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SPORTSPLEX USAEIGHTH AMENDMENT TO LEASE AGREEMENT THIS EIGHTH AMENDMENT TO LEASE AGREEMENT ("Eighth Amendment") is made and entered into effective this 9th day of June 2020 ("Amendment Effective Date") by and between the City of Poway, a municipal corporation ("City"), and SPORTSPLEX, USA, Inc., an Illinois Corporation ("SPORTSPLEX"), collectively referred to herein as the "Parties." In consideration of the mutual covenants contained herein, City and Sportsplex hereby agree to amend the South Poway Sports Park Lease Agreement dated November 11, 1992 ("Lease") as set forth below. RECITALS WHEREAS, the City owns the property located at 12349 Mclvers Court, Poway, California, which is known as the South Poway Sports Park (the "Premises"); WHEREAS, in November 1992, the City entered into the original Lease Agreement (the "Lease") for the Premises with Sportsparks/Kajima; WHEREAS, in December 1993, the City entered into an amendment to the Agreement with the original Lessee's assignor, Sportsparks of California (the "First Amendment"); WHEREAS, in July 1996, the City and Sportsparks of California entered into a second amendment to the Agreement (the "Second Amendment"), which extended the term of the Agreement until December 31, 1998, and modified the rent; WHEREAS, in December 1996, the City consented to the assignment of the lease to Sportsplex, and entered into a third amendment to the Agreement with Sportsplex in October 1997 (the "Third Amendment") whereby the term of the Agreement was extended until December 31, 2006, and the rent was modified; WHEREAS, in September 2002, the City and Sportsplex entered into a fourth amendment to the Agreement (the "Fourth Amendment"), whereby the term was extended until December 31, 2016, and the rent was modified; WHEREAS, in September 2007, the City and Sportsplex entered into a fifth amendment to the Agreement (the "Fifth Amendment"), which modified the description of the Premises covered by the Agreement, and extended the term of the Agreement until December 31, 2023; and WHEREAS, in December 2009, the City and Sportsplex entered into a sixth amendment to the Agreement (the "Sixth Amendment"), by which Sportsplex assumed additional landscape maintenance responsibilities for the Premises in exchange for a reduced rent payment; WHEREAS, in October 2011, the City and Sportsplex entered into a seventh amendment to the Agreement (the "Seventh Amendment"), by which the City agreed to reduce rent in exchange for the completion of certain improvements; WHEREAS, in March 2020, the Sportsplex facility temporarily closed in light of the ongoing COVID-19 pandemic, and in May 2020, Sportsplex reached out to the City requesting renegotiation of the lease; WHEREAS, on May 30, 2020, the owner of Sportsplex during the entirety of the Lease, William Berghoff, executed a Stock Sale and Purchase Agreement with Sean Melvin, the longtime manager of Sportsplex's operations at the Premises, whereby 100% of stock in Sportsplex was sold 1 from Mr. Berghoff to Mr. Melvin, contingent on City approval; WHEREAS, the Parties agree that the Stock Sale and Purchase Agreement must be approved by the City pursuant to Section II(H) of the Lease; WHEREAS, based on evidence provided that the Premises will continue to be operated to the satisfaction of the City, the City desires to approve the Stock Sale and Purchase Agreement; and WHEREAS, for good and adequate consideration, the Parties desire to amend certain provisions of the Lease to allow continued operation of the Premises by Sportsplex following the ongoing COVID-19 pandemic. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: Section 1. Defined Terms. All capitalized terms used herein shall have the same meaning as in the Lease, unless specifically defined in this Eighth Amendment. The term Lease, as used herein, shall mean the Lease as amended by the seven amendments described in the foregoing Recitals. Section 2. Consent to Assignment. The City hereby approves and consents to the Stock Sale and Purchase Agreement, pursuant to Section II(H) of the Lease, and confirms that Sportsplex, as now owned by Sean Melvin, is the Lessee under the Lease. This approval and consent is given on the condition and based on express representation by Sportsplex that previous ownership of Sportsplex, specifically including but not limited to William Berghoff and Paul Berghoff, has no ownership, financial, or any other interest in Sportsplex or the Premises, except as set expressly forth in the Stock Sale and Purchase Agreement. If the City discovers that this foregoing representation is not accurate, the Parties agree that the City shall have the right to immediately terminate the Lease. Section 3. Suspension of Rent. In light of the ongoing COVID-19 pandemic and the resulting closure of Sportsplex's operation on the Premises, the City agrees that Sportsplex's obligation to pay Rent under Section (I)C of the Lease, as amended, is hereby temporarily waived as of the Amendment Effective Date until Sportsplex's operation at the Premises has been reopened for two calendar months, after which time, Sportsplex's obligation to pay all Rent (including both the Minimum Rent and Annual Percentage Rent) shall recommence, without obligation to pay Rent for months during which Sportsplex's operation was closed as a result of the COVID-19 pandemic. By way of example, if Sportsplex's operation at the Premises reopens on July 15, 2020, Sportsplex's Rent obligations shall recommence effective September 1, 2020. Section 4. Utilities. The Parties hereby acknowledge and agree that Section II(G)(1) of the Lease obligates Sportsplex to pay all charges for water and sewer services at the Premises, and the First Amendment obligates the City to pay for water costs incurred for all turf, groundcover, trees, and shrubs. Consistent with the foregoing provisions, the Premises' two water meters that measure indoor water use shall be placed in Sportsplex's name, and commencing on the Amendment Effective Date, Sportsplex shall be invoiced by the City on a bi-monthly basis for all water and sewer charges related thereto, in the same manner on all other water and sewer customers in the City. The Premises' other two water meters, which measure outdoor water use, shall remain in the City's name, and the City shall be responsible for paying all water charges related thereto. Due to the fact that sewer service relates only to indoor water use, Sportsplex is responsible for paying all sewer charges for the Premises. 2 Section 5. Accounting of Gross Receipts/Expenses. Sportsplex hereby agrees to provide the City with monthly financial statements, as described in Section I(C)(3) of the Lease, on the first of each calendar month following the Amendment Effective Date. Section 6. Section 11 of the Lease is hereby amended to add Section 11(1), as follows: 1. Priorities for Expenditure of Revenue Lessee agrees to use its revenue and other funds to pay its expenses relating to its operation on the Premise in the following order: 1. Employee Payroll 2. Insurance 3. City of Poway 4. Utilities 5. Food and Beverage Vendors 6. IT/Computer Services 7. Stock Sale and Purchase Agreement 8. Accounting 9. Misc. Expenses Section 7. Except as otherwise amended by this Eighth Amendment, all other terms and conditions of the Lease and amendments thereto shall remain in full force and effect. [Signatures on Following Page] 3 IN WITNESS WHEREOF, the parties hereto have caused this Eighth Amendment to be executed the day and year first above written. CITY OF POWAY By Chris Hazeltine, City Manager ATTEST: Faviola Medina, City Clerk J APPROVED AS TO FORM: alis4 Alan Fenstermacher, City Attorney SPORTSPLEX By Sears ( Fvin, President 4 South Poway Sports Park Lease Agreement Amendment No. 7 THIS LEASE AGREEMENT AMENDMENT (the "Amendment") is entered into this 4 th day of October, 2011 by and between the CITY OF POWAY, a municipal corporation ( "City") and SPORTSPLEX, USA ( "Sportsplex "), an Illinois corporation. In consideration of the mutual covenants contained herein, City and Sportsplex hereby agree to amend the South Poway Sports Park Lease Agreement dated November 11, 1992 as follows. WHEREAS, the City owns the property located at 12349 Mclvers Court, Poway California, that is known as the South Poway Sports Park (the "Premises "); and WHEREAS, in November 1992, the City entered into the original Lease Agreement (the "Agreement") for the Premises with Sportsparks /Kajima; and WHEREAS, in December 1993, the City entered into an amendment to the Agreement with the original Lessee's assignor, Sportsparks of California (the "First Amendment"); and WHEREAS, in July 1996, the City and Sportsparks of California entered into a second amendment to the Agreement (the "Second Amendment"), which extended the term of the Agreement until December 31, 1998, and modified the rent; and WHEREAS, in December 1996, the City consented to the assignment of the lease to Sportsplex, and entered into a third amendment to the Agreement with Sportsplex in October 1997 (the "Third Amendment ") whereby the term of the Agreement was extended until December 31, 2006, and the rent was modified; and WHEREAS, in September 2002, the City and Sportsplex entered into a fourth amendment to the Agreement (the "Fourth Amendment"), whereby the term was extended until December 31, 2016, and the rent was modified; and WHEREAS, in September 2007, the City and Sportsplex entered into a fifth amendment to the Agreement (the "Fifth Amendment"), which modified the description of the Premises covered by the Agreement, and extended the term of the Agreement until December 31, 2023; and WHEREAS, in December 2009, the City and Sportsplex entered into a sixth amendment to the Agreement (the "Sixth Amendment "), by which Sportsplex assumed additional landscape maintenance responsibilities for -the Premises in exchange for a reduced rent payment; and WHERAS the parties wish to amend the agreement by lowering the rent for eight years to amortize the cost of specific improvements to the Premises funded by Sportsplex. NOW, THEREFORE, the parties amend the Agreement as follows: 1. Section C. Rent is modified by adding clause 11, to read as follows: C. Rent 11. Rent Reduction for Facility Improvements Effective January 1, 2012, the City will credit the Minimum Monthly Rent due from Sportsplex by an amount of $600 per month for a term of eight years, until December 31, 2019. Such rent reduction is subject to the completion of the following improvements to the City's satisfaction prior to December 31, 2011: a. Batting Cage Improvements; b. Purchase of Portable Homerun Fences; c. Purchase of Portable Pitching Mounds; d. Installation of new Dugout Roofs; e. Completion of the Sports Pub Remodel; and f. Installation of Restroom Hand dryers. Sportsplex will provide the City with receipts for these improvements. The total cost of these improvements is estimated to be $57,975. If the total cost varies from this estimate, or should any of these improvements not be completed to the City's satisfaction, the rent reduction will be adjusted accordingly, more or less, by the City. 2. Except as otherwise modified by this Seventh Amendment, by the Sixth Amendment, by the Fifth Amendment, by the Fourth Amendment, by the Third Amendment, by the Second Amendment, and the by First Amendment, the Agreement, and each and every term contained therein, shall remain in full force and effect. [Signatures on Following Page] t } IN WITNESS WHEREOF, the Parties have caused this Amendment to be signed and executed the day and year first above written. City of Poway By. �enny C" Manager �, APPROVED AS TO FORM: By: M rga Fo[ City Attorney Sportsplex, USA � I l- 7v-.jdj, South Poway Sports Park A endment No. 6 to Lease Agreeme This Lease Amendment is entered into this 15th day of December, 2009 by and between the CITY OF POWAY ( "City ") and SPORT.SPLEX, USA ( "Sportsplex "), an Illinois corporation. In consideration of the mutual covenants contained herein, City and Sportsplex hereby agree to amend the South Poway Sports Park Lease Agreement dated November 11, 1992 as follows. WHEREAS, the City owns the property located at 12349 Mclvers Court, Poway, California, that is known as the South Poway Sports Park ( "Premises "); , and WHEREAS, in November 1992, the City entered into the original Lease Agreement ( "Agreement ") for the Premises with Sportsparks/Kajima; and WHEREAS, in .December 1993, the City entered into an amendment to the Agreement with the original Lessee's assignor, Sportsparks of California; and WHEREAS, in July 1996, the City and Sportsparks of California entered into a second amendment to the Agreement, which extended the term of the Agreement until December 31, 1998, and modified the rent; and WHEREAS, in December 1996, the City consented to the assignment of the lease to Sportsplex, and entered into a third amendment to the Agreement with Sportsplex in October '1997, whereby the term of the Agreement was extended until December 31, 2006, and the rent was modified; and WHEREAS, in September 2002, the City and Sportsplex entered into a fourth amendment to, the Agreement, whereby the term was extended until December 31, 2016, and the rent was modified; and WHEREAS, in September 2007, the City and Sportsplex entered into a fifth amendment to the Agreement, which modified the description of the Premises covered by the Agreement, and extended the term of the Agreement until December 31, 2023. WHEREAS, the parties wish to modify: the Agreemenfto clarifythe parties' respective maintenance responsibilities, and to allow Sportsplex to assume additional landscape maintenance responsibilities for the Premises, in exchange for a reduced rent payment. - c South Poway Spor�rk Amendment No. 6 ase Agreement Page 2 0 NOW, THEREFORE, the parties amend the Agreement as follows: 1. Section C(10) is modified by adding the following language C. Rent 10. Citv Pavment for Landscaoe Facilities Effective January 1, 2010, the City will credit the Minimum Monthly Rent due from Sportsplex by an amount of $1,100 per month for the term of the Agreement, as consideration for landscape maintenance in all turf areas, slopes, and parking lot areas of the Premises, inside and outside of the fence, which were previously maintained by the City_ The landscape „maintenance- required. by '- this provision shall include maintenance to irrigation systems but does not :include maintenance or repair of water system infrastructure, which is the responsibility of the City. All landscape maintenance required by this provision shall be performed according to the standards set forth in the Maintenance Guidelines attached to the original Agreement. The maintenance required by this section shall not include the inspection, maintenance and repairs of playground areas, and the trimming of eucalyptus trees outside the fence, which shall be the responsibility of the City. 2. These provisions contained in this Sixth Amendment shall supersede all conflicting provisions in the original Agreement, and First through Fifth Amendments to the Agreement. All other terms and conditions in the original Agreement and First through Fifth Amendments to the Agreement remain in full force and effect. IN WITNESS WHEREOF, the Parties have caused this Amendment to be signed and executed the day and year first above written. City of 'Poway Sportsplex, USA - r� t wj Rod Gould Bill Berghoff City Manager President APPROVED AS TO FORM: By: O L- c o A Lisa A. Foster City Attorney 0 South Poway Sports Park Amendment No. 5 to Lease Agreement This Lease Amendment is entered into this 11 t h day of September , 2007 by and between the City of Poway ("City") and Sportsplex USA, Inc. an Illinois corporation ( "Lessee "). In consideration of the mutual covenants contained herein, City and Lessee hereby agree to amend the South Poway Sports Park Lease Agreement by and between City and Lessee's assignor dated November 11, 1992, Lessee's interest in which was assigned to Lessee by Assignment of Lessee's interest in Lease dated August 31, 1993 and consented to by City on December 6, 1993. The sections specified are amended as follows: I(A) Lease of Premises. A new third paragraph is added to Section I(A), as follows: "Excluded from the scope of this Lease is the vacant property known as the "Upper Pad ", located at the comer of Crosthwaite Circle and Stowe Drive, as delineated on Exhibit A. The Upper Pad is City property and cannot be altered or used for any purpose by the Lessee without prior written permission of the City." I(B) Term. Section I(B) is amended to read as follows: 1. Initial Term. The term of the Lease Agreement shall be revised to approximately thirty years commencing January 14, 1994 and ending December 31, 2023. If the Lessee fails to convert the in -line hockey rink at the South Poway Sports Park to a multi -use sports rink, to the satisfaction of the City Manager or designee, within 12 months of the date of this Amendment No. 5, the Lease term reverts to a term of twenty - three years commencing January 14, 1994 and ending December 31, 2016. All other provisions of the Lease and Amendment Nos. 1 through 4 shall remain in full force and effect. 0 0 IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement Amendment to be duly executed on the respective dates set forth opposite their signatures. Dated: September 11 , . 2007 Dated: 107 CITY OF POWAY By: Rod Gould, City Manager SPORTSPLEX USA B 'VL Bill Berghoff, President • L Exhibit A 'ld9 *p THE 2002 ANNUAL xMING OF BOARD OF DIRECTORS OF SVORTSPLEX USA The annual meeting of the Board of Directors of. SpoMlex USA Inc., a Corporation organized under the laws of the State of nuwi% wad hold in Glenview, on December 20, 2002, at the hour of 1 O:OOAM. I The following Dimctom- constituting a quorum were presoat: P&W Berglwff President i William Berooff S%Mtaty/Treesurer i lion, Paul Berghoff, ca the meeting o order and 1 t The President of the Corpora ' William 13erglwff, the Secretary' of the corporation, prided as Chshman thwe� j acted as Secretary of the meeting and kept the minutes thereof. I The preliminary Year end results were discussed and amongst other l33ue3 it Was de cidod that year end profit sharing would be delayed until the final financial results were in. The final f meneing for the con version of the basketball courts to an arena soccer rink were decided and it was ymanimously approved to move forward With the cw mt Plan• William Berghoff [,astly, Paul Berghoff'decided to resign as )siderttiof d�D 31, 2002. _ was uaauimously approved to take ova P� becama the sole shareholder of 3portsplox USA by Also at thed time William 8elBhoff � F acquiring Paul Bwghoft"s shares. t 9r2 I i Tltm being too pather budissyss to oomc before the nseehng, on motion duly ' was adjourned. made, seconded and caMed, flue moo i ► Dected: 1 a► duo � QI/lUl�it Ber ahO�P i /31W6t: � ► Paul Berooff prudent i I 2 of 1 • f CI= T Y`.OF_POWAY DOCUMENT South Poway Sports Park Amendment No. 4 to Lease Agreement This Lease Amendment is entered into this 17th day of September , 2002 by and between the City of Poway ( "City ") and Sportsplex USA, Inc. an Illinois corporation ( "Lessee "). In consideration of the mutual covenants contained herein, City and Lessee hereby agree to amend the South Poway Sports Park Lease Agreement by and between City and Lessee's assignor dated November 11, 1992, Lessee's interest in which was assigned to Lessee by Assignment of Lessee's interest in Lease dated August 31, 1993 and consented to by City on December 6, 1993. The sections specified are amended as follows: B. Term 1. Initial Term. The term of the Lease Agreement shall be revised to approximately twenty -three years commencing January 14, 1994 and ending December 31, 2016. If the Lessee fails to convert the basketball courts at the South Poway Sports Park to a multi -use sports rink, to the satisfaction of the City Manager or designee, within 12 months of the date of this Amendment No. 4, the Lease term reverts to an initial term of thirteen years commencing January 14, 1994 and ending December 31, 2006. , C. Rent 1. Minimum Monthly Rent Lessee shall pay City monthly, within ten (10) days of month -end, without deduction, offset, prior notice or demand, a Minimum Monthly Rent of the South Poway Sports Park. The Minimum Monthly Rent shall be $4,000. 2. Annual Percentage Rent In addition to the Minimum Monthly Rent, Lessee shall pay City an Annual Percentage Rent, which shall be due and payable by March 1 of each year, for the prior calendar year: a. Lease Years 2002 through December 31, 2008 The Annual Percentage Rent shall be seven percent (7 %) of total annual gross revenues, less the total Minimum Monthly Rent paid to City for that calendar year. b. Lease Years 2009 through December 31, 2018 (including two extension periods): The Annual Percentage Rent shall be eight percent (8 %) of total annual gross revenues, less the total Minimum Monthly Rent paid to City for that calendar year. South Poway Sports F -ark Amendment No. 4 to Lease Agreement Page 2 C. Annual Gross Revenue Exceeding $2,500,000 In the event total annual gross revenues exceed $2,500,000 during the term of this Lease or any extension period, Lessee will pay the Minimum Monthly Rent, the applicable Annual Percentage Rent for revenues up to $2,500,000, and Annual Percentage Rent of ten percent (10 %) of total annual gross revenues above $2,500,000. All other provisions of the Lease and Amendment Nos. 1 through 3 shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement Amendment- to be duly executed on the respective dates set forth opposite their signatures. Dated: l iq D2 CITY OF POWAY 0 Jame-8. L. Bowersox, City Manager Dated: _i 2 6 (DZ- SPORTSPLEX USA As South Poway Sports Park Amendment No. 3 to Lease Agreement This Lease Amendment is entered into this 7th day of October 1997, by and between the City of Poway ( "City ") and Sportsplex USA, Inc., an Illinois corporation (Lessee "). In consideration of the mutual covenants contained herein, City and Lessee hereby agree to amend the South Poway Sports Park Lease Agreement by and between City and Lessee's assignor dated November 11, 1992; Lessee's interest in which was assigned to Lessee by Assignment of Lessee's interest in Lease dated August 31, 1993 and consented.to by City on December 6, 1993. The City also hereby acknowledges the change in the Lessee's corporate identity from Sportsparks of California to Sportsplex USA. The sections specified are amended as follows: I. Conveyance of Premises Delete Section B(1) and B(2) and replace with the following: B. Term 1 . . Initial-Term. The Term of the Lease Agreement shall be revised to approximately thirteen (13) years commencing January 14, 1994 and ending December 31, 2006. If the Lessee fails to convert the volleyball courts at the South Poway Sports Park at an estimated cost of $200,000 within 12 months of the date of this Amendment No. 3, the Lease term reverts to an initial term of five years commencing January 14, 1994 and ending December 31, 1998. 2. Re.new.al Options.. At the end of the Initial Term of this Agreement, the Lessee has the option to renew this Agreement for two additional and successive one - year periods, provided that Lessee is not in default hereof as of the date of the exercise of the option and as of the expiration of the current term. These options may be exercised by providing written notice to the City at least one hundred eighty (180) days prior to the expiration of the term or renewal period of this Agreement. Any and all options provided hereunder shall be subject to the approval of the City Council. Said approval shall not be unreasonably withheld. J.. Add the following to Section C(2): C. Rent 2. An nual-P_er_centage_Rent e. The Lessee will pay additional percentage rent of total annual gross revenues which are above the following amounts in the following lease years: Lea se_Y_ear Amount P_er_centage Rent 2001 $1,150,000 20% 2002 $1,200,000 20% 2003 $1,250,000 20% 2004 $1,300,000 20% 2005 $1,350,000 20% 2006 $1,400,000 20% 2007 $1,450,000 20% 2008 $1,500,000 20% IN WITNESS WHEREOF, the parties hereto have caused this Lease Agreement to be duly executed on the respective dates set forth opposite their signatures. CITY OF POWAY Dated: _( 0� 6 , 1997 Dated: 042 l5 , 1997 James . Bowersox, City Manager SPORTSPLEX USA By V�'� . &J Y• Paul Berghoff, President Sportsplex USA SOUTH POWAY SPORTS PARK AMENDMENT NO. 2 TO (LEASE AGREEMENT This Lease Amendment Is entered Into this -3o day o 996 by and between the City of Poway ( "City") and Sportsparks of California, a California General Partnership, ( "Lessee "). In consideration of the mutual covenants contained herein, City and Lessee hereby agree to amend the South Poway Sports Park Lease Agreement by and between City and Lessee's assignor dated November 11, 1992, Lessee's interest in which was assigned to Lessee by Assignment of Lessee's Interest in Lease dated August 31, 1993 and consented to by City on December 6, 1993. The sections specified are amended as follows: I. CONVEYANCE OF PREMISES Delete Section B(l)and B(2) and replace with the following: B. Term 1. Initial Term The Term'of the lease agreement shall be revised to approximately five (5) years commencing January 1 4, 1994 and ending 'December 31, 1998 2. Renewal Options At the end of the Initial Term of this Agreement, the Lessee has the option to renew this Agreement for two additional and successive one - year periods, provided that Lessee is not in default hereof as of the date of the exercise of the option and as of the expiration of the current term. These options may be exercised by providing written notice to the City at least one hundred and eighty (180) days prior to the expiration of the term or renewal period of this Agreement. Any and all options provided hereunder shall be subject to the approval of the City Council. Said approval shall not be unreasonably withheld. C. RENT Delete Sections 1 and 2, in their entirety, and the first paragraph of Section 10. Replace with the following Sections 1, 2a -d,10 and add Section 14. 1. Minimum Monthly Rent Lessee shall pay City monthly, within ten (10) days of month -end, without deduction, offset, prior notice or demand, a Minimum Monthly Rent of the South Poway Sports Park. The Minimum .Monthly Rent shall be $5,000. Lease Amendment 2 South Poway Sports Park Page 2 • 2. Annual Percentage Rent In addition to the Monthly Minimum Rent, Lessee shall pay City an Annual Percentage Rent (which shall be due and payable within 60 days of the close of the calendar year) which is to be calculated as follows: a. The Lessee will pay a percentage rent of 8% of total annual gross revenues between $750,001 and $800,000. b. The Lessee will pay a percentage rent of 9% of that portion of total annual gross revenues between $800,001 and $850,000. C. The Lessee will pay a percentage rent of 9.5% of that portion of total annual gross revenues between $850,001 and $900,000. d. The Lessee will pay a percentage rent of 10% of total annual gross revenues which are above $900,001. 10. City Payment for Landscape Facilities The City will credit the Monthly Minimum Rent due from Lessee by an amount of $2,500 per month for the term of the agreement as consideration for maintenance of all ballfield turf and related irrigation systems in a manner consistent with the Maintenance Guidelines. If it is determined that the requirements of the Maintenance Guidelines have not been met, the aforementioned credit will be withheld. 14. Notwithstanding the foregoing, the City accepts payments in the amount of $77,502 as compensation for past rent due in calendar year 1995. The City waives any breach relating to rent payments which may have occurred prior to the date of Amendment No. 2. Lease Amendment 2 South Poway Sports Park Page 3 II. OPERATION AND MAINTENANCE OF PREMISES; ASSIGNMENT OF LEASE H. Assignments and Subleases Add the following to the last paragraph of Section H(1): Notwithstanding the foregoing, the City accepts the current composition of the Lessee partnership and waives any breach which may have occurred prior to the date of Amendment No. 2 as the result of change in that composition. IN WITNESS WHEREOF, the parties hereto have caused this Lease Amendment to be duly executed on the respective dates set forth opposite their signatures. CITY OF POWAY Dated: 30 , 1996 By: M034&�o Ja es L. Bowersox i Manager SPORTSPARK OF CALIFORNIA Dated: RJ , 1996 By: V%& Paul Berghoff, Aresid hf Sportspark of California c: \data \wpfiles \tory\sprtprk SOUTH POWAY SPORTS PARK AMENDMENT NO. 1 TO LEASE AGREEMENT This Lease Amendment is entered into this 6th day of December, 1993, by and between the City of Poway (hereinafter referred to as °City°) and Sportsparks of California, a California General Partnership, (hereinafter referred to as "Lessee"). In consideration of the mutual covenants contained herein, City and Lessee hereby agree to amend the South Poway Sports Park Lease Agreement by and between City and Lessee's assignor dated November 11, 1992, Lessee's interest in which was assigned to Lessee by Assignment of Lessee's Interest in Lease dated August 31, 1993 and consented to by City on December 6, 1993. The sections specified are amended as follows: I. CONVEYANCE OF PREMISES B. Term 1. Initial Term. The term of the lease agreement shall be ten (10) years commencing on January 14. 1994 (hereinafter the "Commencement Date "). C. Rent 10. City Payment for Landscape Facilities. The City will credit the Annual Minimum Rent due from Lessee by an amount of $2,500 per month as consideration for maintenance of the following facilities, provided that the facilities are maintained by Lessee in accordance with the Maintenance Guidelines. 1. All ballfield turf and related irrigation systems. During the First Lease Year, when no Annual Minimum Rent is paid, the City will pay $2,500.00 per month directly to the Lessee upon determination by City that the facilities have been maintained in accordance with the Maintenance Guidelines, but no later than the 15th of each month, unless City has notified Lessee that Lessee has not maintained the facilities in accordance with the Maintenance Guidelines. The City's obligation to make such payments shall commence with the first calendar month following issuance of City's notice of final completion of all improvements, including conclusion of construction contractors landscape maintenance establishment period. The City will contract separately for maintenance of all ground cover, trees, shrubs, and related irrigation systems and will be responsible for water costs for all turf, groundcover, trees, and shrubs consistent with the Maintenance Guidelines. II. OPERATION AND MAINTENANCE OF PREMISES; ASSIGNMENT OF LEASE H. Assignments and Subleases 1. Lessee shall not voluntarily or by operation of law assign, transfer, .mortgage, sublet or otherwise transfer or encumber all or any part of its interest in the Lease or the Premises without City's prior written consent, which consent shall not be unreasonably withheld. If Lessee desires to assign or sublet all or any part of its interest in this Lease, Lessee shall submit in writing to City 1) the name�of the proposed sublessee or assignee; 2) the nature of the proposed sublessee's or assignee's business and experience with same; 3) the proposed sublease or assignment; and 4) such financial and other information as City may reasonably request concerning the proposed sublessee or assignee. If and only if City determines in its reasonable discretion that the proposed sublessee or assignee has suitable financial strength, experience and character for operation and control of the Premises will City agree to grant consent to such proposed sublease or assignment. Simultaneously with an assignment, the assignee shall execute an agreement among assignee, Lessee and City, assuming all of Lessee's obligations under this Lease which arise after the date.of such assignment (the "Assumption Agreement "). If City accepts such assignment and approves the Assumption Agreement, Lessee shall remain fully obligated under this Lease for only those obligations (including, without limitation, accrued amounts due City) arising prior to the date of such assignment, unless released in writing by City. City shall not be required to release Lessee from its obligations under this Lease upon the assignment thereof by Lessee. As used throughout this Lease, the term "Lessee" shall also include any permitted sublessee or assignee or Lessee. The consent of City given pursuant to the terms hereof shall not act as a waiver of the requirement that such consent be obtained to any subsequent sublease or assignment. Nothing contained herein shall be deemed to prohibit Lessee from assigning its interest in the Premises or the rents and other sums to be received therefrom to a Lender permitted or approved pursuant to Section V hereof. The rights of the holder of any mortgage, or of any beneficiary, mortgagee, or secured party under such loan shall be as set forth in Section V. Any attempted assignment, transfer, mortgage, encumbrance, or subletting of Lessee's interest in the Lease or the Premises in violation hereof shall be void and shall constitute a material breach'of this Lease. A transfer between general partners of Lessee, or a transfer of said general partner's interests in this Lease to a third party, provided the general partners maintain management and control of the Lease, or a transfer to a corporation in which the Lessee or the general partners of Lessee own not less than seventy -five percent (75 %) of the corporation's outstanding shares, assuming the general partners of Lessee have full management and control of the corporation and the City is provided with 0 0 adequate assurance that the corporation is sufficiently capitalized and has and maintains sufficient net worth to perform Lessee's obligations under this Lease, shall not be deemed to be assignments within the meaning of this Lease and shall not require the prior written consent of City. Lessee covenants that the Lessee's partnership will remain intact and will not be dissolved or altered for a minimum period of three years from the Commencement Date of the Lease, or until such time as the net operating cash flow exceeds the minimum annual lease payment by a ratio of 1.2 to 1. "Net operating cash flow" is defined as gross income less costs of sales and operating expenses (excluding rent payments to the City). A dissolution of the partnership prior to this time period will be considered a material breach of this Lease. 2. The Lessee shall deposit $50,000 with the City of Poway to be held in the name of the City as performance security for the operation of the South'Poway Sports Park until such time as the net operating cash flow in a fiscal year from the operation exceeds the minimum annual lease payment by a ratio of 1.2 to 1, whereupon said deposit shall be released to Lessee. "Net operating cash flow" is defined as gross income less costs of sales and operating expenses (excluding rent payments to the City). The deposited funds will earn interest at the same rate of return as the City's Investment Pool. In the event of any breach by Lessee of a performance obligation hereunder, the City may draw upon the deposit to obtain performance. Funds within the deposit account may be drawn upon by the City to meet the operating needs of the South Poway Sports Park in the sole discretion of the City after notice to Lessee and an opportunity to cure, as set forth in Section VI of the Lease. Any funds withdrawn from the $50,000 deposit account shall be replenished by Lessee within 90 days from the date of withdrawal. Failure to replenish the funds shall constitute an event of default by Lessee. City shall have no duty to withdraw funds at any time that the balance in the account is less than $50,000. As additional security, the Lessee does hereby collaterally assign to City its interest in that startup equipment purchased by Lessee.. A listing of said equipment is contained in Exhibit A. City shall release its collateral interest in the start -up equipment upon the expiration of the initial term of the Lease Agreement or upon mutually acceptable termination of the Lease. Any replacement equipment purchased during this period will automatically be substituted for the original equipment under the collateral assignment. III. TIME OF ACCEPTANCE OF LEASE AMENDMENT BY CITY This Lease Amendment, when executed by Lessee and delivered to City, must be authorized, executed, and delivered by City within thirty (30) days after the latest date of signature by Lessee or this Lease Amendment shall be void, except to the extent that Lessee shall consent in writing to further extensions of time for the authorization, execution and delivery of this Lease Amendment. t ' • EXHIBIT A SPORTSPARK AT POWAY 9/18/93 CAPITAL NEEDS DETAIL CONCESSION BLDG BY OTHERS BY US KITCHEN Popcorn Machine 8450.00 Hot Dog Machine 8500.00 Nacho & Cheese Machine 8400.00 Pretzel Machine $0.00 Soda Dispensers & Ice Bins 80.00 Cash Registers $7,500.00 Coffee Machines 80.00 Juice Machines 80.00 Kitchen Utensils 82,000.00 Taco Bar Equip 82,500.00 Snack Racks 80.00 Signs 82,000.00 Trash Receptacles 8400.00 Retrofit Costs 83,000.00 Microwave Oven 8400.00 INDOOR DINING AREA Tables & Chairs 85,000.00 TV Sets 8600.00 Decoration 82,000.00 Trash & Service Area 8500.00 Cleaning Equip 8500.00 OUTDOOR DECKS Table & Bench Upgrade 84,000.00 Condiment Service 8500.00 Oue Rails 82,250.00 Trash Receptacles 8600.00 Door Mats 8200.00 TOTAL CONCESSION BLDG COSTS 80.00 835,300.00 Page 1 0 0 SPORTSPARK AT POWAY ICON'T) OTHER EQUIPMENT BY OTHERS BY US GROUP EVENT EQUIPMENT Tents $3,000.00 Games $500.00 Bar BQ Equipment $2,500.00 Folding Tables $300.00 Food Serving Equip $1,000.00 OFFICE EQUIPMENT Desks & Chairs $1,500.00 Computers $4,000.00 File Cabinets $400.00 Safe $800.00 Telephone System $3,100.00 Time Clock $300.00 Supplies. $200.00 Copier $1,000.00 CUSTOMER SERVICE EQUIPMENT First Aid $150.00 Cash Register $2,500.00 Counters, Racks $ 500.00 MAINTENANCE EQUIPMENT Tractor $10,000.00 $0.00 Attachments $4,000.00 $0.00 Infield /Drag Vehicle $2,500.00 $0.00 Hoses,Rakes, Shovels $500.00 $0.00 Small Tools $1,000.00 $0.00 Buckets, Mops, Blowers $500.00 $0.00 Rototiller $1,200.00 $0.00 Edgers & Liners $700.00 $0.00 OTHER EQUIPMENT Batting Cage Needs $2,500.00 Tape Deck $100.00 Restroom Equip $300.00 TOTAL CAPITAL STARTUP COSTS $20,400.00 $59,950.00 Page 2 The date of this Lease Amendment shall be the date when the Lease Amendment shall have been signed by City which date is the date set forth next to the signature on behalf of the City. THE CITY OF POWAY Date 1993 By a s L. Bowersox, City Wager ATTEST: LESSEE SPORTSPARKS OF CALIFORNIA, A CALIFORNIA GENERAL PARTNERSHIP Date f Z-/ / }./ , 1993 SPORTSP A E ICA, INC., A General Partner By mes Hi em yer, Pr si ent FREDCON, INC., er P tner By E arl E. Segerda NE 0, NC. , 1 A�Ge al a By �� P aul . Berg ho esi t - c: \wpfiles \lease.doc \ Y -1 _ ASSIG OF LESSEE'S INTEREST 14�SE Agreement made August 3/, 1993, between Sportsparks /Kajima, a California Joint Venture ("Assignor ' and Sportsparks of California, a California General Partnership ( "Assignee "). RECITALS 1. Assignor entered into a Lease, as lessee, on November 12, 1993, (the "Lease ") with City of Poway, as lessor ( "Lessor "). A copy of this Lease is attached as Exhibit A and incorporated herein. 2. Assignor desires to assign, and Assignee desires to assume, the rights, duties, and liabilities of lessee under the Lease. Now, therefore, in consideration of $10.00 and other good 'and valuable consideration, receipt of which is acknowledged by Assignor, Assignor assigns all of its right, title and interest in and to the Lease to Assignee effective on the date of acceptance hereof by the City of Poway, for the Lease term of ten (10) years provided in the Lease, plus two five (5) year options, as set forth in the Lease. Assigner represents and warrants that the Lease has not been amended or modified; that neither Lessor or Lessee is in default thereof; that no event which, with passage of time, giving of notice, or both, could constitute a default has occurred; and that as of the date hereof, the Lease has not commenced. Assignee assumes all rights and obligations of lessee under the Lease, including the obligation to pay rent and the right to receive all payments, and agrees to comply with all terms and condition of the Lease. Dated: August 31 1993 ASSIGNOR: ASSIGNEE: Sportsparks /Kajima, a Sportsparks of California, a California Joint Venture California General Partnership By: Sportspar s ku rica, Inc., By: Sportsparks America, Inc. a t e a gene 1 pa tner By: �— By Its: /ie Its: By: Kajima Engineering, and By: Fredcon, I nera and Construction, Inc. partne a Joint Venturer By: ) � f u By Its: I s: ` By: o, Inc., g e p Y the B �- Its: WhA Being all of the general partners of Sportsparks of California F: \HOME\SSH \80359 \ASSIGN4.MNT CONSENT OF LESSOR of City of Poway, lessor in the above - described Lease ( "Lessor "), consents to the assignment to and assumption by Assignee of the Lease, including all rights and obligations thereof, to Assignee. Lessor represents and warrants that the attached copy of the Lease is true and correct, and has not been amended or modified; that neither Lessor nor Assignor, as lessee, is in default thereof; that to the best of Lessor's knowledge, no event which with passage of time, giving of notice, or both, would constitute a default has occurred; and that as of the date hereof, the Lease has not commenced. Lessor agrees that Assignor is released from any and all obligations accruing pursuant to the Lease on or after the date hereof. Accepted this ,,to/ of , 1993. City of Poway M 4��j RAM By: Imo. Marjori.e X. Wahlsten, City Cler en /i. xcki s, Ul ty Attorney F AHOME\SSH \80359 \ASSIGN4 .MNT F: \80[Z \SS8\80359 \PRTNM4.AGR SPORTSPARKS OF CALIFORNIA PARTNERSHIP AGREEMENT As of October 6, 1993 TABLE OF CONTENTS ARTICLE AND SECTION PAGE Recitals . . . . . . . . . . . . . . . . 2 ARTICLE I - Organization . . . . . . . . . . . 3 1.1 Formation . . . . . . . . . . . . . . 3 1.2 Name . . . . . . . . . ... . . . . . . 4 1.3 Consents . . . . . . . . . . . . . . . 4 1.4 Purpose of Business . . . ... . . . . 5 1.5 Place of Business . . . . . . . . . . 6 1.6 Effective Dates and Term . . . . . . . 6 1.7 Names and Addresses of Partners . . . 6 1.8 Organizational Obligations . . . . . . 6 ARTICLE II - Capital Contributions and Other Funding . . . . . . . . . . . . . 7 2.1 Capital Contribution of Partners . . . 7 2.2 Additional Capital Contributions . . . 8 2.3 Additional Capital Funding . . . . . . 8 2.4 Capital Accounts, Adjustments, Substantial Economic Effect . . . . 9 2.5 Interest . . . . . . . . . . . . . . . 10 2.6 Withdrawals . . . . . . . . . . . . . 10 2.7 Partner Loans . . . . . . . . . . . . 10 ARTICLE III - Profits, Losses, Distributions and Expenses . . . . . . . . . . . 11 3.1 Cash Flow . . . . . . . . . . . . . . 11 3.2 Net Capital Proceeds . . . . . . . . . 12 3.3 Partnership Allocations 13 3.4 Distribution of Cash Flow . . . . . . 17 3.5 Distribution of Net Capital Proceeds 18 3.6 Management and Certain Other Expenses 18 3.7 Taxes on the Partnership . . . . . . . 19 3.8 Default Remedies and Readjustments . . 20 ARTICLE IV - Powers, Duties, Liabilities, Compensa- tion and Decisions of Partners 25 4.1 Authority of Partners . . . . . 25 4.2 Management and Control of Partnership 26 - i - - ii - ARTICLE AND SECTION PAGE 4.3 Certain Dealings of the Partners with the Partnership 32 4.4 Additional Duties and�Obligations of Partner . . . . . . . . . . . . 33 4.5 Indemnification . . . . . . . . . . . 34 4.6 Liability of Partners; Standard of Care . . . . . . . . . . . . . . . 35 4.7 Permitted Transfers . . . . . . . . . . 35 4.8 Required Approvals . . . . . . . . . . 37 ARTICLE V - Hooks of Account, Records and R eports . . . . . . . . . . . . . . 39 5.1 Accounting . . . . . . . . . . . . . . 39 5.2 Reports . . . . . . . . . . . . . . . 40 5.3 Additional Reports . . . . . . . . . . 41 5.4 Further Investigations . . . . . . . . 41 ARTICLE VI - Meetings and Amendments . . . . . . 42 6.1 Meetings of the Partnership . . . . . 42 .6.2 Amendments . . . . . . . . . . . . . . 42 ARTICLE VIZ - Termination of the Partnership . . 43 7.1 Termination . . . . . . . . . 43 7.2 Payment of Debts; Distributions . . . 44 7.3 Reserve . . . . . . . . . . . . . . . 46 7.4 Final Accounting . . . . . . . . . . . 46 ARTICLE VIII - Tax Matters . . . . . . . . . . . . 46 8.1 Tax Information . . . . . . . . . . . 46 8.2 Returns . . . . . . . . . . . . . . . 47 8.3 Elections . . . . . . . . . . . . . . 47 8.4 Consistency of Tax Treatment . . . . . 48 8.5 Tax Matters Partner . . . . . . . . . 48 8.6 Survival of Tax Obligations 49 ARTICLE I% - Fiscal Matters . . . . . . . . . . 50 9.1 Fiscal Year . . . . . . . . . . . . . 50 9.2 Partnership Funds . . . . . . . . _ 50 - ii - ARTICLE AND SECTION P i PAGE ARTICLE S - capacity and Authority; Registration and Investment Decision; No Broker . . . . . . . . . . . . . . 51 10.1 Capacity and Authority . . . . . . . 51 10.2 Registration . . . . . . . . . . . . . 51 10.3 Investment Decision . . . . . . . 52 10.4 No Broker, Fees or Commissions 53 ARTICLE %I - Miscellaneous . . . . . . . . . . . 53 11.1 Governing Law . . . . . . . . . . . . 53 11.2 Notices . . . . . . . . . . . . . . . 53 11.3 Counterparts . . . . . . . . . . . . . 55 11.4 Agreement for Further Execution . . . 56 11.5 Entire Agreement . . . . . . . . . . . 56 11.6 Severability . . . . . . . . . . . . . 57 11.7 Captions . . . . . . . . . . . . . . . 57 11.8 Number and Gender . . . . . . . . . . 57 11.9 Holidays . . . . . . . . . . . . . . . 58 ARTICLE %3I - certain Proprietary information and Rights . . . . . . . . . . . . 58 12.1 Trademarks and Trade Names . . . . . . 58 12.2 No License of Partner Property . . . . 58 Exhibit A - Table of Defined Terms Exhibit B - Names, Addresses and Interests of Partners Exhibit C - Ratified Obligations and Agreements - iii - 0 1 0 AGREEMENT THIS AGREEMENT OF GENERAL PARTNERSHIP ( "Agreement ") is made and executed as of this 6th day of October, 1993, by and among the following parties: (i) Newco Enterprises, Inc. ( "Newco") , an Illinois corporation, with its principal corporate offices at 225 West Washington Street, Suite 400, Chicago, Illinois, 60606; (ii) Fredcon, Inc. ( "Fredcon ") , an Illinois corporation, with its principal corporate offices at 225 West Washington Street, Suite 400, Chicago, Illinois, 60606; and, (iii) Sportspark of America, Inc. ( "SPA "), an Arizona corporation, with its principal corporate offices at 6901 North Casa*Grande Highway, Tucson, Arizona, 85243. The parties are collectively, referred to herein as the "Partners" or individually as a "Partner." • • RECITALS: WHEREAS, the parties are each parties to an Agreement of General Partnership of the Sportspark at San Clemente, dated February 28, 1993, and each of them desire to enter into a new partnership agreement to amend and restate the agreement among themselves and to rename the Partnership; and, WHEREAS, the Partnership has executed an agreement as a successor lessee under a Lease dated August 1, 1991 (the "San Clemente Lease "), between the City of San Clemente, California, as Lessor, and San Clemente Sportspark, Ltd., the original Lessee, to operate a sports complex located in San Clemente (the "San Clemente Property "), California and maintain, manage and operate the Property; and, WHEREAS, the Partnership has accepted or will accept an Assignment of Lessee's Interest in a lease dated November 11, 1992, by and between Sportspark /Kajima Joint Venture (in which SPA is a joint venturer), as lessee, and the City of Poway, as lessor, (the "Poway Lease "), and intends to operate a sports complex in Poway, California (the "Poway Property "), and maintain, manage and operate the Poway Property. - 2 - C7 • WHEREAS, the Partners desire to enter into other leases, and engage in additional business at additional locations, maintaining, managing and operating sports complexes for use by the public for ballparks, basketball courts, volleyball courts, and other sports activities, and sale of concessions at such complexes and desire to enter into this Agreement in order to amend and restate the Agreement of General Partnership of the Sportspark at San Clemente, and to set forth the entire agreement and the relationships as now intended among the Partners; and, NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants, conditions and agreements herein set forth, the Partners agree as follows: ARTICLE I organization SECTION 1.1 - Formation The partnership is formed as a general partnership under and subject to the California Uniform Partnership Act (the "Partnership Act "). Except as is expressly herein stipulated to the contrary, the rights and obligations of the Partners and the administration - 3 - 9 0 and termination of the Partnership shall be governed by the Partnership Act, as amended and in effect on the date of this Agreement. SECTION 1.2 - Name The name of the Partnership shall be "Sportsparks of California." The Partnership shall execute and file such documents as may be required to change its name to Sportsparks of California. In addition, the Partnership may adopt such trade names and trade styles, as the Partners may from time to time consider appropriate. The Partners shall execute all assumed or fictitious name certificates required by law to be published or filed, in connection with the formation and operation of the Partnership. SECTION 1.3 - Consents The Partners each hereby consent and agree to file such certificates as may be necessary to effect this Agreement and any amendments approved pursuant to the terms hereof, and do hereby constitute the Managing General Partner as their lawful attorney- in-fact to execute and file such certificates on their behalf. - 4 - 0 0 SECTION 1.4 - Purpose of Business The purpose for which the Partnership has been formed and the powers which it may exercise, all being in the furtherance of and not in limitation of the general powers conferred on general partnerships under the Partnership Act, are as follows: (a) to invest in, develop, improve, finance, refinance, hold, maintain, renovate, sub -lease and otherwise operate and manage recreational facilities, including, specifically, the San Clemente. Lease, the Poway Lease, the San Clemente Property and the Poway Property, plus such additional properties as the Partners may agree to lease or otherwise acquire (collectively, the "'Projects"), and to engage in any and all activities related to or incidental thereto; and (b) to carry on any and all other activities necessary, convenient or incidental to accomplishing any of the foregoing purposes and powers or to protecting and benefiting the Partnership, including, without limitation: (i) entering into contracts and sub- contracts and otherwise do all things necessary to maintain and prepare the Projects and improvements; (ii) providing for financing the Projects on such terms as may be necessary or beneficial; and (iii) entering into one or more agreements to manage and operate the Projects. - 5 - 0 SECTION 1.5 - Place of Business • The Partnership's principal office shall be located at 247 Avenida de la Pata, San Clemente, California, or any other location within or outside California chosen by the Partners. All Partnership meetings shall take place at the offices of the Partnership, or at such other place specified in the notice of meeting. SECTION 1.6 - Effective Dates and Term The Partnership commenced on March 1, 1993. The Partnership shall continue for a term ending December 31, 2043, unless terminated earlier pursuant to this Agreement. SECTION 1.7 - Names and Addresses of Partners The names and addresses of the Partners are set forth in Exhibit B as attached to this Agreement and made a part hereof. SECTION 1.8 - Organizational Obligations The Partners recognize and specifically ratify, as valid obligations of the Partnership, certain agreements set forth on Exhibit C which were entered into prior to or contemporaneously - 6 - 0 0 with this Agreement and to further the Partnership's goals and objectives. ARTICLZ II Capital Contributions and Other Funding SECTION 2.1 - Capital. Contribution of Partners (a) On the date hereof, each of Newco and Fredcon shall have made or shall make a cash contribution to the capital of the Partnership in the amount of $104,000. (b) On the date hereof, SPA shall have canceled, or shall cancel certain indebtedness owing to it as shown on Exhibit D, and shall have contributed or assigned, or shall contribute or assign its interest in the Poway Lease to the Partnership. Fifty Thousand Dollars ($50,000) shall be credited to the Capital Account of SPA in connection with the cancellation of debt pursuant to this subsection, and $50,000 shall be credited to the Capital Account of SPA in connection with the contribution or assignment of SPA's interest in the Poway Lease pursuant to this subsection. - 7 - • • SECTION 2.2 - Additional capital Contributions Except as otherwise provided in Sections 2.1, 2.3, and 7.2 of this Agreement or by law, in no event shall any Partner be required to contribute additional capital to or for the benefit of the Partnership. SECTION 2.3 - Additional capital Funding (a) The Partnership shall, as soon as practicable, obtain additional funding through LaSalle National Bank (the "Bank ") in such amount (net of expenses incurred in connection with the funding) as will, in the Partners' judgment, assure the Project's operation. The Partnership shall take all actions necessary to relieve the Partners of any obligation to guaranty or provide security in support of any additional funding, including without limitation granting security interests in Partnership assets. (b) At any time, if the Partners determine that the Partnership requires additional capital. funding to assure the continued development or operation of the Projects, then any Partner may provide notice of the requirement to each Partner. At such time, if the Partners are unwilling or unable to cause the Partnership to borrow such funds from a commercial lender on terms acceptable to the Partners, and a majority in. interest of the Partners have agreed that the additional funds shall be contributed - 8 - 0 i 0 as capital and not Partner Loans, as set forth in Section 2.7, then the Partners shall contribute such additional capital to the Partnership's capital ( "Additional Contributions ") in proportion to each Partner's Percentage Interest in the Partnership. Any contributions made pursuant to this subsection which are not in proportion to each Partner's Proportionate Interest in the Partnership shall be subject to the provisions cf Section 3.8. SECTION 2.4 - Capital Accounts, Adjustments, Substantial Economic Effect The Partnership shall establish and maintain a capital account ( "Capital Account ") for each Partner. The Partners intend that the Capital Accounts shall be determined and maintained throughout the full term of the Partnership in accordance with the rules of Section 704 of the Internal Revenue Code of 1986, as amended (the "Code") *and Treasury Regulations S 1. 704-1 (b) (2) (iv) or any subsequent similar provisions (including the rules of Treasury Regulations S 1.704 -1(b) (2) (iv) (g) with respect to reflection of differences between the basis and fair market value of contributed property in the Partners' Capital Accounts) . Accordingly, the Partners understand and agree that the amounts of profits and losses allocated to each Partner as provided in Article III hereof will be credited or debited to the Partners' Capital Accounts and will affect the amounts received by the Partners upon liquidation. - 9 - • SECTION 2.5 - Interest .7 No interest shall be paid on the Capital Account of any Partner, provided that nothing contained in this Section shall affect the obligation of the Partnership to pay interest on the unpaid balance of any Partner Loan or other loans to the Partnership made by any Partner. SECTION 2.6 - Withdrawals The Partnership's capital shall not be withdrawn by any Partner except as provided in this Agreement. SECTION 2.7 - Partner Loans (a) If -at any time any Partner determines that the Partnership requires additional funding to assure the continued development or operation of the Projects, then any Partner may provide notice of the requirement to each Partner. At such time, if the Partners are unwilling or unable to cause the Partnership to borrow such funds from a commercial lender on terms acceptable to the Partners, the Partners shall loan such funds as the Partners shall determine, by majority vote, shall be required, in proportion to each Partner's Proportionate Interest in the Partnership, ( "Partner Loan(s) "), to the Partnership. Any advances made pursuant to this subsection which are not in proportion to each - 10 - Partner's Proportionate Interest in the Partnership shall be subject to the provisions of Section 3.8. (b) Any Partner Loans made pursuant to this Section shall bear interest quarterly at that per annum percentage rate which is equal to the prime lending rate of LaSalle National Bank (the "Bank "), as posted and in effect at the beginning of each quarter for which interest is determined plus two (2) additional percentage points. ARTICLE III Profits, Losses, Distributions and Expenses SECTION 3.1 - Cash Flow The term "Cash Flow" means the operating revenues received in cash or cash equivalents for the Partnership's account (but not including Net Capital Proceeds), less the sum of: (a) the cash expenditures by or on behalf of the Partnership in operating the Project and the Partnership including legal and accounting expenses, administrative expenses (including fees to be paid to the Partners or Affiliates pursuant to the Agreements described in Exhibit C or approved pursuant to Section 4.3), - 11 - 0 0 payments to Partners for property or services provided pursuant to Section 4.2(f), any reserves required by the lender of any financing secured in whole or in part by a lien on the Project or any portion thereof, or required by generally accepted accounting principles to be established from operating revenues, and (b) the aggregate of all scheduled cash payments with respect to discharging Partnership indebtedness including debt secured in whole or in part by a lien on the Project or any portion thereof. Cash Flow shall be determined on a cash basis in a consistent manner without distortions. SECTION 3.2 - Net Capital Proceeds The term "Net Capital Proceeds" means the proceeds of a capital transaction ( "Capital Transaction ") , including any proceeds resulting from: (i) the sale (including, without limitation, a cash sale, land contract or installment sale) , condemnation or other disposition of the Project or any part thereof or interest therein, less the expenses of the disposition, and less the portion of such proceeds utilized to discharge, in whole or in part, any debt secured by a lien on the Project or any portion thereof; (ii) any loan secured by or obtained with respect to the Project or any part thereof; and (iii) collecting under any insurance policy covering - 12 - • • the Project or any portion thereof to the extent not used for repairing or restoring the Project. SECTION 3.3 - Partnership Allocations (a) The Partners intend that the allocations of profits and losses provided by this Section are for Federal income tax purposes as well as financial accounting purposes. All profits and losses of the Partnership, including all items of income, gain, deduction, loss, allowance, or credit, shall be allocated as provided in the following subsections. (b) Each Partner's proportionate interest ( "Proportionate Interest ") in the Partnership and "interest in the partnership ", within the meaning of § 704 of the Code shall be the Proportionate Interest set forth below. Except as provided in subsection (c), (d) and (e) all Partnership items shall be allocated pursuant to the Partners' respective Proportionate Interests. (i) The Proportionate Interests of the Partners are as follows: (A) Newco 1/3 (B) Fredcon 1/3 - 13 - • (C) SPA 1/3 • (ii) Each Partner's Proportionate Interest for purposes of voting and in Partnership items allocable to or distributable to the Partners shall be adjusted in accordance with subsection (e) and Section 3.8. (c) Allocations of gain or loss attributable to Capital Transactions: (i) The net income and /or gain from each Capital Transaction which results in income or gain to the Partnership shall be allocated among the Partners as provided in this subsection: (A) First, to all Partners with a deficit Capital Account balance in such amounts as are required to eliminate such deficits, provided that in the event there is insufficient income or gain to restore the balance of all Partners' Capital Accounts to zero, the allocation shall be made to each Partner in proportion to the Proportionate Interests set forth in subsection (b) (except as such percentages have been modified by subsection (e)) and provided that no Partner shall be allocated income or gain under this subsection in excess of the amount required to restore such Partner's Capital - 14 - • Account balance to zero. Any amount otherwise allocable to a Partner under this subsection and in excess of the deficit in such Partner's Capital Account shall be reallocated among the Partners with remaining Capital Account deficits (in the same proportions as the initial allocations) until all remaining deficits have been eliminated. (B) Second, to each Partner's Capital Account until the positive balance in such Partner's Capital Account is the lowest positive number which bears the same ratio to the positive balance of each other Partner as the Partners' respective Proportionate Interests; (C) Thereafter, to all Partners in proportion to the Proportionate Interests of each Partner (except as such percentages may have been modified by subsection (e)) until all such income or gain has been exhausted. (ii) The net loss from each Capital Transaction which results in a loss to the Partnership shall be allocated among the Partners as provided in this subsection: (A) First, to all Partners with a positive Capital Account balance in such amounts as are required to reduce such positive account balances to zero, provided that in - 15 - the event there is insufficient loss to reduce the balance of all Partners' Capital Accounts to zero, the allocation shall be made to each Partner in a manner which best accomplishes the goal of reducing specific Partner Capital Accounts to that positive balance which when compared with the total of all such remaining positive balances bears the same proportion to the balance in each other account as the Partnership Proportionate Interests of such Partner (except as such percentages may have been modified by subsection (e)) bears to that of all other Partners. (B) Second, to each Partner's Capital Account until the negative balance in such Partner's Capital Account is the smallest negative balance which bears the same ratio to the negative balance of each other Partner as the Partners' respective Proportionate Percentages; (C) Thereafter, to all Partners in proportion to the Proportionate Interests set forth in subsection (b) (except as such percentage interest of each Partner may have been modified by subsection (e)) until all such losses have been exhausted. (d) Allocations of gain or loss required for Federal income tax purposes: In accordance with Code § 704 and Treasury - 16 - Regulations § 1.704- 1(c) (2), all Partnership items of income, gain, loss or deduction with respect to the Property contributed by any Partner (including depreciation, depletion, or gain or loss with respect to such Property) shall be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and the initial agreed value of such property for purposes of the contributing Partner's capital contribution. (e) If a Partner shall have become a Defaulting Partner by failing to timely make any contribution or advance, then the Proportionate Interest and total percentage of all Partnership items otherwise allocable to the Defaulting Partner shall be adjusted as provided in Section 3.8. SECTION 3.4 - Distribution of Cash Flow Cash Flow shall be invested or reinvested as provided herein for the account of the Partnership, if the Partners so agree, or, if no such agreement is reached, shall be distributed not less frequently than annually. Any Cash Flow distributed annually shall be distributed to all of the Partners, in accordance with their Proportionate Interests. - 17 - SECTION 3.5 - Distribution of Net Capital Proceeds Net Capital Proceeds shall be invested or reinvested as provided herein for the account of the Partnership or, in the sole discretion of the Partners, may be distributed. Except as may be required by Section 7:2, in the event such Net Capital Proceeds are realized in connection with winding up the Partnership and disposing of its assets, if such proceeds are distributed they shall be distributed to the Partners in proportion to the Partners' respective Proportionate Interests. SECTION 3.6 - Management and Certain Other Expenses (a) The Partnership shall reimburse each Partner for all reasonable costs and expenses paid or incurred by it for or on behalf of the Partnership and which are directly related to the Partnership's business including (a) legal and accounting fees and expenses, (b) costs and expenses relating to the Partnership's organization and operation (except wages and other compensation of its own office staff and other ordinary office overhead) , and, when applicable, (c) the costs and expenses of performing the duties of the Tax Matters Partner, including accountants, attorneys and other professional fees. Reimbursement to Partner hereunder shall be subject to (a) with respect to any costs or expenses with respect to any activity described in Section 4.8, the Managing General Partner's having obtained in advance the approval of all of the - 18 - Partners; (b) the tither Partners consenting to the reimbursement; and (c) the items subject to reimbursement being itemized in a statement which identifies the purpose and recipient of the expenditures and, in the case of any travel or entertainment expense, the date, form, place, amount, any persons present, substance of the Partnership business discussed and purpose of the expense and otherwise substantiates such expense in such detail as will satisfy the requirements for deductibility under the Code as may be in effect from time to time. In addition, each Partner shall be entitled to reimbursement for those expenses incurred by each of them before entering into this Agreement which are set forth on Exhibit C hereto. (b) SPA shall be reimbursed by the Partnership. for all reasonable costs and expenses paid or incurred by it for or on behalf of the Partnership and relating to acquiring and transferring the San Clemente or the Poway Lease to the Partnership. SECTION 3.7 - Taxes on the Partnership To the extent any taxes are imposed on the Partnership, rather than the Partners, such amounts shall be treated in all respects as expenses of the Partnership. - 19 0 0 SECTION 3.8 - Default Remedies and Readiustments If any Partner shall fail to timely contribute or loan to the Partnership any amount required to be contributed or loaned under this Agreement ( "Defaulting Partner "), such failure shall be an event of default ( "Default ") and the Defaulting Partner shall be subject to the remedies and readjustments of Partnership interest provided by this Section. (a) Any amount which the Defaulting Partner shall have failed to contribute or loan shall be deemed to constitute a loan of an equal amount from the Partnership to the Defaulting Partner effective from the date the contribution or loan was required to have been made and continuing until the earlier of the Partnership receiving a payment on behalf of the Defaulting Partner pursuant to subsection (e) or the Partnership interest of the Defaulting Partner being permanently reduced pursuant to subsections (d) or (e). Such loan shall bear interest monthly at that percentage rate per annum which is equal to the prime lending rate of the Bank as posted and in effect at the beginning of each month for which interest is determined plus three (3) additional percentage points. In addition, any Default and the resulting loan deemed made pursuant to this subsection shall be subject to the Partnership exercising appropriate collection remedies. - 20 - (b) During the period beginning with the date of the failure to contribute or loan and continuing until the earlier of the Partnership receiving a payment on the Defaulting Partner's behalf pursuant to subsection (e) or the Defaulting Partner's Partnership interest being permanently reduced pursuant to subsection (d) or (e) , the Defaulting Partner's Partnership Interest shall be treated as though it had been reduced in the proportion determined under subsection (d) or (e) for purposes of exercising any management or voting rights (including Managing General Partner management rights) provided by this Agreement and for purposes of determining the amount of any distribution to the Defaulting Partner pursuant to Sections 3.4, 3.5 or 7.2. A Defaulting Partner shall have no right to require reconsideration of any decision taken during the period when such Defaulting Partner's voting rights were proportionally reduced pursuant to this subsection and shall have no right to the proportion of any distributions made during the period when the distribution allocable to such Defaulting Partner was proportionally reduced pursuant to this subsection. (c) The amount of reduction which a Defaulting Partner may sustain (and the corresponding increase in the interest of each non - Defaulting Partner) shall be determined as follows: First, the amount of capital committed to the Partnership by the Defaulting Partner ( "Committed Capital ") shall be determined. Such amount shall be the sum, as of the date on which the determination is made, of all capital contributions made by the Defaulting Partner - 21 - • 0 pursuant to Section 2.1 or 2.2 (including the amount credited to any Partner's Capital Account with respect to contributing property to the Partnership), plus the amount of all Additional Contributions and /or Partner Loans made by the Defaulting Partner pursuant to Sections 2.3(b) or 2.7. Next, the Defaulting Partner's Proportionate Interest in the Partnership and all Partner items shall be redetermined by multiplying the Defaulting Partner's Proportionate Interest by the ratio of the Defaulting Partner's Committed Capital to the sum as of the date on which the determination is to be made of (i) all capital contributions required to have been made by such Defaulting Partner pursuant to Section 2.1 or 2.2 (including any amount credited to such Defaulting Partner's Capital Account with respect to contributing property to the Partnership) plus (ii) the amount of all Additional Contributions or Partner Loans required to have been made by such Defaulting Partner. The proportionate increase in the Proportionate Interest of each Partner which is not a Defaulting Partner shall be the difference between the Defaulting Partner's Proportionate Interest before the event of Default and such Proportionate Interest determined again after such Default under this subsection allocated among the non - Defaulting Partners in proportion to such non - Defaulting Partner's relative Proportionate Interests. (d) If a Default shall continue for a period of six (6) months without all amounts initially required to be contributed or - 22 - advanced by the Defaulting Partner being paid, together with all interest due thereon pursuant to subsection (a), the Defaulting Partner's Proportionate Interest shall be permanently reduced by a percentage which reflects the proportionate reduction determined under subsection (c). (e) In the event of a Default, a Partner which is not itself a Defaulting Partner shall have the right to advance to the Partnership the amount which a Defaulting Partner. has failed to contribute or loan subject to the terms and conditions provided in this subsection. (i) Unless the Partner making an advance pursuant to this subsection ( "Advancing Partner ") shall elect as provided in subsection (iii) , any advance pursuant to this subsection shall be treated as a payment to the Partnership by the Defaulting Partner and accordingly shall be treated by the Partnership as a capital contribution or loan made by the Defaulting Partner consistently with the character of the required capital contribution or Partner Loan with respect to which the Default arose, and the Capital Account or outstanding Partner Loan balance of the Defaulting Partner shall be adjusted to reflect the contribution or advance. In addition, the advance by the Advancing Partner shall be deemed to create a loan from the Advancing Partner to the Defaulting - 23 - Partner subject to the interest as provided in section 2.7(b) equal to the amount advanced to the Partnership. (ii) Notwithstanding subsection (i) , during the period beginning with the date of an advance by an Advancing Partner and continuing until the Defaulting Partner's Proportionate Interest has been permanently reduced pursuant to subsection (d), the Partners recognize that any Partner management or voting rights provided by this Agreement (including Managing General Partner management rights) to a Defaulting Partner with respect to the funding advanced by an Advancing Partner shall be exercised by the Advancing Partner. (iii) If the loan deemed made by the Advancing Partner is not repaid within six (6) months after the advance, following written notice to the Defaulting Partner and a period of thirty (30) days accruing after such notice during which the deemed loan (and accrued interest thereon) may be repaid, the Advancing Partner may, but shall not be required to, elect to apply the provisions of subsection (c) (except for the provisions reallocating the reduction in the Defaulting Partner's Proportionate Interest). If the Advancing Partner so elects, as of the effective date of the election, the amount of the advance theretofore treated by the Partnership as having been contributed or loaned by the Defaulting Partner shall be deemed to have been distributed or repaid to the - 24 - • W Defaulting Partner and such amount shall further be treated as having been contributed or loaned by the Advancing Partner on its own account as of the same date, and the Proportionate Interests of the Defaulting and Advancing Partners and their interests for purposes of voting and in any Partner items and the Capital Accounts and any outstanding Partner Loan balances shall all be adjusted accordingly. ARTICLE IV Powers, Duties, Liabilities, Compensation and Decisions of Partners SECTION 4.1 - Authority of Partners (a) Subject to the limitations imposed by the Partnership Act and this Agreement, the Partners shall have full and exclusive authority to manage and control the business affairs of the Partnership and to make all decisions regarding the business of the Partnership. (b) The Partners shall exercise the authority provided in subsection (a) as provided in Section 4.2, and except as otherwise expressly provided in this Agreement, or authorized by the Partners in writing, no Partner, acting alone, shall exercise any authority - 25 - to act for, undertake or assume any obligations or responsibility on behalf of the other Partners or the Partnership. SECTION 4.2 - Management and Control of Partnership (a) The Partners shall direct, manage, control and conduct the business of the Partnership, and shall devote such time to the Partnership business as may be necessary to adequately and properly manage and supervise the Partnership business and affairs in an efficient manner and discharge their obligations hereunder, but nothing in this Agreement shall preclude any agent or third party being employed, at the Partnership's expense, to manage or provide other services in respect of the Partnership properties or administrative matters. (b) Except as required under Subsection (d) , and Section 4.8, all decisions to be made by the Partners shall be mutually agreed to by two - thirds (2/3) of the Partners (voting in proportion to their respective Proportionate Interests) and except to the extent the Partners shall have delegated authority to the Managing General Partner in writing, all documents to be executed and delivered by or on behalf of the Partnership shall be executed by two (2) Partners, provided, however, that in the event of a default by a Partner as described in Section 3.8, in which event all decisions shall be made and all documents shall be executed and delivered by a two - thirds (2/3) vote of the non - defaulting Partner(s) . Each - 26 - • • Partner shall designate a representative who shall vote that Partner's Proportionate Interest in all Partnership matters requiring a vote of the Partners. (c) The Partners, including the Managing General Partner, shall not be required to manage the Partnership as their sole and exclusive function and (except as limited by Section 4.8(i)) they may have other business interests and may engage in other activities in addition to those relating to the Partnership. Neither the Partnership nor any Partner shall have any right, by virtue of this Agreement or the Partnership relationship created hereby, in or to such other ventures or activities or to the income or proceeds derived therefrom. Pursuing such activities or ventures, (except as limited by Section 4.8(i)) even if competitive with the business of the Partnership, shall not be deemed wrongful or improper. (d) SPA shall be the Partnership's initial managing general partner ( "Managing General Partner ") and shall perform or cause to be performed at the Partnership's expense the following administrative duties: (i) preparing the Partnership's operating budget, if so required by the Partners; - 27 - (ii) preparing and completing all tax, accounting and clerical functions of the Partnership as detailed herein, and employing such accountants and attorneys as may be required from time to time to carry on the Partnership's business; (iii) procuring and maintaining with responsible companies such insurance and fidelity bonds as may be available in such amounts and covering such risks as the Partners may deem appropriate; (iv) establishing and maintaining. the bank accounts required for Partnership purposes as set forth in Section 9.2 herein; (v) commencing, defending and settling any litigation involving the Partnership; (vi) performing or completing any other activities incidental to the Partnership's management and operation as delegated by the Partners. The Managing General Partner may be removed from such position and one or more other Partners designated as the Managing General Partners) by the unanimous vote of all Partners except any Partner then serving as Managing General Partner. - 28 - (e) In addition to the administrative duties set forth in (d) above, SPA, as Managing General Partner, shall have complete and exclusive authority to manage and •control the day to day operating affairs and business of the Partnership and to make day -to -day decisions regarding operating affairs and business. Without limiting the generality of the above statement, the specific operational duties of the 'Managing General Partner shall include: (i) remitting lease payments, with respect to the Projects; (ii) rendering for and paying all of the taxes, levies, and assessments against the Projects or the Partnership; (iii) acquiring such tangible personal property and intangible personal property as may be necessary or desirable to carry on the business of the Partnership and selling, exchanging or otherwise disposing of such personal properties; (iv) administering leases of the Partnership; (v) altering, improving, repairing, replacing, or rebuilding any property of the Partnership; - 29 - (vi) repairing or replacing all furniture, furnishings, and fixtures situated on or constituting a part of the Projects; (vii) obtaining, paying for, and administering a policy or policies or insurance, insuring the Partnership against any liability to the public, landlords, or any other perscns and risks to its property, incident to the operation of the Projects, in such amounts and upon such terms as the Partners deem necessary or appropriate under the circumstances. Such policies of insurance may name the Partnership as the sole party insured or as a party co- insured; provided that, in the event the Partnership is co- insured with another party'under any of such policies, the Partnership shall be required to pay only a prorata part of the cost of any such insurance; (viii) employing, terminating the employment of, supervising and compensating such persons, firms or corporations as may be employed in connection with the operation, maintenance, management and other related business of the Partnership; provided however that the Managing General Partner shall have no power to: (A) do any act in contravention of this Partnership Agreement (or any amendment hereto) or any act prohibited by the Act; - 30 - (B) do any act which will cause the Partnership to be treated for federal income tax purposes as an association taxable as a corporation. (C) make any expenditure in excess of $25,000 on behalf of the Partnership which is not included in an operating budget contemplated by Section 4.2(d)(i) and approved by the Partners; or, with respect to discretionary expenditures in furtherance of its functions as Managing General Partner, make any expenditure on behalf of the Partnership in excess of the lesser of $25,000 or the reasonable limitations with respect to the applicable category of expenditure which may be established by the Partners; or, (D) Take any action independently which pursuant to the terms of this Agreement is to be taken only upon approval of the Partners, pursuant to law or any provision of this Agreement including, without limitation, the actions set forth in Section 4.8. SPA agrees to provide such services to the Partnership as are set out in subsection (d) above and this section (e) to the best of its ability and to complete its obligations as Managing General Partner in a careful and prudent manner and in accordance with good - 31 - industry practice. The Partners agree that SPA may contract with an Affiliate of SPA (as hereinafter defined) to perform the operational duties set forth hereinabove in this subsection (e), and that upon such assignment or delegation, the affiliate shall receive the fee set forth in subsection (f) below for such services. (f) SPA shall receive a fee for performing its operational duties as Managing General Partner in the amount of 2.5% of the gross revenues of the Partnership, as defined in the various leases for Projects which the Partnership May undertake, such amount payable monthly in arrears. in addition to the percentage of gross revenues to be paid to Managing General Partner, if cash flow shall be distributed to the Partners pursuant to Section 3.4 above, at such time as the Partners shall have received $75,000 in any one year, and provided additional cash flow shall be available, SPA shall be paid such cash flow until SPA shall have received an additional $25,000 in any one year or a total of $125,000 in the aggregate, over five (5) or more years, such amount payable to SPA even if SPA is removed as Managing General Partner pursuant to paragraph 4 -Z, hereof, unless SPA has been removed as Managing General Partner for cause, in which event such payments shall cease effective on the date of removal. For purposes of this paragraph, cause shall be defined as gross misconduct, criminal activity (whether related to the Partnership or otherwise) , or gross neglect of the Managing General Partner's duties hereunder. - 32 - • SECTION 4.3 - Certain Dealings of Partners with the Partnership (a) In addition to those agreements described in Section 1. 8, the Partners are expressly authorized on the Partnership's behalf to enter into contracts with or pay fees to any Partner or any person or entity which is owned or controlled by any Partner ("Affiliate") upon satisfying subsection (b) hereof. (b) Any agreement with any Partner (or any Affiliate) to provide materials or services shall be in writing and fully disclosed to all Partners. Moreover, the compensation to be paid pursuant to any such agreement may not exceed the fair market value of, or the range of compensation customarily charged in arms- length transactions by others or by the Partners or any Affiliates to third parties as an on -going activity for, the materials provided or the services rendered. SECTION 4.4 - Additional Duties and Obligations of Managing Partner. (a) The Managing General Partner shall direct the Partnership's affairs prudently and in the best interest of the Partnership, including safekeeping all Partnership funds and assets and using them for the Partnership's benefit. - 33 - • • . (b) The Managing General Partner shall take all actions which may be necessary or appropriate to continue the Partnership's valid existence as a general partnership under the Partnership Act and the laws of the State of Illinois. (c) The Managing General Partner shall prepare and file any documents which are required by law to be filed and /or recorded under the laws of California or any other jurisdiction in which the Partnership is or may become qualified to transact business. (d) The Managing General Partner shall use its best effort to meet all current and future Federal income tax requirements to assure that the Partnership will not fail to be classified for Federal income tax purposes as a partnership rather than as an association taxable as a corporation. SECTION 4.5 - Indemnification (a) The Partnership shall defend, indemnify and hold harmless the Partners from and against any loss, expense, damage or injury suffered or sustained by them by reason of any acts, omissions or alleged acts or omissions arising out of in its activities on or reasonably believed by such Partner to be on behalf of the Partnership or reasonably believed by such Partner to be in furtherance of the Partnership's interest in their capacity as a - 34 - • • Partner, including but not limited to any judgment, award, settlement, reasonable attorney's fees and other costs or expenses incurred in connection with defending any actual or threatened action, proceeding or claim if the acts, omissions or alleged acts or omissions upon which such actual or threatened actions, proceedings or claims are based were not performed or omitted fraudulently or in bad faith by the Partners and did not violate the Partners' fiduciary obligation to the Partnership. Any such indemnification shall only be from the assets of the Partnership (and may include advances of amounts contemplated by this Section if approved by the Partner(s) not subject to a claim proposed to be indemnified) . (b) Any and all indemnity obligations with respect to any Partner shall survive any termination of the Partnership. SECTION 4.6 - Liability of Partners; Standard of Care The Partners shall not be liable, responsible or accountable in damages or otherwise to the Partnership or any Partner for any action taken or failure to act on behalf of the Partnership within the scope of the authority conferred on the Partners by this Agreement or by law unless such action or omission was performed or omitted fraudulently, negligently, or in bad faith, or in violation of a Partner's fiduciary obligations to the Partnership. - 35 - • • SECTION 4.7 - Permitted Transfers (a) For whatever. reason, upon written notice to the other Partners, a Partner may demand purchase of his Proportionate Interest in the Partnership by the other Partners. Within ninety (90) days after receipt of such notice, the other Partners shall purchase all of the Partnership interest of the Partner making such demand for a price determined in accordance with the provisions of section 4.7(d) hereof. Each Partner agrees that, during his lifetime, he will not sell or transfer any of his Partnership interest without first offering it to the other Partners, as set forth in this Section 4.7. (b) Two - thirds (2/3) of the Partners, as determined either by vote at a meeting of Partners, or by written consent thereto, shall have the right at any time to purchase all of the Partnership interests owned by any other Partner or Partners by tendering to them pursuant to subsection (a) , at any time after date of said meeting or consent, the purchase price of such Partnership interests as herein set forth. The purchase price pursuant to this subsection (b) shall be determined in accordance with the provisions of Section 4.7(d) hereof, except that the purchase price shall be 115% of the value calculated in accordance with such subsection. (c) The closing of the purchase or sale shall be 90 days after the date of the demand notice. At the closing, the - 36 - Partner(s) whose intOest is being sold or purceed, as the case may be, shall deliver to the other Partner(s) an Assignment of his Partnership interest and the other Partner(s) shall deliver the purchase price to be paid to the Partner, by cashiers or certified check. (d) For purposes of this Section 4.7, the value of the Partnership shall be the greaser of the following values: (i) the book value of the Partnership, determined by analyzing the balance sheet of the Partnership as of the close of the month next preceding the month in which the right or obligation to purchase a Partner's Partnership interest arises; provided however that there shall be excluded from the applicable balance sheet, for purposes of determining the book value of the Partnership, the value of any goodwill or intangible assets, if any; (ii) (A) the agreed value of the Partnership, if all of the Partners have executed a certificate setting forth the value of the Partnership within the previous three (3) years; or (B) if no certificate has been executed within the previous three (3) years, four (4) times the average annual Cash Flow for the three (3) calendar years immediately prior to the date of closing. The Partners agree to negotiate in good faith annually to attempt to determine the value of the Partnership so that a certificate of value may be executed. (e) In the event that the remaining Partners do not fulfill their obligation to purchase a Partner's Partnership interest as set forth in subsection (a) or (b) of this Section 4.7, by closing in accordance with subsection (c), the Partners agree to take all steps necessary to liquidate the Partnership, in which case the - 37 - assets of the Partoship remaining after pant of all other obligations of the Partnership, shall be distributed in accordance with Section VII hereof. SECTION 4.8 - Required Approvals Notwithstanding the authority of the Managing General Partner as provided in Sections 4.1, 4.2 and 4.3, any of the actions specified below may be undertaken only after the Partnership shall have obtained the approval of all Partners possessing outstanding Proportionate Interests: (a) Merging the Partnership with another partnership or entity or acquiring the stock or assets of any other business; (b) Liquidating the Partnership's assets or dissolving the Partnership; (c) Engaging in any transaction involving an actual or potential conflict of interest between a Partner and the Partnership; (d) Constructing any material additional capital improvements, or replacing any material existing improvements, which construction or replacement would substantially alter the Project's character; (e) Acquiring any additional completed, partially improved or unimproved properties by purchase, installment sale, lease, or otherwise; - 38 - (f) Borrowing any funds on a non - recourse basis; (g) Becoming personally liable for, or guaranteeing, any loan mortgage or other financing for the Project; (h) Bringing, adjusting, settling or compromising any claim, obligation, debt, demand, suit or judgment against the Partnership or any Partner (with respect to Partnership activities) involving more than Fifty Thousand Dollars ($50,000); or (i) Financing, refinancing, selling, conveying or mortgaging the Project or any portion thereof or any other material Partnership asset or leasing all or any material portion thereof or terminating any previously- approved agreement providing for or contemplating any such financing, selling, conveying, mortgaging or leasing. ARTICLE D Books of Account, Records and Reports SECTION 5.1 - Accounting The Managing General Partner shall keep proper and complete records and books of account in which shall be entered all transactions and other matters relating to the Partnership's - 39 - 0 0 business as are usually entered into records and books of account maintained by persons engaged in businesses of like character. The Partnership books and records shall be maintained on a cash basis and, except as the Code may require to the contrary, shall be prepared in accordance with generally accepted accounting principles consistently applied. The Partnership's books and records shall at all times be maintained at the principal office of the Partnership and shall be open to the inspection and examination of the Partners or their duly authorized representatives during regular business hours. SECTION 5.2 - Reports (a) As soon as practicable, but not later than seventy -five (75) days after the end of each fiscal year, the Managing General Partner shall send to each person who was a holder of a Partnership interest in the Partnership at any time during the fiscal year then ended: (i) a balance sheet as of the end of the such fiscal year and statements of income, Partners' equity and changes in financial position for such fiscal year, all of which shall be prepared in accordance with Section 5.1; (ii) a cash flow statement; (iii) a report summarizing the fees, distributions and other compensation paid by the Partnership for such fiscal year to any Partners; (iv) a report of the Partnership's activities during such fiscal year; and (v) a statement showing all distributions to holders of Partnership Interests in respect of such year. - 40 - (b) All such annual statements shall be unaudited unless two- thirds (2/3) of the Partners shall agree to the contrary. If so required, the accounting firm shall be appointed by the Managing General Partner and consented to by the other Partners, which consent shall not be unreasonably withheld. SECTION 5.3 - Additional Reports The Partnership shall provide to each Partner such additional reports as the Partners deem to be helpful or appropriate or as a particular Partner may reasonably request. SECTION 5.4 - Further Investigations Each of the Partners shall have the further right at its own expense to examine upon reasonable notice and at any reasonable time, any properties, records or operations of the Partnership, and such examination and inspection may be conducted by its own employees and /or by its own counsel, independent certified public accountants, or other representatives; provided however that such examination or inspection shall not unreasonably interfere with the operations of the Partnership. - 41 - 0 0 ARTICLE VI Meetings and Amendments SECTION 6.1 - Meetings of the Partnershi . (a) The Partnership shall schedule a meeting of the Partners for purposes of reviewing Partnership operations and results not less frequently than semi- annually. (b) Any Partner may, at any time, upon three (3) days' prior written notice, call a meeting of the Partners for informational purposes or for the purpose of taking any action requiring the consent or approval of the Partners under this Agreement. (c) All meetings of the Partnership shall be held at reasonable times at the Partnership's principal office or such other place (including specifically any location in or near Chicago, Illinois) as may be reasonably requested by one Partner and agreed to by a majority of the Partners. SECTION 6.2 - Amendments This Agreement may be amended only by 'a written amendment approved pursuant to Section 4.8 and executed by or on behalf of each Partner. - 42 - 0 0 ARTICLE VII Termination of the Partnership SECTION 7.1 - Termination. (a) The Partnership shall be dissolved upon the earliest to occur of (i) the expiration of the term specified in Section 1.6; (ii) the withdrawal or Bankruptcy of any Partner (unless continued pursuant to subsection (c) ; (iii) the written consent of all Partners; (iv) a decree being entered by a court which results in the Partners or Partnership being unable to meet the Partnership's obligations (unless such decree is being duly appealed); (v) substantially all of the Partnership's assets being sold; or (vi) the failure of the remaining Partners to fulfill their purchase obligation pursuant to Section 4.7(e). Upon any such termination, the Partners (or the remaining Partners) shall proceed with the winding up of the Partnership and its assets shall be applied and distributed as herein provided. (b) For purposes of this Agreement, the "Bankruptcy" of a Partner shall be deemed to have occurred sixty (60) days after the happening of any of the following: (i) filing an application by a Partner for, or consenting to a trustee being appointed for, its assets; (ii) a Partner's statutory bankruptcy or filing a pleading in any court of record admitting.in writing its inability to pay its debts as they come due; (iii) a Partner making a general assignment for the benefit of creditors; (iv) a Partner filing an - 43 - • • answer admitting the material allegations of, or its consenting to, or defaulting in answering, a bankruptcy petition filed against it in any bankruptcy proceeding; or (v) an order, judgment or decree being entered by any court of competent jurisdiction adjudicating a Partner a bankrupt or appointing a trustee of its assets, and such order, judgment or decree continuing unstayed and in effect for such period of sixty (60) days. (c) If any Partner shall withdraw or experience Bankruptcy, the Partnership shall not dissolve, if, within ninety (90) days after such withdrawal or adjudication, all the Partners agree in writing to continue the business of the Partnership. (d) Any Partner who dissolves the Partnership in contravention of this Agreement shall, in addition to any forfeiture required by Section 4.7 (b) , be liable, to the Partnership and to the other Partners for any and all damages, losses and reasonable expenses (including, without limitation, any adverse tax consequences resulting from such dissolution). SECTION 7.2 - Payment of Debts; Distributions (a) Upon the winding up of the Partnership, the remaining Partners shall proceed to orderly liquidate the assets and terminate the Partnership, and the proceeds, together with other available proceeds, shall be applied and distributed in the - 44 - following order: (i) to the expenses of liquidation; (ii) to the payment or provision for payments of all the Partnership's debts and liabilities, including any Partner Loans; and (iii) to establishing any reserves which the remaining Partners deem reasonable or necessary to provide for any contingent or unforeseen liabilities of the Partnership or the Partners in connection with the Partnership. (b) After making or providing for the payments described in subsection (a), the amount of liquidating proceeds distributable shall next be determined as follows: A tentative balance for each Partner's Capital Account shall be determined, taking into account the profits and losses of the Partnership for its final period (including expenses of liquidation), and profits and losses from the sale or disposition of the Project and other Partnership items allocated to each Partner pursuant to Section 3.3(c) and (d). Any additional capital contributions required to be made by any Partner shall be available first to discharge the Partnership's obligations described in subsection (a) of this section. Thereafter, any such contributions, together with any remaining proceeds determined pursuant to subsection (a) , shall be the total proceeds available for distribution to the Partners in accordance with subsection (c) of this section. Any such further discharge or - 45 - SECTION 7.3 - Reserve • After the expiration of such period of time as the Partners may deem advisable, the balance of any reserve, established pursuant to the authority in Section 7.2(a) and remaining after such contingencies have been paid, shall be distributed in the manner set forth in Section 7.2. Any such reserve may, in the discretion of the Partners, be paid over to a national banking or other financial institution with trust authority as escrow agent, to be held by it for the discharge of the Partnership's liabilities. Any such amounts, when and if subsequently distributable to the Partners, shall be distributed in accordance with Section 7.2. SECTION 7.4 - ' Final Accounting Each- of the Partners shall be furnished with a statement setting forth the assets and liabilities of the Partnership as of the date of the complete liquidation. Upon the Partners complying with the distribution plan set forth in Sections 7.2 and 7.3, the Partnership shall cease to be and the remaining Partner(s) shall execute and cause to be filed a Notice of Dissolution. ARTICLE VIII Tax Matters SECTION 8.1 - Tax Information As soon as practicable but not later than Seventy -five (75) days after the end of each fiscal year, the Tax Matters Partner - 46 - 0 0 shall send to each Partner a copy of the Partnership's annual Federal income tax return, a Form K -1 and such other tax information as shall be appropriate for the preparation by such Partner of Federal, California, Illinois, and other state or local income or other tax returns. SECTION 8.2 - Returns The Tax Matters Partner shall cause to be prepared and filed on or before the due date (or any extension thereof) Federal, California, Illinois and other state or local tax or information returns required to be filed by the Partnership. The Tax Matters Partner, to the extent that Partnership funds are available, shall cause the Partnership to pay any taxes payable by the Partnership provided that the Tax Matters Partner shall not be required to cause the Partnership to pay any tax so long as the Tax Matters Partner is in good faith and by appropriate administrative or legal proceedings contesting the validity, applicability or amount thereof and such contest does not materially endanger any right or interest of the Partnership. SECTION 8.3 - Elections To the extent that the Partnership may be or is required to make elections for Federal, California, Illinois, and other state or local income or other tax purposes, and to the extent that Partners may be or are required to make such elections concerning the Project or the business of the Partnership, such elections - 47 - shall be made in a manner as is best calculated, in the opinion of the Partners to minimize the cash requirements of the Partnership and the Partners. SECTION 8.4 - Consistency of Tax Treatment No Partner shall treat a Partnership item on its Federal, California, Illinois, or other state or local income or other tax returns or permit an Affiliate to treat a Partnership item on such Affiliate's tax returns in a manner inconsistent with the treatment of such Partnership item on the Partnership's Federal, California, Illinois, or other state or local tax returns. SECTION 8.5 - Tax Matters Partner (a) Pursuant to Code §6231(a) (7) or any subsequent similar provision, SPA is hereby designated as the "Tax Matters Partner ", and shall assume and be responsible for duties provided in the Code and this Agreement. (b) The Tax Matters Partner shall keep the other Partners informed of all administrative and judicial proceedings for the adjustment at the Partnership level of Partnership items, and shall make available to the other Partners copies of any notices or communications received from the Internal Revenue Service, the United States Departments of Treasury or Justice, or any state or local tax authorities. - 48 - • • (c) Each other Partner shall promptly provide to the Tax Matters Partner copies of all correspondence to or from, or summaries of any other communications with, the Internal Revenue Service or the United States Departments of Treasury or Justice or with California, Illinois, or other state or local tax authorities regarding any tax matter or issue relating to the Partnership or any Partnership tax items. (d) No Partner other than the Tax Matters, Partner shall enter into settlement negotiations with the Internal Revenue Service or the United States Departments of the Treasury or Justice or with any state or focal tax authorities with respect to any income tax treatment of Partnership items. The Tax Matters Partner shall be responsible for all such negotiations. Further, no Partner other than the Tax Matters Partner shall file (i) a request for an administrative adjustment of Partnership items under Code §6227(a), (ii) a petition for readjusting of Partnership items under Code §6226(b), or (iii) civil action for refund under Code §6228(b)(2) without first giving reasonable advance written notice of such intended action (including the proposed treatment of the Partnership item(s) and the proposed court, if applicable) to the Tax Matters Partner. SECTION 8.6 - Survival of Tax obligations The provisions of this Article regarding tax matters shall survive the termination of the Partnership Agreement and the termination or transfer of any Partner's interest under the - 49 - • • Partnership Agreement and shall remain binding on any terminating or transferring Partner for a period of time necessary to resolve with the Internal Revenue Service, the United States Department of Treasury or Justice, and any state or local tax authority any and all matters regarding the Federal, state or local income tax or other matters relating to the taxation of the Partnership and present or previous Partners. ARTICLE IX Fiscal Matters SECTION 9.1 - Fiscal Year The fiscal year of the Partnership shall be the calendar year unless the Partnership shall be required to operate on a different fiscal year to conform with the requirements of Code 5706 and the Regulations thereunder. SECTION 9.2 - Partnership Funds The funds of the Partnership shall be deposited in such account or accounts or certificates of deposit which are selected by the Partners. All withdrawals from any such accounts shall be made by the Managing General Partner or a duly authorized agent. Partnership funds shall not be commingled with those of any other person. - 50 - ARTICLE % Capacity and Authority, Registration and Investment Decision, No Broker SECTION 10.1 - Capacity and Authority The Partners each represent and warrant that: (i) purchasing a Partnership interest and entering into this Agreement have been duly authorized in accordance with its respective governing instruments or otherwise and (ii) the consummation of the transactions contemplated by this Agreement will not result in a breach of, or a default under, their charter, bylaws, or any agreement by which they or any of their properties is bound or any statute, regulation, order or any other law to which they are subject. SECTION 10.2 - Registration (a) Each Partner acknowledges that the acquired interests in the Partnership have not been registered under the Securities Act of 1933, as amended, or under the securities laws of any state, in reliance upon applicable exemptions under said laws and may not be assigned or otherwise transferred without registration or an exemption therefrom. - 51 - (b) Each Partner acknowledges that, notwithstanding any provisions contained in this Agreement, no Partnership interest may be offered or sold and no transfer of such interest will be made either by the Partnership or the Partners unless: (i) Such interest is registered under the Securities Act of 1933 and any applicable state securities laws; or (ii) An opinion of counsel for the Partnership is obtained to the effect that such registration is not necessary. SECTION 10.3 - Investment Decision Each Partner acquiring an interest hereby further acknowledges and represents that: (a) Such Partner is acquiring its interest in the Partnership solely for investment purposes and not with the view to any distribution or resale thereof; and, (b) Such Partner has made an independent investment analysis in deciding to become a Partner, has had full opportunity to investigate the business of the Partnership, the qualifications of the other Partners, and the tax and financial implications of an investment in the Partnership and has made such investigation as it has deemed appropriate for such purpose. = *41C 0 SECTION 10.4 - No Broker, Fees or Commissions 0 Each Partner hereby further represents and warrants that there are no known claims for brokerage or other commissions or finder's or other similar fees in connection with the transactions covered by this Agreement insofar as such claims shall be based on actions, arrangements or agreements taken or made by or on its behalf, and each Partner hereby agrees to indemnify and hold harmless the Partnership and each other Partner from and against any liabilities, costs, and damages, with respect to expenses from any party making any such claims with respect to such transactions. ARTICLE XI Miscellaneous SECTION 11.1 - Governing Law This agreement entered into in the State of California and this Agreement and the Partnership's formation and operation shall be governed by and construed in accordance with the laws thereof, without regard to the provisions thereof with respect to conflicts of . law. SECTION 11.2 - Notices (a) Any notice, request, consent, offer or demand required or permitted to be given under this Partnership Agreement shall be in - 53 - writing and shall either be delivered in person or mailed by registered or certified first class mail, postage prepaid, or sent by telex, telecopy or telegram, addressed to the party intended as the recipient as follows unless a Partner shall have requested the Partnership in writing at least five (5) days before the date of a notice to use a different address: If to the Partnership: Sportspark of California 6901 North Casa Grand Highway Tucson, Arizona 85743 With a copy to: Robert E. Neiman, Esq. Dickinson, Wright, Moon, Van Dusen & Freeman 225 West Washington Street Suite 400 Chicago, Illinois 60606 -3418 If to Newco: Newco Enterprises, Inc. 225 West Washington Street Suite 400 Chicago, Illinois 60606 -3418 With a copy to: Robert E. Neiman, Esq. Dickinson, Wright, Moon, Van Dusen & Freeman 225 West Washington Street Suite 400 Chicago, Illinois 60606 -3418 If to Fredcon: Fredcon, Inc. 225 West Washington Street Suite 400 Chicago, Illinois 60606 -3418 - 54 - With a copy to: Robert E. Neiman, Esq. Dickinson, Wright, Moon, Van Dusen & Freeman 225 West Washington Street Suite 400 Chicago, Illinois 60606 -3418 If to SPA: Sportspark of America, Inc. 6901 North Casa Grande Highway Tucson, Arizona 85243 With a copy to: Linda A. King 710 West Ivy San Diego, California 92101 (b) Any such notice, request, consent, offer or demand shall be deemed received, given or served, if mailed by first class mail, on.the third (3rd) day after the day of mailing, and, if sent by 'telex, telecopy'or telegram, twenty -four (24) hours after the time of dispatch, provided customary confirmation of delivery or receipt has been received. SECTION 11.3 - Counterparts This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which shall constitute one Agreement, and the signature of any party to any counterpart shall be deemed to be a signature to, and may be appended to, any other counterpart. - 55 - • SECTION 11.4 - Agreement for Future Execution At any time or times upon the request of any Partner, the Partners agree to sign, swear to, or acknowledge any certificate required by the Partnership Act, to sign, swear to, or acknowledge any amendment or cancellation as required by law, to sign, swear to, or acknowledge similar certificates or affidavits or certificates of fictitious firm name, trade name or the like (and any amendments or cancellations thereof) required by the laws of California, or any other jurisdiction in which the Partnership does, cr proposes to do, business, and cause the filing of any of the same for record wherever such filing shall be required by law. SECTION 11.5 - Entire Agreement This Agreement supercedes and replaces the Partners' prior Agreement of General Partnership dated February 28, 1993, and this Agreement (including the Exhibits hereto) and certain related agreements referred to herein including specifically those set forth on Exhibit C and the Ancillary Agreements now constitute the entire understanding between the parties and also supersedes any prior discussions, correspondence, understandings and agreements between them respecting the within subject matter. There are no representations, agreements, arrangements or understandings, oral or written, between or among the parties hereto relating to the subject matter of this Agreement which are not fully expressed herein, except that the parties acknowledge the following ancillary agreements ( "Ancillary Agreements ") being entered into - 56 - simultaneously with this Agreement: the LaSalle National Bank Agreement. SECTION 11.6 - Severability This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of the jurisdictions in which the Partnership does business. If any provision of this Agreement or the application thereto to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, the remainder of the Agreement and the application of such provision to any other person or circumstances shall not be affected thereby, but rather shall be enforced to.the greatest extent permitted by law. SECTION 11.7 - Captions Any Section titles or captions contained in this Agreement are for convenience only and shall not be deemed part of the context of this Agreement. SECTION 11.8 - Number and Gender All of the terms and words used in this Agreement regardless of the number and gender in which they are used, shall be deemed and construed to include any other number singular or plural, and any other gender, masculine, feminine or neuter, as the context or - 57 - 0 0 sense of this Agreement or any paragraph or clause herein may require, the same as if such work had been fully and properly written in such number and gender. SECTION 11.9 - Holidays In the event that the date on which any act or performance required or permitted hereunder shall be a Saturday, Sunday or other day on which banking institutions in the State of Illinois are authorized to remain closed, such act or performance may be taken or made on the next succeeding business day. ARTICLE %II Certain Proprietary Information and Rights SECTION 12.1 - Trademarks and Tradenames No Partner shall have any right to use the trademark or trade name of the Partnership except to identify products or services of the Partnership, unless such use shall be approved by the Partners. However, nothing herein shall prevent any Partner, or Affiliate thereof, from identifying its affiliation with the Partnership. No Partner shall have any right to use the trademarks or trade name of any other Partner. SECTION 12.2 - No License of Partner Property Nothing in the Agreement shall grant, imply or constitute a license or obligation to license by any Partner, any individually- - 58 - a 0 owned intellectual or industrial property of the Partner to the Partnership or any other Partner. IN WITNESS WHEREOF, the undersigned corporations, by their duly authorized officers, have each caused this Agreement to be executed all as of the day first written above. PARTNER: NEWCO TERPRISES, INC. { By: Paul Bergho Its: President PARTNER: FREDCON, INC. ByL -,-" - Earl Segerdahl Its: President PARTNER: SPORTSPARK PF AMERICA, INC. James Hlixemeyer Its: President - 59 - • EXHIBIT A Table of Defined Terms Term Additional Contributions Advancing Partner Affiliate Agreement Appraisal Ancillary Agreements Bank Bankruptcy Capital Account Capital Transaction Cash Flow Code Committed Capital Default Defaulting Partner Information Managing General Partner Net Capital Proceeds Other Partner Option Partner(s) Partner Loan(s) Partnership Location Section 2.3(b) Section 3.8(e) Section 4.3(a) Preamble Section 4.7(d)(ii) Section 11.5 Section 2.7(b) Section 7.1(b) Section 2.4 Section 3.2 Section 3.1 Section 2.4 Section 3.8(c) Section 3.8 Section � 3 .8 Section 12.1(a)(i) Section 4.2(d) Section 3.2 Section 4.7(d)(i) Section 4.7(d)(ii) Preamble Section 2.7(a) Recitals Ex -A -1 Fable of Defined Terms (continued) T_ erm Location Partnership Act Section 1.1 Poway Lease Recitals Poway Property Recitals Proportionate T_ntarest Section 3.3(b) Project Section 1.4(a) San Clemente Lease Recitals San Clemente Property Recitals Tax Matters Partner Section 8.5 Transfer Notice Section 4.7(d)(i) Transferring Partner Section 4.7(d)(i) Ex -A -2 � a EXHIBIT B Names, Addresses and Interests of Partners Partner Name Partner Address Newco Enterprises, Inc. Fredcon, Inc. Sportspark of America, Inc.' Proportionate Interest 1/3 1/3 1/3 Ex -B -1 • t EXHIBIT C List of Ratified Obligations and Agreements Ex -C -1 ri LEASE AGREEMENT BY AND BETWEEN THE CITY OF POWAY and SPORTSPARRS /KAJIMA A CALIFORNIA JOINT VENTURE 1 0 9 EXHIBIT A LEASE AGREEMENT TABLE OF CONTENTS I. CONVEYANCE OF PREMISES A . Lease of Premises ..............................1 B. Term ............. ..............................1 1. Initial Term ..............................1 2. Renewal Options ...........................1 3. Holdover .... .:....:.......................2 4. Quitclaim of Lessee's Interest ............ 2 C. Rent ............. ..............................2 1 . Annual Minimum Rent .......................2 2 . Annual Percentage Rent ....................3 3. Accounting Gross Receipts/Expenses ........ 4 4. Maintenance and Inspection of Adequate C. BusinessRecords.. ....... .............5 5. Late Payment.. ..... .......................6 6. Employee.Fidelity Bond ; ...................6 7. Cash and Record Handling Requirements ..... 6 8. Additional Rent ...........................7 9 . Net Rent ...................... .. .......7 10.. City Payment for Landscape Facilities ..... 8 11 . Quiet Enjoyment ...........................9 12 . Surrender ... ..............................9 13 . As -Is Condition ...........................9 II. OPERATION AND'MAINTENANCE OF PREMISES; ASSIGNMENT OF LEASE A . Type of Use ..................... ...............9 B. Commencement of Operations; Continuous Use Hours of Operation ..........................10 C. Operational Standards ..... ...................11 D. Maintenance Repair of Premises ...... E. .........12 Alterations or Improvements ................... 14 F . Personnel ........ .............................14 1. Names and Addresses .......................14 2. Complex Manager /Caretaker .................14 3. Other Employees ...........................14 4. Wage Rates ... .............................15 G. Utilities, Taxes and Assessments ..............17 1. Payment by Lessee ......................... 17 2. Lessee's Right to Contest Taxes ........... 17 H. Assignments and Subleases ............... .:...19 I 0 0 III. INSURANCE AND INDEMNITY; CASUALTY DAMAGE A . Insurance ........ .............................20 B. Indemnity ...... ........ ... ................22 C. Exemption of City from Liability ..............23 D. Casualty Damage . .............................23 1.' Destruction by Risk Covered by Insurance..23 2. Damage Not Covered by Insurance ........... 23. 3. Replacement of Lessee's Property .......... 24 4. Damage Near End of Lease Term .............. 24 5. Abatement of Rent .........................24 IV. CONDEMNATION A . Total Taking ..... .............................25 B. Partial Taking ... .............................25 C. Temporary Taking . .............................27 D. Miscellaneous .... .............................27 V. LEASEHOLD FINANCING; RIGHTS OF LEASEHOLD LENDER A. Mortgage of Lease .............................28 B. Estoppel Certificates .........................29 VI. DEFAULTS, REMEDIES, AND TERMINATION A. Lessee's Default . .............................30 B. Notice of Default .............................31 C. City's Remedies .. .............................32 D. City's Termination Rights Upon Lessee's Default .............................33 E. City's Default ............ :................ .34 F. Effect of Waiver of Default ...................34 G. Settlement of disputes ........................35. VII. MISCELLANEOUS PROVISIONS A. Notices, Demands and Communications ........... 35 B. Nonliability of City Officials and Employees..36 C. Enforced Delay: Extension of Time Performance ..... .............................36 D. Covenant Not to Compete ....................... 36 E. Approvals by City. ........ .....................37 F. Litigation Expenses ............. .... ....,.37 G. Severability ...... ...............'.............37 H . Further Assurances .. .........................38 I. Entire Agreement, Waivers and Amendments ...... 38 J. Nondiscrimination .............................38 K. Time of Essence .. .............................39 L . Successors ....... .............................39 M . , Counterparts ..... .............................39 VIII. TIME FOR ACCEPTANCE OF LEASE BY CITY.......... 39 EXHIBIT A - Maintenance Guidelines II SOUTH POWAY SPORTS PARK LEASE AGREEMENT This Lease Agreement, entered into this 16th day of November , 1992, by and between the City of Poway (hereinafter referred to as• "City ") and Sportsparks /Kajima, a California Joint Venture, (hereinafter referred.to as "Lessee "). In consideration of the mutual covenants contained herein, City and Lessee hereby agree as follows: I. CONVEYANCE OF PREMISES A. Lease of Premises City hereby leases to Lessee and Lessee hereby hires from City, pursuant to the terms and conditions set forth in this Lease, that certain real property "Premises ") located within the City of Poway, California, and as'more particularly described in Exhibit A attached hereto and incorporated herein by this reference. The premises are improved with three regulation softball fields, a concession building, four sand volleyball courts, two basketball courts, batting.cages, tot lot area, group picnic area, concrete amphitheater seating, parking lots, lighting facilities, landscaping, a ticket booth, a smaller remote concession building, and 'a maintenance building. B. Term 1. Initial Term The term of the lease agreement shall be ten (10) years commencing on the date of the Certificate of Occupancy issued by the City of Poway (hereinafter the "Commencement Date "). 2. Renewal Options At the end of the initial term of this Agreement, the Lessee has the option to renew this Agreement for two additional and successive five (5) year periods, provided that Lessee is not in default hereof as of the date of the exercise of the option and as of-the date of the expiration of the current term. These options may be exercised by providing written notice to the City at least one hundred and eighty (180) days prior to the expiration of the term or renewal period of this Agreement. Any and all options provided hereunder shall be subject to the approval of the City Council. Said approval shall not be .unreasonably withheld. 3. Holdover Any holding over by Lessee after expiration or termination shall not be considered-as a renewal or extension of this Lease. The occupancy of the premises after the expiration or termination of this Agreement 1 0. . 0 constitutes a month -to -month tenancy, and all other terms and conditions of this Agreement shall continue in full force and effect; provided, however, City shall have the right to apply a reasonable increase in-rent to bring the rent to fair market value and to terminate the holdover tenancy at: will. 4. Ouitclaim of Lessee's Interest On termination of this Lease for any reason, Lessee shall deliver to City a quitclaim deed in recordable form quitclaiming all its rights in and to'the premises. Lessee or its successor in interest shall deliver the same within five (5) days after receiving written demand therefor. City may record such deed only on the expiration or earlier termination of this Lease. If Lessee fails or refuses to deliver the required deed, the City may prepare and record a notice reciting Lessee's failure to execute this lease provision and the notice will be conclusive evidence of the termination of this Lease and all Lessee's rights to the premises. C. Rent 1. Annual Minimum Rent Lessee shall pay City.monthly, in advance, without deduction, offset; prior notice or demand, a fixed Annual Minimum Rent for capital financing by the City for design and construction of the South Poway Sports Park. The Annual - Minimum Rent shall be as follows: First Lease Year of the Initial Term $ -0- Second Lease Year of the Initial Term 155,000 Third Lease Year of the Initial Term 165,000 Annually thereafter 175,155 The Annual Minimum Rent is payable in equal monthly amounts on the first day of each month, as follows: First Lease Year of the Initial Term $ -0- /month Second Lease Year of the Initial Term- 12,916.66 /month Third Lease Year of the Initial Term 13,750.00 /month Annually thereafter 14,59.6.25/month In the event the amount of the capital expenditure by the City for the construction of the South Poway Sports Park by Kajima Engineering and Construction, Inc., is below the contract amount of $2 ',656,324 (two million six hundred fifty -six thousand three hundred twenty -. four dollars), the Annual Minimum Rent payment beginning in the Second Lease Year of the Initial Term will be reduced by an' amount equal to $7,666 (seven thousand six hundred sixty -six dollars) per $100,000 (one hundred thousand dollars) of savings in construction costs. F 2. Annual Percentage Rent In addition to the Annual Minimum Rent, Lessee shall pay City an Annual Percentage Rent, as follows: a. First Lease Year of the Initial Term One (1) percent of all Gross Revenues collected in the First Lease Year. The payment shall be made within thirty (30) days after the end of the First Lease Year. b. Second Lease Year of the Initial Term If Gross Revenues are less than $950,000 for the Second Lease Year, Lessee will not pay an Annual Percentage Rent, If Gross Revenues are equal to or greater than $950,000 for the Second Lease Year, Lessee will pay an Annual Percentage Rent equal to one (1) percent of all Gross Revenues for the year. The payment - shall be made within thirty (30) days after the end of the Second Lease Year. C. Third Lease Year of Initial Term If Gross Revenues are less than $950,000 for the Third Lease Year, Lessee will not pay an Annual Percentage Rent. If Gross Revenues are equal to or greater than $950,000 for the Third Lease Year, Lessee will pay an Annual Percentage Rent equal to one (1) percent of all Gross.Revenues for the year. The payment shall be made within thirty (30)* days after the end of the Third Lease Year. d. All Subsequent Lease Years Lessee shall pay Annual Percentage Rent to the City on a monthly basis for each month of each Subsequent Lease Year. Lessee shall pay City the Annual Percentage Rent within thirty (30) days after the end of the month during which Gross Receipts on which said Percentage Rent was computed were received. The amount of each monthly payment of Annual Percentage Rent will be calculated as follows for the 12 -month period of each Lease Year: One (1) percent of the Gross Receipts for the month until the total Gross Receipts for the Lease Year are equal to or less than $950,000. Eleven and one -half percent•(11.5 %) of that portion of the Gross Receipts for the month which are between $950,000 and $1,050,000 for the Lease Year. 3 • Thirteen and one -half percent portion of the Gross Receipts which are between $1,050,000 for the Lease Year. Fifteen and one -half percent portion of the Gross Receipts which are between $1,150,000 for the Lease Year. ' Seventeen and one -half percent.(17.5 %) of that portion of the Gross.Receipts for the month which are between $1,250,000 and $1,350,000 for the Lease Year. Nineteen and one -half percent (19.5 %) of that portion of Gross Receipts for the month which exceed $1,350,000 for the Lease Year. Example: (13.5 %) of that for the month and $1,150,000 (15.5 %) of that for the month and $1,250,000 • Total $1,400,000 $1,400,000 % $77,250 3. Accountina of Gross Receipts/Expenses. At such time as Lessee submits to City the Percentage Rent, such payment shall be accompanied by a monthly financial statement showing the Gross Receipts derived from all operations at the Premises during the preceding month, together with a detailed itemization of the goods and services provided, and all costs and expenses incurred as well as all deductions-or exclusions therefrom. Lessee shall also provide to City within thirty (30) days after the-end of each calendar year a financial 4 Monthly Year -to -Date Percentage Month Gross Revenue Gross Revenue Rent Due 1 $ 90,000 $ 90,000 $ 900 2 110,000 200,000 1,100 3 100,000 300,000 1,000 4 150,000 450,000 1,500 5 150,000 600,000 1,500 6 150,000 750,000 1,500 7 150,000 900,000 1,500 8 50,000 500 50,000 1,000,000 5,750 9 50,000 5,750 50,000 1,100,000 6,750 10 50,000 6,750 50,000 1,200,000 7,750 11 50,000 7,750 50,000 1,300,000 •8,750 12 50,000 8,750 50,000 1,400,000 9,750 Total $1,400,000 $1,400,000 % $77,250 3. Accountina of Gross Receipts/Expenses. At such time as Lessee submits to City the Percentage Rent, such payment shall be accompanied by a monthly financial statement showing the Gross Receipts derived from all operations at the Premises during the preceding month, together with a detailed itemization of the goods and services provided, and all costs and expenses incurred as well as all deductions-or exclusions therefrom. Lessee shall also provide to City within thirty (30) days after the-end of each calendar year a financial 4 0 0 statement showing the Gross Receipts derived from all operations at the Premises for the preceding calendar year, together with a detailed itemization of the goods and services provided, and all costs and expenses incurred as well as all deductions or exclusions therefrom. If Lessee shall fail to prepare and deliver any such written statement and itemization within the required time, and such failure shall continue after thirty (30) days notice thereof by City to Lessee, then City may cause, but shall not be obligated to cause, an audit to be made of all books, records, and accounts of the operations at the Premises for such delinquent accounting period and may prepare the statement or statements which Lessee shall have failed to prepare and deliver. Lessee shall pay on demand all expenses of such audit and the preparation of any such statements and all sums as may be shown by such audit to be due as rent together with interest on the past due amounts at the rate of two (2) percent overthe Federal Reserve Bank of San Francisco prime rate. 4. Maintenance and Inspection of Adeauate Business Records Lessee shall maintain at the Premises or at its office in 247 Avenide La Pata, San Clemente, California 92672, full, complete, and accurate books, records, and accounts of, all daily Gross Receipts and other records used in calculating the Gross Receipts. Lessee shall keep all such records for three (3) years. Lessee shall also maintain detailed records on the utilization of.the facilities, schedules of teams, contact information for teams, and other pertinent information on the operation and management of the facility. Lessee shall submit hard copies or computer disk copy of these records to the City on a quarterly basis. City and its agents shall have the right at reasonable times upon request, no more than four times in any calendar year, to examine and inspect all of the books and records of Lessee pertaining to Lessee's operations at the Premises, for the purpose of investigating and verifying the accuracy of any statement of Gross Receipts. In addition, City may once in any calendar year cause an audit of the operations of Lessee-to be made by an independent certified accountant mutually agreed to by City and Lessee and if the statement of gross receipts previously made to City shall be found to be inaccurate, then and in that event, there shall be an adjustment and one party shall pay to the other on demand such sums as may be necessary to settle in full the accurate amount of said rent payments that should have been paid for the period or periods covered 5 by such inaccurate statement or statements, together with interest on past due amounts at the rate of two (2) percent over the Federal Reserve Bank of San Francisco prime rate: In the event City and Lessee are unable to agree upon an independent certified accountant within thirty (30) days of City's election to cause an audit, the parties agree that any accountant selected from the "Big 6 accounting firms shall be acceptable to both. If said audit shall disclose an inaccuracy in favor of City, of greater than a five percent (5 %) error with respect to the amount of Gross Receipts reported by Lessee for the period of said report, then Lessee shall immediately pay to City the cost of such audit; otherwise, the cost of such audit shall be paid by City. If such audit shall disclose any willful inaccuracy with respect to Gross Receipts reported by Lessee, Lessee shall pay triple the amount due as a result of the audit. 5. Late Payment Fee Failure of Lessee to pay any of the rental payments required herein on time is a breach of this Agreement for which City may terminate same or take such other legal action as it deems necessary. City expects all compensation to be paid on time and Lessee agrees to pay on time. Without waiving any rights available at law, in equity or under this Agreement, in the event of late or delinquent payments by Lessee, the latter recognizes that City will incur certain expenses as a result thereof, the amount of which.is difficult to ascertain. Therefore, in addition to monies owing, Lessee agrees to pay the City a late fee set forth below to compensate City for all expenses and /or damages and loss resulting from said late or delinquent payments. The charges for late or delinquent payments shall be $50.00 plus interest calculated at the rate of two percent (2) over the Federal Reserve Bank of San Francisco prime rate, assessed monthly on the balance of the unpaid amount. The postmarked date on the letter containing the rental statement and payment will be considered proof of late or delinquent payments. 6. Employee Fidelity Bonds Lessee shall maintain adequate employee fidelity bonds covering all its employees who handle money. 7. Cash and Record Handling Requirements Lessee shall prepare a description of its cash handling and sales recording systems and equipment which shall be submitted to the City for approval. When approved by the City, such systems and equipment, including any revisions thereto approved by the City, shall be utilized by Lessee in its operation hereunder. 6 0 0 Lessee shall be required to maintain a method of accounting of all the receipts and disbursements in connection with the subject concession, which shall correctly acid accurately reflect the Gross Receipts and disbursements received or made by Lessee from the operation of said concession. The method of accounting, including bank accounts, established for the subject concession shall be separate from the accounting systems used for any other business operated by Lessee or for recording Lessee's personal financial affairs. Such method shall include the keeping of the following documents: a. Regular books of accounting such as general ledgers. b. Journals including supporting and underlying documents such as vouchers, checks, tickets, bank statement, etc. C. State and Federal income tax returns and sales tax returns and checks'and other documents proving payment of sums shown. d. Cash register tapes shall be retained so that day -to -day sales can be identified. A cash register must be used in public view, which prints in a dated double tape, indicating each sale and the daily total. e. Any other accounting records that City, in its sole discretion, deems necessary for proper reporting of receipts. Lessee shall use and maintain a cash register(s) on which it shall record all Gross Sales. The cash register shall be nonresetable and sufficient to supply an accurate recording of all sales on tape. Lessee shall not purchase or install the cash register before obtaining the City's written approval of the specific register to be purchased. All cash registers shall have a price display, which is visible to the public. 8. Additional Rent Taxes, property and liability insurance premiums, and utilities payable by the Lessee pursuant to the provisions of this Lease shall constitute Additional Rent and upon the failure of Lessee to pay any of such amounts, City shall have the same rights and remedies as otherwise provided in this Lease for the failure to pay rent_. 9. Net Rent It is the intention of the parties that the rent payments herein specified shall be net to City in each year during the term of this Lease, that all costs, expenses, and.obligations of every kind relating 7 to the Premises (except as may be otherwise specifically provided in this Lease), which may arise or become due during the term of this Lease, shall be paid by Lessee, and Lessee shall indemnify, defend and hold City harmless against such costs, expenses and obligations. 10. City Payment for Landscape Facilities The City will pay the Lessee monthly an amount of $8,000 for maintenance of the following facilities, provided that the facilities are maintained in accordance with the Maintenance Guidelines: 1. All ballfield turf and related irrigation systems. 2. All ground cover, trees, shrubs, and related irrigation systems. The Lessee shall submit invoices for the above amount by the 15th of the month for the previous month's maintenance. The invoice shall be due and payable by the 30th of the month in which it is received, provided that the above referenced facilities are being maintained consistent with the performance standards detailed in Exhibit'B, Maintenance Guidelines. The City's obligation to make such payments shall commence with the first calendar month following issuance of City's notice of final completion of all improvements. The amount of the City's payment shall'be fixed for the first five (5) years of this Agreement. Beginning in the sixth year, the total annual landscape payment shall be calculated as follows: Sportspark bid to maintain landscape $96,000 /year facilities on a per acre basis - 15 acres _ $6,400 /acre City's FY 91-92-average cost per acre to maintain LMD areas $8,000 /acre Percentage of bid to City's cost Bid is 80% of City's cost. O Eighty percent (80 %) of the City's prior year's average cost per acre to maintain LMD areas throughout the City x 15 acres = .total annual landscape payment to Lessee. The Lessee will maintain records of all costs related to the maintenance of the facilities in accordance with Section 5 of this Agreement. 8 0 0 11. Ouiet Enjoyment City agrees that, subject to the limitations expressly set forth herein, Lessee, upon paying the rent and . performing the covenants in this Lease required to be performed by Lessee, may quietly have, hold, and enjoy the Premises during the term of this Lease and any extended term hereof, without hindrance or interruption by City or any party claiming by, through, or under City. 12. - Surrender Upon the termination of this Lease all buildings, structures, improvements, and trade fixtures permanently affixed to the Premises together with all records and computer disks provided to the City shall become the property of City. Lessee covenants to peaceably yield up and surrender the Premises to City, including all such improvements and trade fixtures in good order, repair and condition, reasonable wear and tear, and damage by casualty excepted. At the option of Lessor, Lessee shall further surrender to Lessor all personal property and equipment to operate the facilities; Lessor shall pay to Lessee within sixty (60) days of such 'surrender the Fair Market value or Fair Rental value of..such personal property, subject to setoff against rent arrearage. 13. As -Is Condition The Premises are leased in an as -is physical condition only. By taking possession of the Premises, Lessee acknowledges the Premises are in good and tenantable condition for the purposes intended and does•not hold the City responsible for any repairs improvements thereon. Notwithstanding the foregoing, the City represents and-warrants that the.uses currently conducted on the Premises at the time of execution of this Lease are permitted by local ordinance and are not in violation of any_applicable ordinances or other laws, orders, permits, rules, regulations and requirements of any governmental authority. II. OPERATION AND MAINTENANCE OF PREMISES; ASSIGNMENT OF LEASE A. Type of Use The Premises are being leased to Lessee for the operation and maintenance of a Sports Park, in substantial accordance with this Agreement, or such other commercial recreation and sports activities and related support functions as may be approved by City in its sole discretion. The Sports Park and related facilities shall be operated on a nondiscriminatory basis for 9' general public use and in compliance with all applicable federal, state, and-local laws and regulations. Lessee shall not permit overnight camping or sleeping on the Premises. Lessee shall not use or suffer to be used the Premises for any other purpose or purposes without in each instance obtaining City's prior written consent. In the event City agrees to permit the facilities to be used for other commercial recreation and'sports. activities and related support functions, Lessee understands that City may request a modification of the terms of this Lease, including without limitation, modified provisions regarding the payment of-rent. H. Commencement of Operations; Continuous Use; Hours of operation Lessee shall commence operating the facilities as of the Commencement Date of this Lease. Thereafter, during the remaining term of this Lease, except as provided below, Lessee agrees to cause the facilities to be continuously open and operated to the extent permitted by law and consistent with prudent business practice. Notwithstanding the foregoing, Lessee may cease continuous operation of the facilities for those periods of time identified in the Maintenance Guidelines as "maintenance intervals." If any of the improvements constructed on the Premises are partially destroyed and this Lease remains in effect, Lessee shall continue such business operations to the extent reasonably practical from the standpoint of good business judgment during the period of restoration. In the event Lessee fails to carry on business as herein provided, except as provided under Section VII(C), entitled Enforced Delay: 'Extension of Time of Performance, Lessee shall pay City, in addition to Annual Minimum Rent, an additional charge at the daily rate of one hundred seventy five dollars ($175) (the "non- Operation Charge ") for each and every day or partial day that Lessee fails to carry on business on the Premises as herein provided. The non - Operation Charge shall not commence until thirty (30) days after City has provided written demand to Lessee to resume continuous operation the Premises. If Lessee fails to adequately assume and continue operation of the Premises within fifteen (15) days after the Commencement Date, City shall have the right to terminate this Lease without the necessity for any legal proceedings and without prejudice to any other rights or remedies. City's right to collect the non - Operation Charge shall not affect any of City's 10 M C . . • other rights and remedies pursuant to this Lease, including City's right to terminate this Lease upon a default under Section II (C) below. Prior to the Commencement Date, Lessee shall notify City of Lessee's operating schedule, and shall thereafter notify City sixty (60) days in advance of any change in said schedule. At the commencement of operations, normal hours of operation shall be 7 a.m. to 11 p.m. The park shall close by 12 midnight. The City retains the authority, after consultation with Lessee, to impose reasonable restrictions on hours of operation (not more restrictive than 7 a.m. to 11 p.m.) in the event•City determines the operation on the Premises interferes with the use and quiet enjoyment of nearby properties or for law enforcement or other public health or safety reasons. Operational standards Sixty (60) days prior to the commencement of operations, and annually thereafter and sixty (60) days prior to the commencement of each Lease Year, Lessee shall submit to City a "Facility Operation Plan." Said plan shall contain a description of planned events, including league play and tournaments, as well as hours of operation. The plan shall provide at a minimum for the accommodation of the City sponsored adult softball leagues. The plan shall also contain a schedule of fees for program participants, entry fees, and admission fees. Lessee shall also include in the plan the proposed use of the facility by the general public. This section shall detail facilities available for general public use, hours available for public use, and fees for general public use of facilities. The Facility Operation Plan shall include a description of the proposed marketing and advertising program. Approval of the Facility Operation Plan shall not be unreasonably upheld. Lessee shall comply with all laws, rules, and regulations and governmental authorities having jurisdiction over the Premises and the business and recreational activities thereon. All law enforcement and security measures undertaken by Lessee•on the Premises shall be subject to the prior approval of the Sheriff's Department. Lessee shall provide to City a "Law Enforcement and Security Plan" at the Commencement Date,•and annually throughout the term of this Lease, detailing law enforcement and security procedures to be followed by Lessee on the Premises. All fees and charges for goods and services provided by Lessee at the Premises shall be reasonable and shall be prominently posted. In addition, Lessee shall provide 11 to City a schedule of fees and charges for all goods and services purveyed at the Premises at least two (2) weeks in advance of any initial implementation or proposed change. All fees and charges established by Lessee for activities provided on the Premises shall be subject to the * prior approval of the City Manager, which approval shall not be unreasonably withheld. Lessee shall operate the South.Poway Sports Complex in a competent and professional manner equal to or exceeding that specified in the Facility Operation Plan. City,shall have the right at reasonable times to inspect the premises. Should City find Operational Standards, including but not limited to, site security, have fallen below a minimum acceptable level in any area, Lessor shall notify Lessee in writing of the specified subject areas requiring correction. Lessee shall than have a period not exceeding thirty (30) days to correct said deficiency. D. Maintenance Repair of Premises At all times during the term of this Lease, Lessee shall, at its expense, maintain the Premises and all improvements constructed thereon in a first -class condition, and in good order and repair, free of litter and trash, reasonable wear and tear and casualty damage excepted. Maintenance and repairs shall be accomplished on a regular basis in accordance with the "Maintenance Guidelines" promulgated by the City and attached hereto and incorporated herein by'this reference as Exhibit B. The Maintenance Guidelines may be amended from time to time in the reasonable discretion of the City. At all times during this Lease, Lessee agrees to comply with the Maintenance Guidelines with respect to the Premises. 'City shall have no responsibility for maintenance or repair of the Premises or any improvements constructed thereon. Lessee shall obtain and maintain throughout the term of this Lease a State of California C -27 license for all landscape maintenance activities performed on the Premises. If maintenance operations are to be handled by an'outside landscaping firm or contractor, such firm or contractor shall be licensed in the same manner as required by Lessee above. Lessee shall provide a list of all such firms or contractors to the City prior to start of work. Prior ' to the Commencement Date, and prior to any • substantial changes being made, Lessee shall provide to City a "Maintenance and Operational Plan" in compliance with the Maintenance Guidelines, detailing the time and manner in which grounds maintenance shall be accomplished.. In addition, Lessee shall have the responsibility for all grounds maintenance on the 12 0 0 Premises including trimming, mowing, litter control, replacement of.landscaping including plant and tree replacement as necessary, lawn fertilization and aeration, repair and replacement of slopes and irrigation system components as needed and all other practices normally required to maintain the Premises in a safe, orderly, neat, clean.manner, and to maintain all landscaping in a good and healthy condition'in accordance with the Maintenance Guidelines. Additionally, Lessee shall be responsible for all major structural maintenance and repairs during the Lease Term. Within thirty (a0) days of the Commencement Date, Lessee shall provide to City'a schedule of . proposed major structural repairs and maintenance to be performed by Lessee on the Premises at regular intervals during the Lease Term. These major repairs shall include, but not be limited to, repaving and /or re- asphalting all parking and driveway areas, re- roofing all buildings, and fence replacement. City shall have the right to require Lessee to effect major structural repairs at any time during the term of this Lease, if, in City's reasonable judgment, the repair is required to maintain the required level and quality of operations and activities conducted on the Premises in accordance with Section II(C) above; provided, that, if during the last five (5) years of the twenty (20) year lease Term such major structural maintenance or repairs are capital improvements and /or capital equipment in excess of one hundred thousand dollars ($100,000) in the aggregate, Lessee shall bear only its pro rata share of the annual amortization over the useful life with a reasonable salvage value on a straight line basis of the costs of any such major repairs, and City shall be responsible for the excess above such amount. Lessee shall maintain the South Poway Sports Complex in a competent and professional manner equal to or ` exceeding the standards as identified in the Maintenance Guidelines. City shall have the right at reasonable times to inspect the Premises. Should City find maintenance standards, have fallen below a minimum acceptable level in any area, Lessor shall notify Lessee in writing of the specific subject areas requiring correction. Lessee shall then have a period not exceeding thirty (30) days or a lessor time frame determined by City if the repair affects health, safety, or loss of plant life, in which to effect the needed corrections. Should the Lessee not perform the scheduled maintenance tasks within the required time period, the lessee will not be paid for these tasks. At the City's sole option, the City has the right to grant an extension of time should Lessee fail to complete the corrections, but are diligently being pursued. The City may enter the Premises and effect 13 0 0 E . F. any correction, subject to the above conditions and notification to the Lessee of existing default (under Section VI(A)), Lessee agrees to promptly reimburse City the cost thereof, plus interest of 2% over the Feaeral Reserve Bank of San Francisco prime rate. In the event that Lessee fails to so reimburse the City, the City has the right to deduct all maintenance and repair cost from annual maintenance payment. Alterations or Improvements In the event that any alteration, addition, or change or otherwise to the improvements, or any portion thereof, is required during the term hereof by law or regulation or rule, the same shall be made by Lessee at Lessee's sole cost and expense. Except as provided in Section I.I(C), Lessee shall not make or permit any material structural or exterior alterations, additions or improvements to be made to or upon the Premises without first obtaining the written consent of City. City shall not arbitrarily withhold consent to any requested alteration, additions, or improvements to the Premises. Any alterations, additions, or improvements made by Lessee shall be diligently constructed, at no cost or expense to City and in a good and workmanlike manner according to and in conformity.with any laws, rules and regulations of all governmental bodies and agencies. Personnel 1. Names and Addresses Lessee shall keep City informed, in writing, of the names, mailing addresses, and phone numbers of the joint' venturers and the general manager of the Premises. 2. Complex Manager /Caretaker An experienced general full -time manager for the facilities shall be employed at all times by Lessee. Said manager shall not reside further than one hour's travel time from the Premises. The manager shall be of good moral character with no felony convictions and shall be authorized and available to confer with City or City's representatives at all reasonable times. 3. Other Employees At all times after the commencement of operations, Lessee shall provide sufficient staff with the skills and experience necessary to reasonably provide for the services envisioned and the safety, good conduct and good order of its customers. Lessee shall comply with the provisions of 14 Section VII(J) with.respect to the hiring of employees. All employees of Lessee shall be of good moral character and shall present a pleasant appearance and pleasing manner to the public. City shall'have the right to request the removal of any employee for cause when any such employee reflects discredit upon City for whatever reason. Removal of such employee shall be subject, to the approval of the Lessee, which approval shall not be unreasonably withheld. 4. Wage Rates This section applies only to those employees or subcontractors of the Lessee whose responsibilities include maintenance of landscape facilities for which the Lessee is being reimbursed by the City of Poway. Pursuant to Division 2, Part 7, Chapter 7, Article 2, of the Labor Code of the State of California or local laws applicable thereto, the City has ascertained the general prevailing rates for legal holiday and overtime work in the locality in which this work is to be performed for each craft, classification or type of workman needed.to execute contracts for public work. 'The Lessee is responsible for paying the prevailing wage to those workers who are eligible to be paid prevailing wage by law, otherwise paying at least minimum wage. The City Council has obtained from the Director of the California Department of Industrial Relations a determination of the general prevailing rate of per diem wages and the general prevailing rate for legal holiday and overtime work in the locality in which said work is to be performed for each craft, classification, or type of worker needed. Not less than the determined rates shall be paid to all workers employed in the performance of the contract, pursuant to Section 1774, 1773, and 1773.2 of the California Labor code. Such rates of wages are on file with the Department of Industrial Relations and in the office of the City and are available to any interested party upon request. is • i Attention is directed to the provisions of Sections 1774, 1775, 1776, 1777.5, and .1777.6 of the State Labor Code, excerpt copies of which are appended to the Specifications. Sections 1774 and 1775 require the Lessee and all sub - Lessee to pay not less than the prevailing wage rates to all workmen employed in the execution of the Contract and specify forfeitures and penalties for failure to do so. The minimum wages to be paid are those determined by the State Director of the Department of Industrial Relations.. Section 1776 requires the Lessee and all sub - Lessee to keep accurate payroll records, specifies the contents thereof, their inspection and duplication procedures, and certain notices required of the Lessee pertaining to their location. APPRENTICES - Section 1777.5 requires the Lessee or employing tradesmen in any apprenticeable occupation to apply to the Joint Apprenticeship Committee nearest the site of the public works project and which administers the apprenticeship program in that trade for a certificate of approval. The certificate will also fix the ratio of apprentices to journeymen to be used in the performance of the Contract. The Lessee is required to make contributions to funds established for the administration of apprenticeship program in that trade for . a certificate of approval. The certificate will also fix the ratio of apprentices to journeymen to be used in the performance of the Contract. Information relative to apprenticeship standards, contributions, wage schedules and other requirements may be obtained from the State Director of Industrial Relations or from the Division of Apprenticeship . Standards. CLAYTON ACT AND CARTWRIGHT ACT - Section 4551 of the State Government Code specifies that in executing a public works contract with the City to supply goods, services or materials, the Lessee or sub - Lessee offers and agrees to assign to the City all rights, title and interest in and to all causes of action it may have under Section 4 of the Clayton Act (15 U.S.C. Sec. 15)_ or under the Cartwright Act (Chapter 2 commencing with Sec. 16700) of 16 s • Part 2 of Division 7 of the Business and Professional Code, arising from purchase of goods, services or material pursuant to the Contract or subcontract. This assignment shall become effective when the City tenders payment to the Lessee without further acknowledgement by the parties. PAYROLL RECORDS - The City retains the right to examine the Lessee's..payroll records and to consult with the Lessee's employees to determine if legal minimum wage rates are being paid.* These records must be available within the City limits of the City of Poway. G. utilities. Taxes and Assessments 1. Payment by Lessee In addition to the rents and other payments required to be paid under this Lease, Lessee shall.pay any and all taxes, (including possessory interest tax, personal property tax, leasehold improvements, and sales tax) assessments, and other charges of any description levied or assessed from the Commencement Date until the termination of this Lease, imposed by any governmental agency or entity on or against the Premises and any portion thereof, or on or against any interest. in the Premises (including the leasehold interest created by this Lease), or any Improvements or other property in or on the Premises. Further, Lessee shall pay when due all charges for water, gas, electricity, sewer, and trash collection services to the Premises. 2. Lessee's Right to Contest-Taxes Lessee may at any time, in good faith and upon reasonable grounds, dispute or contest the validity of the whole or any part of taxes upon the Premises, the improvements thereon, or any personal property utilized or situated on the Premises, defend the same, or may in good faith diligently conduct any necessary proceedings to prevent or void or reduce the same. It is understood that Lessee'shall not, in the event of and during the bona fide and diligent prosecution of such proceeding, be - deemed to be in default in respect to the payment of any disputed taxes or similar impositions so long as Lessee complies with the provisions of this Section. Lessee further agrees that any such contest shall be prosecuted to a final conclusion as speedily as is reasonably possible. Lessee shall have the right to contest or protest payment of such taxes so long as: 17 0, . 0 a. Neither the Premises or any part thereof would by reason of such postponement or deferment be in the reasonable judgment of the City in danger of being forfeited, lost, or materially affected; and, b. Lessee shall have deposited with City or at the election of Lessee a bank or trust company ( "Escrow Agent ") situated in San Diego County, California, mutually acceptable to City and Lessee, cash or an irrevocable letter of credit or a bond in the amount so contested and unpaid, together with all interest and penalties in connection therewith, and all charges that may or might be assessed against or become a charge on the Premises or any part thereof•in•such proceedings (to the extent that amounts of all such interest, penalties and charges are then ascertainable). City shall cooperate reasonably in any such context permitted by this Section and shall execute any documents or pleadings reasonably required for such purpose. Any such proceedings to contest the validity or amount of any imposition or to recover any imposition paid by Lessee shall be prosecuted by Lessee at Lessee's sole cost.and expense; and Lessee shall indemnify and hold City harmless against any and all loss, cost or expense of any kind, including, but not limited to, reasonable attorneys' fees and expenses, which may be imposed upon or incurred by City in connection therewith. Upon the termination of any proceedings it shall be the obligation of Lessee to pay the amount of such taxes or part thereof as are finally determined in such proceedings, payment of which may be deferred during the prosecution of such proceedings, together with all costs, fees, interest, Penalties or other liabilities in connection therewith, and, upon such payment, City shall direct-the Escrow Agent to return any amount deposited with it, not theretofore expended, with respect to such taxes; provided, however, City, if requested by Lessee, shall direct that the Escrow Agent disburse the monies on deposit with it directly to the taxing authority to whom the taxes are payable. 18 0 0 H. Assignments and Subleases Lessee shall not voluntarily or-by operation of law assign, transfer, mortgage, sublet or otherwise transfer or encumber all or any part of its interest in the Lease or the Premises without City's prior written consent, which consent shall not be unreasonably withheld. • If Lessee desires to assign or sublet -all or any part of its interest in this Lease, Lessee shall submit in writing to City 1) the name of the proposed sublessee or assignee; 2) the nature of the proposed sublessee's or assignee's business and experience with same; 3) the proposed sublease or assignment; and 4) such financial and other information as City may reasonably request concerning the proposed sublessee or assignee. If and .only if City determines in its reasonable discretion that the proposed sublessee assignee has suitable financial strength, experience and character for operation and control of the Premises will City agree to grant consent to such proposed sublease or assignment. Simultaneously with an assignment, the assignee shall execute an agreement among assignee, Lessee and City assuming all of Lessee's obligations under. this Lease which arise after the date of such assignment (the "Assumption Agreement "). If City accepts such assignment and approves the Assumption Agreement, Lessee shall remain fully obligated under this Lease for only those obligations (including, without limitation, accrued amounts due City)- arising prior to the date of such assignment, unless released in writing by City. City.shall not be required to release Lessee from its obligations under this Lease upon the assignment thereof by Lessee unless City accepts the assignment. As used throughout this Lease, the term "Lessee" shall also include any permitted sublessee or assignee of Lessee. The consent of City given pursuant to the terms hereof shall not act as a waiver of the requirement that such consent be obtained to any subsequent sublease or assignment. Nothing contained herein shall be deemed to prohibit Lessee from assigning its interest in the or the rents and other sums to be received therefrom to a Lender permitted or approved pursuant to Article VI hereof. The rights of the holder of any mortgage, or of any beneficiary, mortgagee, or secured party under such loan.shall be as set forth in Section V. 19 9 0 Any attempted assignment, transfer, mortgage, encumbrance, or subletting of Lessee's interest in the Lease or the Premises in violation hereof shall be void and shall constitute a material breach of this Lease. A transfer between general partners of Lessee, or a transfer of said general partner's interests in this Lease to a third party, provided the general partners maintain management and control of the Lease, or a transfer to a corporation in which the Lessee or the general partners of Lessee own not less than seventy -five percent (75 %) of the corporation's outstanding shares, assuming the general partners of Lessee have full management and control of the corporation and the City is provided with adequate assurance that the corporation is sufficiently capitalized and has and maintains sufficient net worth to perform Lessee's obligations under this Lease, shall not be deemed to be assignments within the meaning of this Lease and shall not require the prior written consent of'City. Lessor and Lessee contemplate that Lessee may assign its interest herein to Sportsparks of America, Inc. at the end of the third Lease Year of the Initial Term or such time as the net operating cash flow in a fiscal year from the operation exceeds the minimum annual lease payment by a ratio of 1.2 to 1, whichever occurs first. "Net operating cash flow" is defined as gross income less costs of sales and operating expenses (excluding rent payments to the City). City will consent to such assignment. III. INSURANCE AND INDEMNITY; CASUALTY DAMAGE A. Insurance Lessee shall, at its sole expense, procure during the term of this Lease and maintain in.effect, a policy or policies of comprehensive general liability, automobile liability, and property damage insurance (or an equivalent blanket polidy) in a good and solvent insurance company or companies for the benefit of Lessee, City, City's officers and employees, and other parties with an insurable interest that may be designated by City and under and by the terms of which City and such other designed parties are protected from and insured against any and all loss, damage or liability of whatsoever nature arising out of or in connection-with the use of or operations on or from the Premises during the term hereof. The co general liability insurance shall inclu a dram shop liability insurance.j The limits of liab any` (policy of general liability insurance upon they commencement of this Lease shall not be less than THREE 20 0 0 .LMILLION DOLLARS ($3,000,000) for injury or death of one/ for more persons and ONE MILLION DOLLARS ($1,000,000),' property damage, or such greater amount based on inflation, as may be required by City's Risk Manager. The limits of liability on the automobile liability insurance shall be not less than one million dollars ($1,000,000) combined single limits. Such policies shall be written as primary policies and not contributory with or in excess of any policies which , City.or other insureds may carry and shall cover and insure the City, its officers and employees, and the other parties designated by City as additional. ,insureds., Any such policies shall provide that any loss shall-be jointly payable to City and any other named insureds designated by them, notwithstanding any act or negligence of Lessee which may otherwise result in a forfeiture of said insurance. Any such policies shall further require thirty (30) days written notice to City prior to cancellation. The limits of liability covered by such policies shall be adjusted for "adequate protection of the interests of'City and Lessee as deemed reasonably appropriate by City on advice of their insurance agent(s) and based upon recreation industry standards not more frequently than once every three (3) years. Lessee shall name Lender'as an additional insured on any and all policies required under this Lease as required by Lender. Further, Lessee shall, at its sole expense, procure and maintain a policy or policies of standard fire and extended coverage insurance,'with vandalism and malicious mischief endorsements, covering all improvements to the Premises and Lessee's trade fixtures, furnishings and equipment on the Premises in an amount equal to one hundred percent (100 %) of the replacement cost thereof. Further, Lessee shall, at its sole expense, procure and maintain a or policies of business interruption insurance in sufficient amounts to cover the Annual Minimum Rent hereunder for a period of not less than one (1) year during ariy casualty loss and restoration of the Premises while this Lease remains in force. Further, Lessee shall procure and maintain in effect during the term hereof a policy of worker's_ ;compensation insurance covering all of its employees employed at-the Premises. Lessee shall, within ten (10) days of the execution of this Lease, provide City with and file with the City Clerk a certificate of insurance _of all such required policies issued by the insurer or its authorized agent on forms approved by City which shall provide evidence of the insurance coverage required herein, including 21 0 .0 contractual liability coverage for the obligation created in Section III(B) except for uninsurable liabilities. Such certificate shall state the provisions of the policies whereby no material change or reduction in coverage or cancellation of said policies shall be effective unless at least thirty (30)• days written notice in advance of the date thereof shall be given to City. City and Lessee each hereby waive any and all rights of recovery against the other, or against the employees, agents, and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, where such loss or damage is insured against under any insurance policy in force at the time of such loss or damage. City and Lessee shall, upon obtaining such insurance, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. The Insurer shall meet the requirements of the City Council standards as adopted by resolution. B. Indemnity Lessee indemnifies and agrees to hold City harmless -from and against any and all claims arising from Lessee's business or from any activity, work or things /done, permitted or suffered by Lessee in or about the Premises, and shall further indemnify and hold harmless, `City from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the 'terms of this Lease, or arising from any negligence of Lessee, or any of the Lessee's agents, contractors or eemployees and from and against all costs, attorneys' fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon, including acts or occurrences involving the negligence of City's; and in case any action or proceedings be brought against City by reason of any such claim, Lessee, upon notice from City, shall defend, the same at Lessee's expense by counsel satisfactory to City'.' Except as set forth below,(Lessee; as a material part of the consideration to City, assumes all risk of, damage to property or injury to persons in, upon or about the Premises and the Perime arising from any cause; and Lessee waives all claims in respect thereof against City, except for damage or injury caused intentionally or negligently by City or its agents or employees. 22 Notwithstanding the foregoing, Lessee from any and all claims the negligence or intentional agents, contractors, employees • City shall indemnify arising directly from misconduct of City, its or officials. C. Exemption of City from Liability Lessee agrees that City shall not be liable for injury to Lessee's business or any loss of income therefrom or for damage to the goods, wares, merchandise or other property of Lessee, Lessee's employees, invitees, customers or any person in or about the Premises, nor shall City be liable for personal injury to Lessee's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain or from the breakage, leakage, obstruction or other defects of pipes; sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or from any other cause relating to the physical condition or location of the Premises, or utility.services provided thereto. D. Casualty Dams e 1. Destruction by Risk Covered _ by Insurance. If the Premises are totally or partially destroyed by a risk . covered by insurance carried by Lessee, rendering the Premises totally or partially inaccessible or unusable, Lessee shall utilize the insurance proceeds and other necessary funds to restore the Premises to substantially the same condition as they were in immediately prior to such destruction. Restoration shall be commenced soon as reasonably practicable, and in no event later than ninety -(90) days after such destruction, and shall be diligently pursued.to completion. 2. Damage Not Covered by Insurance If the improvements to the Premises are totally or partially destroyed by a risk not covered by, or if the replacement cost (independent of Lessee's personal property and tenant improvements) exceeds the limits of the insurance coverage by more than ten percent (10 %),,then Lessee may at its option elect to terminate this Lease by giving written notice to City within fifteen (15) days after determining the replacement cost. Provided, that in such event,.this Lease shall not terminate if City shall, within thirty (30) days after receipt of such notice give written notice to Lessee of its election to cause the repair and restoration of the Premises. The party electing to cause the repair and restoration shall, at its sole expense, provide-the funds necessary therefor and shall thereafter promptly and diligently repair and restore the Premises. To the same extent required in Section III(D)1, Lessee agrees in such 23 0 0 event to assign all insurance proceeds to the party electing to make the repairs. In the event Lessee terminates this Lease pursuant to this Section, Lessee shall, at the option of City, demolish and clear all improvements from the Premises. In the event City requires Lessee to demolish and remove the improvements, the cost of such demolition shall be-paid from available insurance proceeds, if any. In. the event of termination when insurance proceeds are insufficient, such proceeds as are available shall be divided between City and Lessee, with Lessee receiving a proportionate amount of the proceeds in the ratio which the unexpired portion of the Term of this Lease bears to the total Term of this.Lease, and City shall receive the balance of such insurance proceeds. 3. Replacement of Lessee's Property In the event of the damage or destruction of improvements located on the Premises not giving rise to a termination of this Lease, Lessee shall, at its own expense, replace and repair all Lessee's trade fixtures, equipment, machinery, furnishings, furniture and inventory as soon as possible to permit the prompt continuation of Lessee's business from the Premises. 4. Damage Near End of Lease Term In the event more than fifty percent (50 %) in value of the improvementsto the Premises are totally destroyed during the last six (6) months of the Lease Term, Lessee and City shall each have the option to terminate this Lease on written notice to the other of exercise thereof within thirty (30) days after such destruction. 5. Abatement of Rent In the event that a partial damage or destruction of the improvements on the Premises occurs and this Lease is not terminated, there shall be no abatement of rent for a period of one (1) year (the period of the business interruption insurance, which Lessee is required to maintain pursuant to Section III(A)), and Lessee shall continue to utilize the improvements for the operation of its business to the extent it may be practicable to do so. If, after and despite diligent effort, Lessee is unable to fully repair and restore the Premises during said one year period, the minimum rent shall abate from the end of the one year period until the improvements-on the Premises are fully repaired or restored, but only by that proportion that the unusable part of the improvements bears to the whole thereof. 24 IV. A. Total Taking If the entire Premises are taken for any public or quasi- public use under any statute by right of eminent domain, or by purchase by public authority in lieu thereof, this,Lease shall terminate as of the date that possession of the Premises is taken by the public authority or Lessee is deprived of its practical use of the Premises, whichever date is earlier. The net proceeds of the award shall be distributed in the following order of priority: 1. City shall receive that portion of the award which shall constitute compensation for the value of its fee interest in the Premises as encumbered by this Lease. 2. If there are any outstanding leasehold mortgages on the Premises, the leasehold mortgagees shall receive whatever amounts are due under said leasehold mortgages. 3. Lessee shall be compensated for its interest in the Premises, including direct loss of investment in improvements constructed on the Premises, the cost of removal of any fixtures and equipment, and the loss of the economic benefit of Lessee's leasehold estate. ' 4. The remainder of the award, if any, shall be divided between City and Lessee. B. Partial Taking If any portion of the Premises is taken for any public or quasi- public use under, any statute by right of eminent domain, or by purchase by public authority in lieu thereof, and if the taking or purchase does not, in Lessee's reasonable judgment, substantially impair the operation of the facilities, then: 1. The Lease shall continue in full force and effect, except.that the Annual Minimum Rent (but not the Percentage Rent) shall be reduced in the same proportion as the land area of the Premises taken bears to the total area of the Premises immediately prior to such taking; and, 2. The net proceeds of the award shall be allocated in the following order of priority: 25 0 0 a. the payment of the costs of prompt restoration by Lessee, subject to the rights of any leasehold mortgagees, of the improvements located on the Premises to substantially the same character and condition as prior to such taking, to the•extent physically possible; b. compensation to City for the value of its fee interest in the portion of the Premises taken as encumbered by this Lease; C. the payment of all amounts due to any leasehold mortgagee as a result of such taking; d. compensation to Lessee for its interest in the portion of the Premises taken, including without limitation, the value of the leasehold estate, loss of investment in improvements constructed on the Premises, the cost of removal and reinstallation of any fixtures and equipment, and the loss of the economic benefit of that portion of Lessee's leasehold estate; and e. the remainder.of the award, if any, shall be divided equally between City and Lessee. If any portion of the Premises is taken for any public or quasi - public use under any statute by right of eminent domain, or by purchase-by public authority in lieu hereof, and if the taking or purchase, in Lessee's reasonable judgment, renders it impractical to operate the remainder of the Premises, or substantially impairs the operation of Lessee's business thereon, Lessee shall have the option of terminating this Lease without further liability hereunder. If Lessee so elects to terminate, it shall do so by written notice to City no later than sixty (60) days after the date when possession of (a portion of) the Premises shall be taken by the condemnor or Lessee is deprived of its practical use thereof, which notice will specify the effective date of such termination (no earlier than sixty (60) days after the date of said notice). If Lessee does not elect to terminate this Lease, the provisions of Section IV(B) shall govern. 26 0 0 C. Temporary Taking If all or a portion of the Premises shall be taken for any public or quasi- public use on a temporary basis, then: 1. This Lease shall continue in full force and effect without reduction of the Annual Minimum Rent and Percentage Rent; and 2. Lessee shall be entitled to claim, recover and retain any award with respect to such taking, except that if such taking shall be for a period extending beyond the expiration of the term of the Lease, as the Lease may have been extended, City shall be entitled to receive such portion of the award as shall be attributable to the period occurring after such expiration. In the event, however, that any such taking on a temporary basis (or any other act of God, war, civil disorder, prolonged strike, adverse governmental action or other cause beyond the control of Lessee, rendering, in Lessee's reasonable judgment, the Premises impractical to operate, or substantially impairing the operation of Lessee's business thereon) continues for a period in excess of one (1) year, then Lessee shall have the right to tdrminate this Lease upon written notice to City, without further liability hereunder. D. Miscellaneous 1. City and Lessee each agree to promptly notify the other party, and any leasehold mortgagee, upon receipt of any notice from a condemning authority or agency expressing an intention to commence a taking or condemnation of any part of the Premises. The foregoing shall include not only a formal service of legal process received by either City or Lessee, but also any preliminary indication of such intent. Thereafter, City and Lessee shall keep each other and any leasehold mortgagee fully informed as to all aspects of such proceedings and /or negotiations. 2. City, Lessee, and all leasehold mortgagees shall each have the right to represent their respective interests in each proceeding or negotiation with respect.to a taking or . intended taking and to make full proof of their respective claims. No agreement, settlement, sale, or transfer to or with the condemning authority shall be made without 27 the consent of City, Lessee and each leasehold mortgagee. City and Lessee each agree to execute and deliver to the other any instruments that may be required to effectuate or facilitate the provisions of this Lease relating to condemnation. 3. So long as Lessee is not in default under the terms of this Lease, or has commenced'and is diligently proceeding to cure such default in accordance herewith, City agrees to forego and waive its legal right to acquire by eminent domain the estate conveyed by this Lease. 4. A leasehold mortgagee shall have the right,. at its own expense, to participate in any proceedings involving a total or partial taking of the Premises. Leasehold mortgagees shall have the right to receive proceeds otherwise payable to Lessee pursuant to Sections IV(A) and IV(B) above to be paid towards the satisfaction of any outstanding obligations secured by a leasehold mortgage on Lessee's leasehold interest. V. LEASEHOLD FINANCING; RIGHTS OF LEASEHOLD LENDER A. Mortgage of Lease 1. Lessee shall have the right to encumber at any time, and from time to time, the estate created by this Lease (but not the City's interest in the Premises) by a mortgage, deed of trust or other security instrument, including, without limitation, an assignment of the rents, issues and profits from the Premises, to secure repayment of any loan, and associated obligations, to Lessee from an institutional lender (which, for purposes of this Section, shall mean any national or state bank, foreign bank agency licensed in California, federal or state savings and loan association, trust company, insurance company, educational institution, pension, retirement, or welfare fund, charitable foundation, real estate investment trust or any person, firm, or corporation engaged in the commercial finance business or other mortgagee approved in writing by City, such approval not to be unreasonably withheld). Upon request, City shall cooperate with Lessee and promptly execute appropriate documents that may reasonably be required by a• prospective Lender certifying as to whether the leasehold mortgage complies with the restrictions in this paragraph. 28 2. •In the event Lender requires any modification to the provisions of this Section in order to secure its loan, City agrees not to unreasonably withhold consent to such modifications-so long as the interests of City are not materially adversely affected thereby. B. Estoppel Certificates Lessee and City,shall, without charge, at any time and from time to time within fifteen (15) days of.the receipt of the request'of the other party or•the Lender certified by instrument duly executed and acknowledged: 1. That the Lease is unmodified and in full force and effect, or if there have been any modifications, that the same are in full force and effect as modified and stating the modifications; 2. Whether or not there are then any known existing setoffs or defenses against the enforcement of any of the agreements, terms, covenants or conditions hereof or any modifications hereof upon the part of any party to be performed or complied with and if so, specifying the same; 3. The dates, if any, to which the Annual Minimum Rent, Percentage Rent, and Additional Rent have been paid, and a statement as to the advance payment of such.sums, if any; 4. The date of expiration of the current Term of this Lease; 5. The amount of the Annual Minimum Rent, Percentage Rent, and Additional Rent, then payable under this Lease; and, 6. Such other matters as may reasonably be requested. Any such certificate may be relied upon by any party to whom the certificate is directed. However, no party shall be estopped thereafter from asserting that a default has occurred, if at the time of making of the aforesaid certificate, such party had no knowledge of such default. 29 0 a VI. DEFAULTS, REMEDIES, AND TERMINATION A. Lessee's Default The occurrence of any one of the following shall constitute an event of default by Lessee: 1. Failure to pay any installment of Annual Minimum Rent, Percentage Rent, and any r• Additional Rent when due if the failure . continues for a period of ten (10) days after such payment is due and payable.' 2. Abandonment of the Premises (failure to operate the facilities for thirty (30) consecutive days without the prior written consent of City shall be deemed an .abandonment except in the event of an occurrence described in Section III(C) or Section V or except during maintenance intervals as provided in Section II(B) above) . 3. Failure to provide service to the public in accordance with the current approved Facility Operation Plan, failure to maintain the landscaping in conformance with the Maintenance Guidelines or to perform any other provision of this Lease if the failure to perform is not cured within thirty (30) days after written notice has been given by City to Lessee. If the default cannot reasonably be within thirty (30) days, then it shall not be deemed a default of this Lease if Lessee commences to cure the default within said thirty (30) day period and thereafter diligently and in good faith continues to cure the default. 4. The interest or estate of Lessee under this Lease shall be transferred to, passed to or devolve upon, by operation of law, any other person, firm or corporation except pursuant to Section II(G), Section IV, or Section V. 5. The levy of any attachment or execution or the appointment of any receiver or the execution of any other process, of any court which directly or indirectly substantially interferes with Lessee's operations under this Lease and which attachment, execution, receivership, or other process of such court (or the effect thereof) is not vacated, dismissed or set aside within a period of one hundred twenty (120) days. 30 0 . a 6. Lessee shall become insolvent and shall take the benefit of any present or future insolvency statute by making a general assignment for the benefit of creditors, - or filing a voluntary petition in bankruptcy or a petition or answer seeking an arrangement for reorganization or the readjustment of indebtedness under the•Federal bankruptcy laws or under any other law or statute of the United States or of any state law, or consent to the appointment of a receiver, trustee or liquidator of all or substantially all of their property, if same is not vacated, dismissed or set aside within a period of sixty (60) days. 7. By order or decree of a court, Lessee shall be adjudged bankrupt, or an order be made approving a petition filed any of-the creditors, seeking the readjustment of its indebtedness under Federal bankruptcy laws, or any laws or statutes of the United States, or any state thereof, if same is not vacated, dismissed or set aside within a period of ninety (90) days. S. A petition under any part of the Federal bankruptcy laws or an action under any present or future insolvency law or statute shall be filed against Lessee and shall not be dismissed within one hundred twenty (120) days after the filing thereof. 9. Any lien is filed against City's interest in the Premises because of any act or omission of Lessee and is not removed within one hundred twenty (120) days. 10. Any other event described in this Lease as "default" or as giving Lessor the right to terminate this Lease. B. Notice of Default Notices given under this Section shall specify the alleged default and the applicable provisions of this Lease and shall demand that Lessee perform the provisions of this Lease or pay the rent or other sum that is in arrears, as the case may be, within the applicable period of time, or quit the Premises. No such notice.shall be deemed a forfeiture or termination of Lessee's rights under this Lease except as provided in Section VI(C). City shall send copies of all notices given under this Article to Lender at the address provided to City by Lessee. 31 0 C. City's Remedies Subject to the provisions of Section V, the following remedies if Lessee commits These remedies are not exclusive; they a in addition to any remedies now or later law. • City shall have• a default. re cumulative allowed by 1. City may continue Lessee's interest in the Lease and Premises in full force and effect and City shall have the right to collect any Annual Minimum Rent, Percentage Rent or Additional Rent (collectively referred to hereinafter as "Rent ") payable to City when due. During the period Lessee is in default, unless Lessee is.diligently proceeding to cure the default,.City may enter the Premises and relet them or any part of them to third parties for City's account. Lessee shall be liable immediately to City for all costs City incurs in reletting the Premises. Reletting can be for a period shorter or longer than the remaining term of this Lease. Lessee shall pay to City the Rent due under this Lease on.the date such-Rent is due-which payment sha•11 be adjusted by the amount of Rent City receives from any reletting. No act of malfeasance, effort to relet or any other act by City allowed by this paragraph shall terminate Lessee's interest in the Lease unless City notifies Lessee that City elects to terminate Lessee's interest in this Lease. 2. City may terminate Lessee's right to possession of the Premises at any time while an-event of default is outstanding, provided 'that Lessee is not diligently proceeding to cure such default, by giving notice to Lessee. (with a copy to Lessee's Lender of whose name and address City shall have been given notice) specifying the default and a date consistent with the provisions of Section V(A) but not less than ten (10) days after the giving of such notice on which Lessee's interest in this Lease shall terminate, and unless Lessee or Lessee's Lender shall cure such default within the period of time allowed therefor, Lessee's interest in this Lease shall terminate on the date specified therein as fully and completely as if such date were the date originally fixed for the expiration of the Term and Lessee shall then quit and surrender the Premises. No act by City, other than giving such notice to 32 Lessee, shall terminate Lessee's interest in this Lease. On termination, City shall have the rights described in Section VI(D). 3. City shall have the right to have a receiver appointed to collect Rent and conduct Lessee's'business while an event of default is outstanding provided Lessee's has not commenced to cure and is not diligently proceeding to cure said default. Neither the filing of a petition for the appointment of a receiver nor the appointment thereof shall constitute an election by City to terminate this Lease. 4. City may, at any time after Lessee commits a default, cure such default at Lessee's expense. If City at any time, by reason of Lessee's default, pays any sum or does any act that requires the payment of any sum, the sum paid by City shall be due immediately from Lessee to City at the time the sum is paid, and if paid at a later date, shall bear interest at the rate of two (2) percent over the Federal Reserve Bank of San Francisco prime rate per annum from the date the sum is paid by Agency until City is reimbursed by Lessee. D. City's Termination Rights Upon Lessee's Default On termination of Lessee's interest in this Lease under the provisions of Section VI(D), City has the right to receive from Lessee: 1. The worth, as established by a judicial award of the unpaid rent that has been earned at the time of termination. 2. The worth, at the time of the amount by which would have been earned termination until the the amount of the loss proves could have been of the judicial.award, the unpaid rent that after the date of time of award, exceeds of rent that Lessee reasonably avoided. 3. The worth, at the time of the judicial award, of the amount by which the unpaid rent for a period of three (3) years after the time of the award or the balance of the Term after the time of the award, whichever is less, exceeds the amount of the loss of rent that Lessee proves could have been reasonably avoided. 33 . W - 0 4. Any other amount and judicial costs necessary to compensate City for all detriment proximately caused by Lessee's default. 5. "The worth, at the time of the award" as used in paragraphs 1 and 2 is to be computed by allowing interest at the rate of two (2) percent over the Federal Reserve Bank of San Francisco prime rate. "The worth, at the time of the award," as referred to in paragraph 3 above is to be computed by discounting the amount in accordance with accepted financial practice at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1 %) per year. E. City's Default City shall be in default of this Lease if it fails or refuses to perform any provision of this Lease that it is obligated to perform if the failure to perform is not cured within thirty (30) days after written notice of default has been received by City from Lessee. If such default cannot be reasonably cured within thirty (30) days, City shall not be in default of this Lease if City commences to cure the default within the thirty (30) day period and thereafter diligently and in good faith continues to cure the default. Lessee at any time after City commits a default can cure the.default at City's expense. If Lessee at any time by reason of City's default pays any sum or does any act that requires payment of any sum, the sum paid by Lessee shall be due immediately from City to Lessee at the time the sum is paid, and if paid at a later date shall bear interest at the rate of two (2) percent over the Federal Reserve Bank of San Francisco prime rate per annum from the date the sum is paid by Lessee until Lessee is reimbursed by City. F. Effect of Waiver of Default No consent or waiver express or implied by either party to or of any breach of any covenant, condition or duty of the other party shall be construed as a consent or waiver to or of any other breach of the same or any other covenant, condition or duty unless in writing signed by the aggrieved party. No delay or omission in the exercise of any right or remedy of either party on any default by the other party shall impair such right or remedy or be construed as a waiver. The receipt and acceptance by City of delinquent rent shall not constitute a waiver of any other default but shall constitute only a waiver of timely payments for that particular rent payment involved. 34 G. Settlement of Disputes Any controversy or claim arising out of or relating to this Lease Agreement, or the breach thereof, shall be settled by arbitration, alternative dispute resolution, mediation or JAMS as agreed to in advance by the parties. The award rendered by the Arbitrators shall be final and binding, and judgement upon it may be entered in any Court having jurisdiction hereof. The parties to this Agreement consent to the use of discovery proceedings to the full extent provided for under the California Code of Civil Procedure, Section 1283.05, in the event of arbitration. Such discovery proceedings may include, but not be limited to, depositions, interrogatories, requests for admission, and orders for the production and examination of documents, person, and things. In the event of any dispute arising over the scope or nature of discovery, the arbitrator(s) shall set the terms and conditions of discovery. Such orders shall be binding on the parties. VII. MISCELLANEOUS PROVISIONS A. Notices, Demands and Communications Formal notices, demands and communications between City and Lessee hereunder shall be sufficiently given if dispatched by registered or certified mail, postage prepaid, return receipt requested, to the following principal offices of City and Lessee: LESSOR City of Poway 13325 Civic Center Drive Poway, CA 92064 LESSEE Kajima Engineering and Construction, Inc. 200 S. Los Robles Avenue, Suite 400 Pasadena, CA 91101 -2431 LESSEE Sportsparks of America, Inc. 6901 North Casa Grande Highway Tucson, AZ 85743 Such written notices, demands and communications may be sent in the same manner to such other addresses as either party may -from time to time designate by mail as provided in this Section VII(A). Such notices, etc. shall be deemed received within forty- eight (48) hours' 35 f • after mailing. B . C . D. Nonliability of City officials and Employees No member, official or employee of City shall be personally liable to Lessee in the event of any default or breach by City or for any amount which may become due to Lessee under the terms of this Lease. Enforced Delay: Extension of Time of Performance In addition to specific provisions of this Lease, performance by either party hereunder shall not be deemed to be in default where delays or defaults are due to war, insurrection, strikes, lockouts, riots, floods, earthquakes, fires, casualties, supernatural causes, acts of the public enemy, epidemic, quarantine restrictions, freight embargoes, lack of transportation, governmental restrictions or priority, litigation, usually severe weather, inability to secure necessary labor, materials, or tools, delays of any contractor, subcontractor, or supplier, acts of the other party, acts or failure to act of any or governmental agency or entity (other than the acts or failure to act of City) inability to obtain adequate water supply to maintain the Premises in accordance with the Maintenance Guidelines; where such inability is caused by drought- induced water restrictions or any other causes beyond the reasonable control or without the fault of the party claiming an extension of time to perform. Inability of Lessee to obtain financing shall not be grounds for an extension of time. An extension of time for any-such cause shall only be for the period of the enforce delay, which period shall commence to run from the time of the commencement of the cause. If, however, notice by the party claiming such* extension is sent to the other parties more than thirty (30) days after the commencement of the cause, the period shall commence to run only thirty'(30) days prior to the giving of such notice. Times of performance under this Lease may also be extended in writing by the parties. Covenant Not to Compete During the term of this lease, City agrees that prior to operating or permitting to be operated in any other public park in the City.in competition with Lessee's contemplated use of the Premises (a) a commercial softball business for adult softball leagues, adult softball tournaments or other comparable commercial adult softball events or (b) an outdoor commercial volleyball business for adult volleyball leagues, adult volleyball tournaments or other commercial volleyball adult events, City shall orally and in writing notify 36 s � E. F. G. Lessee and provide Lessee an opportunity to accommodate the proposed activity on the Premises. If Lessee declines to do so, or fails to respond within ten (10) days after receipt of notice from City, City shall be free to accommodate the activity without regard to the restriction in this Section VII(D). Lessee agrees that City shall have the unrestricted right to arrange and operate other children's /youth softball, volleyball and related activities in the City without the prior consent of Lessee. In addition to the foregoing, City agrees that prior to operating in any other public park in the City any Group Outing (as such term is defined below) for which the City is providing recreational programming and event planning (including, without limitation, catering services and organization, and supervision of recreational activities), City shall orally and in writing notify'Lessee and provide Lessee an opportunity to accommodate the proposed activity on the Premises. If Lessee declines to do so or fails to respond to City within ten (10) days after receipt of notice from City, City shall be free to accommodate the activity without regard to the restriction set forth herein. "Group Outing" shall mean and refer to corporate picnics, private parties, and private recreational functions, -but shall exclude all City- sponsored activities and events on all City -owned property. This restriction also excludes private individuals, groups or entities who intend to provide their own recreational programming and /or catering services in connection with the use of a public park in the City. Approvals by City Except as elsewhere specifically provided herein, wherever this Lease requires City to approve any contract, document, plan, specification, drawing'or- other matter, such approval shall not be unreasonably withheld. Litigation Expenses In any litigation arising out of any disputes regarding this Lease by either party, the prevailing party shall. be entitled to recover its reasonable litigation expenses, including attorneys' fees and costs. Severability If any provision of this Lease is held to be unenforceable or invalid by a court of competent jurisdiction, then the remaining provisions of this Lease shall not be affected thereby and shall remain in full force and effect. 37 H . I . J . 1 6 Further Assurances rl Each of the parties hereto agree to do any further acts which may be reasonably necessary to carry out the purposes of this Lease. In connection therewith, the parties hereto agree that within a reasonable time after execution of this Lease, they each will execute a memorandum of this Lease to be recorded in the County Recorder's office of the County of San Diego. Notwithstanding anything contained in the Joint Venture Agreement between Kajima and Sportsparks, each Joint Venturer shall be jointly and severally liable for any and all obligations under this Lease Agreement. . Entire Agreement, waivers and Amendments This Lease includes 40 pages and one Exhibit, which constitutes the entire understanding and agreement of the parties. This Lease integrates all of the terms and conditions mentioned herein or incidental hereto, and supersedes all negotiations or previous agreements between the parties with respect to all or any part of the subject matter hereof. All waivers of the provisions of this Lease must be in writing and signed by the appropriate officials of both parties, and all amendments hereto must be in writing and signed by the appropriate officials of both parties. Nondiscrimination Lessee herein covenants by and for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through it, and this Lease is made and accepted upon and subject to the following conditions: That there shall be no illegal discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, sexual preference, marital status, national origin, or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure, or enjoyment of the Premises nor shall Lessee itself, or any person claiming under or through it, establish or permit any such practice or.practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of licensees, tenants, lessees, sublessees, subtenants, or vendees in the Premises. The foregoing provisions shall be binding upon and shall obligate City and Lessee and any transferees or 38 s � assignees of either of them. R. Time of Essence Time is of the essence of each provision of this Lease. L. Successors This Lease shall be binding on and inure to the benefit of the parties and their successors except as may otherwise be provided herein. M. Counterparts , This Agreement may be signed by the parties in several counterparts and each of the signature pages shall be deemed to be an original copy and combined shall be a document binding on all parties. VIII. TIME FOR ACCEPTANCE OF LEASE BY'CITY This Lease, when by Lessee and delivered to City, must be authorized, executed, and delivered by City within thirty (30) days after the latest date of signature by Lessee or this Lease shall be void, except to the extent that Lessee shall consent in writing to further extensions of time for the authorization, execution and delivery of this Lease. The date of this Lease shall be the date when the Lease shall have been signed by City which date is the date set forth next to the signature on behalf of City. 39 THE CITY OF POWAY Date October 27 , 1992 By jll� . Bowersox, City Manager ATTEST:. Marjo ie K. Wahlsten, City Clerk APPROVED AS'TO FORM: Step n . Eckis, City Attorney LESSEE SPORTSPARKS /KAJIMA, A CALIFORNIA JOINT VENTURE Date `/CBS / gyp 1992 By James Hilkemeyerf President A Joint Venturer By L --- " Koji Hayashi Exec. Vice Pres. A Joint Vent rer 40 MAINTENANCE GIIIDELINES 41 EXHIBIT B MAINTENANCE GUIDELINES TABLE OF CONTENTS SPECIAL CONDITIONS 1. DESCRIPTION OF PROJECT AND INTENT .......................1 2 . OBJECTIVES ................ ..............................1 3. SCOPE OF WORK ..... ............................... .....2 4. WORKING HOURS .............. ..............................3 5. LEVEL OF MAINTENANCE ...... ..............................3 6. SUPERVISION OF CONTRACT ... ..............................3 7. SPECIFICATIONS ............ ..............................3 8. COMPLIANCE WITH APPLICABLE LAWS .........................3 9. EXAMINATION OF SITE WORK ... ..............................4 10. QUALITY OF WORK AND MATERIAL ............................4 11. WORKMANSHIP AND SUPERVISION .............................4 12. RESPONSIBILITY FOR WORK ... ..............................5 13. EQUIPMENT ............:.... ..............................5 14. SAFETY REQUIREMENT ........ ..............................5 15. STREET CLOSURES, DETOURS, BARRICADES ....................5 16. RECORDS ...........*...... .......... ......................6 17. EMERGENCY SERVICES ........ ..............................6 18. SPECIALTY OPERATIONS ...... ..............................6 19. SCHEDULES ................. ..............................6 20. PERFORMANCE DURING INCLEMENT WEATHER ....................7 21. UNDERGROUND EXCAVATIONS ................................... 7 22. ACTS OF GOD, VANDALISM, AND LOSS DUE TO THEFT RESPONSIBILITIES........... ..........................7 TECHNICAL MAINTENANCE SPECIFICATIONS I. GENERAL LANDSCAPE /SITE MAINTENANCE REQUIREMENTS .......... 8 1. NATURAL AREA SLOPE' MAINTENANCE ..........................9 2. DRAINAGE FACILITIES ....... ..............................9 3. IRRIGATION MAINTENANCE .... .............................10 4. TREE MAINTENANCE .......... .............................12 A . Pruning .............. .............................12 B: Watering ............. .............................12 C. Fertilizer /Pest Control.... .....................13 D. Staking and Guying ... .............................13 5. SHRUB MAINTENANCE ......... .............................14 A . Pruning .............. .............................14 B. Fertilizer /Pest Control ...........................14 6. VINES MAINTENANCE ......... .............................14 7. GROUND COVER.... ........ .............................15 A. Trimming ........................ ................15 B. Fertilizer ............ .............................15 C. Pest Control .. ...... .............................15 D. Renovation / Replacements ...........................15 8 . TURF...... .............. .............................16 A. Watering .. ........... .............................16 B. Mowing /Edging.. .... .............................16 C. Renovation/ Verticut .. .............................16 D. Fertilizing .......... .............................17 E. Pest Control ......... .............................17 9. HYDROSEED ......... i .. .............................17 10. PEST CONTROL .............. .............................17 11. WEED CONTROL .............. .............................18 12. FERTILIZATION ............. .............................20 13. REPLACEMENT OF PLANT MATERIAL ..........................22 14. NEW LANDSCAPING ............ .............................22 15. CLEANUP .............. 23 16. HARDSCAPE MAINTENANCE ..... .............................23 17. GENERAL GROUNDS POLICING .. .............................24 18. BALLFIELD MAINTENANCE...... ......................... 24 A. • ..................... ..................:..........25 .......... .... ... ... .............25 B. General. � � C. Preparation of Ball Diamond asDoneby Concessionaire's Personnel ......................25 D . Watering .............. .............................26 E. Dragging .................. ..... ................26 F. ' Repair of Home Plate and Pitcher's Mound Areas .... 27 ° G. Semi - Annual Special Maintenance ................... 27 II. LIGHTING AND OTHER ELECTRICAL SYSTEM MAINTENANCE ....... 27 III. WALLS, FENCES, AND GATES ... ............................28' IV. BUILDINGS AND ANCILLARY STRUCTURES ..................... 29 V. MAINTENANCE FREQUENCY SUMMARY ..........................30 VI. STANDARD MATERIALS ........ .:...........................31 II L CITY OF POWAY SOUTH POWAY SPORTS PARR SPECIAL CONDITIONS 1. DESCRIPTION OF PROJECT AND INTENT The intent of these specifications is to provide a full and complete maintenance by the Lessee at South Poway Sports Park, herein described, and that such park be kept in a clean, aesthetically pleasing, healthy, vigorous, and well - kept•state at all times. 2. OBJECTIVES The objectives set forth herein are general results to be achieved by the maintenance methods set forth in the - Technical Maintenance Specifications.. The purpose of these objectives is to allow the Lessee to assist in interpreting the long -range appearance of the landscaped areas and to- assure that the design criteria and objectives established by the City are being met. When it is obvious that the methods specified are not adequate to meet the general appearance guidelines, that additional frequencies or special pruning are required, the Lessee shall adjust the schedule accordingly, at no cost to the City. The landscape goal for the South Poway Sports Complex is to visually unify the various land uses and maintain a standard of quality for community appearance and safety. This will protect and enhance real estate values, as well as intensifying the image of the City of Poway as a pleasant and attractive place to live. The overall effect of the shrub and tree plantings is to establish an informal, natural effect. Therefore, pruning and trimming practices should reflect this natural feeling. Avoid pruning activities that would create a formal hedge or topiary effect. Ground cover areas should have sharply defined edges when meeting the hardscape. High visibility areas such as medians, parkway and slope planting adjacent to streets, paths, and sidewalks shall have a well groomed appearance. Dead wood, branches, leaves, and flowers should be removed 1 from the plant material and surrounding area as soon as practical after they occur. The maintenance personnel should be constantly aware of the overall general appearance of these critical areas. Plant material (excepting ground covers) shall be allowed to take on an informal edge whenever possible, when meeting structures, masonry, or other landscape elements. Plant material has been selected for low water requirements. In the event of a water shortage, a gradual transition from normal water application to reduce water application shall take place over a three (3) to four (4) month period. Water only as required to allow penetration into the soil and avoid excess run off. Once plant material'is established, water only to maintain healthy plant growth. All.playing fields are to be maintained in aesthetic and safe conditions. Water cycles will need to be monitored to allow the turf areas not to be in a condition to allow patron hazards. Playing fields will also need to be monitored closely to abate all soil depressions caused by rodents and users. 3. SCOPE OF WORK FOR LESSEE A. Furnish all labor, equipment, materials, and supervision to perform maintenance'as described herein including, but not limited to, the following: 1. Landscape /Site a. Weeding, cultivating and brush control both mechanically and with chemicals b. Fertilizing C. Shrub trimming, pruning,.training d. Tree pruning and staking e,. Irrigation control f. General pest and rodent control g. Mowing, verticutting, h. General litter control and grounds policing i. Irrigation system maintenance and repair j. Plant replacement , k. Hardscape cleaning 1. overseeding M. Access roadway clearance and visibility maintenance n. General drainage structure and system maintenance o. Ballfield preparation MG -2 2. Lighting and.Other Electrical Systems . 3. Walls, Fences, and Gates 4. Buildings and Ancillary Structures 4. WORKING HOURS Normal working hours for maintenance purposes shall be an eight -hour day between the hours of 7 a.m. and 6 p.m.,. Monday through Friday. Care shall be made as to not making excessive noise adjacent to residences before 8 a.m. S. LEVEL OF MAINTENANCE All work shall be performed in accordance with the maintenance standard, as stated in the enclosed maintenance specification description. Standards and frequencies may be modified from time to time as deemed necessary by the City for the proper maintenance of the site. 6. SUPERVISION OF CONTRACT A. All work shall meet Poway. There shall Lessee and the City progress and to est monthly maintenance writing to the City with the approval of the City of be a monthly meeting with the representative to determine 3blish areas needing attention. A schedule will be submitted in at the beginning of each month. B. Any specific problem -area which does not meet the conditions of the specifications set forth herein shall ..be called to the attention of the Lessee. 7. SPECIFICATIONS These specifications are intended to cover all labor, material and standards of architectural, electrical, landscaping,.and mechanical workmanship to be employed in the work called for in these specifications or reasonably implied by terms of same. Work or materials of a minor nature which may not be specifically mentioned, but which may be reasonably assumed as necessary for the completion of this work shall be performed by the Concessionaire as if described in the specification. S. COMPLIANCE WITH APPLICABLE LAWS The Lessee shall have in his possession and be familiar with all safety regulations issued by the State Division of .Industrial Safety and shall comply with these and all other applicable laws, ordinances, and regulations governing MG -3 9 . 10. 11. Affirmative Action programs and health and safety. The Leesee shall provide all safeguards and protective devices and take any other action necessary to protect the health and safety of employees on the job and safety of the public in connection with the performance of the work required by this contract. Nothing in these standards shall be construed to relieve the Lessee from compliance with all applicable laws, whether municipal, county, state, or federal. EXAMINATION OF BITE AND WORK City makes no representation about the order or condition of the work area nor does the City warrant that the work area will be free from defects, either apparent or hidden, at the commencement of, or at any time during the term of the agreement. Lessee must examine the location, physical conditions, and surroundings of the work area and judge for themselves the extent to which these factors will influence the performance of the contract work. By entering into the agreement, Lessee shall be deemed to-have agreed to accept the condition of the work area in its "as is" condition with the intent to upgrade or modify existing deficiencies to the maintenance specifications. QUALITY OF WORK AND MATERIAL All material and equipment furnished by the.Lessee shall be new, reasonable grade, and free from material defects and imperfections, unless otherwise hereinafter specified. Workmanship shall be in accord with the best standard practices. Both materials and workmanship shall be subject to the approval of the City of Poway. All materials used shall be approved in advance by the City of Poway. Such approval shall not be unreasonably withheld. WORKMANSHIP AND SUPERVISION A. The Concessionaire shall provide a work force sufficient to complete the work as.it is specified. B. Work shall be performed by competent and experienced workers. Electrical, building, plumbing, irrigation, mechanical maintenance and repairs shall be performed by workers skilled and experienced in the appropriate systems. C. The work force shall include a skilled, experienced and competent supervisor who shall responsible for adherence to the specifications. D. Pesticide operations, where required, be performed by a California State Licensed pest control MG -4 operator. The Lessee shall be responsible for compliance with all local, state, and federal laws and regulations regarding pesticide usage. E. All personnel working at the park shall be of good character, neat appearance, and in appropriate dress as approved by the City of Poway. All personnel shall wear identification badges or patches. 12. RESPONSIBILITY FOR WORK The Lessee shall be responsible for all damages to people and /or property that occur as a result of the fault or - negligence of said Lessee or his employees in connection with the performance of the work. 13. SAFETY REQUIREMENT A. All work performed under this contract shall be performed in such a manner as to provide maximum safety to the public and where applicable, comply with all safety standards required by CAL -OSHA. The City of Poway reserves the right to issue restraint or cease and desist orders to the Lessee when unsafe or harmful acts are observed or reported relative to the performance of the work under this contract. B. The Lessee shall maintain the park to be reasonably free of hazards to - persons and /or property resulting from his operations. 14. STREET CLOSURES, DETOURS, BARRICADES A. Warning signs, lights and devices shall be installed and displayed in conformity with the "Manual of Warning Signs, Lights and for use in performance of work upon highways issued by the State of California, Department of Transportation and as directed by City staff. B. If the Lessee fails to provide and install any of the signs or traffic control devices required hereby or ordered by the City staff, staff may cause such signs or traffic control devices to be placed by others, charge the costs therefore against the Lessee, and deduct the same from the next progress payment. 15. RECORDS A. The Lessee shall keep accurate records concerning all of his employees or agents and provide the City with names, addresses, and telephone numbers of employees to be called in emergency. B. The Lessee shall complete a monthly maintenance report MG -5 • indicating work performed and submit this completed report monthly to the City of Poway. 16. EMERGENCY SERVICES The Lessee will provide the City with names and telephone numbers of at least two qualified persons who can be called by City representatives when emergency maintenance conditions occur during hours when the Lessee's normal work force is-not present.' These Lessee representatives shall respond to said emergency with 60 minutes from receiving notification. 17. SPECIALTY OPERATIONS Written notification of all "specialty type" maintenance operations shall be given to the City in the monthly work schedule unless -it is an emergency or nonroutine. In those cases, 48 hours notice will be given prior to each of these operations by the Lessee. "Specialty type ".maintenance operations are generally defined as: (1) Landscape; pre - emergence weed control, turf aerification, turf dethatching, seeding, preventive and curative application for turf fungicide and all pesticide applications; (2) Buildings; painting, roofing, signage, facade modifications; (3) •Hardscape; sidewalk replacements, parking lot overlays and striping; (4) Fencing replacement; (5) Mechanical and electrical equipment upgrading or replacement. In the event of emergency work required to prevent hazard to persons and /or property, notice will be given to the City within twenty -four (24) hours of after commencement of such emergency work. 18. SCHEDULES A. Annual Schedule 1. The Lessee shall provide an annual maintenance schedule indicating the time frames when items of work shall be accomplished per the performance requirements. 2. The annual schedule shall be submitted for City approval upon the commencement date of agreement. 3. The Lessee shall submit revised schedules when actual performance differs substantially from planned performance. B. Performance on Schedule 1. The Lessee has been provided the maximum latitude in estabiishing work schedules which correspond to its manpower and equipment resources. MG -6 19. 20. 21. PERFORMANCE DURING INCLEMENT WEATHER During the periods when inclement weather hinders normal operations, the Lessee shall adjust his work force in order to accomplish those activities that are not affected by weather. UNDERGROUND EXCAVATIONS Lessee shall be responsible for locating all underground utility lines to insure the safety of his work crew and to protect in place existing utility equipment before commencing any excavation. Lessee shall contract the City and Underground Service Alert (1- 800 - 422 -4133) before commencing any excavation to locate underground service line. ACTS OF GOD, VANDALISM, AND LOSS DUE TO THEFT RESPONSIBILITIES Repairs, and cost of repairs, to maintenance items caused by acts of God, vandalism, and loss due to theft shall be the responsibility of the Lessee. MG -7 CITY OF POWAY SOUTH POWAY SPORTS PARK TECHNICAL MAINTENANCE SPECIFICATIONS I. GENERAL LANDSCAPE /SITE MAINTENANCE REQUIREMENTS A. . All maintenance functions shall be performed in accordance with the following specifications and at the frequencies indicated. Standards and frequencies may be modified from time to time as deemed necessary by the City for the proper maintenance of the park. B. All operations will be conducted so as to provide maximum safety for the public. C. Lessee will keep all gutters, curbs, and walks adjacent to contract areas free of weeds, trash, and other debris. D. Lessee will keep sidewalks free of algae where constant runoff occurs. E. Leaves, paper, weeds, and any other debris will be removed from landscaped areas and disposed of off operations. F. Lessee will clean sidewalks, roadways, and any other areas littered or soiled by his maintenance operations. G. The Lessee shall maintain the premises clean of debris at all times. Upon completion of any work project, the Lessee shall remove remaining excess materials, waste, rubbish, debris, and his construction and installation equipment from the premises. Any dirt-or stains caused by the work shall be removed. H. Prune plant materials adjacent to roadway intersections to provide adequate sight distance for vehicles entering the intersection. I. Prune plant materials so that all traffic control signs are clearly visible to approaching drivers. J. Immediately notify the City about any unusual and hazardous conditions in the work site and rectify said MG -8 conditions. 1. NATURAL AREA SLOPE MAINTENANCE A. All natural slope areas shall be•maintained in a manner to encourage natural desirable vegetation and protect a site from erosion, while presenting a well groomed appearance. 1. Desirable annual, biennial and perennial plants shall be maintained at their natural heights.. Weed growth and grass plants shall be regularly removed before they reach 6 in height. 2. Tree, wells shall be kept as bare soil unless ground cover is present. Weeds shall be removed 3 before they reach " in height. 3. Growth of woody plants shall be encouraged except where it interferes with circulation, maintenance activities, roadways, drainage facilities, fence lines, or other structures. Dead branches of plants shall be removed regularly. 4. Trim plant material regularly adjacent to curbs, sidewalks and roadways to provide for proper, unobstructed circulation. . B. Pest Control 1. All rodents, insects, and other pests shall be reasonably controlled by the'Lessee. Particular attention to burrowing rodents is necessary to protect the site from slope failures. Any control measures should be approved first by the City. 2. Pre - emergents and short -term soil sterilents may be used, as approved, by the City. 2. DRAINAGE FACILITIES A. All drainage structures shall be checked and cleaned monthly or as needed to ensure consistent unrestricted water flow. B. Any damage to structures shall be noted immediately to the City of Poway and repaired or replaced by the Lessee. t- 3. IRRIGATION MAINTENANCE A. The key to water conservation and maintaining a healthy landscape is the use of intelligent irrigation management•practices. Parkway soils are shallow, have low permeability and low organic content. Therefore, the Lessee shall exercise special care to use water MG -9 9 0 effectively and avoid run -off. The Lessee will be responsible for replacement of all plant materials that die from over /under watering. In the event of a water shortage and /or City, County, State, or Federally imposed water restrictions, Lessee shall use his best efforts to maintain the appearance set forth in Exhibit C. Lessee will not be responsible for replacement of plant materials that die from under watering during periods of water shortages or water restrictions. B. At least twice each month, the system shall be physically observed while functioning to ensure efficient operation. Proper coverage and working capability shall be provided at all times. C. Adjustments will be made to prevent excessive runoff onto streets, sidewalks, right -of -way or other areas not meant to be irrigated. Sprinkler heads shall be maintained and adjusted, kept cleaned out and free from overgrowth which may obstruct maximum operation. Valves and heads will be adjusted to keep all systems operating at manufacturer's pressure specifications, provided that the City is able to provide such pressure. Valve throttling and pressure gauging shall be employed to prevent heads from fogging and allow passage of effective sized droplets. All sprinkler heads on each valve shall be of the same manufacture (matched precipitation and spray pattern coverage). D. The Lessee shall turn off all controllers when rainfall has made it unnecessary to provide supplemental irrigation. E. Areas not provided with an irrigation system shall be hand watered by the Lessee. This includes situations where the automatic system is inoperable for any reason. The Lessee shall be responsible for providing all his own equipment, pumps, nozzles, hoses and couplers to accomplish the task: F. The Lessee is responsible for any loss of use due to malfunctioning or the lack of water for any cause except natural disasters, water shortages, or water restrictions previously described above. The Lessee is also responsible for irrigation water which impacts surrounding properties or creates traffic hazards due to excessive runoff. G. Automatic valves shall not be operated manually except for testing and periodic maintenance. H.• In support of the City's strong endorsement of water conservation as a result of better management tools, moisture sensors shall be the primary determinant for scheduling irrigation. Sensors shall be maintained in accordance with MG -10 . 0 . 0 manufacturer's'specifications. They will be used to develop an irrigation scheduling pattern based on need, rather than a fixed timetable. The backup tool for irrigation decisions is the soil probe, which shall be utilized to monitor sensor performance. And, last, there are the trees that will provide visual indicators when transpiration needs are not being met. Through prudent use of the first two tools, it is the Lessee's responsibility to ensure that these symptoms do not occur. I. Newly planted areas shall receive special attention until plants are established.* Adequate water shall be applied to promote normal, healthy growth. Proper berms or basins shall be maintained during the establishment period. J. All repairs to the irrigation system shall be made according to the original details. The Lessee is responsible for making repairs of the system and keeping it functioning properly in every way. K. The Lessee shall submit to the City's Representative or his agent a copy of the irrigation schedule for each controller. (See appendix.) L. Lessee is responsible for adjusting the height of sprinkler risers to compensate for'growth of the plant materials. M. Each system shall be flushed out annually as a preventative maintenance measure. N. Controller enclosures must be painted once annually to keep from rusting. Color shall be.determined by the City Representative. O. When possible, all remote control valves shall-be identified with a painted blue 3 x 3 x 3 triangle on the sidewalk or curb nearest the valve to indicate its location. The location of quick couplers will be identified with a painted red two inch dot on the sidewalk or curb nearest the quick coupler. The location of sensor installation shall be identified with a painted red two -inch dot on the curb opposite. the sensors. P. All irrigation shall be performed between the hours of 10 p.m. and 6 a.m. MG -11 6 0 4. TREE MAINTENANCE A. Pruning 1. Evergreen trees shall be thinned out and shaped when necessary to prevent wind and storm damage. The primary pruning of deciduous trees shall be done during the dormant season. Damaged trees or those that constitute health or-safety hazards shall be pruned at any time of the year as required. 2. All pruning cuts shall be made to lateral branches, or buds, or flush with the trunk. "Stubbing" will not be permitted. 3. Remove no more than fifty percent (50 %) of a plant's foliage during pruning operations. 4. Trees shall be pruned to allow eight foot (8 clearances for pedestrians, twelve foot (12 clearances above the curb gutter, and ten -foot (10 clearance above trails. 5. Pruning the lower branches.of young trees will not be permitted. Lower branches shall only be "tipped back" to encourage caliper growth. 6. Surface roots that have become a maintenance or appearance problem shall be removed, especially those adjacent to paved areas. Surface roots shall be properly severed, cuts painted, and roots recovered without delay. 7. Any on site shall be maintained according to specific.guidelines. Trees shall be selectively pruned to remove unsightly or poorly crotched limbs. Unsightly or interlacing growth such a V- shaped branches or forks shall-be thinned out. out of scale limbs shall be cut back to bring tree into balance. B. Watering 1. Trees shall not be watered until a moisture check has been made or representative points in the landscape. Use of a probe or other tool to check the moisture in the root ball as well as the soil surrounding the root ball. The need for water shall dictate the frequency of watering by the automatic sprinkler system. 2. Maintain a large enough water basin around plants so that enough water can be applied to establish moisture through the major root zone. MG -12 0 4 C. Fertilizer /Pest Control 1. Fertilizer is to be a City approved balanced commercial fertilizer, applied once annually or as often as required to keep trees healthy. Fertilizer is to be applied in the drip zone of the tree, not to main stem or rootball area,.and shall be gently cultivated and thoroughly watered in to prevent burning the tree. 2. Ailing or stunted trees, which fail to meet City standards, will receive additional supplements to correct any deficiencies. 3. Control or prevent plant pests and diseases with properly used insecticides, fungicides, and herbicides. Weed around tree wells once a month. D. Staking and Guying 1. Tree stakes, ties, and guys shall be checked monthly and corrected as needed. Ties shall be adjusted to prevent girdling. Broken stakes or guy wires shall be replaced. Stakes, ties, and guys shall be removed as needed. 2. All restaking shall be done with two inch (2 by ten foot (10 ledge pole stakes treated with copper naphthanate and pointed at one end. Adjust length to fit tree. Tree supports shall be corded rubber straps; nail to sides of stake with one inch (1 roofing nail. 3. For Eucalyptus, remove stakes after first year or at the beginning of the growing season, whichever comes first. 4. For trees other than•Eucalyptus, consider removal of the existing stakes and guys when the trees attain a trunk caliper of four inches (4 If unstable at this time, replacement shall be decided by the City's Representative. S . SHRUB MAINTENANCE All shrubs on the site shall be maintained so as to guarantee their vigorous and healthy growth according to the best horticultural practices, utilizing proper pruning techniques, fertilizer applications, and pest control procedures. A. Pruning 1. Prune shrubs as required to maintain health and safety, as well as for general containment and appearance. MG -13 2. The objectives of shrub pruning are the same as for trees. Shrubs shall not be clipped into bailed or boxed forms. Retain as much of the natural characteristics or branching a's possible. 3. All pruning cuts shall be made to lateral branches or. buds or flush with the trunk. "Stubbing" will not be permitted. 4. Pruning shall be accomplished by removing woody stems from the inside of shrubs at least twice a year. Topping of shrubs shall be done only after interior selective branch pruning has been completed. 5. Remove dead flower stalks or spent blossoms to present a neat, clean appearance. B. Fertilizer /Pest Control 1. Apply a City approved balance commercial fertilizer to provide optimum growth and health to all shrubs. Water in well to prevent burning. 2. Apply insecticides, fungicides, and heras necessary to control pests. 6. VINES MAINTENANCE All vines shall be maintained so as to guarantee their vigorous and healthy growth according to the best horticultural standards, utilizing the proper watering, tying, fertilizing and pest control procedures. A. Deep water vines in pockets not provided with sprinklers -to assure optimum growth. B. Check espaliered vines and maintain properly.* Nails shall not be used in masonry walls. Secure vines with appropriate ties to promote directional growth. C. Apply a City approved balanced commercial fertilizer to provide optimum growth and health. Water in well to prevent burning. . 7. GROUND COVER Ground cover shall be maintained so as to guarantee its vigorous and health growth according to the horticultural standards, utilizing the proper trimming, fertilizing, pest control, and renovation procedures. MG -14 A. Trimming 1. Ground cover beds shall be maintained within their intended bounds and shall not be permitted to encroach into lawns, shrub beds, sidewalks, or adjacent areas, or in any manner deemed undesirable by the City's Representative. 2. Trim back ground cover from controller units, valve boxes, quick.couplers, other structures or walls, and walks. Keep trimmed back approximately four inches (4 from walks for appearance and containment. B. Fertilizer Apply a City approved, balanced, commercial fertilizer at a minimum rate of six (6) pounds per one thousand (1,000) square feet per year in six (6) applications during year of new planting of ground cover. All other areas will be fertilized a minimum of once annually or as required by the City's Representative. C. Pest Control 1. Ground cover areas shall be carefully cultivated regularly and kept free of litter. 2. Control weeds, with pre- emergent herbicides, but also with selective systemic herbicides. 3. Employ chemical control to protect plantings from insects, diseases and snails. , D. RenovationfReplacements 1. Ground cover shall be renovated in September by cutting it back and applying one (1) application of a City approved, balanced.commercial fertilizer. 2. If replanting is required to maintain the continuity of the ground cover area, replacements shall be as approved by the City's Representative, using cuttings from adjacent ground cover areas. S. TURF Turf shall be maintained so as to guarantee its vigorous and healthy growth to the best horticultural standards, utilizing the proper watering, mowing, renovation, fertilizing, and pest control procedures. Iq MG -15 0 0 A. Watering Turf shall be irrigated, as required, to maintain horticulturally acceptable growth and color and to encourage deep rooting. Generally, irrigation will be applied at a rate to provide one inch (1 of water per month. Daily water should be avoided whenever possible, in favor of scheduling applications every other night or twice each week. Additional irrigations shall be performed in the event of unusually hot /dry weather conditions (as are present during-winter Santa Ana conditions, or other times of low humidity or high winds, or during a prolonged high temperature period during the summer months). Allow the lawn to be dry before mowing. All irrigation is to be performed between the hours of 10 p.m. and 6 a.m. B. Mowing /Edging 1. The turf shall be mowed to a height of one inch (1 to one and one -half inches (1 1/2 weekly during the warm season. Frequency of mowing may need to be adjusted during the cooler months. A rotary mower with sharp blades shall be used.. Avoid removing more than one -half (1/2) of-the grass blade at any one time.' Damage to trees, obstacles, or lawn caused by wheel ruts shall be repaired by the Lessee at his expense. The grass clippings shall be: caught and disposed of legally off -site. 2. Trimming and edging shall be performed weekly by mechanical means. Frequency of trimming and edging may need to be adjusted during the cooler .months. C. Renovation / Verticut 1. Renovate /verticut all lawn areas once per year at a time when there will be the least amount of stress to the lawn, preferably in winter. The scheduling will be recorded on the-Maintenance. Schedule Chart. 2. Lawns shall be mechanically aerated with a plug J aerator with one -half inch (1/2 tines at least once per year or more often as required to reduce compaction and stress on the turf areas. 3. Shaded out areas of lawn shall be reseeded with an approved shade tolerant grass seed. MG -16 • D. Fertilizing 9 . 10. City approved, balanced, be applied so as to keep will vary seasonally in management practices. E. Pest Control • commercial fertilizers should the lawn green. The types accordance with good turf 1. Turf areas shall be inspected regularly for signs of diseases and pests. The Lessee is responsible . for applying the appropriate remedy at the recommended amounts. The name of the product applied and the treatment shall be entered on the Maintenance Schedule. 2. Lessee shall maintain a weed -free lawn at all times by either chemical or mechanical means. The Lessee shall be especially careful if applying chemicals to control weeds because of possible damage to the lawn. Before such applications are made,-the turf should be well established and in a vigorous condition. Pre - emergent chemical control is recommended to reduce weed seed germination. All chemicals applied must be recorded on the Maintenance Schedule Chart and coordinated with the-City's Representative or his agent. HYDROSEED Existing hydroseeded areas same manner as the ground may be impractical (i.e., device may be used to cut hydroseeded cover. PEST CONTROL on- site.shall be treated in the cover areas. In areas where this 2:1 slope areas), a weed eating down weeds taller than the A. The Lessee shall provide complete and continuous control and /or eradication of all plant pests and - diseases, including weeds, and shall comply with all City, county, state, and federal regulations or laws regarding chemical controls. B. The Lessee shall assume all liability and responsibility for the use of all chemical controls. 1. Care shall pesticides the target used which the target materials be taken in transferring and mixing to prevent contaminating areas outside area. Application methods shall be ensure that materials are confined to area. Spray tanks containing leftover shall not be drained on the site to MG -17 prevent any contamination. Disposal of pesticides shall be within the guidelines established in the California Food and Agricultural Code. 2. Spray equipment shall be in good operating conditions, quality,*and design to efficiently apply materials the target area. Drift will be minimized by avoiding.high pressure applications and using water soluble drift agents. 3. Pesticides shall be selected from those materials which characteristically have the lowest residual persistence. Use of emulsifiable concentrates shall be used when possible to limit windblown particles. The use of adjuvants will be to* increase pesticide efficiency thereby reducing the total amount of technical material required to gain control. 4. Pesticides shall be applied at times which limit the possibility of contamination from climatic and other factors. Early morning application shall be used when possible to avoid contamination from draft. Applicator shall monitor forecasted weather conditions to avoid making applications prior to inclement weather to eliminate potential runoff of treated areas. Irrigation water applied after treatment shall be reduced to increase pesticide efficiency. It shall be applied only in quantities of.which area is capable of receiving without excessive runoff. 11. WEED CONTROL A. Keep basins and areas between plants free of weed All trees in ground cover areas shall have a•12" radius of open soil maintained around the base of the trunk. This will reduce damage to tree trunks and roots by machinery and by excess water. Use recommended, legally approved herbicides, such as Round -Up, whenever possible to control growth in this open area. Use mulches to help prevent weed seed germination. Weeds that have germinated shall be eradicated either by chemical or mechanical means, within three (3) weeks of germination or before the plants set seeds. B. , Weeds shall be removed as needed from all shrub areas, ground cover beds, and planters, and shall be removed weekly from all cracks in paved areas, including sidewalks, curbs, asphalt, all hardscape, and areas covered with ornamental rocks. This means complete removal of all weed growth. For the purpose of this MG -18 Specification, a weed will be- considered as "any undesirable or misplaced plant," including, but not limited to, artichokes, tumbleweeds, etc. Weeds shall be controlled either by hand, mechanical, or chemical methods. The City's Representative may restrict the use of chemical weed control in certain areas. C. All plant materials within a four (4) foot area adjacent to improved surfaces, such as concrete sidewalks, service roads, and pathways will be continuously controlled so that height does not exceed twelve inches (12 D. Plant material normally classified as weeds will be treated as wild flowers in the natural open space areas, with the following exceptions: 1. Pampas grass, artichoke, and tumbleweed will be continually controlled to reduce fire or safety hazards. 2. Annual plants that attain a height of six inches (6 11 ) inches or more in the seed stage will be mechanically controlled upon completion of cycle to reduce fire hazard in areas deemed necessary by the City's Representative. 3.• Open space areas behind existing home shall be kept free of weeds within one hundred feet (100 of the houses. If there is not 100' of clearance available, notify the Poway Fire Department (679- 4338) to come out and make a field determination of the allowable area for a fire break. The fire break shall be created by mowing down weeds a minimum of two (2) or three (3) times per year, or as needed. All maintenance performed in ' open space areas outside the scope of work is an extra. 12. E. The Lessee shall maintain a ten foot (10 strip next to planted areas free of weeds. FERTILIZATION A. The Lessee shall inform the City's Representative.al. least forty -eight (48) hours before beginning any fertilization and shall have previously submitted a schedule of application showing the site, date, and approximate time of application of the fertilizer. Submission of the fertilizer schedule does not release the Lessee from any of the other obligations described in this paragraph, or in the following paragraph. MG -19 0 a The intensity of the fertilization schedule, i.e., timing, or the number of sites per day or week, cannot be set up to preclude at -site requirement. B. Fertilizers shall be inorganic, dry, pelletized formulation. Application shall be in accordance with manufacturer specifications. C. The fertilizer shall be delivered to the site in the original unopened containers bearing the manufacturer's guaranteed analysis. Damaged packages will not be accepted. The Lessee shall furnish the City's Representative with duplicate signed, legible copies of all certificates and invoices for all fertilizer to be used in the execution of this Contract. The invoices must state the grade, amount, and quantity received. Both the copy to be retained by the City and the Concessionaire's copy must be signed by the City's Representative, on site, before any material may be used. The Lessee may not begin the application until the obligations in paragraph above have been complied with. D. Fertilizers used shall have the following guaranteed* analysis and /or approved equivalent: Area: Total Nitrogen: 45% Particle Size: Shall be a uniform pelletized material. Complete: Total Nitrogen: 16% Available Phosphoric Acid (P derived from Ammonium Phosphate: 6% Water Soluble Potash (K,O) derived from Sulfate of Potash: 8% Sulfur (s) derived from Ammonium Sulfate, Gypsum,' and Sulfate of Potash: 17% Iron (Fe) 1.5% Potential acidity 1550 pounds Calcium Carbonate per ton. MG -20 E. Fertilizers shall be applied to shrubs, ground cover, and small trees (3 caliper and smaller) at the rates and times specified below. (Minimum) Complete: . 15 -5 -8: 4 pounds per 1,000 square feet - March 1 -15, July 1 -15 Complete: 15 -5 -8: 6 pounds per 1;000 square feet - October 1 -15' Adequate irrigation will precede and immediately follow the application of fertilizer to force fertilizer material to directly on the soil surface. F. In making application of fertilizer granules, - precautions shall be taken to contain these materials in the planting areas. Caution should be used when using.a cyclone spreader which tends to throw material onto paved areas. The use of gravity flow spreaders will keep materials contained in planting areas, eliminating /reducing sidewalk stains. G. When climatic factors cause problems of the general use of• fertilizers, an adjustment of the fertilizer schedule may be necessary. If possible, avoid application'of fertilizers prior to forecasted windy weather, heavy rain, which might affect stability. After fertilizer application, monitor watering schedule to eliminate runoff leaching of fertilizer materials. H. Agriform 21 gram plant tablets shall be applied to trees and shrubs that require supplemental.feeding. Annual fall feeding shall be based on one (1) twenty - one (21) gram table per one -half inch'(1 /2 caliper of tree or shrub. Place tablets six (6) to eight (8) inches deep at drip zone areas by using a soil probe to make a hole for inserting tablets. Water in _thoroughly. 13. REPLACEMENT OF PLANT MATERIAL A. The Lessee shall notify the City's Representative within two (2) days of the loss of plant material due to any cause. Plant material not replaced within one (1) week will be replaced by the City at the Lessee's expense. MG -21 1 0 0 B. The Lessee shall supply the labor and all materials to replace any tree, shrub, ground cover, or other plant which is damaged or lost as a result of Concessionaire's faulty maintenance or negligence. The size and species of replacement plant materials shall be as directed by.the City's Representative. C.- Any plant damaged or lost through acts of God, vehicular damage, theft, or mysterious damage that does not occur as a result of the performance of the work by the Lessee shall be replaced in kind and size as approved by the City's Representative. The Lessee may supply and plant the replacement material as specified. by the City's Representative and shall bill the total replacement costs separately. D. In order to ensure maximum healthy growth and overall aesthetic appearance of plantings in the work area, it may be desirable to replace certain plants. The necessity or desirability of such plant replacement - shall be determined by the City's Representative. Where such plant replacements are to be made, all plants may be provided and installed by the City at no expense to the Lessee, or may be replaced by the Lessee with cost negotiated at the time of occurrence. E. All remedial landscaping will conform to the City of Poway's Guidelines and specifications for Landscape Development. 14. NEW LANDSCAPING The Lessee shall pay particular attention to areas with new landscaping with regard to irrigation, fertilizer, replacement of plants and pruning practices. Newly landscaped areas require more care during the establishment period. The Lessee will be fully responsible for any loss of new planting materials due to anything other than vandalism or acts of God. 15. CLEANUP A. The Lessee shall remove promptly, all debris generated by his performance of.the operation or maintenance in the specifications of this contract. Immediately after working in areas of public streets and walks, driveways, and paved areas, the Lessee shall clean them with suitable equipment. All debris and clippings shall be removed and disposed of legally off -site. No debris will be allowed to remain on the site at the end of the work day. MG -22 0 0 B. In all areas covered by this Contract, litter, including, but not limited to, bottles, animal droppings, cans paper, cardboard, metallic items, and other debris, including illegally dumped materials, shall be removed from the site by the Lessee twice a month. C. Hazardous materials, including, but not limited to, wire, broken glass,'jagged metal, and similar kinds of litter.shall be picked up and removed from the site by the Lessee upon notice or observation thereof. D. Shrub areas not planted with ground cover shall be raked and cultivated a minimum of twice per month. E. All walks-shall be kept clean and free of debris, weeds, and hazards'to foot traffic at all times during all maintenance operations. Walks should be kept clean and free of dirt and debris on an as- needed basis or on a minimum of once weekly. 16. HARDSCAPE MAINTENANCE A. On a daily basis, concrete and asphalt areas, including driveways, parking areas, sidewalks, roadways, and patios shall be checked and cleaned. 1. All expansion joints and cracks are to be maintained free of weeds. 2. Dirt, litter,'and other debris must be removed on a daily basis. 3. Inspect for safety hazards, including tripping hazards, holes, or other conditions. Immediately report such to the City of Poway. B. Vacuums, air brooms, sweepers, or other approved means may be used to clean hardscape areas. However, debris shall not under any circumstance be blown or otherwise swept onto adjacent streets or property. All.debris must be picked up by the Concessionaire and removed from the site. C. All parking lots and roadways shall maintain striping and other traffic control devices as required by the City Traffic Engineer. Parking lots and roadways shall be restriped every two years or as necessary-to maintain safe vehicular movement. D.. All on -site parking lot and roadway failures shall be repaired by the Lessee. MG -23 • 17., GENERAL GROUNDS POLICING is A. The Lessee shall provide general grounds policing and inspection at a minimum of once daily. 1. Provide safety and facility inspection and immediately report any deficiencies to the City of Poway. Lessee shall be responsible to repair below standard conditions of all structures and fixtures, including, but not limited to: a . b. C . d. • e. f. 9• Light standards and fixtures Benches /tables Fountains Walls, fences, gates Trash dumpsters /trash cans Signage Graffiti 16. BALLFIELD MAINTENANCE A. The ballfield infields are to be maintained on a daily basis, whenever play is expected. Outfield turf shall be maintained in accordance with general turf maintenance requirements. The outfield areas shall be checked at least weekly for holes which should be filled immediately. This work shall be completed before the times scheduled for use of the fields. Baseball field maintenance includes watering, dragging, filling in sunken areas, installing bases, burning and maintaining lines, and raking all sand areas for debris, and removing water puddles and mud holes. Recognizing that baseball /softball diamonds are a high - use facility and that their proper care and maintenance is critical to the safety and well -being of the user - public, as well as a deterrent to liability litigation, it is necessary to establish . 'standards to ensure adequate playing conditions. B. General The responsibility for the condition and maintenance of baseball /softball diamonds under the supervision of the Lessee shall be as follows: 1. The Lessee's employee responsible for the area in which the diamond is located shall be charged with the overall responsibility for the condition and maintenance of the diamond.. This individual MG -24 0 0 shall, on a daily basis, observe the conditions of the diamond and take those measures necessary to ensure the suitability of the diamond for play. Definition: Suitability for play - A diamond shall be deemed suitable for play when it is smooth and free of debris, water, mud, rocks, ruts, berms, low spots, and any unnamed condition deemed hazardous. Field must be checked by 11 a.m. each day for-the above condition. Standing water and wet mud must be removed prior to use. 2. Lessee shall be responsible for the installation of base anchors, pitcher plate, and home plates. Lessees personnel shall be responsible for the burning of foul lines in advance of each playing session. The foul lines that extend on the grass and also the out -of- bounds lines on the grass should be burned in or delineated in an alternative fashion as approved by the City. In marking the diamond, a string should be,drawn from the point of home plate to the outside edge of first base, and then from the point of home plate to the outside edge of first base, and then from the point of home plate to the outside edge of the third base to ensure straight lines and ease of markings. C. Preparation of Ball Diamond as Done by concessionaire's Personnel 1. During the baseball season, diamonds must be cared for daily to provide continuing high standard of condition. Such preparation is described sequentially below. 2. Preliminary Watering Home.plate and pitcher's mound will receive the heaviest watering as these areas get the most use during actual playing time. Slightly less water will be applied to first, second, and third base areas. 3. Leveling Using a garden rake welded to the back, and pitcher's mound shaped, leveled, and present, the dimple with a two -foot metal'strip the soil in the batter's'box should be loosened, raked, tamped down firmly. If at the pitcher's mound shall MG -25 t 9 be maintained at a graduated elevation to 10" above the playing surface with a diameter of eight to ten feet, the center of which shall be 18" in front of the pitcher's plate. Soil, which has been worked away around each base, must be replaced in the proper area and tamped down firmly. D. Watering 1. The diamond shall now be watered thoroughly with Q the proper amount of water to provide a suitable condition for. dragging. As a rule, the appearance of small water bubbles should indicate sufficient watering. A thin layer of water on the surface is not sufficient. A fine spray of water shall be used. E. 2. In all watering of the procedure is to'water hose to the rear. Do areas. Dragging diamonds, the correct away from yourself with the not walk on the watered 1. Brick dust diamonds require moisture penetration to prevent a hard, dry condition from developing. It is, therefore, important that daily dragging to break the crust be performed. Dragging shall not be done without first watering the field to prevent dust from rising with dragging. The speed of the dragging vehicle shall not exceed 5 mph. The drag used for this purpose should be a minimum 3' x 4' and have 2/3" protruding spikes. 2. Upon completion of the crust - breaking drag, a smoothing drag shall be undertaken. The drag is similar to a metal foot scraper, constructed of heavy interwoven metal squares. The size of the drag is 4' x 6 1 . 3. In all dragging, the correct procedure is to begin in the area adjacent to the backstop and drag in overlapping, concentric circles until the entire skinned area is covered. Care should be exercised to prevent build -up of brick dust, causing a raised berm -under the inner edge of the outfield and infield grasses, or against the backstop and other fences. MG -26 s • F. Repair of Home Plate and Pitcher's Mound Areas 1. Heavy watering must be done to the home plate area and pitcher's mound area after any holes have been filled in. The amount of water applied should not be so much as to prevent playability within 15 -30 minutes. 2. - Water should be applied with a mist spray.to the point of saturation, then allowed to soak in. Repeat this process until soil is damp all the way through. G. Semi - Annual Special Maintenance 1. A ballfield - infield mix shall be added to each infield annually to restore it to original. 2. All fields shall be regraded and then rolled. 3. All base anchors, home plate and valve box heights shall be adjusted when regraded.. 4. Turf areas shall be cleared of any ball field infield mix and the turf heights adjusted level with the infield. 5. All drain boxes shall be cleaned and infield grades adjusted for proper drainage'. II. LIGHTING AND OTHER ELECTRICAL SYSTEM MAINTENANCE A. All lighting and electrical systems shall be maintained in a manner that will allow said systems to function as designed per manufacturer's specifications and provide for a safe environment for al-1 park visitors. 1. All lighting and electrical systems shall be checked weekly or as needed to ensure proper operation and safety. 2. Sports lighting systems shall be tested annually for proper footcandle lighting levels appropriate to the type of sport played. Softball Infield 30 Outfield 20 Volleyball 20 footcandles minimum footcandles minimum footcandles minimum MG -27 i • Any deficiencies shall be rectified by the Lessee, including but not limited to reaming of fixtures, replacement of bulbs, ballasts, and other equipment and cleaning of fixtures lenses. 3. All burned out lighting fixtures shall be replaced by the Lessee within 72 hours of detection. III. WALLS, FENCES, AND GATES A. All fences and gates shall be maintained in a manner that will allow said improvements to function as designed per manufacturer's specifications and provide for a safe environment for all park visitors. 1. All walls, fences, and gates shall be checked monthly or as needed to ensure proper operation, safety, and to identify potential failures. 2. All vandalism and graffiti shall be noted immediately to the City of Poway and shall be repaired by the Lessee-within seven calendar days of detection. 3. All wall, fence, or gate repairs within playing fields or in public access areas shall be repaired by the Lessee within 72 hours of detection. 4. All -repairs shall be to City standards utilizing the same quality materials and equipment as originally specified and /or installed. IV. BUILDINGS AND ANCILLARY STRUCTURES A. All buildings and ancillary structures shall be maintained in a manner that will result in high quality, attractive structures. Lessee is responsible for all maintenance and repair of these buildings and ancillary structures. B.- General Maintenance 1. General maintenance shall include painting; repair of vandalism; pest /insect control; keeping premises in a clean and sanitary condition free of debris; keeping windows, doors, and cabinets, electrical, plumbing, mechanical equipment, including concessionaire's trade fixtures, and other fixtures operational and in good repair. 2. All repairs shall be to City standards utilizing.the same quality materials and equipment as originally specified and /or installed. MG -28 JOINT VENTURE AGREEMENT FOR OPERATION AND MAINTENANCE THIS AGREEMENT, made and entered into this day of October, 1992 at by and between Sportsparks of America., -Inc., an Arizona corporation registered to do business in California hereinafter called "Sportsparks" and Kajima Engineering and Construction, Inc., a California corporation hereinafter called "KAJIMA ". WITNESSETH WHEREAS, The City of Poway or Agency hereinafter called "OWNER. ", has accepted a bid from the parties for the operation and maintenance of a fifteen (15) acre sportspark facility as described in a proposed Lease Agreement. WHEREAS, the parties desire to enter into an agreement in order to fix and define between themselves their respective responsibilities, interests and liabilities in connection with the operation of said facility; NOW, THEREFORE; in consideration of the mutual promises and agreements herein set forth, the parties hereby agree to constitute themselves a joint venture, (hereinafter called the "Joint Venture ") for the purpose of operating and maintaining the said facility specif-ied in the contract above - described (hereinafter referred to as the "Lease Agreement "). 1. NAME The parties hereby constitute themselves a Joint Venture. The name to be assumed by the parties in the conduct of all Joint Venture affairs shall be Sportsparks / Kajima, a California Joint Venture. All. money, equipment, materials, supplies, and other property acquired by the Joint Venture shall be held jointly in that name. 2. PURPOSE AND OBJECT The purpose and 'object for which this Joint Venture is constituted is -to perform the contract work set forth in the recital clause above and for no other purpose. It shall not be interpreted as creating any permanent partnership between the parties and shall not limit either party in its right to carry on its individual business for its own benefit. 3. INSURANCE Sportsparks shall acquire endorsements to their existing General Liability insurance policy and Automobile insurance policy 1 - • s naming the Joint Venture and Kajima as additional insureds to protect the-parties from claims arising out.of the performance under this Agreement. The Joint Venture shall acquire any required workers' compensation insurance. To the .extent that Sportsparks incurs any additional costs for providing the endorsements for the General Liability and Automobile coverage for the Joint Venture, it shall be reimbursed for such costs. Sportsparks, upon request, shall provide Kajima with copies of policies or certificates of insurance evidencing these coverages. 4. PRINCIPAL OFFICE The principal office of the Joint Venture shall be located at 247 Avenida La Pata, San Clemente, CA 92672 or at such other place or places as the parties shall agree upon. 5. TERM The Joint Venture shall commence on the date set forth above and shall continue until dissolved as hereinafter provided. However, the terms, provisions and existence of the Joint Venture shall not become effective until the Lease Agreement is let to the Joint Venture. 6. FROFITS, LOSSES AND INDEMNITY The interests of the parties in any profits and their respective shares in any losses and liabilities that result from the operations of the Joint Venture and their interest in all property, equipment and all moneys received in connection with the Joint Venture Agreement shall be as follows: Sportsparks - Net Losses 100% Sportsparks - Net Profit 88% Kajima Net Profit 120 The terms "Net Profits" and "Net Losses" as used in this Agreement shall mean the Net Profits or Net Losses of the Joint Venture as finally determined under generally accepted• accounting principles. The percentage Net Profit figures shall be referred to hereinafter as the party's percentage of participation. No disbursements of net profits - shall be made to either member of the Joint Venture until the end of the third year of'operation, unless agreed to by both parties of the Joint Venture. The net profits disbursed at the end of the third year shall be based on the aggregate net profits and net losses over this three year period._ It is.the intention of this Agreement, and the parties hereby agree, that in the event of any losses arising out of or arising from operations pursuant to this Joint Venture Agreement, Sportsparks shall assume and pay all of such losses. To that end 2 Sportsparks•agrees to defend and indemnify Kajima against, and to hold Kajima harmless from, any and all losses of said Joint Venture. Notwithstanding the above, allocation of the Net Profits and Net Losses during the first three years of operations shall be allocated on an annual basis between the parties subject to the following provisions: Net profits shall be allocated in the following order and priority: First, each partner shall be allocated Net Profits up to the amount of Cumulative Net Losses previously allocated-to it, until the cumulative Net Profits so allocated are equal to the cumulative Net Losses previously allocated; Second, in proportion to the parties' percentages of participation Net Losses shall be allocated in the following order and priority: First, to the extent Cumulative Net Profits have previously been allocated to the parties, Net Losses shall be allocated to each party proportionally up to the amount Cumulative Net Profits were.previously allocated; Second, the balance, entirely to Sportsparks; EXAMPLE 1 Year 1 Net Loss Year 2 Net Profit Year 3 Net Profit Total Allocation Sportsparks KEC (1000) (1000) 500 500 1000 940 60 EXAMPLE 2 Year 1 Net Profit Year 2 Net Loss Year 3 Net Loss Total Allocation Sportsparks KEC 1000 880 120 500 (440) (60) .1000 (9 ( 60 ) Allocations of Net Profits and Net Losses shall be allocated in accordance with Internal Revenue Code Section 704 and related Treasury Regulations. 3 7. MANAGEMENT The management of the Joint Venture shall be conducted pursuant to policy established by the Joint Venture parties. For the purpose of providing a forum for the exercise of such management rights and for the further purpose of utilizing the knowledge and• engineering and planning talents of the parties hereto,' there is hereby established a "Policy Committee" which shall determine general policy and handle other matters requiring• the attention of the Joint Venture parties. Each party shall delegate a representative to serve on the Policy Committee who shall have the authority to act for the party on all matters with respect to its participation in the Joint Venture. The Joint Venture parties, acting through their Policy Committee representatives, shall determine the policy for the management of the Joint Venture by unanimous vote or, failing that, by the majority vote of the Joint Venture parties by their respective percentages of participation in the Joint Venture. The Policy Committee shall determine the time and place of holding its meeting and to establish procedures for conducting its affairs. Each party shall designate an alternate representative to the Policy Committee who shall serve only when the representative of that party is unable to serve. Each of the parties hereto.may at any time replace either the representative or his alternate designated by it, or both, by a notice in writing served upon the other party. No representative appointed by any party hereto shall be liable to any such party or the other party by reason of his acts, except in the case of his gross negligence or actual fraudulent or dishonest conduct. Except to the extent hereinafter stated, the salaries and expenses of each member and alternate member of the Committee shall be borne by the party hereto whom the member has been designated to represent and shall not be an expense to the.Joint Venture.. Meetings of the Policy Committee may be called by any representative or his alternate, or by the Operations Manager. Reasonable notice of the time and place of any meeting shall be given by the person calling the meeting. Such notice may be waived by the written consent of the representative • or alternate of each of the parties. All actions by the Policy Committee shall be taken at a meeting to be duly held. In order for a meeting of the Policy Committee to be' duly held, all representatives or their alternates must be present, unless a written waiver is obtained from the absent party." 4 Sportsparks appoints James Hilkemeyer as its representative, and Lois Hilkemeyer as its alternate representative. Kajima appoints Koji Hayashi as its representative, and Tetsuo Kimura its alternate representative. Sportsparks will act as Managing Party under this agreement and shall exercise general management and administration of the Joint Venture. However, in the event that a) for any three consecutive months the operation fails to show a net profit, or b) in the event the Owner serves a Notice of Default under the Lease Agreement, at the option of Kajima, Sportsparks shall cease to act as the Managing Party and all actions and decisions with respect to the Joint Venture and the Lease Agreement shall thereafter be taken by Kajima as the Managing Party. At any time after assuming the position of Managing Party, Kajima may, at its option, relinquish that position to Sportsparks. The Managing Party, under the authorization of the Policy Committee, shall take such other steps necessary to permit the Joint Venture to properly and timely carry out performance of the Lease Agreement consistent with the terms of the Lease Agreement. The Managing Party shall act as an organizer and coordinator of the Policy Committee. However, the non- Managing Party must approve all budgets and the appointment of key employees of the Joint Venture. The Managing Party shall be governed by the policies established and directives issued by the Policy Committee. The Managing Party shall make such regular and special reports to the Policy Committee as.the Policy Committee may require. 8. OPERATIONS MANAGER The Policy Committee shall appoint Recreation Technologists, Inc. as Operations Manager, who shall be in charge and generally supervise all work and matters relating to the operations and maintenance of the facility. However, the Operations Manager's authority shall be subject to the approval of the Policy Committee. The Policy Committee may appoint an alternate Operations Manager, at its discretion. The Operations Manager shall be compensated by payment of two and one -half percent of the gross receipts, as defined in the Lease'Agreement. 9. BOOKS. RECORDS AND BANK ACCOUNT Separate books of account shall be kept and maintained for the entry of all transactions of the Joint Venture, the same to be open t'o the examination of and availabl'e for making copies thereof by any party hereto or to its auditor at all reasonable times. All transactions by the Joint Venture, including all expenses incurred, and all revenues received, shall by recorded in said books in accordance with generally* accepted accounting principles. • The 5 Managing Party shall furnish on a monthly basis to each party a balance sheet, a profit and loss statement reflecting the current financial status of the Joint Venture, and a budget analysis which compares revenues and expenses to date with budgeted revenues and expenses. A periodic audit of such books shall be made by an independent firm of accountants selected by the parties. The costs of any such audits shall be a part of the operation cost of the Lease Agreement All persons authorized to draw against the funds of the Joint Venture shall be bonded if and to the extent that the Policy Committee shall determine. 10: FINAL ACCOUNTING Kajima has the option of'dissolving the Joint Venture at the end of the third year of operations or any time thereafter. T the event of the dissolution of the Joint Venture, any undisbursed net profits accrued through the date of dissolution shall be divided in accordance with the parties respective. percentages of participation provided above, and the Joint Venture Agreement shall then-terminate. 11. INSOLVENCY - BANKRUPTCY Upon the bankruptcy or insolvency of Sportsparks, or should Sportsparks commit any act of bankruptcy or take advantage of any bankruptcy, reorganization, composition, or arrangement statute,' then, from and after such date, Sportsparks, its successors or assigns (hereinafter referred to as the "insolvent party ") and its representative(s) shall cease to have any role in the management of this Joint Venture and the Lease Agreement (anything in this Agreement to the contrary notwithstanding). All actions and decisions with respect to the Joint Venture and the Lease Agreement shall thereafter be taken solely by Kajima. Notwithstanding the foregoing, Sportsparks shall remain liable for any losses of the Joint Venture, and, provided it has met and or to meet all required advances of working capital, shall be entitled to return of its working capital advances and to receive its share of any profits, with such distribution to be made at the time and in the manner provided in this.Agreement. 12. CAPITAL CONTRIBUTION All initial working capital required by the Joint Venture shall be advanced to the Joint Venture by Sportsparks. Advanced capital shall be repaid to Sportsparks prior to any disbursement of net profit. 0 13. ASSIGNMENT No party hereto shall sell, assign or in any manner transfer its interests, or any part thereof, in this Joint Venture, without first obtaining the written consent to the other party hereto. Consent need not be' obtained from a party which has lost its role in the management of the Joint Venture as herein provided. 14. AUTHORITY No party hereto nor any other person shall have the authority to act for or bind a party to this Agreement by any act or agreement except in connection with operations and maintenance of the sportspark facility. The Policy Committee sha•11 designate persons who have the authority to sign documents required of the Joint Venture by the Owner in connection with the Joint Venture. 15. FISCAL YEAR The first fiscal year of the Joint Venture shall end as of December 31, 1992 and the Joint Venture fiscal year thereafter shall be the calendar year. 16. ARBITRATION Any controversy or claim arising out of or relating to this Joint Venture Agreement, or the breach thereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (AAA), administered by the Los Angeles office of the AAA. The award rendered by the Arbitrators shall be final and binding, and judgement upon it may be entered in any Court having jurisdiction hereof. The parties to this Agreement consent to the use of discovery proceedings to the full extent provided for under the California Code of Civil Procedure, Section 1283.05, in the event of arbitration. Such discovery proceedings may include, but not be limited to, depositions, interrogatories, requests for admission, and orders for the production and examination of documents, person, and things. In the event of any dispute arising over the scope or nature of. discovery, the arbitrator(s) shall set the terms and conditions of discovery. Such orders shall be binding on the parties. 17. ENTIRE AGREEMENT _ This Agreement is the entire agreement between the parties with respect to the subject matter hereof and supersedes in its entirety all prior agreements which may exist between the parties 7 with respect hereto. -No alteration, modification, interpretation or amendment of this Agreement shall be binding on the parties unless in writing, designated as an amendment hereto and executed with equal formality by each of the Joint Venturers. In the event that any part, term or provision of this Agreement is determined by a court of competent jurisdiction to be unlawful or unenforceable, the validity and enforceability of the remaining portions or provisions shall not be affected thereby. 18. MERGER OR CONSOLIDATION OF A PARTY Notwithstanding any of the other provisions of this Agreement, in• the event a party shall be merged into or consolidated with another corporation or have substantially all of its assets acquired by another corporation, then the consolidated corporation, the surviving corporation or acquiring corporation, as the case may be, shall be substituted 'for such party as a party to this Joint Venture, and the terms and provisions of this Agreement affecting such party shall inure to the benefit of and be binding upon such consolidated survivor or acquiring corporation and the - references in this Agreement to such party shall be deemed references to such consolidated, survivor or acquiring corporation. 19'. NOTICES Any notice, payment, demand, document or paper which either party is'required or may desire to give or deliver to the other party, shall be in writing and personally delivered to or mailed by United States registered or certified mail addressed as follows: To Sportsparks: Attn: James Hilkemeyer S,portsparks of America, Inc. 6901 N. Casa Grande Hwy. Tucson, AZ 85743 To Kajima:. Attn: Koji Hayashi Kajima Engineering and Construction, Inc. 200 S. Los Robles Ave., Suite 400 Pasadena,'CA 91101 -2431 Either party may designate a different address for itself by notice similarly given. 20. This Agreement and the rights of the parties hereto shall be governed and entrusted under the laws of the State of California. ;u� IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first hereinabove written. Attest: Sportsparks f America, Inc. By: �• 5 l fi Attest: Kajima Engineering and Construction, Inc. 0�_J_nl . By: E CORTY OF POWAY JAN GOLDSMITH, Mayor KATHY MCINTYRE, Deputy Mayor DON HIGGINSON, Councilmember B. TONY SNESKO, Councilmember BOB EMERY, Councilmember September 28, 1992 James Hilkemeyer Sportspark of America, Inc. P.O. Box 26706 Tucson, AZ 85726 Steve DeThomas Larry D. Atwater Kajima Engineering and Construction, Inc. 200 S. Los Robles Avenue, Suite 400 Pasadena, CA 91101 -2431 Re: South Poway Sports Park Gentlemen: In anticipation of the execution of a formal lease agreement, construction contract, and any other documents necessary to carry out the intent of the parties below for construction and operation of the South Poway Sports Park, the undersigned have met and agreed to do the following: 1. The City of Poway and the Redevelopment Agency ( "City /Agency ") will lend construction funds for the project from available excess Agency tax increment. It is proposed that these funds will be reimbursed to the Agency from a tax allocation bond financing within one year from date of completion of construction of the project. Lease payments will consist of a set minimum lease payment to cover debt service and a percentage rent to be negotiated in terms acceptable to both parties. 2. Kajima Engineering and Construction, Inc. (KEC) and Sportspark of America, Inc. (Sportspark) will form a joint venture or other arrangement acceptable to City /Agency, which organization will execute a lease acceptable to the parties. All obligations under this letter agreement are subject to KEC and Sportspark reaching agreement on the terms of a joint venture or other arrangement acceptable to City/ Agency. City Hall Located at 13325 Civic Center Drive Mailing Address: P.O. Box 789, Poway, California 92074 -0789 • (619) 748 -6600, 695 -1400 ® Primed on Recycled Paper *­ - 0 Larry Atwater Steve DeThomas James Hilkemeyer September 28, 1992 Page 2 3. KEC will remain as a joint venture lease partner at least until such time as the net operating cash flow in a fiscal year from the operation (Ref. Article 6g) exceeds the minimum annual lease payment (debt service) by a ratio of 1.2 to 1. 4. If approved by City /Agency, award of bid for construction will be to KEC /Sportspark in the amount of $2,656,324, contingent upon execution of a lease agreement with KEC /Sportspark. City /Agency will issue a Notice of Award contingent on lease.agreement by October 15. 5. The construction contract will contain incentives paid to KEC /Sportspark totaling 15 percent of the value of deductive change orders and KEC /Sportspark will provide "value engineering" recommendations where possible for cost - savings in construction and operation. All parties must agree on deductive change orders.' 6. The lease agreement will contain those general terms as provided in the bid specifications and the draft copy on file in the office of the City Clerk incorporated herein by reference. The lease will also contain the following: a. Length of the lease is to be ten years, plus two 5 -year options to extend. The term of the lease is subject to City Council /Agency determination. b. Operator is to be responsible for all start -up costs including, but not limited to, those in the bid specifications. c. Maintenance and operational standards including accounting methods and time periods. d. A cancellation clause which reflects City /Agency as lender /owner. e. City /Agency is to participate in the profits of the park-only as outlined through lease payments asNdefined by Article 1 of the Agreement. Larry Atwater Steve DeThomas James Hilkemeyer September 28, 1992 Page 3 f. The landscape maintenance district cost shall be segregated and identified so as to allow separate maintenance agreements and accounting for the LMD area. The LMD Agreement shall provide for payments of $96,000 per year for the first five years for the LMD maintenance. The cost formula for maintenance costs after the first five years shall be based on the ratio of bid (in the Sportspark submittal) on a per acre basis divided by the City's current cost per acre to maintain LMD areas through the City. The details will be developed before the lease is executed. The lease shall provide for breach.should the operator violate the provisions concerning segregating LMD area costs. g. The lease will permit assignment of its provisions upon approval by City /Agency. The parties contemplate that KEC /Sportspark will be party to the lease only during the construction of the park and for that period of time necessary to secure its operation. (Ref. Article 3) 7. Recreatidn Technologists, Inc., ( RECTECH), a sister company to Sportspark, will receive a Value Engineering and Operation Impact Review Fee to review "value engineering" recommendations and to assess all operational impacts to each recommendation. RECTECH will be compensated for this work task by a fee of $25,000 upon substantial completion of construction. All of the above are subject to approval by the City Council /Agency and approval by the same of the final lease agreement. Following award of said contract, KEC /Sportspark agree to execute the lease agreement within thirty (30) days in essentially the terms stated herein. 0 1. Larry Atwater Steve DeThomas James Hilkemeyer September 28, 1992 ' Page 4 Please indicate your agreement to the above by acknowledging with your signature below. Very truly yours, Stephen M. Eckis Tamara A. Smith dew KAJIMA ENGINEERING & CONSTRUCTION, INC. By: Koji Hayashi Executive Vic President SPORTSPARK OF AM I INC. By: James Hilkemeyer CITY OF POWAY B. L N \) V � - - -/ Bowersox nager REDEVELOPMENT AGENCY By. JamerL. Bowersox Director \wp51 \data \sports.agr