TRI-PARTY AGREEMENT (444 Railroad Avenue and 446 Railroad Avenue)

Transcription

1 TRI-PARTY AGREEMENT (444 Railroad Avenue and 446 Railroad Avenue) THIS TRI-PARTY AGREEMENT (the "Agreement") is made as of October 15, 2007 (the "Effective Date"), by and among the Redevelopment Agency of the City of Pittsburg, a public body, corporate and politic (the "Agency"), Jason R. and Lisa M. Griego, as husband and wife (collectively, the "Owner"), and Nicolas Maamari and Johny Khalilieh, doing business as La Veranda Ristorante Italiano (collectively, the "Tenant") with reference to the following facts, understandings and intentions of the parties: RECITALS A. These Recitals refer to and utilize certain capitalized terms that are defined in Article 1 of this Agreement. The Parties intend to refer to those definitions in connection with the use of capitalized terms in these Recitals. B. The Owner owns the Property on which the Building is located. The Property is more particularly described in Exhibit A. The Owner and the Agency entered into the Master Lease Agreement for the Agency's lease of the Premises from the Owner. The Agency and the Tenant entered into the Sublease Agreement for the Tenant's sublease of the Premises from the Agency. C. The Agency provided the Owner Loan to the Owner pursuant to the Owner Loan Documents. Under the Owner Loan Documents, the Owner shall rehabilitate the portion of the Building under the control of the Owner. The Agency has provided the Tenant Loan to the Tenant pursuant to the Tenant Loan Documents. Under the Tenant Loan Documents, the Tenant shall rehabilitate the Premises. D. Following the execution of the Master Lease Agreement, the Owner has determined to construct the Office Improvements within the Premises, and the Agency and the Tenant have consented to such construction within the Premises. E. Under the terms of the Master Lease Agreement, the Owner is obligated to perform the Initial Owner Work. Under the terms of the Sublease Agreement, the Tenant is obligated to construct the Tenant Improvements. F. The Parties have determined that the Office Improvements are an integral component of the Tenant Improvements, and due to the integrated nature of the Office Improvements and the Tenant Improvements, that close coordination is required between the construction of the Office Improvements and the simultaneous construction of the Tenant Improvements within the Premises. The Parties have further determined that timely completion of the Office Improvements are essential to the overall elimination of blight at the 773\93\

2 Property, and, in turn, to the successful redevelopment of the Property pursuant to the Master Lease Agreement and the Sublease Agreement; and that, under these circumstances, the Office Improvements can be most efficiently, timely, and cost effectively be performed by the Contractor as set forth in this Agreement. G. The Parties desire to enter into this Agreement to set forth the Parties' mutual understanding and agreement regarding the completion of the Initial Owner Work and the Improvements. Section 1.1 Definitions. ARTICLE 1. DEFINITIONS AND EXHIBITS In addition to the terms defined elsewhere in this Agreement, the following definitions shall apply: (a) "Agency" means the Redevelopment Agency of the City of Pittsburg, a public body corporate and politic, organized and existing pursuant to the Redevelopment Law. (b) "Agency Board" means the board of the Redevelopment Agency of the City of Pittsburg. (c) "Agency Executive Director" means the executive director of the Redevelopment Agency of the City of Pittsburg or his or her designee. (d) "Agency Work" means the work described as the tenant improvements in the Master Lease Agreement, as amended by the Master Lease Agreement Amendment, and as set forth on Exhibit F. (e) "Agency Work Construction Cost" means all costs and expenses incurred by, or behalf of the Contractor (including general conditions' costs attributable to the Agency Work), in connection with the construction of the Agency Work. As more particularly set forth in the Master Lease Agreement Amendment, the Agency and the Owner anticipate that the Agency Work Construction Cost shall be approximately Twenty-Eight Thousand Nine Hundred Dollars ($28,900), but in no event shall such cost exceed Thirty-Five Thousand Dollars ($35,000). (f) "Agreement" means this Tri-Party Agreement. (g) "Architect" means James Miller, a sole proprietorship doing business as "JMA Architecture". 773\93\

3 (h) "Architect Agreement" means that certain agreement by and between the Agency and the Architect for the design of the Improvements and the Initial Owner Work. (i) "Building" means the approximately eighteen thousand one hundred twenty-two (18,122) square foot building located on the Property, in which the Premises are located. corporation. (j) "City" means the City of Pittsburg, California, a municipal (k) "Contractor" means the duly licensed general contractor hired by the Tenant for the completion of the Improvements (l) "Construction Contract" has the meaning given in Section (m) "Foundation Improvements" means the work to be performed to the foundation of the Building by the Contractor necessary to permit the use and occupancy of the Premises by the Tenant in accordance with the Sublease Agreement. The Foundation Improvements are more particularly described in Exhibit B-2. As more particularly set forth in Section 3.4(b), the Agency shall pay the costs associated with the Foundation Improvements. (n) "Improvements" means, collectively, the Tenant Improvements, the Foundation Improvements, the Office Improvements, and the Agency Work. (o) "Initial Owner Work" means the construction, rehabilitation, or other improvements to the fire safety systems within the portion of the Building occupied by the Owner (and not part of the Premises) necessary to comply with applicable building code requirements. The Initial Owner Work is more particularly described in Exhibit B-1. (p) "Master Lease Agreement" means that certain Lease Agreement dated as of October 1, 2006, by and between the Owner and the Agency for the lease of the Premises. (q) "Master Lease Agreement Amendment" means that certain amendment to the Master Lease Agreement by and between the Agency and the Owner as more particularly set forth in Section 3.7. The form of the Master Lease Agreement Amendment is attached hereto as Exhibit D. (r) "Office Improvements" means the construction of the approximately eight hundred seventy (870) square foot office to be generally 773\93\

4 located at the northwest corner of the second story of the Building. The Office Improvements are more particularly described in Exhibit C. (s) "Office Improvements Construction Cost" means the costs and expenses incurred in connection with the design and construction of the Office Improvements. As more particularly set forth below, the Parties anticipate that the estimated cost of the Office Improvements Construction Cost shall be approximately Thirty-Five Thousand Dollars ($35,000) which shall initially be funded by the Agency pursuant to the Architect Agreement and Construction Contract, and then deducted from the rent due from the Agency to the Owner under the Master Lease Agreement each month in the amount set forth in the Master Lease Agreement Amendment. and wife. (t) "Owner" means Jason R. and Lisa M. Griego, as husband (u) "Owner Contractor" means the contractor selected in accordance with this Agreement to complete the Initial Owner Work, if any. (v) "Owner Improvements" means the Office Improvements (which shall be paid by the Agency, and thereafter deducted from the rent due under the Master Lease Agreement as set forth in Section 3.4), and the Initial Owner Work (which shall be paid by the Owner as set forth in Section 3.3). (w) "Owner Loan" means, collectively, (i) financing in the amount of three hundred thousand dollars ($300,000) as more particularly set forth in certain loan documents between the Agency and the Owner, and (ii) that certain loan in the amount not to exceed Two Hundred Fifty-Five Thousand Dollars ($255,000) as more particularly set forth in the Owner Loan Documents. (x) "Owner Loan Documents" means, collectively, the documents evidencing the Owner Loan, including, but not limited to, loan agreements, promissory notes, and deeds of trust, each as may be amended from time to time, executed by the Owner in favor of the Agency. (y) "Parties" means, collectively, the Agency, the Owner, and the Tenant. "Party" means any one of the parties to this Agreement. (z) "Premises" means the portion of the Building leased by the Owner to the Agency pursuant to the Master Lease Agreement, as amended by the Master Lease Agreement Amendment. (aa) "Property" means that certain real property as more particularly described in the attached Exhibit A. 773\93\

5 (bb) "Rehabilitation Plans" means the design and final construction drawings for the Improvements and the Initial Owner Work to be prepared by the Architect pursuant to the Architect Agreement. (cc) "Tenant" means, collectively, Nicolas Maamari and Johny Khalilieh, doing business as La Veranda Ristorante Italiano. (dd) "Tenant Improvements" means those certain improvements to the Premises as more particularly described in the Tenant Loan Documents and the Sublease Agreement. (ee) "Tenant Improvements Construction Cost" means all costs and expenses incurred by, or behalf of the Contractor (including general conditions' costs attributable to the Tenant Improvements), in connection with the construction of the Tenant Improvements, and paid by the Tenant in accordance with the Construction Contract. (ff) "Tenant Loan" means that certain loan in the amount not to exceed One Million Three Hundred Thousand Dollars ($1,300,000) as more particularly set forth in the Tenant Loan Documents. (gg) "Tenant Loan Documents" means, collectively, the documents evidencing the Tenant Loan, including, but not limited to, a loan agreement, promissory note, and security agreement, executed by the Tenant in favor of the Agency, as may be amended from time to time. (hh) "Sublease Agreement" means that certain Sublease Agreement dated as of April 1, 2007, by and between the Agency and the Tenant for the sublease of the Premises from the Agency to the Tenant. (ii) "Sublease Agreement Amendment" means that certain amendment to the Sublease Agreement by and between the Agency and the Tenant. The form of the Master Lease Agreement Amendment is attached hereto as Exhibit E. Section 1.2 Exhibits. The following exhibits are attached to, and made a part of, this Agreement: Exhibit A Exhibit B-1 Exhibit B-2 Exhibit C Exhibit D Exhibit E Legal Description of the Property Description of the Initial Owner Work Description of the Foundation Improvements Description of the Office Improvements Form of Master Lease Agreement Amendment Form of Sublease Agreement Amendment 773\93\

6 ARTICLE 2. SUMMARY OF AGREEMENT, ARCHITECT AND CONTRACTORS Section 2.1 Summary of Agreement. The Parties desire to cause the redevelopment of the Property and the rehabilitation of the Building in the most time-efficient and cost-effective manner. In order to accomplish such mutual objectives, the Parties have collectively determined that the Agency shall retain the services of the Architect to prepare the Rehabilitation Plans for the Building. Following the preparation of the Rehabilitation Plans, the Owner shall complete the Initial Owner Work, as more particularly described in Exhibit B-1 and as set forth in Section 3.3. Following the completion of the Initial Owner Work by the Owner, the Contractor shall complete the Improvements. The completion of the Initial Owner Work by the Owner shall be a condition precedent to the commencement of the construction of the Improvements. Section 2.2 Architect. The Agency has retained the Architect to design the Improvements and the Initial Owner Work, and the Agency and the Architect have entered into the Architect Agreement. Prior to the Effective Date, the Agency has requested the Architect to include in the scope of services provided by the Architect under the Architect Agreement the design of the Owner Improvements. The Architect Agreement provides for the Architect to receive compensation from the Agency in an amount not to exceed Two Hundred Forty- Six Thousand One Hundred Sixty Dollars ($246,160). To the extent additions, if any, to the scope of services provided by the Architect require an increase in the fee payable to the Architect, then the Agency Executive Director shall use good faith, commercially reasonable efforts to request the Agency Board to approve the necessary increase to the Architect payment; provided, however, the Owner and the Tenant agree and acknowledge that the Agency Board retains absolute discretion to allocate additional Agency funds to the Architect for the design of the Owner Improvements. Section 2.3 Contractor and Bid Package for Initial Owner Work. Pursuant to the Owner Loan Documents and the Master Lease, the Owner is obligated to hire a general contractor to construct the Initial Owner Work in accordance with the construction drawings prepared by the Architect. Notwithstanding any provision within the Owner Loan Documents to the contrary, the Parties agree and acknowledge that the Owner shall select the Owner Contractor in accordance with this Section 2.3. Following the preparation of the Rehabilitation Plans by the Architect, the Agency shall deliver such plans to the Owner. It is anticipated that the Owner shall perform the Initial Owner Work. In the event the Owner desires to hire a third-party to perform the Initial Owner Work (or the Initial Owner Work is otherwise performed by any party other than the Owner), then the Owner shall obtain no less than three (3) bids from potential general contractors. Each proposed general contractor shall be a reputable, duly licensed contractor reasonably acceptable to the Owner and the Agency. Following the receipt of no less than three (3) bids from the proposed general contractors, the Owner shall select the lowest responsible bidder (or such other 773\93\

7 bidder mutually acceptable to the Parties) as the proposed general contractor for the Initial Owner Work and shall submit such proposed general contractor and bid (collectively, the "Owner Bid Package") to the Agency for its review and approval. The Agency shall have thirty (30) days from the date of the Agency's receipt of the Owner Bid Package to either approve or disapprove such documents, and if not disapproved within that thirty (30) day period, the Owner Bid Package shall be deemed approved. If the Agency disapproves the Owner Bid Package, the Agency shall specify in writing the reasons for disapproval. Within fifteen (15) days following notice of disapproval, the Owner shall thereafter revise the Owner Bid Package so as to remove the reasons for disapproval (or select another responsible bidder) and submit such revised documentation to the Agency for approval. The Agency shall approve or disapprove the revised documentation within fifteen (15) days following submission, and if not disapproved within that fifteen (15) day period, the revised documentation shall be deemed approved. The process for revision and review shall be repeated until the Agency has approved the Owner Bid Package. Section 2.4 Owner Construction Contract. Within five (5) days of the selection of the Owner Contractor (if any), the Owner shall submit to the Agency for its limited approval the proposed construction contract for the construction of the Owner Initial Work to be executed by the Owner and the Owner Contractor (the "Owner Construction Contract"). The Agency's review and approval shall be limited exclusively to a determination whether: (a) the Owner Construction Contract is with a reputable contractor duly licensed by the State of California and previously approved by the Agency; (b) the Owner Construction Contract contains provisions consistent with the Owner Loan Documents; (c) the Owner Construction Contract requires a retention of ten percent (10%) of costs until completion of the work; (d) that no changes to the Owner Construction Contract requiring the approval of the Agency shall be made without the prior written approval of the Agency Executive Director, or his or her designee; (e) the Agency is named as an express third-party beneficiary in the Owner Construction Contract and (f) that all changes orders shall be subject to the prior written approval of the Agency. The Agency's approval of the Owner Construction Contract shall in no way be deemed to constitute approval of or concurrence with any other term or condition of the Owner Construction Contract, including, but not limited to, the means, methods, or techniques to be utilized in connection with the construction of the Initial Owner Work, or a representation or warranty regarding the Owner Contractor's ability to perform its obligations under the Owner Construction Contract. Upon receipt by the Agency of the proposed Owner Construction Contract, the Agency shall promptly review same and approve it within ten (10) days if it satisfies the limited criteria set forth above. If the Owner Construction Contract is not approved by the Agency, the Agency shall set forth in writing and notify the Owner of the Agency's reasons for withholding such approval. The Owner shall 773\93\

8 thereafter submit a revised Owner Construction Contract for Agency approval, which approval shall be granted or denied within ten (10) days following submittal in accordance with the criteria and procedures set forth above. The process for review of the Owner Construction Contract shall be repeated until the Agency has approved the Owner Construction Contract (or the Owner Construction Contract has been deemed approved by the Agency). Failure of the Agency to respond within the ten (10)-day period(s) set forth above shall be deemed approval by the Agency. Any Owner Construction Contract executed by the Owner for the Initial Owner Work shall be in a form approved or deemed approved by the Agency. Following the Agency's approval of the Owner Construction Contract, the Owner shall not materially amend, modify, or alter such contract without the prior written consent of the Agency. Section 2.5 Contractor; Bid Package. Pursuant to the Tenant Loan Documents, the Tenant is obligated to hire a general contractor to construct the Tenant Improvements in accordance with the construction drawings prepared by the Architect. Notwithstanding any provision within the Tenant Loan Documents to the contrary, the Parties agree and acknowledge that the Tenant shall select the Contractor in accordance with this Section 2.5. Following the preparation of the Rehabilitation Plans by the Architect, the Agency shall deliver such plans to the Tenant and the Tenant shall obtain no less than three (3) bids for the Improvements from potential general contractors. Each proposed general contractor shall be a reputable, duly licensed contractor reasonably acceptable to the Tenant and the Agency. Following the receipt of no less than three (3) bids from the proposed general contractors, the Tenant shall select the lowest responsible bidder (or such other bidder mutually acceptable to the Owner and the Tenant) as the proposed general contractor for the Improvements and shall submit such proposed general contractor and bid (collectively, the "Bid Package") to the Agency for its review and approval. To the extent feasible, the Bid Package shall provide for separate costs allocations for the Foundation Improvements, the Office Improvements, and the Tenant Improvements. The Agency shall have thirty (30) days from the date of the Agency's receipt of the Bid Package to either approve or disapprove such documents, and if not disapproved within that thirty (30) day period, the Bid Package shall be deemed approved. If the Agency disapproves the Bid Package, the Agency shall specify in writing the reasons for disapproval. Within fifteen (15) days following notice of disapproval, the Tenant shall thereafter revise the Bid Package so as to remove the reasons for disapproval (or select another responsible bidder) and submit such revised documentation to the Agency for approval. The Agency shall approve or disapprove the revised documentation within fifteen (15) days following submission, and if not disapproved within that fifteen (15) day period, the revised documentation shall be deemed approved. The process for revision and review shall be repeated until the Agency has approved the Bid Package. Section 2.6 Owner's Limited Review of Office Improvements Plans. Within three (3) days following the completion of the Rehabilitation Plans, the 773\93\

9 Agency shall deliver to the Owner the Rehabilitation Plans specifically related to, and necessary for the construction of, the Office Improvements (the "Office Improvements Plans") for the Owner's limited review and approval. The Owner shall have ten (10) days following the Owner's receipt of the Owner Improvements Plans to either approve or disapprove of such plans. The Owner's review and approval of the Office Improvements Plans shall be limited exclusively to a determination whether the Office Improvements Plans (a) provide for the construction of an approximately eight hundred seventy (870) square foot room in the northwest corner of the second floor of the Building, and (b) incorporate the features more particularly set forth on Exhibit C in accordance with applicable building code requirements. The Owner shall have no right to disapprove the Office Improvements Plans if such plans satisfy the requirements set forth in this Section. In the event that the Owner disapproves the Office Improvements Plans within such ten (10) day period, then the Architect shall promptly revise such plans to meet the requirements set forth above, and shall re-submit the revised plans to the Owner. The process for revision and review shall be repeated until the Office Improvements Plans comply with the requirements set forth in Exhibit C; provided, however that if the Owner's approval of such plans has not been obtained by the date the Agency approves the Bid Package pursuant to Section 2.2, then the Owner shall be deemed to have approved the Office Improvements Plans. The Parties agree and acknowledge that the Owner shall have no right to amend or otherwise revise the Office Improvements Plans. Section 2.7 Construction Contract. Within five (5) days of the selection of the Contractor, the Tenant shall submit to the Agency for its limited approval the proposed construction contract for the construction of the Improvements to be executed by the Tenant and the Contractor (the "Construction Contract"). The Agency's review and approval shall be limited exclusively to a determination whether: (a) the guaranteed maximum construction cost set forth in the Construction Contract is consistent with the financing provided to the Tenant pursuant to the Tenant Loan Documents, and the Tenant's other readily available funds; (b) the Construction Contract is with a reputable contractor duly licensed by the State of California and previously approved by the Agency; (c) the Construction Contract contains provisions consistent with the Tenant Loan Documents; (d) the Construction Contract requires a retention of ten percent (10%) of costs until completion of the Improvements; (e) that no changes to the Construction Contract requiring the approval of the Agency shall be made without the prior written approval of the Agency Executive Director, or his or her designee; (f) the Agency is named as an express third-party beneficiary in the Construction Contract; and (g) that the construction schedule provides for the construction of the Office Improvements prior to any other work and otherwise complies with the requirements set forth in the Tenant Loan Documents and the Sublease Agreement. The Agency's approval of the Construction Contract shall in no way be deemed to constitute approval of or concurrence with any other term or condition of the Construction Contract, including, but not limited to, the means, methods, or techniques to be utilized in connection with the construction 773\93\

10 of the Improvements, or a representation or warranty regarding the Contractor's ability to perform its obligations under the Construction Contract. Upon receipt by the Agency of the proposed Construction Contract, the Agency shall promptly review same and approve it within ten (10) days if it satisfies the limited criteria set forth above. If the Construction Contract is not approved by the Agency, the Agency shall set forth in writing and notify the Tenant of the Agency's reasons for withholding such approval. The Tenant shall thereafter submit a revised Construction Contract for Agency approval, which approval shall be granted or denied within ten (10) days following submittal in accordance with the criteria and procedures set forth above. The process for review of the Construction Contract shall be repeated until the Agency has approved the Construction Contract (or the Construction Contract has been deemed approved by the Agency). Failure of the Agency to respond within the ten (10)-day period(s) set forth above shall be deemed approval by the Agency. Any Construction Contract executed by the Tenant for the Improvements shall be in a form approved or deemed approved by the Agency. Following the Agency's approval of the Construction Contract, the Tenant shall not materially amend, modify, or alter such contract without the prior written consent of the Agency. ARTICLE 3. OWNER IMPROVEMENTS Section 3.1 Description of Owner Improvements. The Owner Improvements consist of the following work to be performed within the Building for the benefit of the Owner: (a) Initial Owner Work. The Initial Owner Work shall be performed by the Owner, or the extent applicable, the Owner Contractor, as set forth in Section 3.3 below, and is more particularly described in Exhibit B-1. The Initial Owner Work is necessary for the Building to meet applicable building code requirements regarding fire prevention and safety. (b) Office Improvements. The Office Improvements are more particularly described in Exhibit C and shall be performed by the Contractor. The Parties desire to develop the Office Improvements in connection with the Tenant Improvements to eliminate the potential disruption of the Tenant's quiet use and enjoyment of the Premises in accordance with the Sublease Agreement. Section 3.2 Design of Owner Improvements; Payments. (a) Design. In conjunction with the other work to be performed by the Architect under the Architect Agreement, the Architect shall design the Owner Improvements and shall include the necessary design and construction plans and specifications for the Owner Improvements in the Rehabilitation Plans. 773\93\

11 (b) Payments. The Agency shall be solely responsible for the costs related to the design of the Owner Improvements. Section 3.3 Construction of Initial Owner Work. (a) Construction. Following the Agency's approval of the Owner Contactor (if any) and the Owner Construction Contractor (if any), the Owner shall, or shall cause the Owner Contractor to, promptly commence, and thereafter diligently pursue to completion, the Initial Owner Work in accordance with the Rehabilitation Plans. The Initial Owner Work shall be subject to all of the applicable provisions of the Owner Loan Documents; provided, however, notwithstanding any provision in the Master Lease Agreement or the Owner Loan Documents to the contrary, the Owner hereby agrees to cause the completion of the Initial Owner Work no later than December 31, 2007, and shall thereafter promptly deliver the Premises to the Agency and the Tenant for the completion of the Tenant Improvements. For the purposes of this Agreement, the Initial Owner Work shall be deemed complete only upon the Agency's issuance of the Final Inspection Approval as set forth in the Owner Loan Documents. The Owner's failure to complete the Initial Owner Work by December 31, 2007 shall constitute a default under Article 5. The Owner shall indemnify, defend (with counsel reasonably selected by the Agency), and hold harmless the Agency and/or the Tenant from all suits, actions, causes of action, costs, demands, judgments and liens arising out of the Initial Owner Work (including, but not limited to any claim related to the performance or nonperformance of the Initial Owner Work). (b) Payments. The Agency shall pay the Owner an amount not to exceed Eleven Thousand Four Hundred Twenty Nine Dollars and Twenty-Five Cents ($11,429.25) for the Initial Owner Work as set forth herein. The Owner shall use the funds disbursed by the Agency solely for costs and expenses of the Initial Owner Work, and the Owner's failure to use such funds for the Initial Owner Work shall constitute a default hereunder. No later than ten (10) days following the Effective Date, the Agency shall disburse an amount not to exceed Seven Thousand Dollars ($7,000) (the "Initial Disbursement") to the Owner for the Initial Owner Work. Following the Owner's completion of the Initial Owner Work (as evidenced by the Agency's inspection of such work), the Agency shall disburse an amount not to exceed Four Thousand Four Hundred Twenty-Nine Dollars and Twenty-Five Cents ($4,429.25) to the Owner. The Agency's inspection or disbursement of any funds hereunder shall in no way be deemed to constitute approval of the means, methods, or techniques utilized in connection with the construction of the Initial Owner Work. Section 3.4 Construction of Office Improvements; Payments. The Parties have determined that the Office Improvements and the Foundation Improvements are an integral component of the Tenant Improvements and the Agency Work. The Parties have further determined that it is impractical for the Owner to construct the Office Improvements and the Foundation Improvements concurrently with the Tenant's construction of the Tenant Improvements and the 773\93\

12 Agency Work. The Parties have further determined that due to the integrated nature of the Agency Work, the Office Improvements, the Foundation Improvements, and the Tenant Improvements that close coordination is required between the Office Improvements, the Foundation Improvements, and the simultaneous construction of the Tenant Improvements and Agency Work within the Premises. The Parties have further determined that timely completion of the Agency Work, the Office Improvements and the Foundation Improvements are essential to the overall elimination of blight at the Property, and, in turn, to the successful redevelopment of the Property; and that, under these circumstances, the Agency Work, the Office Improvements and the Foundation Improvements can be most efficiently, timely, and cost effectively be performed by the Tenant, paid by the Agency, and thereafter the Agency shall deduct the costs incurred by the Agency for the construction of the Office Improvements, the Agency Work, and the amount of Five Thousand Dollars ($5,000) for the Foundation Improvements from the rent due under the Master Lease Agreement as set forth herein. (a) Contractor. Pursuant to the Construction Contract, the Contractor shall construct the Office Improvements and the Foundation Improvements in conjunction with the construction of the Tenant Improvements and the Agency Work. The Tenant shall cause the Contractor to construct the Office Improvements as more particularly described in Exhibit C, prior to commencing the other work set forth in the Construction Contract. (b) Payments. (1) By Agency and Tenant. In connection with each application for payment under the Construction Contract, the Tenant shall cause the Contractor to set forth: (i) the costs and expenses incurred by, or on behalf, of the Contractor for the Foundation Improvements, (ii) the costs and expenses incurred by, or on behalf, of the Contractor for the Office Improvements, (iii) the costs and expenses incurred by, or on behalf of the Contractor for the Agency Work, and (iv) the Tenant Improvements Construction Cost, which shall equal the costs and expenses incurred by, or on behalf, of the Contractor for the Tenant Improvements. Thereafter, the Agency shall pay such costs associated with the Office Improvements, the Agency Work, and the Foundation Improvements and the Tenant shall pay the Tenant Improvements Construction Cost. (2) Deduction From Rent Under Master Lease for Office Improvements Construction Costs and Foundation Improvements. Following the payment by the Agency of the costs associated with the Office Improvements and the Agency Work, the Agency shall deduct an amount equal to the Office Improvements Construction Cost and the Agency Work Construction Cost from the rent due from the Agency to the Owner under the Master Lease Agreement as set forth in the Master Lease Agreement Amendment. The Agency and Owner anticipate that the Office Improvements Construction Cost will cost approximately Thirty-Five Thousand Dollars ($35,000); provided, however, the 773\93\

13 actual Office Improvements Construction Cost shall be determined based on the Contractor's costs and expenses incurred in connection with the Office Improvements, and paid by the Agency pursuant to this Agreement, and the actual rent payment made by the Agency to the Owner shall be calculated based on the actual cost of the Office Improvements. In addition, the Agency shall deduct Five Thousand Dollars ($5,000) from the rent due from the Agency to the Owner under the Master Lease Agreement as set forth in the Master Lease Agreement Amendment. In the event the term of the Master Lease Agreement expires, or the Master Lease Agreement is terminated for any reason (other than a termination by the Owner due to a default by the Agency), and the Agency has not otherwise been fully reimbursed by the Owner for the Office Improvements Construction Cost and/or the Agency Work Construction Cost, then, at the sole option of the Agency, the Agency may either: (i) add such remaining unreimbursed amount to the outstanding balance due the Agency under the Owner Loan Documents, or (ii) require Owner, upon written demand from the Agency, to immediately repay such amount to the Agency. The Owner's failure to immediately pay such amount shall constitute a default under the Owner Loan Documents. Section 3.5 Change Orders to Office Improvements. (a) Cooperation by Parties. The Parties agree and acknowledge that it is in each Party's best interest that all the work to be performed by the Contractor at the Property be completed as efficiently and expeditiously as possible, and that each Party shall thoroughly review the Rehabilitation Plans to minimize the likelihood of change orders during the course of construction. Nevertheless, the Parties acknowledge that during the course of construction of the Office Improvements, circumstances may arise that necessitate change orders. In such event, the Parties shall follow the procedures set forth below to effectuate such change orders. (b) By Owner. In the event the Owner desires a change order to the Office Improvements which will increase the cost of the Office Improvements, then the Owner shall notify the Tenant and the Agency, in writing of such requested change order. Following the Owner's notification, the Tenant shall inform the Contractor (and to the extent applicable, the Architect), of such proposed change order, and shall obtain from the Contractor (and to the extent applicable, the Architect) the estimated cost of such change order. The Tenant shall then provide such cost increase information to the Owner and the Agency. Such requested change order shall only be deemed to be an accepted change order to be incorporated into the work of the Contractor upon the Owner's deposit of funds (which must be in currency of the United States of America) with the Agency for such change order. Notwithstanding any provision to the contrary, in no event shall the Owner request a change order that will have a material adverse impact on the schedule for the completion of the Tenant Improvements. 773\93\

14 (c) By Contractor, Agency or Tenant. In the event the Contractor, the Agency and the Tenant desire to implement a change order to the Office Improvements, and the cost of such change (when added to the cost of previous change orders, if any) is less than five percent (5%) of the total cost for the Office Improvements (as set forth in the Bid Package), then the Owner shall have no right to approve or disapprove of such change order. In the event the Contractor, the Agency and the Tenant desire to implement a change order to the Office Improvements, and such change (when added to the cost of previous change orders, if any) is greater than five percent (5%) of the total cost for the Office Improvements (as set forth in the Bid Package), then either Party shall inform the Owner of such proposed change, in writing. Such proposed change order shall not be submitted to the Contractor unless the Owner has consented to such proposed change order, (such consent not to be unreasonably withheld, delayed, or conditioned), and either the Agency or the Tenant has agreed to pay the costs associated with such change order. For any change order paid by the Agency, such additional cost shall be deducted from the rent due under the Master Lease Agreement. (d) Change Orders to Other Components. The Owner shall have no right to approve or disapprove of any proposed change order (requested by the Contractor, the Agency or the Tenant) that does not affect the Office Improvements, including, but not limited to change orders for the Foundation Improvements. Section 3.6 Acknowledgement By Parties. The Parties agree and acknowledge that, under the terms of the Master Lease Agreement and the Sublease Agreement, the exact parameters of the Office Improvements were unknown, and that the Parties have entered into this Agreement to permit the development of the Office Improvements within the Building as set forth in Section 2.1. The Owner further agrees and acknowledges that in consideration for the performance of the work by the Agency and the Tenant set forth in this Agreement, the Owner: (i) upon completion of the Office Improvements, and the Foundation Improvements, in accordance with the Rehabilitation Plans, shall accept such improvements in their "as-is" condition without any warranty of any kind by the Tenant or the Agency, and (ii) hereby releases the Tenant and the Agency (collectively, the "Released Parties") from any and all claims, responsibility and/or liability that the Owner may have or hereafter acquire against any of the Released Parties for any costs, loss, liability, damage, expenses, demand, action or cause of action arising from or related to the construction, the condition (including any construction defects, errors, omissions or other conditions, latent or otherwise), valuation, salability or utility of the Office Improvements, and/or the Foundation Improvements, or their suitability for any purpose whatsoever. The Owner further acknowledges and agrees that (i) to the extent required to be operative, the disclaimers of warranties contained in Section 3.6 hereof are "conspicuous" disclaimers for purposes of all applicable laws and other legal 773\93\

15 requirements, and (ii) the disclaimers and other agreements set forth in such sections are an integral part of this Agreement, that the Released Parties would not have agreed to permit the development of the Office Improvements or enter into this Agreement without the disclaimers and other agreements set forth in this Section. Section 3.7 Completion of Office Improvements. The Owner agrees and acknowledges that the Contractor shall complete the Office Improvements in accordance with Exhibit C, and that additional construction or other work will be necessary before the Owner can use and occupy the Office Improvements (and the Owner shall bear all costs and expenses in connection therewith utilizing a portion of the Owner Loan, and any other funds obtained by, or available to, the Owner). The Owner hereby agrees that any additional work within the Office Improvements shall be performed: (i) in accordance with all applicable provisions of the Owner Loan Documents, (ii) in a manner that shall not interfere with, or otherwise disrupt the construction of the Tenant Improvements or the Tenant's use or occupancy of the Premises, and (iii) completed no later than the completion of the Tenant Improvements. In the event the Owner conducts any additional work with the Office Improvements (or any other portion of the Building) during the hours the Tenant's restaurant is open for business, or otherwise interferes with or disrupts the Tenant's use or occupancy of the Premises, then the Agency may declare the Owner in default under the Owner Loan Documents and/or the Master Lease Agreement. Section 3.8 Use of Office Improvements. As additional consideration for the Agency's agreement to permit the development of the Office Improvements, the Owner hereby further agrees and acknowledges that, following completion of the Office Improvements, such improvements shall only be utilized for office purposes (or other non-residential uses) and in no event shall such improvements be converted to, or improved for, residential purposes (including, but not limited to, the construction or installation of a shower or other bathing facilities within the Office Improvements or the construction or installation of a kitchen or cooking facilities within the Office Improvements) unless and until the Owner applies for, and obtains, all necessary permits and approvals necessary for the Office Improvements to be legally used for residential purposes. The Owner further agrees and acknowledges that in no event shall the Office Improvements be utilized by the Owner, or any other person, for residential purposes or as living space unless and until the Owner applies for, and obtains, all necessary permits and approvals necessary for the Office Improvements to be legally used for residential purposes. Section 3.9 Right of Entry. The Owner hereby grants the Agency, the Tenant, the Contractor, and their respective agents, consultants, employees, and subconsultants, a right of entry to enter such portions of the Building necessary to complete the Improvements. 773\93\

16 Section 3.10 Master Lease Agreement Amendment. A copy of the Master Lease Agreement Amendment is attached hereto as Exhibit D. Concurrently with the execution of this Agreement, the Agency and the Owner shall execute such Master Lease Agreement Amendment. A copy of the Sublease Agreement Amendment is attached hereto as Exhibit E. Concurrently with the execution of this Agreement, the Agency and the Tenant shall execute such Sublease Agreement Amendment. ARTICLE 4. TENANT IMPROVEMENTS Section 4.1 Description of Tenant Improvements. The Tenant Improvements consist of the build-out of the Premises to accommodate an approximately three thousand nine hundred thirty-eight (3,938) square foot restaurant and are more particularly described in Tenant Loan Documents. Section 4.2 Design of Tenant Improvements; Payments. The Architect shall design the Tenant Improvements in accordance with the requirements of the Architect Agreement and the Tenant Loan Documents. The Agency shall pay for the Architect's costs and expenses in connection with the design of the Tenant Improvements in accordance with the Architect Agreement. Section 4.3 Construction of Tenant Improvements; Payments. The Contractor shall construct the Tenant Improvements in accordance with the Construction Contract. The Tenant shall pay for the Tenant Improvements Construction Cost in accordance with the Construction Contract. As set forth in the Tenant Loan Documents, the Tenant shall be solely responsible for all costs and expenses incurred in connection with the construction of the Tenant Improvements. Section 5.1 Default. ARTICLE 5. GENERAL PROVISIONS (a) Owner. A default by Owner under this Agreement shall constitute a default under the Owner Loan Documents and the Master Lease Agreement (subject to any applicable notice and cure provisions), and the Agency may pursue any right or remedy available therein or at law or equity. (b) Tenant. A default by Tenant under this Agreement shall constitute a default under the Owner Loan Documents and the Master Lease Agreement (subject to any applicable notice and cure provisions), and the Agency may pursue any right or remedy available therein or at law or equity. 773\93\

17 (c) Agency. A default by the Agency under this Agreement shall constitute a default under the Owner Loan Documents and the Master Lease Agreement (subject to any applicable notice and cure provisions). Section 5.2 Time. Time is of the essence in this Agreement. Section 5.3 Relationship of Parties. Nothing contained in this Agreement shall be interpreted or understood by any of the Parties, or by any third persons, as creating the relationship of employer and employee, principal and agent, limited or general partnership, or joint venture between the Parties or their agents, employees or contractors. Each Party has and retains the right to exercise full control of employment, direction, compensation, and discharge of all persons assisting in the performance of services of such Party under the Agreement. Section 5.4 No Claims. Nothing contained in this Agreement shall create or justify any claim against the City or the Agency by any person that either the Owner or the Tenant may have employed or with whom the Owner or the Tenant may have contracted relative to the purchase of materials, supplies or equipment, or the furnishing or the performance of any work or services with respect to the Property, or the construction of the Improvements, and the Owner and the Tenant shall include similar requirements in any contracts entered into for the construction of the Improvements. Section 5.5 Notices, Demands and Communications. Formal notices, demands, and communications between the Parties shall be sufficiently given if, and shall not be deemed given unless, dispatched by certified mail, return receipt requested, or delivered by an express delivery service with a receipt showing date of delivery, or hand delivered with a receipt showing date of delivery, to the principal offices of the Parties as follows: Agency: Owner: Redevelopment Agency of the City of Pittsburg 65 Civic Avenue Pittsburg, CA Attn: Executive Director Jason R. and Lisa M. Griego 446 Railroad Avenue Pittsburg, CA \93\

18 Tenant: Nicolas Maamari and Johny Khalilieh 6201 Center Street Clayton, CA Such written notices, demands and communications may be sent in the same manner to such other addresses as the affected party may from time to time designate by mail as provided in this Section. Delivery shall be deemed to have occurred at the time indicated on the receipt for delivery or refusal of delivery. Section 5.6 Non-Liability of Officials, Employees and Agents. No member, official, employee or agent of the City or the Agency shall be personally liable to the Owner or Tenant, or any successor in interest, in the event of any default or breach by the Agency or for any amount which may become due to the Owner or Tenant or any successor or on any obligation under the terms of this Agreement. Section 5.7 Enforced Delay. In addition to specific provisions of this Agreement, performance by a Party shall not be deemed to be in default where delays or defaults are due to war; insurrection; strikes; lock-outs; riots; floods; earthquakes; fires; quarantine restrictions; freight embargoes; lack of transportation; or court order; or any other similar causes (other than lack of funds of the Tenant or Owner) beyond the control or without the fault of the party claiming an extension of time to perform. An extension of time for any cause will be deemed granted if notice by the Party claiming such extension is sent to the other within ten (10) days from the commencement of the cause and such extension of time is not rejected in writing by the other party within ten (10) days of receipt of the notice. In no event shall the Agency be required to agree to cumulative delays in excess of one hundred twenty (120) days. Section 5.8 Title of Parts and Sections. Any titles of the sections or subsections of this Agreement are inserted for convenience of reference only and shall be disregarded in interpreting this Agreement. Section 5.9 Applicable Law. This Agreement shall be interpreted under and pursuant to the laws of the State of California. Section 5.10 Severability. If any term, provision, covenant or condition of this Agreement is held in a final disposition by a court of competent jurisdiction to be invalid, void or 773\93\

19 unenforceable, the remaining provisions shall continue in full force and effect unless the rights and obligations of the parties have been materially altered or abridged by such invalidation, voiding or unenforceability. The Parties to this Agreement, and their counsel, have read and reviewed this Agreement and agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (including but not limited to Civil Code Section 1654) shall not apply to this Agreement. Section 5.11 Legal Actions. In the event any legal action is commenced to interpret or to enforce the terms of this Agreement or to collect damages as a result of any breach thereof, the party prevailing in any such action shall be entitled to recover against the party not prevailing all reasonable attorneys' fees and costs incurred in such action (and any subsequent action or proceeding to enforce any judgment entered pursuant to an action on this Agreement). Section 5.12 Binding Upon Successors. This Agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors, and assigns of each of the parties. However, there shall be no transfer except pursuant to the terms of the Owner Loan Documents and the Tenant Loan Documents (as applicable). Any reference in this Agreement to a specifically named party shall be deemed to apply to any successor, heir, administrator, executor, or assign of such party who has acquired an interest in compliance with the terms of this Agreement, or under law. Section 5.13 Entire Understanding of the Parties. This Agreement constitutes the entire understanding and agreement of the Parties. Section 5.14 Approval. Whenever this Agreement calls for Agency approval, consent, or waiver, the approval, consent, or waiver of the Agency Executive Director shall constitute the approval, consent, or waiver of the Agency, without further authorization required from the Agency Board. The Agency hereby authorizes the Agency Executive Director to deliver such approvals or consents as are required by this Agreement, to extend time deadlines, to waive requirements under this Agreement, on behalf of the Agency, to make minor amendments to this Agreement, and to take such actions and execute such documents on behalf of the Agency as may be necessary to carry out this Agreement, including, but not limited to amending this Agreement and the Master Lease Amendment to set forth the rent payment following the determination of the Office Improvements Construction Cost. Any consents or approvals required under this Agreement 773\93\