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HomeMy WebLinkAboutIRI Sun Willows Golf Course Lease Agreement & Amendments Golf Course Lease Agreement This Agreement (the "Agreement" or "Lease") is entered into, this 27th day of December, 2000,between the CITY OF PASCO,a municipal corporation of the State of Washington, herein called the "Cif"and IRI SUN WILLOWS ASSOCIATES LLC, a Delaware limited liability company, herein called"Lessee". Whereas, the City desires to have a responsible, qualified and competent entity operate and maintain the Sun Willows Golf Course, hereinafter called "Golf Course", located in the City of Pasco, Washington; and Whereas, Lessee desires to obtain the right, license and privilege to provide such operation and maintenance services; Now, Therefore,the City and Lessee agree as follows: ARTICLE I CERTAIN DEFINITIONS 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the terms defined in this Article I shall have the following meanings: (a) "Additional Capital Improvements"shall mean improvements to the golf course for which the Additional Capital Improvement Amount is expended. (b) "Additional Capital Improvement Amount" shall mea# an amount equal to the sum of (i) $100,000, plus (ii) the differe ce between $1oo,000.00 and sums actually expended for Required Capital Improvements. (c) "Additional Concession Fee"shall have the meaning set forth in Section 2.2 d i hereof. (d) 'Additional Payment"shall have the meaning set forth in Section 2.2 i hereof. (e) "Annual Concession Fee"shall have the meaning set forth in Section 2.2(c)(D hereof. (f) "Annual Lease Payment" shall have the meaning set forth in Section 2.2 a i hereof. Page-1- (g) "Bonds"shall mean a performance bond,or other bonds,or combination of bonds and insurance, acceptable to the City Manager, in the amount of One Hundred Thousand Dollars ($loo,000.00). (h) "Buildings" shall mean and include the Clubhouse/Restaurant, the Pro- Shop and other above ground enclosed structures and any and all alterations, replacements or modifications thereto during the Term of this Lease. (i) "Business Dav" shall mean a day that is not a Saturday, a Sunday, a legal holiday or a day on which banks are required or permitted by law or other governmental action to close in the City of Pasco, Washington. (j) "Capital Improvement Budget" shall mean an annual budget for the applicable Lease Year covering the installation of Capital Improvements to the Golf Course,which shall include an estimate of any capital replacements, substitutions,and/or additions to the Golf Course or any component thereof to be accomplished during such Lease Year. (k) "Capital Improvements"shall mean any improvements,replacements or modifications to the Buildings or Other Improvements which are of a capital nature and which do not constitute routine repair and maintenance operations and which are made for the purpose of creating a long term beneficial impact on the quality and success of the Golf Course. (1) "Capital Replacement Amount"shall have the meaning set forth in Section 4.2(b) hereof. (m) "Capital Reserve Account"shall have the meaning set forth in Section 4-2(a) hereof. (n) "City Construction Election"shall mean the election by the City to either (i)proceed with the construction of the Renovation Improvements on its own behalf or (ii) require Lessee to proceed with the construction of the Renovation Improvements. (o) Representativg"shall mean the City Manager or his designee. (p) "Ot Ys Environmental Covenant" shall have the meaning set forth in Section 1q.2.(0. hereof. (q) "Clubhouse Construction Cost Amount"shall mean the aggregate costs incurred by the City or Lessee in connection with the construction of the Renovation Improvements. Page-2- 0 • (r) "Clubhouse Renovation Date"shall mean the date upon which: (i) the renovation of the Clubhouse/Restaurant has been substantially completed so that the Food and Beverage Operations can be commenced without unreasonable interference from contractors or subcontractors who are in the process of completing the balance of construction of the of the Renovation Improvements, (ii) the equipment necessary for the operation of the Food and Beverage Operations has been installed and is fully operational, and (iii) All Permits have been issued and/or obtained by Lessee to permit Lessee to operate the Food and Beverage Operations in accordance with applicable law or are available upon proper application by Lessee. (s) "Clubhouse/Restaurant" shall mean the existing building containing clubhouse and restaurant/food service facilities. (t) "Comparable Facilities"shall mean Columbia Point Golf Course,Canyon Lakes Golf Course, and Horn Rapids Golf Course. (u) "Commencement Date" shall mean January 1, 2001. (v) "Contract Documentation" shall mean all contracts and other documentation with third parries regarding the development and construction of the Renovation Improvements. (w) "Course Manager" who shall mean a frill time, on-site, competent golf course manager who shall be a PGA"Class A'golf professional or certified by the Country Club Manager's Association and with at least three (3) years experience in the operation of golf courses comparable to the Golf Course, whose operations include the operation of a pro shop. (x) "Default Rate" shall mean a rate of interest equal to one and one-half percent(1.5%) per month. (y) "Environmental ActivitX"shall mean: (i) any past, present or future storage, holding, presence, existence, release, threatened release, emission, discharge, generation, processing,use,abatement,disposition,handling or transportation of any Hazardous Substance in violation of any applicable Environmental Laws from, under, into or on the Golf Course, or otherwise relating to the Golf Course or the ownership,use,operation or occupancy thereof, or any threat of such activity, or Page-3- (ii) the migration of any Hazardous Substance to or from other property, or (iii) the loss or injury resulting from any underground or aboveground storage tanks located on or at the Golf Course,whether filled,empty, or partially filled with any substance, as defined in any applicable Environmental Laws, including any Hazardous Substance and the release thereof into the air, atmosphere, ground, water supply or sewer systems from the Golf Course. (z) "Environmental Laws" shall mean (i) all applicable federal laws and regulations (A) relating to(t)pollution of the environment(including without limitation, ambient air, surface water, ground water, land surface or subsurface strata), or (2) emissions, discharges, releases or threatened releases of Hazardous Substances or (B) otherwise relating to the manufacture,processing,distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, (ii) any and all state and local laws similar to,in whole or in part,federal toxic waste laws, which from time to time are in effect in the jurisdiction in which the Golf Course are located, and the regulations adopted pursuant thereto, (iii) any laws or regulations governing "wetlands", and (iv) any common law theory based on nuisance or strict liability. (aa) "Environmental Liabilities" shall mean any and all actual or potential obligations to pay the amount of any judgment or settlement, the cost of complying with any settlement,judgment or order for injunctive or other equitable relief,the cost of compliance or corrective action in response to any notice, demand or request from any department, agency or other body or component of any government authority that exercises any form of jurisdiction or duthority under any Environmental Laws,the amount of any civil penalty or criminal fine,and any court costs and reasonable amounts for attorney's fees,fees for witnesses and experts,and costs of investigation and preparation for defense of any claim or any judicial action,suit or proceeding (whether civil or criminal), any administrative proceeding (whether formal or informal), any investigation by a governmental authority or entity Page-4- 0 0 (including a grand.jury),and any arbitration,mediation or other non judicial process for dispute resolution, regardless of whether such proceeding is threatened,pending or completed,that may be or have been asserted against or imposed upon the City, Lessee, the Golf Course or any property used therein and arising out of (i) failure to comply at any time with all Environmental Laws applicable to the Golf Course; (ii) presence of any Environmental Activity on,in,under,at or in any way affecting the Golf Course; (iii) identification of Lessee or the City as a potentially responsible party under any Environmental Laws; (iv) presence at any time of any underground or aboveground storage tanks,whether filled,empty,or partially filled with any substance,as defined in any applicable Environmental Laws on, in,at or under the Golf Course;or (v) any and all claims for injury or damage to persons or property arising out of exposure to Hazardous Substances originating or located at or migrating from the Golf Course to adjacent properties, or resulting from operation thereof. (bb) "Equipment Replacement Account"shall have the meaning set forth in Section a..i(a) hereof. (cc) "Existing Facilities"shall mean the following facilities situated on the Real Property: (i) Pro Shop (ii) Driving Range (iii) Clubhouse/Restaurant (iv) Maintenance Building and Yard (v) Course Restroom (vi) Parking Lot (dd) "Expiration Date"shall mean December 31, 2010. Page -5- 0 0 (ee) "Fees"shall have the meaning set forth in Section 7.i. hereof. () "Food& Beverage Concession Fee"shall have the meaning set forth in Section 2.2(e)(i)hereof. (gg) "Food and Beverage Operations" shall mean the restaurant and food and beverage services offered from time to time at the Golf Course. (hh) "Food and Bever.age Revenues" shall mean all gross income, revenues and consideration of whatever form or nature, received by or paid to Lessee, its agents or employees, from any and all sources attributable to the operation,leasing,licensing or occupancy of the Golf Course,determined on a cash basis, from: (i) food and beverage sales (including alcohol sales) at the Golf Course and at bars and restaurants now or hereafter situated on the Golf Course,and (ii) proceeds of business interruption or similar insurance payable in connection with any loss of revenues described in this Subparagraph (hh). In no event shall "Food and Beverage Revenues" include any income, revenue or other consideration arising from Golf Course Play Revenues,Golf Course Ancillary Revenues and Merchandise Sales. 00 "Golf Course"shall mean and include the Real Property and the Facilities, including the Buildings and Other Improvements. Qj) "Golf Course Ancillary Revenue"shall mean all gross income,revenues and consideration,of whatever form or nature,received by or paid to Lessee, its agents or employees, from any and all sources attributable to the operation, leasing,licensing and occupancy of the Golf Course, determined on a cash basis, for: (i) golf cart rentals, (H) driving range revenues, (iii) trail fees, (iv) parking fees, (v) rentals, rents and receipts from licenses, concessions, vending machines and similar items, Page-6- 0 0 (vi) other fees,charges or payments not determined as rental,but payable for or in connection with the rental of office,retail,storage,parking or other space in the Golf Course, and (vii) proceeds of business interruption or similar insurance payable in connection with the loss of revenue described in this Subparagraph UP. The term "Golf Course Ancillary Revenues" shall include all other sources of revenue or income of Lessee or its agents or employees with respect to the use,operation and activities associated with the Golf Course to the extent not clearly included within the definitions of Golf Course Play Revenues, Merchandise Sales, or Food and Beverage Revenues, as appropriate,using common sense application to specific sources of revenue not specifically identified above. (kk) "Golf Course Play Revenues"shall mean all gross income,revenues and consideration, of whatever form or nature, received by or paid to Lessee, its agents or employees,from any and all sources attributable to the operation, leasing, licensing and occupancy of the Golf Course, determined on a cash basis,for: (i) green fees, (ii) tournaments, (iii) group outings, (iv) season passes, (v) similar charges for the right to play golf on or otherwise use the Golf Course, and (vi) proceeds of business interruption or similar insurance payable in connection with any loss of revenues described in this Subparagraph (kk). In no event shall "Golf Course Play Revenues" include any income, revenue or other consideration arising from Golf Course Ancillary Revenues, Merchandise Sales and Food and Beverage Revenues. (11) "Hazardous Substance" shall mean any substance, material or waste which is regulated or governed by any Environmental Law, and includes, without being limited to, Page-7- 0 0 (i) any substance,material or waste defined,used or listed as"hazardous waste", "extremely hazardous waste", "restricted hazardous waste", "hazardous substance", "hazardous material", "toxic substance" or other similar or related term as defined, used or listed in any Environmental Laws, (ii) any asbestos or any substance containing asbestos, (iii) any petroleum products stored in bulk or polychlorinated biphenyl, (iv) any additional substances or materials which are now or hereafter hazardous or toxic substances under any Environmental Laws relating to the Golf Course, and (v) as of any date of determination,any additional substances or materials which are from and after the Effective Date incorporated in or added to the definition of "hazardous substance" for purposes of any Environmental Law. (mm)"Irrigation Renovation Date" shall mean a date which is no later than June 30, 2003. (nn) "Irrigation Renovation Plan"shall mean a plan for the Irrigation System Improvements. (oo) "Irrigation System" shall mean the irrigation system located on the Golf Course, including the on-site pump station (which on-site pump station includes three pumps) and the off-site pump station (which off-site pump station includes one pump)located near 4oth Avenue and Argent. (pp) "Irrigation System Improvements"shall mean the improvements to the Irrigation System contemplated by the Irrigation Renovation Plan. (qq) "Late Charge"shall have the meaning set forth in Section 2.4-. hereof. (rr) "Lease Year" shall mean, other than the initial Lease Year, any 12-month period from January 1 to December 31 during the Lease Term;provided that the initial Lease Year shall be the period beginning on the Commencement Date and ending December 31,2001.To the extent any computation or other provision hereof provides for an action to be taken on a Lease Year basis, an appropriate proration or other adjustment shall be made, if the context requires, in respect of the initial and final Lease Years to reflect that such periods are less than full calendar year periods. Page-8- (ss) "Lessee Default"shall have the meaning set forth in Section 17.2(a). hereof. (tt) "Lessee Representative" shall mean Mr. Jeffrey M. Silverstein or Mr. Dave Flickwir, Mrs. Debbie Pedersen or another individual designated by Lessee in writing to the City. (uu) "Lessee's Environmental Covenant"shall have the meaning set forth in Section 19.1. hereof. (w) "Maintenance Equipment"shall have the meaning set forth in Section im.i, hereof. (ww) "Maintenance Standards"shall mean the maintenance standards set forth on &hibit"E"attached hereto and by this reference incorporated herewith. (xx) "Merchandise Sales" shall mean all gross income, revenues and consideration, of whatever form or nature, received by or paid to Lessee,its agents or employees,from any and all sources attributable to the operation, leasing, licensing and occupancy of the Golf Course, determined on a cash basis,from: (i) retail and wholesale sales of merchandise and products (including, without limitation, receipts from the pro shop now or hereafter located at the Golf Course), and (ii) proceeds of business interruption or similar insurance payable in connection with any loss of revenues described in this Subparagraph(xx). In no event shall "Merchandise Sales" include any income, revenue or other consideration arising from Golf Course Play Revenues, Golf Course Ancillary Revenues and Food and Beverage Revenues. (yy) "Permits" shall mean all certificates, permits, licenses, approvals and franchises relating to the Renovation Improvements or any part thereof, including,but not limited to,building permits and certificates of occupancy. (zz) "Monthly Report"shall have the meaning set forth in Section 5.2.hereof. (aaa) "Project Cost(s)" shall mean all costs of construction of the Renovation Improvements including the following: (i) the cost of all labor, materials, utilities, equipment (acquired or rented) and similar items incorporated into or consumed in the Page-9- 40 0 construction and development of the Renovation Improvements, including fees of contractors or materialmen; (ii) expenses paid to outside architects, surveyors, consultants and engineers in connection with the planning and construction of the Renovation Improvements, and any utility work; (iii) to the extent not included in fee and expense statements from architects and engineers, costs of reproducing plans and specifications; (iv) all rents, office supplies, utilities and related expenses; (v) all costs of Permits for the Renovation Improvements; (vi) costs incurred in connection with the Temporary Facilities,including the temporary construction of sewer and water lines; (vii) a fair and reasonable charge for cost of capital based upon a reasonable rate of interest,such rate to be set forth in the Renovation Budget; (viii) all reasonable third party expenses,incurred in connection with the construction of the Renovation Improvements including: (A)reasonable travel expenses of employees of Lessee or the City incurred in the discharge of duties connected with the construction of the Renovation Improvements and included in the Renovation Budget; (B)supplies of whatever nature contemplated by the Renovation Budget; (C)cost of water, power, and fuel directly related to construction; (D)cost of telephone and telecopy service,data processing services, telegrams,postage,blueprints,photographs,field office supplies, stationery, and similar items; (E)cost of surveys; (F) sales, or other similar taxes based upon labor performed and materials furnished; (G)fees for Permits; Page-lo- 0 0 (H) surety bond premiums; (I) premiums on insurance directly related to construction; (J) cost of discharging liens; and (K)reasonable attorneys' fees and expenses growing out of the performance of the construction of the Renovation Improvements; and (ix) such other fees and expenses as may be contemplated by the Renovation Budget. (bbb)"Pro-Shop"shall mean the existing building containing pro-shop facilities. (ccc) "Optional Capital Improvements" shall mean the improvements to the Golf Course or additions to the equipment used and maintained at the Golf Course to be made by Lessee at its sole cost and expense identified in Exhibit "G"attached hereto. (ddd)"Optional Capital Improvement Amount" shall mean the amount expended by Lessee in respect to the Optional Capital Improvements. (eee) "Other Improvements" shall mean any and all improvements to the Real Property other than the Buildings which may from time to time exist during the Term of this Lease, including the Irrigation System, parking lots, septic tanks and similar improvements. (M) "Real Prol erty" shall mean the real property depicted on the sketch attached as Exhibit"A"hereto and incorporated herein by this reference,on property legally described on Exhibit"B"hereto and incorporated herein by reference. (ggg) "R cor "shall have the meaning set forth in Section 5.2. hereof. (hhh)"loegulation(s)"shall mean any and all laws,ordinances,rules,regulations, statutes, building and fire codes, zoning ordinances, restrictions, orders or decrees,health and environmental laws and regulations and other matters of all governmental authorities having jurisdiction over the Renovation Improvements or the Golf Course. (iii) "Renewal Option" shall mean a one-time right to renew the Term of this Lease for an additional five (5)years in accordance with the provisions forth in the Renewal Term Rider attached hereto and made a part hereof for all Page-1i- purposes. (jjj) "Renovation Budget"shall mean a budget to cover the Project Costs for the construction of the Renovation Improvements. (kkk)"Renovation Election Date"shall mean February 1, 2ooi. (111) "Renovation Improvements"shall mean the improvements contemplated by the Renovation Plan. (mmm) ",Kenovation Improvement Outside Completion Date"shall mean,in the event that the City is responsible for the consturction of the Renovation Improvements, December 31, 2ooi,to the extent of a renovation as opposed to a replacement of the Clubhouse/Restaurant, or April 1, 2oo2, to the extent of the replacement of the Clubhouse/Restaurant and the Pro-Shop. (nnn)"Renovation Plan"shall mean a plan for the renovation or replacement of the Clubhouse/Restaurant which shall include: (i) preliminary plans regarding the scope of the renovation or replacement, (ii) any interior or exterior modifications or improvements to the Clubhouse/Restaurant to the extent of a renovation as opposed to replacement, (iii) a list of proposed furniture,fixtures and equipment, and (iv) drawings as to location of improvements to the extent alteration of existing structural components or drawings of the replacement improvements. (000)"Rent"shall mean the aggregate of the Annual Lease Payment,the Additional Payment,the Annual Concession Fee, the Additional Concession Fee and the Food & Beverage Concession Fee, together with any and all other sums due and payable hereunder. (ppp)"Rental Credit"shall have the meaning set forth in Section 2.2(n hereof. (qqq)"Required Capital Improvements"shall mean those improvements to the Golf Course to be constructed at Lessee's sole cost and expense identified in Exhibit"F"attached hereto not later than the dates specified in Exhibit"F" and to the reasonable satisfaction of the City. Page-12- 0 0 (rrr) "Required Capital Improvement Amount" shall be an amount to be expended by Lessee in respect to the Required Capital Improvements which shall be not more than the sum of$100,000.00. (sss) "Revenues" shall mean the aggregate of Golf Course Play Revenues, Golf Course Ancillary Revenues, Merchandise Sales and Food and Beverage Revenues. (ttt) "Superintendent"shall mean a full time,on-site golf course superintendent, certified by the Golf Course Superintendents Association of America who has at least three(3)years experience in maintenance of golf courses comparable to the Golf Course, in the supervision of grounds maintenance activities. (uuu)"Security Interests" shall have the meaning set forth in Section 20.14 hereof. (vv) "Temporary Facilities"shall mean temporary facilities,improvements and equipment to be used for the purpose of conducting limited Food and Beverage Operations,until the Clubhouse Renovation Date. (www) "Term"shall mean a period of ten (10)years. (xxx) "Unamortized Capital Amount" shall mean the sum of the following: 0) The unamortized cost of the Required Capital Improvements, plus (ii) The unamortized cost of the Additional Capital Improvements,plus (111) The unamortized cost of that portion of the Optional Capital Improvements which Lessee is unable to remove from the Golf Course as of the early termination date of the Lease or which were designed exclusively for use at and which shall remain at the Golf Course. The unamortized cost of the foregoing items shall be determined by using straight line depreciation over the lesser of (A) the useful life of the Capital Improvement in question,or(B)the Term hereof,assuming that the Renewal Option has been exercised. 1.2 Inclusive Nature of Revenue DefinitiQns.The parties intend that all gross income,revenues and consideration from the Golf Course not expressly excluded as set forth in Section 1.3.below shall be included as Golf Course Play Revenues,Golf Course Ancillary Revenues, Merchandise Sales, or Food and Beverage Revenues, as appropriate, using common sense application to specific sources of revenue. Page-13- 0 0 1.3 Specific Exclusions to the Revenue Definitions. Golf Course Play Revenues,Golf Course Ancillary Revenues,Merchandise Sales and Food and Beverage Revenues shall exclude the following items: (i) Federal, state or municipal taxes collected from the consumer (regardless of whether the amount thereof is stated to the consumer as a separate charge) and paid over periodically by Lessee to a governmental agency accompanied by a tax return or statement as required by law(provided that any leasehold excise tax shall not be so excluded); (ii) Charges attributable to goods which have been returned to Lessee or deposits which are subject to refund, until such deposits have been forfeited to Lessee; (iii) Proceeds from the sale of assets which have been clearly identified as being owned by Lessee (including the sale of Lessee's leasehold estate hereunder, if such sale is otherwise permitted by the City); (iv) Proceeds from insurance or insurable losses related to the Golf Course, provided that all such proceeds shall be used to repair or restore corresponding losses or destruction of the Golf Course, including improvements,unless the City consents in writing to other use of the proceeds; (v) Additional sums or funds provided by Lessee or its partners on an equity or loan basis; and (vi) Customary and reasonable fees,salaries,bonuses and tips earned by golf instructors, employees and agents as payment of, or services rendered for, golf instruction, golf lessons and waiter and waitress services at the Golf Course. ARTICLE II TERM; RENT; RENTAL CREDIT; EXCISE TAXES; LATE CHARGE; BONDS 2.1 Term. (a) Initial Term. For and in consideration of the Rent and faithful performance by Lessee of the terms and conditions and the mutual covenants hereof, the City hereby grants to Lessee the exclusive right to operate and maintain the Golf Course for the Term commencing on the Commencement Page-14- 0 0 Date and ending on the Expiration Date. (b) Delivery of Possession. If Lessor,for any reason whatsoever, cannot deliver possession of the Golf Course to Lessee on the Commencement Date, Lessor shall not be subject to any liability nor shall the validity of the Lease be affected; provided, the Term of this Lease shall commence on the date possession is actually tendered to Lessee;provided,further,that the Expiration Date of the initial Term shall in all events occur on December 31, 2010. (c) Remedies for Failure to Deliver Possession. In the event that possession of the Golf Course is not delivered by the City to Lessee on or before March 31, 2001, Lessee shall, at its option, have the right to terminate this Lease by the delivery of written notice to the City of its election to terminate, in which event neither party hereto shall have any further obligation hereunder, one to the other. The foregoing option to terminate may be exercised at any time commencing on April 1, 2001, and prior to the date the City delivers possession of the Golf Course to Lessee. (d) Option to Renew.Lessee is hereby granted the Renewal Option, subject to the provisions forth in the Renewal Term Rider attached hereto and made a part hereof for all purposes. (e) Term. The word"Term"whenever used herein refers to the initial Term of this Lease and any valid extension or renewal thereof. 2.2 Rent; Payment: Rental Credit. Lessee agrees to pay the City for the right, license and privilege of leasing,operating and maintaining the Golf Course,food and beverage concession, and other concessions,the following payments: (a) Golf Course Annual Lease Payment. 0) Lessee agrees to pay an annual lease payment (the"Annual Lease Payment") for each Lease Year in the amount of $150,000, pro- rated for a partial Lease Year. (ii) Lessee shall pay the Annual Lease Payment in equal monthly installments of $12,500 on or before the 5' day of each calendar month during the term of this lease, commencing on the 5`h day of the first full month following the Commencement Date. (b) Golf Course Additional Payment. (i) In addition to the Annual Lease Payment,Lessee agrees to pay,on an annual basis,the amount,if any,by which 17.5%of Golf Course Play Revenues exceeds an amount equal to the Annual Lease Payment Page-15- 0 0 (the "Additional Payment"). (ii) Any Additional Payment shall be due and payable on January 31 of each Lease Year of the Term of this Agreement, commencing on January 31, 2002, for the Golf Course Play Revenues generated in the prior Lease Year. (c) Golf Course Concession Fee. (i) Lessee agrees to pay, for the right to offer golf related merchandise for sale,lessons and other golf related services,an annual concession fee for each Lease Year in the amount of $75,000 (the "Annual Concession Fee"), pro-rated for a partial Lease Year. (ii) Lessee shall pay the Annual Concession Fee in equal monthly installments of $6,250 on or before the 5' day of each calendar month during the Term of this Lease, commencing on the 5'day of the first full month following the Commencement Date. (d) Golf Course Additional Concession Fee. (i) In addition to the Annual Concession Fee, Lessee agrees to pay, on an annual basis,the amount,if any,by which(a)20%of Golf Course Ancillary Revenues, plus 6% of Merchandise Sales, exceeds (b) the Annual Concession Fee(the"Additional Concession Fee"). (ii) Any Additional Concession Fee shall be due and payable on January 31 of each Lease Year of the Term of this Agreement,commencing on January 31, 2002, for Golf Course Ancillary Revenues and Merchandise Sales generated in the prior Lease Year. (iii) Example: If during the Lease Year in question Golf Course Ancillary Revenues are $415,0oo and Merchandise Sales are $150,000, the Additional Concession Fee payable under this Section 2.2(d)shall be $17,000, calculated as follows: 20%of Golf Course Ancillary Revenues $83,000 6%of Merchandise Sales 9,000 Subtotal $92,000 Less Golf Course Concession Fee ($7-5,000) Additional Concession Fee $17,000 (e) Food&Beverage Concession Fee. Page-16- 0 0 (i) Lessee agrees to pay for the right to operate the Food and Beverage Operations an annual food and beverage concession fee(the"Food & Bevera a Concession Fee") in the amount of. (A)6% of the Food and Beverage Revenues, commencing on the Commencement Date,plus (B)$10,00o per Lease Year, commencing with the Lease Year in which the Clubhouse Renovation Date occurs, pro-rated for a partial Lease Year. (ii) The portion of the Food&Beverage Concession Fee attributable to 6%of the Food and Beverage Revenues for the prior calendar month shall be due and payable on or before the 25" day of each calendar month during the Term of the Lease,commencing on the 25th of the second full month following the Commencement Date. (iii) The remaining portion of the Food & Beverage Concession Fee ($10,000.0o per annum) shall be payable in equal monthly installments of$833.00,payable on the 5th of each calendar month, commencing on the 5' day of the first full month following the Clubhouse Renovation Date. (f) Rental Credit. In the event that the City elects to require Lessee to construct the Renovation Improvements in accordance with the provisions of Section 9.3.below,Lessee shall be entitled to a credit(the"Rental Credit") against sums due in respect to the Annual Lease Payment, the Additional Payment,the Annual Concession Fee,the Additional Concession Fee and the Food and Beverage Concession Fee, until such time as the amount of the Clubhouse Construction Cost Amount has been reduced to zero through any combination of the Rental Credits contemplated by this Subparagraph (f), the application of the Additional Capital Improvement Amount and/or the application of funds from the Capital Reserve Account. (g) Place of Payment. All required payments due and payable under this Section 2.2. shall be directed to City Treasurer, 525 N. 3r'Avenue, Pasco, Washington, 99301, or to such other place as the City may from time to time designate. (h) Partial Month Rental. To the extent that,during the Term,Rent is payable for a partial month, the monthly.Annual Lease Payment,Annual Concession Fee and Food&Beverage Fee shall be pro-rated based upon the actual number of days in the month in question. Page-17- • ! 2.3 Leasehold Excise Taxes. (a) The City shall be responsible for and shall remit to the State of Washington leasehold excise tax payable on the "taxable rent" due under this Lease in accordance with Chapter 82.29A RCW with respect to: (i) the Annual Concession Fee, (ii) the Additional Concession Fee, and (iii) payments made by Lessee with respect to (A) the Required Capital Improvements, (B) the Additional Capital Improvements, and (C) the Capital Replacement Amount. (b) Lessee shall be responsible for and shall remit to the City (and the City shall thereafter remit to the State of Washington) leasehold excise tax payable on the "taxable rent" due under this Lease in accordance with Chapter 82.29A RCW with respect to: (i) the Annual Lease Payment, (ii) the Additional Payment, and (iii) the Food&Beverage Concession Fee. 2.4 Late Charge: Interest. (a) Lessee hereby acknowledges that late payments of any sums due hereunder will cause the City to incur costs not otherwise contemplated by this Lease. Accordingly,if any payment due from Lessee is not received by the City within five (5) Business Days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay the City a late charge (the "Late Charge") equal to five percent(5%) of the overdue amount. (b) The parties agree that the Late Charge represents a fair and reasonable estimate of the costs the City will incur by reason of late payment by Lessee. (c) Acceptance of the Late Charge by the City shall in no event constitute a waiver of Lessee's default with respect to such overdue amount,nor prevent the City from exercising any of the other rights and remedies granted hereunder. (d) In addition to the Late Charge provided for in this Section 2.4,interest shall accrue on Rent,or any other sums due hereunder,at the Default Rate from and after the 6"Business Day following the date due until paid. Page-18- 2.5 Performance Bonds. (a) Performance Bonds. On or before the Commencement Date,Lessee shall deliver to the City Manager the Bonds in a form and executed by a surety acceptable to the City.The Bonds shall secure the faithful performance of the terms and conditions of this Agreement by the Lessee. (b) Renewal of the Bonds. To the extent that the Bonds have a term shorter than the Term of the Lease,Lessee shall from time to time renew or replace the applicable Bond on or before thirty (3o) days prior to the expiry date of the Bond in question. (c) Reduction in Amount or Cancellation of the Bonds. The City Manager may elect to reduce the amount of or cancel the requirement for the Bond(s) during the course of this Agreement. (d) Presentation of the Bonds for Payments. Subject to the provisions of Section 17.3. hereof, if a Lessee Default shall occur with respect to any covenant or condition of this Lease, including but not limited to the payment of Rent or any other payment due under this Lease, the City may present the Bonds for payment and apply all or any part thereof to the payment of any sum in default or any other sum which the City may be required or may in its reasonable discretion deem necessary to spend or incur by reason of a Lessee Default. In such event, Lessee shall, within five (5) Business Days of written demand therefor by the City, deposit with the City the amount so applied. (e) Return of the Bonds. If Lessee shall have fully complied with all of the covenants and conditions of this Lease, but not otherwise, the Bonds or amount of the Bond proceeds (with interest) then held by the City shall be returned or repaid to Lessee within thirty (3o) days after the expiration or sooner termination of this Lease. (f) Remedies. Subject to the provisions of Section 17.3. hereof, in the event of the occurrence of a Lessee Default under this Lease,the City's right to retain the Bond proceeds shall be deemed to be in addition to any and all other rights and remedies at law or in equity available to the City. (g) Protection of Proceeds of the Bonds,, To the extent that the City has presented the Bonds for payment and has not expended all of the proceeds thereof in respect to the payment of sums required to cure a Lessee Default hereunder, the City shall be required to keep the unexpended balance of the proceeds of the Bonds separate from its general funds and Lessee shall be entitled to interest thereon at the rate the City receives from time to time from the investment of the City's funds on a short term basis. Page-19- 0 ARTICLE III UTILITIES;IRRIGATION WATER FEES 3.1 Utilities. (a) Basic Utilities. Lessee agrees to pay for all utilities required for the operation of the Golf Course as contemplated by this Agreement,including gas, water, electricity, and telephone services and for trash collection. (b) Lack of Liability for Failure to Deliver Utilities. The City shall not be liable to Lessee in damages or otherwise: 0) if any utility shall become unavailable from any entity(including the City) supplying or distributing such utility, or (ii) for any interruption in any utility service (including, without limitation,any heating,air-conditioning or sprinkler)caused by the making of any necessary repairs or improvements or by any cause beyond the City's reasonable control. (c) Interrupti!Qn of Utilities; Unavailability of Utilities; Lessee's Right to Terminate. 0) If any utility service used at the Golf Course shall be interrupted,for which the City is responsible,the City shall use reasonable efforts to restore such utility service as soon as reasonably possible. (ii) In the event that (a) one or more of the utility services become partially or totally permanently unavailable and (b) Lessee determines, in good faith, that the unavailability of such utility services to the Golf Course will cause a material adverse economic impact on the operations of the Golf Course,in the ordinary course, then in such event,Lessee shall have the right to terminate this Lease upon ten(xo)days prior written notice,in which event neither party hereto shall have any further obligations hereunder,one to the other, other than Lessee's obligation to pay Rent on a current basis through the date of termination. 3.2 Irrigation Water Fees. (a) Annual Irrigation Water Fee; City's Responsibility. The City shall pay the annual irrigation water fee assessed by the Franklin County Irrigation District ("FCID") up to a maximum amount of Twelve Thousand Dollars ($12,000.00) in any Lease Year. Page-20- 0 0 (b) Lessee's Payment Responsibility. The Lessee shall be responsible to pay any irrigation water fees imposed by FCID in excess of Twelve Thousand Dollars ($12,000.00)in any Lease Year. (c) Adjustment to City's Payment Responsibility. Following the initial five (5) years of the Term of this Agreement the maximum amount of the City's payment to FCID shall be adjusted by an amount equal to the percentage increase in the Consumer Price Index(all items,US City Average,as published by the Department of Labor Bureau of Labor Statistics)last published before January 1,20o6 in relation to the Consumer Price Index last published before January 1, 2001. ARTICLE IV REPLACEMENT AND RESERVE ACCOUNTS; ANNUAL CAPITAL IMPROVEMENT BUDGET 4.1 Egpipment Replacement Account. (a) Equipment Replacement Account. Beginning on the Commencement Date,the City shall establish and maintain an equipment replacement account (the"Equipment Replacement Account"),into which Lessee shall make the payments identified in Exhibit"D"to be used solely for the purposes set forth below.The Equipment Replacement Account shall be initially funded by the City with the sum of $116,000.00. The payments to be made by Lessee under this Subparagraph(a)are in addition to the payment of Rent and the performance of the other obligations set forth herein. (b) Book Entry Account. The Equipment Replacement Account may be a book entry account on the City's records and commingled with other City funds,but shall be exclusively available to fund the cost of replacement of the Maintenance Equipment. (c) Purpose of Equipmment Replacement Account. The purpose of the Equipment Replacement Account is to establish a reserve to fund the costs of replacing the Maintenance Equipment, as needed,and as further provided in Section 134. below. Lessee and the City agree in good faith to adjust the required deposits into the Equipment Replacement Account to reflect the anticipated replacement cost of the Maintenance Equipment. (d) Expiration of Tgrm. At the expiration or earlier termination of this Lease, any funds remaining in the Equipment Replacement Account shall be retained by the City. Page-21- 0 6 4.2 Capital Reserve Account. (a) !anital Reserve Account. Commencing January 1,2003,the City shall establish and maintain a capital reserve account (the "Capital Reserve Account")to be used solely for the purposes set forth in this Section 4.2. (b) Capital Replacement Amount. Commencing on January 1, 2003, Lessee shall pay to the City and the City shall deposit into the Capital Reserve Account on an annual basis(ie for each Lease Year) an amount(the "Capital Replacement Amount") equal to the greater of: (i) four percent (4%) of Golf Course Play Revenues, or (ii) the surn of$20,000.00. (c) Timing of Funding. Lessee shall fund the sums contemplated by Subparagraph(b)(i) on a monthly basis.To the extent that the amounts so funded into the Capital Reserve Account for any Lease Year do not equal the sum of$2%000.00(pro-rated for a partial Lease Year),Lessee shall fund such deficit into the Capital Reserve Account on or before January 31 of the following Lease Year. The sums to be deposited by Lessee into the Capital Reserve Account shall be in addition to the payment of Rent and the performance of the other obligations set forth herein. (d) Commencement of Lessee's Obligations. Lessee's obligation to fund the full Capital Replacement Amount shall not begin until the Clubhouse Renovation Date.Prior to the Clubhouse Renovation Date(a)Lessee shall only be obligated to fund fifty percent (5o%)of the Capital Replacement Amount, and (b) the minimum funding amount contemplated by Subparagraph (b)(ii)shall be the sum of$10,000.00. (e) Book Entry Account. The Capital Reserve Account may be a book entry account on the City's records and commingled with other City funds,but shall be exclusively available to fund the amounts contemplated by Subparagraph (f)below. (f) Use of Funds. Funds in the Capital Reserve Account shall be used and applied as follows: (i) From and after January 1, 2003, two percent (2%) of Golf Course Play Revenues (being one hundred percent (loo%) of the Capital Reserve Amount until the Clubhouse Renovation Date) shall be applied to the cost of Capital Improvements to the Golf Course, as required by the then applicable Capital Improvement Budget or as Page-22- 0 0 otherwise mutually determined by Lessee and the City. From and after the Clubhouse Renovation Date,the application of the Capital Reserve Amount may include (A) the renovation or replacement of the Irrigation System, or (B) the reduction of the Clubhouse Construction Cost Amount. (ii) Lessee and the City agree to cooperate in good faith to identify and agree upon Capital Improvements to the Golf Course, with the intention of allocating the applicable portion of the Capital Reserve Account to Capital Improvements that will have a long term beneficial impact on the quality and success of the Golf Course. (iii) From and after the Clubhouse Renovation Date,fifty percent(go%) of the Capital Reserve Account(two percent(2%)of Golf Course Play Revenues) shall be utilized, as directed by the City, in the payment of: (A)costs associated with the renovation and/or replacement of the Irrigation System, or (B)costs associated with the renovation of the Clubhouse/Restaurant in reduction of the Clubhouse Construction Cost Amount. (iv) From and after the date the Clubhouse Construction Cost Amount has been reimbursed in its entirety, and the costs of the Irrigation System have been reimbursed in their entirety,one hundred percent (loo%)of the Capital Reserve Amount shall be applied to the cost of Capital Improvements. (g) Payments by Lessee. The City may require funds deposited in respect to the Capital Reserve Amount to be applied directly by Lessee(in lieu of placing funds into the Capital Reserve Account)to accomplish all or a portion of: (i) the renovation or replacement of the Irrigation System, or (ii) the installation of Capital Improvements, or (iii) the reimbursement of the Clubhouse Construction Cost Amount. (h) Lessee's Expenditures. Additionally, to the extent that Lessee expends sums in respect to Capital Improvements, as contemplated by the Capital Improvement Budget or otherwise approved by the City,it shall either receive a credit against amounts required to be funded in respect to the Capital Replacement Amount or it shall be entitled to reimbursement from the Capital Page-23- 0 i Reserve Account. (i) Expiration of Term. At the expiration or earlier termination of this Lease, any funds remaining in the Capital Reserve Account shall be retained by the City. 4.3 Annual Capital Improvement Budget. (a) Submission of Budget. No later than forty-five (45) days prior to the commencement of each Lease Year, commencing with the Lease Year beginning January 1,2002,Lessee shall submit to the City a proposed Capital Improvement Budget for the Golf Course for such Lease Year. (b) QWs Approval of Budget. Within thirty(3o) days after the proposed Capital Improvement Budget is so submitted to the City, the City shall endeavor to approve such proposed Capital Improvement Budget or notify Lessee of any proposed revisions therein that the City deems reasonably necessary. (c) Failure to Approve. In the event the City fails to approve the proposed Capital Improvement Budget or make proposed revisions to the proposed Capital Improvement Budget within thirty(3o)days after it is submitted to the City by Lessee, such proposed Capital Improvement Budget shall be deemed to be disapproved; provided, however,that the City shall respond in a timely manner to insure that a final Capital Improvement Budget may be prepared prior to the commencement of each Lease Year. (d) Final Approval oil:Capital Improvement Budget. If the City approves the proposed Capital Improvement Budget,or Lessee does not make reasonable objections to such proposed revisions within ten (xo) days after receipt of any proposed revisions to the proposed Capital Improvement Budget, then such proposed Capital Improvement Budget and proposed revisions shall be deemed thereafter to constitute the "Capital Improvement Budget" for the Lease Year in question for all purposes hereof. (e) Budget Approval Process; Cooperation. In the event Lessee timely makes any reasonable objection to any proposed revisions to the proposed Capital Improvement Budget, the City and Lessee shall cooperate with each other to resolve any questions with respect to such proposed revisions to the proposed Capital Improvement Budget and shall use their best efforts to agree upon an approved Capital Improvement Budget for the Golf Course for the Lease Year in question prior to the beginning of the Lease Year to which such Capital Improvement Budget relates. Page-24- 0 0 (f) Operation Pending Approval of Budget. In the event the City fail to agree upon an Capital Improvement Budget for any Lease Year prior to the commencement thereof,Lessee shall continue to manage,maintain,supervise, direct, and operate the Golf Course in accordance with the Capital Improvement Budget for the previous Lease Year until a new Capital Improvement Budget is approved. (g) Resolution of Disputes. To the extent that Lessee and the City are ultimately unable to agree upon a proposed Capital Improvement Budget after using good faith efforts to do so, either the City or Lessee shall be entitled to submit the disputed matters to the submitted to Dispute Resolution Procedures contemplated by Sect�iZ.4. hereof. In submitting proposed expenditures and in approving or disapproving of proposed expenditures,the parties shall use reasonable efforts to make decisions based upon the purpose of maintaining and keeping the Golf Course in good working order and attractive and functional to meet the reasonable needs and desires of the public. (h) Bud2et.Amendment. Lessee shall have the right from time to time during each Lease Year to submit revised budgets and amendments to the Capital Improvement Budget to the City for approval. 'Me City shall endeavor promptly to reject or to approve the same or make such revisions thereto as the City may deem reasonably necessary and proper.Once approved or so revised, such revised budgets and amendments shall be incorporated and become part of the Capital Improvement Budget for the remaining portion of the Lease Year in question. (i) Decisions of City Representative. All decisions to be made by the City with respect to the Capital Improvement Budget shall be made by the City Representative, ARTICLE V ACCOUNTING, REPORTS RECORDS 5.1 Accounting Method. Lessee shall maintain a cash method of accounting in accordance with sound accounting principles which accurately reflects the Revenues of Lessee in connection with the operation of the Golf Course. 5.2 Maintenance of Records:Monthly Reports. Lessee shall maintain accurate and complete records (the "Records") showing the all receipts from all sources of Revenue from the operation of the Golf Course and shall deliver to the City an itemized report (the "Monthly Report") of all Revenues monthly, subject to the following: Page-25- 0 0 (a) The record keeping for the operation of the Golf Course shall be maintained separately from the records used for any other business operated by the Lessee. (b) The Monthly Report shall include abreakdown of the number of rounds of golf played,by category and month, and shall separately itemize Golf Course Play Revenues, Golf Course Ancillary Revenues, Merchandise Sales and Food and Beverage Revenues. (c) The Monthly Report shall be submitted on or before the 2oth day of each month for the preceding month in a form reasonably acceptable to the City, commencing on the loth day of the second full month following the Commencement Date.The Monthly Report shall be accompanied by a copy of the Lessee's monthly or quarterly B & O Tax Report filed with the State of Washington Department of Revenue. 5.3 Records. (a) Inspection of Records. The City or its authorized auditors and representatives shall have access to and the right to audit and reproduce any of the Records related to the generation of Revenues to the extent the City deems necessary to insure the City is receiving all moneys to which the City is entitled under this Agreement or for other purposes relating to this Agreement. (b) Preservation of Records. Lessee shall maintain and preserve all the Records for at least three (3) years after termination of this Agreement. If Lessee fails to make the Records available within the city limits of the City or at a mutually agreed upon place,Lessee shall promptly reimburse the City for all reasonable costs incurred in conducting the inspection at another location, including but not limited to expenses for personnel,salaries,private auditors, travel, lodging , meals and overhead. ARTICLE VI DESCRIPTION OF GOLF COURSE AND FACILITIES; CONDITION OF THE GOLF COURSE; OWNERSHIP; NAME 6.1 Description of the Golf Course. The City agrees to provide Lessee with the the Golf Course in the manner and for the purposes as herein provided.Lessee hereby acknowledges that the term "Golf Course"shall not include the cart storage sheds which are owned and managed by the City. 6.2 Acceptance ofthe Condition of the Golf Course. Except as expressly set forth herein in respect to the Clubhouse/Restaurant and the Irrigation System,Lessee Page -26- agrees to accept the Golf Course,including the Buildings and the Other Improvements in an "as is" condition, without representation or warranty of any kind or nature whatsoever. 6.3 Ownership of the Golf Course, Equipment and Improvements. (a) During and after the Term of this Agreement, the City shall retain ownership of the Golf Course and all Buildings and Other Improvements. (b) For purposes of federal and state tax law,the City and Lessee agree that Lessee shall be considered as"owner"of all equipment and improvements purchased, improved and maintained by Lessee during the Term of this Agreement,to the extent paid for by Lessee. 6.4 Name of Golf Course. Lessee agrees that the Golf Course shall bear the name of "Sun Willows Golf Course." ARTICLE VII FEES 7.1 Standard For Fees. Fees charged to the public and referred to in this Article VII shall be the"base i$-hole regular weekday and weekend rates and trail fees"(the "Fees"herein). Any discounts or promotions offered by Lessee in respect to the Fees may be offered in Lessee's reasonable discretion. 7.2 Initial Fee Structure. All Fees which Lessee charges to the public for the first thirty-six (36) months of the Term of this Lease have been initially established, in concert with the City, based upon the fee structure currently in place at the Comparable Facilities. Fees for the first 36 months of the Term of this Lease will be as set forth in Exhibit "C" attached hereto, and may only be amended with the consent of the City Representative. 7.3 Adjustment to Fees. (a) Adjustment to Fees. At the beginning of the 37th month of the Term hereof,and on January i of each subsequent Lease Year,Lessee shall establish rates for Fees for such Lease Year based upon the structure contemplated by this Article VII., subject to the prior approval of the City Representative, which approval will not be unreasonably withheld,so long as the rate structure complies with the provisions set forth herein,which rates so established in the manner set forth herein shall remain constant throughout such Lease Year. Subject to the limitations set forth in Subparagraph (b) below, at the beginning of the 37th month of the Term hereof, Lessee may increase any Fee Page-27- 9 0 which it charges the public as provided in this Lease at such times as Lessee deems appropriate. (b) Limitations on Increases in Fees. Any increase i n the Fees contemplated by Subparagraph (a)above shall not result in the Fees being in excess of eighty-five percent(85%) of the average regular rates then being charged at the Comparable Facilities, unless the consent of the City Representative is obtained,which shall not be unreasonably withheld. When adjustment to the Fees are established, they may be rounded upward to the nearest one-half dollar. (c) Special Programs. Lessee shall not discontinue programs such as Senior Discounts,Senior Passes,Junior Discounts,Season Passes and similar programs benefitting the public which have been historically maintained at the Golf Course without the prior consent of the City,which consent shall not be unreasonably withheld so long as such programs have been discontinued at one (1) or more of the Comparable Facilities or the maintenance of such programs is no longer economically viable for the operation of the Golf Course. To the extent that Lessee desires to increase the fees or charges relating to such programs, such increases shall be determined and governed in the same manner as applicable to the Fees under Subparagraphs (a)and(b)above. 7.4 Charges For Cart Rental. Golf cart rental fees shall be charged based upon market rental charges and other factors such as the cost thereof and a reasonable return of and on investments in golf carts or the leasing thereof. ARTICLE VIII OLD COURSE; RELEASE OF PORTIONS OF THE REAL PROPERTY; SALE OF THE GOLF COURSE; RESIDENTIAL SUFFER ZONES; RESIDENTIAL DEVELOPMENT 8.1 Old Course. Lessee shall maintain that portion of real property adjacent to the Golf Course commonly referred to as"the old course"and as further illustrated in Exhibit "A" in accordance with the Maintenance Standards set forth herein and shall be entitled to use "the old course"at no additional charge. 8.2 Sale of Portions of the Real Property, (a) Stele of the Old Corse. The City reserves the right to sell or otherwise transfer all or any part of "the old course"and any other portions of area described on Exhibit"A"not currently developed as a golf course at anytime for any use,without otherwise affecting the other provisions of this Agreement, so long as the sale of such adjacent land does not negatively impact the operation of the Golf Course in any material manner. Page-28- (b) CiWs Right of Early Termination. In recognition of the potential opportunities for the City to sell or otherwise transfer all or substantially all of the Real Property involved in this Lease, Lessee agrees that the City reserves the expressed right to terminate this Agreement effective December 31 of any Lease Year provided that: (i) The City gives written notice of such termination at least ninety(go) calendar days prior to such termination date, (ii) The City has entered into a bona fide binding agreement for the sale or other transfer of all or substantially all of the Golf Course in a transaction that makes continued operation of the Golf Course as contemplated by this Lease impractical; and (iii) The City pays to Lessee the Unamortized Capital Amount. 8.3 Residential Buffer Zones. Lessee acknowledges that portions of the Golf Course are adjacent to residential development.Provided the City installs,at the City's sole cost and expense, all required irrigation facilities, Lessee agrees to plant grass and to maintain to"rough"standards,buffer zones between the adjacent residential developments and the Golf Course. 8.4 Modification t4 Accommodate Residential Development. Lessee agrees to cooperate in good faith and permit modifications to the Lease and the Golf Course to the extent determined reasonably necessary by the City to facilitate development of the remaining undeveloped residential subdivision adjacent to the Golf Course and commonly known as the Villa of Sun Willows. Such modifications may include the relocation of tee boxes, a reconfiguration of portions of the Golf Course, or similar matters to accommodate such residential development. All costs and expenses of any such modification shall be at the sole cost and expense of the City and/or the residential developer. Following such modifications,the Lease shall apply to the Golf Course, as so modified. ARTICLE IX CAPITAL IMPROVEMENTS 9.1 Lessee's Required C4pijal Imvrovements. Lessee agrees to make the Required Capital Improvements to the Golf Course at its sole cost and expense not later than the dates specified in Exhibit"F"and to the reasonable satisfaction of the City. Lessee shall not be required to expend sums in excess of the Required Capital Improvement Amount in respect to the Required Capital Improvements. 9.2 Lessee's Optional Improvements. Lessee may, in Lessee's sole discretion, Page-29- ! 0 make the Optional Capital Improvements at its sole cost at such cost and within such time parameters as Lessee may reasonably determine. 9.3 The Clubhouse/Restaurant- Renovation or Replacement. (a) Clubhouse/Restaurant. The City and Lessee recognize that the Clubhouse/Restaurant is in need of renovation and modification and that the condition of the Clubhouse/Restaurant does not satisfy Lessee's requirements for the operation of the Food&Beverage Operation. (b) City's Election to Renovate or Replace. 0) On or before the Renovation Election Date, the City shall made an election in writing and deliver same to Lessee as to whether or not it desires to renovate or replace the Clubhouse/Restaurant. (iii) In the event the City elects to replace the Clubhouse/Restaurant,the construction of new facilities shall include the demolition of the existing Pro-Shop and the inclusion of facilities for a pro-shop in the building which is constructed in place of the Clubhouse/Restaurant. (iii) The election by the City to replace the Clubhouse/Restaurant and the Pro-Shop shall be deemed to be an election by the City to also be responsible for the construction thereof and the payment and funding of construction costs (from sources including the Capital Improvement Amount and the Capital Replacement Account). (iv) In no event shall Lessee be required to make any improvements to the Pro-Shop as part of the Required Capital Improvements prior to the City Construction Election and then only in the event the City elects to have the Clubhouse/Restaurant renovated and not replaced. (c) Preparation of the Renovation Plans and Renovation Budget. G) As soon after the Renovation Election Date as may be reasonable practical the City and Lessee shall do the following: (A)Develop the Renovation Plan for the Renovation Improvements; and (B)Prepare and develop the Renovation Budget. (ii) The City and Lessee shall use all reasonable efforts to complete the Renovation Plan and the Renovation Budget on or before February 28, 2001. Page-30- 0 • (d) The Renovation Improvements shall include the furnishing of such equipment as may be reasonably necessary to operate the Food and Beverage Operations to meet the reasonable requirements for the operation of the Golf Course and serving the public in the ordinary course of business in a manner jointly contemplated by Lessee and the City,taking into consideration the nature of the Golf Course, its quality and the public nature of its operations. (e) City Construction Election. Within fifteen (15) days following completion of the Renovation Plan and the Renovation Budget,the City shall make the City Construction Election. The City shall deliver to Lessee written evidence if its election within the fifteen(15)day period.To the extent that the City has elected to have the Restaurant/Clubhouse and Pro-Shop replaced,the City Construction Election shall be deemed to be an election by the City to be responsible for the construction of the new facilities and the payment of the cost thereof. (f) Development and Construction of the Renovation Improvements. (X) In the event that the City elects to be responsible for the construction of and the payment of the cost of the Renovation Improvements: (A)The City shall proceed with all reasonable diligence to commence and complete construction of the Renovation Work as quickly as reasonable possible, subject to compliance with applicable Regulations; (S)Construction of the Renovation Improvements,to the extent that the Clubhouse/Restaurant is to be renovated and not replaced, shall in all events commence no later than forty-five (45) days following the date the City makes the City Construction Election or such additional period of time which may be reasonably necessary for the City to complete the public bidding process; (C)To the extent that the Clubhouse/Restaurant and Pro-Shop are to be replaced,construction shall commence within ninety(go) days following the date of the City Construction Election is made; and (D)The City shall cause the Renovation Improvements to be completed, at its sole cost and expense, no later than the Renovation Improvement Outside Completion Date. (id) In the event that the City makes the City Construction Election, electing to construct the Renovation Improvements itself,and in the event the Clubhouse Renovation Date has not occurred on or before the Renovation Improvement Outside Completion Date, subject to Page-31- delays beyond the City's reasonable control: (A)Lessee shall have-the right to terminate this Agreement at any time thereafter until the Clubhouse Renovation Date actually occurs upon delivery of written notice to the City of its election to terminate this Lease. (B)The effective date of such termination shall be sixty (6o) days following the date such notice is delivered to the City,unless the Clubhouse Renovation Date occurs prior to the expiration of such sixty(6o) day period. (C)In the event of such termination,the City shall pay to Lessee the Unamortized Capital Amount. (g) Lessee's Responsibilities With Regard to the Renovation Improvements. (i) In the event the City elects to require Lessee to construct the Renovation Improvements, Lessee shall supervise, manage, and direct all activities necessary to develop,construct,install,and equip the Renovation Improvements pursuant to the Contract Documentation and the terms set forth herein. Lessee shall have the discretion and authority to perform,on behalf of the City, such acts deemed necessary or desirable for the construction and development of the Renovation Improvements consistent with this Agreement,the Renovation Budget, the Regulations, the Contract Documentation and the restrictions, approval requirements, conditions and terms recited herein. (ii) In the event that Lessee is responsible for the construction of the Renovation Improvements,the following provisions shall apply: (A)Permits. Lessee shall secure all requisite Permits required by applicable governmental authorities to construct the Renovation Improvements. (B)Standard of Care. In regard to the construction of the Renovation Improvements,Lessee shall act in good faith and in a manner that Lessee reasonably believes to be in the best interest of the City, and shall conduct the development, construction, equipping and installation of Renovation Improvements using the standard of care of a prudent development manager. (C)Construction Contracts. Lessee shall prepare,or cause to be Page-32- 0 0 prepared, recommendations concerning potential contractors who shall be qualified to perform all or any portion of the work for the Renovation Improvements, including the estimated economic costs of each proposal. Based on a review of the alternative proposals,bids and estimates and the City's approval of the specific proposals to be pursued, Lessee shall work with the prospective contractors to secure the services necessary for development of the Renovation Improvements. Lessee and the City shall approve the Contract Documentation to be executed between Lessee and the Contractors. All contracting shall be in compliance with applicable Regulations. (D)Costs-of Construction. Lessee shall use its best efforts to cause the Renovation Improvements to be completed within the parameters of the Renovation Budget. The City recognizes that the Renovation Budget will be a reasonable estimate of the necessary costs to complete the construction of the Renovation Improvements and that there will be no guaranteed cost coverage for such construction.Any cost increases in the Project Costs outside of the original scope of the work shall be incurred only be pursuant to change orders approved by Lessee and the City. Lessee shall (a) fund the Clubhouse Construction Cost Amount and(b)shall be reimbursed for the aggregate Clubhouse Construction Cost Amount by way of Rental Credits as contemplated herein and at the City's election,from application of the Additional Capital Improvement Amount and the Capital Reserve Account. (h) Interim Food and Severjlge Operations; Temporary Fa- lities. (i) As soon as the City furnishes the Clubhouse/Restaurant with sufficient equipment and furnishings to operate Food and Beverage Operations and Lessee is able to secure necessary licenses with which to operate the Food and Beverage Operations, Lessee shall use reasonable efforts to use the existing facilities to provide a minimum level of food and beverage service until the Clubhouse Renovation Date. (ii) From and after April 30, 20oi, during the construction of the Renovation Improvements, so long as the Food and Beverage Operations cannot be reasonably conducted in the existing facilities, taking into consideration construction interference, noise and disruption, Lessee shall have the right to rent and/or install the Temporary Facilities for the purpose of conducting limited Food and Beverage Operations until the Clubhouse Renovation Date. Page-33- 0 9.4 Irrigation ft stem. (a) Preparation of the Irrigation Renovation Plan.The City and Lessee recognize that the Irrigation System is in need of renovation, modification or replacement. The City and Lessee shall, as soon as reasonably practical following the Commencement Date, but no later than December 31, 2001, conduct and complete a study,by themselves or using third party consultants, which study shall make recommendations as to the improvements, replacements,modifications or repairs required to bring the Irrigation System in good working order and to provide reasonably adequate irrigation for the Golf Course. Based upon the studies and reports the City and Lessee shall prepare and approve the Irrigation Renovation Plan for the construction of the Irrigation System Improvements. (b) City's Responsibility for Completion of the Irrigation S stem Improvements. The City shall use reasonable efforts to cause the Irrigation System Improvements to be completed, at its sole cost and expense, no later than the Irrigation Renovation Date. (c) Maintenance of Irrigation System. To the extent that the Irrigation System Improvements are not completed by the Irrigation Renovation Date, the City shall be solely responsible for all maintenance and repair costs for the wells and pumps constituting portions of the Irrigation System and fifty percent (50%) of the maintenance and repair costs of the balance of the Irrigation System throughout the Golf Course, until the date the Irrigation System Improvements are completed. (d) Rental Abatement. During the period in which the Irrigation System Improvements are being constructed,to the extent that all or a portion of the Golf Course must be shut down on a temporary basis to permit the completion of the renovation,the Rent payable hereunder shall be abated on an equitable basis taking into consideration the length of time of the shut down and whether or not play is shut down in its entirety or interrupted or impaired in a material manner. To the extent that a dispute arises as to the amount of reasonable Rent abatement, such dispute shall be resolved by the Dispute Resolution Procedures set forth in Section ma. hereof. 9.5 Additional Capital Improvement Amount. The City may, on or after January 1, 20o2, require Lessee to, and Lessee agrees to, contribute the Additional Capital Improvement Amount,which shall be used towards the costs of: (i) payment of the costs of the renovation of the Clubhouse/Restaurant, and/or (ii) reimbursement of the Clubhouse Construction Cost Amount,and/or Page-34- 0 0 (iii) payment of the costs of the Irrigation System Improvements. The City shall direct in writing to Lessee the manner in which-the Additional Capital Improvement Amount is to be applied and paid. ARTICLE X GOLF COURSE USES; HOURS OF OPERATION; CERTAIN RESTRICTIONS 1oa Golf Course Uses. (a) Primary Use. Lessee shall maintain the Golf Course as a public 18 hole golf course. The general public shall not be wholly or permanently excluded from any portion of the Golf Course,except during non-business hours or for scheduled tournaments. (b) Reasonable Restrictions on Use. Lessee may develop reasonable restrictions for the use of the Golf Course provided they are consistent with the rights of the general public and are designed to allow Lessee to use the Golf Course for the purposes specified herein. (c) Limited.Right to Deny Permission to Use the Golf Course. (i) Lessee shall be permitted to deny entry or permission to play to anyone who refuses to conform to those reasonable rules and regulations from time to time established by Lessee. (ii) Lessee shall have the right to refuse admission and/or service to persons who are drunk, disorderly, under the influence of drugs, or who conduct themselves in a manner that could result in injury or harm to persons or property on the Golf Course. 10.2 Hours of Operation. (a) Days of Operation. The Golf Course and related facilities(including the restaurant/food service facility) shall be open every day except Christmas. (b) Closure for Weather. Lessee may close the Golf Course and related facilities on any day weather does not reasonably permit play. (c) Hours of Operation. Hours of operation shall be generally dawn to dusk, subject to adjustment based upon the mutual approval of the City and Lessee. If Lessee and the City cannot agree on adjustment to such hours,same shall be set in accordance with the hours of operation followed by the Comparable Page-35- 0 Facilities. (d) Hours of Food and Beverage Operation. Lessee shall have the right to shut down Food and Beverage Operations at any time the Golf Course is closed for play. i0.3 Certain Restrictions on Use of Clubhouse. No other usage of the portions of the Clubhouse/Restaurant designated for restaurant use shall be allowed unless prior written consent is obtained from the City Representative,which shall be granted or not granted at the absolute discretion of the City. 10.4 Restrictions on Operations of the Restaurant. Lessee may not sublet or license the operation of the restaurant and Food and Beverage Operations without prior written approval from the City Representative. Lessee shall not grant to any third party the right to sell food and/or beverages at the Golf Course. ARTICLE XI REPRESENTATIVES; COURSE MANAGER AND COURSE SUPERINTENDENT; EMPLOYEE UNIFORMS. IDENTIFICATION AND QUALIFICATION. mi Representatives of The Qty and Lessee. (a) City Representative. The City Representative shall be the person generally responsible for administering and monitoring this Agreement on behalf of the City. (b) L&gsee Representative.The Lessee Representative shall be the person generally responsible for administering and monitoring this Agreement on behalf of Lessee in respect to all material issues and decisions dealing with the Golf Course or this Agreement. 11.2 Course Managemgnt Throughout the Term of this Lease, Lessee shall provide competent management of the Golf Course to the reasonable satisfaction of the City. For the purposes of this paragraph,"competent management"shall mean demonstrated ability in the management and operation of a golf course, restaurant, clubhouse, greens keeping and related activities in a manner consistent to those standards adhered to at the Comparable Facilities. 11.3 Golf Course Manager. Lessee, at its cost, shall obtain the services of a full time, on-site, competent Course Manager. The Course Manager shall be reasonably available during normal working hours to meet with the City Representative. After normal working hours,the Course Manager shall be reasonably available to appear at the Golf Course if deemed necessary by the City Representative. The Course Page-36- 0 0 Manager shall not have the authority to act for Lessee on any matters relating to the performance of services under this Agreement, other than day to day operational matters. The Course Manager shall be the principal contact person with the City Representative in respect to day to day operational issues.The personal and business telephone number of the Course Manager shall be provided to the City Representative at all times. 11.4 Golf Course Superintendent. Lessee, at its cost,shall also obtain the services of a full time, on-site golf course Superintendent. 11.5 Replacement of Course Manager or Superintendent. The Course Manager and the Superintendent, if terminated by Lessee, shall be replaced as soon as reasonably practical following termination. Each person replacing the Course Manager or the Superintendent shall satisfy the criteria for such Person set forth in the definition of "Course Manager" and "Superintendent." Lessee agrees to consult with the City in regard to the hiring of such replacement personal, however Lessee shall have make the ultimate hiring decision,so long as the foregoing criteria are satisfied. 11.6 Employee Uniforms,Identification and Qualifi_ cation. Lessee agrees to the following in regard to its employees: (i) Each of Lessee's employees on the Golf Course shall carry appropriate identification. The identification system shall be furnished at the Lessee's expense and shall include appropriate attire, name badges and/or name plates. (ii) Where required by law, the employees performing services under this Agreement, shall possess the appropriate and currently valid licenses or certificates. (iii) Lessee's employees shall perform services in a courteous and business-like fashion. (iv) Lessee shall maintain an adequate and proper staff and shall discharge any employee whose conduct or activity shall, in the reasonable exercise of discretion,be deemed to be detrimental to the interests of the public patronizing the Golf Course. ARTICLE XII SCOPE QF SERVICES AND OPERATION AND MAINTENANCE 12.1 Comparable Golf Course Operations. Lessee agrees to operate and maintain the Golf Course and related facilities in accordance with the standards of maintenance Page-37- 0 • and service provided for herein. The condition of the Golf Course and the operations, maintenance and services provided by Lessee shall be consistent with prudent golf course maintenance and management practices and at a minimum shall be comparable to the standards followed at the Comparable Facilities. 12.2 Personnel; Services and Equipment. Lessee agrees to furnish the personnel, material, supplies, equipment, tools, services, supervision and administration necessary to: (i) Operate the Golf Course and related facilities including but not limited to collecting all fees(including fees for golf play and golf cart usage), scheduling tournaments, arranging reservations, sending golfers to the tee,starting golfers in proper intervals and renting golf carts; (ii) Provide maintenance services including but not limited to mowing, edging, trimming, over seeding, fertilizing, aerating, sodding, changing cups, servicing tees, top dressing, raising divets, raking traps, spraying, spot irrigating, syringing and renovating turf and other plantings,as well as providing weed,disease and pest control, tree maintenance, maintenance of hazards (sand traps and lakes) and the monitoring and maintaining of irrigation systems, in conformance with the Maintenance Standards; and (iii) Provide,subject to the provisions of Articles XIII and XIV below, maintenance of Golf Course facilities such as restrooms, maintenance yard, tool sheds, golf cart maintenance area and maintenance of equipment. (iv) Operate the Restaurant/Food and Beverage Operations in conformance with applicable city ordinances and state and federal laws; (v) Display and maintain a professional shop inventory comparable to the Comparable Facilities, which shall include golfing equipment, supplies, shoes and apparel which shall be offered for sale to the public and, in particular, to patrons of the Golf Course at prices reasonable and comparable to prices being paid for equipment, supplies, and apparel at the Comparable Facilities; (vi) Furnish such personnel as may be required to marshal the play of golfers without substantial delay; and (vii) Set dress and conduct standards consistent with those imposed at the Comparable Facilities. Page-38- ARTICLE XIII GOLF COURSE MAINTENANCE EQUIPMENT. 13.1 Maintenance Equipment. The property leased by Lessee hereunder in respect to the Golf Course includes the golf course maintenance equipment (the "Maintenance Equipment")listed in Exhibit"D"attached hereto. Subject to the provisions set forth below regarding replacement of the Maintenance Equipment, Lessee shall keep the Maintenance Equipment in good condition and repair,ordinary wear and tear excepted. 13.2 Replacement of Maintenance Equipment. Lessee agrees to replace the Maintenance Equipment generally in accordance with the replacement schedule set forth in Exhibit "D", and may use the funds held or deposited in the Equipment Replacement Account to do so,including the initial $116,000.00 funded by the City. 13.3 Early Replacement. In the event an item of Maintenance Equipment must be replaced earlier than as scheduled pursuant to Exhibit"D",Lessee shall replace such piece of Maintenance Equipment early,but shall have the right to be reimbursed for the cost thereof from the Equipment Replacement Account as funds become available. 13.4 F iration of Term. At the expiration of the Term or earlier termination of the Lease, the City shall be entitled to retain all Maintenance Equipment (including all replacement Maintenance Equipment acquired pursuant hereto), in their then existing condition, together with any funds then held on deposit in the Equipment Replacement Account. ARTICLE XIV MAINTENANCE AND REPAIR OF BUILDINGS AND OTHER IMPROVEMENTS 14.1 Acceptance of the BML1d ngs and Other Improvements. Except with respect to the Clubhouse/Restaurant,the Irrigation System and the Restaurant/Food and Beverage Operations,Lessee has examined the Golf Course and accepts the Golf Course (including the Buildings and the Other Improvements) in its present condition. 14.2 Maintenance of the Buildings. (a) ssee',j R=gnsibilities. Lessee shall be responsible for the general maintenance of the condition of the Buildings and for all repairs of the roof, structure and heating and cooling systems of the Buildings costing less than $1,000 per repair. Page-39- 0 0 (b) Guy's Responsibilities. The City shall be responsible for repairs of the roof, structure,and heating and cooling systems of the Buildings costing$1,000.00 or more per repair,and are not the result of any actions,omissions,negligence or lack of reasonable maintenance on part of the Lessee, or its employees. 14.3 Maintenance of the Other Improvements,including the Irrigation System. (a) Maintenance of the Other Improvements. Lessee shall be responsible for the general maintenance of the condition of the Other Improvements, including the Irrigation System and for all repairs necessary in connection therewith.All monitoring and maintenance obligations required hereunder in respect to the Other Improvements shall be conducted in conformance with the Maintenance Standards. (b) Maintenance of the Irrigation System. (i) Lessee shall repair and maintain in good condition, ordinary wear and tear excepted,the Irrigation System, including pump stations, and Lessee shall promptly document any revision or major repair of the Irrigation System, including but not limited to pumps, values, lines and heads, with as-built drawings and such documents shall be timely filed with the City Representative. (ii) Notwithstanding the foregoing,any repair or group of repairs to the Irrigation System which costs or cost in excess of$500.00 per item or$3,000.00 in the aggregate per Lease Year shall be considered as a Capital Improvement and shall be funded from the Capital Reserve Account. (iii) To the extent that improvements to the Irrigation System contemplated herein are not completed by Irrigation Renovation Date, the City shall be responsible for a share of the maintenance costs of the Irrigation System until the date the improvements in question are completed in accordance with the provisions of Section 4.4(c)above. (c) Maintenance of the Parking Lobs. Lessee shall keep the parking lots swept and free of debris.The City shall be responsible for the construction of and payment of the cost of any improvements to the parking lot of a capital nature. (d) Maintenance Building and Yard. The Maintenance Building and Yard shall be delivered to Lessee by the City in a neat and orderly fashion and Lessee shall maintain or keep such areas during the Term in a neat and orderly fashion. Page-40- 0 0 (e) Roadways. Restrooms and Cart Paths. (i) The maintenance roadways at khe Golf Course shall be delivered to Lessee by the City graded and graveled as appropriate and Lessee shall maintain or keep such roadways during the Term graded and graveled as needed. (ii) Restrooms on the Golf Course shall be cleaned daily and stocked with paper products as necessary. (iii) Cart paths shall be edged at least once during each Lease Year.Holes existing in or occurring in the cart paths will be repaired within a reasonable period of time following discovery. 14.4 Use of Ca$ital Reserve Accounts. Upon mutual approval of Lessee and the City, portions of the Capital Reserve Account established pursuant to Section 4.2. may be used for unexpected or material repairs to the Buildings and Other Improvements at the Golf Course. 14.5 Alteration or Modification to the Buildings or Other Improvements. Except as expressly authorized hereunder in respect to the Renovation Improvements, Lessee shall not demolish, remove, alter, modify, replace or add to the Buildings or Other Improvements on the Golf Course during the Term of this Lease Agreement other than in connection with the removal of obsolete equipment or improvements unless Lessee secures the prior written approval of the City,which approval may be granted or withheld in the City's sole discretion. To obtain approval of any proposed demolition,remodel,modification or alternation, Lessee shall submit detailed plans and specifications of the proposed action to the City, together with a statement of Lessee's reasons therefor. Any such approved demolition, removal, alteration, modification, replacement or addition shall be commenced and completed in accordance with all of the provisions of this Lease. ARTICLE XV LESSEE'S COVENANTS 15.1 Subcontracting. Lessee agrees to be responsible for the standards of performance of any subcontractor engaged by it. Lessee agrees to assure that the work or services performed by any such subcontractor shall satisfy the terms of this Agreement. Lessee agrees that no subcontractor shall relieve Lessee of any obligation under this Agreement. All subcontracts shall first be approved by the City. The City agrees not to unreasonably withhold approval of any subcontract. 15.2 Security. Lessee agrees to provide reasonable security for and to safeguard all City property under the care of and used by Lessee and to provide for the reasonable Page-41- safety of the patrons while on the Golf Course. 15.3 Easements. Lessee shall recognize all existing easements on the Golf Course and shall not obstruct their use. Lessee shall join in and consent to any amendments to such existing easements (or new easements) as reasonably requested by the City. 15.4 Cross CountryMeet. Lessee agrees to honor the commitment of the City to the Washington Interscholastic Activities Association to host the state cross country championships at the Golf Course in 2001 and 2002. 15.5 Liens. Lessee shall keep the Golf Course free from any liens arising out of any work performed, materials furnished or obligations incurred by Lessee and hold the City harmless therefrom including all costs and attorney's fees. 15.6 Golf Instruction and Junior Golf Program. Lessee shall promote golf instruction and a.junior Golf Program by providing, at a reduced charge,to the City or participants therein group lessons,range balls,general golf instruction,actual play and junior tournaments. Such programs shall be taught by Lessee's golf professionals and publicity for same shall be coordinated through the City's Parks and Recreation Department. Golf shall be taught only by qualified instructors. 15.7 Disorderly Persons. Lessee agrees to use reasonable efforts to promptly remove from the Golf Course any unreasonably loud,boisterous or disorderly persons. 15.8 Illegal Activities. Lessee shall not knowingly permit any illegal activities to be conducted upon the Golf Course. 15.9 Golf Clubs/Organizations. Lessee acknowledges that there is a benefit to the operating of the Golf Course to have responsible golfing organizations. Without granting any special privileges to any person or group, Lessee may encourage,create and accommodate organizations,including withoutlimitation,senior citizens and any general nondiscriminatory golf club organizations. 15.10 Patron Forms. Lessee agrees to supply and have readily available at all times appropriate forms for patrons of the Golf Course to present their comments, criticisms, commendations or complaints regarding Lessee's operation and maintenance of the Golf Course. On a regular basis,Lessee shall provide the City Representatives with copies of such forms returned to Lessee by patrons. 15.11 Compliancy with Law-Non-Discrimination. Lessee shall conform to and abide by all City and County ordinances, and all State and Federal laws and regulations,insofar as the same are applicable and where permits and/or licenses are required for the Golf Course operation, the same must be first obtained from the regulatory agency having jurisdiction thereof. Lessee agrees to keep the Golf Course equipped with all safety equipment reasonably Page-42- 9 0 required and otherwise required by law. Lessee shall comply with all laws concerning alcoholic beverages, including licensing requirements. In such regard,Lessee shall have the right to sell alcoholic beverages for consumption during all hours of course operation,including the sale of alcoholic beverages on the Golf Course from beverage carts and related facilities and from or in club house facilities. 15.12 Responsibility for Taxes. Lessee shall be responsible for all fees,taxes and charges which may be levied upon Lessee in relation to its performance of services under this Agreement. This Section 15.12. does not apply to the payment of leasehold excise tax, for which payment responsibility is specifically provided for elsewhere in this Agreement. The City agrees that it will not design or adopt any new tax specifically targeted to golf course operations during the Term of this Agreement. ARTICLE XVI INSURANCE; DAMAGE BY FIRE, OTHER CASUALTY; EMINENT DOMAIN. 16.1 Insurance. (a) Lessee's Responsibilities. Lessee shall procure and maintain for the duration of the Agreement,insurance against claims for injuries to persons or damage to property which may arise from or in connection with the Lessee's operation and use of the Golf Course. (b) Minimum Scope of Insurance. Lessee shall obtain insurance of the types described below: 0) Commercial General Liability. Commercial general liability insurance shall be written on Insurance Services Office (ISO) occurrence form CG o0 01 and shall cover premises and contractual liability. The City shall be named as an insured on Lessee's Commercial General Liability insurance policy using ISO Additional Insured-Lessees or Lessors of Premises Form CG 20 11 or a substitute endorsement providing equivalent coverage. (ii) Liquor Liability Insurance. In the event Lessee offers alcoholic beverages in or around the Golf Course, "Dram Shop" and/or "Innkeeper's Liability"insurance against claims or liabilities arising directly or indirectly to persons or property on account of the sale or dispensing of beer, wine or other alcoholic beverages, with a combined single limit coverage of $1,000,00o bodily injury and property damage liability, or in greater amounts if required by law, Page-43- in form and substance reasonably acceptable to the City,and naming the City and its employees,officers and agents as additional insureds. (iii) Property Insurance. Property insurance on Lessee's property shall be written on an all risk basis. (c) Minimum Amounts of Insurance. Lessee shall maintain the following insurance limits: (i) Commercial General Liability insurance shall be written with limits no less than $i,000,000 each occurrence, $2,000,000 general aggregate. (ii) Property insurance shall be written covering the full value of Lessee's property and improvements with no coinsurance provisions, loo replacement value with no coinsurance penalty. (d) Other Insurance Provisions. The insurance policies are to contain,or be endorsed to contain,the following provisions for Commercial General Liability insurance: (i) The Lessee's insurance coverage shall be primary insurance with respect the City. Any Insurance, self-insurance, or insurance pool coverage maintained by the City shall be excess of the Lessee's insurance and shall not contribute with it. (ii) The Lessee's insurance shall be endorsed to state that coverage shall not be cancelled by either party, except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the City. (e) Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best rating of not less than A/VII. (f) Verification of Coverage. Lessee shall furnish the City with original certificates and a copy of the amendatory endorsements, including but not necessarily limited to the additional insured endorsement, evidencing the insurance requirements of the Lessee. (g) Waiver of Subrogation. Lessee and the City hereby release and discharge each other from all claims,losses and liabilities arising from or caused by any hazard covered by property insurance required to be carried by this Lease or actually carried by such parry. Each party shall obtain any special endorsements,if required by its insurer,whereby the insurer waives its rights of subrogation against the other party. This provision is intended to waive fully,and for the benefit of the parties hereto,any rights and/or claims which Page-44- 0 0 might give rise to a right of subrogation in favor of any insurance carrier. (h) The CiWs PronejU Insurance. The City shall purchase and maintain during the term of the Lease all-risk property insurance covering the Buildings for their full replacement value without any coinsurance provisions. Such insurance may be included as part of a blanket insurance program maintained by the City. (i) Worker's Compensation. Lessee agrees that all persons furnishing services to the City pursuant to this Agreement are, for purposes of workmen's compensation liability, employees solely of Lessee and not employees of the City. Lessee shall bear the sole responsibility and liability for furnishing workmen's compensation benefits to any person for injuries arising form or connected with services performed on behalf of Lessee pursuant to this Agreement. Lessee agrees to provide and maintain workman's compensation insurance in amounts required by state law. (j) The QA5fs Right to Obtain. In the event the insurance required under this Section 16.1.is not maintained,or if a default by Lessee occurs,the City shall have the right (but not the obligation) to place and maintain the Insurance required to be placed and maintained by Lessee hereunder. Lessee agrees,on demand,to pay to the City the amounts expended therefor with interest at the Default Rate from the time the City incurs said costs of insurance.In the event Lessee fails to place and maintain the insurance required under Section 16j(W i),the City shall have the right(but not the obligation)to require the immediate cessation of the sale of alcoholic beverages at the Golf Course. 16.2 Damage by Fire, other Casualty. (a) Material Casualty. In the event of casualty to a material part of the Golf Course,where: (i) Lessee shall reasonably determine that the Golf Course in its entirety cannot be effectively used or operated by Lessee(whether on account of physical, economic, aesthetic or other reasons), or (ii) the Buildings and Other Improvements cannot be appropriately repaired with available insurance proceeds within one hundred eighty(18o)days of such casualty to a substantial similar economic function, Lessee shall have the right to terminate this Lease in which event Lessee shall forward a written notice to the City of such determination not more than sixty (6o) days after the date of such damage. (b) Insufficiency of Insurance Proceeds. To the extent of an occurrence Page-45- 0 • of a casualty and to the extent that Lessee does not elect to terminate this Lease as contemplated by Subparagraph (a) above, in the event that proceeds of insurance are not sufficient to repair or restore the damage resulting from the casualty in question, the City shall have the right to terminate this Lease unless Lessee commits to pay the costs of repair or restoration in excess of available insurance proceeds. (c) Lessee's or the Gig's Right to Terminate.The term of this Lease shall expire upon such date as Lessee shall specify in such notice contemplated by Subparagraph (a)(H) above but not earlier than thirty (3o) days after the date of such notice.Likewise,the term of this Lease shall expire upon such date as the City shall specify in such notice contemplated by Subparagraph (b) above but not earlier than thirty(3o)days after the date of such notice,unless Lessee commits in writing to pay the costs of repair or renovation within fifteen (15) days following the City's written notice. (d) Abatement in Rent. If this Lease is not terminated as aforesaid, it shall continue in full force and effect and the Rent shall be equitably reduced during such reconstruction, unless the casualty was due to the negligence or intentional misconduct of Lessee, in which event Rent shall not be abated. (e) Limitation of Qtv's Liability. If this Lease is terminated as aforesaid, no damages, compensation or claim shall be payable by the City for inconvenience, loss of business or annoyance arising from any damage or destruction to any portion of the Golf Course. M Lessee's Acknowledgment. Lessee hereby acknowledges that the City will not carry insurance of any kind on any improvements paid for by Lessee or on Lessee's furniture,furnishings,fixtures,equipment or appurtenances of Lessee under this Lease and the City shall not be obligated to repair any damage thereto or replace the same. (g) Lessee's Waiver. As a material inducement to the City entering into this Lease,with respect to any destruction(including any destruction necessary in order to make repairs required by declaration of any authorized public authority) which the City makes or is obligated to make, Lessee hereby irrevocably waives the provisions of any law, code, or ordinance permitting Lessee to make repairs at the City's expense or to terminate this Lease in the event of damage or destruction to Lessee's property. (h) Availability of Insurance Proceeds. In the event of the occurrence of a casualty and in the event neither the City or Lessee exercises its rights to terminate this Lease as contemplated above, all insurance proceeds maintained hereunder shall be made available for the purpose of paying the costs of such repair or renovation,with any remaining proceeds to be paid to the City. Page-46- 0 0 16.3 Eminent Domain. (a) Taking of All of the Golf Course. If all of the Golf Course is taken by eminent domain, this Lease shall automatically terminate as of the date title vests in the condemning authority. (b) Material Taking. In the event of a taking of a material part,but less than all, of the Golf Course, where either the City or Lessee shall determine that the remaining portions of the Golf Course cannot be economically and effectively used by Lessee (whether on account of physical,economic,aesthetic or other reasons) or where the City or Lessee determines the Golf Course should be restored in such a way as to materially alter its use or functionality,either party shall forward a written notice to the other party of such determination not more than sixty(6o) days after the date of taking. (c) Termination of the Lease. The Term of this Lease shall expire upon such date as the City or Lessee shall specify in such notice but not earlier than sixty(6o) days after the date of such notice. (d) Partial Taking. In case of taking of a part of the Golf Course,or a portion thereof not reasonably or substantially interfering with the continued use of the Golf Course for its intended purposes,then this Lease shall continue in full force and effect and the Rent shall be unchanged. (e) Allocation of Damages.Except as expressly set forth herein, the City reserves all rights to damages to the Golf Course for any partial,constructive, or entire taking by eminent domain,and Lessee hereby assigns to the City any right Lessee may have to such damages or award, and Lessee shall make no claim against the City or the condemning authority for damages for termination of the leasehold interest or interference with Lessee's business. (f) Legsee's Right to Damages. Lessee shall have the right to recover from a portion of the City's award an amount equal to the Unamortized Capital Amount. Lessee shall also have the right,however,to claim and recover from the condemning authority compensation for any loss to which Lessee may be put for Lessee's moving expenses,business interruption or taking of Lessee's personal property (not including Lessee's leasehold interest) provided that such damages may be claimed only if they are awarded separately in the eminent domain proceedings and not out of or as part of the damages recoverable by the City. Page-47- 0 .ARTICLE XVII INDEMNIFICATION/ HOLD HARMLESS; DEFAULT; DISPU'T'E RESOLUTION 17.1 Indemnification. (a) Lessee's Indemnity. Lessee hereby agrees that it will protect, indemnify, hold harmless and defend the City from and against all liabilities,obligations, claims, damages, penalties, causes of action, costs and expenses (including, without limitation, reasonable attorney's fees and expenses), to the extent permitted by law,by reason of: (i) any accident, injury to or death of persons or loss of or damage to property occurring on or about the golf course or the real property, during the Term or while the Golf Course is in the possession or control of Lessee; (ii) any failure on the part of Lessee to pay,perform or comply with any of the terms of this Lease; or (iii) all liabilities arising from events between the commencement date of this lease through the termination date hereof and which result in a failure to comply with Lessee's Environmental Covenants. (b) Lessee's Waiver of Certain Rights. Solely for the purpose of effectuating Lessee's indemnification obligations under this Lease, and not for the benefit of any third parties(including but not limited to employees of Lessee), Lessee specifically and expressly waives any immunity that may be granted it under applicable federal, state or local worker compensation acts, disability benefit acts or other employee benefit acts. Furthermore, the indemnification obligations under this Lease shall not be limited in any way by any limitation on the amount or type of damages,compensation or benefits payable to or for any third party under worker compensation acts, disability benefit acts or other employee benefit acts. The parties acknowledge that the foregoing provisions of this section have been specifically and mutually negotiated between the parties. (c) Exclusions From Lessee's Indemnity. Lessee shall be relieved from the indemnity obligations set forth above to the extent that such liabilities, obligations, claims, damages, penalties, causes or action, costs and expenses or those imposed upon or incurred by or asserted against the City are the direct result of(a)the City's negligence or willful misconduct or(b)the City's breach of its obligations under this Lease. (d) . City's Indemnity. The City hereby agrees that it will protect, indemnify, Page-48- 9 0 hold harmless and defend Lessee from and against all liabilities, obligations, claims,damages,penalties,causes of action,costs and expenses imposed upon or incurred by or asserted against any Lessee indemnified party as a result of: 0) all liabilities arising from the City's failure to perform the City's Environmental Covenants. (ii) the negligence or willful misconduct of the City; or (iii) any failure on the part of the City to perform or comply with any of the terms of this Lease. (e) Exclusions From The QWs Indemnity. The City shall be relieved from the indemnity obligations set forth above to the extent that such liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses or imposed upon or incurred by or asserted against a lessee indemnified party are the direct result (a) Lessee's negligence or willful misconduct or (b) Lessee's breach of its obligations under this Lease. (f) Pa, ent of Sums Due. Any amounts that become payable by an indemnifying party under this Section 17,1. shall be paid within thirty(30) days after liability therefor on the part of the indemnifying party is determined by litigation or otherwise, and if not timely paid, shall bear interest (to the extent permitted by law) at the Default Rate from the date of such determination to the date of payment. Any such amounts shall be reduced by insurance proceeds received and any other recovery(net of costs)obtained by the indemnified party. (g) Defenses of Claims. An indemnifying party, upon request, shall, at its sole expense, resist and defend any proceeding, claim or action, or cause the same to be resisted and defended by counsel designated by the indemnified party and approved by the indemnifying party; provided, however,that such approval shall not be required in the case of defense by counsel designated by any insurance company undertaking such defense pursuant to any applicable policy of insurance. (h) Parts'cipation in Defense of Claims. Each indemnified party shall have the right to employ separate counsel in any such proceeding, claim or action and to participate in the defense thereof,but the fees and expenses of such counsel will be at the sole expense of such indemnified party unless a conflict of interest prevents representation of such indemnified party by the counsel selected by the indemnifying party and such separate counsel has been approved by the indemnifying party. (i) Settlement of Claims. The indemnifying party shall not be liable for any settlement of any such proceeding,claim or action made without their consent, Page -49- but if settled with the consent of the indemnifying parry, or if there be a final, non-appealable judgment for an adversary parry in any such proceeding,claim or action, the indemnifying party shall indemnify and hold harmless the indemnified party from and against any liabilities incurred by such indemnified party by reason of such settlement or judgment. (j) Survival. Lessee's and the City's obligations under the provisions of this Section V.i shall survive any termination of this Lease. 17.2 Default. (a) Default By Lessee. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Lessee(a "Lessee Default"): (i) the abandonment of the Golf Course by Lessee or the vacating of the Golf Course for more than thirty(30)consecutive days,other than as a result of the damage or destruction of the Golf Course as a result of fire or other casualty; (ii) the failure by Lessee to make any payment of Rent or any other payment required to be made by Lessee hereunder,and such failure continues for more than ten (1o) days after written notice from the City; (iii) the failure by Lessee to observe or perform any of the other covenants,conditions or provisions of the Lease,where such failure shall continue for a period of thirty (3o) days after written notice from the City; provided, however, if more than thirty(3o) days are reasonably required for its cure then Lessee shall not be deemed to be in default if Lessee commences such cure within said thirty(30) day period and thereafter diligently prosecutes such cure to completion; (iv) the making by Lessee of any general assignment or general arrangement for the benefit of creditors; (v) the filing by or against Lessee of a petition to have Lessee adjudged bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Lessee,the same is dismissed within sixty(6o) days); (vi) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Golf Course or of Lessee's interest in the Lease, where possession is not restored to Lessee within thirty(30) days; Page-50- (vii) Lessee is adjudged insolvent by any court or competent jurisdiction; (viii) the attachment,execution or other judicial seizure of substantially all of Lessee's assets located at the Golf Course or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (go) days; or (ix) the assignment or other transfer of all or any interest of Lessee in this Lease,or the subletting of all or any portion of the Golf Course, in either case which is in violation of Section 20.2. below. (b) Affect of Notice and Cure Periods. All notice and cure periods set forth above are in lieu of and not in addition to any notice required pursuant to applicable unlawful detainer/eviction statutes. (c) The C!Ws Remedies Upon Ussee Default. All rights and remedies of the City herein enumerated shall be cumulative,and none shall exclude any other right or remedy allowed by law or in equity,and all of the following may be exercised with or without legal process as then may be provided or permitted by the laws of the State of Washington: (i) Upon any default under this Lease, the City may reenter the Golf Course and remove or put out Lessee or any other persons found therein. No such reentry shall be construed as an election on the City's part to terminate this Lease unless a written notice of such intention is given to Lessee. (ii) The City may elect to re-let the Golf Course or any part thereof upon such terms and conditions, including rent,term and remodeling or renovation,as the City in its sole discretion may deem advisable. To the fullest extent permitted by law,the proceeds of any reletting shall be applied: first, to pay the City all costs and expenses of such reletting(including without limitation,costs and expenses incurred in retaking or repossessing the Golf Course, removing persons or property therefrom,securing new Lessees,and,if the City maintains and operates the Golf Course,the costs thereof); second,to pay any indebtedness of Lessee to the City other than rent;third,to the rent due and unpaid hereunder; and fourth, the residue, if any, shall be held by the City and applied in payment of other or future obligations of Lessee to the City as the same may become due and payable,and Lessee shall not be entitled to receive any portion of such revenue. (iii) The City may also elect to terminate the Lease and all rights of Lessee by giving notice to Lessee of such election. If the City elects to terminate the Lease,the City shall have the right to reenter the Golf Page-51- 0 0 Course and remove all persons,and to take possession of and remove all equipment and fixtures of Lessee in the Golf Course. Lessee hereby waives all damages that may be caused by the City's reentering and taking possession of the Golf Course or removing or storing the properly thereof,and Lessee shall save the City harmless therefrom,and no such reentry shall be considered a forcible entry. If the City so elects to terminate the Lease,the City may also recover from Lessee: (iv) The worth at the time of the award of the unpaid rent which had been earned at the time of termination; (v) The worth at the time of the award of the amount by which the unpaid rent which would have been earned after termination until the time of the award exceeds the amount of rental loss that the Lessee proves could have been reasonably avoided; (vi) The worth at the time of the award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of rental loss that the Lessee proves could be reasonably avoided; (vii) Any other amount necessary to compensate the City for all the detriment proximately caused by the Lessee's failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom; and (viii) At the City's election,such other amounts in addition to or in lieu of the foregoing that may be permitted from time to time by applicable law. (ix) The "worth at the time of the award" of the amounts referred to in paragraphs (1) and (2) above is computed by allowing interest at twelve percent (12%). The "worth at the time of the award" of the amount referred to in paragraph (3) above is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent (1%). (d) Indemnification Provisions Unaffected. Nothing in this Section 17.2. shall be deemed to affect the City's right to indemnification for liability or liabilities arising prior to termination of this Lease for personal injury or property damage under the indemnification provisions or other provisions of this Lease. (e) Mitigation of Damages.Notwithstanding anything contained herein to the Page-52- 0 0 contrary,the City shall use reasonable efforts to mitigate its damages incurred as a result of Lessee's default hereunder, as and to the extent required by applicable Washington law. 17.8 Lessee's Right To Terminate. At anytime during the Term, commencing with the sixth(6th)Lease Year,whether or not a Lessee Default has occurred,Lessee shall have the right to terminate this Lease upon the satisfaction of the following conditions: (i) Delivery of written notice to such effect to the City at least eight(8) months prior to the proposed termination date, which shall take place on the last day of the Lease Year in which the election is made; (ii) All Rent then due through the date of termination is paid in full;and (iii) Lessee has complied in all material respects to its obligations in respect to the maintenance of the Golf Course in accordance with the Maintenance Standards; and (iv) Lessee has fully completed the Required Capital Improvement s and fully funded the Additional Capital Improvement Amount. In such event (A) the Bonds or the proceeds thereof then held by the City shall be returned to Lessee, (B) the City shall have no obligation to fund the Unamortized Capital Amount to Lessee, and (C) the parties thereafter shall have no further obligation one to the other except for those obligations which expressly survive the termination of this Lease. 17.4 Dispute Resolution Procedure. (a) Disputes-Subject to Dispute Resolution Procedures. The purpose of this Section 17.4.. is to provide a mechanism whereby the parties hereto can resolve a bona fide dispute with respect to the following matters: (i) the determination of the Fair Market Rental for any Renewal Term as set forth in the Renewal Term Rider attached hereto; (ii) the finalization of and approval of any Capital Improvement Budget; (iii) the determination of whether or not Lessee is performing or in compliance with the Maintenance Standards; (iv) A determination of a reasonable amount of Rent abatement as contemplated by the provisions of Section 16,2.(d.). (v) A determination of Golf Course Play Revenues,Golf Course Ancillary Revenues, Merchandise Sales and Food and Beverage Revenues; Page-53- (vi) the determination of the Clubhouse Renovation Date, and matters relating to the construction of the Renovation Improvements; (vii) the determination of the adequacy of the repairs to the Irrigation System; and (viii) similar issues regarding the manner of operating and maintaining the Golf Course and the Other Improvements. Notwithstanding the foregoing, the Dispute Resolution Procedure shall not apply to claims of a material default by a party under this Lease whereby the party alleging the default asserts in good faith that,as a result of such default, this Lease has terminated or the party desires to so terminate this Lease, in accordance with the provisions hereof. (b) Dioute Resolution Procedure. (i) If the provisions of this Section x7,4. are instituted by a party hereto,the City and Lessee shall immediately attempt to agree upon an independent appraiser, accountant, golf course operator or another person qualifiedto resolve the dispute in question,who shall have at least ten (1o) years of real estate appraisal experience, accounting experience or other experience in or for the management and operation of golf courses similar to the Golf Course to make the determination in question (such Person is hereinafter called a "Decision Maker"). (ii) If the City and Lessee cannot agree upon a Decision Maker within ten (1o) days after the initiation of this procedure,then: (A)The party initiating this procedure (the "First Party") shall notify the other party(the"Second Parr')and in such notice shall designate the first Decision Maker. If the first Decision Maker is acceptable to the Second Party,the Second Party shall immediately so notify the First Party and the first Decision Maker shall proceed to make the determination within fifteen (15) days thereafter. (B)If the first Decision Maker is not acceptable to the Second Party, then within twenty (ao) days after receipt of the First Party's notice,the Second Party shall designate, in a written notice,the second Decision Maker. If the Second Party fails to timely approve the first Decision maker or designate the second Decision Maker,then the first Decision Maker shall proceed to make the determination within fifteen (15) days thereafter. Page-54- • ! (C)If a second Decision Maker is designated, the first and second Decision Makers shall meet within ten (1o) days after the designation of the second Decision Maker,and proceed to make the determination within fifteen(15) days thereafter. (D)If the first and second Decision Makers are unable to reach a decision within such fifteen (15) day period, they shall jointly appoint a third Decision Maker who shall make an independent evaluation of the analysis and the determinations made by the first and second Decision Makers and who shall, within an additional fifteen (15) day period, elect the analysis and determination of the first two Decision Makers which, in the opinion of such third Decision Maker, most closely adopts the proper analysis. (c) Final Decision. A decision of the Decision Maker or Decision Makers shall be binding and conclusive on the parties hereto. (d) Refusal to Act. If any Decision Maker shall fail,refuse,or become unable to act, a new Decision Maker shall be appointed in his place following the same method as was originally followed with respect to the Decision Maker to be replaced. (e) Decision Maker Fees. The City and Lessee shall pay the fees and expenses of the Decision Maker appointed by them, and if only one Decision Maker is used,or if a third Decision Maker is required,the fees and expenses of the sole Decision Maker or the third Decision Maker, as applicable, and all other Decision Making expenses shall be borne equally by the Party. All hearings and proceedings held and all investigations and actions taken by the Decision Makers shall take place in the City of Pasco,Washington. (f) Independgnce. Any Decision Maker designated to serve in accordance with the provisions of this Section i7..a.(f)shall be independent of the City, Lessee or any of their respective affiliates. ARTICLE XVIII SURRENDER UPON LEASE TERMINATION. 18.1 Surrender of Golf Course. At the expiration of the Term of this Lease, or at the earlier termination of this Lease, Lessee shall surrender the Golf Course in good condition, reasonable wear and tear excepted. 18.2 Removal of Fixtures. Lessee may place any personal property or equipment in the Page-55- 0 r Golf Course for use in connection with the business of Lessee, and the title of-said personal property or equipment shall remain in Lessee regardless of whether or not such property or equipment is attached to or made a part of the building or real property covered by this Lease. Upon the expiration or sooner termination of this Lease, Lessee shall have the right to remove any such property whether or not the same is attached to the real property covered hereby, provided that upon any such removal,the Golf Course hereby leased shall be replaced in as good condition as the same now are, reasonable wear and tear excepted. Provided, further, except as expressly set forth in Section 17.3. hereof in respect to Lessee's right to terminate this Lease,that Lessee shall not have the right to remove any such personal property or equipment if Lessee is in default in the payment of rentals due under this Lease or if Lessee is in default if any of the terms and conditions of this Lease. 18.3 Rights of Lessee Upon Termination by the City. In the event that the City exercises its right to terminate this Lease pursuant to Sections 8.2(b) or Lessee exercises its right to terminate this Lease pursuant to Section 1g.2(b)the City shall pay to Lessee the Unamortized Capital Amount. .ARTICLE XIX ENVIRONMENTAL MATTERS. 19a Lessee's Enyironm�ntal Covenants Regarding Operations- of the Golf Course. Lessee hereby covenants and agrees with the City that it shall use reasonable efforts not to do or permit,except for the use of fertilizer, pesticides and gasoline products in the ordinary course of business in connection with the operation of the Golf Course, to be used in commercial quantities similar to those quantities usually used,released,kept or disposed of in the Comparable Facilities,and which are used, released, kept or disposed of in compliance with applicable Environmental Laws,any Environmental Activity to take place in,on or under the Golf Course,or to be incorporated in the Golf Course.Additionally,Lessee hereby agrees to hold the City harmless from and against any Environmental Liabilities arising from the acts of Lessee during the Term of this Lease (the foregoing covenants herein called "Lessee's Environmental Covenant"). 19.2 The vir nme ve Re ar I rs P 'or Operations. (a) Cry's Obligations and Covenants. The City shall be responsible for any and all liabilities arising from Environmental Activity at the Golf Course prior to the Commencement Date,including but not limited to existing underground or aboveground storage tanks, asbestos or other Hazardous Wastes. Page-56- 0 0 (b) Lessee's Right to Terminate. (i) In the event that Hazardous Wastes existing on or at the Golf Course as of the Commencement Date are found and in the event that as a result of requirements to comply with Environmental Laws the City is legally required to remove or remediate such Hazardous Wastes, the City, at its election, may or may not, remove or remeidate such Hazardous Wastes. (ii) In the event, the City does not elect to remove or remediate such Hazardous Waste, and such removal or remediation is be required to permit Lessee to operate the Golf Course in the ordinary course without undue interference or risk, economic or otherwise, Lessee may terminate this Lease. (iii) Notwithstanding anything contained herein to the contrary, the City's right to elect not to remove or remediate Hazardous Substances shall not apply to its obligations with respect to underground storage tanks and any removal or remediation obligation with respect thereto, if the City's failure to do so would prevent Lessee from operation the Golf Course in the ordinary course without undo interference or risk, economic or otherwise. In such event such removal or remediation shall be conducted by the City at its sole cost and expense within a reasonable period of time following the determination that such removal or remediation is necessary or required. (c) City's Environmental Covenants. The City hereby agrees to hold Lessee harmless from and against any Environmental Liabilities(a)existing in respect to the Golf Course as of the Commencement Date,or(b) arising from the acts of the City or its agents prior to or after the Commencement Date, or (c) the existence of Hazardous Wastes at the Golf Course as of the Commencement Date, or (c) the performance of the City's covenants set forth in Subparagraph (b)(iii) above (the foregoing covenants herein called the "QWs Environmental Covenants"). ARTICLE XX MISCELLANEOUS 20.1 Independent Contractor Status. ThisAgreernent is not intended,and should not be construed,to create a relationship of agent,servant, employee,joint venture, or association,as between the City and Lessee. Lessee shall at all times be considered an independent contractor under this Agreement. Page -57- 2o.2 Transfer. (a) No Assignment, Subletting, Licensing or other Transfer. (i) Neither this Lease nor any interest therein may be assigned, mortgaged,transferred,hypothecated or encumbered by Lessee,nor shall all or any part of the Golf Course be sublet or licensed(each of which, a "Transfer"), without the City's prior consent, which may be withheld in its sole discretion. (ii) If Lessee is a corporation,partnership,limited liability company,or any other entity, any transfer of a controlling ownership interest in such entity or any transfer of this Lease by merger,consolidation or liquidation shall be deemed a Transfer requiring the City's consent. (iii) Transfers include,without limitation,one or more sales or transfers, by operation of law or otherwise, or creation of new stock,by which an aggregate of more than fifty percent (50%) of Lessee's stock, or partnership or membership interests, as applicable, shall be vested in a parry or parties who are non-stockholders or non-partners or non-members, as applicable, as of the date hereof. (b) Transfer by the City. If the City shall assign its interest under this Lease or transfer its interest in the Golf Course, the City shall be relieved of any obligation accruing hereunder after such assignment or transfer, and such transferee shall thereafter be deemed to be the City hereunder. 20.3 Notice of Delaya. When either Lessee or the City has knowledge that any actual or potential situation is delaying or threatens to delay the timely performance of this Agreement, that party shall, within five (5) days, give notice thereof, including all relevant information with respect thereto to the other party. 204 Severability. The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of any other provision. 20.5 Waiver. No waiver of a breach of any provision of this Agreement by either Lessee or the City shall constitute a waiver of any other breach of the same provision or any other provision of this Agreement. Failure of either the City or Lessee to enforce at any time, or from time to time, any provision of this Agreement, shall not be construed as a waiver of such provision or breach. The remedies herein reserved shall be cumulative and additional to any other remedies in law or in equity. 20.6Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and(a) hand delivered, including delivery by courier service, (b) sent by facsimile, or(c) sent by certified mail, return receipt requested, postage prepaid, addressed as shown below, or to such other Page-58- i 6 address as the parry concerned may substitute by written notice to the other. If the notice is sent by facsimile, it must be properly addressed, reflecting the facsimile phone number of the addressee(s), and must be transmitted by a facsimile which produces a dated message completed confirmation.Facsimile notices shall be deemed received on the date of confirmed transmission if during normal business hours in Pasco, Washington, otherwise on the next Business Day. All notices hand delivered shall be deemed received on the date of delivery.All notices forwarded by mail shall be deemed received on a date three (3) days (excluding Sundays and legal holidays when the U.S.mail is not delivered)immediately following date of deposit in the U.S. mail;provided,however,the return receipt indicating the date upon which all notices were received shall be prima facie evidence that such notices were received on the date on the return receipt. The addresses and addressees may be changed by giving notice of such change in the manner provided herein for giving notice. Unless and until such written notice is received, the last address and addressee given shall be deemed to continue in effect for all purposes.Any notice to Lessee may be delivered personally or by mail addressed to Mr.Dave Flickwir,c/o IRI Golf Management,L.P., 16236 San Dieguito Road, Ste. 4-13, Rancho Santa Fe, CA 92067, Telephone: 858- 756-6333,Facsimile:858-756-6334,E-mail:golfsuds(&aol.com.Any notice to the City may be delivered personally or by mail addressed to City Manager,City of Pasco,525 N. 3rd, P.O. Box 293,Pasco,Washington 99301,or such other place as the City may designate in writing. 20.7&M nses of Enforcement. Lessee and the City agree to pay all reasonable costs, attorney's fees (including the reasonable value of the services rendered by the City Attorney) and expenses, including investigation fees, expert witness fees,to the prevailing party in any dispute involving the terms and conditions or interpretation or breach of this Agreement. 20.8 Successors and Assigns.. This Agreement shall be binding upon and inure to the benefit of the heirs,executors,administrators,successors and assigns of the City and, if permitted by the City hereunder, the successors and assigns of Lessee. 20.9 Time of Essence. Time is of the essence in regard to the performance of any of the terms or conditions of this Agreement. 20.10 Governing Laws. This Agreement shall be construed, and the rights and duties of the City and Lessee shall be determined, in accordance with and governed by the laws of the State of Washington. Venue shall be in the Franklin County Superior Court. 20.11 Entire Agreement. This Agreement constitutes the entire agreement between the City and Lessee. It supersedes all prior communications, agreements, contracts and promises, either oral or written, by the City and Lessee. No modification of the terms of this Agreement shall be effective unless agreed to in writing and signed by both the City and Lessee. Page-59- 0 0 20.12 Quiet Possession. The City covenants that, subject to the limitations, covenants and conditions expressly set forth in this Lease, and, so long as Lessee is not in default hereunder beyond applicable cure periods,Lessee may quietly have,hold, and enjoy the Golf Course during the period commencing on the Commencement Date hereof and ending upon the expiration or earlier termination of this Lease, without hindrance or interruption by the City, subject to the City's right to enter upon the Golf Course as provided herein. 20.13 The Ci . s Entrv. (a) The City and any of its agents shall at any time upon reasonable notice to Lessee have the right to go upon and inspect the Golf Course and improvements erected or constructed, or in the course of being erected or constructed,repaired, added to, rebuilt or restored thereon. (b) The City shall have the right to serve or to post and to keep posted on the Golf Course, or on any part thereof, any notice permitted by law or by this Lease, any other notice or notices that may at any time be required or permitted by law or by this Lease. (c) The City shall not be liable in any manner for any inconvenience,disturbance, loss of business, or other damages arising out of the City's entry on the Golf Course as provided in this clause except for such damage that is caused directly by, or through the negligence of, the City, their employees, agents, or representatives. 20.14 Subordination. This Lease shall be subordinate to (a) any deed of trust, mortgage or other security instrument now or in the future encumbering the City's interest in the Golf Course, or any part thereof, (b) all obligations secured thereby, and (c) all renewals, modifications, consolidations, replacements and extensions thereof (collectively, "Security Interests"), provided that the City first obtains the agreement of the holder of such Security Interest that Lessee's rights under this Lease will not be abrogated by any foreclosure or other remedy exercised by such holder against the City as long as Lessee complies with all of its obligations under this Lease. Lessee's obligation to subordinate this Lease to any future Security Interest is conditioned on the agreement of the holder of such Security Interest that Lessee's rights under this Lease will not be abrogated by any foreclosure or other remedy exercised by such holder against the City as long as Lessee complies with all of its obligations under this Lease. 20.15 Estoppel Certificates. Lessee shall, from time to time, upon written request of the City,execute,acknowledge and deliver to the City or its designee a written statement certifying that: (a) this Lease is in full force and effect and has not been assigned or amended in Page-6o- 0 0 any way (or specifying the date and terms of agreement so affecting this Lease); (b) this Lease represents the entire agreement between the parties as to this leasing;that all obligations under this Lease to be performed by the City have been satisfied; (c) on this date there are no existing claims, defenses or offsets which the Lessee has against the enforcement of this Lease by the City; (d) no Rent has been paid more than one month in advance; and that no security has been deposited with the City(or, if so,the amount thereon; and (e) such other items as the City shall reasonably request. It is intended that any such statement delivered pursuant to this Section 20. i.may be relied upon by a prospective purchaser of the City's interest or holder of any mortgage upon the City's interest in the Golf Course. If Lessee shall fail to respond within ten (xo) days of receipt by Lessee of a written request by the City as herein provided, Lessee shall be deemed to have given such certificate as above provided without modification and shall be deemed to have admitted the accuracy of any information supplied by the City to a prospective purchaser or mortgagee and to have certified that this Lease is in full force and effect,that there are no uncured defaults in the City's performance,that the security deposit is as stated in the Lease,and that not more than one month's rent has been paid in advance. M Amg_ndmentto Lease;Material.Agreements. Any amendment to this Lease shall be made in writing and only with the approval of Lessee, and Lessee's Representative, and the City, and the City Representative. Any decision or consent or approval of any material matter dealing with this Lease or the Golf Course or its operations shall be made only by Lessee's Representative and the City Representative and neither the Course Manager or the Superintendent shall have the right or power to bind Lessee in any material manner. Page-61- Dated this _day o£ X-ff- er, z� J CITY OF PASCO: ICHAEL L. ARRISON Mayor ATTEST: APPROVED AS TO FORM: CATHERINE D. SEAMAN LELAND B. KERR Deputy City Clerk City Attorney STATE OF WASHINGTON ) ss. County of Franklin ) I certify th,a�, I know or have satisfactory evidence that is the person who appeared before me,and said person acknowledged that sai " erson signed this instrument,on oath stated that said person was authorized to execute the instrument and acknowledged it as the of the City of Pasco, a Washington municipal corporation,to be the free and voluntary act of such municipal corporation for the uses and purposes mentioned in the instrument. GIVEN under my hand and official seal this day of irk;2see: NOTARY PUBLIC in afid f r the oN� L zUti State of Washington,..r�s ing ���SS1 at: My Commission Expires: �3Z3_0 NOTARy� �AVBLIGk 2 Page-62- LESSEE: IRI SUNWILLOWS ACCOCIATES LLC, a Delaware limited liability company By: IRI GOLF MANAGEMENT, L.P., a Delaware limited liability company, Its Manager By: GolfMark Corporation, a Delaware corporation, Its General Partner By: Name: V Je rey M. Silverstein Title: President STATE OF I i J : ) ss. , County o ,� _ ) certif� that I know or have satisfactory evidence that c � rs- is the person who appeared before me,and said person acknowle ged that said person signed this instrument,on oath stated that said person was authorized to execute the instrument and acknowledged it as the President of Golfmark Corporation,a Delaware corporation,General Partner of IRI GOLF MANAGEMENT, L.P., a Delaware limited partnership, Manager of IRI SUNWILLOWS ASSOCIATES, LLC, a Delaware limited liability company, to be the free and voluntary act of such corporation, limited partnership and limited liability company for the uses and purposes mentioned in the instrument. GIVEN under my han official seal this day of December, 2000. X P�U►�� Ci � . ohe z � a o=mG-m-"EsG sCu of residin g # 178 iQ74 a " �. Notary Public-CO idomiq SanDl ega CCUOY My Commission Expires: 4{-Z S-o Z- _. ' ,,rycsan 0, C:\LJBdocs\SILVERSTEIN\SUN WILLOWS GOLF COURSE\LEASE AGREEMENT\LJB DRAFTS\LJB LEASE AGREEMENT.12.22.00mpd Page-63- 0 0 SCHEDULE OF EXHIBITS: Renewal Term Rider Exhibit A - Sketch of Golf Course and Old Course Exhibit B - Legal Description of Golf Course and Old Course Exhibit C - Rate Schedule for First 36 Months Exhibit D - List of Equipment/Replacement Schedule Exhibit E - Golf Course Maintenance Standards Exhibit F - Course Improvements Page-64- 0 • Renewal Term Rider Provided Lessee is not then in material default,and provided that neither this Lease nor any interest in the Golf Course has been assigned, sublet, licensed, or otherwise transferred by Lessee other than in accordance with the provisions of this Lease, Lessee shall have the right to renew and extend this Lease(the"Renewal Option")with respect to the Golf Course for the Renewal Term upon and subject to the following terms and conditions: 1.1 Lessee may renew the initial Term of this Lease for one (1) Renewal Term of five (5) years. Subject to the provisions of this Renewal Term Rider, the Renewal Term, herein so called, shall commence immediately upon the expiration of the original Term by Lessee's giving written notice thereof to City no later than twelve (12) months' prior to the expiration of the original Term. If Lessee does not renew this Lease for the Renewal Term,then Lessee shall have no further renewal rights. 1.2 The exercise by Lessee of any Renewal Option must be made, if at all, by written notice executed by Lessee and delivered to City on or before the date set forth in Paragraph 1.2 above. Once Lessee shall exercise the Renewal Option, Lessee may not thereafter revoke such exercise. Lessee shall not have the right to exercise the Renewal Option at a time a Lessee Default has occurred and remains uncured. Lessee's failure to exercise timely the Renewal Option for any reason whatsoever shall conclusively be deemed a waiver of such Renewal Option. 1.3 Lessee shall take the Golf Course"as is"for the Renewal Term and City shall have no obligation to make any improvements or alterations to the Golf Course. 1.4 Rent for the Renewal Term shall be the greater of the Rent in effect for the year prior to the commencement of the Renewal Term,or the Fair Market Renewal Rate.If City and Lessee have not agreed upon the Fair Market Renewal Rate at least four (4) months prior to the commencement of the Renewal Term,such Fair Market Rate shall be determined as provided in Section 17.4. of the Lease. 1.5 In determining the Fair Market Renewal Rate,the parties (and Decision Makers,as applicable) shall take into account all revenue sources then existing with respect to the use and operation of the Golf Course, and a market rate return to the City with respect thereto. The parties may elect to follow the allocation of the rent to different sources of revenues as provided in this Lease, or use other another formula to establish the Fair Market Renewal Rent hereunder. Page-1- EXHIBIT A SKETCH OF GOLF COURSE AND OLD COURSE ` LEASE NO. CLUB UDVSE GOLF I FA E AREA 250542 - AIRSPACE EASEMENT 258248 - PUD EASEMENT 261892 - PUD EASEMENT CITY OF PASCO 2?0 9 200 400 am ' EXHIBIT B LEGAL DESCRIPTION OF GOLF COURSE AND OLD COURSE EXHIBIT B LEGAL DE O LPTION OF GOLF COURSE AND OLD fkRSE INS n rr • : 3 �x • s r s " x 1 � 1 7� p KI q N 1 R ~ R p l p R 1 p \ � s •»Y , 1 \Mild R J � f i w I � n SAINT ANDREWS LOOP z 3Ad Fuoz N EXHIBIT B (2) LEGAL DESC ION OF GOLF COURSE AND OLD CO TH PTN N2 19-9-30 DAF : BEG AT SW COR LOT 8 , BLK 3 AMENDED PLAT OF SUN WILLOWS; TH NlOD42 ' E ALG SELY BDRY OF SD ELK 3 , 69 . 681 ; TH N71D 291E TO SELY COR LOT 1 , BLK 3 OF SD PLAT, 4421 ; TH N10D331W ALG ELY LN OF SD LOT 1 , 102 . 451 ; TH N24D26 ' E TO PT ON SW COR LOT 22 , BLK 1 SD PLAT, 158 . 18 ' ; TH S85E ALG SELY LN OF SD LOT 22 , 123 . 93 ' ; TH S 75D171E, 278 . 861 ; TH N55D10 ' E, 227 .291 ; TH N40D271B, 240 . 181 ; TH S 79D27 ' E, 175 ' ; TH S12D14 ' E, 304 . 18 ' ; TH S02D301E, 169 . 15 ' ; TH S28D 18 ' E, 458 . 231 ; TH S56Dll ' E, 119 . 66 ' ; TH N72D56 ' E, 64 . 371 ; TH N47D331 E, 99 . 75 ' ; TH S72D141E, 81 . 341 ; TH S23D45 'W, 344 . 631 ; TH S87D21 ' W, 142 . 521 ; TH N76D14. 'W, 227 . 34 ' ; TH N70D231W, 283 :154 ' ; TH S72D19 'W, 147 . 37 ' ; TH N82D36 'W, 385 . 651 ; TH S79D39 'W, 476 . 031 ; TH N55D37 ' W, 488 . 791 ; TH N33D16 'W, 67 . 961 ; TH N39D47 ' E, 26 . 251 TO PT TH IS NW COR LOT 1, BLK 2 OF SD PLAT; TH S50D12 ' E ALG WLY LN SD LOT 1 , BLK 2 , 651 TO PT TH IS SW COR SD LOT 1; TH N39D471E ALG SELY LN SD LOT 1 , 137 .22 ' ; TH N67D34 ' E, 301 TO PT ON CUR TO RT, RAD PT BEARS N67 W1207 . 54 ' OF NE4 19-9-30 LY N OF NLY R/W OF HWY & NW4 19-9-30 EXC PTN LY WITHIN RS#498653 , EXC SUN WILLOWS DIV 2 THRU 6 AND EXC PTN DEEDED IN DOC #396531 (RED LION) w EXHIBIT C RATE SCHEDULE FOR FIRST 36 MONTHS • EXHIBIT C 0 RATE SCHEDULE FOR FIRST 36 MONTHS Proposed Golf Fees I.R.I. Proposal (11113) Season March • October 2001 Rates 2002 Rates 2003 Rates 18 Hole Rate Includes tax Includes tax includes tax Weekday $18.00 $20.00 $22.00 Friday $22.00 $23.50 $25.00 Weekend $24.00 $26,00 $28.00 Freq. Weekday $14.00 $16.00 $18.00 Freq. Friday $18.00 $19.50 $21.00 Freq. Weekend $20.00 $22.00 $24.00 Jan, Feb, Nov, Dec Freq. Weekday $12.00 $14.00 $16.00 Freq. Friday $16.00 $17.50 $19.00 Freq. Weekend $18.00 $20.00 $22.00 Senior Weekday $15.00 $17.00 $19.00 Senior Weekend $15.00 $17.00 $19.00 Junior Weekday $13.00 $15.001 $17.00 Junior Weekend $13.00 $15.00 $17.00 Hotel Weekday $16.00 $18.00 $20.00 Hotel Friday $22.00 $23.501 $25.00 Hotel Weekend $24.00 $26.00 $28.00 9 Hale Rate Weekday $13.00 $15.00 $17.00 Friday $17.00 $18.50 $20.00 Weekend $19.00 $21.00 $23.00 Senior Weekday $11.00 $11.00 $11.00 Junior Weekday $8.00 $8.00 $8.00 Event Rounds Weekday $18.00 $20.00 $22.00 Weekend $24.00 $26,00 $28.00 Twillght Weekday $13.00 $15.00 $17.00 Friday $17.00 $18,50 $20.00 Weekend $19.00 $21.00 $23.00 Super Twilight Weekday $12.00 $13.00 $14.00 Friday $12,00 $13.00 $14.00 Weekend $12.00 $13.00 $14.00 League Frequent $10.00 $11.00 $12.00 Non Frequent $12.00 $13.00 $14.00 Season;Passes (All proposed pricing of season passes does not Include sales tax,and will be added on at the time of sale.) 7 Day $995.00 $1,020.00 $1,045.00 Spouse or dependent add on $250.00 $250,00 $250.00 5 Day $795.00 $620.00, $845.00 Spouse of dependent add on $200.00 $200.00 $200.00 4 Day Senior Citizen (M-Th) $525.00 $550.00 $575.00 Spouse or dependent add on $150.00 $150.00 $150.00 4 Day Junior M-Th, & After 4 pm F, S, S $295.00 $320,00 $345.00 Trail Fees (off site storage cart) $250.00 $250.00 $250.00 Trail Fees on site storage cart $150.00 $150.001 $150.00 0 EXHIBIT D LIST OF EQUIPMENT/REPLACEMENT SCHEDULE City of Pasco 525 N 3rd Ave Pasco,WA 99301 EQUIPMENT RENTAL Goff Course-Vehicle Fleet MONTHLY Leasehold Excise Tax ACCUMULATED REPLACEMENT ALLOCATION REPLACEMENT ANTICIPATED ANTICIPATED PAYMENT ACTUAL LEASEHOLD NET BALANCE REPLACEMENT REPLACEMENT VEH.# YEAR/ MAKE VEHICLE Apr-Dec00 PAID-IN TAX SHARE PAID-IN (31 Au '00) DATE COST 4503 91 Lely 800 Spreader 0.00 0.00 0-00 0.00 5,110.67 March-2001 3,790.00 4511 94 John Deere 5300 Tractor 0.00 0.00 0.00 0.00 19,690.41 June-2004 13,843.00 4517 97 Toro Workman 3200 w/27 325.00 325.00 (36.98) 288.02 10,370.77 March-2002 17,025.00 4518 197 TriDeck Rotary Mower 1 265.00 265.00 (30.15) 234.85 10,748.88 March-2002 12,920.00 4519 198 Greensmaster 430-00 430.00 48.93) 381-07 11,744.96 March-2003 20,700.00 p 4520 198 Greensmaster 420-00 420.00 (47.79) 372.21 11,930.10 March-2003 20,700.00 N 4521 98 Ransom 660.00 660.00 (75.10) 584.90 18,768.65 March-2003 40,520.00 4522 98 Toro Fa i rway 395.00 11 395.00 (44.95) 350.05 17,533.72 March-2003 30,825.00 4523 Toro Sand Pro 5000 200.00 200.00 (22.76) 177.24 2,602.19 April-2004 10,520.00 4524 Carryall Turf 11 140.00 140.00 (15.93) 124.07 1,837.51 April-2004 7,380-00 4525 Cushman 31HP Truckster 300.00 300.00 (34.14) 265.86 3,927.67 March-2004 15,590-00 Ca CJ, 4526 1999 Spra er 70.00 70.00 (7.97) 62.03 1,029.15 April-2004 3,750.00 : 4527 GA30 Ryan Aerator 190.00 190.00 (21.62) 168.38 993.50 March-2008 16,085.00 H PL4 H Total 3,395.00 3,395.00 (386.32) 3,008.68 116,288.18 w d O E-+ U) f--I 1 EXHIBIT E MAINTENANCE STANDARDS 12/03/2000 12:24 FAX 8587566334 I R I GOLF GROUP tj002 EXHIBIT E G LF CUU 1E SE MAR TENANCE SPECIFICAnQNS "Maintenance Standards"shall mean the maintenance standards for the Golf Course designed to insure maintenance of the grounds in an attractive and playable condition,which standards are set forth below,or such other similar standards that may be from time to time required by the USGA to insure a similar standard of maintenance; provided that such similar standards are(i) approved by the City,which approval shall not be unreasonably withheld, and(ii) are commensurate with the Comparable Facilities. I. SUPERVISION OF MAINTENANCE (a) The golf course superintendent shall be responsible for supervising the maintenance of the course. He will be a Golf Course Superintendents of America Affiliated Golf Course superintendent employed full-time at the course who will develop the maintenance program and be responsible for its implementation. At least one full-time crew member shall have a current pesticide applicator's license as required by State law. (b) Other than during inclement weather, a full maintenance crew,consisting of a minimum of seven(7)worker in season and a minimum of three(3)workers off season shall be on duty at the course, supervised by an on-duty superintendent. Regular hours will be established and maintained. The superintendent's hours shall normally be the same as those of his crew. 2. WEATHER IlVIPACT ON MAINTENANCE When horticultural tasks are specified to be performed in a scheduled basis(as daily, every other day, etc.),the crew will not be expected to perform the task on the specified schedule if the performance of the task is precluded by weather conditions. The tasks shall be.performed on the next available day which the weather conditions will not interfere with the reasonable performance of the task. 3. GREENS MAINTENANCE (a) Mowingthe Greens 0) The greens shall be mowed at least five days per week(Saturday and Sunday required). Greens shall be cut at a length of 5/32"but may be adjusted, depending on the time of year and the amount of play. A stemp meter reading of not less than seven feet is desired. Page-I- 11/03/2000 12:26 FAX 8587566334 1 K 1 GULF GRUUF WjUUa w • (ii) Grass clippings shall be properly disposed and at a minimum of 20 feet from all greens. (iii) Basket devices for catching grass clippings shall be used on mowers each time a green is cut, except for the first mowing after the green has been top- dressed. (iv) The mowing patterns shall be alternated each time a green is mowed. (v) "Graining" or "thatch" in the greens shall be controlled as necessary by use of combs, brushes, or "verticut" attachments on greens mowers. (b) WAjgring on(rr, eens (i) The crew shall water the greens as necessary to keep the grass in optimal growing condition. (ii) Irrigation should produce greens that are wet evenly over the total green. Wet and dry spots are to be minimized by controller settings and by hand- watering as necessary. (c) Top-Dressing of Qreens The crew shall top-dress each green af3er aeration in the summer,winter, spring and fall;using sand similar to that used for construction. Sand shall be applied at the rate of approximately one(1)yard of materials per green in each top-dressing process. (d) Aeration of Greens The crew shall aerate each green four(4)times each year,using a recognized greens aerator manufactured for the purpose. (e) Vertical N, owin-&-of Greens (i) The greens shall be vertically mowed as necessary to control "graining" or "thatching." (ii) The greens shall be vertically mowed on a 45-degree angle of difference each time they are vertically mowed to assure the most benefit from this process. Page -2- 11/03/1000 12:Z7 r'AA 00U/:) b4d4 A ,. I "Vill, V.%Vu, _ (fj Fertilizing Greens (i) All greens shall be fertilized with nitrogen, phosphorous, potash, and other elements as needed to maintain color,growth,health, and turgidity of the turf without allowing excessive or succulent growth. (ii) The goal of the greens fertilization program is to provide the best possible putting surface,not to produce the maximum amount of growth. (iii) Greens shall not be closed for fertilization, unless required by State law. (g) Pes Control Qn Greens (i) Pest control management of the greens is considered to be a constant ongoing responsibility of the superintendent. (ii) The greens shall be checked daily for fungus activity, insect infestations, or any other pest problem which will adversely affect the quality of the putting surface. The appropriate controls for these pests shall be applied as soon as necessary after their detection, (iii) Develop an Integrated Pest Management Plan for Pest Control practices (h) Weed Control on Greens All greens shall be maintained free of undesirable grasses and weeds. Preernergent herbicides shall be used as necessary to prevent intrusion into the greens of weeds difficult to eradicate such as goose grass, crabgrass, etc_ (i) impair of Greens Any damage done to the greens from any source which affects the putting surface shall be repaired immediately by the crew. All such areas shall be sodded or plugged from similar base material and same species of grass. {j) Other Greens Requirements (i) The crew shall repair ball marks on all greens on a daily basis. (ii) The crew shall change the pin placement on the greens every day utilizing a systematic rotation. Page-3- 11/03/2000 12:29 FAX 8587566334 1 x 1 wLr uxuur C, 4. MAINTENANCE OF TEES AND DAAPRONS (a) Mowing of Tees and Aprons (i) The crew shall mow all tee areas and aprons around the greens not less frequently than three times per week. Tees and aprons shall be cut at a maxinwin height of 5/8 inch, but may be adjusted for different types of grasses. (ii) The crew shall not use snowing implements intended for mowing fairways for the mowing of tees or aprons. (b) Watering of Tees and Aprons Tees and aprons are to be watered as necessary to keep the grass in optimal growing condition. Hand watering shall be used by the crew where necessary to augment the irrigation system. (c) Aeration and To -p„Dressingrgf Tees and Aprons (i) The tees shall be aerated two (2)times per year or more as needed. They shall be top-dressed two (2)times'per year using 1/4 yard of sand per square foot per application- (H) The aprons shall be aerated two(2)times per year. Plugs shall be chopped and returned to the apron surface. (iii) A recognized greens aerator, manufactured for the purpose, shall be used for each area. (d) Vertical Mowing of Tees and Aprons Tees and aprons shall be vertically mowed as.necessary to prevent thatching. They shall be snowed at different angles each time to assure the most benefit from the process. (e) Fertilizing of Tees and Aprons All tees and aprons shall be fertilized with nitrogen,phosphorous, potash, and other elements as needed to maintain color, growth, health, and turgidity of the turf without allowing excessive or succulent growth. Page -4- 11/03/ZUUU 1L:31 NAA 6001300JJ4 i n i %Jv).A' VAN"— (� Pest Control of Tees and Aprons The tees and aprons shall be checked daily for fungus activity and insect infestations or any other pest, gopher, or burrowing animal infestations which would interfere with the playing surface or the health of the turf grasses. The appropriate controls for these pests shall be put into force as soon as necessary after their discovery,utilizing Integrated Pest Management procedures. (g) Weed Control on Tees and Aprons Tees and aprons shall be kept weed-free to an extent of at least 90 percent of the area by the proper and timely application of preemetgent and/or postemergent herbicides. (h) Qverseeding of Tees and AprEM (i) The tees shall be overseeded in the Fall with erennial Rye at the rate of ten(10)pounds per 1,000 square feet. This process may be combined with the aeration/top-dressing process if the superintendent so desires. (ii) All divots on tees are to be filled with seed/sand mixture weekly or as needed, using a seed mixture if Tifway 419 is used on the tee,boxes. (i) Setup Tee markers and all tee equipment shall be moved daily for proper play and control of turf wear. S. MA_.INTENANCE OF FAIRWAYM2R_1 VING RANGE (a) Mowing of fairways/Driving Ran$& (i) The fairways shall be mowed at a height of 5/8 inch. The mowing heights may be adjusted as needed to provide a difference in height between fairways and the rough. (ii) The driving range shall be mowed one(1)time per week at a height of V or as needed. (iii) Excess grass clippings shall be removed mechanically to prevent damage to existing grass. (iv) During periods of rainy weather which interfere with the normal Page-5- 11/03/2000 12:31 FAX 8587566334 i K 1 kJuLV wwur fairway mowing schedule, the crew shall be expected to use additional mowing resources to catch up on mowing requirements so as to prevent overlying long grass. (b) meterin _g of F ays/Driving Rang Fairways and the driving range are to be watered as necessary to keep the grass in optimal playing condition. (c) Aeration of Fairwa g2dyjg R The fairways and driving range shall be aerated a minimum of two (2)tithes per year or as needed, using an aerator with 5/8" diameter spoon and a minimum penetration depth of three(3)inches. (d) Vertical Mov ng_of airways wing Roge Vertical mowing of fairways and the driving range is not required except in extraordinary circumstances for disease control or to reduce thatch of stoniferous weed grasses. (e) Fertilization of Fairways/Driving&nS (i) All fairways/driving range shall be fertilized with nitrogen, phosphorous,potash, or other elements as needed to maintain color, growth, health and turgidity of the turf without allowing excessive or succulent growth. (ii) Fairways and the driving range are to be fertilized four{4)times per year. M Pest Control on Fairways/Driving Range (i) The fairways and the driving range shall be checked daily for any pest infestation, gophers, and other burrowing animals which will affect the playing surface of the ongoing health of the turf grass. (ii) Any pest problem recognized as such shall be dealt with as soon as possible. 6. 1^WARD MAINTENANCE (a) Sand Maintenance Page -6- 11/03/2000 12:34 FAX 8587566334 1 x t GULN' GKUUr LW Vvo (i) All sand traps shall be edged as necessary to maintain an appropriate lip, raked daily, and filled with USGA trap sand of proper color as needed to maintain a minimum 3" depth on slopes and 5" in the bottom. (ii) The sand shall be raked five(5)times per week,Monday, Wednesday,Friday, Saturday and Sunday in each sand trap. (iii) The sand traps shall be kept weed-free, 7. TREES, SMM5 AND QJJMRLANDSCAPING . (a) The superintendent will be responsible for the maintenance of all the landscaping at the course. (b) All landscaped planter areas shall be kept weed-free. (c) All trees and shrubs shall be pruned as necessary to provide ease of play on the course and to provide ease of play on the course and to provide aesthetic value throughout. the crew shall replace trees damaged by wind, etc., and provide staking as necessary. (d) Any pruning on larger trees that necessitates the use of the ladders and/or mechanical raising and lowering devices to carry a person about in order to prune,thin out dead wood or debris or unwanted growth is the responsibility of the crew. (e) The crew shall irrigate all tree shrubs and other landscape plants as necessary to maintain them in the optimum condition for growth. (f) All dead trees,for whatever cause, shall be removed as soon as reasonably possible. Replacement trees shall be planted as soon as reasonably possible with a tree of appropriate type and size, (g) The landscaped slope separating the golf course from the adjacent housing shall be cultivated,weeded and pruned on a regular basis. (h) The crew is to keep grass adjacent to trees mowed at the same frequency and to the same height as is applicable to the location of each tree(e.g.,whether fairway or rough). Large area mowers shall not be used within one(1)foot of the trunk of any tree. (i) Ali newly planted trees, existing,specimen trees and other landscaping shall be fertilized a minimum of one(1)time each year to maintain color, growth and vigor_ Page-7- 11/03/2000 12:37 FAX 8587566334 1 R 1 GULk GKUUY WJUUU S. ROUGHS (a) ow` All roughs shall be mowed weekly during the growing season, and as necessary during the balance of the year,at heights between 3/4" and 1 1/2". Rough height shall not exceed 2" without the direct approval of the regional superintendent, and rough mowing shall not be suspended for any tournament without such approval. Vegetation within and along drainage ditch slopes shall be mowed or weedeatered as required to maintain a suitable appearance. (b) Aeration (i) Fairway-to-tree-line play areas shall be aerated at least two (2) times per year. (ii) Within wooded play areas,aeration shall be performed as necessary to establish and/or maintain turf. (c) Fertilization Roughs shall be fertilized as necessary to maintain turf. (d) Wg,d Control Shall be performed as necessary to prevent seed formation and to allow proper play, 9. WETLANDS All areas that are designated wetlands shall be maintained in their natural condition. Exotic weed species such as tamarisk, pampas grass, grant reed, and castor bean shall be removed. 10. NON-.HORTICULTURAL MAINTENANCE RELATED T4 PLAY QN THE CollSE (a) Lessee shall be responsible for the maintenance of all tee markers, cups, flags, ball washers, trap rakes, yardage signs, and benches on the course. Maintenance shall include repairing,painting,-replacing, furnishing towels, and otherwise beeping these amenities in a good condition that is conducive to player enjoyment of and respect for the course. Page -$- 11/03/2000 12:35 N"AL aba-iSOn.s.sq . 0 0 (b) The cups on each green and the tee markers on each tee shall be relocated every day or as dictated by weather, (c) The ball washers located around the course shall be services Monday, Wednesday,Friday, Saturday, and Sunday. The towels for the ball washers shall be changed on the same schedule with clean towels furnished as needed. (d) The superintendent shall have the responsibility to mark temporary hazards, out-of-bounds areas, and other course conditions as they occur or are required by tournament play. Definition of tournament requirements will be furnished by the starter staff in the Pro Shop at the clubhouse of the course. (e) The crew shall pick up litter throughout the course on a daily basis. Litter receptacles are to be fiwished by the Lessee and maintained by the lessee. (f) Vertebrate pest control shall be routinely performed throughout the property on an ongoing basis in such a manner that vertebrate pest populations are steadily reduced and eventually eliminated. (g) A soil analysis shall be performed yearly by an approved professional laboratory, (h) Any change in the physical characteristics of any area of the golf course such as addition or removal of sand traps,addition or removal of any hazards (water, trees, or native vegetation), movement of soil exceeding 20 cubic yards in any single area, or the modification of any portion of the golf course or the buildings shall only be undertaken with the direct approval of the City Manager or his designated representative. 1.1. GENES PENANCE STATEMENT These specifications indicate minimurti practices necessary for the proper maintenance of any golf course. In no way do they limit the responsibility of the golf course superintendent for the professional care and maintenance of the property. Page -9- EXHIBIT F COURSE CAPITAL IMPROVEMENTS m Reguired Capital Improvements. Lessee shall, subject to the terms of this Exhibit "F" perform the following Required Capital Improvements at its sole expense, such work to be completed on or before June 1, 2001: (a) Rebuild and level tees (estimated cost $25,000). (b) Replace sand bunkers (estimated cost $15,000). (c) Remove silt from lakes(estimated cost $lo,000). (d) Repair existing cart paths (estimated cost $lo,000). (e) Repair and improve drainage (estimated cost $lo,000). (f) Trim trees (estimated cost $7,500). (g) Refurbish existing restrooms and cart storage areas (estimated cost $5,000). Lessee and the City, acting in good faith, shall prioritize the construction of the improvements listed above and to the extent that Lessee has expended the Maximum Amount, as defined below, it shall be relieved of further obligation to complete the balance of the such improvements. 1.2 Above and JTndergrgund Storage Tanks. Lessee shall install new above-ground fuel tanks,in priority of the items listed in Paragraph 1.2 above,in accordance with all applicable codes on or before June 1, 2001. The existing underground tanks shall thereafter be abandoned and not used for Golf Course operations. A decision whether to remove the underground fuel tanks or to abandon such tanks in place shall be made by the City. Any costs to remove the existing underground tanks or abandon such tanks in place shall be the responsibility of the City. 1.3 Delay in Commenegment of Improvements. in the event that the City makes the City Construction Election pursuant to which it elects to construct the Renovation Improvements, Lessee's obligation to start commencement of the necessary construction or installation of the improvements or equipment contemplated by Paragraph i.i. or 1.2 above shall be delayed until ten (lo) days following the date the City's bidding procedures have been complied with and completed,a construction contract has been awarded and executed by the City and the City has issued a Notice to Proceed to its Contractor. 1.4 Cad on Expenditures. Notwithstanding the foregoing, Lessee shall not be required to incur more than$loo,000(the"Maximum Amount")in direct,actual, Page-1- �► s verifiable costs to complete the improvements under Paragraphs 1.1 and 1.2. If Lessee incurs less than $1oo,000 in direct, actual, verifiable costs to complete such improvements, any remaining amount shall be added to and constitute a portion of the Additional Capital Improvement Amount. 1.5 Plans. The foregoing work(the"InWrovements") shall be subject to City's prior approval,not to be unreasonably withheld,and shall be subject to the other terms and conditions of this Exhibit "F". All architectural, engineering and other design fees shall be paid by Lessee. Lessee shall use its architect, engineers and other design professionals,all of wham shall comply with any applicable licensing or governmental requirements in the state in which the Golf Course are situated. 1.6 Contractors. All contractors and subcontractors participating in construction of the Improvements shall be reputable and shall meet all licensing and insurance requirements of the state in which the Golf Course are situated, and be reasonably satisfactory to City. Lessee's choice of subcontractors shall not materially affect any guaranties or warranties relating to the improvements on the Golf Course. 1.7 Construction Work and Costs. Lessee shall complete all Improvements at Lessee's sole risk, cost and expense. The construction shall be performed in a good and workmanlike manner and in compliance with all applicable rules,laws,codes and regulations, including all applicable safety procedures established by City. 1.8 Construction Insurance. During construction, Lessee or its Contractor shall procure and maintain in effect the following insurance coverages with an insurance company or companies authorized to do business in the State where the Golf Course are located in amounts and with coverages reasonably acceptable to City, including without limitation builders risk coverage. Lessee shall furnish the City with certificates of insurance evidencing such coverage prior to the commencement of the construction work.All insurance shall be carried in companies reasonably acceptable to the City. The carrying of any of the insurance required hereunder shall not be interpreted as relieving the insuring party of any responsibility to the other party,and the other party does not waive any rights that it may have against the other party and/or its representatives for any expense and damage to persons and property (tangible and intangible) from any cause whatsoever with respect to the insuring party's work. 1.9 As-Builts. Upon completion of the Improvements,Lessee's Contractor shall submit to City(i)copies of all as-built Construction Documents and specifications indicating reconfiguration of Lessee's Golf Course, including changes to the mechanical, electrical, architectural, plumbing, cabling, sprinkler and fire alarm, as applicable; and (ii) original permit with inspector(s) final acceptance (if any permit was required). mo Legal Title. Legal title to all Improvements shall immediately vest in City upon substantial completion thereof. Page-2- No City Liability. The City shall not be liable for any injury,loss or damage to any person (including death) or property on or about the Golf Course during the performance of the work, unless caused by the City, its employees or agents, and Lessee shall indemnify and hold the City harmless against and from any such liability, and any costs or charges(including,without limitation,reasonable attorney's fees and court costs)which the City may incur on account of any such injury,loss or damage. Lessee's Contractor shall carry commercial general liability insurance which shall include coverage of the foregoing contractual liability. City's collection rights to any amounts due shall be deemed the same as for additional rent under the Lease. Page -3- EXHIBIT G OPTIONAL CAPITAL IMPROVEMENTS EXHIBIT "C" OPTIONAL DTROVEE TS Capital Expenditures - Clubhouse Start-up POS System 28,000 Office Supplies 500 Rental Sets 1,775 Merchandise Bags 100 Fixtures 3,000 Time Clock 500 Television 500 Office Furniture 1,000 PA System 1,100 Telephone System 1,800 Vacuum Cleaner 250 Security System 1,200 Range Picker 1,800 Ball Washer 2,400 Range-other 550 Cart Tools 500 Air Compressor 525 Power Washer 500 46,000 Contingency 4,000 Total $50,000 Proposed Golf Course Maintenan e, E uipmen_t,p-nd Staffing plans Sun Willows Course Supplies and Equipment Numher aL Itgms item QQst 2 Edgers $ 1,112.00 2 Weed eaters 1,000.00 5 Square shovels 150.00 5 Scoop shovels 210.00 5 Maintenance rakes 280.00 5 Steel rakes 160.00 4 Leaf rakes 160.00 2 Pumps 11500.00 1 Chain saw 400.00 36 Flags 428.00 27 Flag poles 490.00 18 Ballwashers 4,284.00 108 Tee markers 2,500,00 80 Bunker rakes 940,00 12 Divot containers 575.00 2 Spreaders 600.00 1 Drop spreader 200.00 �—' 200 Stakes 1,300.00 4,800 Rope 150.00 2 Cup cutters 140,00 2 Blowers 705.00 3 Whipping poles 140.00 100 Signs 1,825.00 1 Parts cleaner 650.00(per rental) 1 Tee towels 90.00 1 Wheel blower 1,131.00 2 Fuel tanks 10,000.00 Shop tools 4,000.00 Aerator, Fairway 4,000,00 Topdresser 6,000.00 Overseeders 4,800.00 Sod Cutter- 5,000.00 Verticutters 2,800.00 Rollers 51000.04 2-way radios 1,400,00 1 Tool chest 250.00 1 Drag brushes 465.00 Wood benches 174.00(each) Sweepers 10,000.00 Aerway Trailer 8,QOO.00 $ 83,009.00 W Amendment No. 1 Golf Course Lease Agreement This Amendment is entered into this 3 day of 2005 between the CITY OF PASCO, a municipal corporation of the State of Washington, herein called the "City" and IRI SUN WILLOWS ASSOCIATES LLC, A Delaware limited liability company, here in called"Lessee". Whereas, the City and Lessee entered into that certain Golf Course Agreement dated December 27, 2000; and Whereas, the City and Lessee desire to amend said Agreement as set forth herein below; Now, 'Therefore, the City and Lessee agree as follows: Section 1 Section 4.2 Capital Reserve Account, sub paragraph b is hereby amended to read as follows: (b) Capital Replacement Amount. Commencing on January 1, 2003, Lessee shall pay to the City and the City shall deposit to the Capital Reserve Account on an annual basis (ie for each Lease Year) an amount (the "Capital Replacement Amount") equal to the greater of: (i) four percent (4 %) of Golf Course Play Revenues, or (ii) the sum of$20,000.00. Commencing on July 1, 2005, Lessee's payment requirement shall increase to six and one half percent (6.5%)of Golf Course Play Revenues. Section 2 Section 15.12 Responsibility for Taxes, is hereby amended to read as follows: 15.12 Responsibility for Taxes. Lessee shall be responsible for all fees, taxes and charges which may be levied upon Lessee in relation to its performance of services under this Agreement. This Section 15.12, does not apply to the payment of leasehold excise tax, for which payment responsibility is specifically provided for elsewhere in this Agreement. The City agrees that it will not design or adopt any new tax specifically targeted to golf course operations during the Term of this Agreement. The City agrees that effective July 1, 2005, except for spectator admissions, the golf course and driving range shall not be subject to the City Admission Tax as imposed by Section 3.02.020 of the Pasco Municipal Code. Section 3 That all other provisions of said Lease Agreement shall remain as originally written. r CITY F PASCO ICHAEL L. GXIKSON Date Mayor ATTEST: APPROVED AS TO FORM: SANDY . NWORTHY LELAND B. KERR Deputy City Clerk City Attorney LESSEE: IRI SUNWILLOWS ASSOCIATES LLC, a Delaware limited liability company By: IRI GOLF MANAGEMENT, L.P., a Delaware limited liability company, Its Manager By: Golf/Mark Corporation, a Delaware corporation, Its General Partner By. 1 11 Name: Je ffrey M. Silverstein Date Title: President Amendment No. 2 Golf Course Lease Agreement This Amendment is entered into this ze,7N day of -JA Vi:,-AA tj 2006 between the CITY OF PASCO, a municipal corporation of the State of Washington, herein called the "Lj!y" and IRI SUN WILLOWS ASSOCIATES LLC, a Delaware limited liability company, here in called"Lessee". Whereas, the City and Lessee entered into that certain Golf Course Agreement dated December 27, 2000; and Whereas, the City and Lessee desire to amend said Agreement as set forth herein below; Now,Therefore,the City and.Lessee agree as follows: Section 1 Section 2.2 Rent; Payment; Rental Credit, sub paragraph(a), is hereby amended to read as follows: (a) Golf Course Annual Lease Payment. (i) Lessee agrees to pay an annual lease payment (the "Annual Lease Payment") for each Lease Year in the amount of$150,000,prorated for a partial Lease Year. (ii) Lessee shall pay the Annual Lease Payment in equal monthly installments of $12,500 on or before the 5th day of each calendar month during the term of this Lease, commencing on the 5th day of the first full month following the Commencement Date. Provided, however, commencing on January 1, 2006, Lessee shall pay monthly installments according to the following schedule: January $0 February $6,250.00 March $12,500.00 April $21,875.00 May $21,875.00 June-December $12,500.00 Section 2 Section 2.2 Rent; Payment; Rental Credit; sub paragraph (c), is hereby amended to read as follows: (c) Golf Concession Fee. (i) Lessee agrees to pay, for the right to offer golf-related merchandise for sale, lessons and other golf related services, an annual concession fee for each Lease 0 0 Year in the amount of$75,000 (the "Annual Concession Fee"),pro-rated for a partial Lease Year. (ii) Lessee shall pay the Annual Concession Fee in equal monthly installments of $6,250 on or before the 5th day of each calendar month during the Term of this Lease, commencing on the 5th day of the first full month following the Commencement Date. Provided, however, commencing on January 1,2006, Lessee shall pay monthly installments according to the following schedule: January $0 February $3,125.00 March $6,250.00 April $10,937.50 May $10,937.5.0 June—December $6,250.00 Section 3 Section 2.2 Rent; Payment; Rental Credit; sub paragraph(e), is hereby amended to read as follows: (e) Food & Beverage Concession Fee. (i) Lessee agrees to pay for the right to operate the Food and Beverage Operations an annual food and beverage concession fee (the "Food & Beverage Concession Fee") in the amount of: (A) 6% of the Food and Beverage Revenues, commencing on the Commencement Date, plus (B) $10,000 per Lease Year, commencing with the Lease Year in which the Clubhouse Renovation Date occurs, pro-rated for a partial Lease Year. (ii) The portion of the Food & Beverage Concession Fee attributable to 6% of the Food and Beverage Revenues for the prior calendar month shall be due and payable on or before the 25th day of each calendar month during the Term of the Lease, commencing on the 25th day of the second month following the Commencement Date. (iii) The remaining portion of the Food& Beverage Concession Fee ($10,000 per annum) shall be payable in equal monthly installments of$833.00,payable on the 5th of each calendar month, commencing on the 51h day of the first full month following the Clubhouse Renovation Date. Provided, however, commencing on January 1, 2006, Lessee shall pay monthly installments according-to the following schedule: January $0 February $416.70 March $833.33 April $1458.33 May $1,458.33 June—December $833.33 Section 4 Section 4.2 Capital Reserve Account, sub paragraph b is hereby amended to read as follows: (b) Capital Replacement Amount, Commencing on January 1, 2003, Lessee shall pay to the City and the City shall deposit to the Capital Reserve Account on an annual basis (ie for each Lease Year) an amount (the "Capital Replacement Amount") equal to the greater of- (i) four percent(4%) of Golf Course Play Revenues, or (ii) the sum of$20,000.00. Commencing on July 1, 2005, Lessee's payment requirement shall increase to six and one half percent(6.5%) of Golf Course Play Revenues. Commencing on January 1, 2006, Lessee's payment requirement shall increase to six and one half percent (6.5%) of Golf Course Play Revenues plus two and one half percent (2.5 1/o) of driving range revenues. Section 5 That all other provisions of said Lease Agreement shall remain as originally written. CITY OF PASCO &4-rlp - - --16� c - /I- ZcmG JOYJ O ON Date May ATTEST: APPROVED AS TO FORM: Sa f 7, • SANDY L. E WORTHY L B. KERR Deputy City Clerk ity Attorney LESSEE: IRI SUN WILLOWS ASSOCIATES LLC, a Delaware limited liability company By: IRI GOLF MANAGEMENT, L.P., . � 0 i a Delaware limited liability company, Its Manager By: GoIVMark Corporation, a Delaware corporation, Its General Partner By: � Namej Jeffrey M. Silverstein Date Title: President Amendment No. 3 Golf Course Lease Agreement This Amendment is entered into this_�` N day of May, 2007 between the CITY OF PASCO, a municipal corporation of the State of Washington, herein called the "City" and IRI SUN WILLOWS ASSOCIATES LLC, a Delaware limited liability company, herein called "Lessee". Whereas, the City and Lessee entered into that certain Golf Course Agreement dated.December 27, 2000; and Whereas, the City and Lessee desire to amend said Agreement as set forth herein below; Now,Therefore,the City and Lessee agree as follows (deletions by interlineation, additions by underline): Section 1 Section 1.1 Definitions, sub paragraph(t), is hereby amended to read as follows: 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires,the terms defined in this Article I shall have the following meanings: (t) "Comparable Facilities" shall mean Columbia Point Golf Course;and Canyon Lakes Golf Course , . Section 2 Section 2.2 Rent; Payment; Rental Credit; sub paragraph(b), is hereby amended to read as follows: 2.2 Rent; Payment; Rental Credit. Lessee agrees to pay the City for the right, license and privilege of leasing and operating and maintaining the Golf Course, food and beverage concession, and other concessions, the following payments: (b) Golf Course Additional Payment. (i) In addition to the Annual Lease Payment, Lessee agrees to pay on an annual basis, the amount, if any, by which 17.5% of Golf Course Play Revenues exceeds an amount equal to the annual Lease Payment (the "Additional Payment"). Effective January ls`, 2009,the Additional Payment will be 17.5% of Golf Course Play Revenues generated in excess of the amount of Golf Course Play Revenues for the 2008 calendar year. Section 3 Section 4.2, Capital Reserve Account, sub paragraph(b), is hereby amended to read as follows: 0 0 4.2 Capital Reserve Account. (b) Capital Replacement Amount. Commencing on January 1, 2003, Lessee shall pay to the City and the City shall deposit to the Capital Reserve Account on an annual basis (i.e. for each Lease Year) an amount(the "Capital Replacement Amount") equal to the greater of: (i) four percent (4%) of Golf Course Play Revenues, or (ii) the sum of$20,000.00. Commencing on July 1, 2005, Lessee's payment requirement shall increase to six and one half percent(6.5%) of Golf Course Play Revenues. Commencing on January 1, 2006, Lessee's payment requirement shall increase to six and one half percent(6.5%) of Golf Course Play Revenues plus two and one half percent (2.5%) of driving range revenues. Commencing on January 1, 2009, Lessee's payment requirement shall increase to seven and one half percent (7.5%) of Golf Course Play Revenues plus two and one half percent (2.5%) of driving range.revenues. Section 4 Section 7.3 Adjustment to Fees, sub paragraphs (b) and (c) are hereby amended to read as follows: (b) Limitations on Increases in Fees. Any increase in the Fees contemplated by Subparagraph (a) above shall not result in the Fees being in excess of eight-five percent (85%) of the average regular rates then being charged at the Comparable Facilities, unless the consent of the City Representative is obtained, which shall not be unreasonably withheld. When adjustment to the Fees are established, they may be rounded upward to the nearest one-half dollar. Effective for the 2009 calendar year, any increase in the Fees shall not result in the Fees being in excess of the average of the regular rates then being charged at the Comparable Facilities. (c) Special Programs. Lessee shall not discontinue programs such as Senior Discounts, Senior Passes, Junior Discounts, Season Passes, (including a 15% discount on season passes for Pasco residents), and similar programs benefiting the public which have been historically maintained at the Golf Course without the prior consent of the City, which consent shall not be unreasonably withheld so long as such programs have been discontinued at one (1) or more of the Comparable Facilities or the maintenance of such programs is no longer economically viable for the operation of the Golf Course. To the extent that Lessee desires to increase the fees or charges relating to such programs, such increases shall be determined and governed in the same manner as applicable to the Fees under Subparagraphs (a) and (b) above. Section 5 Renewal Term Rider is hereby amended to read as follows: Provided Lessee is not then in material default, and provided that neither this Lease nor any interest in the Golf Course has been assigned, sublet, licensed, or otherwise transferred by Lessee other than in accordance with the provisions of this Lease, Lessee shall have the right to renew and extend this Lease (the "Renewal Option"),together with all existing terms and co_nditions,with respect to the Golf Course for the Renewal Term upon and subject to the following terms and conditions: 1.1 La) Lessee may renew the initial Term of this Lease for one (1) Renewal Term of five (5) years. Subject to the provisions of this Renewal Term Rider, the Renewal Term, herein so called, shall commence immediately upon the expiration of the original Term by , Lessee's giving written notice thereof to City no later than twelve (12) months' prior to the expiration of the original Term. If Lessee does not renew this Lease for the Renewal Term, then Lessee shall have no further renewal rights. (b) Lessee desires to install a pavilion, the estimated cost of which is in excess of$50,000, to accommodate large group events,tournaments, etc. In the event that Lessee completes such improvements, in compliance with all ap lip cable permits and plans approved by the City, by March 31, 2008, Lessee shall have the right to exercise the Renewal Option, subject to the Rent provisions(Section 2.2)in effect beginning with the 2009 calendar year, for the term of the renewal, in lieu of the provisions for Rent as determined in paragraphs 1.4 and 1.5, below, by giving written notice as in paragraph 1.1(a), above. 1.2 The exercise by Lessee of any Renewal Option must be made, if at all, by written notice executed by Lessee and delivered to City on or before the date set forth in Paragraph 1.2 above. Once Lessee shall exercise the Renewal Option, Lessee may not thereafter revoke such exercise. Lessee shall not have the right to exercise the Renewal Option at a time a Lessee Default has occurred and remains uncured. Lessee's failure to exercise timely the Renewal Option for any reason whatsoever shall conclusively be deemed a waiver of such Renewal Option. 1.3 Lessee shall take the Golf Course "as is" for the Renewal Term and City shall have no obligation to make any improvements or alterations to the Golf Course. 1,4 Rent for the Renewal Term shall be the greater of the Rent in effect for the year prior to the commencement of the Renewal Term, or the Fair Market Renewal Rate. If City and Lessee have not agreed upon the Fair Market Renewal Rate at least four (4) months prior to the commencement of the Renewal Term, such Fair Market Rate shall be determined as provided in Section 17.4, of the Lease. 4 1.5 In determining the Fair Market Renewal Rate, the parties (and Decision Makers, as applicable) shall take into account all revenue sources then existing with respect to the use and operation of the Golf Course, and a market rate return to the City with respect thereto. The parties may elect to follow the allocation of the rent to different sources of revenues as provided in this Lease, or use der another formula to establish the Fair Market Renewal Rent hereunder. Section 6 That all other provisions of said Lease Agreement shall remain as originally written. CITY OF PASCO (fov-ct S 6 JO E SON Date M r ATTEST: APPROVED AS TO FORM: , SANDY KENWORTHY LELAND B. KERR Deputy City Clerk City Attorney LESSEE: IRI SUN WILLOWS ASSOCIATES LLC, a Delaware limited liability company By: IRI GOLF MANAGEMENT, L.P., a Delaware limited liability company, Its Manager By: Golf/Mark Corporation, a Delaware corporation, Its General fartner By: S It`�IZoa�'1 Name: Jeffrey M. Silverstein Date Title: resident