10-day, 21-day, or 30- day period, as applicable, this Lease shall automatically terminate on the expiration of such 10-day, 21- day or 30-day period (as applicable) and all of Tenant's rights in the Premises and in all improvements situated thereon shall terminate. (A) Upon any such termination (i) Landlord may reenter and take possession of the Premises and all remaining improvements and eject all parties in possession (other than subtenants not in default whose possession Landlord had agreed not to disturb) or eject some and not others, or eject none; and (ii) Landlord may remove Tenant's personal property from the Premises and store such property ATTACHMENT 2 C6 - 47 GROUND LEASE: Page 25 in a public warehouse or elsewhere at the cost of, and for the account of Tenant, without notice or resort to legal process except to the extent required by law, and Landlord shall not be guilty of trespass or be liable for any loss or damage which may be occasioned thereby. (B) The termination of this Lease pursuant to this Section 16.2 shall not relieve Tenant from the payment of any sum then due to Landlord or from any claim for damages previously accrued or then accruing against Tenant. (C) The provisions of this Lease which expressly state that they survive expiration or termination shall so survive and remain enforceable despite the termination of this Lease pursuant to this Section 16.2. 16.2.2 REENTRY BY LANDLORD WITHOUT TERMINATION. If, upon the occurrence of an Event of Default, Landlord does not elect to terminate this Lease as provided in Section 16.2.1, then Landlord may, from time to time, without terminating this Lease, re-enter and endeavor to relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Landlord reasonably considers advisable. (A) Landlord shall be entitled to make such alterations and repairs as may reasonably be necessary in order to relet the Premises. In the event that Landlord elects to so relet, then any such reletting shall be deemed to be a sublease for the benefit of Tenant, and rentals received by Landlord from such reletting shall be applied: (i) first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; (ii) second, to the payment of any reasonable costs of such reletting, including the reasonable costs of repairs and new tenant improvements, attorneys' fees and brokerage commissions; (iii) third, to the payment of Rent due and unpaid hereunder; and (iv) the residue, if any, shall be remitted to Tenant. Should that portion of such rentals received from such reletting during any month, which is applied to the payment of Rent hereunder, be less than the Rent payable during that month by the Tenant, then Tenant shall pay such deficiency to Landlord immediately upon demand by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as ascertained, any reasonable costs and expenses (but subject to any limitations set forth above) incurred by Landlord in such reletting not covered by the rentals received from such reletting. No re- entry or taking possession of the Premises by Landlord for the purpose of making repairs or alterations or reletting the Premises shall be construed as an election by Landlord to terminate this Lease unless a written notice of termination is given to Tenant or a court of competent jurisdiction finds that a termination has occurred. (B) Notwithstanding any other provisions set forth in this Lease to the contrary, if Landlord takes possession of the Premises and/or relets the Premises without terminating this Lease, then the only obligations of Tenant to Landlord from and after the date of taking of possession by Landlord and/or the date of reletting by Landlord, whichever shall occur first, shall be the payment of Base Rent and Additional Rent; Tenant shall have no further obligations under this Lease with regard to indemnification, insurance, use, maintenance, or otherwise. (C) Should Tenant Abandon the Premises, Landlord may, but shall not be required to, padlock or otherwise secure the entrances to the Premises without prior notice or resort to legal process and without being deemed guilty of trespass or becoming liable for any loss or damage. All costs and expenses reasonably incurred by Landlord in securing the entrances to the Premises shall be borne by Tenant. No such padlocking or securing of the Premises shall constitute or be deemed to be an election by Landlord to terminate this Lease unless a written notice of termination is given to Tenant or a court of competent jurisdiction finds that a termination of this Lease has occurred. ATTACHMENT 2 C6 - 48 GROUND LEASE: Page 26 16.2.3 RIGHT TO RECOVER RENT. In addition to any other remedy provided to Landlord hereunder, as long as this Lease has not been terminated Landlord shall have the right to recover the Rent when and as it becomes due, together with late charges and interest, from time to time and at such intervals as Landlord elects, as provided by Section 1951.4 of the California Civil Code. 16.2.4 LANDLORD'S DAMAGES. Notwithstanding any reletting by Landlord without termination of the Lease, Landlord may at any time elect to terminate this Lease following the occurrence of an uncured Event of Default. Should Landlord elect to terminate this Lease, then in addition to any other remedies it may have, Landlord may recover from Tenant all damages Landlord may incur by reason of such breach, including (a) the reasonable costs incurred in recovering the Premises, (b) the worth at the time of award of an amount equal to the sum of (i) the unpaid Rent which had been earned at the time of such termination plus (ii) the amount by which the unpaid Rent which would have been earned for the balance of the Term after such termination exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; (c) reasonable attorneys' fees, and (d) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease, including without limitation any failure by Tenant to reimburse or indemnify Landlord as required under any provision of this Lease. 16.2.5 ASSIGNMENT OF SUBRENTS. To secure Tenant's obligations under this Lease, Tenant hereby assigns to Landlord all subrents and other sums becoming due from subtenants, licensees and concessionaires (referred to collectively herein as "subrents"). Landlord agrees not to enforce such assignment other than during any period in which Landlord has the right under this Lease, whether exercised or not, to reenter the Premises on account of a default by Tenant, and Tenant shall not have any right to such sums during that period. Any such subrents actually paid to and received by Landlord shall be applied against the obligations of Tenant as provided in Section 16.2.4, above. This assignment is specifically subject and subordinate to any and all assignments of the same subrents and other sums made to a Leasehold mortgagee under any first-priority Leasehold mortgage permitted by the provisions of this Lease, and upon the request of any such Leasehold mortgagee, Landlord shall make, execute, and deliver to such Leasehold mortgagee a subordination instrument confirming that the rights of Lender under this Section 16.2.5 are subject and subordinate to those of such Leasehold mortgagee. Subject to the rights of such Leasehold mortgagee, Landlord may at Landlord's election reenter the Premises and improvements, without terminating this Lease, and either collect these sums or bring an action for the recovery of such sums from the obligors. 16.2.6 OTHER REMEDIES. During the continuance of any uncured Event of Default, Tenant shall not be entitled to exercise any rights or options, or to receive any funds or proceeds being held under or pursuant to this Lease. 16.2.7 REMEDIES CUMULATIVE AND NOT EXCLUSIVE. The rights, powers and remedies of Landlord hereunder shall be in addition to all rights, powers and remedies given by statute, rule of law and in equity, and all such remedies shall be cumulative. The exercise of any one or more of such right, powers and remedies shall not be construed as a waiver or election by Landlord of any other rights, powers or remedies of Landlord arising pursuant to any provision of law or this Lease. 16.2.8 RIGHTS AND REMEDIES NOT WAIVED. No course of dealing between the Tenant and the Landlord or any failure or delay on the part of the Landlord in exercising any rights or remedies pursuant to law or arising pursuant to this Lease shall operate as a waiver of any rights or remedies of Landlord. Neither the subsequent acceptance by Landlord of any amounts paid to it on account of or with respect to amounts owed by Tenant pursuant to this Lease, or the application of any such amounts in reduction of outstanding Rent or other obligations due from Tenant shall constitute a waiver or cure of default, other than default in the timely payment of the amount so accepted, regardless ATTACHMENT 2 C6 - 49 GROUND LEASE: Page 27 of Landlord's knowledge of the preceding breach. Landlord's acceptance of Rent or any other payment after termination of this Lease shall not entitle the Tenant to have this Lease reinstated. Any waiver, express or implied, by any party hereto, of any breach by any party of any covenant or provision of this Lease, shall not be, nor be construed to be, a waiver of any subsequent breach of the same or any other term or provision hereof. 16.2.9 LANDLORD'S RIGHT TO CURE DEFAULTS. Landlord, at any time after the occurrence of an Event of Default, shall be entitled but shall not be obligated to cure such default, or to cause such default to be cured, at the sole cost and expense of Tenant after first giving Tenant notice of its intention to do so. If, by reason of any default by Tenant, Landlord reasonably incurs any expense or pays any sum, or performs any act requiring Landlord to reasonably incur any expense or to pay any sum, including attorneys' fees and reasonable costs and expenses paid or incurred by Landlord in order to prepare and post or deliver any notice permitted or required by the provisions of this Lease or otherwise permitted or contemplated by law, to appear in any bankruptcy or insolvency proceedings, or otherwise to enforce any of its rights under this Lease, then the amount so paid or incurred by Landlord shall be immediately due and payable to Landlord by Tenant as Additional Rent. Tenant hereby authorizes Landlord to deduct said sums from any security deposit held by Landlord. If there is no security deposit, or if Landlord elects not to use any such security deposit, then such sums shall be paid by Tenant immediately upon demand by Landlord, and shall bear interest at the Agreed Rate from the date on which such demand is made until the entire amount due has been paid in full. 16.3 LANDLORD’S DEFAULT. If Landlord fails to perform or observe any of the covenants, provisions, or conditions contained in this Lease on its part to be performed or observed within thirty (30) days after written notice of default or if more than thirty (30) days are required because of the nature of the default, if Landlord fails to commence the cure of such default within the thirty (30) day period and proceed diligently to cure such default after written notice, then Landlord shall be responsible to Tenant for any and all actual damages (excluding any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages) sustained by Tenant as a result of Landlord’s breach and Tenant shall be entitled to deduct all costs, expenses and damages resulting from Landlord’s breach against all sums due under this Lease, or to seek injunctive relief or specific performance from Landlord. 16.4 FAILURE TO PAY SENIOR LIEN. If the Premises are subject to the lien of any trust deed, mortgage, judgment, assessment, tax or other obligation, whether incurred before or after the execution of this Lease, that Tenant is not bound under this Lease to pay or discharge, or should Landlord fail to pay or discharge any obligation that Landlord is obligated under this Lease to pay or discharge, Tenant may, but need not, pay or discharge any such obligations. If Tenant elects to pay or discharge any such obligation, Landlord shall, upon demand, reimburse Tenant in the full amount thereof, together with Tenant’s expenses incurred in connection therewith, including reasonable attorney’s fees and interest from the date of payment pursuant to Section 21.13 of this Lease, and Tenant may deduct from Rent and other sums due Landlord under this Lease or from the purchase price of any sale of the Premises made by Landlord to Tenant all amounts due to Tenant from Landlord, but not timely paid, under this Section 16.4 of this Lease or any other section of the Lease, until such amounts have been paid in full. ARTICLE 17 TERMINATION; SURRENDER OF DEMISED PREMISES 17.1 REMOVAL OF PERSONAL PROPERTY. Upon the expiration or an earlier termination of this Lease, Tenant shall surrender the Premises to Landlord subject to Tenant's rights with respect to Trade Fixtures. ATTACHMENT 2 C6 - 50 GROUND LEASE: Page 28 17.1.1 REMOVAL OF TRADE FIXTURES. Tenant shall repair any damage to the Improvements caused by the removal of any Trade Fixtures. Should Tenant fail to remove its Trade Fixtures or other personal property from the Premises prior to the date on which Tenant has vacated the Premises, then (a) such all property shall be deemed abandoned by Tenant, and (b) title to any such property shall automatically vest in Landlord without further action or documentation, and (c) Landlord may dispose of the same without liability to Tenant. 17.1.2 CONDITION OF IMPROVEMENTS. Subject to termination due to damage or destruction, on the last day of the Lease Term the Premises shall be in broom clean condition, reasonable wear and tear excepted, and the Premises shall be suitable for immediate refixturing and occupancy. 17.2 HOLDING OVER. Should the Tenant hold the Premises with the written consent of Landlord after the expiration of the Term of this Lease, then such holding over shall be construed to be only a tenancy from month-to-month, Tenant shall pay in advance on the first of each holdover month one-twelfth of 150% of the Base Annual Rent due as of the last month in the Term, and such tenancy shall be subject to all of the conditions and agreements herein contained. Should the Tenant hold the Premises without first obtaining the written consent of Landlord after the expiration of the Term of this Lease, then such holding over shall be construed to be only a tenancy from month-to-month, Tenant shall pay in advance on the first of each holdover month one-twelfth of 250% of the Base Annual Rent due as of the last month in the Term, and such tenancy shall be subject to all of the conditions and agreements herein contained. 17.3 SURVIVAL OF EXECUTORY OBLIGATIONS. The termination of this Lease pursuant to shall be without prejudice to any rights or any remedies to which the terminating party is entitled, if any, due to the breach by one of the parties of any warranty, representation or covenant given by the defaulting party under this Lease. Each party shall continue to be bound by those provisions of this Lease which, by their nature, extend beyond or cannot be fully performed prior to the effective date of termination, including without limitation the provisions of Article 6 (Hazardous Substances) and Article 11 (Insurance and Indemnity). ARTICLE 18 AIRSPACE CONDOMIMIUM UNITS 18.1 CONVEYANCE OF AIRSPACE CONDOMINIUM UNITS. Landlord and Tenant hereby: 18.1.1 Acknowledge that Tenant intends to subdivide and create airspace condominium interests in the airspace above the Land, subject to Landlord’s prior written approval of the form and substance of such airspace condominium interests and all documentation creating them including without limitation Landlord's approvals described in Section 3.3, above, and that Tenant intends to sell such airspace condominium interests to third parties; 18.1.2 Agree that this Lease does not constrain, limit or in any manner alter Landlord's rights as a city or regulatory agency to approve or to disapprove any proposals of, or requests for entitlements or permits by, Tenant as to the Project or any portion thereof as to which City approvals are or may be required, including without limitation any or all of the Landlord's approvals described in Section 3.3 or required by law in connection with the Tenant's proposed subdivision and creation of airspace condominium units in the airspace above the Land; 18.1.3 Agree that if there is not then an Event of Default under this Lease (including without limitation a default pursuant to Tenant's obligations to timely pursue and complete the Project and the Garden Street Improvements), if all conditions precedent stated in Section 3.3, above, have been satisfied by Tenant or waived in writing by Landlord, and if Tenant has obtained all approvals required by ATTACHMENT 2 C6 - 51 GROUND LEASE: Page 29 law in connection with the Tenant's proposed subdivision and creation of airspace condominium units in the airspace above the Land, and further provided that Tenant shall pay to Landlord prior to recording of such grants any amounts due pursuant to Section 18.3, then upon the request of Tenant, Landlord shall make, execute, and deliver in recordable form such grants of any and all right, title and interest of Landlord in and to the airspace condominium interests on and above the second floor of the Improvements to be constructed on the Premises, such that Tenant shall obtain, and be able to transfer to its successors in interest, fee title to such airspace condominium interests as contemplated by Section 18.1.1; 18.1.4 Agree that if Tenant is not then in default under this Lease (including without limitation in default pursuant to Tenant's obligations to timely pursue and complete the Project and the Garden Street Improvements), and if all conditions precedent stated in Section 3.3 have been satisfied by Tenant or waived in writing by Landlord, and if Tenant has obtained all approvals required by law in connection with the Tenant's proposed subdivision and creation of airspace condominium units in the airspace above the Land, then upon the request of Tenant, Landlord shall make, execute and deliver in recordable form such grants of easements and other documents and instruments as may be necessary or convenient for granting to Tenant (and its successors as fee owners of such airspace condominium interests) such commercially reasonable support and access easements, and to utility providers delivering utilities to the owners of such airspace condominium interests such commercially reasonably utility and access easements, as may be reasonably necessary to enable Tenant and its successors as owners of such airspace condominium interests to construct, maintain, and occupy the improvements constructed in such airspace condominium interests; and 18.1.5 Further agree that any and all such airspace condominium interests and all such easements and other rights granted in connection therewith, as to which written grants shall then have been executed by Landlord and recorded, shall survive the expiration or earlier termination of the Term of this Lease, but any planned or proposed airspace condominium interests and all such easements and other rights granted in connection therewith, as to which written grants shall theretofore have been executed by Landlord or recorded, or both, shall not survive the expiration or earlier termination of the Term of this Lease, but shall be null and void, and of no further force or effect upon such expiration or earlier termination of the Term. 18.2 LANDLORD’S RETAINED TITLE. Tenant and Landlord agree and acknowledge that notwithstanding anything to the contrary in Section 18.2, above, or elsewhere in the Lease, Landlord shall retain the fee interest in and to the Premises below any subdivided condominium airspace units on the second floor or above that are transferred pursuant to Section 18.1.3, above, subject only to Tenant's rights to use the Premises expressly demised in this Lease. 18.3 FAIR MARKET VALUE. Landlord and Tenant acknowledge and agree that: 18.3.1 In accordance with the Qualified Appraisal, the fair market value of the airspace condominium rights that Landlord has agreed to convey to Tenant pursuant to the terms and conditions stated in this Section 18 is Seven Hundred Sixty Thousand Dollars ($760,000); and 18.3.2 If the amount of such fair market value: (A) Exceeds the amount that Tenant is required to contribute toward the cost of the Garden Street Improvements pursuant to Section 3.7 hereof, then within twenty-one (21) days following written demand from Landlord, but in any case on or before Landlord shall be obligated to execute or deliver to Tenant or to any third party the first written grant of any airspace condominium ATTACHMENT 2 C6 - 52 GROUND LEASE: Page 30 interest pursuant to Section 18.1.3, Tenant shall pay the amount of such excess to Landlord in immediately available funds; or (B) Is less than the amount that Tenant is required to contribute toward the cost of the Garden Street Improvements pursuant to Section 3.7 hereof, then Tenant shall not be required to pay any amount in addition to the amounts required pursuant to Section 3.7 hereof, but for avoidance of doubt, there shall be no reduction in the amount that Tenant is required to contribute toward the cost of the Garden Street Improvements pursuant to Section 3.7 hereof. ARTICLE 19 WAIVER OF JURY TRIAL; JUDICIAL REFERENCE 19.1 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW, LANDLORD AND TENANT EACH WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LITIGATION OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE ARISING OUT OF OR WITH RESPECT TO THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO. THE PRECEDING SENTENCE IS SUBJECT IN ITS ENTIRETY TO SECTION 19.2, BELOW. 19.2 JUDICIAL REFERENCE. 19.2.1 SCOPE. This Section 19.2 concerns the resolution of any controversies or claims between Landlord and Tenant, whether arising in contract, in tort or by statute, including (but not limited to) controversies or claims that arise out of or relate to this Lease (collectively, “Disputes”). 19.2.2 RESOLUTION OF DISPUTES. To the extent permitted by law, all Disputes shall be resolved in court by a judge without a jury, except that any Disputes which are brought in any state court in California shall be determined by judicial reference as described below. 19.2.3 GENERAL REFERENCE. Any Dispute which is brought in state court in California shall be resolved by a general reference to a referee as provided in California Code of Civil Procedure (“CCP”) Section 638. The referee shall be a retired judge or justic e. The referee shall be selected by mutual written agreement of the parties; provided, however, that if the parties do not select a referee within fifteen (15) days after either party invokes this provision, the referee shall be selected by the Presiding Judge of the Court (or his or her representative) as provided in CCP Section 638 and the following related sections. The referee shall determine all issues in accordance with existing California law and the California rules of evidence and civil procedure. The referee shall be empowered to enter equitable as well as legal relief, provide all temporary or provisional remedies, enter equitable orders that will be binding on the parties and rule on any motion which would be authorized in a trial, including motions for summary judgment or summary adjudication. The award that results from the decision of the referee will be entered as a judgment in the court that appointed the referee, in accordance with the provisions of CCP Sections 644(a) and 645. The parties reserve the right to seek appellate review of any judgment or order, including orders pertaining to class certification, to the same extent permitted in a court of law. 19.2.4 CERTAIN REMEDIES. This Article 19 does not limit the right of any party to (i) exercise self-help remedies or (ii) act in a court of law to obtain an unlawful detainer or any interim remedy, such as but not limited to, injunctive relief, writ of possession or appointment of a receiver, or additional or supplementary remedies. The filing of a court action is not intended to constitute a waiver of the right of any party, including the suing party, thereafter to request or require submittal of the Dispute to judicial reference as provided herein. ATTACHMENT 2 C6 - 53 GROUND LEASE: Page 31 ARTICLE 20 LOAN TO TENANT 20.1 LOAN. Landlord (via its Parking Enterprise Fund), will provide to the Tenant, at or prior to Tenant’s commencement of construction of the Project but only after Tenant's execution, delivery and recordation of the Loan Documents, a loan in the original principal amount of Five Hundred Thousand Dollars ($500,000), which Tenant shall repay as follows: 20.1.1 INTEREST RATE. The loan shall bear interest at a fixed annual rate equal to the Wall Street Journal Prime Lending Rate in effect on the date of the loan plus two percent (2.0%). For purposes of the foregoing, the term “Wall Street Journal Prime Lending Rate” means, as of any day, the "U.S. Prime Rate" published in The Wall Street Journal's "Money Rate" table on the last business day immediately prior to the day as of which such rate is being determined. If such table or rate is not published as of such date, then the term "Wall Street Journal Prime Lending Rate" shall be deemed to be a reference to the prime lending rate of Bank of America in effect on the last business day immediately prior to such date. If Bank of America does not then exist or does not then publish its prime lending rate, then the "Wall Street Journal Prime Lending Rate" shall be the prime lending rate of Landlord’s principal banking institution on the last business day immediately prior to the date as of which such rate is being determined. 20.1.2 AMORTIZATION; REPAYMENT; MATURITY. The principal of and interest on such loan shall be repayable in equal monthly installments of principal and interest based upon 25-year amortization, provided that the loan shall mature and be repayable in full ten (10) years following the date of such loan. 20.1.3 SECURITY. The obligations of Tenant under such loan shall be evidenced by a promissory note and secured by a deed of trust and assignment of rents and conventional commercial loan documents in commercially reasonable form (the "Loan Documents"), each prepared by Landlord and reasonably acceptable to Tenant encumbering title to the Project, other than title to any airspace condominium units as to which Landlord has conveyed and recorded title pursuant to Section 17.1.3(A)(iii). The lien of such deed of trust shall be a second-priority lien, subordinate to the lien of a first-priority deed of trust securing financing in an original principal amount of not more than 65% of the fair market value of the Project, as constructed and completed, and after rents shall have been stabilized. 20.2 USE OF PROCEEDS. Tenant shall use the proceeds of such loan to finance only the Project. ARTICLE 21 MISCELLANEOUS. 21.1 INTENTION OF PARTIES; TRIPLE NET LEASE; COOPERATION. All rent due pursuant to the terms of this Lease shall be absolutely net to the Landlord, so that this Lease shall yield net to Landlord the rent payable hereunder during the Term of this Lease, it being intended that this Lease shall be a so-called triple net lease. The parties intend that the entire risk for development and use of the leased premises shall be borne by Tenant, and that this Lease shall not be subject to termination due to intervening events (including changes in land use and zoning laws and regulations) which frustrate Tenant's proposed use of the Premises or (except to the extent expressly provided in Articles 12 and 13) the occurrence of an uninsured casualty loss. Consistent with its obligations as a city to conform to applicable law and exercise its discretion concerning the approval of any development plans, permit applications or other requests for approvals, entitlements, permits or similar permissions submitted by Tenant, Landlord shall cooperate with Tenant in all respects thereto, including evaluating such requests for approvals, entitlements, permits or similar permissions as required under applicable law, and approving such requests for approvals, entitlements, permits or similar permissions in accordance with ATTACHMENT 2 C6 - 54 GROUND LEASE: Page 32 applicable law and Landlord’s policies. For avoidance of doubt, nothing stated or implied in this Lease, including without limitation in this Section 21.1, shall be interpreted to mean that Landlord is in any way waiving, limiting, or weakening any regulatory or police power Landlord may have in any of its governmental capacities, and no refusal or failure by Landlord in its governmental or regulatory capacity to take any legislative action, issue any permit or license, or take any other action or provide any approval sought by Tenant as developer for the construction of improvements on, or development of, the Project shall constitute a breach of this Lease. 21.2 TIME OF ESSENCE. The timely payment when and as due of all rent and all other sums required to be paid by Tenant under this Lease, and the timely performance by Tenant of each other obligation required to be performed by Tenant, is expressly agreed to be of the essence. 21.3 GOVERNING LAW. This Lease shall be governed by and construed in accordance with the laws of the State. 21.4 DEFINITIONS, EXHIBITS AND ATTACHMENTS. As used in this Lease and its exhibits, the definitions of terms set forth in Schedule 1 to this Lease have the meanings set forth in that Schedule 1. All exhibits, attachments and schedules attached to this Lease are incorporated herein. 21.5 CONSTRUCTION. The Article and Section headings throughout this Lease are for convenience of reference only and the words contained in them shall not be held to expand, modify, amplify or aid in the interpretation or construction of this Lease. The parties negotiated the terms of this Lease equally, and it shall be construed without regard to which party drafted all or any part of it. 21.6 TRANSFER OF LANDLORD'S INTEREST. Landlord shall have the right to transfer any portion of the Project and any of its rights under this Lease without the prior written consent of Tenant. If Landlord assigns its rights under this Lease, then Landlord shall thereby be released from any further obligations hereunder arising after the date of transfer, provided that the assignee assumes Landlord’s obligations hereunder in writing. Landlord shall provide a copy of any such assignment to Tenant, promptly after the occurrence of such assignment. If all or a portion of Landlord's interest in the Premises is sold or conveyed, other than pursuant to a mortgage or transfer for security purposes only, Landlord shall be relieved of all obligations and liabilities accruing on the part of Landlord as to the transferred portion of the Premises after the date the sale is consummated and after notice thereof has been provided to Tenant if the following conditions are satisfied at the date the sale is consummated. All obligations of Landlord under the Lease must be expressly assumed in writing by Landlord's successor in interest. Any funds in the hands of Landlord at the time of transfer in which Tenant has an interest must be delivered to the successor of Landlord. This Lease shall not be affected by any such sale. Tenant agrees to attorn to the purchaser or assignee if (i) all of Landlord's obligations under this Lease are assumed in writing by the transferee and (ii) Landlord is not in default at the date of such transfer. 21.7 LANDLORD’S LIABILITY. The liability of Landlord (and its officials, staff and agents) to Tenant (or any person or entity claiming by, through or under Tenant) for any default by Landlord under the terms of this Lease or any matter relating to or arising out of the occupancy or use of the Premises shall be limited to Tenant’s actual direct, but not consequential, damages therefor and shall be recoverable only from the interest of Landlord in the Premises, and Landlord (and its officials, staff and agents) shall not be personally liable for any deficiency. 21.8 FORCE MAJEURE. Other than for Tenant’s obligations under this Lease that can be performed by the payment of money (e.g., payment of rent and maintenance of insurance), whenever a period of time is herein prescribed for action to be taken by either party hereto, such party shall not be ATTACHMENT 2 C6 - 55 GROUND LEASE: Page 33 liable or responsible for, and there shall be excluded from the computation of any such period of time, any Unavoidable Delays beyond the control of such party. 21.9 SEVERABILITY. If any term, provision, condition or covenant contained in this Lease, or the application thereof to any person or circumstance, is determined to be, to any extent, illegal, invalid or unenforceable, or be held to be illegal, invalid or unenforceable by any court of competent jurisdiction under present or future laws, then the remainder of this Lease, or the application of such term, provision, condition or covenant to persons or circumstances other than those as to which it is held illegal, invalid or unenforceable, shall not be affected thereby and all such remaining terms, provisions, conditions and covenants in this Lease shall be deemed to be valid and enforceable, and in lieu of such clause or provision, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid, or unenforceable clause or provision as may be possible and be legal, valid, and enforceable. 21.10 INVESTMENT TAX CREDIT. Landlord hereby grants to Tenant the right and privilege to apply, pursuant to the appropriate sections of the Internal Revenue Code and regulations thereunder, for any investment tax credit which may be available on the Improvements to be constructed on the Premises and Landlord agrees to execute all necessary documents as may be reasonably required to evidence the consent herein given, provided that (a) Tenant shall upon demand reimburse Landlord for any and all internal and external attorneys’ fees and expenses incurred to review, analyze and approve or disapprove such documentation, and (b) such documents shall not impose on Landlord any obligation to increase or change its obligations hereunder or to incur any out of pocket expenses. 21.11 FINANCIAL REPORTS. Within fifteen (15) days after Landlord’s request from time to time (except as provided below), Tenant shall furnish Tenant’s most recent audited financial statements (including any notes to them) to Landlord, or, if no such audited statements have been prepared, such other financial statements (and notes to them) as may have been prepared by an independent certified public accountant or, failing those, Tenant’s internally prepared financial statements. If Tenant is a publicly traded corporation, Tenant may satisfy its obligations hereunder by providing to Landlord Tenant’s most recent annual and quarterly reports. Tenant will discuss its financial statements with Landlord and, following the occurrence of an Event of Default hereunder, will give Landlord access to Tenant’s books and records in order to enable Landlord to verify the financial statements. To the extent allowed under the Laws applicable to it, Landlord will not disclose any aspect of Tenant’s financial statements that Tenant designates to Landlord as confidential except (1) to Landlord’s mortgagee, if any, or prospective mortgagees or purchasers of the Premises, (2) in litigation between Landlord and Tenant, and (3) if required by court order. Tenant shall not be required to deliver the financial statements required under this Section more than once in any twelve (12) month period unl ess requested by Landlord’s mortgagee or a prospective buyer or lender of the Premises or if an Event of Default occurs. 21.12 LANDLORD’S FEES. Whenever Tenant requests Landlord to take any action not required of it hereunder or give any consent required or permitted under this Lease, Tenant will reimburse Landlord for Landlord’s reasonable, out-of-pocket costs payable to third parties and incurred by Landlord in reviewing the proposed action or consent, including reasonable internal and external attorneys’, engineers’ or architects’ fees and staff fees, within thirty (30) days after Landlord’s delivery to Tenant of a statement of such costs. Tenant will be obligated to make such reimbursement without regard to whether Landlord consents to any such proposed action. 21.13 ATTORNEYS’ FEES. Without limiting the generality of Tenant’s obligations to pay the fees and expenses of Landlord as provided in Sections 7.4 and 21.12 above, if it becomes necessary for either Landlord or Tenant to employ an attorney (including internal or external counsel) to enforce its ATTACHMENT 2 C6 - 56 GROUND LEASE: Page 34 rights pursuant to this Lease because of the default of the other party, the defaulting party shall reimburse the non-defaulting party for the non-defaulting party’s reasonable attorneys’ fees and expenses. 21.14 MEMORANDUM OF LEASE. This Lease may not be recorded. However, concurrently with the execution of this Lease, Landlord and Tenant shall execute in recordable form a Memorandum of Lease in substantially the form attached hereto as Exhibit E, and Tenant at its cost and expense may record such Memorandum of Lease in the Official Records of San Luis Obispo County, California. 21.15 APPROVALS. Except as otherwise provided herein, whenever in this Lease Landlord’s or Tenant’s approval or consent is required, such approval or consent shall be in writing and shall not be unreasonably withheld, conditioned or delayed. Unless otherwise provided herein, Landlord’s or Tenant’s failure to disapprove or to withhold consent within ten (10) days after receipt of notice from Tenant or Landlord shall be deemed to constitute Landlord’s or Tenant’s approval or consent. 21.16 WAIVERS. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord, and no custom or practice which may evolve between the parties in the administration of the terms hereof shall waive or diminish the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. 21.17 INTEREST CHARGES. All sums that are due and payable by one party to the other party hereunder shall bear interest (which shall be due upon written demand) at the Agreed Rate from the date that is two (2) business days after the due date for such payment until the date on which paid in full. 21.18 NOTICES. All notices permitted or required by this Lease shall be in writing, and shall be deemed to have been delivered and received (a) when personally delivered, (b) on the third (3rd) business day after the date on which deposited in the United States mail, postage prepaid, certified or registered mail, return receipt requested, or (c) on the next business day after the date on which deposited with a regulated public carrier or nationally recognized overnight commercial delivery service (e.g., Federal Express, DHL, etc.), addressed to the party for whom intended at the mailing address set forth beneath the signature of such party on the signature page of this Lease, or such other mailing address, notice of which has been delivered in a manner permitted by this Section, or (d) sent by email transmission to the email address set forth beneath the signature of such party on the signature page of this Lease during normal business hours followed within 24 hours by a confirmatory letter sent in another manner permitted hereunder. The parties hereto may change their addresses by giving notice thereof to the other in conformity with this provision. Rejection or other refusal to accept a notice, request, communication or demand or the inability to deliver the same because of a changed address of which no notice was given shall be deemed to be receipt of the notice, request, communication or demand sent. Landlord and Tenant hereby agree not to conduct the transactions or communications contemplated by this Lease by electronic means, except by email transmission as specifically set forth in this Section; nor shall the use of the phrase “in writing” or the word “written” as used in this Lease be construed to include electronic communications except by email transmissions as specifically set forth in this Section 21.18. 21.19 BROKERS. Each party hereby (a) represents and warrants to the other party that the representing party has not engaged and is not obligated to compensate any agent or broker in connection with the execution and delivery of this Lease or the transactions described herein and (b) agrees to indemnify, defend, and hold the other party free and harmless from and against all claims that may breach the foregoing representation. 21.20 NO OFFER. The submission of this Lease to Tenant shall not be construed as an offer, and Tenant shall not have any rights under this Lease unless Landlord executes a copy of this Lease after obtaining its required internal approvals and delivers it to Tenant. ATTACHMENT 2 C6 - 57 GROUND LEASE: Page 35 21.21 COUNTERPARTS; ELECTRONIC SIGNATURES. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument, binding on each signatory thereto. This Agreement may be executed by signatures delivered by email pursuant to Section 21.18, and a copy hereof that is executed and delivered by a party by email will be binding upon that party to the same extent as a copy hereof containing that party's original signature. 21.22 BINDING ON SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure to benefit of, as the case may require, the parties to this Lease and their respective heirs, executors, administrators, successors, and assigns, and shall run with the Land. This Lease is for the sole benefit of Landlord and Tenant, and, other than any first priority leasehold mortgagee of Tenant and assignee’s of Tenant’s ownership interest in the airspace condominium interests described in Section 18.1, above,, no third party shall be deemed a third party beneficiary hereof. 21.23 ENTIRE AGREEMENT. This Lease, along with any exhibits and attachments hereto, constitutes the entire agreement between Landlord and Tenant relative to the Premises and the subject matter hereof. This Lease and the exhibits and attachments hereto may be altered, amended, or revoked only by an instrument in writing signed by both Landlord and Tenant. It is understood that this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements, or representations, and understandings, if any, between the parties hereto, including without limitation the provisions in that certain Memorandum of Agreements, which, for avoidance of doubt, are superseded in their entirety by this Lease. Except for those set forth in this Lease, no representations, warranties, or agreements have been made by Landlord or Tenant to the other with respect to this Lease or the obligations of Landlord or Tenant in connection therewith. The normal rule of construction that any ambiguities be resolved against the drafting party shall not apply to the interpretation of this Lease or any exhibits or amendments hereto. [Signatures appear on the following page.] ATTACHMENT 2 C6 - 58 GROUND LEASE: Page 36 IN WITNESS WHEREOF, the parties hereto have caused this Ground Lease to be executed as of the day and year set forth below. “LANDLORD: THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city By Name & title: Jan Howell Marx, Mayor ATTEST: Anthony J. Mejia, City Clerk APPROVED AS TO FORM: J. Christine Dietrick, City Attorney Address & Email for Notices: The City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 Attention: Katie Lichtig, City Manager Tel: (805) 781-7123 Email: klichtig@slocity.org with a copy to: The City of San Luis Obispo 990 Palm Street San Luis Obispo, CA 93401 Attention: J. Christine Dietrick, City Attorney Tel: (805) 781-7143 E-Mail: cdietrick@slocity.org “TENANT:” GARDEN STREET SLO PARTNERS, L.P., a California limited partnership By DOWNTOWN INVESTORS, LLC, a California limited liability company, its general partner By Hamish Marshall, its Manager Address & Email for Notices: Garden Street SLO Partners, L.P. c/o Westpac Investments, LLC 895 Aerovista Place, Suite 100 San Luis Obispo, CA 93401 Tel: 805-544-7343 Email: hamish@westpacusa.com with a copy to: Michael E. Pfau, Esq. Reicker, Pfau, Pyle and McRoy, LLP 1421 State Street, Suite B Santa Barbara, CA 93101 Tel: (805) 966-2440 E-Mail: mpfau@rppmh.com ATTACHMENT 2 C6 - 59 -i- SCHEDULE 1 DEFINITIONS “Adjustment Date” is defined in Section 4.1.3(B)(i). “Adjustment Index” is defined in Section 4.1.3(B)(ii). “Affiliate” means any corporation, partnership, limited liability company or person (collectively a "Person") that directly or indirectly controls or is controlled by Tenant or Landlord, as applicable, and any Person that is controlled by the same person that controls Tenant or Landlord, as applicable. The terms "controls" and "controlled by" mean the ownership of and right to vote a majority of the voting interest in the controlled Person. “Agreed Rate” means a variable rate of interest per annum equal to the sum of (x) the Wall Street Journal Prime Lending rate as in effect from time to time, plus (y) five percent (5.0%), provided that in no event shall the Agreed Rate exceed the maximum rate permitted by applicable Law. The term “Wall Street Journal Prime Lending Rate” shall mean, as of any day, the "U.S. Prime Rate" published in The Wall Street Journal's "Money Rate" table on the last business day immediately prior to the day as of which such rate is being determined. If such table or rate is not published as of any date, then the "Wall Street Journal Prime Lending Rate" shall be deemed to be a reference to the prime lending rate of Bank of America, N.A., in effect on the last business day immediately prior to such date. If Bank of America, N.A., does not then exist or does not then publish its prime lending rate, then the "Wall Street Journal Prime Lending Rate" shall be the prime lending rate of the Partnership's principal banking institution on the last business day immediately prior to the date as of which such rate is being determined. “Base Index” is defined in Section 4.1.3(B)(iii). "Base Annual Rent Floor" is defined in Section 4.1.1. “Business Day” means any Monday through Friday, except any such day on which the United States Mail is not delivered. “City” shall mean the City of San Luis Obispo, California. “City Manager” shall mean the city manager for the City. “Claim” means any allegation, complaint or cause of action asserting an entitlement to Damages or to other equitable, administrative, regulatory or judicial relief, and any action or proceeding commenced for the purpose of asserting or disputing such entitlement. “CPI Index” is defined in Section 4.1.3(B)(iv). “Damages” means any amount for which a Claim is made, including amounts alleged to be due (a) to compensate for a loss of or damage or injury to person, property or economic benefit, but excluding any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages, or (b) to reimburse a cost or expense paid or incurred, including (i) amounts paid to investigate a Claim or to determine if a Claim exists and (ii) reasonable attorneys' fees paid or incurred in asserting or defending a Claim. “Effective Date” is defined in Section 1.5. ATTACHMENT 2 C6 - 60 -ii- "Event of Default" is defined in Section 16.1. "Excluded Fixtures" means the existing fixtures situated in the Improvements that are to be retained by the City pursuant to Section 3.6.2, including without limitation the fixtures related to parking (e.g., meter heads, and wheel stops) and from the public restrooms. "Financing Documents" means a recorded first priority deed of trust or mortgage encumbering the Premises or any portion of the Premises. "Fiscal Year" means the fiscal year of the City of San Luis Obispo, California, which begins on each July 1 and ends on the next occurring June 30, and which may be changed at any time by the unilateral actions of the City of San Luis Obispo, California. “Fixtures” means any tangible personal property that is affixed to and becomes a part of the Land or Improvements, including property that is permanently attached to what is thus permanent by means of cement, plaster, nails, bolts, screws, and the like, and any other property constituting a fixture within the meaning of California Civil Code Section 660. "Hazardous Substance" means any product, substance or waste whose presence, use or manufacture, disposal, transportation or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) toxic, hazardous to health, radioactive, reactive or corrosive or that is defined or designated as a hazardous or extremely hazardous toxic waste, material or substance by Law, (iii) regulated or monitored by any governmental authority, or (iv) a basis for potential liability of Landlord to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to hydrocarbons, petroleum, gasoline and/or crude oil or any products, by products or fractions thereof. “Hotel” means that certain boutique-style transit occupancy hotel that Tenant shall construct and operate (or cause to be operated) on the Premises and shall (a) contain no fewer than forty-five (45) overnight guest rooms (or such lesser number as Landlord hereafter approves), (b) have and maintain throughout the Term a three or four star rating, and (c) may include approximately 2,500 square feet of meeting space, and a restaurant, a bar, a gym and a spa facility. “Improvements” means the Parking Facility and all buildings, driveways, signs, lighting, parking areas, landscaping, and all other items located on the Land or constructed or to be constructed by Tenant. “Landlord’s Approval Notice” is defined in Section 3.3.2. “Law” or “Laws” means all present and future federal, state, and local statutes, common law, ordinances, regulations, orders, and other requirements of governmental authorities, including without limitation building codes, environmental laws, and the Americans with Disabilities Act. “Leasehold Improvements” means any addition to or modification of the Premises made by Tenant, including Fixtures, other than removable Trade Fixtures. "Lease Termination Date" means the date on which the Term of the Lease expires, which shall occur on the day occurring immediately before the day which is the one hundredth (100th) anniversary of the Rent Commencement Date. "Loan Documents" is defined in Section 20.1.3. ATTACHMENT 2 C6 - 61 -iii- “Memorandum of Lease” shall have the meaning ascribed to that term in Section 18.14 of the Lease. “Non-Disturbance Agreement” means a duly acknowledged and executed agreement capable of being recorded in the County in substantially the same form attached hereto as Exhibit C to this Lease or in such other similar form as may be acceptable to Tenant and Landlord. “Outside Date of Completion” is defined in Section 3.8. “Outside Delivery Date” is defined in Section 3.2.2. “Permits” means: (1) any Approval (as defined below) required to be obtained in connection with Tenant’s Use of the Premises and the conduct of its business on the Premises (2) any Approvals required for the construction of the Improvements on the Land, including, without limitation thereto, permits for Tenant’s signs and number, size, configuration and location satisfactory to Tenant, driveways and vehicular and pedestrian access to the Premises in locations acceptable to Tenant; and (3) all Approvals from third parties that Tenant or Tenant’s title insurer deems necessary or appropriate by virtue of any recorded instrument or document. For purposes of this paragr aph and the use of the term “Permits” throughout the Lease, “Approval” means that with respect to any item or matter that requires approval by the City/County or any other governmental authority, agency, commission or body (collectively and individually the “Governmental Authority”), such Governmental Authority has voted to approve such item or matter and all applicable appeal or review periods for such approval have expired without the filing of an appeal or request for review including without limitation by any ballot initiative or judicial action (hereinafter “Appeal”), or if an Appeal has been filed or occurs, that the Appeal has been resolved on terms satisfactory to Tenant in its sole and absolute discretion. "Personalty" means Tenant's Trade Fixtures, furniture, equipment, signs, inventory and other personal property located in or on the Premises, but excludes any fixtures or accessions to the Improvements located on the Land. "Possession Delivery Date" is defined in Section 3.4.1. “Premises” is defined in Section 1.1. "Qualified Appraisal" means that certain Appraisal Report of City Parking Lot #2 dated December 17, 2014, prepared by Schenberger, Taylor, McCormick and Jecker Inc., for the City of San Luis Obispo. "Real Property Taxes" means any form of (a) tax on the personal property of Tenant located in the Premises or (b) real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, levy or tax imposed by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire street, drainage, or other improvement district thereof, levied against any legal or equitable interest of Landlord in the Land and the Improvements or any portion thereof, Landlord's right to rent or other income therefrom, and/or Landlord's business of leasing the Land and the Improvements, or Tenant’s leasehold estate or other interest in the Premises. The term "Tax" shall exclude any income tax, excise tax or other similar tax or charge, or inheritance, franchise, capital levy transfer, estate, succession or other similar tax or charge that may be payable by or chargeable to Landlord under any present or future law of the United States or California or imposed by any political or taxing subdivision thereof. ATTACHMENT 2 C6 - 62 -iv- “Rent” means the Base Annual Rent and all other amounts coming due from Tenant under this Lease. “Rent Adjustment Period” is defined in Section 4.1.3(B)(v). “Rent Commencement Date” is defined in Section 1.7. "Reportable Use" means (i) the installation or, use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the Premises of a Hazardous Substance with respect to which any Law requires that a notice be given to persons entering or occupying the Premises or neighboring properties. “State” means the state of California. "Tenant's Notice Requesting Possession" is defined in Section 3.4. “Term” means the ninety-nine (99)-year term of this Lease, as the same may be extended by a later written amendment to this Lease. “Trade Fixtures” means furniture, furnishings, machinery, equipment and Leasehold Improvements owned by Tenant which are not necessary to the use of the Building for its intended purpose and which can be removed from the Building without causing material damage to the Building. “Unavoidable Delay” means that delays in either party’s performance of its respective obligation to construct, repair or replace improvements on or for the Premises hereunder shall be excused for the actual period said performance is delayed by (a) any strike, lockout or other labor dispute, (b) war, riot, sabotage, (c) unforeseen and unavoidable changes in applicable building codes or other Laws, and/or (d) weather, earthquakes, or other similar acts of God, provided that in no event shall financial inability constitute Unavoidable Delay. Within ten (10) days after the occurrence of an Unavoidable Delay, the party seeking to extend a deadline shall give the other party written notice of the specific cause of the delay and the estimated number of days delayed. ATTACHMENT 2 C6 - 63 EXHIBIT A, PAGE 1 EXHIBIT A LEGAL DESCRIPTION OF THE LAND PARCEL B1: (PORTION OF APN: 002-424-022) ALL OF LOT 4 AND THOSE PORTIONS OF LOTS 3 AND 5 IN BLOCK 86 OF THE LANDS OF A. MURRAY, IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MAY 1, 1876 IN BOOK A AT PAGE 145 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; AND THOSE PORTIONS OF LOTS 8, 9, 10 AND 11 IN BLOCK 86 OF THE MISSION VINEYARD TRACT IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MARCH 8, 1873 IN BOOK A AT PAGE 143 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS: BEGINNING AT A POINT ON THE EASTERLY LINE OF BROAD STREET WHICH IS DISTANT SOUTH 36° 53' EAST, 14.05 FEET FROM THE CORNER COMMON TO LOTS 2 AND 3 IN BLOCK 86 OF THE LANDS OF A. MURRAY; THENCE NORTH 53° 07' EAST PARALLEL WITH THE SOUTH LINE OF HIGUERA STREET, 109.35 FEET; THENCE AT RIGHT ANGLES NORTH 36° 53' WEST, 14.75 FEET TO THE SOUTHWEST CORNER OF THE LAND DESCRIBED IN THE DEED TO WALLACE EVERSON RECORDED JANUARY 28, 1884 IN BOOK R AT PAGE 519 OF DEEDS; THENCE AT RIGHT ANGLES NORTH 53° 07' EAST, ALONG THE SOUTH LINE OF THE LAND DESCRIBED IN THE DEED TO WALLACE EVERSON AND ALONG THE SOUTH LINE OF THE LAND DESCRIBED IN THE DEED TO REMICK AND ORR RECORDED APRIL 5, 1884 IN BOOK S AT PAGE 69 OF DEEDS, 72.29 FEET TO THE SOUTHEAST CORNER OF THE LAND DESCRIBED IN THE DEED TO REMICK AND ORR; THENCE AT RIGHT ANGLES SOUTH 36° 53' EAST, 60.7 FEET TO THE MOST SOUTHERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO P. B. PREFUMO, RECORDED AUGUST 27, 1885 IN BOOK T AT PAGE 578 OF DEEDS; THENCE AT RIGHT ANGLES NORTH 53° 07' EAST ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO P. B. PREFUMO, 4.91 FEET TO THE MOST WESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO H. M. OSGOOD, ET AL., RECORDED APRIL 30, 1875 IN BOOK C AT PAGE 285 OF DEEDS; THENCE AT RIGHT ANGLES SOUTH 36° 53' EAST ALONG THE WESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO B. 14. OSGOOD, AT AL., AND ITS SOUTHEASTERLY EXTENSION, 41.7 FEET TO A POINT ON THE NORTH LINE OF THE SECOND PARCEL OF LAND DESCRIBED IN THE DEED TO EMMA KREBS, RECORDED FEBRUARY 17, 1888 IN BOOK Z AT PAGE 393 OF DEEDS; THENCE AT RIGHT ANGLES SOUTH 53° 07' WEST ALONG THE NORTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO EMMA KREBS, 40.03 FEET TO THE MOST WESTERLY CORNER THEREOF; THENCE AT RIGHT ANGLE. SOUTH 36° 53' EAST ALONG THE WESTERLY LINE OF THE LAND DESCRIBED IN SAID DEED TO EMMA KREBS,14.68 FEET TO THE MOST SOUTHERLY CORNER THEREOF; THENCE AT RIGHT ANGLES SOUTH 53° 07' WEST, 146.50 FEET TO A POINT ON THE EASTERLY LINE OF BROAD STREET; THENCE AT RIGHT ANGLES NORTH 36° 53' WEST ALONG THE EASTERLY LINE OF BROAD STREET, 102.30 FEET TO THE POINT OF BEGINNING, BY DEED RECORDED AUGUST 25, 1955 IN BOOK 815 AT PAGE 497 OF OFFICIAL RECORDS. ATTACHMENT 2 C6 - 64 EXHIBIT A, PAGE 2 PARCEL B2: (PORTION OF APN: 002-424-022) THAT PORTION OF LOT 5 IN BLOCK 86 OF THE LANDS OF A. MURRAY, IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MAY 1, 1876 IN BOOK A AT PAGE 145 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY; AND THAT PORTION OF LOT 11 IN BLOCK 86 OF THE MISSION VINEYARD TRACT IN THE CITY OF SAN LUIS OBISPO, ACCORDING TO THE MAP THEREOF RECORDED MARCH 8, 1873 IN BOOK A AT PAGE 143 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST WESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO JOHN MULLER, RECORDED MARCH 28, 1887 IN BOOK U AT PAGE 396 OF DEEDS, SAID POINT BEING DISTANT NORTH 36° 12' WEST, 83.72 FEET FROM A POINT ON THE NORTHERLY LINE OF MARSH STREET THAT IS DISTANT NORTH 54° EAST, 146.77 FEET FROM THE MOST NORTHERLY CORNER OF BROAD AND MARSH STREETS; THENCE NORTH 36° 12' WEST, 14 FEET 7 INCHES TO A POINT ON THE SOUTH LINE OF THE LAND DESCRIBED IN THE DEED TO ERNEST KREBS RECORDED APRIL 23, 1884 IN BOOK S AT PAGE 100 OF DEEDS; THENCE NORTH 54° EAST ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO ERNEST KREBS, AND ITS NORTHEASTERLY EXTENSION, 49.30 FEET TO A POINT ON THE WESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO M. A. ELIZALDE RECORDED SEPTEMBER 23, 1884 IN BOOK S AT PAGE 497 OF DEEDS; THENCE SOUTH 36° 33' EAST ALONG THE WESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO M. A. ELIZALDE, 13.78 FEET TO THE MOST NORTHERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO JOHN MULLER HEREINABOVE REFERRED TO; THENCE SOUTH 54° WEST ALONG THE NORTHERLY LINE OF THE LAND DESCRIBED IN SAID DEED TO JOHN MULLER, 49.40 FEET TO THE POINT OF BEGINNING, BY DEED RECORDED AUGUST 25, 1955 IN BOOK 815 AT PAGE 497 OF OFFICIAL RECORDS. PARCEL B3: (PORTION OF APN: 002-424-022) THAT PORTION OF LOT 8 IN BLOCK 86 OF THE MISSION VINEYARD TRACT IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MARCH 8, 1873 IN BOOK A AT PAGE 143 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHERLY LINE OF HIGUERA STREET, AS THE SAME NOW EXISTS, WHICH IS DISTANT SOUTH 53° 07' WEST, 121 FEET FROM THE SOUTHWESTERLY CORNER OF GARDEN AND HIGUERA STREETS, SAID POINT ALSO BEING THE NORTHEASTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO FRANK C. ASHTON RECORDED FEBRUARY 11, 1922 IN BOOK 150 AT PAGE 293 OF DEEDS; THENCE AT RIGHT ANGLES SOUTH 36° 53' EAST ALONG THE NORTHEASTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO FRANK C. ASHTON, 89.30 FEET TO THE NORTHERLY LINE OF AN ALLEY; THENCE AT RIGHT ANGLES NORTH 53° 07' EAST ALONG THE NORTHERLY LINE OF SAID ALLEY. 6.50 FEET; THENCE AT RIGHT ANGLES NORTH 36° 53' WEST, 89.30 FEET, MORE OR LESS, TO A POINT ON THE SOUTHERLY LINE OF HIGUERA STREET; THENCE AT RIGHT ANGLES SOUTH 53° 07' WEST ALONG THE SOUTHERLY LINE OF HIGUERA STREET, 6.50 FEET TO THE POINT OF BEGINNING, BY DEED RECORDED AUGUST 25, 1955 IN BOOK 815 AT PAGE 489 OF OFFICIAL RECORDS. ATTACHMENT 2 C6 - 65 EXHIBIT A, PAGE 3 PARCEL B4: (PORTION OF APN: 002-424-022) THAT PORTION OF LOT 10 IN BLOCK 86 OF THE MISSION VINEYARD TRACT, IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MARCH 8, 1873 IN BOOK A AT PAGE 143 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WESTERLY LINE OF GARDEN STREET AT THE POINT OF INTERSECTION OF THE LINE BETWEEN LOTS 10 AND 11 IN SAID BLOCK 86, WITH THE WESTERLY LINE OF GARDEN STREET; THENCE AT RIGHT ANGLES SOUTH 53° 07' WEST ALONG THE LINE BETWEEN LOTS 10 AND 11 IN SAID BLOCK 86, 88 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING SOUTH 53° 07' WEST ALONG SAID LINE BETWEEN LOTS 10 AND 11 IN SAID BLOCK 86, 22 FEET TO A POINT; THENCE AT RIGHT ANGLES NORTH 36° 53' WEST, 40 FEET; THENCE AT RIGHT ANGLES SOUTH 53° 07' WEST, 5 FEET, MORE OR LESS, TO THE LINE OF THE LAND DESCRIBED IN THE DEED TO C. A. YOUNGLOVE, RECORDED NOVEMBER 24, 1908 IN BOOK 79 AT PAGE 347 OF DEEDS; THENCE AT RIGHT ANGLES NORTH 36° 53' WEST ALONG SAID LINE, 7 FEET TO THE SOUTHWESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO C. L. JOHNSON AND F. H. JOHNSON, RECORDED FEBRUARY 29, 1912 IN BOOK 92 AT PAGE 192 OF DEEDS; THENCE AT RIGHT ANGLES NORTH 53° 07' EAST ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO C.L. JOHNSON AND F. B. JOHNSON, 7 FEET TO A POINT DISTANT 88 FEET FROM THE SOUTHWEST LINE OF GARDEN STREET; THENCE AT RIGHT ANGLES SOUTH 36° 53' EAST, 47 FEET, MORE OR LESS, TO THE TRUE POINT OF BEGINNING, BY DEED RECORDED AUGUST 25, 1955 IN BOOK 815 AT PAGE 481 OF OFFICIAL RECORDS. PARCEL B5: (PORTION OF APN: 002-424-022) THOSE PORTIONS OF LOTS 5 AND 6 IN BLOCK 86 OF THE LANDS OF A. MURRAY, IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MAY 1, 1876 IN BOOK A AT PAGE 145 OF MAPS, IN THE OFFICEOF THE COUNTY RECORDER OF SAID COUNTY; AND THOSE PORTIONS OF LOTS 11 AND 12 IN BLOCK 86 OF THE MISSION VINEYARD TRACT IN THE CITY OF SAN LUIS OBISPO, ACCORDING TO THE MAP THEREOF RECORDED MARCH 8, 1873 IN BOOK A AT PAGE 143 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTHERLY LINE OF MARSH STREET, WHICH IS DISTANT NORTH 54° EAST, 146.77 FEET FROM THE NORTHERLY CORNER OF MARSH AND BROAD STREETS; THENCE NORTH 36° 12' WEST, 83.72 FEET; THENCE NORTH 54° EAST, 49.40 FEET; THENCE SOUTH 36° 33' EAST, 83.72 FEET TO A POINT ON THE NORTHERLY LINE OF MARSH STREET; THENCE SOUTH 54° WEST ALONG THE NORTHERLY LINE OF MARSH STREET, 49.93 FEET TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THAT PORTION OF SAID LAND DESCRIBED IN THE DEED TO THE CITY OF SAN LUIS OBISPO, A MUNICIPAL CORPORATION, BY DEED RECORDED JANUARY 11, 1890 IN BOOK 7 AT PAGE 2 OF DEEDS, BY DEED RECORDED AUGUST 25, 1955 IN BOOK 815 AT PAGE 493 OF OFFICIAL RECORDS. ATTACHMENT 2 C6 - 66 EXHIBIT A, PAGE 4 PARCEL B6: (PORTION OF APN: 002-424-022) THOSE PORTIONS OF LOTS 5 AND 6 IN BLOCK 86 OF THE LANDS OF A. MURRAY, IN THE CITY OF SAN LUIS OBISPO, COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA, ACCORDING TO THE MAP THEREOF RECORDED MAY 1, 1876 IN BOOK A AT PAGE 145 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTHERLY LINE OF MARSH STREET. AS WIDENED, IN THE CITY OF SAN LUIS OBISPO, DISTANT THEREON 146.50 FEET NORTHEASTERLY FROM THE NORTHEASTERLY CORNER OF MARSH AND BROAD STREETS AND BEING THE SOUTHWESTERLY CORNER OF THE LAND DESCRIBED IN THE DEED TO JOHN MULLER BY DEED DATED MARCH 21, 1887 AND RECORDED IN BOOK V AT PAGE 396 OF DEEDS; THENCE SOUTHWESTERLY ALONG THE NORTHERLY LINE OF MARSH STREET, 25 FEET; THENCE AT RIGHT ANGLES NORTHWESTERLY PARALLEL WITH THE EASTERLY LINE OF BROAD STREET, 74 FEET TO THE SOUTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO C. A. YOUNGLOVE RECORDED NOVEMBER 24, 1908 IN BOOK 79 AT PAGE 347 OF DEEDS; THENCE AT RIGHT ANGLES NORTHEASTERLY ALONG THE SOUTHERLY LINE OF THE LAND DESCRIBED IN THE DEED TO C. A. YOUNGLOVE, 25 FEET TO THE WESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO JOHN MULLER, AS AFORESAID; THENCE AT RIGHT ANGLES SOUTHEASTERLY ALONG THE WESTERLY LINE OF THE LAND DESCRIBED IN THE DEED TO JOHN MULLER, 74 FEET TO THE NORTHERLY LINE OF MARSH STREET AND THE POINT OF BEGINNING, BY DEED RECORDED AUGUST 25,1955 IN BOOK 815 AT PAGE 485 OF OFFICIAL RECORDS. ATTACHMENT 2 C6 - 67 EXHIBIT A, PAGE 1 EXHIBIT B SITE PLAN OF THE PROPERTY ATTACHMENT 2 C6 - 68 EXHIBIT C NON-DISTURBANCE AGREEMENT RECORDATION REQUESTED BY, AND AFTER RECORDATION, RETURN TO: NON-DISTURBANCE AGREEMENT THIS NON-DISTURBANCE AGREEMENT is made as of this ____ day of _____________, ____, by ___________________________________________________________________. Reference is made to that certain Ground Lease dated _____________ __, 2015 (the “Lease”), by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city, as “Landlord,” and GARDEN STREET SLO PARTNERS, L.P., a California limited partnership, as “Tenant,” covering certain premises located in City of San Luis Obispo, County of San Luis Obispo, State of California, as more particularly described in Exhibit “A” attached hereto and hereby made a part hereof (the “Premises”). 1. Reference is further made to that certain ________________________________ dated ________________________, in the amount of $_________________, executed by ______________________, to _______________________________________________, filed for record on ___________________, as Instrument No. _________, covering the Premises. The ________________________________________[interest under said ________________________________________ was subsequently assigned by instrument dated _______________________ to _____________________________.] 2. For and in consideration of the promises herein contained, and mutual benefits to accrue to the undersigned and Tenant, ________________, hereby agrees on behalf of itself, its successors and assigns, that so long as Tenant is not in default under the terms and provisions of the aforementioned Lease, that in the event of foreclosure of the aforementioned [Deed of Trust/Mortgage], Tenant’s Lease shall be recognized and the possession of the Premises by Tenant, its successors and assigns under said Lease shall not be disturbed. 3. Effective with the date of this Lease, the undersigned hereby acknowledges that the furniture, Trade Fixtures, equipment, signs, and any property bearing any of Tenant’s trade name and/or trademark, whether registered or unregistered, which may be installed in or upon the Premises at Tenant’s cost and may be removed from the Premises without causing material damage to the Improvements, shall not be deemed to become a part of the Premises and may be removed by Tenant at any time during the term of said Lease or any extension or renewal thereof. The undersigned hereby consents to the alteration of improvements on said premises from time to time during the term of said Lease or any extensions or renewals thereof, provided such alteration shall conform with the terms and provisions of said Lease and shall not diminish the value of the improvements. ATTACHMENT 2 C6 - 69 4. All initially capitalized terms used herein without definition are used as defined in the Lease. By: ______________________ By: ______________________ ATTACHMENT 2 C6 - 70 EXHIBIT D ESTOPPEL CERTIFICATE Date: __________________________, 20____ Address: _______________________________ To Whom It May Concern: GARDEN STREET SLO PARTNERS, L.P., a California limited partnership ("Tenant") has entered into that certain Ground Lease dated ___________ __, 2015 (the “Lease”), THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city, as Landlord, for the leasing of certain Property, commonly known as ___________________________________________________ (the “Premises”). [Tenant understands that you have offered or committed to enter into a transaction with Landlord with respect to an interest in the Lease or the Premises. You have requested this Estoppel Certificate (the "Certificate") from Tenant as a condition precedent to consummation of one of the following transactions: sale, purchase, exchange, transfer, assignment, lease, conveyance, encumbrance, pledge, mortgage or hypothecation.] In accordance with the terms of the Lease, Tenant ratifies the Lease and certifies that: (1) Tenant has entered into occupancy of the Premises described in said Lease on ________, 20__. (2) The Rent Commencement Date under the Lease is ________, 20__. (3) Tenant has accepted and has taken possession of the Premises, is paying rent for the Premises, and is presently open and conducting business with the public in the Premises. The Base Annual Rent currently payable under the Lease is $________________ and has been paid through _____________, 20_____. The next increase in Base Annual Rent is scheduled to occur on [ . (4) Tenant is responsible for payment of taxes, insurance, operating expenses, utilities and any other common area maintenance charges under the Lease, and Tenant acknowledges that it is not entitled to any credits for any taxes, insurance, operating expenses, utilities and any other common area maintenance charges previously paid under the Lease, and that there is no cap or maximum amount of such taxes, insurance, operating expenses, utilities and any other common area maintenance charges due under the Lease. (5) The Lease is in full force and effect and has not been assigned, modified, supplemented or amended in any way (except by Amendments dated _________________), and Tenant is not in default thereunder. (6) The Lease and its Amendments (if any) represent the entire agreement between Landlord and Tenant , and a true, correct and complete copy of the Lease and all of its amendments and modifications (including any side letters) is attached to this Estoppel Certificate. The Lease Term expires on _____________, 20_____, unless extended pursuant to the Lease. (7) To the knowledge of Tenant after reasonable inquiry, all conditions and covenants under the Lease to be performed by Landlord have been satisfied. All conditions and covenants under the Lease to be performed by Tenant have been satisfied. (8) To the best knowledge of Tenant, no party is in default under the Lease. To the best knowledge of Tenant, no event has occurred which, with the giving of notice or passage of time, or both, would constitute such a default. (9) All required contributions by Landlord, if any, to Tenant on account of Tenant's Improvements have been received. On this date there are no existing claims for offsets, counterclaims or deductions against Rent which the undersigned has against the enforcement of the Lease by Landlord. ATTACHMENT 2 C6 - 71 (10) No Rent has been paid more than one (1) Lease Year in advance and no security deposit has been deposited with Landlord. (11) Except as specified in Section(s) [ ] of the Lease, Tenant has no option or preferential right to purchase all or any part of the Leased Premises or the Property. Except for the foregoing, Tenant has no right or interest with respect to the Leased Premises or the Property other than as Tenant under the Lease. (12) Tenant has made no agreement with the Landlord or any agent, representative or employee of the Landlord concerning free rent, partial rent, rebate of rental payments or any other similar rent concession, except as expressly set forth in Section(s) [ ] of the Lease. All concessions related to the Lease have been provided and no obligations are outstanding by the landlord under the Lease. (13) Tenant has not provided Landlord with any security deposit in connection with the Lease. (14) All insurance required of Tenant under the Lease has been provided by Tenant and all premiums have been paid. (15) The interest of Tenant in the Lease has not been assigned or encumbered[, except to ]. Tenant is not entitled to any credit against any rent or other charge or rent concession under the Lease except as set forth in the Lease. (16) Tenant is not the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor–creditor relationships, and no such proceedings are intended to be initiated by Tenant or any guarantor as of the date this Tenant Estoppel is signed. (17) Tenant represents and warrants that it has not used, generated, released, discharged, stored or disposed of any Hazardous Substances on, under, in or about the Leased Premises or the Property other than Hazardous Substances used in the ordinary and commercially reasonable course of Tenant’s business in compliance with all applicable laws. Except for such commercially reasonable use by Tenant, Tenant has no actual knowledge that any Hazardous Substance is present, or has been used, generated, released, discharged, stored or disposed of by any party, on, under, in or about the Leased Premises or the Property. As used in this Certificate, “Hazardous Substance” means any substance, material or waste (including petroleum and petroleum products) which is designated, classified or regulated as being “toxic” or “hazardous” or a “pollutant,” or which is similarly designated, classified or regulated, under any federal, state or local law, regulation or ordinance. (18) The person signing this Certificate on behalf of Tenant is a duly authorized representative of Tenant and is most qualified to provide the representation contained in this estoppel. (19) All exhibits attached hereto are by this reference incorporated fully herein and are true, correct, and complete. The terms “this Certificate” or "this Estoppel Certificate" shall be considered to include all such exhibits. (20) This Certificate shall inure to the benefit of Landlord and its successors and assigns, and shall be binding upon Tenant and Tenant’s heirs, legal representatives, successors and assigns and may be relied upon in the future enforcement or interpretation of the Lease. This Certificate shall not be deemed to alter or modify any of the terms and conditions of the Lease except to the extent specifically set forth herein. ATTACHMENT 2 C6 - 72 (21) The agreements and certifications set forth in this Certificate are made with the knowledge and intent that they be binding upon the undersigned, its successors and assigns, and that the landlord under the Lease will rely on them in connection with its rights thereunder. Very truly yours, GARDEN STREET SLO PARTNERS, L.P., a California limited partnership By: _____________________________ ATTACHMENT 2 C6 - 73 EXHIBIT E FORM OF MEMORANDUM OF LEASE ATTACHMENT 2 C6 - 74 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: Garden Street SLO Partners, L.P. c/o Michael E. Pfau, Esq. Reicker, Pfau, Pyle & McRoy LLP 1421 State Street, Suite B Santa Barbara, California 93101 (Space Above This Line Reserved For Recorder’s Use) MEMORANDUM OF LEASE THIS MEMORANDUM OF LEASE (“Memorandum”) is made and executed as of _________ __, 201__, by and between THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city (“Landlord”), and GARDEN STREET SLO PARTNERS, L.P., a California limited partnership (“Tenant”). In consideration of valuable consideration paid by Tenant to Landlord and the mutual covenants contained in that certain Ground Lease dated _______ __, 2015, by and between the parties hereto (the “Lease”), Landlord has leased and does hereby lease to Tenant, and Tenant has leased and does hereby lease from Landlord, upon the terms and conditions set forth in the Lease, in its “AS-IS” “WHERE-IS” condition, the real property described on Exhibit A to this Memorandum, which is hereby incorporated herein by this reference. 1. The term of this Lease is ninety-nine (99) years commencing on the Rent Commencement Date as defined in the Lease. 2. This Lease includes an assignment by Tenant of all subrents and other sums becoming due to Tenant from subtenants, licensees and concessionaires (referred to collectively herein as "subrents") in order to secure Tenant's obligations under this Lease. This assignment is specifically subject and subordinate to any and all assignments of the same subrents and other sums made to a Leasehold mortgagee under any first-priority Leasehold mortgage permitted by the provisions of this Lease. Subject to the rights of such Leasehold mortgagee, Landlord may at Landlord's election reenter the Premises and improvements, without terminating this Lease, and either collect these sums or bring an action for the recovery of such sums from the obligors. 3. The purpose of this Memorandum is to give record notice of the Lease and of the terms thereof and the rights created thereby. It is not intended to amend or modify any of the rights and obligations set forth in the Lease. To the extent that any provisions of this Memorandum and the Lease conflict, the provisions of the Lease control. 4. This Memorandum may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument. [Signatures appear on the following page.] ATTACHMENT 2 C6 - 75 IN WITNESS WHEREOF, the parties hereto have caused this Memorandum of Lease to be executed as of the day and year set forth below. “LANDLORD”: THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city By Jan Howell Marx, Mayor ATTEST: Anthony J. Mejia, City Clerk APPROVED AS TO FORM: J. Christine Dietrick, City Attorney “TENANT”: GARDEN STREET SLO PARTNERS, L.P., a California limited partnership By DOWNTOWN INVESTORS, LLC, a California limited liability company, its general partner By Hamish Marshall, its Manager ATTACHMENT 2 C6 - 76 ACKNOWLEDGMENT State of _______________ ) ) County of ____________ ) On ______________________, 20___, before me, ______________________________, a notary public, personally appeared ______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _______________________________ (Seal) ACKNOWLEDGMENT State of _______________ ) ) County of ____________ ) On ______________________, 20___, before me, ______________________________, a notary public, personally appeared ______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _______________________________ (Seal) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the docu ment to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. A notary public or other officer completing this certificate verifies only the identity of the individual who signed the docu ment to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. ATTACHMENT 2 C6 - 77 EXHIBIT F-1 CONFIRMATION OF DELIVERY OF POSSESSION ______________, 20__ Garden Street SLO Partners, L.P. c/o Westpac Investments, LLC 835 Aerovista Place, Suite 230 San Luis Obispo, CA 93401 Attention: Mr. Hamish Marshall Re: Agreement Regarding Confirmation of Rent Commencement Date Ladies and Gentlemen: This letter agreement, when signed by THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city (“Landlord”), and countersigned by GARDEN STREET SLO PARTNERS, L.P., a California limited partnership (“Tenant”), will amend, supplement and otherwise modify that certain Ground Lease dated as of ______________, 2015, between Landlord and Tenant (as amended, supplemented or otherwise modified and in effect from time to time, the “Lease”). Initially capitalized terms used in this letter agreement without definition shall have the respective meanings assigned to such terms in the Lease. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Condition of Premises. Tenant has accepted possession of the Premises in their “AS-IS” “WHERE-IS” condition pursuant to the Lease. Furthermore, Tenant acknowledges and agrees that the Premises are suitable for the permitted Use. 2. Date of Delivery of Possession. Possession of the Premises was delivered to Tenant on __________, 20__. 3. Contact Person. The name, address and other contact information for Tenant’s contact person in the Premises is as follows: Garden Street SLO Partners, L.P. c/o Westpac Investments, LLC 835 Aerovista Place, Suite 230 San Luis Obispo, CA 93401 Attention: Hamish Marshall Tel: (805) 706-2915 Email: hamish@auzcodev.com 4. Ratification. Tenant hereby ratifies and confirms its obligations under the Lease and represents and warrants to Landlord that it has no defenses thereto. Tenant further represents and warrants to Landlord that, as of the date that Tenant executes and delivers to Landlord this letter agreement, (a) the Lease is and remains in good standing and in full force and effect, and (b) Tenant has no claims, ATTACHMENT 2 C6 - 78 counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant. 5. Binding Effect. Except as modified hereby, the Lease shall remain in full effect and this letter shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of this letter and the terms of the Lease, the terms of this letter shall prevail. 6. Interpretation. Paragraph, subparagraph and other headings are solely for the parties’ convenience, are not a part of this letter agreement and shall not be used to interpret this letter agreement. The singular form shall include the plural and vice versa. This letter agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties have prepared it. 7. Counterparts. This letter agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. Signatures may be exchanged by email transmission of PDF documents pursuant to Section 21.18 of the Lease, and each party hereto agrees to be bound by its own scanned and emailed signature and to accept the scanned emailed signature of the other party. 8. Governing Law. This letter agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and intended to be performed entirely therein (excluding application of any statute, rule or principle of choice or conflict of laws which would direct the application of the law of any other jurisdiction). Kindly indicate Tenant’s acceptance of and agreement with the foregoing by signing this letter agreement in the appropriate space below and then returning a fully executed original of this letter agreement to Landlord at the address and in the manner set forth in the Lease. Sincerely, THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city By: _________________________________ Katie Lichtig, City Manager ACCEPTED AND AGREED: GARDEN STREET SLO PARTNERS, L.P., a California limited partnership By DOWNTOWN INVESTORS, LLC, a California limited liability company, its general partner By Hamish Marshall, its Manager ATTACHMENT 2 C6 - 79 EXHIBIT F-2 CONFIRMATION OF RENT COMMENCEMENT DATE ______________, 20__ Garden Street SLO Partners, L.P. c/o Westpac Investments, LLC 895 Aerovista Place, Suite 100 San Luis Obispo, CA 93401 Attention: Mr. Hamish Marshall Re: Agreement Regarding Confirmation of Rent Commencement Date Ladies and Gentlemen: This letter agreement, when signed by THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city (“Landlord”), and countersigned by GARDEN STREET SLO PARTNERS, L.P., a California limited partnership (“Tenant”), will amend, supplement and otherwise modify that certain Ground Lease, dated as of ______________, 2015, between Landlord and Tenant (as amended, supplemented or otherwise modified and in effect from time to time, the “Lease”). Initially capitalized terms used in this letter agreement without definition shall have the respective meanings assigned to such terms in the Lease. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 1. Condition of Premises. Tenant has accepted possession of the Premises in their “AS-IS” “WHERE-IS” condition pursuant to the Lease. Furthermore, Tenant acknowledges that the Premises are suitable for the permitted Use. 2. Rent Commencement Date. The Rent Commencement Date of the Lease is __________, 20__. 3. Expiration Date. Unless extended pursuant to and in accordance with the terms of the Lease, the Term is scheduled to expire on ______________, 2___. 4. Contact Person. The name, address and other contact information for Tenant’s contact person in the Premises is as follows: Garden Street SLO Partners, L.P. c/o Westpac Investments, LLC 835 Aerovista Place, Suite 230 San Luis Obispo, CA 93401 Attention: Hamish Marshall Tel: (805) 706-2915 Email: hamish@auzcodev.com 5. Ratification. Tenant hereby ratifies and confirms its obligations under the Lease and represents and warrants to Landlord that it has no defenses thereto. Tenant further represents and warrants to Landlord that, as of the date that Tenant executes and delivers to Landlord this letter agreement, (a) the Lease is and remains in good standing and in full force and effect, and (b) Tenant has no claims, ATTACHMENT 2 C6 - 80 counterclaims, set-offs or defenses against Landlord arising out of the Lease or in any way relating thereto or arising out of any other transaction between Landlord and Tenant. 6. Binding Effect. Except as modified hereby, the Lease shall remain in full effect and this letter shall be binding upon Landlord and Tenant and their respective successors and assigns. If any inconsistency exists or arises between the terms of this letter and the terms of the Lease, the terms of this letter shall prevail. 7. Interpretation. Paragraph, subparagraph and other headings are solely for the parties’ convenience, are not a part of this letter agreement and shall not be used to interpret this letter agreement. The singular form shall include the plural and vice versa. This letter agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties have prepared it. 8. Counterparts. This letter agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. Signatures may be exchanged by email transmission of PDF documents pursuant to Section 21.18 of the Lease, and each party hereto agrees to be bound by its own scanned and emailed signature and to accept the scanned and emailed signature of the other party. 9. Governing Law. This letter agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts made and intended to be performed entirely therein (excluding application of any statute, rule or principle of choice or conflict of laws which would direct the application of the law of any other jurisdiction). Kindly indicate Tenant’s acceptance of and agreement with the foregoing by signing this letter agreement in the appropriate space below and then returning a fully executed original of this letter agreement to Landlord at the address and in the manner set forth in the Lease. Sincerely, THE CITY OF SAN LUIS OBISPO, a municipal corporation and charter city By: _________________________________ Katie Lichtig, City Manager ACCEPTED AND AGREED: GARDEN STREET SLO PARTNERS, L.P., a California limited partnership By DOWNTOWN INVESTORS, LLC, a California limited liability company, its general partner By Hamish Marshall, its Manager ATTACHMENT 2 C6 - 81 EXHIBIT G PLANS FOR GARDEN STREET IMPROVEMENTS [to be inserted prior to execution of Lease] ATTACHMENT 2 C6 - 82 EXHIBIT H EXPENSES INCURRED BY LANDLORD—CALCULATION OF "NET REVENUE" (Section 4.1.1) Annual net Revenue from the operation of Parking Lot 2 shall be calculated as follows: Net revenue = Gross Revenue – Gross Expenses Gross revenues shall include: 1) Meter payment received from a) Credit Card payments, b) loose coinage payments, and c) construction bags; 2) Parking Fines and forfeitures associated with Lot 2; 3) Lot leases or miscellaneous agreements including trash pickup; and 4) Other miscellaneous revenues accrued to Lot 2. Gross Expenses shall include: 1) Costs of Lot cleaning; 2) Landscape maintenance; 3) Cost of coin collections; and 4) Citation processing costs associates with Lot 2. ATTACHMENT 2 C6 - 83 THIS PAGE IS INTENTIONALLY LEFT BLANK C6 - 84 AMENDED AND RESTATED MEMORANDUM OF AGREEMENTS This MEMORANDUM OF AGREEMENTS (the "Agreement") is made and entered into, effective as of February __, 2014 (the "Effective Date"), by and between THE CITY OF SAN LUIS OBISPO, a chartered California municipal corporation (the "City"), and GARDEN STREET SLO PARTNERS, L.P., a California limited partnership ("Developer") and supersedes the prior MOU between the parties dated August 17, 2010, with reference to the following facts: RECITALS: A. Except for the real property and improvements situated at 778 Marsh Street, San Luis Obispo, California, Developer and its affiliates have acquired title to or control of all parcels of real property that are owned by parties other than the City and are situated in that portion of the City of San Luis Obispo that is bounded by Broad Street, Garden Street, Marsh Street, and the Garden Alley (such parcels, in conjunction with "Parking Lot 2" described below, collectively are referred to as the "Project Area"), the ownership of which is set forth on EXHIBIT 1 to this Agreement; and B. The City is the owner of a 62-space parking facility that is situated at the interior of the Project Area; and C. Developer desires to develop and construct in the Project Area a mixed use Project that will include residential condominiums, a hotel, retail stores, and restaurants, and which will eliminate on-site public parking previously contemplated to be constructed on a portion of the Project Area (collectively, the "Project"); and D. On July 18, 2006, Developer and City entered into an MOU which contemplated the sale of Parking Lot 2 to Developer in exchange for the Developer’s construction and lease back to the City of an airspace condominium public parking facility; and E. The Project originally contemplated by the parties has been modified through the City’s environmental and development review processes; and Reference to the appropriate page and section in the Lease Reference information not required in Lease Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease ATTACHMENT 3 C6 - 85 2 F. On June 1, 2010, the City Council of the City provided final approval of the environmental and land use entitlements for the Project by adopting the following resolutions (together, the "Final Entitlements"): (i) Resolution No. 10182 (2010 Series), "A Resolution of City of San Luis Obispo Certifying the Final EIR for the Garden Street Terraces Project and Approving the Reduced Development and Project without Public Parking Spaces Alternatives as the Required Project (E 1240-06)," certifying the final environmental impact report for the Project; and (ii) Resolution No. 10183 (2010 Series), "A Resolution of the City of San Luis Obispo Approving A Modified Use Permit and Vesting Tentative Tract Map for the Garden Street Terraces Project (U/TR 124-06)" (Resolution No. 10183"), approving Developer's application for a use permit for the Project; and G. The appeal periods for the Final Entitlements have lapsed without any appeal being filed with respect to such Final Entitlements; and H. The Final Entitlements require the Project to be reduced in scale, eliminate the previously contemplated public parking component of the Project, and in accordance with the City's customary exercise of its police powers over all projects within the City, require review and approval of final design of the Project by the City Council; and I. As a result of the modified Project, as entitled, Council also approved a Term Sheet setting forth terms to be included in a successor Memorandum of Understanding memorializing the parties’ conceptual agreement for the lease of Parking Lot 2 to Developer for a period of 99 years (the “Long Term Lease”) in order to facilitate the construction and operation of the Project; and J. The Project as entitled will have an important revitalization effect on the downtown area and, therefore, continues to merit particular consideration by the City; and Historical information, Term of lease referened in lease on page 2 Article 1.3 Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease Lease Page 1 Recital D ATTACHMENT 3 C6 - 86 3 K. The Project is consistent with key General Plan policies including Land Use Element Policy 4.1, which describes downtown’s role as that of ensuring: 1) the Downtown is the cultural, social and political center of the City for its residents as well as home for those who live in its historic neighborhoods; 2) that the civic, cultural and commercial portions of downtown should be a major tourist destination; and 3), that downtown visitor appeal should be based on natural, historical, and cultural features, retail services, and numerous and varied visitor accommodations. In addition, Land Use Element Policy 4.2.1, together with Housing Element Policy 3.11.2, direct new Downtown development, such as the Project, to include dwellings; and L. The Project will support concepts set forth in the Conceptual Physical Plan for the City's Center (the Downtown Concept Plan), which is to be considered by the City as set forth in Land Use Element Policy 4.16; and M. Negotiations between City and Developer are appropriate in light of Developer's ownership or control of the parcels abutting Parking Lot 2, but for those parcels fronting Higuera Street and 742 Marsh Street, and the Developer’s significant investment to procure the Project entitlements to date because, without Developer's participation, the Project and the benefits it confers upon the community would not occur; and N. Therefore, the City contemplates that the proposed Long Term Lease (as defined in Recital I above) will be accomplished without a competitive bidding process that the City otherwise might use if the Project, of which the Long Term Lease is a part, did not serve substantial revitalization objectives furthered by the Project, and if private ownership on the site was fragmented, rather than fully consolidated by the Developer, as in this instance; and O. The utilization of City property and the elimination of on site City parking is critical to implement the Project, as entitled by the City Council on June 1, 2010; and P. Developer has agreed diligently to pursue final design approval of the Project as entitled; and Q. The parties contemplate later entering into a Property Lease Agreement and other instruments necessary to implement the terms and conditions set forth herein, subject to Developer Lease Page 1 Recital E Lease Page 1 Recital F Lease Page 1 Recital G Lease Page 1 Recital G Lease Page 2 Recital H Lease Page 4 Article 3.2.2 Historical information not required in Lease ATTACHMENT 3 C6 - 87 4 receiving design approval and completing required environmental review of the Long Term Lease; and R. Section 15162 et seq. of the California Environmental Quality Ac t provides that a lead agency, such as the City of San Luis Obispo may determine that when an environmental impact report ("EIR") has been certified for a project, no subsequent EIR shall be prepared for that project unless the lead agency determines, on the basis of substantial evidence in light of the whole record. The City of San Luis Obispo has determined the revised project is consistent with and any and all environmental impacts associated with the certified EIR. S. The core components of the Project contemplated to be a part of the Long Term Lease were part of the Project description included in the final EIR, which was certified by Council Resolution No. 10182 (2010 Series); T. Developer and City previously executed that certain Memorandum of Agreements dated effective August 17, 2010 (the "2010 MOU"), pursuant to which the City and Developer, inter alia, amended and restated the 2006 MOU and agreed upon terms to be included in a Long Term Lease (to be finalized at a later date) in order to facilitate the construction and operation of the Project; and U. The parties have agreed to execute this Agreement in order to amend and restate the 2010 MOU and memorialize the core components and terms and conditions precedent to the execution of the contemplated Long Term Lease and related aspects of the Project. AGREEMENTS: NOW, THEREFORE, the parties hereto, intending to be legally bound, do hereby agree as follows with respect to the proposed Long Term Lease and the Project. 1. CONCEPTUAL PROJECT DESCRIPTION. The Project, as originally entitled, included the following elements, which the parties acknowledge may be modified as to number of units and total retail square footage prior to final design, subject to the limits set forth in Paragraph 2, below: 1.1 HOTEL. A 63-room hotel containing approximately 2,500 square feet of meeting space and a Lease Page 3 Article 1.8.1 Lease Page 3 Article 1.8 Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease Historical information not required in Lease ATTACHMENT 3 C6 - 88 5 restaurant, bar, gym, and spa facility occupying a total built area of 51,346 square feet; and 1.2 RESIDENTIAL UNITS. 33 residential units ranging in size from 650 square feet to 1,500 square feet, with the average size of each unit being approximately 1,100 square feet occupying a total built area of 40,775 square feet; and 1.3 RETAIL SPACE. General - 14,341 square feet of retail space on the ground floors; and 1.4 RETAIL SPACE. Market – 13,248 square feet of retail space; and 1.5 PARKING. 147 parking spaces, not including any public parking spaces. 2. PERMISSIBLE SCOPE OF CHANGES TO PROJECT COMPONENTS. Developer acknowledges that the inclusion of the following Project components are a necessary elements of the consideration for the Agreement and the City’s Execution of the Long Term Lease and the parties agree that if the Developer reduces or eliminates any component below the following minimum requirements, the City shall have no obligation to enter into the Long Term Lease contemplated herein: 2.1 HOTEL. The Project shall include a hotel that has no fewer than 45 boutique hotel rooms and carries a three-star or four-star rating, as determined by a mutually agreeable third party. 2.2. RESIDENTIAL UNITS. The Project shall include no fewer than 8 Residential units. 2.3 RETAIL SPACE. The Project shall include no less than 20,000 square feet of retail space including ground level retail as approved by the City Council. 3. ENVIRONMENTAL REVIEW OF LONG TERM LEASE. The Parties (a) acknowledge that (i) the Long Term Lease, which shall be finally negotiated based upon the final approved project design, will require environmental review, (ii) the City shall have no obligation to enter into the Lease, as contemplated herein, until Developer has obtained the requisite environmental determination relating to the Long Term Lease and has agreed to comply with any required mitigations, and (iii) as noted in Recital R above, the core components of the Long Term Lease Page 3 Article 1.8.2 Lease Page 3 Article 1.8.2 Lease Page 3 Article 1.8.3 Lease Page 3 Article 1.8.4 Lease Page 3 Article 1.8 Lease Page 3 Article 1.8.1 Not required in lease as the City has determined that the lease is consistent with and was analyzed and any impacts to the extent feasible were mitigated in the certified EIR for the project, up to and including the addendum dated February 2014. Lease Page 3 Article 1.8.3 ATTACHMENT 3 C6 - 89 6 Lease were part of the Project description included in the final EIR, which was certified by Council Resolution No. 10182 (2010 Series), and (b) agree to complete such environmental review of the Long Term Lease at the earliest meaningful time after which the proposed final project design is known. The City has determined that this Agreement is consistent with and was analyzed and any impacts to the extent feasible were mitigated in the certified EIR for the project, up to and including the addendum dated February 2014. 4. LEASE OF PARKING LOT BY CITY – Subject to Paragraph 3, above, the City and Developer shall enter into the Long Term Lease with respect to Parking Lot 2, and the City shall convey to Developer certain airspace rights, on the following terms and subject to the conditions precedent set forth in this Agreement: 4.1 PREMISES – LEASE. The premises subject to the Long Term Lease shall include the undivided fee interest in Parking Lot 2. 4.2 PREMISES – AIRSPACE. Developer shall be permitted to pursue a subdivision of the airspace above Parking Lot 2, and in consideration of Developer's contribution pursuant to Paragraph 17.2, below, toward the costs of the public improvements described in Paragraph 17.1, below, City shall convey to Developer fee ownership of the airspace lots created by any subdivision that may be approved, while retaining fee ownership of the ground below any subdivided airspace. The Developer and City jointly shall engage an M.A.I. appraiser to appraise the value of the airspace rights to be conveyed to Developer pursuant to the preceding sentence, and if such appraiser determines that the fair market value of such airspace rights exceeds the amount that Developer is required to contribute pursuant to Paragraph 17.2, below, then the amount that Developer is required to advance under that Paragraph 17.2 shall be increased by such excess amount. 5. TERM. The term of the Long Term Lease shall be ninety- nine (99) years. The Long Term Lease shall provide that, at the end of the lease term, Developer shall have no further right to occupy or improve Parking Lot 2 and all rights and title to any and all improvements on or to the Property shall become the sole property of the City, unless a successor lease is negotiated prior to the expiration of the term. 6. BASE RENT. Developer will pay to the City base rent that is equal to an agreed upon fair market percentage of the fair market Lease Page 2 Article 1.1 Lease Page 28 Article 18.1-18.1.5 Term: Lease Page 2 Article 1.3 Surrender: Lease page 13 Article 9.5 ATTACHMENT 3 C6 - 90 7 value of the real property, to be determined by a qualified appraiser agreeable to Developer and City, subject to the terms and conditions set forth in Paragraphs 6.1 and 6.2 below. 6.1 The parties acknowledge that the City's annual net revenue from the operation of Parking Lot 2 currently is $204,379 per year, and agree that in no event shall the base rent be less than the amount of the City’s annual net revenue from the operation of Parking Lot 2 as of the date the lot is taken out of operation. 6.2 Annual base rent shall be increased (a) on the first day of every third fiscal year (each such date, an "Adjustment Date") by the amount of increase in the Consumer Price Index for All Urban Consumers (Los Angeles- Riverside-Orange County) (the "Index"), for the period of three (3) years immediately preceding such Adjustment Date (comparing (i) the change in the Index for the month of April immediately prior to the effective date of the Long Term Lease, with (ii) the Index for the month of April immediately preceding the Adjustment Date), but in no event shall the increase be less than two percent (2%) nor more than four percent (4%) per year, for a cumulative total increase of not less than six percent (6%) and not more than twelve percent (12%) in any three year period, or (b) at such other higher or more frequent rate of periodic increase as may be determined, by the appraiser engaged by agreement of City and Developer pursuant to this Paragraph 6, to be a fair market rate of periodic cost-of-living increase in such annual base rent. For purposes of this Agreement, all references to "fiscal year" shall be deemed to be references to the fiscal year of the City. 7. TIME OF RENT PAYMENT. Base rent payments shall begin to accrue on the date on which the City delivers to Developer possession of the premises, which shall mean the date on which the Developer requests and the City agrees, in writing, to cease operation of Parking Lot 2. Rent shall be due and payable in advance on the first day of the first year of the lease term and first day of each fiscal year every year of the lease term thereafter. 8. INTENTIONALLY OMITTED. 9. INTENTIONALLY OMITTED. 10. DEVELOPER DILIGENCE; LEASE "AS IS." Developer shall perform at its cost and expense such due diligence Lease Page 7-9 Article 4 The appraisal was completed and then the language from the MOA was revised to be consistent with standard contract terminology and to be enforceable. Rent increases: Lease Page 8 Article 4.1.3 Term of Payment Lease Page 8 Article 4.1.2 ATTACHMENT 3 C6 - 91 8 investigations of Parking Lot 2 as Developer determines to be appropriate. The City shall lease Parking Lot 2 to Developer on an "AS IS" basis, without any representation or warranty regarding the condition of such property. City shall not be responsible in any way for cleaning, removing, monitoring, cataloguing or otherwise addressing sub-soil conditions, archeological conditions, hazardous materials, etc. that may be found in the Project Area and the parties shall execute any additional agreements necessary to ensure that Developer will assume full responsibility for such costs. 11. FINAL PROJECT ENTITLEMENTS. 11.1 The City acknowledges and agrees that Developer has successfully completed the processing of all discretionary land use approvals needed to proceed with the final design of the Project. Building permits and other regulatory permits consistent with conditions of discretionary entitlements and mitigations required by the certified Final EIR, and any subsequent environmental review, must be obtained in order for construction to proceed. 11.2 The City acknowledges that Developer has provided to the City with respect to the Project, as entitled, a construction phasing plan that has been approved by the Community Development Director. The Parties acknowledge that if any significant changes are made to the project subsequent to the date on which the Final Project Entitlements were approved by the City Council, then the Developer will be required to submit such changes to and obtain Director approval of a revised construction phasing plan. 12. CONDITIONS TO LEASE EXECUTION. The obligations of the Parties to proceed with the Long Term Lease shall be subject to the waiver or satisfaction of the following conditions. 12.1 DEVELOPER REQUIREMENTS. Subject to Paragraph 3 of this Agreement, the City shall be obligated to enter into the Long Term Lease contemplated by this Agreement if and only if Developer has satisfied or legally bound itself to satisfy the following conditions or the City has waived the conditions: (a) Developer has obtained final design approval to proceed with the Project in accordance with the City’s normal design review requirements, which shall be subject to the City Lease Page 3-4 Article 2.1 Lease Page 5-6 Article 3.3.1 Lease Page 4-6 Article 3.3 Lease Page 4 Article 3.3 Lease Page 5 Article 3.3.1 (A) Lease Page 6 Article 3.3.1 (G) ATTACHMENT 3 C6 - 92 9 Council’s final approval[this condition shall not be waived by the City]; (b) The proposed Lease has received final environmental approval and any subsequent Project environmental review necessitated by any changes by the Developer to the Project has been completed [this condition shall not be waived by the City]; (c) Developer has obtained or agrees to obtain, by a date to be specified by the City; building permits for the Project, consistent with the design finally approved by the San Luis Obispo City Council; (d) City shall have no obligation to permit Developer to occupy Parking Lot 2 and City shall retain the right to operate and retain all revenues from its parking lot until such time as Developer has obtained a final, binding commitment letter from a lender of Developer's choice to fund the construction costs of the Project, obtained building permits to construct the Project consistent with the City’s approved phasing plan, and has requested and received written authorization from the City to take Parking Lot 2 out of operation; and (e) Developer shall agree to include a provision to permit termination of the Long Term Lease and reversion of all rights in and to Parking Lot 2 to the City if Developer fails to meet agreed upon benchmarks toward Project completion, which shall be set forth in the Long Term Lease; (f) Developer has provided a plan that is acceptable to the City and addresses trash and delivery access, during construction, to the businesses along Higuera Street that currently depend upon Parking Lot 2 and the alleyway adjacent to it for these purposes. 12.2 CITY REQUIREMENTS. Developer shall be obligated to enter into the Long Term Lease if and only if the City has satisfied or legally bound itself to satisfy the following conditions, or the Developer has waived the conditions: (a) City agrees to allow Developer to pursue a subdivision of the airspace above Parking Lot 2 as necessary to facilitate the development of the Project as finally approved by the San Luis Obispo City Council; and See comment on Agreement Section 3, Page 5 of this MOA Lease Page 5 Article 3.3.1 (C) Lease Page 5 Article 3.3.1 (D) Reserved use Lease page 6-7 Article 3.6.1 Outside Delivery date: Lease Page 4 Article 3.3.2 Outside Completion Date: Lease page 7 Article 3.8 Lease Page 5 Article 3.3.1 (F) Lease Page 28 Article 18.1 ATTACHMENT 3 C6 - 93 10 (b) City agrees to convey to Developer fee ownership of the airspace lots created by any subdivision that may be approved, free and clear of all liens and encumbrances securing monetary obligations and free and clear of all covenants, conditions, and restrictions (other than those hereafter negotiated between the City and Developer in connection with the Long Term Lease and the Project). Developer acknowledges that City shall retain fee ownership of the ground below any subdivided airspace. 13. DATE FOR SATISFACTION OF ALL TERMS AND CONDITIONS. All terms and conditions contained herein shall be completed by and construction of the Project on Lot 2 shall begin no later than five years from the date of execution of this Agreement (“Date of Completion”). Failure to satisfy all terms and conditions by the Date of Completion, without a party waiving a term or condition, or legally binding itself to satisfy a term or condition, terminates this Agreement. The City Manager shall have the authority to extend the Date of Completion for a time period not to exceed one year. 14. INTENTIONALLY OMITTED. 15. IN-LIEU PARKING FEES. If the Project fails to provide all on-site parking required under applicable provisions of the City's Zoning Code, then the Developer will be required to pay the generally applicable in-lieu parking fee at the time building permits are issued. 16. LOAN TO DEVELOPER. The City, will provide a loan to the Developer, at no cost to the City, in the original principal amount of Five Hundred Thousand Dollars ($500,000), which Developer shall repay as follows: 16.1 INTEREST RATE. The loan shall bear interest at a fixed annual rate equal to the Wall Street Journal Prime Lending Rate in effect on the date of the loan plus two percent (2.0%). For purposes of the foregoing, the term “Wall Street Journal Prime Lending Rate” means, as of any day, the "U.S. Prime Rate" published in The Wall Street Journal's "Money Rate" table on the last business day immediately prior to the day as of which such rate is being determined. If such table or rate is not published as of such date, then the term "Wall Street Journal Prime Lending Rate" shall be deemed to be a reference to the prime lending rate of Bank of America in effect on the last business day immediately prior to such date. If Bank of America does not then exist or does not then publish its prime Outside Delivery date: Lease Page 4 Article 3.2.2 Outside Completion Date: Lease page 7 Article 3.8 Lease Page 28 Article 18.1 Lease Page 5 Article 3.3.1 (E) Lease Page 31 Article 20 Lease Page 31 Article 20.1.1 ATTACHMENT 3 C6 - 94 11 lending rate, then the "Wall Street Journal Prime Lending Rate" shall be the prime lending rate of the City’s principal banking institution on the last business day immediately prior to the date as of which such rate is being determined. 16.2 AMORTIZATION; REPAYMENT; MATURITY. The principal of and interest on such loan shall be repayable in equal monthly installments of principal and interest based upon 25-year amortization, provided that the loan shall mature and be repayable in full ten (10) years following the date of such loan. 16.3 SECURITY. The obligations of Developer under such loan shall be secured by a deed of trust encumbering title to the Hotel to be constructed as part of the Project. The lien of such deed of trust shall be a second- priority lien, subordinate to the lien of a first-priority deed of trust securing financing in an original principal amount of not more than 65% of the fair market value of the Property (as built, and with rents stabilized). 16.4 USE OF PROCEEDS. Developer shall use the proceeds of such loan to finance only that part of the Project that is owned by Developer or other persons other than the City or any governmental agency or authority, and for the avoidance of doubt, no portion of the proceeds of such loan shall be used to construct improvements on any real property owned by the City or to fund the cost of the public improvements to be constructed by Developer pursuant to Paragraph 17, below. 17. DEVELOPER PARTICIPATION IN GARDEN STREET IMPROVEMENTS. 17.1 DESIGN AND CONSTRUCTION. Developer shall complete the design and construction of physical improvement to Garden Street substantially consistent with the Garden Street Makeover Plan (as memorialized in those certain "Garden Street Improvements Construction Documents" prepared by "firma" (Specification No. CP #90088B) dated 12/4/03) (the "Garden Street Improvements"). The design for said Garden Street Improvements shall be submitted to the City as part of the final Garden Street Terraces Project architectural design review process consistent with Recital H and Paragraph 11 of this Agreement. Lease Page 31 Article 20.1.2 Lease Page 31 Article 20.1.3 Lease Page 31 Article 20.2 Language related to public improvements no longer required due to Article 7.3, lease page 11 Lease Page 5 Article 3.3.1 (B) ATTACHMENT 3 C6 - 95 12 17.2 COSTS. Subject to increase pursuant to Paragraph 4, above, the aggregate costs of such physical improvements shall be paid solely by Developer. 17.3 CONSTRUCTION OF PROJECT. As part of the Project, Developer shall assure high levels of maintenance, uniformity of street facade appearance and maintenance, adequate security and a variety of other enhancement improvements to the streetscape of Garden Street from Marsh Street to Higuera, some of which will occur on public property or on property not owned by the Developer. Developer shall construct all of the Garden Street improvements, concurrently with project construction on Garden Street, the cost and expense of which shall be paid in accordance with Paragraph 17.2, above. 18. PREVAILING WAGES. 18.1 Developer shall be responsible for evaluating the applicability of and, to the extent applicable, complying with prevailing wage requirements, if any, that may be applicable to work associated with the Garden Street Makeover Plan improvements that Developer will construct. The Long Term Lease to be executed prior to construction of the Project shall provide that the Developer shall hold harmless and indemnify the City against any and all claims, liabilities and/or costs of any kind arising from or as a result of Developer’s contracting for and/or construction of the Garden Street Makeover Plan improvements . 19. DOCUMENTATION. The parties agree that, at a minimum, the documentation to be created as a result of this Agreement may include the following: 19.1 Lease Agreement; 19.2 Loan Documents and security instrument(s); and 19.3 A Performance Bond for the Garden Street Makeover improvements. 19.4 Conveyance of airspace rights to Developer. Lease Page 7 Article 3.7 Lease Page 11 Article 7.1 Lease Page7 Article 3.7 ATTACHMENT 3 C6 - 96 13 20. RESPONSIBILITIES OF THE PARTIES 20.1 DEVELOPER. It shall be the responsibility of the Developer diligently to pursue final design approval for the Project and pay all costs associated with Project approvals, including any environmental processing and reimbursement to the City for third party expenses associated with the Long Term Lease, subsequent or supplemental environmental review necessitated by subsequent changes to the Project to comply with approved Project conditions or mitigations, and for third party expenses (without any mark up) incurred after approval of this Agreement in the preparation of any documents necessary to implement this Agreement and finalize other documents contemplated herein. 20.2 CITY. The City, in its role as landowner, shall cooperate with and furnish information to the Developer regarding the properties included within the Project. With regard to zoning, land use, and environmental and design review and/or approval, the City's responsibility shall be limited to providing that level of interaction, timely response, and review as provided for in state law, regulations and ordinances of the City of San Luis Obispo. 21. OTHER MUNICIPAL PROCESSING. The Parties understand and agree that those approvals required of the City acting in its governmental or regulatory capacity are separate and distinct from those approvals required by the City under this Agreement. Notwithstanding anything to the contrary in this Agreement, nothing herein shall be interpreted to mean that the City is in any way waiving, limiting, or weakening any regulatory or police power the City may have in any of its governmental capacities. It is intended that the Developer shall be obligated to fulfill such requirements as may be imposed by the City or any other governmental agency or authority having or exercising any jurisdiction over the Project or over any construction to be undertaken by the Developer in, on or about said Project. Refusal or failure by the City in its governmental or regulatory capacity to take a legislative action, issue any permit, license or any other action or approval sought by the Developer for construction of improvements on, or development of, the Project shall not constitute a breach of this Agreement. Final design approved Costs Lease Page 11 Article 7.4 Cooperation Lease Pages 31-32 Article 21.1 Cooperation Lease Pages 31-32 Article 21.1 ATTACHMENT 3 C6 - 97 14 22. HOLD HARMLESS AND INDEMNIFICATION. Developer agrees to hold harmless, defend and indemnify the City, its agents, officers and employees from and against all actions, damages, claims, losses or expense of every type and description to which they may be subjected or put, by reason of, or resulting from any claims arising out of or related to this Agreement. Notwithstanding the foregoing, no indemnification is given hereunder for any action, damage, claim, loss or expense to the extent directly attributable to the intentional acts or negligence of the City or its officers, directors, employees or agents. 23. POSSESSORY INTEREST TAXES. The Developer (a) acknowledges that if the Project contemplated by this Agreement is subsequently approved and constructed, then a possessory interest subject to property tax may be created and owed by Developer, and the Developer or its interest in the Project and the improvements thereon may be subject to payment of property taxes levied on such possessory interests, and (b) agrees to pay all such taxes, however categorized or calculated. 24. MISCELLANEOUS. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California (without regard to application of the conflict-of-law principles thereunder). Upon the request of either party, each of the undersigned shall make, execute, and deliver such documents and instruments, and shall take such other actions, as may be reasonably necessary to carry into effect the agreements of the parties described in this Agreement. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof, nor the legality, validity, or enforceability of such provision under the law of any other jurisdiction, will in any way be affected or impaired thereby, and the remainder of the provisions of this Agreement will remain in full force and effect. This Agreement (a) represents the entire understanding between the parties regarding the subject matter hereof, and supersedes and replaces the 2010 MOU and all other prior and contemporaneous understandings, whether oral or written, regarding such subject matter, and (b) may not be modified or amended, except by a written agreement executed after the effective date hereof by the party sought to be charged by such modification or amendment. If any action is commenced to construe or enforce this Agreement or the rights and duties of the parties hereunder, then the party prevailing in that action shall be entitled to recover its costs and reasonable attorneys’ fees in that action, as well as such costs and fees of enforcing any judgment Prevailing Wage Lease Page 11 Article 7.3 General Indemnification Loan Pages 14-15 Article 11.1 and 11.2 Lease Page 14 Article 10 Lease Pages 31-35 Article 21 ATTACHMENT 3 C6 - 98 15 entered therein. This Agreement may be executed in counterparts, each of which shall be deemed an original and both of which, taken together, shall constitute one and the same instrument, binding on each signatory thereto. A copy of this Agreement that is executed by a party and transmitted by that party to the other party by facsimile or as an attachment (e.g., in ".tif" or ".pdf" format) to an email shall be binding upon the signatory to the same extent as a copy hereof containing that party's original signature. [Signatures appear on the following page] ATTACHMENT 3 C6 - 99 16 IN WITNESS WHEREOF, the undersigned have executed this Agreement, effective as of the "Effective Date" set forth above. "CITY:" CITY OF SAN LUIS OBISPO A Municipal Corporation By: City Manager ATTEST: City Clerk APPROVED AS TO FORM: City Attorney "DEVELOPER:" GARDEN STREET SLO PARTNERS, L.P., a California limited partnership By DOWNTOWN INVESTORS, LLC, a California limited liability company, its general partner By Hamish Marshall, its Manager ATTACHMENT 3 C6 - 100 EXHIBIT 1 OWNERSHIP OF PROJECT AREA (per Recital A) ATTACHMENT 3 C6 - 101 THIS PAGE IS INTENTIONALLY LEFT BLANK C6 - 102 No . 6 9 6 4 Ex p . 0 9 - 3 0 - 1 5 No . 5 4 4 0 8 No . D a t e D e s c r i p t i o n ww w . w a l l a c e g r o u p . u s CO N S T R U C T I O N M A N A G E M E N T ME C H A N I C A L E N G I N E E R I N G LA N D S C A P E A R C H I T E C T U R E SU R V E Y I N G / G I S S O L U T I O N S WA T E R R E S O U R C E S PU B L I C W O R K S A D M I N I S T R A T I O N PL A N N I N G BL O C K 8 6 MI S S I O N V I N E Y A R D TR A C T A N D M U R R A Y AN D C H U R C H A D D I T I O N CI T Y O F S A N L U I S OB I S P O , S T A T E O F CA L I F O R N I A FILE NAME: 1185-0002 BASE.DWG C3 . 1 AT T A C H M E N T 4 C6 - 10 3 SS CTV CTV CT V CT V CT V CT V CTV CTV CTV CTV CTV Gas Ga s Ga s Ga s GM GM GM GM GM GM GM GM GMGMGM GMGMGMGM GMGMGMGMGM 50+0051+0052+0053+0054+0054+27 0+00 1+ 0 0 2+ 0 0 3+ 0 0 3+ 4 9 2+003+004+005+005+83 18+0019+00 20 + 0 0 21 + 0 0 22 + 0 0 19+0020+00 21 + 0 0 22 + 0 0 23 + 0 0 23 + 2 5 STA: 23+12.86 OFF: 9.75' L STA: 22+42.94 OFF: 9.75' L STA: 22+28.44 OFF: 16.70' L STA: 19+93.17OFF: 16.70' LSTA: 19+87.90OFF: 15.00' LSTA: 19+56.12OFF: 15.00' LSTA: 19+48.98OFF: 18.28' L STA: 51+54.21OFF: 14.00' LSTA: 53+68.79OFF: 13.92' L STA: 21+35.46 OFF: 7.67' R ST A : 2 2 + 1 5 . 6 2 OF F : 7 . 6 6 ' R STA: 23+02.38 OFF: 1.70' L STA: 22+65.08 OFF: 1.71' L 6 ( 1 ( 1 ( 6 ( STA: 21+99.20 OFF: 7.67' R STA: 22+10.66 OFF: 7.66' R No . 5 4 4 0 8 No . D a t e D e s c r i p t i o n ww w . w a l l a c e g r o u p . u s CO N S T R U C T I O N M A N A G E M E N T ME C H A N I C A L E N G I N E E R I N G LA N D S C A P E A R C H I T E C T U R E SU R V E Y I N G / G I S S O L U T I O N S WA T E R R E S O U R C E S PU B L I C W O R K S A D M I N I S T R A T I O N PL A N N I N G FILE NAME: 1185-02-IMP-DEMO.DWG De m o P l a n C4 . 1 RE F E R E N C E K E Y N O T E S DE S C R I P T I O N 1 ST R E E T L I G H T T O B E S A L V A G E D A N D R E T U R N E D T O C I T Y 2 PA R K I N G M E T E R T O B E S A L V A G E D A N D R E T U R N E D T O T H E C I T Y 3 BI K E R A C K T O B E S A L V A G E D A N D R E U S E D I F P O S S I B L E 4 SI G N T O B E R E M O V E D A N D D I S P O S E D 5 BO L L A R D T O B E R E M O V E D A N D D I S P O S E D 6 TR E E T O B E P R O T E C T E D A N D C A N O P Y T O B E T R I M M E D A T T H E DI R E C T I O N O F T H E C I T Y A R B O R I S T 7 FI R E H Y D R A N T T O B E S A L V A G E D A N D R E L O C A T E D 8 D R A I N A G E I N L E T T O B E R E M O V E D 9 E X I S T I N G W A T E R M E T E R T O B E R E M O V E D & R E L O C A T E D P E R CO M P O S I T E U T I L I T Y P L A N C 6 . 0 UT I L I T Y T Y P I C A L L E G E N D SS SA N I T A R Y S E W E R SD ST O R M D R A I N FI R E F I R E L I N E W W A T E R L I N E G G A S L I N E PG & E E L E C T R I C A L EL E C E L E C T R I C A L AL L H A R D S U R F A C E S ( r e t a i n i n g w a l l s , c u r b - g u t t e r & s i d e w a l k , as p h a l t ) T O B E R E M O V E D . UT I L I T Y B O X E S & L I D S , M A N H O L E S T O B E A D J U S T E D T O GR A D E P E R C I T Y S T D 6 0 4 0 . R E P L A C E A S N E C E S S A R Y . RE F E R E N C E E L E C T R I C A L A N D P L U M B I N G P L A N F O R RE M O V A L A N D O R R E L O C A T I O N O F U T I L I T I E S . 00 20 40 (I N F E E T ) 10 GR A P H I C S C A L E 1 I N = 2 0 F T EX I S T I N G B U I L D I N G T O RE M A I N EXISTING B U I L D I N G T O REMAIN EX I S T I N G B U I L D I N G T O RE M A I N EX I S T I N G B U I L D I N G T O RE M A I N TR E E T O B E R E M O V E D OB J E C T T O B E R E M O V E D O R S A L V A G E D UN D E R G R O U N D O B J E C T T O B E R E M O V E D OR A B A N D O N E D P E R C I T Y S T D 6 0 5 0 NO T E : 1. B U I L D I N G O U T L I N E S H O W N F O R R E F E R E N C E O N L Y . 2. T H E T R E E C A N O P Y S H A L L B E T H I N N E D P R I O R T O R E M O V A L O F R O O T S B Y A N A P P R O V E D C E R T I F I E D A R B O R I S T . 3. N O T I F Y C I T Y A R B O R I S T 4 8 h r s P R I O R T O C U T T I N G A N Y T R E E R O O T S O V E R 2 " I N D I A M E T E R . T R E E R O O T S A R E T O B E C U T B Y H A N D . 4. R E F E R T O C I T Y S T A N D A R D S P E C I F I C A T I O N S 7 7 - 1 . 0 3 A ( 2 ) T R E E P R O T E C T I O N . P A G E 1 0 8 A N D 1 0 9 . 5. V E R I F Y U T I L I T Y U S E A N D O W N E R S H I P P R I O R T O R E M O V A L , A B A N D O N M E N T O R R E L O C A T I O N LE G E N D : Ma r s h S t r e e t Broad Street Hi g u e r a S t r e e t Ga r d e n A l l e y Garden Street ST R E E T L I G H T ST R E E T L I G H T ( M I S S I O N S T Y L E ) PA R K I N G M E T E R DR A I N A G E I N L E T BI K E R A C K ST R E E T S I G N LI M I T S O F D E M O L I T I O N TY P 1 7 BI K E R A C K TY P 1 TY P 2 TY P 2 TY P 2 3 3 33 3 4 4 4 4 4 BO L L A R D TY P 5 TY P 5 8 8 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 GA R D E N S T S T A : 2 + 0 0 . 0 0 = HI G U E R A S T S T A : 2 1 + 8 4 . 1 0 GA R D E N S T S T A : 5 + 5 2 . 8 5 = MA R S H S T S T A : 2 2 + 8 4 . 0 0 BROAD ST STA: 53+87.10=MARSH ST STA: 19+35.08 BROAD ST STA: 50+34.28=HIGUERA ST STA: 18+35.00 Ga r d e n A l l e y S t a : 3 + 4 9 . 0 6 = Ga r d e n S t r e e t S t a : 3 + 3 3 . 4 9 Garden Alley Sta: 0+00 =Broad Street Sta: 51+67.74 4 TY P 2 TY P 2 TYP 2 9 9 AT T A C H M E N T 4 C6 - 10 4 ©Sheet NumberSheet TitleRevisionsConsultantDrawn By:Comm. No.:PIC / AIC:Project TitleDate:Document Phase:Checked By:8665 Hayden Place Culver City, CA 90232 Tel: 310 895 2200 Fax: 310 895 2199 www.cuningham.com®Cuningham Group Architecture, Inc.Copyrightby Cuningham Group Architecture, Inc. (All Rights Reserved) 6/26/201311:56:19AMC:\RevitLocal\05-0542-2a_2b_jsanchez.rvt 06/20/2013 05-0542MHAJVW Garden Street Terraces _ Scheme 1 Building Sections A.8PRELIMINARYNOT FOR CONSTRUCTIONNo.DateDescription Date: 08-08-2013 Drawn By: MJH Title Sheet RE D E V E L O P M E N T P R O J E C T AR C H I T E C T U R A L R E V I E W C O M M I S S I O N GA R D E N S T R E E T T E R R A C E S Ga r d e n S t r e e t a t M a r s h S t r e e t , B r o a d S t r e e t a n d G a r d e n A l l e y 11 1 9 G a r d e n S t r e e t Sa n L u i s O b i s p o , C a l i f o r n i a 9 3 4 0 1 T.1Sheet Index________________________________T.1 TITLE SHEET / PROJECT DATA / SHEET INDEX SP.1 EXISTING CONDITIONS WITH BUILDING NOTES PD.1 PROJECT DESCRIPTION C.1 MASTER UTILITY PLAN AND OFF-SITE IMPROVEMENTS C.2 GARDEN STREET IMPROVEMENT PLAN C.3 GARDEN STREET SECTIONS & DETAILS C.4 GARDEN ALLEY IMPROVEMENT PLAN C.5 SIDEWALK AND PEDESTRIAN FACILITY IMPROVEMENTS C.6 PRELIMINARY GROUND LEVEL GRADING AND DRAINAGE PLAN L.1 OVERALL PLAN + STREETSCAPE L.2 LEVEL 1 - GROUND FLOOR L.3 LEVEL 2 - COMMON OPEN SPACE L.4 LEVEL 4 - ROOFTOP POOL TERRACE L.5 EXISTING TREE INVENTORY A.1 GROUND LEVEL FLOOR PLAN A.2 LEVEL 2 FLOOR PLAN A.3 LEVEL 3 FLOOR PLAN A.4 LEVEL 4 FLOOR PLAN A.5 ROOF LEVEL PLAN A.6 BUILDING SECTIONS A.7 BUILDING ELEVATIONS A.8 BUILDING ELEVATIONS A.8 PERSPECTIVE RENDERING A.9 PERSPECTIVE RENDERING A.10 ARCHITECTURAL DETAILS A.11 ARCHITECTURAL DETAILS A.12 SUN SHADING AND SHADOW CONDITIONS A.13 INTERIOR FLOOR PLANS A.14 MATERIALS BOARDProject Data________________________________SITE AREA 48,418 SF. RESIDENTIAL 8 FLATS 480 -1590 SF HOTEL 64 KEYS LOBBY RESTAURANT RETAIL TOTAL: 20,542 SF. RETAINED / RETROFIT: 14,032 SF NEW: 6,510 SF PARKING 41 SPACES 12 BIKE SPACES TOTAL BUILDING AREA : 41,102 SF. ( NOT INCL.15,060 SF. PARKING AREA ) Project Directory________________________________OWNER / APPLICANT : GARDEN STREET SLO PARTNERS, L.P. 805 AEROVISTA PLACE, #202 SAN LUIS OBISPO, CA 93401 CONTACT : HAMISH MARSHALL PH: 805.544.7343 AGENT / PLANNER : OASIS ASSOCIATES INCORPORATED 3427 MIGUELITO COURT SAN LUIS OBISPO, CA 93401 CONTACT : CAROL FLORENCE, AICP PH: 805.541.4509 ARCHITECTS : CUNINGHAM GROUP 8665 HAYDEN PLACE CULVER CITY, CA 90232 CONTACT : JONATHAN WATTS, AIA PH.: 310.895.2201 CIVIL ENGINEER : WALLACE GROUP 2 CLARION COURT SAN LUIS OBISPO, CA 93401 CONTACT : CRIS DISARUFINO PH : 805.544.4011 LANDSCAPE DESIGN OASIS ASSOCIATES, INC. 3427 MIGUELITO COURT SAN LUIS OBISPO, CA 93401 CONTACT : SCOTT WRIGHT PH : 805.541.4509 Vi c i n i t y M a p __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Pr o j e c t M a p __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Oc c u p a n c y C l a s s i fi c a t i o n - B , R 2 a n d S 2 __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Fr o n t a g e I n c r a s e w i t h s i d e s > 3 0 ’ = 1 . 3 0 (1 7 7 . 3 + 1 7 7 . 3 + 2 5 0 . 6 ) / ( 1 7 7 . 3 + 2 9 6 . 6 + 1 7 7 . 3 + 2 5 0 . 6 + 7 4 + 4 6 + 7 4 ) = 6 0 5 . 3 / 1 0 9 6 = . 5 5 If = ( . 5 5 - . 2 5 ) = . 3 Ty p e V - A c o n s t r u c t i o n w i t h s p r i n k l e r Al l o w a b l e f o r R - 2 : 1 2 , 0 0 0 s f x 1 . 3 0 x 2 = 3 1 , 2 0 0 s f ; 3 s t o r i e s m a x Al l o w a b l e f o r B : 1 8 , 0 0 0 s f x 1 . 3 0 x 2 = 4 6 , 8 0 0 s f ; 3 s t o r i e s m a x Al l o w a b l e f o r S - 2 : 2 1 , 0 0 0 x 1 . 3 0 x 2 = 5 4 , 6 0 0 s f ; 4 s t o r i e s m a x Al l o w a b l e f o r A - 1 : 1 1 , 5 0 0 x 1 . 3 0 x 2 = 2 9 , 9 0 0 ; 2 s t o r i e s m a x Mi x U s e d O c c u p a n c y C a l c u l a t i o n f o r t y p e V - A c o n s t r u c t i o n : ( T a b l e 5 0 3 ) Ty p e V - A w i t h s p r i n k l e r Fi r s t F l o o r : B: 2 4 , 8 3 0 s f , S - 2 : 1 6 , 9 5 0 s f ( 2 4 , 8 3 0 / 4 6 , 8 0 0 + 1 6 , 9 5 0 / 5 4 , 6 0 0 ) = . 5 3 + . 3 1 = . 8 4 < 1 , O. K . ) Se c o n d F l o o r : R - 2 : 1 6 , 9 0 2 / 3 1 , 2 0 0 + 3 , 5 0 0 / 2 9 , 9 0 0 = . 5 4 + . 1 8 ( n o t i n c l u d e c o r r i d o r a n d ba l c o n y y e t ) < 1 ; O . K . Th i r d F l o o r : o k Fo r t h F l o o r : o k Fi r e R e s i s t a n c e R a t i n g R e q u i r e m e n t s f o r t y p e V - A ( T a b l e 6 0 1 ) Pr i m a r y S t r u c t u r a l f r a m e : 1 h r Be a r i n g W a l l s : 1 h r ( e x t e r i o r ) ; 1 h r ( i n t e r i o r ) No n b e a r i n g i n t e r i o r w a l l s : 0 h r Fl o o r C o n s t r u c t i o n a n d s e c o n d a r y m e m b e r s : 1 h r Ro o f C o n s t r u c t i o n a n d s e c o n d a r y m e m b e r s : 1 h r ATTACHMENT 5 C6 - 105 ATTACHMENT 5 C6 - 106 Introduction The Garden Street Terraces project has travelled a long and interesting road since it was first submitted to the City in 2006. The subject of an Environmental Im- pact Report (December 2009), the City Council approved the Reduced Develop- ment and Project without Public Parking Spaces alternatives. In addition to the rec- ommendations by the Cultural Heritage Committee and Architectural Review Commission (“ARC”), and Council’s ap- proval, the project has been influenced by a variety of factors over time – the formal agreement between the City and the Ap- plicant that established specific threshold levels for the project components, the im- pacts of the recession and the ability to finance the project, and the introduction of a hotel partner, to name a few. Project Description To describe this most recent iteration of the project, it seemed unnecessary to start at the beginning of the process, but instead more appropriate to compare and contrast it to the component threshold levels in the Agreement and the previously reviewed/ approved project (ARC, 2011). See Table A below. As noted, the current project meets or exceeds the component threshold levels established initially by the City’s Steering Committee and the Applicant, as modified, and ultimately approved by the City Council. From an overall perspective, modifica- tions to the project over time appear to be fairly inconsequential when viewed solely as the quantity of hotel rooms, residential units, and retail floor area. To provide additional detail about the major project components, the following table describes a floor-by-floor comparison of the ARC 2011 project versus the current project. It is noteworthy that the improve- ments to Garden Alley and the miscel- laneous improvements to the perimeter sidewalks have not changed. Modifica- tions to Garden Street were made to better accommodate the Fire Department access requirements, standardize the street sec- tion, and in doing so, control storm water runoff and direct it to existing facilities. Of interest to the Architectural Review Commission is how these modifications have changed the form and massing of the project. As a refresher, the historic build- ings with frontage on Garden Street will essentially remain “as-is” with modifica- tions solely to the interiors to accommo- date the adaptive reuse. No new structures are planned above the existing buildings. The most notable change is the removal of residential townhomes and patio area previously planned above the buildings located at the corner of Marsh Street and Broad Street (712, 720, 722 and 728 Marsh Street). For clarity, included are the 2011 ARC floor plans, building sec- tions, and elevations. Corner of Marsh St. and Broad St. ARC 2011 Corner of Marsh St. and Broad St. Current Project Images See “Images” far right Corner of Marsh St. and Broad St. Existing Conditions PD.1 Project Description 712 720 722 728 712 720 722 728 Table B Previously Reviewed Project Current Project August 2013ARC Sept. 2011 Basement Level 63 parking spaces• Hotel BOH • Residential storage• No subterranean level• Ground Floor/1st Floor Level 11 parking spaces• Hotel entry courtyard, • lobby & office Restaurant• Retail (retained, • retrofitted, remodeled) 41 parking spaces• Hotel entry courtyard, • lobby & office Restaurant• Retail (retained, • retrofitted, remodeled) Mezzanine Hotel • – 2 keys Hotel BOH• Retail• Outdoor terrace• No Mezzanine• 2st Floor Hotel • – 18 keys Conference space• Hotel back of house• Residential • – 8 townhomes units (Level 1 of 3) Pool deck• Residential patios• Hotel – 28 keys• Function space • Hotel BOH• Residential – 4 units• Common garden• Hotel and Residential • private patios 3rd Floor Hotel • – 17 keys Residential townhomes • (Level 2 of 3) Hotel – 21 keys• Residential – 4 units• 4th Floor/ Roof Level Hotel • – 11 Keys Residential townhomes • (Level 3 of 3) Hotel rooftop patio, • residential rooftop patios Hotel – 15 Keys• Gym• Pool deck• Residential rooftop • patiosTable A Agreement Project Component Minimums Previously Reviewed Project ARC Sept. 2011 Current Project August 2013 45 Hotel rooms• 8 Housing units• 20,000 SF retail• 48 Hotel rooms• 8 Housing units• 25,047 SF retail• 64 Hotel rooms• 8 Housing units• 20,542 SF retail• ATTACHMENT 5 C6 - 107 ON E W A Y ON E W A Y LOADING ZONE NO PARKING Ma s t e r S i t e a n d U t i l i t y P l a n w i t h O f f - S i t e I m p r o v e m e n t s M a r s h S t r e e t G a r d e n A l l e y B r o a d S t r e e t G a r d e n H i g u e r a S t r e e t RE S T A U R A N T / B A R Reference Notes S t r e e t Le g e n d Utility Reference Notes Off-Site Parking SummaryRefer to Sheet C.2 for Garden Street Improvements NO T A P A R T HO T E L L O B B Y Garden Street ImprovementsRefer to Sheet C.2 for RE T A I L RE T A I L owner/applicant:No. 41819 ©® 7/11/2013 9:29:49 AMC:\RevitLocal\05-0542-2a_2b_jsanchez.rvt No.DateDescription 001 2 0. 5 GR A P H I C S C A L E ATTACHMENT 5 C6 - 108 ONE WAY ONE WAY LOADING ZONE NO PARKING Pr o p o s e d G a r d e n S t r e e t I m p r o v e m e n t P l a n Si t e P l a n N o t e s ( f r o m G a r d e n S t r e e t I m p r o v e m e n t s P r o j e c t C P # 9 0 0 8 8 B , s h e e t S P - 1 ) Ga r d e n S t e e t I m p r o v e m e n t s M a t r i x M a r s h S t r e e t H i g u e r a S t r e e t owner/applicant:No. 41819 ©®No.DateDescription 00120.5GRAPHIC SCALEATTACHMENT 5 C6 - 109 ONE WAY ONE WAY LOADING ZONE NO PARKING > > > > > > > > > > > > > > > > > > > > >>>>> > > FIRE LANEFIRE LANEFIRE LANE FI R E L A N E FI R E L A N E FI R E L A N E FI R E L A N E >>>>>> M a r s h S t r e e t ow n e r / a p p l i c a n t : No . 4 1 8 1 9 7/11/2013 9:29:49 AM C:\RevitLocal\05-0542-2a_2b_jsanchez.rvt No . D a t e D e s c r i p t i o n Garden Street Improvement Plan Re f e r e n c e N o t e s H i g u e r a S t r e e tG a r d e n S t r e e t Trash BinProp o s e d P l a n D e t a i l + S t r e e t S e c t i o n Pu b l i c B e n c h 00 1 2 0. 5 GR A P H I C S C A L E AT T A C H M E N T 5 C6 - 11 0 ON E W A Y >>> FIRE LANEFIRE LANE Garden Alley Improvement Plan ow n e r / a p p l i c a n t : No . 4 1 8 1 9 7/11/2013 9:29:49 AM C:\RevitLocal\05-0542-2a_2b_jsanchez.rvt No . D a t e D e s c r i p t i o n Retail G a r d e n S t Ex i s t i n g S L O B r e w e r y C o m p a n y B r o a d S t r e e t Pr o p o s e d G a r d e n A l l e y P a v i n g M a t e r i a l s Re m o v a b l e B o l l a r d Re f e r e n c e N o t e s 00 1 2 0. 5 GR A P H I C S C A L E AT T A C H M E N T 5 C6 - 11 1 ON E W A Y ON E W A Y LO A D I N G Z O N E NO P A R K I N G Sidewalk and Pedestrian Facility Imp r o v e m e n t P l a n M a r s h S t r e e t G a r d e n A l l e y B r o a d S t r e e t G a r d e n H i g u e r a S t r e e t Lo b b y Ho t e l Re s t a u r a n t / B a r PA R T Re f e r e n c e N o t e s S t r e e t Ut i l i t y R e f e r e n c e N o t e s A NO T Retail ow n e r / a p p l i c a n t : No . 4 1 8 1 9 7/11/2013 9:29:49 AM C:\RevitLocal\05-0542-2a_2b_jsanchez.rvt No . D a t e D e s c r i p t i o n Re t a i l 11 1 9 G a r d e n 11 2 3 / 1 1 2 5 / 1 1 2 7 G a r d e n 00 1 2 0. 5 GR A P H I C S C A L E AT T A C H M E N T 5 C6 - 11 2 Retail Lo b b y Ho t e l Re s t a u r a n t / B a r Preliminary Ground Level Grading an d D r a i n a g e P l a n Re f e r e n c e N o t e s PA R T M a r s h S t r e e t G a r d e n S t r e e t B r o a d S t r e e t No t e s Le g e n d A NO T ow n e r / a p p l i c a n t : No . 4 1 8 1 9 7/11/2013 9:29:49 AM C:\RevitLocal\05-0542-2a_2b_jsanchez.rvt No . D a t e D e s c r i p t i o n Reta i l Co u r t y a r d Retail Co u r t ( O p e n t o A b o v e ) 00 1 2 0. 5 GR A P H I C S C A L E AT T A C H M E N T 5 C6 - 11 3 THIS PAGE IS INTENTIONALLY LEFT BLANK C6 - 114