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2017/02/23 Agreement SH-Menifee, LLC - Development AgreementPLEASE RECORD AND WHEN RECORDED RETURN TO: CITY OF MENIFEE 29714 Haun Road Menifee, CA 92586 Attn: City Clerk Recorded for the benefit of the City of Menifee and exempt from recording fees pursuant to Government Code Section 27383 2017-0075807 02/23/2017 08:42 AM Fee: $ 0.00 Page 1 of 17 Recorded in official Records County of Riverside Peter Aldana Assessor -County Clerk -Recorder !III Ig W*gp 0&1, (Space above this line is for Kcu„u,�'T[11i_ COVENANTS CONDITIONS AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY 411 This COVENANTS, CONDITIONS, AND RESTRICTIONS AFFECTING INTERESTS IN REAL PROPERTY (the "Covenant") is entered into as of this 4th day of January 2017, by and between the CITY OF MENIFEE, a California general law City and municipal corporation ("City"), and SH-MENIFEE, LLC, ("Developer") (individually a "Party" and collectively the "Parties"). RECITALS A. Developer is the owner of that certain real property consisting of approximately 2.80 acres, in the City of Menifee, County of Riverside, State of California, which is more particularly described in the legal description attached hereto as Exhibit "A" and incorporated herein by this reference (the "Site"). B. On or about January 4th, 2017, City and Developer entered into that certain unrecorded agreement captioned "Agreement to Enter into Covenant to Operate and to Share Transient Occupancy Tax Revenue" (the "Agreement") authorizing the recordation of this Covenant against the Site upon the timely satisfaction of the "Covenant Conditions" identified therein. C. Subject to the terms and conditions hereof and of the Entitlements (defined below), Developer has agreed to develop and operate a hotel on the Site, containing minimum 80 guest rooms, conference rooms, ballrooms, and other related amenities, with at least 4,000 square feet of meeting space. The hotel flagship (the "Hotel") will be a upper mid -scale hotel, limited service hotel, from the list on Exhibit C, and any change from this list shall be approved or denied prior by the City with sole and absolute discretion before a franchise agreement is signed by the Developer, provided that City may reasonably object to a proposed brand. 2648/031858-0001 9994442.1 a01/04/17 -3- D. In consideration for Developer's encumbrance of the Site by this Covenant and Developer's performance of its obligations hereunder, City has agreed to make certain payments to Developer, the amount of which are measured by the "Transient Occupancy Tax" (as those terms are defined below) generated by the operation of the Hotel on the Site. City and Developer have agreed that the portion of Transient Occupancy Tax required to be paid by City to Developer hereunder during each "Quarter" of the "Operating Period" (as those terms are defined below) provided for herein is a fair exchange for the consideration to be furnished by Developer to City in that Quarter. E. Developer represents and warrants that the Hotel to be built on the Site is not relocating, and shall not relocate, a big box retailer to the Site, within the meaning of California Government Code section 53084. COVENANTS Based upon the foregoing Recitals, which are incorporated herein by this reference and are acknowledged by the Parties as true and correct, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by both Parties, City and Developer hereby agree as follows: 1. DEFINED TERMS. The following terms when used in this Covenant shall have the meanings set forth below: The term "Agreement" shall have the meaning ascribed in Recital B of this Covenant. The term "Commencement Date" shall mean the first day of the first month following the date City issues to Developer a Final Certificate of Occupancy for the Hotel. The term "Covenant Payments" shall mean the amounts to be paid by City to Developer with respect to each Quarter of the Operating Period. The term "Covenant Payments Cap Amount" shall have the meaning ascribed in Section 4.1.1(b) of this Covenant Agreement. The term "Default" shall have the meaning ascribed in Section 5.1 of this Covenant Agreement. The term "Effective Date" shall have the meaning of the date the Agreement is executed by the Menifee City Council. The term "Entitlements" shall mean those discretionary City land use permits and approvals (including all conditions of approval therein) required to authorize development and operation of the Owner Facility on the Site, as the same may be amended from time to time. The term "Holder" shall have the meaning ascribed in Section 5.1(b) of this Covenant Agreement. 2648/031858-0001 9994442.1 a01/04/17 -4- The term "Hotel" shall have the meaning described in Recital C. The term "Municipal Code" shall mean the Menifee Municipal Code. The term "Operating Period" refers to the period between the Commencement Date and the Termination Date. The term "Quarter" shall mean City's Quarter, which occurs four times a year in conjunction with when the hotel pays the City the transient occupancy tax that are generated from the use and occupancy of guest rooms in the Hotel, such as any of the following three (3) month periods during the Operating Period July 1—September 30, October 1—December 31, January 1— March 31, or April 1 — June 30. The term "Site" shall have the meaning ascribed in Recital A of this Covenant Agreement. The term "Termination Date" shall mean the date that is the earliest of (i) the date that is (10) years following the Commencement Date; (ii) the date that the Covenant Payments Cap Amount is paid in full; or (iii) the date on which this Covenant is terminated pursuant to Sections 5.2 or 5.3, as applicable. The term "Transient Occupancy Tax" means, for each month, or part thereof, during the Operating Period, that portion of transient occupancy taxes reported and remitted by Developer to City pursuant to Chapter 3.28 of the Municipal Code, that are generated from the use and occupancy of guest rooms in the Hotel. Notwithstanding anything herein to the contrary, Transient Occupancy Tax shall not include any interest or penalty that has been paid by Developer pursuant to Chapter 3.28 of the Municipal Code, and any costs City incurs in enforcing Chapter 3.28 of the Municipal Code or any provision of this Agreement shall be deducted from the amount of Transient Occupancy Tax that is received by City prior to calculating the amount of a Covenant Payment. 2. CONDITION TO DEVELOPER'S RIGHT TO RECEIVE COVENANT PAYMENTS. 2.1 Opening Date, Commencement Date. As a condition precedent to Developer's right to receive the Covenant Payments, Developer shall be required to opem and to thereafter continue operating the Hotel. Developer's obligations to continuously operate the Hotel until the Termination Date, as described in Section 3.1 below, shall be a condition to the receipt of Covenant Payments during the Operating Period. 2.2 Outside Date. Notwithstanding any other provision set forth in this Covenant, and subject to extension for events of force majeure as provided in Section 6.6, (i) if the condition set forth in the first sentence of the preceding paragraph is not satisfied on or before the date that is fifteen (15) months after the issuance of the first building permit for the Hotel or a later date mutually agreed to by both parties so long as Developer demonstrates a good faith effort to commence and complete the project, and the City may in its sole and absolute discretion grant, or deny the building permit, or (ii) if a building permit is not issued for the Hotel on or before the date that is fifteen (15) months after the Effective Date or a later date mutually agreed to by both parties so long as Developer demonstrates a good faith effort with meeting the milestones (Exhibit 2648/031858-0001 9994442.1 a01/04/17 -5- B) to commence and complete the project; however, the City may in its sole and absolute discretion grant, or deny the permit if the City can determine that the Developer has or have not demonstrated compliance with Exhibit B, and either the Developer or City may terminate this Covenant by delivery of written notice of termination to the other Party. 2.3 Operating Condition. If Developer, or a Permitted Assigns, ceases to operate a Hotel on the Site other than by reason of a Permitted Closure, with at least 4,000 square feet of available meeting space, then this Agreement shall terminate as of the date such operation is discontinued (other than by reason of a Permitted Closure) and no further payments shall be due under Section 4.1 below by reference to Transient Occupancy Tax Revenues generated in any Quarter after such date. 3. DEVELOPER'S OBLIGATIONS. 3.1 Continuous Operation; Site As Point of Sale. During the Operating Period, Developer covenants and agrees to continuously operate the Hotel at the Flagship name or better level of hotel, on the Site (subject to temporary interruptions for casualty losses, repairs, labor unrest, and the like, provided, however, that no such interruptions shall continue for more than five (5) days without City's prior written consent, which consent may be withheld in City's sole and absolute discretion during the entire Operating Period). 3.2 Use Restriction. During the entire Operating Period, the Site shall not be put to any use other than the operation of the Hotel and uses ancillary thereto, and such use shall qualify as a transient occupancy use under Chapter 3.28 of the Municipal Code. 3.3 Maintenance and Repair of Site: Landscaping. During the entire Operating Period, Developer, at its sole cost and expense, shall keep and maintain the Site and the improvements thereon and all facilities appurtenant thereto in first class condition (as judged by other developments of similar quality located in Menifee) and repair and free from accumulations of debris, weeds, graffiti, and waste materials, with landscaping in a healthy condition, and shall otherwise fully comply with the Site's maintenance standards established in the Entitlements. During such period, Developer shall not abandon any portion of the Site or leave the Site unguarded or unprotected, and shall not otherwise act or fail to act in such a way as to unreasonably increase the risk of any damage to the Site or of any other impairment of City's interest set forth in this Covenant. During the entire Operating Period, Developer, at its sole cost and expense shall maintain the landscaping on the Site in compliance with the approved landscape plans. 3.4 Failure to Maintain Site and Hotel. In the event Developer does not maintain the Site or the Hotel in the manner set forth herein and in accordance with the Maintenance Standards, City shall have the right, but not the obligation, to maintain such private and/or public improvements, or to contract for the correction of such deficiencies, in accordance with the provisions of this Section 3.4. City shall notify Developer in writing if the condition of said improvements do not meet with the Maintenance Standards and to specify the deficiencies and the actions required to be taken by Developer to cure the deficiencies. Subject to the following sentence, upon notification of any maintenance deficiency, Developer shall have thirty (30) days within which to correct, remedy or cure the deficiency. If the written notification states the 2648/031858-0001 9994442,1 a01/04/17 -6- problem is urgent relating to the public health and safety of City, then Developer shall have forty- eight (48) hours to correct, remedy, or cure the problem. In the event Developer or any person or entity acting on behalf of Developer fails to correct, remedy, or cure after notification and after the period of correction has lapsed (or, for deficiencies that cannot reasonably be corrected, remedied, or cured within such period, if Developer or any person or entity acting on behalf of Developer has not commenced correcting, remedying or curing such maintenance deficiency within such period and diligently pursued such correction, remedy or cure to completion), then City shall have the right to maintain such improvements. Developer agrees to pay City such charges and costs and if not paid within 45 days of notice to Developer, the City shall have the right to claim such outstanding amounts as an offset against any and all Covenant payments. Until so paid, City shall have a lien on the Site for the amount of such charges or costs, which lien shall be perfected by the recordation of a "Notice of Claim of Lien" against the Site. Upon recordation of a Notice of a Claim of Lien against the Site, such lien shall constitute a lien on the fee estate in and to the Site prior and superior to all other monetary liens except: (i) all taxes, bonds, assessments, and other levies which, by law, would be superior thereto; (ii) the lien or charge of any mortgage, deed of trust, or other security interest then of record made in good faith and for value, it being understood that the priority of any such lien for costs incurred to comply with this Covenant Agreement shall date from the date of the recordation of the Notice of Claim of Lien. Any lien in favor of City created or claimed hereunder is expressly made subject and subordinate to the lien of any mortgage or deed of trust made in good faith and for value, recorded as of the date of the recordation of the Notice of Claim of Lien describing such lien as aforesaid, and no such lien shall in any way defeat, invalidate, or impair the obligation or priority of any such mortgage or deed of trust, unless the mortgage or beneficiary thereunder expressly subordinates his interest, of record, to such lien. Upon foreclosure of any mortgage or deed of trust made in good faith and for value and recorded prior to the recordation of any unsatisfied Notice of Claim of Lien, the foreclosure -purchaser shall take title to the Site free of any lien imposed by City that has accrued up to the time of the foreclosure sale, and upon taking title to the Site, such foreclosure -purchaser shall only be obligated to pay costs associated with this Covenant Agreement accruing after the foreclosure -purchaser acquires title to the Site. Developer acknowledges and agrees City may also pursue any and all other remedies available in law or equity. Developer shall be liable for any and all attorneys' fees, and other legal costs or fees incurred in collecting said maintenance costs. 3.5 Continued OVeration of Hotel. During the entire Operating Period, Developer shall operate a Flagship hotel or higher level, that has at least 4,000 square feet of meeting space, which City will have preferred access to for its events at no cost to the City up to three times per year or up to 3 rental days, as well as up to two additional rental days at 50% off the rental costs per year, until the expiration of the Covenant Agreement. City will only be responsible to pay for set up/take down charges, cleaning fees, food service/catering fees as they may apply. Developer shall also use its best efforts to review and hire Hotel employees from Menifee or the local area. The hotel flagship (the "Hotel") will be a upper mid -scale hotel, limited service hotel, from the list on Exhibit C, and any change from this list shall be approved or denied prior by the Citywith sole and absolute discretion, before a franchise agreement is signed by the Developer, provided that City may reasonably object to a proposed brand. 2648/031858-0001 9994442.1 a01/04/17 -7- 3.6 Compliance with Laws. During the entire Operating Period, Developer shall construct and operate the Hotel on the Site in conformity with all applicable federal, state (including without limitation the California Civil Code, the California Government Code, the California Health & Safety Code, the California Labor Code, the California Public Resources Code, and the California Revenue & Taxation Code), and local laws, ordinances, and regulations (including without limitation City standards relating to the placement of storage containers), provided that Developer does not waive its right to challenge the validity or applicability thereof to Developer or the Site. The operation of the Hotel shall be in compliance with all of the requirements of any permits issued by City for the Hotel, including, without limitation, all of the conditions of approval issued in connection therewith. Nothing herein constitutes a representation or warranty by City that the construction of the Hotel was not a "public work" or otherwise subject to California Health and Safety Code Sections 33423 through 33426, or Chapter 1 of Part 7 of the California Labor Code (commencing with section 1720), and all applicable statutory and regulatory provisions related thereto, and Developer expressly waives any right of reimbursement for any "increased costs" under California Labor Code Section 1781 or otherwise with respect to the Hotel or Developer's development thereof. Developer shall indemnify, defend, and hold City and City's representatives, volunteers, officers, officials, members, employees, and agents harmless, including, but not limited to, litigation costs, expert witness fees, and reasonable attorneys' fees, from and against any and all claims pertaining to the payment of wages in connection with Developer's development of the Hotel on the Site or failure to comply with federal or state labor laws, regulations, or standards. 3.7 Non -Discrimination. In the development, opening, and operation of the Hotel, Developer agrees not to violate applicable laws that prohibit discrimination against any person or class of persons by reason of gender, marital status, race, color, creed, mental or physical disability, religion, age, ancestry, or national origin. 3.8 Indemnification of _City. Developer shall defend, indemnify, assume all responsibility for, and hold City, and City's representatives, volunteers, officers, employees and agents, harmless from any and all claims, demands, damages, defense costs or liability of any kind (including attorneys' fees and costs), that arise from Developer's operation of the Site or which may be caused by any acts or omissions of the Developer under this Covenant, whether such activities or performance thereof be by Developer or by anyone directly or indirectly employed or contracted with by Developer and whether such damage shall accrue or be discovered before or after termination of this Covenant including, but not limited to, Developer's failure to pay, if required, prevailing wages on the construction and development of the Developer Facility. Developer shall be solely responsible for determining and effectuating compliance with prevailing wage laws, and the City makes no representation as to the applicability or non -applicability of any of such laws to the development and construction of the Developer Facility or any part thereof. Developer hereby expressly acknowledges and agrees that City has not previously affirmatively represented to Developer or its contractor(s), in writing or otherwise, in a call for bids or otherwise, that the development or construction of an Developer Facility is not a "public work," as defined in Section 1720 of the Labor Code. 2648/031858-0001 9994442.1 a01/04/17 -8- 4. OBLIGATIONS OF CITY. 4.1 Covenant Payments to Developer. 4.1.1 Amount of Covenant Payments, Cap. In consideration for Developer's undertakings pursuant to this Covenant and the encumbrance of Developer's interest in the Site pursuant to this Covenant, City shall make the following Covenant Payments to Developer after the end of each Quarter during the Operating Period: (a) Subject to subparagraph (b) below, the Covenant Payments with respect to each Quarter shall be in an amount equal to fifty percent (50%) of the Transient Occupancy Tax for that Quarter, except that in the Quarter during which the Termination Date occurs, the Covenant Payments shall be prorated such that City shall only pay to Developer 50% of the Transient Occupancy Tax for the period between the first day of such Quarter and the Termination Date. (b) Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall the aggregate amount of Covenant Payments made by City to Developer exceed the sum of one million dollars ($1,000,000.00) and will not exceed ten years, which ever occurs first (the "Covenant Payments Cap Amount"). In this regard, it is understood and "agreed that the Covenant Payments are in consideration of Developer's performance during each Quarter of the Operating Period and are not repayments of a loan. (c) Notwithstanding any other provision set forth in this Covenant to the contrary, even in the event the Covenant Payments Cap Amount has not been reached at the end of the Operating Period, City shall have no further obligation after that time to make additional Covenant Payments. 4.1.2 Source of Payments. The Covenant Payments shall be payable only from Transient Occupancy Tax generated from the Developer's operation of the Hotel. 4.1.3 Payment Procedure. The City's Payments to Developer hereunder shall be made quarterly, during the payment period describered herein. The amount of the Payment due on each payment date shall be equal to fifty percent (50%) of the total Transient Occupacy Tax generated and received by the City during the applicable preceding each quarter period, not to exceed 10 years and not to exceed the amount in 4.1(b), as confirmed by Transient Occupancy Tax filed by the Developer. Each such payment shall be accompanied by a statement identifying (i) the amount of Transient Occupancy Tax upon which the Covenant Payment was calculated, and (ii) a cumulative total comparing how the Covenant Payment in question, together with all prior Covenant Payments, relate to the Covenant Payment Cap Amount. It is understood that the amount of City's quarter Covenant Payments to Developer shall be based upon the amount of Transient Occupancy Tax that City shall have actually received from Developer. In addition, if after any such quarter payment is made, either City or Developer obtains information that the amount of City's payment was in error, including, without limitation, by reason of Developer's overpayment of tax, the Party obtaining such information shall promptly notify the other Party and shall provide such detailed information as may be necessary to explain 2648/031858-0001 9994442.1 a01/04/17 -9- the discrepancy. The discrepancy then shall be taken into consideration by means of an adjustment to the next quarter Covenant Payment to be made by City (either by City making an additional payment in the event City has underpaid a prior Covenant Payment that is due, or by City receiving a credit against the subsequent Covenant Payment in the event City has overpaid a prior Covenant Payment); provided, however, that in the event an adjustment needs to be made in excess of Ten Thousand Dollars ($10,000), the Party entitled to said sum shall be entitled to deliver a written notice to the other Party requesting an immediate adjustment and in such event the other Party shall make an appropriate payment within thirty (30) days from receipt of said notice. 4.1.4 Books and Records. Upon the written request of either Party, the other Party shall make available for inspection (at City Hall in the event of a review of City records and at Developer's place of business in Menifee in the event of a review of Developer's records) such of its books and records as the requesting Party may reasonably determine must be reviewed in order determine whether the correct amount of Covenant Payments have been made or are being made hereunder. Notwithstanding the foregoing, City shall not be required to produce any books or records that it is prohibited from producing by law and Developer shall not be required to produce information that violates the statutorily prescribed privacy rights of individual customers. 4.1.5 No Acceleration-, Prepayment Permitted. It is acknowledged by the Parties that any payments by City provided for in this Covenant are in consideration for the performance by Developer during the time period(s) for which payments are due. Therefore, City's failure to timely make any payments or City's failure to perform any of its other obligations hereunder shall not cause the acceleration of any anticipated future Covenant Payments by City to Developer. The City shall be permitted to prepay any of the Covenant Payments at any time without penalty. 4.2 Additional Condition Precedent to City's Obligations. In addition to the provisions set forth in Section 2 of this Covenant, City's obligation to make the Covenant Payments pursuant to Section 4.1 of this Covenant for any Quarter during the Operating Period shall be contingent and conditional upon Developer's performance of its obligations set forth in Section 3 of this Covenant during such Quarter. 5. - DEFAULTS AND REMEDIES. 5.1 Defaults. (a) Subject to Force Majeure (Section 6.6), the occurrence of any of the following shall constitute a Default: (i) the failure by either Party to perform any obligation of such Party for the payment of money under this Covenant if such failure is not cured within thirty (30) calendar days after the nonperforming Party's receipt of written notice from the other Party that such obligation was not performed when due; or (ii) the failure by either Party to perform any of its obligations (other than obligations described in clause (i) of this Section 5.1) set forth in this Covenant, if such failure is not cured within thirty (30) days after the nonperforming Party's receipt of written notice from the other Party or, if such failure is of a nature that cannot reasonably be cured within 2648/031858-0001 9994442.1 a01/04/17 -10- thirty (30) days, the failure by such Party to commence such cure within thirty (30) days and thereafter diligently and continuously prosecutes such cure to completion; or (iii) any representation or warranty by a Party set forth in this Covenant proves to have been incorrect in any material respect when made; or (iv) Developer fails to meet any Development Milestone, attached hereto as Exhibit "B"; or (v) Developer changes the name, Flagship of the hotel, or lowers the level or operation standard of the hotel compared to similar such hotels, outside of Exhibit C, without the written approval from the City, the City may grant, withhold, deny payments and have absolute discreation moving forward; including termination of the agreement. (vi) Developer closes the Hotel; or (vii) the Hotel is materially damaged or destroyed by fire or other casualty during the Operating Period and Developer fails to commence restoration of the improvements within a six (6) months or thereafter fails to diligently and continuously proceed to complete such restoration in accordance with this Covenant; or (viii) Developer makes any total or partial sale, transfer, conveyance, assignment, subdivision, or lease of the whole or any part of any of the Site, the Hotel, the Agreement, and/or this Covenant Agreement without City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion, or if any voluntary or involuntary successor -in -interest of Developer acquires any rights or powers under the Agreement and/or this Covenant without City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion; or (ix) the Ownership and/or control of the Hotel changes without the prior written consent of City; provided, however, that changes to the Ownership and/or control of the Hotel may be made so long as a minimum of fifty-one percent (51 %) of the Ownership and control of the Hotel is held by SH-MENIFEE, LLC; or (ix) Developer refinances any existing construction, permanent, or other loans encumbering the Site without the City's prior written consent, which consent City may grant or withhold in its sole and absolute discretion; or (x) Developer (1) is the subject of an order for relief for a bankruptcy court, or is unable or admits its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors; (2) applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or any part of its property; or (3) institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, rehabilitation or similar proceeding relating to it or any part of its property, or any similar proceeding is instituted without the consent of Developer and continues undismissed or unstayed for ninety (90) days; or 2648/031858-0001 9994442.1 a01/04/17 -1 1- (xi) any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of Developer, and the appointment continues undischarged or unstayed for ninety (90) days; or any judgment, writ, warrant of attachment or execution, or similar process is issued or levied against the Site and is not released, vacated, or fully bonded within ninety (90) days after its issue or levy; or (xii) Developer is enjoined or otherwise prohibited by any governmental agency from occupying the Site at any time during the Operating Period and such injunction or prohibition continues unstayed for ninety (90) days or more for any reason. (b) In the event Developer fails to perform any of its obligations under this Covenant and City sends a notice of such failure to Developer, concurrently therewith City shall send a copy of such notice to any mortgagee or deed of trust holder with respect to the Site (herein the "Holder") (the name and address of which Holder shall be furnished by Developer or such Holder to City) and the Holder shall have the same period of time as is available to Developer to remedy such breach or failure under this Covenant. City shall accept any proper cure of a breach or failure tendered by the Holder. 5.2 City's Remedies Upon Default by Developer. Upon the occurrence of any Default by Developer, and after Developer's receipt of written notice of default and expiration of the time for Developer to cure such Default as provided in Section 5.1, City may at its option: (i) suspend the payment of Covenant Payments otherwise due and payable to Developer hereunder for the period that Developer remains in Default. If City has so suspended its payments in accordance with the terms of this clause (i), then upon Developer's cure of such Default, City shall resume its payment obligations, but shall have no obligation to make payments for any Quarter or portion thereof during which City's obligation to make payments was so suspended; or (ii) if the Default continues uninterrupted for a period of three (3) months, City may terminate this Covenant, in which case City's obligation to make payments to Developer for any period of time after the occurrence of the Default shall be finally terminated and discharged. In no event, however, shall City have the right (i) to specifically enforce Developer's covenants set forth in Section 3 of this Covenant, (ii) to seek damages other than by offset of future Covenant Payments otherwise due hereunder, (iii) to prevent Developer's conversion of the Site to another lawful use (even if such use would be inconsistent with this Covenant), or (iv) to sue Developer or to recover from Developer any amount that is actually or allegedly attributable to loss of anticipated Transient Occupancy Tax or other revenues, whether because the amount of Transient Occupancy Tax generated from the Site is less than projected by Developer or City, or because Developer does not operate the Hotel on the Site for the entire Operating Period, or otherwise. 5.3 Developer's Remedies Upon Default by City. Upon the occurrence of any Default by City, and after City's receipt of written notice of Default from Developer and expiration of the time for City to cure such Default as provided in Section 5.1, Developer may terminate this 2648/031858-0001 9994442.1 a01/04/17 -12- Covenant by written notice to City and/or seek whatever legal or equitable remedies may be available to Developer, subject to the provisions of Section 4.1.5 and Section 6.5. 5.4 Cumulative Remedies, No Waiver. Except as expressly provided herein, the nondefaulting Party's rights and remedies hereunder are cumulative and in addition to all rights and remedies provided by law from time to time and the exercise by the nondefaulting Party of any right or remedy shall not prejudice such Party in the exercise of any other right or remedy. None of the provisions of this Covenant shall be considered waived by either Party except when such waiver is delivered in writing. No waiver of any Default shall be implied from any omission by City to take action on account of such Default if such Default persists or is repeated. No waiver of any Default shall affect any Default other than the Default expressly waived, and any such waiver shall be operative only for the time and to the extent stated. No waiver of any provision of this Covenant shall be construed as a waiver of any subsequent breach of the same provision. A Party's consent to or approval of any act by the other Party requiring further consent or approval shall not be deemed to waive or render unnecessary the consenting Party's consent to or approval of any subsequent act. A Party's acceptance of the late performance of any obligation shall not constitute a waiver by such Party of the right to require prompt performance of all further obligations. A Party's acceptance of any performance following the sending or filing of any notice of Default shall not constitute a waiver of that Party's right to proceed with the exercise of its remedies for any unfulfilled obligations. A Party's acceptance of any partial performance shall not constitute a waiver by that Party of any rights relating to the unfulfilled portion of the applicable obligation. 5.5 Limitations on City's Liability. Developer acknowledges and agrees that: (i) this Covenant shall not be deemed or construed as creating a partnership, joint venture, or similar association between Developer and City, the relationship between Developer and City pursuant to this Covenant is and shall remain solely that of contracting Parties, that the development and operation of the Hotel is a private undertaking and is not a public work, and City neither undertakes nor assumes any responsibility pursuant to this Covenant to review, inspect, supervise, approve, or inform Developer of any matter in connection with the development or operation of the Hotel on the Site other than as expressly provided for herein, including matters relating to architects, designers, suppliers, or the materials used by any of them; and Developer shall rely entirely on its own judgment with respect to such matters; (ii) by virtue of this Agreement and/or Covenant, City shall not be directly or indirectly liable or responsible for any loss or injury of any kind to any person or property resulting from any construction on, or occupancy or use of, the Site, whether arising from: (a) any defect in any building, grading, landscaping, or other onsite or offsite improvement; (b) any act or omission of Developer or any of Developer's agents, employees, independent contractors, licensees, lessees, or invitees; or (c) any accident on the Site or any fire or other casualty or hazard thereon; and (iii) by accepting or approving anything required to be performed or given to City under this Covenant, including any certificate, survey, appraisal, or insurance policy, City shall not be deemed to have warranted or represented the sufficiency or legal effect of the same, and no such acceptance or approval shall constitute a warranty or representation by City to anyone. 6. GENERAL PROVISIONS. 2648/031858-0001 9994442.1 a01/04/17 -13- 6.1 Integration and Amendment. This Covenant and the Agreement constitute the entire agreement by and between the Parties pertaining to the subject matter hereof, and supersede all prior agreements and understandings of the Parties with respect thereto. This Covenant may not be modified, amended, supplemented, or otherwise changed except by a writing executed by both Parties. 6.2 Captions. Section headings used in this Covenant are for convenience of reference only and shall not affect the construction of any provisions of this Covenant. 6.3 Binding Effect; Successors and Assigns, Assignments. This Covenant shall run with the land and shall be binding upon and inure to the benefit of, the Parties and their respective successors and assigns, as limited by this Section 6.3. Except as such assignment relates to Holder, the Developer shall not assign, hypothecate, encumber or otherwise transfer, either voluntarily, involuntarily or by operation of law, its rights or obligations as set forth in this Covenant without first obtaining the City's written consent, which may be given or denied or conditioned in the City's sole and absolute discretion. Developer may assign its right to receive the Covenant Payments to any Holder for security purposes or to any lessee or business owning and operating the Hotel on the Site. In the event of an assignment for security purposes to a Holder, City agrees that this Covenant be subordinated to the lien of said Holder's deed of trust or mortgage and City agrees to cooperate with Developer in executing an appropriate subordination agreement. In the event of any assignment that is consented to in writing by the City, the references in this Covenant to "Developer" shall be deemed to refer to the assignee. 6.4 Counterparts. This Covenant may be executed in two or more counterparts, each of which when so executed and delivered shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. 6.5 Governin Law. This Covenant shall be governed by and construed in accordance with the internal laws of the State of California without regard to conflict of law principles. 6.6 Force Maieure. Notwithstanding any other provision set forth in this Covenant to the contrary, in no event shall a Party be deemed to be in Default of its obligations set forth herein where delays or failures to perform are caused by circumstances without the fault and beyond the reasonable control of such Party, which circumstances shall include, without limitation, fire/casualty losses; strikes; litigation; unusually severe weather; inability to secure necessary labor, materials, or tools; delays of any contractor, subcontractor, or supplier; unjustified acts or failure to act by City or other governmental agency in the processing or approval of plans or permits or inspection or approval of the construction of the Developer Facility project; litigation by third Parties challenging the validity or enforceability of the Agreement or this Covenant or the Entitlements; and acts of God (collectively, "force majeure"). Adverse market conditions or Developer's inability to obtain financing or approval to operate the Developer Facility shall not constitute events of force majeure. In the event of an event of force majeure, the Party so delayed shall notify the other Party of the circumstances and cause of the delay within a reasonable time period after commencement of the delay, it shall keep the other Party informed at reasonable intervals upon request regarding the status of its efforts to overcome said delay, and it shall exercise commercially reasonable diligence to perform as soon as practicable thereafter. 2648/031858-0001 9994442.1 a01/04/17 -14- 6.7 Notices. Notices to be given by City or Developer hereunder may be delivered personally or may be delivered by certified mail or by reputable overnight delivery service providing a delivery conformation receipt, with mailed notices to be addressed to the appropriate address(es) hereinafter set forth or to such other address(es) that a Party may hereafter designate by written notice. If served by overnight delivery service or certified mail, service will be considered completed and binding on the Party served on the date set forth in the confirmation or certification receipt. If notice is to City: City Manager City of Menifee 29714 Haun Road Menifee, California 92586 with a copy to: City Attorney City of Menifee 29714 Haun Road Menifee, California 92586 Attention: Jeffrey T. Melching, City Attorney If notice is to Developer: SH-MENIFEE, LLC Attention: Hiral Patel 1030 S. Summer Breeze Ln Anaheim, CA 92808 6.8 Further Acts. Each Party agrees to take such further actions and to execute such other documents as may be reasonable and necessary in the performance of its obligations hereunder; reserving to City, however, its lawful discretionary and police power authority. Without limiting the generality of the foregoing, upon the expiration or termination of the Operating Period, City will execute and deliver such instruments as may be prepared by Developer at Developer's expense to release the cloud upon title to the Site created by this Covenant; provided, however, that any such document shall be in a form reasonably acceptable to the City Attorney of City. 6.9 Third Party Beneficiaries. With the exception of the specific provisions set forth in this Covenant for the benefit of Holder, there are no intended third party beneficiaries under this Covenant and no such other third parties shall have any rights or obligations hereunder. 6.10 Attorney's Fees. The prevailing party shall be entitled to recover its reasonable attorney's fees and costs in connection with any breach or default by the other party under this Agreement. [End — Signature page follows] 2648/031858-0001 9994442.1 a01/04/17 -15- IN WITNESS WHEREOF, the Parties have executed this Covenant to be effective as of the Effective Date. M A. Manwaring, City APPROVED AS TO RUT ;-e UCKER, LLP J y thing, Cit Att rney CITY: CITY OF MENIFEE, a California municipal corpo at n Nk I R. Winter, Mayor DEVELOPER: SH-MENIFEE, LLC a Vi6mr,. L-�&%rto, 01 .. By: Its: 2648/031858-0001 9994442.1 a01/04/17 -16- EXHIBIT A Le&al Description of Site THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF MENIFEE, IN THE COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS: PARCELS 18 AND 19 OF PARCEL MAP NO. 36299-1, IN THE CITY OF MENIFEE, COUNTY OF RIVERSIDE, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 238, PAGES 88 THROUGH 93_ INCLUSIVE OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, APRIL 28, 2015. APNS: 360-080-082 AND 360-080-083 2648/031858-0001 9994442.1 a01/04/17 EXHIBIT B DEVELOPMENT MILESTONES ACTION ITEM TIMING 1 Developer shall submit a Signed Letter of Submitted within 90 days of the Effective Date Intent between Developer and Hotel brand of the Agreement. to the City, and the City shall approve or deny the Hotel brand within fifteen (15) days of receiving the Signed Letter of Intent. City's approval will not be unreasonably withheld, conditioned or delayed; provided that City may reasonably object to a proposed brand. 2 If the Hotel is to be operated by a Hotel Before commencement of construction, within brand, a Signed Hotel Franchise and/or 120 days of the Effective Date of the Management Agreement between Agreement.. Developer and Hotel brand and/or Management Company shall be sent to the City by start of construction. 3 Developer shall submit to City a complete Submitted to the City within 180 days of the development application for the Hotel, Effective Date of the Agreement.. including conceptual plans, materials board, and all items required by the application. 4 The City shall turn around comments on all With concurrent processing, the total processing Plan Check within 3 (three) weeks or 15 time is expected to be 6 months to obtain working days for submittals. The Planning Commission approval, and in a good Developer will turn around Plan Check faith effort it shall be no longer than 9 months revisions or comments within 3 weeks or to obtain full plan approval including all plans sooner to guarantee project stays on track. and construction documents necessary to begin grading and construction of the Hotel; overall being completed by 441 days of the Effective Date of the A eement. 5 Start of grading for Hotel Within 60 days from grading permit issuance. 6 Start of construction of the Hotel Within 1 month of full city approved building permit issuance; no later than 500 days of the Effective Date of the Agreement. 7 Completion of Developer Improvements. Shall be completed within fifteen months (15) following commencement of construction. 8 Hotel opens for business (Certificate of Within fifteen (15) months of start of Occupancy or Temporary Certificate of construction; no later than 956 days of the Occupancy issued). Effective Date of the Agreement.. 2648/031858-0001 9994442.1 a01/04/17 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. EXHIBIT C Flagship Hotels Fairfield Inn & Suites — Marriott Hampton Inn & Suites — Hilton Tru by Hilton — Hilton Springhill Suites - Marriott Hilton Garden Inn — Hilton Residence Inn - Marriott Home2Suites — Hilton Homewood Suites - Hilton Courtyard - Marriott Aloft- Marriott Doubletree Club — Hilton Wyndham Garden — Wyndham Hyatt Place — Hyatt Four Points - Sheraton 2648/031858-0001 9994442.1 a01/04/17 -2-