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ITRAID NUM: 2017-000070

COMMONWEALTH OF PUERTO RI CO
LAND ADMINISTRATION
SAN JUAN, PUERTO RI CO

DEVELOPMENT AGREEMENT

This DEVELOPMENT AGREEMENT, hereinafter referred to as "Agreement", is

made and entered into in San Juan, Puerto Rico as of the ~ usy of December,

2016, by and between: The PUERTO RICO LAND ADMINISTRATION, a public

corporation or a governmental instrumentality with legal existence of Its own,

separate from t he Commonwealth of Puerto Rico, hereinafter referred to as the

'PRLA", and represented herein by its Executive Director, LUIS RIVERO CUBANO,

of legal age, single, agronomist and resident of Manati, Puerto Rico; and GRAN

HOTEL S AN FEUPE DEL MORRO, LLC a limited liability company organized and

existing under the Jaws of t he Commonwealth of Puerto Rico, register number

364789, hereinafter referred to as the 'Developer", represented in this act by Its

Managing Director ARNOLD BENUS S I LVA, of legal age, married, executive and

resident of San Juan, Puerto Rico, who has the capacity and aut hority to appear on

behalf of that entity, pursuant to Corporate Resolution approved on December 23,

2016 and signed by Jorge M. Ruiz Montilla as Assistant Secretary of the Developer.

STATEMENT OF BACKGROUND AND PURPOSE

WHEREAS, the PRLA by virtue of Act No. 13 of May 16, 1962, as amended,

known as t he 'Puerto Rico Land Administration Act" (23 L.P.R.A. sec. 311f) has the

authority to issue contracts and to execute any and all lnstruments necessary or

convenient In the exercise of any or all of Its powers and faculties.

WHEREAS, on October 19, 2016, Developer submitted for PRLA's approval a

proposal (the "Proposal") for t he design, construction and operation of the historic

"Asilo de la Beneficencla Building• as a luxury hotel of approximately fifty three rooms

and ancillary facilities, as described in the Proposal (the "Project").

WHEREAS, t he United States, acting through t he General Services

Administration ("GSA"), and PRLA executed a Quitclaim Deed on November 17, 1978,

whereby GSA t ransferred t he "Asilo de la Seneflclencla Building", located in Ward

Ballaja In Old San Juan ( the 'Property"), to PRLA pursuant to the Federal Property

and Administrative Services Act of 1949 (the 'Quitclaim Deed"). The Quitdalm Deed

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states that the Property should be used and maintained for historic monument

purposes in accordance to the Preservation and Utilization Program (the •utmzatlon

Program") submitted by PRLA on August 25 1976, as amended. Nonetheless, It was

convened in the Quitclaim Deed t hat the Utilization Program could be amended at

the request of either the PRLA or the United States under mutual agreement, and

that such amendments should be added to and become a part of the aforesaid

approved Utilization Program. Furthermore, the Quitdalm Deed states that the

Property shall not be sold, leased, assigned or disposed, except to another local

government agency at the discretion of the U.S. Secretary of the Interior; and It also

states that in case of a national emergency declared by the President of t he United

States or the Congress, the Federal Government may immediately occupy the

Property.

WHERE.AS, on October 27, 1986, PRLA submitted a new proposed Utilization

Program for the purpose of rehabilitating the Property and use it as the offices of the

Institute of Puerto Rican Culture ("ICP", by its Spanish acronym), which was endorsed

by the National Par1< Services on May 27, 1987. After approval of the National Park

Services, a Lease Agreement was signed with ICP for a twenty (20) year lease term;

nonetheless, such Lease Agreement has already expired. To that effect, and taking

Into consideration the Important cultural value of the Property, the Proposal of

Developer was evaluated Inasmuch as it would enhance the cultural use of the

Property while maintaining it as a historic monument In one of the most important

areas in Puerto Rico for tourism.

WHEREAS, In view of the Proposal submitted by Developer and the fact that

It conforms to the historic character of the Property while also promotes the cultural

and economic development of the area, the Government of Puerto Rico sent a letter

on June l, 2016 to the Secretary of the United States Department of the Interior to

endorse and request the future approval or a new Utilization Program that would

allow the Property to be used for the operations of a boutique hotel. In response, the

Regional Director of the National Park Service In Atlanta e•pressed the reaslblllty of

the project in a letter sent on August 26, 2016. In such regard, PRLA has been In

contact with the National Par1< Services in Puerto Rico to promote and initiate the

process of amending the current Utilization Program as well as the Quitclaim Deed to

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allow the development and operations of a boutique hotel that would maintain the

Property as a hlstolic monument. In view of the foregoing, the partles acknowledge

that for the construction and development of the Project as set forth In the Proposal,

a new Utilization Program has to be approved for the Property and the Quitclaim Deed

has to be amended according to the Historic Preservation Surplus Program and any

other applicable law and/or regulation.

W HEREAS, this Agreement, induding the precedent conditions and its long·

term lease conditions, has been duly authorized by the PRLA's Governing Board,

through Resolution No. 2050dated on December, 2016.

WHEREAS, pursuant to the Proposal, and subject to the satisfaction or waiver

of certain conditions precedent set forth in this Agreement, Developer and PP.LA

Intend to enter into a 40-year lease with two consecutive ten year extensions,

providing for the leasing to Developer of the land and improvements occupied by the

Property and whiCh lease shall be In the form attached to and form part of this

Agreement as Exhibit •A• (the • Lease•) ; and shall be executed only upon satisfaction

or waiver of all of the Conditions Precedent set forth In Article 2 hereof.

NOW, THEREFORE, In consideration of the foregoing, the covenants and

condltlon.s hereinafter set forth, and other good and valuable considerations, the

receipt and sumciency of which are hereby acknowledged, PRLA and Developer

hereby covenant and agree as follows:

TERMS ANO CONDITIONS:

ARTICLE 1

GENERAL PROYISIONS AND PRELIMINARY A GREEMENTS

Section 1.1 l\Dollcabllity o( Statement of Background and Puroose. The

Statement of Background and Purpose Is a description of the current intent of the

parties with regard to the development and construction of the Project and Is intended

to be an aid to the understanding of this Agreement, but It ls not intended to limit

the rights or the obligations of the parties except to the extent that It contains

definitions and terms which are used elsewhere In this Agreement.

Section 1.2 Exbll;!itli and Schedule$. All Exhibits and Schedules attached to

this Agreement are incorporated herein by this reference.

Section 1.3 fDorTransaction for !he Pmte<t. The parties hereto acknowledge

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that to commence constructlon and development of me Project, as set forth In the

Proposal, a new Utlllzatlon Program has to be approved by the Department or the

Interior through the National Park Services and the Quitclaim Deed has to be

amended according to the Historic Preservation Surplus Program and any other

applicable law and/or regulation.

Section 1.4 Oescrlctlon of the Propertv. PRlA Is the owner of the Property,

which is more fully described in Exhibit ·a·.

ARTICLE 2

PRE DEVELOPMENT PERIOD

Section 2.1 pre Pevelocment Period. For the purpose of conforming t he

Utlllzatlon Program and the Qultcialm Deed to be able to restore and use the Property

as a hotel, the PRLA and Developer, during the Pre Development Period, will request

the approval of a new Utlllzatlon Program and the amendment of the Quitclaim Deed,

In accordance to the Historic Preservation Surplus Program and any other applicable

law and/or regulation. PRLA and Developer shall each use its best efforts In good faith

to timely satisfy the obligations convened In this Section (the " Pre Development

Period").

Section 2.2 fteJ;>exelooment Term . The term of the Pre Development Period

shall be twelve ( 12) months, provided however, that the Pre Development Period

shall be extended upon request by Developer for up to two (2) additional extensions

of six (6) months each, If Developer used its best efforts In good faith to timely satlSfy

and comply with its obligations hereunder. Accordingly, Developer shall have the right

to extend the Pre Oovelopment Period if the Pre Development process is In an

advanced stage, there are real expectations of acquiring the necessary approvals to

reconstruct and use the Property as a hotel, and that the reason of not satisfying the

obllgatlons stated herein are not attributable to Developer's acts or omissions.

2.2.1 It is recognized by the parties hereto that It Is not the intention or

any party to encumber the Property with t his Agreement for an indefinite

period of time. Accordingly, PRlA shall have t he right to terminate this

Agreement If the obligations under the Pre Development Period are not

satisfied or waived by the PRlA after the Pre Development Term.

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Section 2.3 economic Conslderatlgo, In consideration of the rights allowed in the Pre

Development Period, Developer shall pay at the execution of this Agreement, an

economic consideration of TWENTY FIVE THOUSAND DOLLARS ($25,000.00)

which will cover the term set forth in Sectlon 2.2 to satisfy the Pre Development

Period.

Section 2.4 frl>perty Taxes. PRLA will be responsible for the payment of the

real property taxes assessed on the Property dunng the Pre Development Period.

CONDmONS PRECEQENT

Section 2.5 CQ!ld)tlons Precedent to Development of the PrQject and Closing

of t he Lease (as hereafter defined). The conditions precedent period shall commence

once the Pre Development Period has been completed and all the obligations set forth

In Section 2.1 are satisfied (•Commencement of Conditions Precedent Period"). All of

the parties' rights, duties and obligations with respect to the development of the

Project and to the dosing of the Lease under this Agreement are expressly

conditioned upon and subject to the satisfaction of each and every one of the

following conditions precedent (the ·conditions Precedent"):

2.5.l The National Park Services shall have approved the amendment

to the Utilization Program and the Quit Claim Deed to allow the development,

restoration and use of the Property as a hotel, as set forth in the Proposal.

2.5.2 PRLA, and to the extent required, the Department of the Interior

through the National Parle Services, shall have approved the Schematic

Drawings for the Project as denned in, and provided by, in the Proposal.

2.5.3 PRLA shall have obtained the location approval and the approval

of the tran~ctlon as one Involving a public improvement by the Planning Board

of Puerto Rico under its Joint Regulation for the Evaluation and Issuance of

Permits Related to the Development and Land Use, as amended, \Regulation

No. 31 ").

2.5.4 Developer shall have obtained all governmental approvals and

permits [including, without limitation, any necessary zoning and environmental

approvals, variances, general building permits, and/or any and all necessary

actions of, or approvals by the Permit Management Office (OGPE, by Its

Spanish acronym), the Municipality of San Juan or the Planning Board),

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necessary for commencement of construction of the Project in accordance with

the approved Schematic Drawings therefor.

2.5.5 Developer shall not have made a determination that development

of t he Project Is economically Infeasible. In making such determinat ion and

any other determinations as to economic feasibility pursuant to this

Agreement, Developer shall act in good faith and base such determinations

solely, upon reasonable economic considerations. In the event Developer In

good faith determines that the Project Is not economically feasible, then

Developer shall:

2.5.5.l Notify PRLA t hereof In writing within three (3) days of suoh

determination and the reasons therefor; and

2.5.S.2 Deliver to PRLA within the same three (3) days true,

correct and complete copies of all documents substantiating such

infeasibility, as well as of all Plans, reports and studies obtained by or

done for Developer in connection with the Project.

Closing of the Lease by Developer shall be deemed a conclusive

determination by Developer t hat the entire Project Is economically feasible.

2.5.6 Developer shall have entered into valid and binding construction

contracts In accordance with the requirements of Section 4.2 for the

construction of the Project.

2.5.7 Developer shall have dosed and obtained funding of a

construction loan which, In the aggregate together with any cash equity being

funded in advance by Developer, provides the necessary funding to cover the

full cost of constructlon of all of the Project.

2.5.8 The Property shall be free and dear of all liens and enrumbrances

and dalms of interest in title by third parties.

2.5.9 All of the representations and warrantles made by Developer and

PRLA herein shall be true as of t he Clos Ing (hereafter defined) hereunder and

Developer and PRLA shall not be in breach of any or the terms and conditions

of this Agreement.

2.5.10 The Developer must submit quarterly progress reports to the

PRLA, regardin9 the comJ>letion and advance of the conditions precedent.

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 The Closing of the transactions contemplated by this Agreement, that is, the

execution of t he Lease, shall occur on a date, within the twenty (20) days next

following the date on which all of the conditions precedent to Closing have been

satisfied, selected by the notary public designated by the Developer or the lender{s)

to authorize t he execution of the Lease and the leasehold mortgage collaterallzlng

the construction loan. The Closing shall be held at said notary public's office, at

10:00 a.m. on the Closing date.

Section 2.6 Assistance. PRLA wlll use all reasonable efforts to assist

Developer in its efforts to obtain the necessary permits and approvals in order to

expedite t he development of the Project. The Developer wlll be ultimately responsible

for obtaining all necessary pennits and/or approvals In accordance with the applicable

laws and regulations t o develop the Project. Although Developer has sole

responsibility for obtaining the permits, licenses, variances and approvals necessary

to develop the Project (with the exception contained in Section 2.5.3), PRLA agrees

t o cooperate with Developer In the pursuit of same and in that respect agrees to

reasonably execute and/or join In such documents and applications where necessary

to obtain the pennlts and approvals; provided, however, that PRLA does not, and is

not obligated, to post any bonds or other Rnandal assurances or otherwise incur any

expenses, obligations or liabilities whatsoever in connection with Its cooperation; and

provided further, that PRLA's cooperation shall not require PRLA to directly or

Indirectly exercise any powers with which it may be vested by virtue of being an

instrumentality of the Commonwealth of Puerto Rico.

Section 2. 7 Permits and Approvals. Developer shall provide to PRLA copy of all

the permit and approvals necessary for the development and construction of the

Project, copy of the constructlon contracts for the Project, and copy of the

construction schedule, which shall comply with the terms and conditions set forth in

this Agreement for t he completion of the Project, and all the tenns and conditions

set forth in this Agreement.

Section 2.8 Termination. Developer shall each use its best efforts In good

faith t o timely satisfy and comply with each and every one of the Conditions

Precedent set forth herein . It is recognized by the parties hereto that It Is not the

Intention of any party to encumber the Property with this Agreement for an indefinite

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period of time during the period of satisfaction of the Conditions Precedent.

Accordingly, PRLA shall have the right to terminate this Agreement if all of the

Conditions Precedent set forth in Section 2.5 are not satisfied on or before eighteen

(18) months of the Commencement of Conditions Precedent Period, provided,

however, that Developer shall have t he right to extend t he date for satisfaction of

the Conditions Precedent set forth in Section 2.5 for up to an additional two (2)

extensions of three (3) months each if, due to causes beyond 1ts control, it has not

been able to satisfy the Conditions Precedent, and, provided further, that the

aforesaid peliod of thirty (30) months shall be further extended for up to the term

equivalent to (i) the additional term required to dispose of the intervention of t hird

parties in t he permitting process and of administrative or (ii) judicial attacks on said

process which have the effect of paralyzing said process, provided the Intervention

or attacks are not attributable to Developer's acts or omissions.

In the event this Agreement is terminated In Its entirety pursuant to the

foregoing, then Developer shall immediately deliver to PRLA true, correct and

complete copies of all studies, reports, Plans, data and Information obtained by or for

the benefit of Developer with respect to the Project, whereupon the parties shall be

released from all further obligations under this Agreement and with respect to the

Project, except as otherwise specifically hereinafter provided.

Section 2. 9 Possessjoo. PRLA shall retain possesston of the Property until the

Conditions Precedent have been fully satisfied or waived In writing as provided in this

Article. Once Developer has satisfied the Conditions Precedent described in Section

2.5, the parties will promptly (on a mutually satisfactory time and date from within

the next twenty (20) days to be determined after consultation with botti parties by

the notary publlc selected by Developer) proceed to the execution of the

corresponding Lease and PRIA shall deliver possession of the Property to Developer,

free of occupants concurrently with such execution and satisfaction of all such

conditions precedent (the "Closing"); provided, however, PRLA will provide Developer

with access to the Property for the purpose of completing necessary studies and all

permitting requirements. Notwithstanding the foregoing, having access to the

Property does not imply that the Developer has the possession of the Property, nor

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authorization to commence any construction, activity or operation on the Property,

without prior written autholization issued by PRLA.

Section 2.10 Economic consjderatlwl. In consideration for t he rights allowed

duling the Conditions Precedent Period, the Developer shall pay within ten (10) days

following Commencement of Conditions Precedent Period, at the office of t he PRLA,

an economic consideration of FIFTY THOUSAND DOLLARS ($50,000.00), which

cover all the term set forth in Section 2.3 to satisfy the conditions precedent.

Section 2.11 froperty Taxes. During this peliod of time, the Developer will

be responsible for the payment, in timely manner, of the property taxes assessed

on the Property.

ARTICLE 3

PLANS

Section J.1 eRLA's Appr,oval of Plans. The rehabilitation work on the Property

shall not be commenced untll the Schematic Drawings for the Project (as defined

below and together with t he Construction Plans, collectively referred to herein as the

"Plans") have been approved in writing by PRLA, and to the extent required, by the

Department of t he Interior through the National Parks Services, as more particularly

set forth In t his Article 3. No building, wall, structure or other Improvements of any

kind shall be commenced, erected, placed, altered or maintained on any portlon of

the Project until t he Construction Plans for the same have been approved in writing

by t he Municipality of San Juan or OGPE as t he case maybe, and copies thereof

delivered to PRLA. All structures or other improvement of any nature and all

landscaping shall be erected, and placed upon the Property in substantial accordance

with t he Plans, including, without !Imitation, the Construction Plans and any changes

t hereto, all as approved by PRLA or OGPE or the Municipality of San Juan, as

applicable, In accordance with this Article J (the "Approved Plans").

Section J.2 Schematic Drawings.. Within t he peliod of sixty (60) days

following the execution of this Agreement, Developer shall submit t o PRLA for

Schematic Drawings for t he Project. To t he extent required, PRLA shall submit for

approval to the Department of the Interior through the National Park Services, said

Schematic Drawings.Section 3.3 Design Development. Within the period of fifteen

(15) days from the t erminat ion of the Conditions Precedent Period, Developer shall

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submit to PRLA the Design Development for the Project, If such plans were submitted

to a governmental agency, for review in accordance with the Plan A.pproval Process

descrtbed herein. Such plans shall refiect any modifications to the Schematic

Drawings, and the progress and completion schedule for construction.

3.3.1 The term •0es1gn Development • as used In this Agreement shall

mean plans, drawings and outline specifications providing details as to: (i) the

volume of all Improvements to be constructed; (ll) design of all outdoor (or

visible from the outdoors) common and public areas, and the materials to be

used in such areas; (Ill) roof-level design; (Iv) elevations and facades of all

Improvements (lncludlng elements such as windows, spacing and size of

fenestration, balconies, canopies, cornices, moldings and ornamentation lines

and exterior details); and (v) exterior finishing materlals, lighting plans and

architectural treatment of machinery and equipment visible from the exterior

of the improvements lnduding courtyards.

Section 3.4 Coostructloo Documents. Prior to Developer submitting to

OGPE and prior to commencing clearing, excavation and/or construction on the

Property, Developer shall submit to PRLA for review in accordance with the

Plan Approval Process, copy of the Construction Documents for the Project,

lnduding the progress and completion schedule for such construction; and

estimated costs to be incurred for the completion of the construction of the

Project.3.4. l Construction Documents as used In this Agreement shall Include

final detailed wori<lng plans, drawings and speclRcatlons as submitted to OGPE

or the Municipality of San Juan, as applicable.

3.4.2 Developer acknowle<fges that the Construction Documents, the

construction of the Project and the operallon of the hotel has to comply with

the requinements set forth in the new Utilization Program and the amended

Quitclaim Deed that allows for the development and operation of the hotel, the

Historic Preservation Surplus Program, the Secretary's Standards for

Rehabilitation and any other law and/or regulation applicable.

Section 3.5 flan Aporoyal Process. PRLA shall have a period of ten (10) days

a~er receipt of plans to advise Developer in writing of Its approval or disapproval of

the same. If no written disapproval is received by Developer within such ten (10)

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day period, then said plans shall automatically be deemed approved. PRLA shall

notify Developer on or before the fifth (S"') day following its receipt of the Plans of

any disapproval of said plans together with the specific reasons therefor In

accordance with the standards for review provided In this Agreement and the steps

necessary to correct same. In the event of a disapproval of which Developer Is duly

notified, Developer shall, within ten (10) days after the date Developer receives the

notice of such disapproval, resubmit such plans to PRLA altered to meet the grounds

of disapproval. Any resubmission shall be subject to review and approval by PRLA

pursuant to the foregoing process, until the same shall be finally approved by PRLA.

All Plans as finally approved by PRLA (whether expressly approved or by failure of

PRLA to timely disapprove) shall be initialed and dated by PRLA and Developer, and

shall be and are Incorporated into this Agreement by this reference, and such Plans

shall be deemed conclusive evidence that PRLA has accepted such Plans as being in

conformity with the requirements of this Agreement.

Section 3.6 Change to Plans. Developer shall not change or modify the

Construction Plans after their final approval without dellverlng to PRLA copies of such

modified plans and a certification describing the change and Developer's opinion as

to whether the change Is In accordance with the Schematic Drawings. Any change

which is in fact in accordance with the approved Schematic Drawings shall be deemed

approved by PRLA, but any change which in fact Is not In accordance with the
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approved Schematic Drawings shall require PRLA's written approval.

Section 3. 7 As Built Plans. Developer agrees that, within sixty (60) days of

completion of the Project, It shall provide PRLA with copies of all final •as bullt" plans

and specifications of the Project, together with a non-exclusive assignment of the

right to use same In connection with any rights of ownership and/or use reserved by

PRLA pursuant to this Agreement. All Plans, Including, without !imitation, the Anal

•as built" Plans shall belong to Developer, but Developer agrees to, at all reasonable

times, make available to PRLA t he use of said as·bullt Plans to the extent requested.

Section 3.8 CooCormltv of Plans. All work by Developer with respect to the

Project and the construction thereof shall be in substantial accordance with the

Approved Plans, this Agreement and applicable Federal, Commonwealth, municipal

and local laws, codes, ordinances and regulations.

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 Section 3.9 Llablllty of PRLA. PRLA's rights of review and approval of plans

and other submissions under this Agreement and/or the Lease is intended solely for

t he benefit of PRLA. Neither PRLA nor any of Its officers, directors, employees,

agents, contractors, consultants or attorneys shall be liable to Developer or any

owner of any portion of the Property or any other person or entity by reason of

mistake in judgment, failure to point out or correct denclencles in any Plans or other

submissions, negllgence, °' any other misfeasance, malfeasance or non-feasanc:e

arising out of or in connection with the approval or disapproval of any Plans or

submissions or its enforcement or failure to enforce any site maintenance or other

requirements hereof. Without limiting t he generality of t he foregoing, PRLA shall not

be responsible for reviewing, nor shall Its review of any Plans be deemed approval of

any Plans from the standpoint of structural safety, soundness, workmanship,

materials, usefulness, accordance with building or other codes or industry standards,

or compliance with governmental, Industry or professional requirements. Further,

Developer (Including Its successors and assigns, but specifically excluding any

institutional lender advancing funds to Developer for construct ion and/or acquisition

of the Project); agrees to indemnify and save and hold PRLA (and its officers,

directors, employees, agents, contractors, consultants, Inspectors or attorneys,

lndudlng Its successors and assigns) harmless from and against any and all costs,

claims (Whether rightfully or wrongfully asserted), damages, expenses or habllltles

whatsoever (including, wtthout limitation, reasonable attomeys' fees and court costs

at ali trial and appellate levels), arising out of any review of Plans by PRLA hereunder

and/or under t he Lease. Anything to the contrary notwithstanding, the provisions of

this Section 3.8 shall survive the termination or cancellation of this Agreement or any

portions hereof.

ARTICLE 4

TERMS ANP CONPI TION S OF THE LON G TERM LEASE

CONSTRUCTION PERIOD AND MAINTENANCE OF PROJECT

Section 4.1 Lease and Commencement of Construction. Upon satisfaction

by the Developer of the Conditions Precedent, Including any extension thereof, as set

forth In Article 2 of this Agreement, and the closing of the construction financing,

PRLA agrees to lease to the Developer the Property under the term and conditions

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hereinafter set forth and until the expiration of the Operating Period, as defined

hereinafter in this Artlde 4 ("Lease Term/, and execute the Deed of Lease attached

hereto as Exhibit "A".

4 .1.l Subject to "Force Majeure• (as hereinafter defined), Developer shall

commence construction of the Proj ect within the term specified in Section 4.1. 3

and, at all times, proceed diligently to Substantial Completion (as hereinafter

defined) thereof on or before twenty four (24) months from the completion of

the Conditions Precedent in accordance With the Approved Plans and this

Agreement (the ·construction Period"). Notwithstanding the foregoing, the

term of the Construction Period shall be extended for up to three (3) months,

if Developer used its best efforts in good faith to timely satisfy and comply with

its obligations hereunder and the reason of not satisfying the obligations stated

hereunder are not attributable to Developer's acts or omissions.

4.1.2 Except as prollided in Section 4.2.l.l, all costs, expenses and

obligations lncu1Ted or relating to construction of the Project, including without

limitation, those for labor, employment benefits, work, materials, utilities,

services, Insurance, equipment, permits, professional fees and technical,

engineering, mechanical and design fees, shall be the sole obligation and

expense of Developer, except ror PRLA's expenses of review, approval and

inspection. Developer shall be solely responsible for obtaining all utilities and

services necessary for the construction, occupancy and operation or the Project

including, without llmltation, potable water supply, storm and sanitary sewer

facilities, electricity, gas and telephone facilities. Developer shall also be solely

responsible for obtaining all binding agreements, allocations or commitment

letters required to Insure the connectlon of the Project to such services and/or

utilities and for the payment of all impact, connection or other allied fees.

4.2.l.l To PRLA's knowledge, PRLA has not caused the Property to be

in violation of, nor has It received written notice from a governmental authority

t hat the Property Is In violation of any federal or local environmental law. If

during Developer's Inspection or during the performance of an environmental

study on the Property, Developer identifies Asbestos Containing Matenal

("ACM"), Lead·based Paint, or any Hazardous Substance (as defined below) In

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 the Property that requires mitigation, remediation or removal of said

contaminant (collectlvely "Mitigation Work"), PRLA shall be responsible to carry

out said Mitigation Work. Alttiough PRLA shall be ultimately responsible for

such Mitigation Work, Developer may Initially cover the costs for conducting

the Mitigation Work of the contractor retained by PRLA, subject to the

following: (1) Developer shall approve the contractor performing the Mitigation

Work prior to commencement of the same, and (2) Developer shall receive a

credit against future Rents equal to the amount Incurred by Developer to cover

t!'le cost of the Mttlgatlon Work.

4.1.3 Developer agrees to commence t he construction of the Proj ect within

six (6) months after the execution of the Lease.

4.1.4 Upon completion of the Conditions Precedent Period, and any

extension thereto, and execution of the Lease, Developer will pay to PRLA

during the Construction Period, and any extension thereto, a monthly rent in

consecutive monthly Installments of FIVE THOUSAND DOLLARS

($5,000.00) each, payable In advance on the first day of each month of the

Construction Period, at the offices of PRLA, and will be responsible for the

payment, in timely manner of the property taxes assessed on the Property.

4.1.5 Upon completion of the Conditions Precedent Period and the execution

of the Lease, Developer shall pay to PRLA a security deposit or FIFTEEN

THOUSAND DOLLARS ($15, 000.00), equivalent to three (3) months of rent.

Section 4.2 Constru,tion Cooi.racts. Developer shall enter into with

contractors having experience commensurate with the size and scope of the Project

and the financial ability to perform their obligations under the construction contracts.

Such construction contracts shall Include the provisions of Sections 4.2 hereof, with

references to Developer substituted by references to the contractor and references

to PRLA substituted with references to Developer. They shall also include a provision

requiring the contractor to Include the same clauses In any contract with a

subcontractor, with references to the contractor substltuted by references to the

subcontractor and references to the Developer substituted by references to the

subcontractor. Developer shall provide PRLA through the notification process

established in Section 14.3 hereof with copies of the construction contracts (and all

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amendments to the construction contracts), in each case within five (5) days after

execution of same. PRLA shall have the right to review the construction contract to

determine that the contract: (I) is bonded based on a reasonable estimate of the cost

of refurbishment, as to both payment and performance, as more fully described

below, in favor of PRLA, Developer and Developer's construction tender, as co·

obligees and as their Interests may appear; (II) Is with a general contractor meeting

the requirements of this Section 4.2; (iii) requires construction of the Project In

accordance with the Approved Plans; (iv) requires completion of the Project so as to

timely satisfy the soft opening requirement hereof, subject to Force Majeure (as

hereinafter defined); and (v) contains t he clauses required by this Section 4.2. If

PRLA reasonably determines that a construction contract Is not in accordance with

the foregoing, then PRLA shall give written notice of such to Developer together with

a written list of provisions In the construction contract which It determines do not

comply with clauses (I) through (v) above, and accordingly require modification, and

the conditions precedent set forth In Article 2 which require a signed construction

contract shall not be deemed satisfied untll and unless all such objections of PRLA

are satisfied or waived. If Developer does not receive written notice of objections to

the construction contract by PRLA within TEN (10) business days following receipt of

the construction contract by PRLA, then the construction contract shall be deemed In

accordance with the requirements of this Section 4.2. The construction contract shall,

subject to Developer's construction lender's prior rights, be collaterally assigned to

PRLA.

Section 4.3 faymeot and Performance Bonds. Prior to the commencement or

construction, Developer shall (or shall cause its contractor or contractors to) provide

PRLA, Developer and Developer's construction lender with dual-obligee payment and

performance bonds (in such form as may be provided by applicable law to preciude

liens for labor and materials from attaching to the Property or otherwise in form

acceptable to Developer's construction lender, and subject to such lender's prior

rights) for one hundred percent (100%) of t he estimated cost of construction or

refurbishment, which bonds shall: (I) guaranty payment of all contractors,

subcontractors, sub-subcontractors, suppliers, materlalmen and other penons

performing work or supplying materials to the Project by or through Developer or

15
 Oeveleper's general contractor; (ii) guaranty the contractors' faithful performance or

a11 of their obligations under the respective construction contracts; (iii) automatically

be amended to reflect the final cost of t he Project (or appllcable Phase of the Project)

once same Is determined; (Iv) name PRLA and Developer's construction lender(s) as

co·obligees; (v) be Issued by an entity duly authorized to issue payment and

performance bonds in the Commonwealth of Puerto Rico; (vi) be issued by an entity

having a safety and/or credit ratlng by A.M. Best or other recognized rabng service

of A (or higher) as to management and Class X (or higher) as to financial strength;

(v11) by their terms, automatically continue in full force and effect regardless of

changes to the Plans; and (viii) be In effect at all times through Substantial

Completion of the applicable Phase of the Project. The existence of the bonds shall

not Hmlt or alter any other remedies of PRLA under this Agreement, and PRLA may

from lime to lime and at any tlme elect to pursue (or not to pursue) Its rights under

II t, the bonds, subject and 11mlted by the priority rights of Developer's construction

I
/ lender, without thereby limiting, voiding or relinquishing any of its other rights or

remedies under t his Agreement.

Section 4.4 fl:anlts and Approvals. Developer shall submit to PRLA copies of

all applications for permits and approvals with respect to the development of the

Project prior to submitting same to the app11cable governmental authontles. The

above submission to PRLA shall Include all environmental requirements necessary for

the commencement and completion of the construction of the Project. Except for the

location approval and the approval of t he transaction as one involving a public

Improvement by the Planning Board of Puerto Rico under Its Regulation No. 31 which

shall be obtained by PRLA, Developer shall apply, diligently pursue, obtain and pay

for any and all permits, licenses, vanances and approvals necessary for proper

demolition, excavation, construction, completion and operation of the Project,

lnduding all zoning, plattlng, site planning, bonding, pollution c-0ntrol, environmental

and other similar governmental requirements which might be necessary for the

commencement and completion of the construction of the Project. As more

particular1y described In Section 2. 2, PRLA agrees to assist Developer In obtaining

tile necessary approvals, llcenses and permits.

16
 Section 4.5 Progress of Construction. Developer shall commence

construction of the Project and at all times continuously proceed with said

construction in accordance with the Construction Schedule, subject to Force Majeure.

Developer shall keep PRLA advised of t he progress of the Project through concurrent

copies of such reports as Developer shall have to render to its lender(s), If any.

Developer shall perform all work in a good and workmanlike manner and consistent

wilh and substantially In accordance with !he Approved Plans. Developer shall

construct the Project with new matertals of the quality established in the

specifications, If any, approved by PRLA pursuant to the Plan Approval Process and

with diligence and continuity and no construction shall be undertaken at t he Project

except as shown in the Approved Plans.

4.5.l Developer shall submit quarterly reports to PRtA regarding the

progress of the Project. Such reports will contain, at a minimum, the following

lnfonmatlon: (I) a general desaiption of the construction actill1ty and progress

achieved each month, (Ii) the percentage of completion of the Project, (Ill)

updated costs schedule, (Iv) comparison of progress on the Project against the

Schedule, and (v) any circumstance that adversely affects the Project.

4.5.2 PRLA and the Developer shall, at all times during the permlttlng

process and construction of the Project, act with due diligence so that, insofar

as It is within their control, the Project Shall be Inaugurated with a •sott

opening• within twenty four (24) months from the date of commencement of

construction. For purposes of t his Agreement, a soft opening shall mean t hal

at least fifty percent (50%) of the rooms and the public areas of the hotel have

been substantially completed and have been opened for use to the public.

Section 4.6 PRLA's Insoectlon. It is Developer's obligation to continuously

Inspect the construction and work being performed by me contractors to Insure ltoat

said construction and work are being performed In substantial accordance with the

Approved Plans. PRLA shall have t he rlght at Its own cost and expense, to Inspect

the Project From time to time to verify the progress of t he construction and that

performance of the construction work is in substantial accordance with the Approved

Plans. Developer shall provide, at Developer's cost, suitable work space and utilities

for such representatives of PRLA during ttoeir inspections. Developer shall cooperate

17
(and shall cause Its contractors, subcontractors, employees and agents to cooperate)

fully with all such Inspections and el<amlnatlons. In making the foregoing inspections,

PRlA will take care so as not to interfere with the progress of construction of the

Project and shall endeavor to coordinate with Developer's lenders so as to have said

Inspections made by the same inspector as lenders' Inspectors.

4.6.l No outv to lnsoect. Notwithstanding the foregoing, it Is hereby

understood and agreed that PRU'< has no duty or obligation of any kind

whatsoever to Inspect or police the performance of the construction work, and

the rights granted to PRU'< hereunder shall not create or be deemed to create

any such duty or obllgatlon. Accordingly, Including without limitation, the fact

t hat PRV. has not exercised its right to object to the construction of all or any

part of the construction work, shall not constitute an agreement or

acknowledgment on the part of PRlA that the Developer has in fact performed

such wor1< in accordance with the terms of this Agreement and the Approved

Plans, nor shall any such fact constitute a waiver by PRV. of the requirement

of compliance by Developer In all material respects with the provisions of t his

Agreement and the Approved Plans.

Section 4. 7 t:wnJ2Uance with Laws. In causing the Project construction work

to be performed, Developer will assure that the construction compiles with applicable

Federal, Commonwealth, and local statutes, laws, ordinances, rules, regulatlons,

codes and orders (collectively, •Legal Requirements"), Including, without limitation,

those regarding the storage, use, removal, disposal, handling and transportation of

Hazardous Substances (as defined below), provided that nothing herein shall llmlt

the right of Developer or contractor to contest the validity or enforceability of any

such legal Requirements with which Developer may be required to comply. As used

herein, the term "Hazardous Substances• mean any flammable explosives,

radioactive materials, friable asbestos, electrical transformers, batteries and any

paints, solvents, chemicals, or petroleum products, as well as any substance or

material defined or designated as a hazardous or toxic waste material or substance,

or other similar term by any Legal Requirements presently or hereinafter In effect, as

such Legal Requirements may be amended from time to time. With respect to the

removal of any existing Hazardous Substances, Developer shall use only such

18
contractors as are bonded and licensed for the removal and treatment of Hazardous

Substances, and shall str1ctly comply with all Legal Requirements regarding same.

Section 4.8 S!mitantlal Completion and Dellverles. For the purposes hereof,

"Substantial Completion• or "Substant ially Completed" shall mean such time as: (I)

the architect for the Project shall certify to PRL.A that the wor1< on t he Improvements

Is sufficiently complete In accordance with the Approved Plans and other contract

documents so that the Developer can occupy or utilize the same for Its intended use;

and (Ii) OGPe has issued the corresponding use penmit for the same after approval

by the Health and Fire Departments of the Commonwealth of Puerto Rico.

Developer agrees that after achieving Substantial Completion of the Project, It

will provide PRL.A with the following documents :

4.8.1 two (2) S<!ts of as-built Plans for the Project; and

4.8.2 a final affidavit and release of Hen from Developer's general

contractor attesting to the receipt and payment of all obligations relating to

construction and development for each Phase of the Project and final releases

oflien by all llenors.

The foregoing shall be delivered by Developer to PRLA within ninety (90) days

of Substantial Completion of eacll Phase of the Project.

Section 4.9 Liil!llllY of PRlA. Neither PRLA nor any of Its officers, directors,

employees, agents, contractors, consultants or attomeys shall be liable to Developer

or any owner or, or holder of any Interest In, any portion of the Property or any other

person or entity by reason of mistake in judgment, failure to point out or corTect any

deficiencies in construction or other negligence, misfeasance, malfeasance or

nonfeasance arising out of or In connection with the construction contract, any

payment and perforTnance bonds, any permits and approvals, and/or any

construction with respect to the Project or any portions thereof. Developer, and any

tenant under any of the Lease referTed to in this Agreement and any occupant of any

retail or commercial areas of the Project agree not to seek damages from PRLA arising

out of PR.I.A's review and approval of any of the foregoing. Without limiting the

generality of the foregoing, PRL.A shall not be responsible for reviewing, nor shall Its

review of any of the foregoing be deemed approval of any contract, bond,

construction, or workmanship, nor compliance with any govemmental requirements,

19
but the rights of PRLA are solely for Its own benefits as aforesaid. Further, Developer

(Including Its successors and assigns, but specifically excluding any Institutional

lender advancing funds to Developer for construction) agrees to indemnify, save and

hold PRLA (including Its successors and assigns) harmless from and against any and

all costs, claims ( whether rightfully or wrongfully asserted) damages, expenses or

llabllltles whatsoever (including, without llmltatlon, reasonabl e attorneys' fees and

court costs at t rial and all appellate levels) arising out of any review or approval or

certification made by PRLA hereunder and/or under the Lease. Anything to the

contrary notwithstanding, the provisions of this Section 4.9 shall survive t he

termination or cancellation of this Agreement or any portions hereof.

Section 4.10 Maintenance. Developer agrees to at all times during the term of

this Agreement maint ain the Property and all improvements from time to time locat ed

thereon In a neat, clean, secure and order1y manner.

OPERATI NG PERIOD

Section 4.11 Commencement of Operating Period. Upon completion of the

Construction Period the Developer, will commence the operat ion of t he under the

terms of the Lease ("Commencement of Operating Period"). The term of t he

Operating Period shall be forty (40) years from the Commencement of Operating

Period, provided, however, the Operating Period shall be extended upon request by

Developer, or its successor or assign for up to two (2) additional extensions of ten

(10) years each ("Operating Period").

Section 4.1 2 Operating Period Bent. Upon Commencement of Operating

Period and during the following three lease years, Developer will pay to the PRLA,

without offset, deduction or abatement, and without demand therefor, t he greater of

(1) an annual rent of EIGHTY FIVE THOUSAND DOLLARS ($85,000.00), payable

In consecutive mont hly installments of seven thousand eighty three dollars and t hirty

t hree cents ($7,083.33) each, or (2) THREE POINT FIVE PERCENT (3.S•/o) of the

annual gross Income generated by the hotel ("Stabilization Period Rent"). The

Stabilization Period Rent shall be payable monthly in advance, without offset,

deduction or abatement, and without demand t herefor, on the first (l") calendar day

of each twelve (12) month period following the Commencement of Operating Period

and until the end of the t hird (3"') year of the Operating Period ('St abilization

20
Period"), at the offices or PRLA and wlll be responsible for the payment, in timely

manner, of the property taxes assessed on the Property.

4.12.1 Develope.- shall submit quaiterly reports to inform the annual gross

Income gene;ated by the hotel within thlity (30) days following the previous

quaiter and shall pay any additlonal COITespondlng payment.

4.12.2 After completion of the Stablllzatlon Petiod, Developer will pay to

PRLA, without offset, deduction or abatement, and without demand therefor, an

annual rent of the greater of (1) ONE HUNDRED THOUSAND DOLLARS

($100, 000.00), in equal consecutive monthly Installments of eight thousand

three hundred and thirty three dollars and thirty three cents ($8,333.33),

which upon reaching the end of the tenth (10"') year of the Ope.-ating Period,

shall be Increased at the end of every nve (5) years thereafter by an amount

equal to FIFTEEN PERCENT ( 15%) \ Base Rent"). or (2) THREE POINT

FIVE PERCENT ( 3 .5%) of the annual gross operating Income generated by

the hotel (the " Percentage Rent"), The Base Rent shall be payable monthly

In advance, without offset, deduction or abatement, and without demand

therefor, on the first (1") calendar day of each twelve (12) month period

following the completion of the Stablllzatlon Petiod until completion of the

Operating Petiod, at the offices of PRLA and will be responsible for the payment,

In llmely mannec, of the property taxes assessed on the Property.

4.12.3 After the foulth (4"') lease year of the Operating Period, Developer shall

pay the Base Rent as well an addltlonal annual rent of FIVE PERCENT ( 5%) of the

net after tax Income generated by the hotel ("Addlllonal Rent"). The Additional Rent

shall be payable to PRLA within ninety (90) days following each twelve (12) month

Lease term, without offset, deduction or abatement, and without demand therefor, at

the offices of PRLA, and will be responsible for the payment, in timely manner, of the

propeity taxes assessed on the Property.

Section 4.13 Capital Gain in tfle Event pf Sale. In the event of a sale of

DevelOj)er's Leasehold Interest in the Project, Developer wlll pay PRLA seven and one

half percent (7.5%) of the net capital gain on such sale, after: (I) deducting all

reasonable transaction costs of such sale, (U) deducting the full amount due on all

outstanding pnor loans, (iii) deducting the total amount of Invested capital, and (iv)

21
deducting a yield of ten percent (10%) return on the caSh Invested by Developer In the

Project and not previously distributed. The provisions or mis Section 4 .13 shall not apply
to any successor of Developer that succeeds to Developer's rights and obligations

hereunder pursuant to t he foreclosure of any mortgage, direct or indirect foreclosure of

all membership interests In the Developer, and/or through a deed in lieu of foreclosure.

Section 4.14 Qgltal Gain in the Event or Refinancing. In the event or a

refinancing of Developer's Leasehold Interest In the Project for the purpose of making

a distribution to Developer's members, Developer will pay PRLA an amount equal to

tlve percent (5%) of the lesser of: (A) the amount of such refinancing after deducting

the following items: (I) the total amount of Developer's debt t hen outstanding, (II)

the aggregate cost of such refinancing, including advisors and lender's fees, internal

revenue stamps, filing and recording vouchers, counsel and notarial fees, (ill) the

total amount of Invested capital being substituted by such refinancing, (iv) a yield of

ten percent (10%) return on the cash invested by Developer being substituted by

such financing and (B) the amount of such refinancing actually distributed to

Developer's members.

Section 4.15 Upon completion of the Construction Period, Developer shall pay

to PRLA a security deposit of TWENTY FIVE THOUSAND DOLLARS ($25,000.00),

equivalent to three (3) monms of Basic Rent, less the balance unapplied of any previous

security deposit.

Section 4.16 Pemiltted Use. The Developer shall use the Property during the

Lease Term exclusively for the construction and operation of a hotel and ancillary

Facilities customarily provided by tourism hotels, or as approved by the Governing

Board of PRLA. Developer expressly recognizes that It IS forbidden to use the Property

for any use not covered by this Agreement or the Lease attached hereto as Exhibit

Section 4.17 The Developer covenants and agrees to at all times operate and

maintain the Project In a commercially reasonable manner, consistent with prudent

business practices and the standards of operation set rorth herein. In this regard,

following completion of Construction Period and Commencement of the Operating

Period thereunder, the Developer shall operate and maintain the Project Without

Interruptions throughout the Lease Tenn, subject to partial or total interruption due

22
to casualty, remodeling, refurblstung, repairs, vacancies In the ordinary course of
business and Force Majeure on the Property.

ARTICLE 5

I NSURANCE AND CASUALTY

Section 5.1 Oeyelooe(s Insurance. Except as may otherwise be provided In

the Lease, Developer shall obtain and at all times prior to its satisfaction of all

obligations hereof, maintain or cause to be obtained and maintained the followlng

insurance with respect to the Property and the Project, and as otherwise required In

tnis Article 5:

5.l.1 Comprehensive General Public Liability Insurance with respect to

tne Property and the business of the Developer, Including but not limited to

premises, operations, completed operations, comprehensive automobile

liability, bodily Injury liability - induding death, and/or property damage

liability. DevelOper shall mainrain adequate limits for the insurance required

herein wnich shall not be less than One Mllllon Dollars ($1,000,000.00) per

occurrence, and Two Mllllon Dollars ($2,000,000.00) of aggregate. A Hold

Harmless Agreement to t he PRLA is required In addition to t he corresponding

Certificate of Insurance.

S.1.2. Builder's risk insurance shall be maintained during any period of

construction, repair or replacement of improvements on the Property, insuring

the Project against all casualties on a progressively Insured basis for not less

t han one hundred percent (100%) of t he replacement cost of t he

improvements on a completed value form with an Installation noater covering

materials and supplies In transit to the Project. During sum construction,

repair or replacement, Developer shall require Developer's contractors to

maintain (or, If Developer acts as the contractor, then Developer shall

maintain) worker's compensation Insurance In the amounts required by law

and adequate contractor's general comprehensive liability insurance (Including

automobile liability coverage) which shall name t he subcontractors as Insureds

and shall Include supplemental endorsements, a completed operatlons

endorsement and personal injuries and broad form property damage

endorsements. If the policy conrains a co-insurance requirement, the policy

23
shall contain an agreed amount endorsement. The Bullder's Risk Policy shall

provide coverage against all rtsks that would be covered by a Builder's Risk

Completed Value Polley with All·Risk Difference In Conditions, Increase Cost of

Construction and Demolition Cost endorsements.

5. 1.3 After construction of the Project Is completed, the Developer shall

replace the Builder's Risk Insurance with a Special Form, All Risk Property

Insurarn:e with standard special broad form extended coverage endorsement

and supplementary penis insuring the Property for any risk of loss, damage or

destruction, for any cause, in an amount of no less than one hundred percent

( 100%) of their replacement value. Said pollcy shall also contain an lnftatlon

guard protection causing an increase in t he annual property insurance

coverage amount by 8% and name the PRLA as •toss payee•. If further

improvements are carried out on the Property, the Developer shall carry out

an appraisal of the same and the insurance coverage shall be adjusted

accordingly for the year following t hat appraisal.

5.1.4 During the construction of t he Project, the Developer shall

maintain pollution liability insurance with respect to t he Property, t he Project

or the Improvements with limits (in which both primary and excess or

•umbrella" coverage may be aggregated) of at least one mllllon dollars

($1,000,000.00) per occurrence and two million dollars ($2,000,000.00) In the

aggregate.

5.1.S The Developer shall obtain and maintain a •Fire Legal Liabillty• of

at least one hundred thousand dollars ($100,000.00).

5.1.6 The Developer shall obtain and maintain an employer's liablllty

insurance as required by law with the State Insurance Fund Corporation

(Corporaci6n del Fondo def Seguro del Estado). Furthermore, the Developer

shall obtain and maintain an additional coverage of no less the five hundred

t housand dollars ($500,000.00) per person and per event, to cover all liabilitles

not covered by t he State Insurance Fund in the event of gross negligence.

5.1. 7 The Developer shall keep or cause to be kept all improvements on

the Property Insured for the benefit of the Developer, its mortgagee and the

Administration, as their respective interests may appear, against loss or damage

24
 by fire and customary extended coverage pet11s (lndudlng flood insurance, If

applicable) 1n an amount not less than one hundred percent (100%) of the full

replacement value. The Admlnlstratlon shall not carry any Insurance concurrent

ln coverage and contributing In the event of loss with any insurance provided by

the Developer. In the event of a loss, under the Deed of Lease, t:he

Administration and the Developer shall cooperate In order to obtain the largest

possible recovery and the Administration shall execute and deliver any and all

consents and other documents and Instruments to accomplish same, at no cost

to the Developer.

5.1.8 The Developer shall obtain any and all additional insurance policies

as required by applicable laws, regulations, and as recommended for t he

particular uses and activities to be conducted upon the Property of the Project

5.1.9 The Developer shall deliver to the Administration on the date of

execution of the Deed of Lease, all corresponding Insurance certificates and a

copy of all insurance pollcles. The Developer shall therefrom deliver to the

Administration, on an annual basis, the certificates of renewal of all Insurance

policies, before said policies expire. Such policy or policies of the Developer shall

contain a provision stating that such insurance cannot be cancelled without sixty

(60) clays' prior written notice to the Administration.

5.1.10 The insurance requirements of the Lease are incorporated hereto

and made a part hereof by reference, except to the extent as they may be

clearly Inapplicable.

Section 5.2 eRLA May procure Insurance If f;!eyefoper Fails To Do So. If

Developer fails to maintain any insurance required by this Article S, PRLA may, In

addition to any other rights hereunder, at its option and after ten ( 10) days prior

written notice to De'eloper, procure such Insurance, and all amounts paid therefor

shall be payable together with interest thereon at the lower of Ten Percent (10%)

per annum or the highest rate permitted by law (the •Default Rate"). PRLA shall

notify Developer In writing of the dates, purposes, and amounts of any such

payments, and Developer shall reimburse PRLA within ten (10) days following receipt

of such notifkatlon.

2S
 Section 5.3 lnsuCllQCC Does Not Waive Deyelooe(s Obligations. Subject to the

provisions of Section 5.5, no acceptance or approval of any Insurance by PRLA st-tall

relieve or release Developer from any liability, duty or obligation under this

Agreement.

Section 5.4 Proo( of Loss. Whenever any part of the Proj ect shall have been

damaged or destroyed by fire or other casualty, Developer shall promptly make proof

of loss in accordance with the terms of the appllcable Insurance policies and shall

promptly prosecute all valid daims which may have ansen against insurers or others

based upon any such damage or destruction. Developer shall give PRLA written

notice of any damage or destruction to the Project within t hree (3) days t hereof.

Section 5.5 Prooerty Insurance Proceeds. Subject to t he requirements of

Developer's construction lender for repayment of the construction loan, all insurance

proceeds shall be promptly used, to the extent necessary, for the reconstruction,

repair or replacement of the Project, so that the Project shall be restored to a

condition comparable to the condition prior to the loss or damage (hereinafter

referred to as "Reconstruction Work•).

Section 5.6 Coxeoaot for Commencement aod Comgletjon of Re'onstcuct lon .

Developer covenants and agrees to promptly submit any claim for damage to the

insurer, to promptly restore the Property to a neat, clean and orderty condition and

to commence the Reconstruction Work as soon as practicable (after the insurance

proceeds have been received), and to fully complete such Reconstruction Work as

expeditiously as reasonably possible.

Section 5. 7 Waiver of Subrogation Rights. Anything in this Agreement to the

contrary notwithstanding, PRLA and Developer each hereby waive any and all rights

of recovery., daim, action, or causes of action against the other, Its agents, officers,

directors, partners, investors, or employees, for any liability, loss or damage that

may occur In, on, about or to the Property and/or any Improvements from time to

time existing thereon, or to any portion or portions thereof, or to any personal

property brought thereon, by reason of fires, the elements or any other cause(s)

which are insured against under the terms of valid and collectible Insurance policies

carried for the benefit of the party" entitled to make such claim, regardless of cause

or origin, lnduding negligence of another party hereto, Its agents, officers, directors,

26
 partners, investors, or employees; provided that such waiver does not limit in any

way any party's right to recovery under such Insurance policies, and provided further

that the insurer pays such clalms. Developer shall obtain an endorsement to all of

Its insurance policies relatlng to or covering the Property, or any portions thereof, to

effect the provisions of this Article 5.

Section 5.8 Condftlon of casualty Site. Regardless of the disposition of

insurance proceeds, Developer shall be required to Immediately dean and clear the

site of any casualty so that the same remains in a neat and attractive manner.

ARTICLE 6

LIENS: NO INTERFERENCli

Section 6.1 ~elooer to Discharge Mechanics' Lfeos. Developer shall make

or cause to be made payment of all money due and legally owing to all persons and

entities doing any wor1< or providing any materials or supplies for the Project.

Developer will not permit to be created or to remain undischarged any lien,

J; encumbrance or charge arising out of work done or materials or supplies fumlshed

l/1) C,
1' by any contractor, subcontractor, mechanic, laborer or materialman which might

VI become a lien, encumbrance or charge upon the Property or any income therefrom

(other than the lien of an Institutional lender advancing funds for the acquisition,

construction and/or development of the Project or any portion thereof). All work

whlch Developer is permitted or required to do shall be deemed to be for the

Immediate use and benefit of Developer, and no lien shall be allowed against the

estate of any other partY as a result thereof. If any such lien or encumbrance shall

at any time be filed against the Property as a result of Developer's construction of

the Project, then Developer shall file a bond satisfactory to cause same to be removed

as a doud on title within twenty (20) days of the filing of the lien and shall promptly

take and diligently prosecute appropriate action to have the same discharged or to

contest in good faith the amount or validity thereof. and if unsuccessful lo such

contest, to have the same discharged. Upon Developer's failure to do so, PRLA, In

addition to any other right or remedy it may have and after five (5) days prior written
notice to Developer, may take such action as may be reasonably necessary to protect

Its interests and Developer shall pay PRLA any amount reasonably paid by PRLA In

connection with such action, and all reasonable legal fees, = and expenses

27
incurred by PRl.A in connection therewith ( including reasonable attorneys' fees, court

costs, costs of appeal and other necessary disbursements). Any such amounts not

disbursed by Developer within twenty (20) days after the date Developer receives

notice from PRLA of t he amount thereof and demand for payment of same shall bear

Interest at the Default Rate from t he date of t he disbursement by PRLA.

Section 6.2 No Right to Lleo. Neither Developer, nor any contractor,

subcontractor, supplier, vendor, agent, employee, tenant, subtenant, patron,

customer or invitee of Developer, nor any other party acting on behalf of Developer

shall have any authority to create any liens for labor or material on PRLA's interest

In the Project and the Property, and all persons contracting with Developer for t he

construction or removal of any facilities or other Improvements on or about the

Project, and all materialmen, contractors, mechanics, and laborers are hereby

charged with notice that t hey must look only to Developer and to Developer's

Interests In the Project to secure the payment of any bill for work done or material

furnished at the request or instruction of Developer.

ARTICLE 7

CONDEMNATION

In the event t hat any of the Property Is taken for any public use or purpose by

the exercise of the power of eminent domain (or deed given In contemplation

thereof), hereinafter a "Taking", the following provisions shall apply:

Section 7.1 Entire or Material Portion of Property Igken by Condemnation

Prior to Commencement Qt Coostruttlon. In the event that all of the property Jn a

Phase of the Project or a •material" portion t hereof is taken for any public use or

purpose by the exercise of the power of eminent domain (or deed given In

contemplation thereof) prior to commencement of construction of the Project, then

all of t he obligations of Developer under this Agreement and, at Developer's option

exercised within sixty (60) days of such taking, shall fully terminate as of the taking

and all awards payable on account t hereof shall be paid to PRLA; provided, however,

that from the condemnation proceeds, PRLA shall reimburse to Developer its losses

incurred In preparation eo plans, studies and appraisals, including architect, engineer,

and counsel fees.

28
 Neither Developer nor PRlA shall in any way cooperate with, seek or aid,

directly or indirectly, any condemnation with respect to the Project.

The term • material" as used in this Article 7 shall mean a condemnation of

such portion of the Project as, in t he good faith opinion of Developer, renders It

economically infeasible for Developer to continue with the Project.

Section 7.2 Non·Materlal Taking. by Condemnation Prior to Commencement

of Construction. In the event of a non material condemnation prior to commencement

of construction of the Project, then all of t he obligations of t he parties shall continue

and Developer shall take such action as is reasonably necessary to restore the

applicable portion of t he Project to as close a condition as Is reasonably feasible to

t he originally approved Plans for the Project. To the extent any portion of the Project

is not feasibly restorable or is not economically feasible to restore, then such portion

shall be deemed omitted f'rom the Project. All condemnation awards for a

nonmaterial condemnation shall be paid to Developer to be applied to the cost of

restoration of the Project, Including costs related to the modification of plans and

supplementary permitting expenses required as a consequence of such non-material

condemnation. Any amounts not used to restore the Project shall be distributed to

PRlA.
I
Section 7.3 Taking Afl:er Commencement of Coostructlsm of );be Prolect. In

the event of a Taking after commencement of construction of the Project, t he

condemnation provisions of the Lease, which are incorporated hereto and made to

form part hereof, shall apply.

ARTICLE 8

DEFAULT AND RE MEDIES

Section 8.1 Deyelope( s Default. The occurrence of any of the following

events shall constitute a default under t his Agreement:

8. 1.1 Developer's abandonment of the construction of the Project for

twenty (20) consecutive working days (excluding Saturdays, Sundays and

legal holidays) after receipt of written notice from PRlA for any reason

whatsoever other than reasons which constitute Force Majeure; or

8.1.2 Any failure to obtain, assign, deliver or keep In force the policies

of Insurance required by this Agreement after written notjce from PRLA; or

29
 8.1.3 If Developer shall make an assignment for the benefit of

a-editors, file a pet1tlon In bankruptcy, apply to or petition any tribunal for the

appointment of a custodian, receiver, intervenor or trustee for Developer or a

substantial part of Its assets; or If Developer shall commence any proceeding

under any bankruptcy, arrangement, readjustment of debt, dissolut ion or

liquidation law or statute of any jurisdiction, whether now or hereafter In

effect; or If any such petition or application shall have been filed or proceeding

commenced against Developer which remains undlsmlssed for sixty (60) days

or more or In which an order for relief Is entered; or if Developer shall suffer

any such appointment of a custodian, receiver, Intervenor or trustee to

continue undischarged for sixty (60) days or more; or

8.1.4 Developer's failure to observe or perform any other covenant or

agreement made by Developer in this Agreement, and the continuation of such

failure or default for a period of tllirty (30) days alter written notice tllereof

from PRLA to Developer. provided, however, If such failure cannot reasonably

be cured within thirty (30) days, and Developer, within said thirty (30) day

period, shall have commenced and thereafter, at all times, continues diligently

and In good faith to prosecute tile cure at all times of such failure, then during

such curatlve period, said fa~ure shall not constitute a default hereunder;

provided further that any failure that can be cured by the payment of money

shall never be deemed a failure that cannot be cured within thirty (30) days.

Section 8.2 Remedies. Subject to Sections 9.3, any default under this

Agreement shall entitle PRLA, at its option and at any time, to exercise any or all of

the following rights and remedies, and all such remedies shall be deemed cumulative

and not mutually exclusive:

8.2.1 The right to pursue any and all equitable remedies, including the

right to specifically enforce Its rights hereunder, to enjoin Developer or obtain

any other type of Injunction against Developer with respect to the Project; or

8.2.2 Subject to t he rights of the construction lenders, t he right to claim

on any payment and performance bond obtained; or

8.2.3 The nght, In the cases herein expressly provided, to terminate

this Agreement.; or

30
 8.2.4 The right to pursue any and all remedies available at law,

including the right to sue and collect for out-of-pocket losses and for damages;

or

8.2.S The right to enter Into possession of t he Property (or the

applicable portions ln question), to perform any and all work and labor

necessary to complete t he Project, and to employ watchmen to protect the

Property and all materials and supplies therefor, and all sums expende<I by

PRLA for such purposes shall bear interest at the Default Rate and be repayable

by Developer t o PRLA.

Section 8.3 Mortgagee's Rights. PRLA agrees to provide duplicate copies of

all notices of default under this Agreement t o any lender advancing funds for

development of the Project specifically named In the request from Developer.

Anything t o the contrary notwithstanding, PRLA shall accept curative action by any

such lender and, except for remedial action necessary on an emergency basis, any

' such lender shall have an additional period of t hirty ( 30} days beyond the applicable

vI grace period provided to Developer, if any, to cure any default of Developer under

this Agreement; provided, however, If such default of Developer cannot reasonably

be cured by t he lender within such additional thirty (30) day period, then

notwithstanding the foregoing, PRLA shall forbear from exercising any of its rights

under Sections 8.2.3, 8.2.4 or 8.2.5 { but will not forbear from exercising Its rights

under Sections 8.2.1or8.2.2), provided that any such lender: (i) ctJres any monetary

default of Developer within no more than thirty (30) days following written notice to

such lender of the default; (ii ) thereafter keeps all monetary obligations of Developer

to PRLA current in all respects; and (iii) at all times diligently and In good faith seeks

to continuously cure the default, including, without limitation, the foreclosure of its

mortgage and/or appointment of a receiver as may be necessary to dlllgently obtain

passession of the Property to effect such cure. Further, provided that such lender

has met, and continues to meet, all of t he requirements of clauses (i), (ii) and (Iii)

above, PRLA shall continue to forbear from exercising Its rights under Sections 8.2.3,

8.2.4 and89.2.S for a period of six (5) months following such lender's or Its successor

in tltle's acquisition of possession of t he Property t hrough foreclosure, provided t hat

such person maintains the Property in a neat, clean, secure and orderly manner.

31
Upon any such person's obtaining title to, and possession of, applicable portions of

the Project, PRl.A, If requested in writing by such person, shall execute a new

development agreement with such person as to such portion of the Project on t he

same material terms which are contained In this Agreement. Anything t o the contrary

notwithstanding, if PRLA elects to take remedial action In t he event of an emergency

as aforesaid, such remedial action shall not preclude timely curative action by

Developer and/or its lender(s), and Developer shall pay PRLA any amount reasonably

paid by PRLA in connection with such remedial action, and all reasonable legal fees,

costs and expenses incurred by PRLA In connection therewith (Including reasonable

attorneys' fees, court costs, costs of appeal and other necessary disbursements).

Any such amounts not disbursed by Developer within ten (10) days after t he date

Oeveloper receives notice from PRLA of the amount t hereof and demand for payment

of same shall bear interest at the Default Rate from the date of t he disbursement by

PRLA.

Section 8.4 Obligations, Rights and Remedies Cumulative. The rights and

remedies of PRLA, whether provided at law, in equity or under this Agreement, shall

be cumulative. The exercise by PRLA of any one or more of such remedies shall not

preclude the exercise by it, at the same or different t imes, of any other such remedies

for the same default or for any other default or breach by Developer. No waiver

made by PRLA with respect to performance, manner or t ime of any obligation of

Developer or any condition to Its own obligation under this Agreement shall be

considered a waiver of any rights of PRlA with respect to the particular obligations of

Developer or condition to Its own obligation, or a waiver In any respect in regard t o

any other rights of PRLA. Nothing herein shall be deemed to llmlt or modify any

rights of PRLA under any of the lease.

Section 8.5 PRJ,.A's Default. The occurrence of any of t he following events

shall constitute a default under t his Agreement by PRLA:

8.5.1 any default or event of default by PRLA (after the expiration of any

applicable cure period) under any of the Lease; or

8.5.2 PRLA's failure to observe or perform any other covenant or agreement

made by PRLA In t his Agreement, and the continuation of such failure or default

for a period of thirty (30) days after written notice thereof from Developer to

32
 PRLA, provided, however, if such failure cannot reasonably be cured within

thirty (30} days, and PRLA, within said thirty { 30} day period, shall have

commenced and thereafter, at all times, continues diligently and in good faith

to prosecute the cure at all times of such failure, then said failure shall not

constitute a default hereunder.

Any default by PRLA under this Agreement shall entitle Developer, at its option and

at any time, to exercise any and all rights and remedies available at law or in equity;

provided, however, that any action for damages shall be limited to any actual

damages (but not any consequential damages} which shall Include, but not be limited

to, any costs related to a loss of a loan com mitment or speclnc loan interest rate.

ARTICLE 9

REPRESEl!IJAIIONS AND WARRANTIES

Section 9.1 Developer's Representations al'.ld Warranties. In order to Induce

PRLA to enter into this Agreement, Developer makes the following representations

and warranties to PRLA, each of whlcll shall survive t he execution and delivery of t his

Agreement, and shall be and remain true and correct at all times at least up to and

until one {l) year after the Developer satisfies t he requirements of Section 4.8

{including 4.8.1, 4.8.2 and 4.8.3} hereof} for the entire Project:

9.1.1 Developer is a limited liability company duly organized and validly

existing under the laws of the Commonwealth of Puerto Rico; Developer has

full power and capacity to own Its properties, to carry on Its business as

presently conducted by Developer, and to enter into the transactions

contemplated by this Agreement.

9.1.2 Developer's execution, delivery and performance of this

Agreement have been duly authorized by all necessary company and legal

actions and do not and shall not conflict with or constitute a default under any

indenture, agreement or instrument to which Developer is a party or by v"hich

Developer or Developer's property may be bound or affected.

9.1.3 As of t he date hereof, there are no actions, suits or proceedings

now pending or (to the best of Developer's knowledge} now t hreatened against

or affecting Developer or its property before any court of law or equity or any

administrat ive board or t ribunal or before or by any govem mental authority.

33
 9.1.4 Developer will make and devote Its good faith efforts to obtain

t he permits, licenses, approvals and consents From, and make all filings with,

any governmental authority which are necessary in connection with the

execution and delivery of t his Agreement, the performance of the obligations

of Developer hereunder, the enforcement of any provisions of this Agreement,

or the development, construction and operation of the Project.

9.1.5 The construction plans when delivered to PRLA shall be

satisfactory t o Developer, will have been approved by all applicable

governmental authorities to the extent required, will be complete In all

respects and contain all details necessary for the construction of t he applicable

portion of the Project to which the Construction Plans pertain.

9.1.6 All construction work, when performed, will be performed

substantially in accordance with the Constructi on Plans and all applicable

governmental requirements in an efficient, continuous and diligent manner.

All construction work shall be performed with good workmanship, and in

l
observance of t he prevailing construction techniques in Puerto Rico under t he

applicable laws, codes and regulations. There will be no structural defects, or

Hazardous Substances (except for those for which PRLA has accepted

responsibility) In the Project, and when completed In accordance with the

Plans, the Project will not encroach upon any building line, setback line or any

recorded or visible easement which exists with respect to the Property (except

with the consent of t he beneficiary of t he easement which is evidenced by an

inst rument recorded among the appropriate publlc records).

9.1.7 The anticipated uses of the Property and the Project shall, when

completed, comply with all appllcable governmental requirements, including

without limitation all zoning, building, environmental, land use, noise

abatement, occupational health and safety or other laws, any building or

occupancy permit, and any condition, grant or easement.

9.1 .8 Prior to commencement of constl'l.lction, all zoning, platting, site

planning, bonding, ecological, pollut ion control, environmental (except as

otherwise agreed herein), workmen1s compensation insurance and other

similar governmentaJ requirements which are necessary for the

34
commencement of construct ion of the Project have been or will be duly

complied with by Developer; all licenses, approvals and permits r~uired to

commence and prosecute such work, except as herein otherwise expressly

agreed, have been or will be duly paid for by and Issued to Developer (or If the

present stage of work does not allow such issuance, then such licenses,

approvals and permits will be paid for by Developer and issued when the

appropriate stage is reached).

9.L9 Developer acknowledges that it is a knowledgeable and

sophisticated developer and t hat it has previously reviewed and considered the

nature of t his transaction and has investigated and inspected the Project and

the property upon which t he Project is to be developed . Developer is familiar

with the status of the Project and the property upon which It ls developed and

all necessary governmental requirements for the intended development of the

Proj ect and Developer has determined that, except as previously stated herein

with respect to existing environmental conditions, such property is satisfactory

to Developer In all respects. Developer further ack.nowledges and agrees t hat

it has entered into this Agreement based solely upon Developer's own

independent investigations and inspections, and Developer has not relied, and

will not rely, on any representation of PRLA, either expressed or implied, other

than t he express representat ions contained In this Agreement. The parties

agree that, except as previously stated herein with respect to express

representations and warranties contained herein, PRLA has made no

representation, warranty, or covenant with respect to the Project or the

property upon which It Is to be developed, and PRLA Is not and shall not be

responsible, liable or bound In any manner to Developer for any other express

or implied warranties, guaranties, statements, representat ions pertaining to

the Project or such property. For the purposes of t his Section 9.1.9, the term

"PRLA" shall include PRLA and all agents, employees and representatives of

PRLA.

9.1.10 Developer shall at all t imes be In substantial compliance with all

covenants made by Developer and will comply with all terms and conditions

necessary to effectuate t he obligations contained In t his Agreement, and shall

35
 comply with all applicable laws, regulations, ordinances, administrative orders,

Judgments, decrees, Commonwealth, Federal or Municipal, as the case may

be.

9.1.ll This Agreement constitutes the valid and binding obligation of

Developer, enforceable against Developer,,. and Its successors and assigns, in

accordance with Its respective terms.

Section 9.2 PRLA's Representations and Warranties. PRLA hereby represents

and warrants to Developer, the following which shall survive the execution and

delivery of this Agreement, and shall be and remain true and correct at all times at

least up to and until one ( 1) year after Developer's satisfaction of the requirements

of Section 4.8 (Including 4.8.l, 4.8.2 and 4.8.3) hereof.

9.2.l PRLA Is an Instrumentality of the government of the

Commonwealth of Puerto Rico, is duly authorized to transact business In the

Commonwealth of Puerto Rico, and has all requisite power, authority and

capacity to own its properties, to carry on its business as presently conducted

and proposed to be conducted, and t o execute, deliver, perform and enter into

the transactions contemplated by this Agreement, under the prevailing laws in

effect at the time this Agreement is executed.

9.2.2 PRLA's execution, delivery and performance of this Agreement

has been duly authorized by its Governing El-Oard and certified, and all

n ecessary actions, including without limitation, all acts required under its by-
laws and does not, and shall not, confli<..t with or constitute default under any

Indenture, agreement or Instrument to which PRLA is a party or by which

PRLA's property may be bound or affected.

9.2.3 Except as otherwise disclosed to Developer In Schedule 9.2.3

hereof, as of the date hereof there are no actions, suits or proceedings pending

against or affecting PRLA in relation with the Property or the Property

(Including, without !Imitation, PRLA's right to enter into this Agreement with

respect to the Property) before any court of law or equity or any administrative

board or tribunal or before or by any governmental authority.

36
 9.2.4 This Agreement constitutes the valid and binding obligation of

PRLA, enforceable against PRLA and its successors and assigns, In accordance

with its terms.

9.2.S As of the date hereof, PRLA has received no notice of

condemnation or eminent domain proceedings with respect to all or any

portions of the Property.

9.2.6 PRLA shall at all times be in substantial compliance with all

covenants made by PRLA In this Agreement and will comply with all terms and

conditions necessary to effectuate its obligations contained In t his Agreement,

and shall comply with all applicable laws, regulations, ordinances,

administrative orders, judgments, decrees, Commonwealth, Federal or

Municipal, as t he case may be.

ARTICLE 1 0

AFFIRMATIVE COVENANTS

Section 10.1 By Developer. At all t imes prior to Developer's satisfact ion of t he

requirements of Section 4.8 (including 4.8. 1, 4.8.2 and 4.8.3} hereof, Developer

hereby covenants and agrees with PRLA as follows:

10.1.1 Developer shall do or cause to be done all things necessary to

preserve and keep In force and effect its existence, Its properties, pennits,

rights, franchises, licenses and qualifications to canry on business in all

applicable jurisdictions.

10.1.2 Developer shall pay all costs incurred or required to be Incurred

by Developer in connection with the development and construction of the

Project.

10.1.3 Without PRLA's prior written consent, Developer shall not

materially change or modify the Approved Plans or cause any contract with its

contractors to be in violation with Section 4.2 hereof, except as provided In

Articles 3 and 4 hereof.

10.1.4 During the period Developer is in the process of applying for

governmental approval of plans and permits, Developer shall keep PRLA

currently advised of all developments in connection therewith, Including,

without Implying a limitation, notifying PRLA with a copy of any substantive

37
 communication sent to or received from the corresponding governmental

entity within five ( 5) business days of delivery to or receipt from said

governmental entity.

10.1.5 Developer shall advise PRLA of any communications received by

Developer In regard to any lawsuits hereafter threat ened or Ried and pending

against Developer within three (3) days of receipt of any such communication.

10.1.6 If any actions or proceedings are filed or are threatened to be

filed seeking to (i) enjoin or otherwise prevent or declare invalid or unlawful

the construction, occupancy, maintenance or operation of t he Project or any

portion t hereof or the permits thereof; (ii) adversely affect In a material way

the financial condition of Developer or the ability of Developer to complete t he

Project, then within five (5) business days of Developer acquiring knowledge

of any such event, Developer shall notify PRLA thereof and Developer shall

I promptly cause such claim, suit or proceeding to be vigorously contested in

~.
good faith, and In the event of an adverse ruling or decision Developer shall

prosecute all allowable appeals therefrom. Without limit ing the generality of

~I the foregoing, Developer shall resist t he entry of any temporary or permanent

injunction and shall seek the stay of any such injunction t hat may be entered,

and Developer shall use Its best efforts to bring about a favorable and speedy

disposition of such proceedings.

Section 10.2 By PRLA. PRLA hereby expressly covenants and agrees with

Developer as follows:

10.2. 1 Upon delivery of possession of t he Property t o Developer, the

Property shall be free and clear of any lease or occupancy agreements and free

of claims of third parties.

10.2.2 PRLA shall comply at all times with the terms and conditions of

this Agreement and with all applicable laws, rules, regulations, ordinances and

other requirements of any Federal, Commonwealth, municipal or other

governmental authorities.

10.2.3 If, In connection with t he recording of the deeds contemplated by

the Lease at t he Registry of the Property, clarlflcations are required by said

Regi stry, t hen, PRLA agrees to execute such documents to make such

38
 clarifications, provided that any such document and/or clarification is wholly

consistent with the provisions of this Agreement and the Lease.

ARTICLE 11

NEGATIVE COVENANTS

At all times prior to t he Developer's sat isfaction of the requirements of Section

4.8 (Including 4.8.l, 4.8.2 and 4.8.3) hereof, Developer covenants and agrees with

PRJ.A that without the prior written consent of PRLA, which consent shall not be

unreasonably withheld or delayed :

Section 11.1 Encumber. Developer may not encumber all or any part of the

Property or any Interest t herein, or grant or record any covenant, restriction,

declaration, dedication, plat, replat, easement, mortgage or similar Item affecting the

title to the Property or any part t hereof or Interest therein except as specifically

permitted in Sections 12.1and12.2 and as otherwise permitted by PRLA pursuant to

prior written approval.

Section 11.2 Modification of Drqaolzatlonal Documents. Developer shall not

merge or consolidate with any other entity, nor cause, permit or suffer to occur any

pledge, assignment, hypothecation or other encumbrance of the whole or any portion

of any shareholder's controlling interest in Developer or any change In the ownership

control of Developer (except in connection with financing permitted In Section 12.2).

Section 11.3 Assign. Developer shall not directly or Indirectly assign or

t ransfer any of Developer's rights or obligations under this Agreement without the

express pr1or written consent of PRJ.A, which shall not be unreasonably withheld,

denied, or delayed . Any permitted assignee shall (i) expressly assume In writing all

(or so much of the) obligations of Developer under this Agreement and the Lease, as

applicable to the rights, duties and obligations t ransferred in Developer's and such

assignee's sole discretion (II) recertify all representations and warranties of t he

Developer as set forth In t his Agreement; (iii} agree to be subject to all conditions or

restrictions to which the Developer is subject; and (iv) qualify to do business In the

Commonwealth. PRJ.A and Developer shall not be relieved or released In any manner

whatsoever of its obligations under t his Agreement because of any assignment or

transfer hereunder. PRJ.A agrees to an assignment of any or all of Developer's rights,

39
 duties and obligations hereunder to any lender advancing funds for the acquisition,

construction and/or development of the Proj ect.

ARTICLE 12

GENERAL CONDITIONS AND OTHER COVENANTS

Developer and PRlA further covenant and agree as follows:

Section 12.1 Documents Affecting Title. All proposed mortgages and other

documents which Developer intends to record against Its leasehold interests in the

Property shall be submitted to PRlA and its legal counsel at least five (5) business

days in advance of the proposed date of recording for their review of same, and shall

be accompanied by a copy of any plans relating thereto.

Section 12.2 Financing. Prior to Substantial Completion, Developer shall not

place or agree to any mortgage, security agreement or other encumbrance against

any portion of the Project which does not provide t he followlng:

12.2.1 t hat t he terms of the loan shall be consi stent with the applicable

terms and provisions of this Agreement;

12.2.2 t hat the loan terms shall specifically acknowledge and accept that

[
1 the only Improvements permitted to be developed and constructed In the

Property are as provided for in this Agreement; and that t his stipulation shall

be binding to any permitted successor or assign of the Developer or to any

successor of the Developer as a consequence of the exercise by the lender of

Its rights under the loan agreement.

12.2.3 that the primary lender(s} shall be a recognized lender with

experience In making loans for construction and development of a project of

the size and scope of the Project;

12.2.2 that all funds to be provided by t he lender(s} prior to completion

of the Project shall be required to be used in the construction, development

and/or operation of the Project or otherwise in connection with the Project.

Section 12.3 No Third-Partv Benefi,clarle~. PRLA's Inspection, review or

approval of matters pertaining to the Project has no purpose other than to determine

aesthetic quality from PRlA's point of view and Is not done for t he benefit of anyone

other t han PRlA. Any "approval' by PRLA or PRlA's agents with respect to any plan

or specification or any resulting structure or Improvement means only that PRlA finds

40
the same aesthetically unobjectionable, and no such approval or consent by PRLA or

authorization to proceed shall Imply or be construed as any representation that any

such plans or specifications are suitable for any particular purpose, or that the

resulting st ructure or Improvement or any materials incorporated therein are safe or

suitable for any particular purpose or have any particular value or actually cost the

amount reputedly paid therefor. Under no circumstances shall any person

whomsoever (other than the parties to this Agreement and their respective permitted

successors and assigns) be deemed a beneficiary of the terms, conditions, covenants

and agreements contained in this Agreement.

Section 12.4 lodemojty. Developer shall indemnify PRLA and hold PRLA (Its

officers, directors, agents, consultants and employees) harmless of and from any and

all: (a) claims or demands of any parties whatsoever (including without llmitatlon

any persons rendering labor, services and/or materials in connection with the Proj ect)

arising from or growing out of, the performance by Developer of Its obligat ions under

this Agreement and/or Developer's actions or omissions In the construction and

operation of the Project except only as may result from the gross negligence or wilful

misconduct of PRLA; (b) any and an claims or demands of any parties whatsoever

(including, without limitation any persons rendering labor, services and/or materials

in connect ion with the Project) arising from or growing out of, the existence of any

Hazardous Substances or t he removal, discovery, existence, storage, disposal, use

or generation of any Hazardous Substances In or around the Project; ( c) litigation

related to any of the foregoing ; and (d) costs or expenses incurred by PRLA in

connection with any such claims, demands, taxes, interest, penalties or litigation

(Including attorney's fees and court costs at all trial and appellate levels). In the

event PRLA is made a party to any suit at law or equity or made to defend any

counterclaim or any administrative proceeding In connection with matters It is to be

indemnified under the provisions of this Section, Developer shall provide PRLA with

counsel reasonably acceptable to PRLA and shall pay t he reasonable fees and costs

of such counsel. Anything to the contrary notwithstanding, (i) no indemnification will

be required from Developer for any such claims or demands to the extent arising or

resulting from PRLA's own actions or from matters which PRLA has agreed to

41
indemnify Developer; and (ii) t he provisions of this Section 13.4 shall survive any

tennination of all or any portion of this Agreement.

Section 12.S Writing Required. Neither this Agreement nor any provision

hereof may be changed, waived, discharged or t erminated except by the written

agreement of the party against whom enforcement of the change, waiver, discharge

or termination is sought.

Section 12.6 Partial Invalidity. Any provision of this Agreement which Is

prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction only, be

ineffective only t o the extent of such prohibition or unenforceabllity without

Invalidating the remaining provisions hereof or affect ing the validity of enforceability

of such provision in any other jurisdiction.

Section 12. 7 Priority of t his Agreement. Notwithstanding anything to t he

contrary, in case of any conflict between t his Agreement, the Proposal and the

Acceptance, t he provisions contained in this Agreement shall prevail.

Section 12.8 Title to Improvements. Title to the Improvements constructed on

t he Property shall be governed by t he applicable Lease.

Section 12.9 Estopoel C~rtificates. Developer and PRLA shall, at any time and

fTom time to time, within thirty (30) days after written request by the other, execute,

acknowledge and deliver to t he party which has requested the same a certificate

stating that: (i) this Agreement Is in full force and effect and has not been modified,

supplemented or amended In any way, or, if t here have been modifications, the

Agreement Is in full force and effect as modified, identifying such modification

agreement, and if the Agreement is not in full force and effect t he certificate shall so

state and the reasons why, (ii) the Agreement, together with t he Lease, all as

modified represent the entire agreement between the parties as to the Proj ect or, if

It does not, t he certlflcate shall so state and why; and (iii ) t here are no existing

defenses or offsets which Developer or PRLA, as t he case may be, has against the

enforcement of the Agreement by t he other party, or If there are any defenses or

offsets, the certificate shall so state. The party to whom any such certificate shall be

issued may rely on t he matters therein set forth and t hereafter the party issuing the

same shall be estopped from denying the veracity or accuracy of the same.

42
 Section 12.10 Confirmations. Upon written request of any lender

advancing funds for the development of the Project, PRLA shall execute documents

reasonably necessary to confirm to such l ender the rights of PRLA with respect to

such lender, as set forth In t his Agreement.

ARTICLE 13

SPECIAL GO)lERNMEN!AL REQUIREMENTS

To t he extent that the followlng special requirements for governmental

contracts are applicable to this Agreement, the parties agree as follows:

Section 13.1 Loyalt~. Developer acknowledges t hat in execut ing any services

pursuant to this Agreement it has the obligation t o exhibit complete loyalty towards

PRLA, including having no adverse interest to PRLA. Adverse interests include

representing clients who have or may have interests contrary to PRLA's. This duty

includes the continued obligation t o dlsclose to PRLA all circumstances of its relations

with clients and third persons, and any interest which could influence PRLA when

executing this Agreement or while it is in effect .

13.1. 1 Developer represents conmctlng interests when, on behalf of one

client it must support that which It Is It's duty to oppose t o compl y with its

obligations with another previous, present or potential client. Also, it

represents conflicting Interests when Its conduct is described as such in the

standards appllcable to its work, or in the laws and regulations of the

Commonwealth of Puerto Rico.

13.1.2 In contracts with partnerships and firms, the conduct herein

described by one of Its directors, partners or employees shall constitute a

violation of this prohibition. Developer shall avoid even the appearance of the

existence of a conflict of interest.

13.1.3 Developer acknowledges the power of PRLA's Executive Director

to oversee the enforcement of the prohibitions herein establlshed . If PRLA's

Executive Director determines t he existence or t he emergence of adverse

Interest with Developer In the context of this Agreement, he shall inform such

nndlngs in writing and his intentions to terminate t his Agreement within a t hirty

(30) day term. Within such term, Developer can request to meet with PRLA's

Executive Director to present Its arguments regarding the alleged conflict of

43
 Interest. This meeting shall be granted in every case. If such meeting is not

requested within the specified t erm or if t he controversy is not settled

satisfactorily during the meeting, the continuation of such controversy may

constitute cause to terminate this Agreement at any time.

Developer has advised PRlA and PRLA has accepted that Developer and Its

principals are In the business of owning and operating hotels and t hat they

presently operate and In the future may operate additional hotels in the

Commonwealth of Puerto Rico that may be considered to compete with t he

Project, including hotels In the vicinity of t he Project and t hat such other

operations shall not const itute a conrnct of Interest hereunder.

Section 13.2 Contracts with other goyernment entities. Developer certifies

that, at t he t ime of execution of this Agreement it has no other contracts with

government entitles or agencies and has not been sub-contracted by a developer or

owner In a construction project for a governmental entity or agency.

During the term of this Agreement, should Developer enter Into a contract with

another governmental entity, it will notify PRLA thereof.

Section 13.3 Litigation with Cornmoowealtb. Developer certifies t hat, at the

time of execution of this Agreement, It has no litigat ion outstanding against the

Commonwealth of Puerto Rlco, Its agencies or Instrumentalities.

Section 13.4 Economic Interests of Government Employees. Developer

certifies t hat at the t ime of execution of this Agreement It has no particular Interest

in any case or matter of any kind which Involves a conflict of interest or a conflict of

public policy while developing t he Project, and will not accept any agreement of any

kind which may cause a conflict of interest or a conflict of public policy with PRlA.

No public official or employee who is empowered to evaluate, consider.

approve, authorize or execute a contract In the name of PRLA, has or has had, during

t he last four (4) years before taking office, a direct or Indirect pecuniary interest in

Developer.

Developer certifies for Itself, Its shareholders, agents or employees, or any

member of their family unit, as it is defined in Act No. 12 of July 24, 1985, as

amended, that at the time of execution of t his Agreement t hey did not hold office as

44
an employee of the Commonwealth of Puerto Rico during t he two (2) years before

the signat ure of this Agreement.

Developer certifies for Itself, Its shareholders, agents or employees, t hat at the

time of execution of this Agreement no public official or employee of PRlA, nor any

member of their family unit, as It Is defined In Act No. 12 of July 24, 1985, as

amended, has or has had, during the last four (4) years before taking office, a direct

or Indirect pecuniary Interest In Developer and that It does not know of any employee

of the Commonwealth of Puerto Rico who Is part or has any Interest In the gains or

benefits of this Agreement.

Sect ion 13.5 Ccimlnal Convictions. Developer certifies and guarantees that, at

the execution of this Agreement, nelttier Developer, nor any of its directors, officers

or managerial employees have been convicted, and Developer has no knowledge of

it or any of the aforesaid persons being indicted or convicted In a criminal procedure

in state or federal court for criminal charges related to t he public t reasury, t he public

trust, a public function, or a fault that involves criminal misuse of public funds or

property. It is expressly acknowledged t hat t his certification Is an essential condition

of t his Agreement. If the certificat ion Is false, It shall constit ute sufficient cause to

enable PRlA to terminate this Agreement immediately, and, if such conviction is

related to this particular transactlon, PRlA shall be entitled t o require t hat Developer

reimburse PRlA any amount of money Developer may have received from PRlA under

this Agreement. If t he status of Developer or its directors, officers or managerial

employees with regards t o t he criminal convictions previously mentioned in this

clause should change at any t ime during t he term of this Agreement, PRLA shall be

immediately notified. The failure to comply with such notification obligation shall

constitute a violation of this clause, and shall result In the remedies mentioned in the

third sentence of this paragraph .

Section 13.6 Controversies or Disputes. Should a cont roversy or dispute arise

at any t ime between PRlA and Developer, or between Developer and the Architect,

over any Item covered under this Agreement, Developer will be required, to the

extent feasible, to continue with the completion of all contracted work while

Developer and PRLA, or Developer and the Architect attempt to resolve t he dispute

and work out an agreement.

45
 Section 13.7 Income Tax Returns. Developer certifies that at the execution of

t his Agreement, Developer has submitt~ Income tax returns In Puerto Rico that it is

required to have submitted during the past five (5) years and that neither Developer

nor Its partners (If applicable) do have any Tax Indebtedness (as defined hereunder)

with the Commonwealth of Puerto Rico or, If there Is any such Indebtedness, the

same Is subject to a payment plan approved by the corresponding governmental

agency and that Developer or Its partner(s), as t he case may be, is current under t he

terms of any such payment plan. For purposes of t his Agreement, a Tax

Indebtedness means any debt for Income, excise, property (personal and real estate)

taxes, special assessments, license fees, and withholding of taxes as required by law,

including, without limitation, unemployment, dlsabillty and chauffeurs insurance law.

13.7.1 Developer agrees, with respect to itself and to each of its partners

(If applicable), to submit to PRlA immediately after the execution of this

Agreement, the Certification of Filing of Ret urns {Form SC 2888) for t he last

ftve (5) years, a Certificate of Indebtedness (Form SC 3537 or such other form

t hat may be adopted for said purpose by t he Treasury Department), and the

corresponding certificates of indebtedness issued by the Municipal Revenues

Collection Center (CRIM), with respect to Developer, from the Department of

Labor and Human Resources concerning unemployment, disability and

chauffeurs insurance, State Insurance Fund, and by the corresponding

Municipality, as t he case may be, provided however that If Developer has

requested t he above referred certifications, but has not received them,

Developer shall submit copies of the request for such certlficatJons filed with

the corresponding governmental agency, bearing t he filing stamp of said

agencies, provided further that Developer shall submit the aforementioned

certifications not later than sixty (60) days from the date this Agreement is

executed. This Agreement shall be terminated by PRlA and Developer does

hereby agree to said termination, In the event Developer falls to submit the

above referred certifications within said sixty (60) days period.

13.7.2 Developer certifies that it and all of its partners (if applicable} do

not currently have any Tax Indebtedness being revised or subject to

adjustment by t he Treasury Department. In the event that at any time during

46
 t he term of this Agreement Developer or any of its partners (if applicable) has

a Tax Indebtedness that is being revised or subject to adjustment by the

Treasury Department, Developer shall submit quarterly reports certified by t he

Treasury Department describing the st atus of the proceeding; provided further

t hat Developer agrees t hat If, within thirty (30) days of a final administrative

determination Developer has not paid any Tax Indebtedness administratively

determined to be due, PRLA may terminate t his Agreement.

13.7 .3 Developer shall require t hat any cont ractor or subcontractor used

by Developer in t he Project comply with the provisions of this Sectlon 14.8.

Professional and technical personnel used by Developer In fulftlllng Its

obligations pursuant to this Agreement shall be deemed contractors or

subcontractors if they dedicate twenty five percent (25°.l>J or more of their t ime

to work on the Project. Developer shall be responsible for requiring such

contractors or subcontractors to provide the documents and certify the

Information referred to above and to notify PRLA thereof

Section 13.8 Gru>d Standing ~e!j:lflcate : Certificate of Resolut ion. Immediately

prior to the execution of t his Agreement, Developer shall deliver to PRLA a certified

copy of its certificate of incorporat ion, a certificate from the Department of State of

the Commonwealth of Puerto Rico attesting to the good standing status of Developer

and a certificate of resolution, executed by Developer's corporate Secretary or an

Assistant Secretary and acknowledged before a notary public, certifying as to t he text

of t he resolution adopted by Developers Soard of Directors authorizing the

representative of Developer signing this Agreement to enter Into and perform

Developer's obligations under this Agreement.

ARTICLE 14

MISCEl,1,ANEOUS P ROVISIONS

Section 14.1 No Partnership or Joint Venture. Nothing contained In this

Agreement Is Intended or shall be constructed in any manner or under any

circumstances whatsoever as creating or establishing a partnership or a joint venture

between Developer and PRLA or as constituting any party as the agent or

representative of any other party.

47
 Section 14.2 ConstruJ;l:iOO· This Agreement shall be governed by the laws of

the Commonwealth of Puerto Rico. All of the parties of this Agreement have

participated fully in the negotiation and preparation hereof, and, accordingly, this

Agreement shall not be more strictly construed against any one of the parties hereto.

In construing this Agreement, the singular shall be held to Include the plural, the

plural shall be held to include t he singular and t he use of any gender shall be held to

Include every other gender. The captions of t he various paragraphs of this Agreement

are inserted for the purpose of convenient reference only and shall not affect the

construction or interpretation to be given any of the provisions hereof or be deemed

In any manner to define, limit, modify or prescribe t he scope or intent of t his

Agreement or any provision hereof. It is expressly agreed and understood by the

parties, including its partners, successors and assigns, that any and all claims

hereunder or in connection herewith, shall be filed before the Court of First Instance,

San Juan Part, who shall have exclusive jurisdiction with respect to the same. Unless
1
otherwise provided to t he contrary, any reference herein to a section or subsection

shall be deemed a reference to the corresponding section or subsection of this

Agreement.

Section 14.3 Notl,e. Any notice or communication under this Agreement shall

be deemed sufficiently given if hand delivered or dispatched by certified or registered

mall, postage prepaid, return receipt reque.sted, or by nationally recognized overnight

delivery service, to the appropriate party or entity at the address specified below or

at such other address of which the other party shall be duly notified.

(a ) In the case of a notice or communication to Developer, to:

P. 0. Box 6067
San Juan, Puerto Rico 00914
Att. Arnold Benus

With a copy to:

Silvestre Miranda, Esq.

McConnell Valdes
270 Rivera Avenue, 9tn Floor
Hato Rey, Puerto Rico 00918

(b) In the case of a notice or communication to PRLA, to:

Puerto Rico Land Administration

P.o. Box 363767
San Juan, Puerto Rico 009936·3767
Attention: Executive Director

48
 All notices shall be deemed received when actually delivered if delivered by

hand or by a nationally recognized overnight delivery service and shall be deemed

delivered five (5) days following mailing in the event mailed as provided.

Section 14.4 Counterparts. This Agreement may be executed in several

counterparts, each of which shall be deemed an original, but all of which shall

constitute one and the same instrument.

Section 14.5 Force Majeure. For the purposes hereof, 'Force Majeure" shall

mean and refer to any Act of God, earthquake, hurricane, flood, riot, war, order of

civil or military or naval authority, fire, strikes, extraordinary weather conditions,

labor disputes or any other course of events reasonably beyond Developer's control

(provided, however, t hat the inability to fund any obligation shall never be deemed

a •force Majeure"). In the event of any such Incident of Force Majeure, Developer

shall, within no more than thirty (30) days thereafter, advise PRLA of the

commencement of the Force Majeure, and thereafter promptly notify PRLA when the

problem resulting in t he Force Majeure is resolved; and, all time periods shall be

extended for the period of time for which the act of Force Majeure existed and actually

affected the construction of t he Project. Any failure of Developer to timely advice

PRLA of an event of force Majeure as aforesaid shall be deemed a waiver by

Developer of any right to claim Force Majeure with respect to such event.

Section 14.6 Utlgatlon. In the event of any lltlgation between the parties under

this Agreement, the prevailing party shall be entitled to reasonable attorney's fees

and court costs at all t rial and appellate levels. The provisions of this subparagraph

shall survive any termination of this Agreement.

Section l4.7Tlme of Essence. Developer's representation that It can satisfy

the time commitments on Its part contained In this Agreement has been a material

inducement for PRLA to execute the same. The performance of all obligations on the

precise times stated in this Agreement (subj ect to the extensions specifically

provided) is of absolute importance and failure to so perform on time is a default,

time being of the essence. The provisions of this subsection shall survive the

execution of the Lease.

49
 Section 14.8 Successors and Assigns. All of the covenants, conditions and

obllgatlons contained in this Agreement shall be binding upon and inure to t he benefit

of the respective successors and assigns of the parties.

Section 14.9 Seyerabllltv. In t he event any term or provision of this

Agreement shall be determined by appropriate judicial authority to be Illegal or

otherwise Invalid, such provision shall be given Its nearest legal meaning or b€

construed as deleted as such authority determines, and the remainder of this

Agreement shall be const rued In Full force and effect.

Section 14.10 Exculpation. It Is the intent and agreement of the parties

hereto that only the parties as entitles shall b€ responsible in any way for their

respective obligations hereunder. In that regard, no officer, director, partner

(whether Individual or corporation), Investor, official, representative, employee,

agent or attorney of Developer and/or PRLA shall be personally liable for the

performance of any obligations and liabilities of the parties hereunder, and no

property or assets of any such persons or t heir successors and assigns (as opposed

to t he assets and properties of Developer and/or PRLA) shall be subject to levy,

execution or any other enforcement or legal procedure for the performance or

satisfaction of any claim, writ, judgment, Injunction, order or decree.

Section 14.11 PRLA's Waiver Blgllt. PRLA shall have the authority to

waive In writing any of the obligations of Developer, provided, however, that any

such decision on the part of PRLA shall be at PRLA's sole and absolute discret ion and

any such waiver must be consistent with t he Proposal.

Section 14.12 Early Entry. Provided t hat Developer has obtained t he

liability Insurance required by Article S hereof, Developer, and Developer's agents

and contractors shall have the right during the term of t his Agreement to enter upon

the Property at reasonable t imes and with the prior written consent of PRLA (which

shall not be unreasonably withheld or delayed), for purposes of inspection and

investigation, lndudlng making tests and studies thereon . If Developer requests, and

PRLA allows Developer t o enter upon t he Property for any purposes involving clearing,

excavation and/or construction, which PRLA is not obligat ed to do prior to satisfaction

of the applicable conditions precedent set forth In Article 2, Developer shall be

required to have obtained all of t he necessary permits, as well as the insurance

so
 required by Article 5. Developer agrees to Indemnify, defend and hold harmless PRLA

from and against all llabilltles, damages, claims, costs, fees and expenses whatsoever

(lncludlng reasonable attomey's fees and court costs at trial and all appellate levels}

arising out or or resulting from any such Inspection or investigation and in connection

with any removal or disposal of Hazardous Substances. Notwithstanding anything to

t he contrary contained in this Agreement, the provisions of this Section shall survive

any cancellation or termination of this Agreement (or any portion hereof).

Section 14.13 Days. Whenever In this Deed a reference Is made to

"days', It shall be understood to mean calendar clays, unless it is expressly and

specifically state to be "business days" or •worl<ing days".

Section 14.14 Entja;: Agreement: Headings. This Agreement, the Lease

and all documents referenced in this Agreement, toget her contain t he entire

agreement between the parties with respect to t he subject matter hereof. No

modification or amendment of this Agreement, or waiver of any right under t his

I~
Agreement, shall be binding upon the parties unless such modification, amendment,

or waiver is in writing and signed by the party to be bound thereby. The headings or
L
any sections hereto are for convenience and shall not be taken Into consideration in

interpreting or construing this Agreement.

{ Signature pages to follow]

51
 EXECUTED as of the day and year first above written.

PUERTO RICO LAND ADMINISTRATION

Luis Rivero Cubano .,_,, ~

Execut ive Director
SSP:

GRAN HOTEL SAN FEUPE DEL MORRO LLC

Amold Benus
Managing Director
SSP:

Affidavit Number: t."J'.)

Acknowledged and subscribed to before me by 1\b;;~ul t3c.;~~ <),WI< of legal

age, 1'1.f\ll14c) , Yd>•""S~!:\J\W and a resident of S¥J :lvP.-.1
Puerto Rico in his capacity as Managing Director of Gran Hotel San Felipe del Morro
LLC, who I personally know, in San Juan, Puerto Rico, this 2. l "'day of December, 2016.

52
 EXJUBIT A

• • • • • · · ·······DE.ED NUMBER (_ ) · · · ··

· · · · · · · · · · · · · · · · ·DEED OF LEASE AND •· · · · · · · · · ·· · · ·

· · · · · · · · · · · ·CONSENT TO F:rxTURE F ILING-·- -··-··· · · ·

- - - -- I n the City of San Juan, Puerto Ri co, thi s

(_ } day of two t housand

(201_). --- - - ..................................... ____ _ __ ______ _

Attorney-at-Law and

Notary Public in and for the commonwealth of Puerto

Rico, with offices located at on t he eighth (8th}

f loor of the Two Hundred Seventy (270) r.rufioz Rivera

Buil ding, Hato Rey, municipality of San Juan Pue rto

Ri co, and •. .;ith plac e of res i denc e in Guaynabo,

·· -AS PARTY OF THE FIRST PART : TRI!! PO'ERTO RICO

LAND ADM1NIS'l'RATION, a public corporation and

instrumentality of the Commonwealth of Puerto Rico,

(hereinafter referred to a s the "Landlord") , hex-ein

represented by its Bxecucive Di rector,

of legal age,

ar-.d re-s ident of

-----, Puerto Rico,

who is dul y authorized to execute thi s Deed of

Lease , Right of First Refusal and consent to

Fixture Fi ling (this "'~") pursuant t o Resolution

Number of the
Governing Board of the Landlord, approved on

Decembe r _ _ _), c •,1,10 thousand fifteen (201 5)

pursuant to the certification ~xecuced by ita

secretary, Francisco Acevedo Nogueras on December

_ _ _ ), t .,10 thousand sixteen (2016) , a copy of

which ehali accompany the first certified copy of

this Deed .

---AS PARTY OF THE SECOND PART: Gran Hotel San

Fel ipe del Morro, LLC, a limited liabil ity company ,

organized and exi$t i ng under the laws of the

Commonwealt.h of Puerto Rico (hereinafter referred

to as the "Tenant •) , herein represented by Arnold

aenus Silva of legal age, married, executive and

resident of San Juan, Puerto Rico, who is dul y

authorized to execute this Deed pursuant to

Certificate of Resolution subscribed by Cesar

Hernandez l·1onagaa, on Decembe r ) two

thousand sixteen (2016), before the undersigned

Notary under affidavic. number-------- ) an

original of which shall accompany the first

certified copy hereof.---------------------------

-----Landlord and Tenant shall hereinafter be

referred to, individually as a •Party" and

collectively as the ~Parties ... ••••••••••••••••••••

-----FIRST: The Property. Landlord represents and

warrants that it is the sole owner in fee s imple

(pleno dominio) of the property descri bed i n the

Registry of Property of Puerto Rico, Fi rst Section

of San Juan ( the •Registry") in t he Spanish language

as follows: .._,,_ _,.,._,,_,,_ _ _ _ _,,__,,,,_ _ _,,_

URBANA: Barrio San Juan de San Juan Antiguo,

Cabida, 9, 904. 608 Metros Cuadrados . Linderos'
Norte, by che ~Manicomio Annex" property of the
I nstitute of Puerto Rico Culture . Sur, by Parce l B-
l o f the Campo del Morro area property of the
Commonweal tl1 of Puerto flico . €ste , by El t'1orro Road
wh ich separaces the described parcel from the
Ballaja Barracks property . oeste, by Parcel B- 1 of
the campo del Morro a:rea property of the
Common\<feal tb of Puerto Rico . ·------··-·----------

-·-·· SECOND: Title.-- ---- -- ----------- -----------

-·-·--·The above described parcel (the -Property" ),

Property Number Three thousand Five Hundred Ninety

Five (3,595). The Property was acquired by Landlord

from the united states of America through the

Administration of General Services pursuant to a

Quitclaim Deed executed in the County of New York,

State of New York, before Barbara Gerwin Notary

Publ ic, State of New York, on November seventeen

(17) Nineteen Seventy Bight (1978) and accepted by

the Puerto Rico Land Administration on March Ninth

(9t.h) Nineteen seventy Ni ne { 1979) before Notary

Public Jose E. Figueroa Gonzalez. Cadastral Number:

( )Center for the collection of Municipal

Revenues ('llCRIM"). -------------------------------

-----THIIU): Liens and Encumbrances. The Property

is subject to the following liens and encu.'llbrancee :

.... - ....... fa) By its origin, the i?roperty is free and

clear of l iens and encumbrances . -----------------

-------(b) Sy itself, the Property is free and

clear of liens and encumbrances. -----------------

-----FOURTH: Lease. Landlord and Tenant have

agreed on th~ lease of the Property and the

buildings, structures, fixtures, and i mprovement a

(the ~ rmprovem.e.nts u) now and hereafter bui l t thereon

(other than those bui lt by Tenant or any assignee or

subtenants of Tenant, which shall be the property of

Tenant or of such assignee or aubtenants of Tenant

until the expiration or earlier termination ot this

Lease} and all appurtenances, rights, privileges and

easements benefiting, belonging or pertai.n ing

thereto {collectively, the •oemised Premises•} under

the following cerms and conditions (the "Leasa"): -

----- Seotion One . Demise. ------------------------

3
----- -· Landlord hereby l eases to Tenant, and Tenant

hereby leases from Landlord, upon and subject to the

terms, conditions, covenants and provision$ hereof,

the Demised Premises.--------------- - - - -----------

··-·-Section Two . Te.nn.--------------------------

-------(a) The t.erm (th e "'!!!:!!*} of thi s Lease
shall commence on the date hereof {the ~ Commencemen t

Date" ) and run for forty (40) years plus the term

necessary to complete the construction of the

Project (th• "Initial Term'') which shal l not exceed

t wenty four (24} months from the Commencement Date,

unless extended by the Parties for up co an

additional three (3) months in the ev~nt that thQ

Project has not been completed due to justifiable

reasons and these reasons are not attributable to

1·e11anc• s acts or omissions, (the "Construction

Period") . opon request of the Tenant, the !nitial

Term may be extended for two consecutive additional

cen (10) year extens i on terms (the \\Extended

Terms"). Tenant may exercise its option to extend

the Term of the Lease for each of the Extended Terms,

by notifying Landlord not less than ninety (90) days

prior to the expiration of the I n i tial Term or ~he

first EXtended Term, as the case may be. During the

Construction Period, Tenant shall carry out the

rehabilitation of t.he Property to co11vert the same

into a luxury boutique hotel of fifty three (53)

rooms plus rel ated facilities, aa described i n that

certain Development Agreement among the Parties

dated as of December_ _ _ _ _ _ _ _ _ _ _) twenty

sixteen (2016), (the "Project) . Landlord hereby

covenants and agrees to cooperate y.•ith the Tenant in

4
the process of obtaining all required permits,

l icenses, authorizations and/or consents to al low

for the construction of the Project.------------ --

------ -Ref erences in this Lease t.o the "end" of the

Term shall mean the expiration or earlier

t ermination of the Term. Eacl1 t•o11elve monch period

during the Term of this Lease shall hereinafter be

referred to as a "Lease Year ". _ ........ ___ __________ _

-----Section Three. Rent.--------------- ---------

-------{a} Rent During the Construction Period.

During the Construct.ion Period, and any extension

thereto, Tenant shall pay to Landlord without

offset, deduction or abatement, and without. demand

therefor, an annual rent (the 11 Construction Rent•• )

of SIXTY THOUSAND DOLLARS ($60' 000. 00) in

consecutive monthly installment-a of FIVB THOOSAND

OOLLAllS ($5,000.00) each, payable in advance on the

first day of each month. ------------ - - ------------

-------(b) Security Deposit for the Construction

Period. on the date of execution of this Lease,

Tenant shall pay to Landl ord a security deposit of

FIE"l'EEN THOUSAND DOLLARS ($15,000.00)' equivalent to

three (3) months of rent.-------------------------

-- - ----{c) Rent During th• Op!ration of the

Project . During the initial three Lease Yea.r s

of the Operations Period (t.he "Initial

Operations Period" ) , Tenant shall pay to

Landlord \'t'lthout offset, deduction or abate-

ment, and without demand therefor, an annual

rent of EIGHTY FIVE THOUSAND EIGHT DOLLARS
($85 ,008. 00) (the "Stabi lization Re.nt 11 ) , or (2)

THREE POINT FIVE PERCENT (3. 5 %) of the anntlal

s
gross i ncome generat ed by the hotel
(•stabili zation Period Rent") . The
Stabi lization Rent s hall be paid in consecutive

monthly i nstallments of Seven Thousand Eighty

Four Dollars ($7,084.00) , payable in advance on

the first day of each month. Aft er completion

of the Initial Operations Pe riod, starti ng on

the fourth Lease Year of the operations

Period, Tenant shal l pay to Landlord, without

offset, deduction or abatement, and without

demand there for, an annual rent of the greater

of (1) HUNDRED THOUSAND DOLLARS

($100,000. 00) , i n equal consecutive monthl y

insca llments of e i ght thousand three hundred

and t hirty chree dollars and t11i rty c.hree

cents ($8,333.33), which upon reaching the end

of the t enth <lO"") year of the Operating

Feriod shal l be increased by an amount equal

to [ ] PERCBN'.l' ( %) , and f ur ther

increased at t he end of every five (S} years

thereafter by c.he same amount of FIFTEEN

PERCBNT {lSt)' or (2) THREE POINT FI VE PERCENT

(3.5\) of c.he annual gross i ncome generated by

the hotel (~ Base Rent"). The term ~ Operations

P eriod Commencement Date " shall mean whichever

occurs firsc of the f ollowing, (i) fifteen (lS)

days after the Tenant obtains the use permit

for the Pro)ec~. (ii) the rent al and occupacion

of any hotel room of the Project: by t.he genera.!

pttblic, or (iii) twenty f our {24) months a.f ter

the execution o f ~hi s Deed, \Ulless extended for

the additional three (3) month period . The

6
 firs t Lease Year during the I nitia l Operations

Period shall run from the Operations Period

Commencement Date unti l one fu l l year has

elapsed (the "'First Full tea r of Operations

Commence:rnentN ) . The second {2nd) Lease \'ear

during the Operations Period shall commence on

the first anniversary of the Operations Period

Commencement Dat e. The last Lease Year duri ng

~he Initial Tenn of operat i ons Period , unless

t erminated earlier as provided i n t his Lease ,

shall run from the thirty-ninth { 39"')

anniversary of the Operations Period

Commencement Date, Wltil one f ull year has

e lapsed, or, i f Tenant has exercised its option

to extend the Initial Term, then the Operations

Period s hall r un from the fortieth anniversary

of the operat i ons Period commencement Dat e

through the end of the l ast Extended Term ( the

------ -{c) Fu.11 Rent Due. The Const-ruction Rent ,

Stabilization Rent and Base Rene. .shall ba d ue,

l i qui d , and payable on the payment dates speci fied

in this Lease, in advance, wichout che right co

credi t or deduction of any kind by t he Tena11t , except

a s provi.d ed for here i n. ----- - ------------- - -------

------(d) Payment Date . '!'he first monthly

in$tallment of Construction Rent must be made on the

Commencement Date. All subsequent i nstal lments of

Construction Rent are due in advance, on the firat

day of each consecutive month of the construction

Period . - -- -- - -------------------------------------
---The first monthly installment of the

7
Stabili zation Rent payment ahal l be due on the

Operations Period commencemenc Date . and thereafter,

i n advance on the firs& day of each consecutive month

chereafter until the end of the Initial Operations

Period.----------------------------- ------------ --
--- ---The fi rst monthly i nstallment of the Base Rene

pa~nent shall be due upon completion of the Initial

Operations Period, and chereafter , in advance on the

first day of each consecutive month thereafter until

the end of the Last Lease ~ear.-------- -- --------­

- - - - -section Four. Additional Rent and Capital Gain

- - ---· {a }The cor'.struction Rent, the Stabilization

Rent , the Base Rent, and the Additional Rent ahal l

collective l y be referred to aa the ~aent n). -------

- - --- - (b) The Project 's Gros s Operating I ncome

(nQOI#) s hal l be calculated i n accordance with the

Uniform Syst em of Accounts for t11e Lodging Industry

(Eleventh Revised Edition, 2013 ) published by t he

Atnerican Ho -;el and Lodging Association. In any

event , for purposes of detel'.1Tiiniag the Additional

Rent, the i ncome from all operations carri ed out at

the Project s hall be considered, excluding , room

taxes, sales, use, and value added taxes, and

gratuities . -- ----- - ---- - -- -- --- ------------------

---Tenant shal l submit Landlord on a quarterly

basis, within thirty (3 0 ) days from the close of

each quarter, a report showing the Project's Gross

Operating Income generated during the preceding

quarte r . If the Project's Additional Rent calculated

on the basis of such report, exceeds the aggregate

of Base Rent payments made duri ng the then current

8
Lease Year, Tenant shall make an additional payment

of Rent in the amount of sucl1 excess within thirty

(30) clays from the date of the Gross I ncome report.

In the event that tl1e Gross Operating Income report

reflects that the aggregate payments of Additional

Rent for the then current Lease Year, exceeded the

aggregate amounts of Additional Rent due, Tenant

\'<'ill take a credit for the excess Additional Rent

against the following month's payment of Base Rent .

· · ···· (c) Starting at the end of the Fourtb Lease

Year and for the remainder of the Term, Tenant shall

pay to Landlord, in addition to the Base Rent , an

amount equal to FIVE PERCENT (5%) of the Project's

Net Aft.er Tax Income, which shall be calculated

baaed on a l l operations carried out in the Project,

(the "Additional Rent"). The Project's Net After

Tax Income shall be calculated in accordance with

the Uniform system of Accounts for the Lodging

Industry (Eleventh Revised Edition, 2013) published

by the American Hotel and Lodging Associacion ----

------(d) The Net. After Tax Income of the Project

(~NATI ~) shall be calculated in accordance with the

Uniform Systen1 ot Account$ for the Lodging Industry

(Elevench Revise d B<lition, 2013) published by the

American Hotel and LOdging Association. ~----------

------ (e) The Additional Rent for each Lease Year

during the Operations Period shall be d1,1e ninety

(90} days after the end of the corresponding Lease

Year.---------------------------------- - - - - -------

------(f) Landlord reserves the right to audit, upon

prior notice to Tenant, once per year during the

Op~rations Period, all financial information used by

Tenant to calculate the Addicional Rent. Landlord

may also reque$t from Tenant, once a year , that the

amount of Tenant's reported GI be certified by a

Certified Public Accountant acceptable to Landlord,

as part of the Tenant's audited financial

statements.---------------------------------------
-----(g)In the event of a sal~ of Tenant's Leasehold

Interest in the Project, Tenant -will pay Landlord

seven and one half percent (7 . St) of the net capital

gain on such sale, after: (i) deducting all

reasonable transaction CO$t:S of such sale, {ii)

deducting the ful l amount due on all outstanding

prior loans , (iii) deducting the total amount of

i nvested capi tal , and (iv) deducting a yie l d of ten

percent {10t) return on the cash invested by Tenant

i 11 the Project and not previous l y distributed. The

provisions of this Paragraph (g} of section Fi ve

shall not appl y to any successor of the Tenant that

succeeds to Tenant's rights and obligations

hereunder pursuant to the foreclosure of any

mortgage, direct- or indirect foreclosure of all

membership i nterests in the Tenant, and/or through

a deed in lieu of foreclosure . - ----------------- --

------{h) In che event of a refinancing of Tenant's

Leasehold Interest in the Project for the purpose

of making a distribution to Tenant's members,

Tenant will pay Landlord an amount equal to five

percent (5\-) of the lesser of' (A) the amount. of

such refinancing after deducting the following

items: (i) the tocal amount of Tenant's debt then

outstanding, (ii) the aggregate cost of such

refinancing, including advisors and lender's fees,

10
internal revenue stamps, filing and recording

vouchers, counsel and notarial fees, (iii) t he

total amount of invested capital being substicuted

by such refinancing, ( iv} a yi e ld of ten percent

{ 10%) return on the cash invested by Tena;n t being

substituted by such f inancing and {B) the amount of

such refinancing actually distributed to Tenant's

members.-------------------------------- --------

-----Section Five. =F_,e'-'•=--~S=imp==l=•=---'R=ig=h-'t=s'---'an=d=

Improvements.--------------------------------- ----
---- -a) Landlord will continue to be, at all times ,
the owner in fee simple (pleno dominio} of the

Property, and Landlord'e title and rights cannot and

will not be affected by Tenant in any way, except

that Landlord recognizes that Tenant ia hereby

authorized to conduct all acts, rights and :r emedies

permitted by this Deed as a result of the

develop1nent, deslg'n , construction and operation of

the Project. -- ------ --------·-··--------·---······

-- ---- (b) When the Term expires or when Tenant

terminates in any way or manner ics use and/or

possession of the Demised Premises before the

expiration of the Term, the title in fee .simple

(pleno dominio) over tbe Improvements, will

automatical ly revert to Landlord and Tenant will not

have any right to compensation or indemnity. -----·

- - - - - Section Six. Develoeent and Conatruc::tion of

the Project. ----·------------····-·--·---·-·--·--·

-------(a) Tenant shal l complete the development

and construction of the Project in accordance to

the p lans approved by Landlord, which shall comply

with the ne\11 Utilization Program, the Secretary' e

11
standards for Rehabi l itatio n and any other law

and/or regulation appl i c able . ---- --- --------- ---·

--· ·--- (b) All of the Parties • r i ghts, duties and

obligations 'ttit:h respect to the de velopment,

constructi on and o per ation of the .Project under chis

Lease are expressly condi tioned u pon and subject to

the satisfaction of each and every one of the

fol l owing conditions precedent related co the

govern..~ental approvals and permits, design and

f i nancing of the Project, as detai led in this section

---------( i.> Tenant shall cause the refu.r bishment

room.sand ancillary .facilit::ies{"Tenant ' s Work" ) in

accordance with the plans approved by Landl ord

prior to che execution of chis Deed {the ~ Plana w),

and t here shal l be no change, modification or

aubatanti a l a l tera t i on to the Projec t and/or Plans,

r.>1ithout Landl ord's prio r wri tten authori zat i on,

which shal l not be unreasonably i...• ith held , delayed,

conditioned, or denied. Landlord shal l make its

decision regal:ding such change, modification or

substantial alteration no l ater than ten {10)

bu siness days after receiving it, otherwise i t

shall be unde~atood that Landlord conc l usive l y

approved the change, modification or substantial

alteration. To the extent necessary to accommodate

the demand , Tenant may increase or reduce thE!

12
number of hotel rooms under construction. - - - --- --

·------- - (ii) Tenant shal l complete Tenant's work

i n a good and workmanlike manner and i n accordance

with the pl ans and specifications referred to above.

The Project shall be built within th<' boundariea of

the Demiaed Premi ses but may make use of t.he adjacent

streets as staging area, as authorized by t he

Municipality of San Juan. Tenant shall comply, and

Tenant's Work s hal l be in CO.'Tipliance, with all

applicable l aws, orders and regulations of fede ral,

commonweal th, municipa l and other governmental

authorities and with any direction pursuant to l aw

of any public officer thereof, subject to Tenant ' s

r ight t o contest s uch laws , orders and regulations

in accordance with the provisions of parag raph {b>

of section Ten.-----------------------------------
---------{iii) Prior to the commencement of

Tenanc's work, Tenant shall, at its sole coat and

expense, provide and keep in force adequate

insurance, in compliance with the Insurance

provisions in Section Sixteen of chis Deed.-- ---·-

- -------- Civ) Tenant shall at any time and from

cime to time ha,1e the right to enter into reasonable

agreements \"ith utility companies and governmental

units creating easements i11 favor of s uch companies

and governmental units as may be required in order

to provide water, aewer, e l ectric, gas, telephone

and other utility services t o che Demised Premises,

and Landlo rd shall , at Tenant's cost, conaent

t hereto and execute any and all reasonabl e documents

and ins truments, and take a ll other r easonable

actions, in order to effectuate the same.-------- -

13
 ------ --- (v) unti l the expiration or sooner

termination of the Tenn, t i t l e to all Improvements

situated or erected by Tenant on the Property shall

remain solely in Tenant, and Tenant alone shall be

entitled c.o deduct all depreciation on Tena11t•s

income tax returns for all such Improvements. Tenant

shal l have the right to mortgage or otherwise

encumber its leaaehold interest, subject to

Landlord• s rights set forth in this ~a.se. Landlord

shall cooperate with Tenant and joi.n in the execution

of all public deeds and other instruments which

Tenant, or Tenant's lenders may reasonably require,

from time to time , io order to accomplish the

foregoing: provided, however, that Tenant shall pay

for Landlord's actual out of pocket costs and exper1se

I payable to third parties to be incurred in connection

therewith. On the expira tion or sooner termination

of the Term, title to or ownership of all

Improvements situated or erected by Tenant on the

Property shal l thereupon automatical ly vest in

Landlord •..;ithottt the execution of any further

instrument and without any paymenc therefor by

Landlord. such transfer or vesting shall not ba

cone trued as a payment i n l i eu of Rent hereunder.

Tenant shall remain responsible for any

environment.al remediation or cleanup necessary on

the Property after the conclusion of the Term, unless

such environmental remediation or cleanup was

attributable to conditions present in the Property

prior to the commencement Date . Tenant' e

re.sponsibility herein shall survive the expiration

of the Term of this Lease. -------------------- - - --

14
· · ·· -----(vi) Landlord hereby expressly consents to

the conscruction work whi ch Tenant or its subtenants

or assignees shall cause to be perf ormed on the

Demised Premises as aforesaid . Landlord here.by

grants to Tenant a ll construction and development

rights ( the "Oevel.opment .Rights") which may be

necessary to permi t Tenant to construct on, above

and below cile land of c.he Demised Premises and

perform the Tenant's work. Promptly upon the request

of Tenant, Landlord shall join i n the execution of

a l l other public deeds and other instruments which

Tenant may reasonably require i n order c.o evidence

and record the Oevelopment Rights i n Tenant's favor,

as well as those necessary to evidence and record in

Tenant' a name the r mprovements constructed by

Tenant. Tenant shal l have the right to mortgage,

assign, or othel:'\\'l ae encumber the Improvements and

Development Rights cogether with Tenant ' s leasehold

i nterest, pursuant to the provisions of section

T•11el ve hereof, as if the references therein to

Tenant's leasehol d interest included the

Improvements and Development Rights. Landlord s hall

cooperate wi th Tenant and join in the execution of

a ll public deeds and i nstruments whi ch Tenant may

reasonably require in order to accomplish the

foregoing-; provi ded, however, that: Tenant ahall pay

for Landlord's actual costs and expenses to be

incurred pursuai1t to this provision. - - - - - - - - - - - - - -

--- - ---- -(vii) ( l) If for reasons attributable to

Tenant the Demised Premises, construction does not

commenGe within six (6} months after the execution

of this Deed <subject to extension due to Force

15
Majeure) an/or does not open to the public for

business after the Construction Peri od as might have

been reasonably extended by the parties, t h en, ac

any time after the end of such Cons truction Period,

a$ may be extended by the parties, Landlord may

cerminate t.his Lease by written notice to Tenant

specifying the effecti ve date of termi11ation, which

shall not be less than ninety (90) days after the

date in which Te nant is notified about such

termination, and Landlord and Tenant shal l be ful ly

released and discharged from a l l further liabil ity

and responsibility to one another. ----------------

---------(2) The Constructi on Period may be extended

as provided in Section Two and in paragraph (b} of

Section Tl...,enty- Seven due to delays not attributable

t o Tenant, including delays in obtaining permits,

licenses and authorizati ons from the government of

the Commonwealth of euerto Rico . -----·---·---- ----

---------(3) The construction Period may be e.xtended

due to delaya attri butabl e to Tenant , by written

notice to Landlord given within a term no greater

than fifteen (15) days before the end of the

Construction Period. such 111ritten notice shal l

establish the expected l ength of the delay. Landlord

shall eval uate such request and, if such delay is

ju$tif iabl e, shall proceed co extend the

Construction Period . Notwithstanding, the Base Rent

shall increase duri ng such extension, co that of the

Base Rent established for Operational Period . If the

request for che extension is made by the bank or

financial ent i ty providi ng construction f inancing,

I.andlord shall agree to the extension for a term

16
necessary for the completion of the work. -- -·----

---- ---·- (~) During the Construction Period, Tenant

$hall at all times work with reasonable diligence in

order to achieve the compl etion of Tenant's work and

the opening of the Project to the public . --·· ------

---------{viii) Tenant shall enter into

construction contract (s) with contractors havi ng

experience commensurate •11i th the size and scope of

the Project and the f i nancial ability to perform

their obligations under the construction contracts.

Such construction contracts shall i nclude the

provisions o f this section, with (i) reference to

Tenant substituted by reCerence to the contractor,

(ii) reference to the Landlord substituted with

reference to Tenant (iii) include a provi sion

requiring the contractor to inc l ude the same

clauses in any contract with a subcontractor , (iv)

with reference to the contractor substituted by

reference to the subcontractor and (v} reference to

the Tenant substituted by references to the

subcontractor. Tenant shall provide to Landlord

through the notification process established here i n

with copies of the construction contracts (and all

amendments to the construction contracts), in each

case withi n five {S) business days after execution

of same. Landlord shall have ~he right to review

the construction contract to determi ne tl1at the

contract is in accordance .,.;ith the applicable

proviaions in this Agreement:. If Landlord

reasonably det.ermines that: a construction co1~tract

is not in accordance with the foregoing. then

Landlord shall give written notice of such to

17
Tenant together with a written list of the

provisions in the construction contract which as a

matter of fact do not comply with this Deed, which

require a signed construction contract, shal l not

be deemed satisfied until and unless aLl auch

objections of Landlord are satisfied or waived. If

Landl ord does not receive written notice of

objections to the construction contract by Landlord

within five {S) bueiness days following receipt of

the construction contract by Landlord, then the

construction contract shall be deemed in accordance

with the requirements of this section. -----------

------ -- -{ix) Operations. Tenant covenants and

agrees to at all times operate and maintain t he

Project in a commercially reasonable manner,

consistent with prudenc business practices and the

standards of operation set forth herein. In t his

regard, following completion of conscruction of the

Project and commencement of the operations

thereunder, Tenant shall operate and maintain the

Project without interruptions throughout the Term,

subject to partial or total interruption due to

casualty, remodeling, refurbishing, repairs,

vacancies in the ordinary course ot business and

Force Majeure . - - - - - ------------------------ ---

·······--- (x) Tenant shall require al l

subcontractors in the Project 111ith contracts in

excess of one hundred thousand dollars ($100,000) to

obtain payment and performance bonds co secure

performance of their obligations under such

subcontracts.--- - - ---- -- - -------------------------

19
------- (b) Tenant shall deliver to Landlord a set

of final project plans , as bu ilt ( "As Bt1ilt " J,

•11ithin ninety (90) days after t he Permits

1'1anagement Office (" ~" ) grants the

cor-t"eaponding use permit.------- - - - - - --- ---- ----·

-------(c) In conjunc tion with the executi on of

this Deed, Tenant shall deli ver to Landlord a n

agreement with the professionals who worked on the

Plana (architects, engineers, etc.), i n form and

substance reasonabl y sat:isfactory to Land lord -

subject, anci subordinated in all respects, to t he

rights of the financi a l i nst itution (either public

or private) which will be providing the financing

for the Project to a llo\.,, Landlord , '''ithout further

payment, to use the Pl ans and specifications

submitted to Tenant to complete t he Project in the

event Tenant fails to do so. Landlord hereby agr ees

for the benefit of t hese professionals , that thi s

acceptance will only be for the purpose of

compl eti ng the Project. In suoh case, Tenant hereby

express l y ackno•11led9es and agree$ to assig n to

Landlord any right it has over the Plans and

specificat ions, as well as over the endorsemente,

permits and approvals granted by the pertine nt

governmental agencies and needed for the

development of the Project , a l l of thi s subjec t,

and subordinated i n all respects, to the rights of

the aforementioned financial i nstitution . --- ---- -

······ (d) (i) Within s ixty (60) days after the

execution of this Deed, Tenant shall provide

Landl ord •11ith a copy of the construction schedule

for the Project (the "Schedule" ) with a critical

19
Path Method {CPM) progress schedule; -- ----- -------

-------- -( ii) Tenant will submit quarterly reports

to Landlord regarding che progress of the Project .

Such reports will contain , at a minimum, the

following i nformation: <i } a general description of

the construction activity and progress achieved each

month, (ii) percentage of completion of the Project,

(i ii) updaced costs schedule, (iv)comparison of

progress on the Projecc. against the schedule, (v)

any circumstance that affects the Project, and {vi)

any additional information relevant to the Project.

---------- (ii) Tenant acknowl edges that che

construction Documents, t11e conscruction of the

Project and the operation of the hotel has to comply

with the requirements set forth in the new

Utilization Program and the amended Quitclaim Deed

that allows for the development and operation ot

the hote l , the Historic Preservation Surplus

Program, Che Secretary's Standards for

Rehabilitation and any o~her law and/or regulation

applicabl e. - - ------------------------------------
------(e)Landlord is hereby granted, at it:s sole

option, the right to i nspect the Demised Premises,

to ensure that the 'florks being performed

substantially conform to the Plana approved by

Landlord.--------------------- ---- ---- ----------- -

---Notwithstanding the foregoing, it is hereby

understood and agreed that Landlord has no duty or

obl igation of any ki nd whatsoever to inspect or

pol ice the performance of the construction work,

and the rights granted to Authority hereunder shall

not create or be deemed to create any such duty or

20
obl igation. Accordingly, including without

limitation, the fact that La11dlord has not.

exercised its right co object to the construccion

of all or any part of the construction work, s hal l

not constitute an agreement or acknowledgment on

the part of the Landlord that the Tenant has in

fact performed such work in accordance 111ith 'Che

terms of this Agreement and the Reviewed Plana, nor

shall any such fact constitute a waiver by Landlord

of the requirement of compl iance by Tenant in all

material respects with the provi sions of this

Agreement and the Reviewed Plans.----------------

----- -( f)Tenant shall submit to Landlord, copy of

all necessary permits and authorizations to develop

and/or construcc the Project, copies of the contract

for the construction of the Proje~t, a copy of the

construction schedule, a ll of \\.•hich must comply with

the tenns and conditions agreed upon by the parties,

The above submission to Landlord shall include all

environmental requirements necessary for the

commencemP.nt and completion of the construction of

the Project. Tenant s hal l diligently pursue, obtain

and pay for any and a ll permits, l icenses, variances

and approvals necessary for proper demolition,

excavation, construction, completion and operation

of the Project, including all zoning, platting, site

planning, bonding, pollution control , environmental

and other s i milar gov·e rnment:al requirements which

mi ght be necessary for the commencement and

compl eti on of the conscruction of the Projecc. ----

---- -- {g} Tenant will pay and is responsi ble for all

costs and/or development e:xpenses and/or

21
construction expenses of the Project and/or

Improvements and/or relaced services, without

limitation, of any nature , independently of theix-

men~ioning i n this Oeed.--------------------------

---- -Seot.ion Seven. Use of Premises.--------------

-------{a) The Demised Premises may be used and

occupied for the development, construction and

operation of a hotel with at least fifty three (53)

rooms plus related facilities, as described in the

certain Development Agreement among the Parties

dated as of December_ _ _ _ _ _ _ _ (_) twenty

sixteen (2016}, and a level of servi ce equal to at

least what i s known in the industry as "luxury

boutiqve hotel~ (the ~ ao te lN). The Demised Premises

shall be used and maintained in accordance co the

Utilization Program, the secretary's s t andards for

Rehabilitation and any other law or regulation

applicable . ----- - - --------------------------------

-- - - --- (b) Tenant shall not use or occupy, nor

permit or suffer, che Demised Premises or any part

thereof to be used or occupied for any unlawful or

illegal business, use or purpose, nor for any

business, use or purpose which is extra hazardous,

nor in such manner as to constitute a nuisance, nor

for any purpose or i n any way in violation of the

corresponding use perm.it or of any present or fucure

governmental la..,•e, ordinancee, requirements, order$,

directions. rules or regulations, subject to

Tenant• s right to cone.est the same in accordance

with paragraph (b} of section Ten.----------- ---- -

-- -- -Section Eight. Re&l Estate Taxes; Utility

Expenses.-----------------------------------------

22
----- --(a) Tenant shall pay during the Term the Real

Estate Taxes on the Demised Premises and the

Improvemente thereon. With respect to any Real

Estate Taxes that have been pre· paid by Landl ord or

Tenant as of the beginning or the termination or

expiration of the Term, said Real Estate Taxes shall

be apportioned on a daily basia and t:eimbureed co

the proper Party. "Rea1 Estate Taxes" shall mean

all real estate taxes and asse$smenta, extraordinart

as well as ordinary, levied or assessed by the lawful

taxing authorities. Real Estate Taxes shall not

i nclude (il any income, franchise, gross receipts,

corporation, capital levy, excess profits, revenue,

i nheritance, devolution, gift, estate, payroll or

stamp tax, by whatsoever authority imposed or

howsoever designated, or (ii} any tax upon the sale,

transfer and/or assignment of the title or estate of

Landlord.---------------------------------- -------
-------(b) Tenant shall notify Landlord of any

Real Estate Taxes owed CRif\1 prior c.o the Conunencement

Oate and Landlord shall either pay them or contest

them . Landl ord wi l l hold Tenant harmless of any

payment due CRIM for the period prior to the

Commencement Date and if Landlord has noc paid CRDt

within one hundred and eighty (130) daya after the

later of a notice of payment. request. from CRIM, or,

in the event. Landlord contests such payment request

from CRlM, the final adjudication of such contest,

Te11ant. may offset such amount due to CRIM from the

next Rent payment due to Landlord.----------------

- - -- - -- (c) Tenant shall pay the Real Estate Taxes

d i recc.ly to the taxing authority on or prior to the

23
date the same are due and shal l provide evidence of

payment to Landl ord within ten (10 ) clays after making

ehe same.------------- - - ------------ - - - - - ---------

-- - - -· (d) Tenant shal l have the r ight to contest the

vali di t y or amounc of the assessed valuation or of

the Real Estate Taxes by appropriate proceedings i n

the name of Landlord or Tenant , and Landlord shall ,

upon Tenant' s request and at Tenant ' s sole cost and

expense, promptly t ake any steps reasonably

necessary in connection therewith, i n cludi ng

f urnishing information and executing documenes. In

the event Tenant desires to concest the Real Estate

Taxes , Landlord shall, upon Tenant 's r equest and at

Tenant 's sole cost a nd expense, promptly take any

steps reasonably necessary i n connectio11 therewith,

i ncluding furnishing information and executing

documents. --- --- ----- - ---- -- - ------ ---- - ----------

-- - --- - (e) Throughout. the ·rerm, Tenant shal l bear

and pay all charges for wa t~r, gas, electrici ty,

sewerage and other uti li ty services f urnished to the

Oemised Premises. Landlord shall not cause any

interruption of same . ----------------------- - - ----

----section Nine. Improvements, Repairs, Additions

and l\!pl&cemcants.------- - -- - - -- ------ - - - ------ ----

-------(a) Tenant shall have the right at any time

and from time co time to a lter the Improvements

provided that (i ) all work shal l be in compliance

with all c.hen applicabl e building codes and

ordinances; (ii) the qual i ty of the b u ild i ng

materials used by Tenant shall be equal to or becter

than those ori ginall y used by Tenant in the

construction o f the Improvement&; (iii) construction

24
shall be performed in a worklTl$.nlike manner, in

accordance with the other applicable requirements of

this Lease; and (iv) Tenant shall notify Landlord

prior to filing any appl ication for a permit

ne cessary t o carry out auch alteration.---- -------

·····- · (bl At all times during the 'l'erm, Tenant

shall keep and maintain, or cause to be kept and

maintained, the Demised Premi ses i n good repair,

or der a.11d condition . Landlord shall not be required

to make any improvements, repairs or alterations in

or to the Demised Premises Cunle$s caused by the

negligence or willful acts of Landlord or i ts

employees, agencs or contractors).----- -- - - ------ -

- ---·-· Cc) on the expi rat ion or sooner termination

of the Term , Tenant shall quit and surrender the

Demised Premises in reasonably good order and

condition, reasonable wear and t ear and damage by

fire or other casualty and by Taking (as hereafter

defined) excepted if covered by insurance or by a

condemnation award payable to Landlord, together

wi th all alterations, changes and additions made

thereto which are then a part of the r ealty. -- ----

----- Section Ten. !jtequirement s of Pub1ic Authority.

······· (a ) Duri ng the Term, Tenant shall promptly

observe and co1np ly with all present and future la•,...s,

ordinances, requirements, orders. directives, rules

and regulations of all governmental authorities

affecting ~he Demised Premises or any part thereof,

whether the same are i n f orce at the commencement of

the Tenn or may in the f uture be passed, e nacted or

directed.- ---------------- - -----------------------

----- --Cb) Tenant shall have the right , at ics s ole

25
cost and expense, and subject to prior notificat ion

to Landlord, to contest or review by appropriate

l egal proceedings or otherwise the validity or

application of any law, ordinance, requirement,

order, di rective, rule or regul ation of the nature

referred to in paragraph {a ) of this section Ten

and, if by the terms of a11y such law, ordinance,

order, rule, regulation or requirement, compliance

therewith may legal ly be delayed pending the

prosecution of any such proceeding, Tenant, at its

own cost and expense, may delay such compliance

therewith until the .final determination of such

proceedings. Landl ord shall cooperate with Tenant

and shall ex~eute and deliver any and all documents

and inst.ru1T.ents reasonably request ed by Tenanc to

accomplish same; provided, however , that Landlord

&hal l not be required co incur any coat or expense,

and any such coat or expense wil l be borne by Tenant.

- ----S&etion tJ.even. Intentiona11y Omitted. -- -----

---- - --(a) Landlord may mortgage, l ien, pledge or

encumber its interest in the leasehol d estate

created by this Deed or its fee intereet in the Land.

In such event Landl ord wi ll not require the Tenant

to subordinate this Lease nor any of the rights of

Tenant thereunder to any such mortgage, and Landlord

s hall use good faith efforcs to cause any benefi ciary

of such mortgage, lien or pl edge to execute a non-

disturbance agreement recognizing the rigl1t.s of

'I'enants hereunder . -- - - -- -- -- .. -- • .... -· .... - - ·- .. ·--- -

-------{b) Tenant and &very successor and ass i gnee

26
of Te.n ant is hereby g i ven the right by Landlord, i n

addition to any other rights herein granted, without

Landlord 1 s prior conaent, to mortgage its lease.hold

interest in this Lease and all other rights

(including, without limitation, the Development

Rights}, granted to it- hereunder, as \.,iell as the

Improvements constructed by Tenant ; under one or

more mortgages and/or under one or more purchase

money mortgages in connection with any sale of such

interest, and assign this Lease and any other r i ghts

of Tenant hereunder, or any part or parts thereof,

as collateral security for such mortgages or other

loans, upon the condition that a ll rights acquired

under such mortgages shall be subject to all of the

provisions of this Lease <unless otherwise

$pecifically provided herein}, and to all rights and

interests of Landlord and Landlord's successors. If

Tenant and/or Tenant's successors and assignees

shall grant any such mortgage, and if the holder of

any of euch mortgages s ball send to Landlord a true

copy of such holder ' s mortgage ; together \\•ith

write.en notice specifying the name and add.reas of

t11e mortgagee and the pertinent recording data with

respect to such mortgage, Landlord agrees that so

long as such mortgage shal l remain unsatisfied of

record or until written notice of aatis.faction is

give.n by the holder to Landlord , the following provi-

aions shall apply (in respect of such mortgage and

of any other rrr0rtgages wl1ich also comply with che

above; provided same is not held by a person or

entity controlled by, controlling or under common

control or otherwise affi liated with, Tenant): ----

27
------{i} There shall be no cancellation, surrender

or material modification of thi$ Lease by joint

voluntary action of Landlord and Tenant without the

prior consent in writing of the mortgagee. ------- -

-------- (ii } Landlord shall, upon servi 11g Tenant:

•11i t h any notice of default, simultaneously serve a

copy of such notice upon the holder of s uch mortgage,

and no such notice of default shal l be deemed

effective or duly g i ven for purposes of this Lease

unless a copy thereof is simultaneously served upon

such holder and sets forth t he information required

by the l a st sentence of this subsection . I f Tenant

defaults under the Lease and , after notice, fails to

cure its default within the cure period provided in

the Lease, Landlord will afford any such the hol der

of a mortgage an additional thirty five (35) days to

cure that default . I f Tenant defaul ts on a non-

monetary ob ligation under the Lea.;e and s uch default

cannot reasonabl y be cured within such t hirty five

(35) day period, then Landl ord will afford th"

mortgagee such adciitional time as may be reasonably

required to ~ the default Ol'.·, at the Leasehold

mortgagee• s option, co foreclose the mortgage or

p u~s ue secured creditor rights in any Tenant

bankruptcy proceedi ng, provided mortgagee proceeds

di ligently and continuously with that cure . Be fore

the expiration of the cure period, Landlord will not

exerci se any o f its remedies under the Lease ,

i ncl uding, without l imitation, terminating the

Lease, evicting Tenant or e xercising any self -he lp

rights . Not hing contained herein shall constitute a11

obligation of mortgagee to cure any de fau lt of

2S
Tenant. Landlord shall accept performance by or at

the instigation of such mortgagee as if the same had

been done by Tenant. Each notice of default given by

Landlord will state the amount-a of Rent and other

payments herein provided for which are then in

default . ··--·-·-·····--···-···········------ - - -- - -

-------(11i) Anything herein contained to the

contrary notwithstanding. if any default shall occur

which, pursuant to any provision of this Lease,

entitles Landlord to terminate this Lease , and if

before the expiration of the sixtieth (60th) day

following the date such mortgagee shall receive

Landl ord ' s noti ce of its intencion to terminate this

Lease, such mortgagee or its nominee or designee

shall have pai d to Landlord all Rent and other

payments herein provided for and then in default,

and shall have notified Landlord that such mortgagee

agrees to comply or co commence the work of complying

with all of the other requirements of this Lease, if

any a•e then i n detault, and shall prosecute the

same to compl eti on with r easonable diligence, then

in such event Landlord shall not be encitled to

t~rminate this Lease and any notice of intention to

terminate theretofore given $hall be void and of no

effect.---------------------------- ---------------
-------(iv) In the event of the timely curing of

defaults by said mortgagee or its nominee or designee

as aforee-aid and the termination pursuant to the

provisions of Secti on Seventeen of this Lease,

Landlord will enter into a new lease of the Demised

Premises with the mortgagee or its nominee or

designee £or· the remainder of the Tenn, at the rent

29
 and upon the cerms, provisions, covenants and

agreemencs as herein contained and sub)ect only to

the rights, if any, of any parties then in possession

ot any pare of the oemieed Premises, providedr --

----------(a) Said mortgagee or its nominee or

deaignee shall make writt•n request upon Landlord

for such new lease at any ti""' wit.lu.n suety (601

day• after the mortgagee receives che notice from

Landlord of such intended termination pursuant to

the provisions of Section seventeen and s uch writLen

request is accompanied by said mortgagee's payment

of the su."'s then due to Landlord under this Lease

and aaid norc..gagee proaecutes wi~ reasonable

diligence the curing of any other defaults which are

reaaonably susceptible of being cured by t.he

. mortgagee prior to ito acquisition or sale of

(; I Tenant• s mortgaged interest or mortgaged property,

a.a the case may be, as set forth below . Said written I
request of morcgagee or lte nominee shall have the

effect of extending the specified date for the

termination of this Lease as fixed by Landlord in

its notica of termination for a pariod of one hundred

eighty (180) days, provided that such mortgagee or

it• nonainee or designee shall meanwhile pay or cause

to be paid the Rent and any other charges ae and I

when the same becorae due and shall cause the other

obligations of Tenant under this Lease to be complied

with, and provided further that the mortgagee or ite

nominee or dasignee shall forthwith take stepo co

acquire or eell Tenant's interest in ch.ls Lease or

in the Improvements con.atrueted by Tenant on tn.

Property, as applicable, by tore.closure of the

30
 mortgage or otherwise and shall prosecute the same

to completion with reasonable diligence. Subject to

the same aforesaid payment and compliance with

Tenant's other obligations hereunder, if at the end

of said one hundred eighty (180) day period the

mortgagee or its nominee or design.e e shall be

actively engaged in steps to acqulre or sell Tenant ' s

mortgaged i ncerest or mortgaged property, ae the

case may be, che termination of this Lease specified

by Landlord in its notice to Tenant shall be extended

for an additional one hundred eighty (180) days . If

Tenant's interest or property i s acquired or sold as

aforesaid by foreclosure of the mortga.g e or

otherwise during the first one hundred eighty-day

(180) period ae same may be extended as aforaaaid,

the termina tion of this Lease shall occur on the

date on which Landlord enters into a ne\" lease with

I the mortgagee or its nominee or designee as

contemplated i n this paragraph_l!l . ---------------

- ------(b) Said mortgagee or its nominee or. designee

shall agree to, and shall thereafter, perform and

observe all covenants herein contained on Tenant's

part to be performed as applied to such mortgagee or

its nominee or designee and shall further remedy any

other conditions which Tenant under the terminated

Lease was obligated ec perform.----- --------------

--- -------(c) The mortgagee or its nominee or

designee as cenant under such new lease shall have

the same right, title and interest in and to c:he

Improvements er:ected by Tenant on the Demised

Premises as Tenant had under the terminated Lease .

........ _____ If more than one mortgagee makee write.en

31
request upon Landlord in accordance with the

provi sions hereof for a new lease, the new l ease

shall be delivered pursuant to the requesc. of the

mortgagee whose more.gage is prior in lien among those

who made the request, and the written request of any

mol:"tgagee whose mortgage ia subordinate in lien

shall be void and of no force or effect. --- -------

- --···- (v} The mortgagee shall be given notice of

any suit, action or other legal proceeding by or

between the parties hereto, and shall have the right

to intervene and be made a party to such suit, action

or legal proceeding, and the parties hereto do he~by

consent to such intervention. In any event., the

mortgagee shall receive notice of such proceedings

and a copy o f any not.ices or decisions issued during

such proceedings , •11hether the mortgagee intervened

or became a party or elected not to do either.----

----- ·· (vi) Landlord and Tenant each agree to amend

from time to time any provision of this Lease •11hich

may be reasonably required by any mortgagee of

Tenant's leasehold interest herein or oe any other

rights granted to i t hereunder or of the Imp1·ovements

constructed by Tenant on the Property; provided,

however, c.hac. r.o auch amendment shall affect {a) the

monetary obligations of t•enant hereunder, (b) the

Term nor (c) the rights of Landlord hereunder.----

--- ----{vii) Landlord shall, upon request, execuce,

acknowledge and deliver to each mortgagee, an

agreement prepared at the sole cost and expense of

Tenant among Landlord, Tenant and the mort:gagee,

agreeing to a l l of the provisions of this Section .

---~---· -(c } The provisions of c.his Section Twelve

32
shall not be amended by Landlord and Tenant without

the express written consent of any and all

mortgagees hereunder.-- - ---- - - - -· ------ -----------

-----Seetion Thirteen. Assignmen t and Sublet tinq.

----··-- -{a)Subject to the provisions of section

Seven, notice to Landlord, and provided Tenant is

not then in defaul t hereunder, Tenant may at any

time and from time to t ime assign this Lease or

sublease, license to any subsidiary or affi l iate of

Tenant and/or permit che use or occupancy of all or

any part or parts of the Demised Premises and may

permit its subtenants, l icensees, franchisors,

franchisees, operating subsidiaries and affiliates

to assign their subleases or licenses or to aub-

sublease or sublicense al l or any part or parts of

their premises to any subsidiary or affiliate of

Tenant (each a ~ Permitted Assi gne e") . ----- - --- ---

- - -- --- (b) In the event of a proposed assignment.

sublease, l icense or permit to anyone that is not a

Permit ted Assignee, the proposed assignee,

sublessee, licensee or pe:rmittee shall be reasonably

acceptable to Landlord. The acceptability of any

proposed assignee, licensee or permittee chat is not

a Permitted Assignee .shall be decertnined in the

reasonable judgment of Landl ord baaed on (x) the

integrity and business reputation of such party, (y)

the experience of such party in connection •..;ith

facilities co1nparable to the Tenant's work, which

shall be equal to that of Tenant and its affil iates,

and (z) the financial capacity of such party and its

affiliates and principals which shall be evaluated

in che manner customary within the hospitality

33
industry . ------- - - ------- -------- ------ ------ -----

---- ---(c) In the event of any assignment, sublease,

license and/or permit to a Permitted Assignee,

Tenant shal l remain obligated under this Lease for

the duration of the Lease Term as a guarantor of all

the obligations assumed by the Permitted Assignee .

Should such assignment , sublease, license and/or

permit cover the entire Demised Premises, Landlord

after: satisfying itself with the assignee• s

performance during at least two {2 ) years may release

the Tenant as guarantor of the obligations assumed

by the Permitted Assignee. Notwithstanding, in the

event of such a r e l ease, or in the event of an

assignment co an unrelated third parcy approved by

Landlord, Tenant shall remain responsible for any

liability resulting from acts and omissions, or for

any event or matter that arose out of acts or

omissions that took place during the construction

Period and the operations Period prior to the

Aesignment, including, but not limited to, l iability

related to environmental matters.------ - ------- ~--

-------ldJThe term of any aublease hereunder shall

not extend beyond the l ast day of the stated Term of

this Lease. -------- ------------------ - - ---- -------

·--- --- (e }Landlord agrees to appear in any private

or public instrument of a sublease for a restaurant

to a Permitted Assignee or any other assignee

approved by La11dlord (a "Restaurant sublease"),

consenti ng t.o cuch Restaurant Sublease and to the

recordation of the same in tha Registry. Landlord

a l so agreas to execute and deliver any additional

111struments and documents that may be necessary to

34
 record such Restaurant Subl ease in the Registry. Any

cost and expenses incurred in connection with the

execution of any addi tional instruments and

documents shall be for the account of the requesting

Party . Landlord also agrees that if th.is Deed is

terminated prior co the expiration of its Term as a

result of a. default by Te.n ant, Landlord agrees to

l ease such property subject of the Restaurant

Sublease to the sublessee under the same terms and

conditions as the Restaurant Sublease, provi de that

t:he sublesee under the Restaurant Sublease is not

then in default thereunder and continues to meet

Landlord's requirements of integri ty and business

reputation, experience, and financial capacity.-- - -

-------(f) (i) As used herein, the term ""affiliat.e"

I I means, with respect co any person, any person that

(/
/ directly or indirectly, through ontt or ntore

intermediaries, controls, or ie controlled or is

under common control with such first per·s on. ------

- ---- Seotion Fourteen. Concessions. Anything to the

contrary notwithstanding, Tenant , if not in default

hereunder, may enter into concession agreements with

third parties for the use of space at the Demised

Premises with the approval of Landlord, which

approval shall not be unreasonably delayed ,

t\>ithheld, conditioned or denied; provided ho11.·ever,

that such concession agreements comply wit.h the

terms of this Lease. as •nell as all applicable laws

and regulations, and Tenant remains responsible to

Landlord for the concessionaire' a actions. For

example, Tenant may enter into an agreement with a

third party for the establishment and operation of

35
a gift shop, restaurant, or newsstand at the Demised

Premises. A written request from Tenant to Landlord

for approval of a concession shall be deemed approved

thirty (30 ) days after notic<> to Landlord if Landlord

does not respond to Tenant within those thirty (30)

da)tS. - - - - - - - - - - - - - - - - - - "'"'"'"' • •'" - - - - - - - - - - - - - - - - - - - -

-- ---Section Fifteen . Signs. ··--------------------

(a) Tenant and Tenant ' s subtenants shal l have the

right , at any time and from time to ~ime, to i nstall,

maintain, remove and replace i n, on or in front of

the Demised Premises or any part thereof such signs

and advertis i ng matter aa Tenant may desire;

provi ded, however, that all such signs shall comply

with all applicable legal requirements.-----------

--- ----(b} Tenant shal l have the right ac any time

to remove or cease using any sign identifying Tenant

or its business. However , Tenant at its cost shall

repair arty damage to a structure or building caused

by the remo"•al of the sign. As used i n this section,

the \\'Ord 11
s ign•• shall include, without l imi t .a tion,

any placard, light or other advertising symbol or

object, irrespect i ve of 111hether the same be

temporary o r permanent.-------------------- -----··

----- Section Sixteen. r nsurance. Tenant shall keep

or cause to be kept, ac i ts own cost, the building

and Improvements on the Demised Premises insured

throughout the Term for che benefit of Tenant,

mortgagee and Landlord, as their respective

i nterests may appear, against lose or damage i n the

following manner:--------------------------- -~---­

------(a) Property :Insurance. Tenant shall obtain

the following property insurance {the ~Property

36
I n&urance" : ( i) during the construct ion of th.e

Project, a Builder• a Risk Insurance that covers,

without limi tati on , one hundred percent (100%-) of

the structures agai nst risk of loss or destruction,

for any cause, incl udi ng the cost of removal of

debris; and {ii) after construction of the Project

is completed, Tenant shal l replace the Builder's

Ri sk Insurance with a "Special Form, All Risk Form"

which shall cover the structure againat any riek of

lose, damage or destruction, for any cause, in an

amount no less than one hundred percent ( 100%) of

the cost of replacement of the property, including

Improvements and/or personal property. The policy

shall include an endorsement of protection against

i11flation of eight percent (St} {" Inflation Guard" } ,

and will include Landl ord and any mortgagee as "LOss

Payee". If f'urther impro·v ements are carried out on

the Demised Premises, Tenant shall carry out an

appraisal of the same and the i11surance coverage

shall be adjusted accordingly . -------·· · ····

-- ----(b)Genera.1 Liability Insurance . During the

constroction and operation of the Project, Tenant

shal l maintain general liability insurance for

general claims arising out of torte , personal

damage&, death and/or property damage, including

pollution damage, with respect to the Demised

Premises , the Project and/or Improvemente,

throughout the Term with limits {in which both

primary and excess or "umbrella" coverage may be

aggregated) of at least ONE MILLION DOLLl\RS

( $1, 000, 000. 00) in respect of each occurrence and

'l'NO MILLION DOLLARS ($2,000,000.00) annual

)7
aggregate. Such policy s hall i ncl ude Landlord,

1nortgagee and Tenant as an insured party and shall

include an endorsement of "Hold Harmless Agreementff

in favor of Landlord. During the Operations Term,

Tenant shall i ncl ude an endorsement for "Li quor

Liabi li ty"' as part of the aforementioned general

liabi lity insurance.---------------- --------------

-- ---- (c} Employers Liability Insurance. Tenant s hall

obtain che employers liability i nsurance required by

law and che Seate Insurance Fund ("'Fondo del Segura

del Estado" } . Furt.hermore, Tenant. shal l obtain an

additional coverage of no l ess than FIVE HUNDRED

THOUSAND OOLl.J\RS (SS00,000. 00) per pe rson and per

event, co cover all l i abi licies not covered by the

s cat:.e I nsurance Fund in the event of gross

negligence.- ------- ------- ---- ---- -- ---------- ----

------(f) Tenant shall keep or cause to be kept all

Improvements on the Property i nsured throughout the

Term for the benefit of Tenant, mortgagee and

Landlord, as their respective interests may appear,

agai nst l oss or dam.age by f ire and customary extended

coverage perils in a11 amount not lea$ than one

hundred percent (lOOt) of the f ull r epl acement

value. Landlord shal l not carry any insurance

concurrent in coverage and contribucing in the event

of loss with any insurance provided by Tenant.

Landlord and Tenant shall cooperate in order to

obtain che largest possi ble r ecovery and Landlord

shal l execute and de liver any and all cons ents and

o ther documents and instruments t o accompl ish same,

at no cost to Landlord. -------------- - ------------

- - - --- (9> Tenant shall obtain any and al l additional

38
insurance policies as required by applicable la·11e,

regulations , and as r ecommended for the particular

uses and activi ties to be conducted upon the premises

of the Project . ------ --- --------------- ------- --- -

-------(h) Any i nsurance required to be maintained

by Tenant pursuant to this Leaae may be provided by

"blanket• i nsurance covering the Demised Premiaea

and other locations of Tenant provided the policy

expressly identifies ~he persons required above to

be ineuxed and the Demised Premises as being covered

thereby.-- --·--------- ---- --- -- ------------ --- --·-

-- ----- (i) Any insurance required to be provided by

Tenan~ pursuant to this Lease may contain deductible

clauses as per t h@ prevailing market conditions f or

insurance for hotels, which on the date of execution

of t.his Deed are as follow$ : ( i) during

constructior1 : Property Insurance and Bui lder's

Risk, FIVE THOUSAND DOLLARS ($5,000 .00) for AOP

{ ... all other peril s II') , two percent (2%) for

wi ndstorms, five percent {5%} for earthquakes, and

TWENTY FIVE THOUSAND DOLl.J\RS {$25,000) f or flood;

(ii} during operations, Property rn.s urance FIVE

THOUSAND DOLLARS {$5,000) to FIFTY THOUSAND DOLLARS

($50,000) for ADP ( •all other peri lall' } , cwo percenc

(2\) for windstorm, f i ve percenc ( St) for

earthquakes, and ~IVE THOUSAND DOLLARS ($5,000.00)

to FIFTY THOUSAND DOLLARS ($50,000 . 00 ) for f l ood,

and (III) Employers Liabi l ity, no deductible .-----

-----------·-·-·······-------- -- -------------------
----·· {j ) All i nsurance polic ies subscribed by

Tenan~ must include Landlord as an add.l.tional named

insured and must cover a l l safeguards of a hold

39
harmless agreement . ----------------------------- --

-------(k) Certificates of r n sur~nce. Tenant shall

deliver to Landlord on the date of execution of this

Deed, all corresponding insurance certificates and

a copy of all insurance policies. Tenant shal l

therefrom deliver to Landlord, on an aru1ual basis,

the certificates of renewal of all insurance

policies, before said policies expi re . Such policy

or polici es of Tenant shall contain a provision

stating that such insurance cannot be cance lled

without sixty {60) days ' prior \\'rit.ten notice to

Landlord . --------------------------- - -- -----------

---·--( l)Insurance Companies . All insurance policies

must be issued by companies authorized to do business

in t .h e commonwealth of Puerto Rico, and said

companies must be approved by Landlord. which

approval shall not be unreasonably conditioned,

-----section Seventeen. Tenan t Defau l t Provisi ons .

- - -----(a) If one or more of the following events

(herein sometimes called 11

Events of Default") shall

happen and shal 1 not have been remedied aa herei n

provided, ------ ---------------------------- - ----- -

- -------- (i) Tenant fails to pay any Rent payable

under chis Lease beyond tl1e Rent payment dace and

s uch non- payment shall continue for a peri od of t en

(10) days after receipt by Tenant of written notice

from Landlord specifying the non-payment; or------

-- --- ----(ii) rf Tenant shall fail to perform or

comply with any of the covenants, agreements, cerms

or conditions contained in this Lease other than

those referred to in the foregoing subparagraph One

40
of this paragraph (a), and s uch f ailure shall

con tinue for a period of thirty (30) day s after

written notice thereof from Land lord to Tenant

spec ifying the nature of such f ail ure, or, in the

caee of a failur e or a contingency which cannot with

reasonable diligence be cured within such peri od of

thirty (30) days, if Tenant f ail s to proceed with

all reasonable diligence within s uch period of

thirty (30) days to cure t he same and thereafter to

prosecute the curing of such failu re with all

reasonable diligence (it being intended tha t in

connection t'lith a failure not suscepti ble of being

cured with reasonable dil igence wi t hin thirty (30}

days that the time of Tenant within which to c ure

the same shall be extended for such period as may be

necessary to complete the same with all reasonable

diligence ). No default under this subparagraph (ii)

shall be deemed to continue if and so long as Tenant

shall be diligently proceeding to cure the same in

good faith, or be del ayed in or prevented from

eecuring the same by any cause, i ncl uding those

speci fied i n Secti o n Twenty-Two; provid ed however ,

any failure to compl y with a monetary obligation

shall not be deenied to be one that cannot be eured

wi thin thirty (30) days; or-----------------------

- -- ---- - -(i11 ) If Tenant submits itself or is

involuntarily subjected to a bankruptcy or

insolvency or receivership procedure, or if its

rights o r property under this Deed are affected or

b u rdened by these p rocesses, and the Tenant does

not f ree its rights or property from the

aforementioned processes t\•ithin one hundred and

41
 eighty (160) daya from the initiation of the

bankruptcy proceedings; or----------- --- - - ----·--

---------{iv) If Tenant abandons, during twenty (20)

consecutive days or longer, the construction of the

Project, except if such abandonment is the re$ult of

an e·vent considered to be a force majeure, as

contemplated by Section TWenty Seven of chis Lease ;

or--------------------------- ---------------------
-- - - -·--· (v) If Tenant conducts a transfer in an

unauthorized manner or in violation of the

provisions of this Lease;---------------- - --------

then and in any such event Landlord, or at any time

thereafter while ariy such Event of Default shal l

f;ct continue, may by "'1ritcen notice to Tenant specifying

such Event of Default or Events of Default terminate

chis Lease but Tenant shall remain liable as

hereafter provided. Notwithstanding the foregoing,

if {i) such notice of termination is given by reason

of a default under subparagraph One of this

paragraph {a), and (ii) before the dace specified in

any such not.ice of termination, such defaulc. is fully

remedied and a l l arrears of Rent payable by Tenant

under this Lease, together in each case with interest

thereon at ~be Lease Interest Rate from the time

when the same became due and payable, and all costs

and expenses incurred by or on behalf of Landlord in

che Demised Premises, includi ng reasonabl e

atc.orneys ' fees, shal l have been full y paid by

Tenant, and all other defaults (of which Tenant has

received notice) at the time existing under this

Lease shall have been ful ly cured and made good,

the.n the consequences of such Bvent of Default or

42
Events of Default shall be deemed to be annull ed.

The curing of any default(e) wi thi n the time periods

provided herein by Tenant or any nominee of Tenant

shall constitute a curing of any such default {s)

here\Ulder. "1.&ase I nterest Rate" shall mean a rate

of i nterest equal to eleven percent (11\} per annum .

All costs and expenses by or on behalf of Landlord

in the Demised Premises shall bear an interest rate

equal to one percent (1%} ovei::· the rate announced

from t i me to t i me by Citibank N.A. in New York, New

York, as Citibank• s prime rate, or any successor

thereto (or, if said bank does not at any time bave

a base rate, at the rate per annum which is the rate

of interest: generally offered by said bank for

unsecured loans of ninety (90} days or less duration

to its most creditworthy corporate customers) in

effect at the time in quest i on, but in no event a t

a rate which i s higher than the maximum rate allowed

by law. ------------------------------- ---- --- --- -

-------(b) If pursuant to an order, j udgment or

decree entered by any court cf compet ent

jurisdiction (i) a receiver, trustee or liquidator

of Tenant or of all or subst.antially all of the

assets of Tenant shall be appointed, or {ii) Tenant

shal l be adjudicated a bankrupt or insolvent, or

(iii} a petition seeking reorgani zation of Tenanc or

an arrangement with creditors or a petition to take

advantage of any insolvency law shall be approved,

and, as a result of the happening of any of such

contingenci es, the obl igation of Tenant to pay any

Rent or any other material obl1gatio11 under this

Leaae shall be modified or abrogated, Landlord may

43
serve notice o f terminati on of t.his Lease upon Tenant

stating the date of termination, which date ot

termination shal l be a t least sixty (60) days after

the date on which such notice i s served, and upon

the date specLfied in such notice this Lease shal l

termi nate and Tenant shall quit and surrender the

Demised Premises, but Tenant shall remain l iabl e as

hereinafter provided. -- -- - -- - ---------- ---------

------- (c ) Opon any such expi ration or termination

of this Lease pursuant to ~graph {a) or

paragraph (b) of this section, or any termination by

summary proceedings or otherwise, Tenant shall quit

and peaceful ly surrender the Demised Premises to

Landlord, without any paym~nt there f or by Landl ord,

and Landlord, upon or at any time after any such

expiration or te1-rninatio11, may, without further

notice, enter upon and re - enter the Demised Premi ses

and possess and repossess i tself thereof, by summary

proceedings , ejectment or otherwise, and may

dispossess Tenant and remove Tenant and all other

persons and property from the Demised Premises and

may have, hold and enjoy the Demised Premises,

incl udi ng the Improvements thereon and the right to

r eceive al l rencal income of and from the same. ---

-------(d) At any time o r f rom time to time after

any such expirati on or cerminatio11 pursuant to

paragraph ( a } of this Section, Landlord may relet

t he Demised Premises or any part thereof, in the

name of Landl ord or otherwise , for su ch term or terms

hich may be greater or less than t:::he per·iod which

( \ \1

•NOuld othen•i se have constituted the bal ance of the

Te rm of this Lease) and on such conditione {which

44
may i nclude concessions or f ree rent} as Landlor d,

in ita sole discretion, may determine a nd may collect

and receive the renta therefor . Landlord shall in

no way be r espons i bl e or liable for any failure to

relet the Demised Premi ses or any part thereof , or

for any failure to col l ect any rent due upon any

such re letting, b ut Landlord shall use its best

e f forts to mit igate damages, if any, suffered by i t

a s a result of the occurrence of an Event of Default.

--- ------------·--------------------------------- -
--- - -- - (e) No expirac.ion or termination of t.his

Lease pursuant t:o earagraph {a) of this Section

shall rel ieve Tenant of i ts liability and

obligat ions under this Lease.------ --···--·------ -

---- --- ( f ) -dies. In the event of d e f a ult by

Tenant, Landlord shall be entitled to: (i ) fi le a

lawsuit against Tenant. for the recovery of any and

all monetary obligations of Tenant, (ii) charge

Tenant with the Lease Interest Rate for breach of

monetary obligations, (ii i} fi le a lawsuit against

Tenant for damages caused by Tenant' s breach of i ts

obligations, (i v) terro.inate this Leaae , {v) request

specific performance with any and al l obl igations of

Tenant and/or request that Tenant stops any and all

acts that cont ravene r:.his Lease, and/or {vi ) any

other available l egal remedy . --- ------------------

-- - - ---{gl Each r i g ht and remedy of Landlord

provided for in thi s Lease s hal l be cumulative and

shall be in addicion t.o every other right or remedy

provided for i n chis Lease or now or hereafter

existing at: law or in equity or by statute or

otherwise, and the exercise or beginning of the

45
exercise by Landlord of any one or more of the rights

or ;remedies provided for in this Lease or now or

hereaft er exist i ng at law or in equity or by statute

or otherwise shall not precl ude the simultaneous or

later exercise by Landlord of any or all other rights

or r emedies provided for in this Lease or now or

hereafter e.x isting at law or in equity or by statute

or ocherwi se.-- ------ ------- ------- - - -------------

-- ---Section Eighteen . =L=a=n=d1=:o=r=d~·~·=--~~~-=C=o~v~•=n=a=n~t=s:oL,

Land.lord ' s Default. ------- -------------------- -----

------- (a) Landlord covenants and agrees with

Tenant that Landlord shall execute and del iver to

Tenant from time to time such reasonable letters of

consent and authorizations as may be necessary to

enable Tenant to obtain all required permits and

approvals for Tenant ' s work. ------- ----------- ----

----- --(b) Landl ord shall be in default of any of

its obligati ons under this Lease {including, withoue

l i mitation, the provisions of paragraph (a) of this

Section) , if Landlord does not cure said default

after sixty (60) days following Landlord's receipt

of notice f rom Tenant informing Landlord of said

defaul t. Notwithstanding che preceding sentence,

Landlord shall not be in default i f i t is of such

nature that it cannot reasonably be correc·t ed withi n

the sixty ( 60) days, and Landlord has begun and

continues to diligently pursue all corrective

measures needed to comply with its obligations with

Tenant. --·--- -------------------- ---------- -------

00
- - - ... -- (c} If Landlord is in defaul t of its

obl igations with Tenant, Tenant is hereby authorized

to pureue any and all avail abl e action provided by

46
the l aw, subject to the mortgagee ' s rights. -------

--- ---- (d) Each right and remedy of Tenant provided

f or in this Lease shal l be cumulative and shal l be

in addition to every other right or remedy provided

for i n thi s Lease or now or hereafter existi ng at

law or in equity or by statute or otherwise , and the

exerci se or begi nning of the exercise by Te.n ant of

any one or more of t he rights or remedies provi ded

for in this Lease or now or hereafter exi sting at

l aw or in equity or by statute or otherwise shall

not precl ude the simultaneous or later exercise by

Tenant of any or all other rights or rtimediea

provided for in this Lease or now or hereafter

existi t19 at l aw or i n equity or by statute or

otherwise.------------------- - - -------------------

-----Section Nin•t..n . Intentionall y Omit ted .

---- -S.ction Twenty. Wa.ivers. -------------- ------

---- -- -The failure of Landlord or Tenant co complain

of any act or omi ssion on the part of the other

Party, no matter how long the aame may continue ,

shall not be deemed to be a waiver by said party of

any of it-s rights hereunder. No waiver by Landlord

or Tenant at any time, express or implied, of any

breach of any provi s i on of this Lease shall be deemed

a waiver of a breach of any other provision of this

Leaae or a consent to any subsequent breach of the

same or any other provision. No acceptance by

Landlord of any partial payment ahall constitute an

accord or satisfaction but shall only be deemed a

parti a l payment on account.-------- ----·-··--- - - --

----- Seotion Twenty-One . Covenant Against Liens. -

------- {a) If any mechanic's lien or other lien,

47
 charge or order for the payment of money shall be

filed against the Demised Premises or the

Improvements thereon as a result of any a.ct, omission

or negligenc~ of Landlord, Landlord shall cause the

same to be discharged of record or bonded within

sixty (60) days after notice from Tenant to Landlord

of the filing thereof; and Landlord shall defend and

indemnify Tenant and hold Tenant harmless from and

against all costs, liabi l ities, suits, penalties,

claims and demands, including reasonable attorneys•

fees, in connection therewith. - ---- - - - ------------

- - -- - -- (b) If any mechanic•s lien or other lien,

charge or order tor the payment of money shall be

filed against the Demised Premises or che

l Improvements thereon as a result: of any act, omission

I
1 or negligence of Tenant, Tenant shall cause the same

to be discharged of record or bonded within sixty

(60) days after notice from Landlord to Tenant of

the filing thereof ; and Tenant shall defend and

indemnify Landlord and hold Landlord ha:rmless from

and against all costs, liabilities, euits,

penalcies, claims and demands, including reasonable

attorneys • fees, in connection tl1erewic:h. ------- --

•••••• • (C) Nothing contained in this Lease shall be

deemed or construed in any way as constituting the

request of Landlord, express or imp lied, by

inference or otherwise, co any contractor, sub -

contractor, laborer. materialman, architect or

engineer for the performance of any labor or che

furnishing of any materials or services for or in

connection with the Demised Premises or any part

chereof. Notice is hereby given that. Landlord shal l

48
not be liable for any labor or materials or services

furt\iShed or to be furnis hed to Tenant or any

eublessee or assignee upon credit, and that no

mechanic•s or other lien for any such labor,

materials or services shall attach to or affect che

fee or reversionary or other estate or interest of

Landlord in the Demi sed Premises or in this Lease.

Neither Tenant nor any subtenant of Tenant shall

have che power to do any act or make any contract

•11hich may create ot.· be the foundation for any lien,

1nortgage or other encumbrance upon the reversionary

or other estate of Landlord, or any i n terest of

Landlord in the Demised Premises, and except that

Tenant and ics successors and assigns may mortgage

the Improvements erected or constructed, or caused

to be erected or constructed, on che Demised Premises

(subject, however, to Landlord's rights in such

Improvements pursuant to the tenna of this Lease} .

-----Section Twenty-Two . Ris k of Damage to Prop erty .

----·--------------------------------------- --- ---

-------Tenanc shall bear the sole risk of damage to

1:.he property of Tenanc and all persons claiming

under, by or through Tenant, including, but not

limited to, water or the burscing, leaking, running

of any tank, c istern, \\•ashstand, water closet or

wascepipe, in or upon the Demised Premises or for

damage occasioned by water being upon or coming

through the roof, skylight., trapdoor or othen°:ise or

from any damage occasioned by faulty sewet;age or

city drainage or damage that may occur from any cause

whatsoever, and Tenant shall defend and i ndemnify

Landlord and hold Landlord harmless from and against:

49
 all costs, liabilities , suits, penalties, claims and

demands, including reasonable attorneys ' fees, in

connection therewith, unless caused by t.he gro&s

negligence or wil l ful misconduct of Landl ord.-----

--- --Se ct.ion Fixtures and

Improvementa . --·------------------------- ------- --

-- -----(a) All trade fixtures, other fixtures

including, without l imitation, furniture, busi ness

equipment, trademarked item$ and signs. or personal

property fu.m ished or instal led by Tenant, its

subtenants or l icensees in the buildings and

Improveme11ts on the Demised Premises, regardless of

t:.he manner or mode of attachment, shall be and remain

the property of Tenant: or its subtenants or licensees

()
~ and m.ay be removed by Tenant or its subtenants or

l icensees at any time during the Term or within

thirty (30) days period after the end of the Term .

Tenant shall repair all damage to the Demised

Premises caused by the removal by Tenant, i ts

subtenants or l icensees of any such trade fixtures,

other fixtures or personal property . Any such t~ade

fixtures or personal property remaining on the

Demised ~remiaes after the expiration of such

thirty-day period shall be deemed abandoned. ------

-------(b)Tenant shall co.n serve and maintai n at all

moments during the Term, the Demised Premi ses, tl1e

Proj ect, the Improvements, and any and all parts of

the aforement.ioned, i n good and safe conditions,

except for normal wear and tear . Tenant will comply

with all laws , regulations, ordinances, and/or legal

provisions applicable to the conservat ions,

security, and maintenance of the Demised Premises,

50
t:he Project, and the Improvements, Tenant hereby

reserves all rights to em.ploy the necessary legal

resources to refute and/or answer any of the

aforementioned regulations, ordi nances and/or legal

dispositions. ----·--------··- ----------- - - ---- ----

.......... (c}The Parties hereby agree that after the

termination of the Term, or the termination of thia

Lease, the title in fee simple (pleno dominio) over

all Improvements constnicted on the Property, will

automatically revert to Landlord, as well as all

rights that derive from the Improvements and that

Tenant •nill lose all right to compenaation and/or

indemnity for such Improvements and that Tenant will

proceed to immediately vacate and surrender its

possession of the Demised Premises to Landlord, i n

a good state of repair and maintenance, except for

the ordinary wear and tear. The possession of the

Demised Pre·m ises will therefrom correspond to

Landlord in full right, without any additional

re·q uirement or assertion of rights.---------------

----- -- (d)The Parti es hereby agree that, in the

event that Tenant does not deliver to Landlord the

Demised Premises after the Term has expired or this

Lease has been terminated, Tenant shall be deemed to

occupy the same on a month to month basis under ~he

same terms and conditions as set forth i n t-his Lease,

cancellable by either party by giving thirty (30)

days prior written notice of cancellation to the

other party. During the holdover perio~ Tenant will

pay to Landlord an amount equal to t'.\fO (2) times its

last annual sase Rent , prorated and payable monthly.

Additional Rent shal l remain the same except th3t it

51
shall be paid monthly in arrears. Furthermore, t he

Parti es hereby agree that Tenant will respond for

any and all damage& and/or torts suffered by Landlord

as a result of Tenants delay in leaving and

delivering the Demised Premises . Ter1ant hereby also

rel ieves and safeguards Landlord from any and all

responsibility for any claim, action, or lawsuit

against Landlord a.s a r esult of said delay by Tenant.

------- (e) All Improvements to the Demi sed Premises,

except for those expressly stated i n r.his Lease,

require the written consent of Landlord. Thi& shal l

constitute a restrictive condition upon all

const ruction to be done on ~he Demised Premises . --

.... - .. Section Twen t y - Four . Indemni f i cation of

- ---- --(a) Tenant assumes all r isks of loss and/ or

damage during the Lease Term to the Demised Prernises

inc l uding envi ronmental damages . In additi on to any

other indemnities in favor of Landlord specifically

provided in this Lease, Tenant shall i ndemnif y,

relieve, release and hold harmless Landlord aga ~ nst

and from all liabili t i es, suits, obligations, fines,

damages, penalties, c lai ms, costs, c leanup and

environmental remedial actions, charges and expenses

(including court costs and reasonable attorneys' and

consultant-' e f ees ) whi ch may be imposed upon or

incurred by or asserted against Landlord by reason

of the occurrence of any of the foll owi ng during the

Term: ---------- ------- ----------------------------

·-------- (i) any w·ork or thi ng done in, on or about

the Demised Premises or a ny part thereof:---

52
------- -- (ii) any use , non-use, possession,

occupation, alteracion, repair, condition,

operation, maintenance or mana9ame.nt of the Demised

Premises or any part thereof ; ---- ------ --------- --

., ____ ____ l.J.l.
'
{ ..
) any negligence on che part of Tenant

or any subtenant of Tenant or any of its or their

agents, contractors, $ervants, employees , licensees

or invitees;--------------- - --- ------------ -------

-- -·-··-·(iv) any accidenc, i njury (includi ng

death} or damage to any pe rson or property occurring

in, on or about the Demi sed Premises;- - - -- - - ------

---------(v) any failure on the part of Tenant to

perform or comply with any of the co·.renanta,

agreements, l'.:epresentationa and warranties, terms or

conditions in chis Lease; and -------- -- --- -- - ----

- ---------(vi} any failure on che pa.rt of Tenant or

any of its subtenants, contractors, employees or

agents to comply with any applicable law, order,

regulation, ordinance, policy, guidel i ne, permit,

permit condition or requirement, including but not

limited to environmenta l matters or hazardous

materials, ari sing during the Lease Term. ---------

---------In the event any claim covered hereunder

arises against Landlord by a third party (a "Third

Party Claim~), Tenant, at i ts own expense, shall

immediately assume the d efense of Landlord in any

such l itigation with counse l reasonabl y satisfactory

to Landlord, and shall satisfy ariy j udgment rende red

in favor of the claimant, subject to any relevant

rights to appea l . Any sett.lement or compromise s hal l

be effecced only wic.b the consent of Landlord,

which consent shall not be: unreasonably \.,.ithheld,

53
conditioned, delayed or denied, and which shall be

deemed given i f Landlord does not respond within

sixty (60) days to a written request from Tenant

for such consent. Tenant shall copy Landlord with

all pleadi ngs f i led in the case. Landlord shall

have the right to employ counsel to represent i t

if, in Landlord's reasonable judgment, it is

advisable for Landlord to be represented by

separate counsel , and in that event the fees and

expenses of eucb separate counsel shal l be paid by

Landlord. La11dlord shal l have the right to control

the defense of any Third-Party Claim if it notifies

Tenant that it i s assuming the defense of such

claim. If Tenant does not assume control or

otherwise participates in che defense of any Third-

Parcy Claim, it shall be bound by the results

obtained b y Landlord with respect to such Third-

Party Claim. Landlo~d and Tenant agree to render to

each other such assistance as may reasonably be

requested in order to insure the proper and

adequate defense of any Third- Party Claim . " ··-····

---------Tenant s hall not in any event be required

to indemnify or hold harmless Landlord against and

from any l iabilities, suits, obligations, fines,

damages, penal ties, claims , costs, charges or

expenses which arise as a result of the negligence

or willful acts of Landlord, i ts employees, agents,

contractors or tenanta.---------------------------

-------(b} I n addition to any other indemnities in

favor of Tenanc specifical ly provided i n this Lease,

Landlord s hall indemnify and hold harmless Tenant

54
against and from all liabilities , suits,

obligat.ions, finea, damages. penalties, clalJIB,

cost.s. charges and expenses (including court coats

and reasonable attorney•' fees) which may be imposed

upon or incurred by or asserted against Tenant by

reaso11 of the occurrence of any of the following

during the Term:-------------- ------- - ---- --------

---- --- --(i) any negligence on the part of Landlord

or any of its agents. contractors , s ervants,

employees, assignees or licensees or any of their

agents, contractors, servants. employees. assignees

---------Iii) any failure on ehe part of Landlord

to perform or comply with any of the covenant.a,

agreements, terms, conditions, representations or

warrancies in t h ie Leaee to be performed or complied

with by Landlord; or-- -- ------- --- - ----- -------

-- -- -----In case any claim covered hereunder is made

against Tenant, Landlord shall immediately assume

the defense of Tenant, in any such litigation, and

shall eatisty any judgment rendered in favor of the

claimant, subject to any relevant righcs to appeal.

---- ---Landlord shall not i n any event be required

to indemnify or hold harmless Tenant agai nst and

from any liabilitiee, ouits, obligations, fines,

damages, penalties, claims, costs, charges or

expenses which arise as a result of t.he negligence

or willful acts of Tenant. its employees, agents,

contraceors or tan.a.nta.--------- ---- --·····-------

--- ---- (c) T"11Ant ia hereby subrogated to any

r~ghes of Landlord againat any other part ies ~n

55
connection with any claima and liabilities for which

indemnificaeion by Tenant to Landlord is provided in

this Lease (except with respect to any financial

institution (public or private) which will be

providing the financi ng tor the Proj ect ) . Landlord

shall notify Tenant of any claim asserted aga1nat

Landlord for which J..andlord shall expect

indemnification under this Lease and shall deliver

to Tenant c.he original or a true copy of any summona

or other process , p l eading, or notice issued in any

suit or other proceeding• to assert or entorce any

auch claim, within five ISi business days a!ter

rece1pt of notice of such claim or of such swrnon.e i

or other process, pleading or not.ice. Tenant shall

immediately proceed , at its cost, to defend any such

suit with attorneys of its own selection . Subject

to the all rights of appeal, Tenant shall satiety

any judgment rendered against Landlord in connection

with any claililS and liabilie1es for which I

1ndemnificat1on by Tenant to Landlord is provided in

--·---(di Landlord is hereby aubrogated to any

rights of Tenant againat any other parties in

connection with any claime and liabilities for which

inderanification by t.andlord to Tenanc is provided in

thia Lease (except with respect to any financial

institut,on (public or private) which will be

providing the financing tor th& Project). Tenant

shall notify Landlord o! any claim asserted against

Tenant for which Tenant shall expece indemnification

under thia Lease and shall deliver to Landlord the

original or a c.rue copy of any summons or other

56
process, pleading, or notice issued l.D any suit or

other proceeding to assert or enforce any such cla1m,

within five {S) business daya after receipt of notice

ot such claim or of such summons or o t her proceoe ,

pleading or notice. Landlord sha l l i mmediately
proceed, at its coat, to defend any such suit with

attorneys of its own selection. SUbject to the all

r4ghts of appeal, Landlord shall satisfy any

judgment rendered againet Tenant in connection with

any claims and liabili ties tor which indemni fication

by Landlor d co Tenant ie provided in t his Leaee. --

S.ctioo Twenty-Five . Entry oo Premise• bx

- --Tenanc shall permit Landlord and ite

authorized representatives to enter the Demiead

Premises at all reasonable times for the purpose of

inapecting the same. Any entry by t he Landlord shall

not unreasonably interfere with the conduct of the

Tenant's business, and, except in cile event of an

emergency, ent.ry may be made only upon reasonable

prl.or notice c.o Tenant but. in no event leso than

for~y-eight (48) houre . --------------- - - - ------ --

Sec tion Twenty- Six . &•toppel Cextifi c:ate• .

----- •W4thin twenty (20) daye after the requeot of

either party, at any time or from ti1lle to time,

Landlord and Tenant shall execute, acknowledge and

deliver to che other a writ.ten instrument,

(ii certifying that this Lease has not be en modified

and ie in full force and effect or, if this Lease

ahall have bee.n modified, that. t.hie Lease is in full

force and effect as modified, stating euch

moclification(sJ, Iii) Gpt1cifyin9 the dates to which

57
the ~nt has been paid, (iii) stating whether or

noL, to the knowledge of the party executing such

instrument, the other party hereto is in default

and, if such party is i n default, stating the nature

of ouch default, and (iv) atating any other factual

matter• relating to this Leaae as shall be reasonably

requested.---------------------------- ----- -----

-·-- .. Section Twenty·- seven. Poree Majeure . .............. ..

------(a) If Landlord or Tenant shall be delayed in,

hindered in or prevented from, the performance of

any act required hereunder {ocher than performance

requiring the payment of a aunt of money) by reaaon

of acts of God, strikes, lockoucs, labor troublee,

ina.bility to procure materials (for reasons other

than financial inability), failure of power, natural

dioaetera, restrictive governmental lawe,

regulations or actions, riots, insurrection, the

act, failu•e to act or default of the other party,

war or other reason beyond auch party• s control,

then the performance ot such act shall be excused

for the period of the delay and the period for the

performance of any such act al'lall be extended tor a

period equivalent to the period of such delay. ·---

------(b) Tenant rnuet notify Landlord, witlu.n thirty

()O) daye of the event considered to be an impediment

tor the cont:i.nuation of t.he conscruction and/or

operat.ion of the Project, 11pecifyi11g the nature of

the event, the date of occurrence, and the waya in

which it a!fected the progress of the Project.

Landlord will evaluate the aituation and will reach

an agreement wich Tenant •• to the tiine , if any,

dur~ng which cile Term to tiniah the Project will be

58
suspended.--- - ---- ----------------- ---------- ---
---- -S.ct:J.oa Twenty-Ei 9 bt . Not:J.cea . -- --------- ---

----- -- la) All notices, consents, approvals ,

submissions or demands given under this Lease or

pursuant to any law or governmental regulation, by

Landlord to Tenant or by Tenant to Landlord, shall

be i n writing. Unleea otherwise required by law or

9ove:rnme ntal regulation, any such notice, consent,

approval, submission or demand shall be deemed given

if sen~ by messenger or by registered or certified

mail, return receipt requested, postage prepaid as

foll°"'s,----------------- ----- ----- -- ------- -----

- - ------- 111 if to Landlord, to, PUerto Rico Land

Adm.L'<"listration, PO Box three, six, three, seven,

six, seven (363767), San Juan, Puerto Rico, zero,

zero, nine, three . six, dash, three , seven, six,

seven (00936-3767}, Att. executive Director.------

--- ------ (ii) it to Tenant, to: Hot el caaa

I
Provincial, P.O. Box ~~~~~~~ · san Juan, Puerto
Rico, zero, ~ero, Attention: Sr. Arnold

eenus Silva Kith copy to, McCOnnell Valdes, LLC, I

Avenida Munoz Rivera two hundred and seventy (i70),

Hato Rey, Puerto Rico zero, zero, nine, one, eight

(00918), Att . Silvestre M. Miranda .

------ ---Ei ther party may change t he name(s) and/or

address (ea) for the above by notice to the other.

During the period ot any postal strike or other

interference with the mails, pereonal delivery shall

be substituted tor regiatered or certified mail.

Notice, consents, approvals, subraissions and d.emand.e

will be deemed given when delivered, if by messenger

or when d~poeited with the united Staees Postal

59
Service, if mai l ed.-- - -- - --- ----- ------ - - - --- -----

- ------(b) tf the ownership of the Demised Premises

or the name or address of the part y entitled to

receive the rents reserved in this Leas e s hall be

changed, Tenant may, until rec eipt of proper noti ce

of such change from t.be party entitled to receive

the Rent i mmediatel y preceding such change, continue

to pay the Rent reserved i n this Lease to the party

to which, and in t.he manner in which , t .h e laat

precedi ng installment of Rent was paid, and s uch

payment shal l be deemed made to Landlord um:.il Tenant

receives proper notice 0£ such change.----- ----- --

--- - -sec tion Twenty-Ni ne . InUn tionally left

blank-

- - - - - - -Section Thir ty . Performance by Subtenant . -

-- -----Any act required or permitted to be performed

by Tenant pursuant to the terms of t his Lease

(including the payment of Rene or any other sum

requi red to be paid by Tenant under this Lease) may

be performed by any s ubtenant of Te nant. occupying

a l l or any pare of the Demised Premises, and the

performance of s ·uch act shal l be deemed to be

perf ormed by Tenant and s hall be accepted by Landlord

as Tenanc •s acc.------ -----·-- ----- - ---- - ------ -·-

- - • - .. Se cti o n Thirty-One. Tenant No t t o En.c umber Fee

Estate.------------------------ -------------------
---- ~-- Tenant shal l have no power to do any act or

make any contract 111•h ich may create or be the

fowtdation for any l ien, mortgage or other

encumbrance upon t•1e reversionary or other ~atate of

Landlord, or of the f ee interesc of Landlord, in the

Demised Premises; provided, however, that the

60
foregoing provision;, shall not prohibi t Tenant from

mortgaging and assigning che leasehold estate and

other rights of Tenant created hereby , including,

without limitati on the rights granted to Tenant

under section Twenty-Nine hereof, nor from

mortgaging ics interest in the Improvements situated

or erected by Tenant on the Demised Premises as

provi ded in this Lease. -·------ -------------- -----

-- ----Section Thirty-Two. Quiet :tnjoyme.nt; Certain

Representations and Warranties of Landlord . -------

-- -----(a) Landlord covenants that Tenant shall

quietly have and enjoy the Demi sed Premises during

the Term of this Lease, 'l1ithout hindrance or

molestation by anyone claiming by, through or under

Landlord, subject, however, to the terms. covenants

and conditions of chis Lease.-------- -------- -----

----- -- (b) Landlord represents and warrants to

Tenant that it has c.he power and authority co execute

and deliver this Lease and to carry out and perf orm

all covenants to be performed by it hereunder and

the execution of this Lease has been duly authorized

by the Board of Directors of Landlord and this Lease

is a valid and binding obligation of the Landlord

and ics successors and ass igns , and does not conflict

or contravene any other obligacion or agreemenc ot

Landlord. Landlord further represents and warrants

to Tenant that as of the date of execution of this

Deed:-----···------ ---------------- ---------------

--- ------ ( i) chat, to the knowledge of Landlord a rtd

according co a title study prepared by

dated
(_), t wo thousand fifteen

61
(2015), there are no exceptions to or liena or

encumbrances on the title ot the Demised Premise•,

e.xcept for those shown on the title study; --------

---- (ii) that there are no special or general

tax assessments affecting or pending against the

Demised Pre~ises other than those assess~ente which

Landlord is concest1ng in good faith by appropriate

proceedings and for which Landlord has made adequate

I
reserves;---------- ----- ---------------- ------- ---

---- - - (iii) that, to tho knowl edge of Landlord,

there io no pending, proposed or threatened,

condemnation, eminent domain or similar proceedings

affecting the Demised Premises or any part thereof

---------(iv) that, to the knowledge of Landlord,

the Demised Premises are free from encroachmente,

overlaps and boundary line disputes; -- ----·-·-····

····-·---(v) tha t, to the knowl edge ot Landlord,

there are no underground. tanks or other containers

in or on the Demised Premieea. and, t.o t.he beat of

Landlord's knowledge, there have never been any ouch

tan_k e or ocher containers in or on t:he Demised

Premioes. The Landlord has not received and, to the

beat o! Landlord's knowledge1 no previous owne~ haa

received any notice or allegation t:o such effect;

and-------------------------- "
---·····-·(vi) ohao with respect to the De11ieed

Premises, or any part thereof, Landlord ha.a not

violated, or r~ceived a notice or charge asserting

any violation of (nor to the beso of Landlord 's

knowledge has any prior owner or occupant ot the

Demised Premises violated or received a notice or

charge assereing any violation of) any applicable

62
federal , commonweal th or local environmental law,

rule, regulation or ordinance.---·---- -------- ----

- ------(cl If Landlord shall be :ui default under

any 0£ the proviaiona of this Section, Tenant, in

addition to any and all remedies it may have at law

and/ or in equity, may, at its sole discretion ,

terminate this Lease upon thirty (30) days written

noti ce to Landlord; provided, however, that i f s uch

default is susceptible of be i ng cured and during

such thirty (30) day period is in fact cured, or if

such default cannot Wl.th reasonable diligence be

cured within auch period of thirty ( 30) days, if

Landlord proceeds with all reasonable diligence to

cu~e the same and thereatter to prosecute the curing

of such default with all reasonable di ligence, then

such notice of termination shall be annul led and

this Lease shall continue in full force and effect,

without: prejudice, however, co any rights which

Tenant. may have to recover damages suffered aa a

result of such default. -------- -------- ----------

-- ---- (d) When used in this Section 'l'hirty-'I'.ole, the

knowledge of Landlord is limited to that of the

Exe cuti ve Director, the Head of the Legal Division

and the Head of the Planning Division of the Puerto

Rico Land Administration. ----- -------- -----------

--···-{e) &nvi roruaental Condition of Pr operty . --·

- ---------(;) The Property ie free from Hazardoua

Substances and in full compliance with &11

Snvironmenta~ La.wa. The t.ent •environmental LawM

shall include any statute. law, treaty, rule,

resulat.ion, ordinance, code, permit. enactment ,

injunction, order, writ, decision, au ~horization,

63
j udgment, decree or other legal or regulatory

determination or restriction by a coure or

governmental authority of competent jurisdiction

relating directly or indirectly to (i) the

protection of the environment {including air, water

vapor, surface water, groundwater, drinking water

supply, surface or subsurface lat1d); (ii) the

protection and occupational heal th and safety of

workers and employees; or (iii} ch~ exposure to, or

the use, transportation, storage, recycling, reuse,

creacment, generation, l abeling, protection,

release or disposal of Hazardous substances~ and

the term ~Hazardous substancesN shall mean any and

all hazardous materials, toxic substances,

chemicals, contaminants, pollutants, solid wastes

or waste, as defined by any Environmental Law, and

also includes, but is not limited to, any asbestos,

lead-based paint, mold, radon, petroleum, petroleum

products, petroleum byp»oducta, reactive
materials, ignitable materials, corrosive
materials, hazardous chemicals, hazardous waste,

toxic substances, toxic chemicals, chemicals,

pesticides, radioactive material s, polychlorinated

byphenols1 111ethane, soil vapor, gas, linoleum. and

surface and subsurface man- made media left at or

underneath ~he Property, and any other element,

compound, mixture, solution, substance, material,

waste or the like "'hich may pose a present or

potential danger to human health and aafety, biota

or the environment.--------- ·-· - ·-- ------- ----- - --

----------{ii} In the event that any Hazardous

Substance is found at, on or under the Property

64
 existing prior to the date of execution of this

Lease, Landlord shall be responsible , at its 0 1,m

expenae, for the remediation, c l ean-up and

restoration of the Property i n accordance with all

B11vironmental Laws. Whi l e performing remediation,

clean-up or restoration activit i es in the Property,

as provided in this subsecti on, Landlord shall take

necessary measures and coordinate with Tenant the

works to be performed in order to avoid or minimize

i nterruptions to the operations and functions of

Tenant's businesses at the Demised Premiaea. --· - -

- ----Section !l'hirty-Three. Representations and

Warranties of Tenant. Tenant hereby represents and

warrants that1 --------- ------ ---- - ---------- ----·

;i -------(a} txis tance and Capacity . Tenant i s a for

// profit, l imited liability company rightfull y

constituted under the la\\'S of the commonwealth of

Puerto Rico, with tull po.,1ers and capacity to

execute this Lease, and to conduct its busines s

act i vities. -------- --·-------- -------------------

------- (b) Authoriza tion and No Contravention. The

delivery and performance by Tenant, as contemplated

by chis Lease , has been duly authorized, and does

not: conf l ict nor viol ate any other agreement or

obligation of Tenant. -- --------- - --------- --·····

-------(c) Research and/or I ndependent Study by

Tenant. Tenant hereby acknowledges and guarantees

that it is a developer and entrepreneur skilled and

trained for the purposes specified in this Lease,

~1ho has researched, performed and considered a l l

aspects and nature of this transaction, and the

Demised Premisee subject to this tr~ nsact ion .

65
Tenant is sufficiently aware of the condl.t.ion of

the Demised Premises and of all governmental

requirements for the development of the

Improvements. Tenant has determined that the

condition of the Demised Premises is satisfactory

and adequate for the construction and operation of

the Project and accepts the Demised Premises in its

present condition without any reservation on ita

part (•aa is~}, recognizing that Landlord has not

made any representation or warranty in connection

wich the condition of the Demised Premises

including :its environmental condit.ion o~er than

those expressly contained in t.bis Leaee and

anci llary documents. ···········-------- --- -------

··-- ---(d) C0111.pl.iance. Tenant wi ll, at all times

comply with ite obligations , agreomenta , terms and

conditions eetablished in this Lease, as wel l as

wich all laws, regulations, ordinances, permits and

applicable legal provisions, including

environmental requirement.a for cleanup. remedial

actions and or micigacion measures, to the extent

arising from cauaea attributable t.o the Lease Term.

Tenant shall have the right to challenge through

ad.~inistrative or judicial proceedings, any and all

actions, requirement&, penal ties, orders, or

i nquiries i nitiated, issued , or imposed by

municipal, st~t• or federal governmental agenciea.

· ······(e) Valid Obligation . This Agreement

constit.ut.es a valid obligation for Tenant and for

it.s successors ; •ubject to compliance, if

applicable, with bankruptcy laws and creditor

66
rights . -------------------- · ------ ----------
........... (f) Toxic Baz.ardoua or

Pollutanta.

------- --(i} Tenant will uoe the Demised Premieea

•olely for the use agreed upon herein, and is hereby

forbidden from performing a.n y tasks tchat may have

an adverse environmental impact on the Demised

Premises, such as contaminating the Demieed

Premises with hazardous substances, spills or

improper storage of toxic materia ls or chemical

products that could adversely affect the

environment of ~he Demised ~remiaes and surrounding

areaa. Tena.'lt shall not inatall underground storage

I

tanke of any nature at the Demised Pre-misea and

ehall not install wells without Landlord's previoua

authori2acion. Tenant hereby declares that the

operations to be conducted on the Demised Premises

shall occur in such manner eo as to protect the

enviroM1ent from contamination th.at could be cauaed

by Tenant andfor other individuals or entities with

access to che Demised Premises throughout the

duration of this Lease.-· -------- ------- ----

------ ----(ii} curing the Term of this Leaee,

Tenane ehall not incur nor permit anyone to incur

in a violacion of any lawa regarding environmental

conditions within the Oem1eed Premises, including

the aurtace, soil, subsoil, groundwater, storage or

disposal of any toxic aubetance, dangerous or

polluting, over, undar, o.r in che proximity ot the

Demieed Premises. and eh.all immediately take any

necessary remedial actions it such a.re needed, ae

required by law . Tenant ehall deliver to Landlord

67
a c:opy of any report , proj ect, study or

environmental assessment that is performed i n the

Demised Premises. Tenant shall not enter into any

agreement., arrangement or commir.ment which could

affect Landlord' s interests in the Demi sed Premises

or i n this Lease, without Landlord's prior wr itt en

consent. -- ----- - - --------- --- ------- --- - - -- ------

---- -----{iii) I f t he use of the Demi sed Premises

could lead to i ts contaminar.ion duri 11g the Te r m of

this Lease, it shall be the sole responsibil ity of

Tenant to bear t he costs of the c l eanup of the

Demised Premises , i n addition to the damages and

risks caused by such activity and the f i nes and

administrative responsibi lity imposed by pertinent

environmental protection agenciea. Landlord is

hereby expressly released of all r espons i bil i t y

regarding the aforementioned and Tenant shall

defend, release and hol d Landlord harmless thereof .

Tenant shal l have the right to challenge through

administrative or judicial proceedings, any acti o n,

r equi rement, penalty, order, i nqui ry, or

investigation initiated, issued, or imposed by

municipal, state or federal goverr~menta l agencies. -

----- ---- (v) If at any time this Lease ceases,

termi nates or somehow ends, "l'enanc shall not be

released f rom liabi l ity to Landlord, subsequent

tenants or buyers of the site or t o any other

i ndividuals or entities that could f i le a c laim as

a result of ehem being af fec~ed or otherwise harmed

by t he concamination that coul d have been caused on

t he Demi sed Premises or on adjacent premises, by

any of the activit.ies performed on the Demised

68
I~
Premises by Tenant during the duration of this

-------lg) Ll.tl.gatl.on/Arl>itrati on . Except as may

have been previouely informed co Landlord. 1n

writing. there are no (a) actions, suits, or

proceedings pending before the courts or

administrative, quasi-judicial, or governmental

agenc i es, (b} arbitration, or (c) me diation or

dispute resolution against Tenant that may affect

its ability to eoD\ply with its obligations under

this Lease. -----

-------(b) Tenant expreealy relieves and safeguards

Landlord, its agents, offi.cers, directors ,

employees and/or consultants, from a l l l iability of

any nature regarding the Plans, including any

claim, action or lawsuit that might ari se out of

the Plans, either because of defects i11 t hem, or

claims regarding their production cost or value, in

case Tenant desist t:rom the Project. or does not

obtain cbe neceseary approvals from the pertinent

municipal. scate or federal governmental agencies

wic.hin the term hereby agr~ed, required by l aw or

current regulatione, or tor a cause of action that

subs equently arises atter the approvals, for any

damages, of contractual or tor t. nature, coata,

expenses, tees, or penalties t hat may arioe

concerning this matter.

----- Section Thi.r ty- Four . Disputes . The parties

agree to submit any dispuce arising out of,

connected to, or related to this t:e.as.e to the Court

of First In.etanee in San ~uan Puerto Rico. -

----- Section Thirty-Five . De• t ruction. -----------

69
------(a) [lamage• or Destruction of Property. The

loss, d.amage. or deacruction of che Improvements,

for a.~y reason, will not cause che termination of

this Lease, except as expressly stated in this Lease,

or exempt the Tenant from payment of its Rent

obligations. In the event chat che Improvements

i ncur in any loss or damage, Tenant shall notify

promptly the insurance company and Landlord, and

shall pursue all claims in conformity with the terms

and cond.l.tions of the in.eurance policies. ---------

- - - - -- (b) Partial or Col!lplete Destruction of the

Property . In the event that the Improvements on the

Demised Premises are damaged, destroyed or rendered

untenantable, partially or completely, by f ire or

other casualty, Tenant shal l begin the

reconstruction of the Improvements and ehall

compl ete the reconstruction of the Improvements with

the disbursed amounc corresponding co the Propercy

rneurance if auch &moWlt is suf f icient. t.o fully

reconstruct. the Iq:>rovements t:o t.heir prior I

condition. If the insurance proceeds are not

sufficient to cover the cost of the reconstruction

Tenant shall complete the necessary amount tor the

reconstruction with ito own funds . Nonetheless, if

the destruction is ot euch magnitude that , (i) the

reconstruction cost exceeds thirty percent (30t) of

the tot.al replacerr.ent co•t (e.x cluding the land cost,

excavation, and piling); (ii} the construction

period interrupt• the operation of t.he Hotel for a

period exceeding eighteen (18) months; or (iii) the

destruction occurs within three (3) years of the end

of the Term. Tenant will ~ve a righc to not conduct

70
the reconstruction of the Improveme..."1.t.s, asaign the

inaui:anee disbursement to L.andlord, and end the

Term.--------- ----- ------ ------ ------- ----------

----- Section Thirty-Six. E:m.inent Domain. ---------

·······(a) (i) In the event o! a t aking for any

public or cr.iasi-public use by right of eminent domain

or by exercise of purchase in lieu t.hereot Ca

"Takinq•) of the whole o! the Property and the

Improvements thereon, this Lease shall terminate aa

of the date of such Taking, the Rent will be prorated

to the date of the Taking, and the Parties will be

relieved from their obligations, except for the

obligations that expressly persist.···············

········(ii) If, in the event of Taking o! leee

than the entire Property and the Improvements

thereon (a "Partial Taking" ), Tenant certit ies that

the damage or loss euftered from Taking cannot be

restored or replaced in such a manner so that che

remainder of such property aubject to a Taking can

be etteccively us~ to carry on Tenant's busineee,

then Tenant shall have the right and option to

terminate this Lease. Such termination shall be

etfocted by notice from Tenant given not more thAn

one hundred eighty (180) daye after the date of the

veeting of title and shall epeeity a date oot more

than ninety (90) days after the giving of such notice

&.a the date of such termination. Opon the date

specified in such notice , this Lease and all right,

title and incerest of Tenant hereunder ahall

teminate, and Tenant shall make payment of the Rent

and otr.er charges payable by Tenant hereunder,

juatly apport.ioned: to the date of ~ermination, and

71
 11

Landlord and Tenant ehall be fully released and die·

charged from all further liability and reeponsi·

bility to one another. It on the other hand, Tan&nt

certifies that the Partial Taking does not

effectively impede Tenant from conducting ite

business, then this Lease will remain in full force

I
and effect wich regard• to che non·expropriaced

part, except that the Rent, as applicable, will ba

pa.id in its entirety to the date of the taking, and

from then on will be proportionatel y adjusted based

on the reduction of the area ot the Demised Premise•.

---- - ------ ------------- - ------------ --- ----

• • • · · · • (b) :n the event of a Taking resulting in

t.he termination of this Lease pursuant to the

provisions of paragraphs (a.) (i_l or (a } {ii) of thia

{;
Section, and with regardo to the Partial Taking, the

parties hereto shall cooperate i n applying for and

in prosecuting any claim for such Taking and the

aggregate ne~ award, atter deduc~ing all costs

expenses, includJ.ng, wit.bout limitation, actorneya•

tees, shall be paid to Landlord and Tenant (subject

to the rights of any mortgagee of t:he leasehold or

ot any other intereete or rights ot Tenant hereunder

or ehe rights of any mortgagee of the Improvements

on the De~ised Premises) ae follO'frfS: - ------ ----- --

( i) All amounts so awarded or paid for the

Property shall go to and •hall be the sole property

of Landlord;················· ····· ········ ·····

··· • (11) All amounts so awarded or paid for the

unexpired portion of thia Lease shall gc to and ehall

be che sole property of Landlord;·················

-·--(iii) All other amounts so awarded or pa.id for

72
the Improvements on the Property shall be

diatributed between Tenant. on the one band, and

Landlord, on the other hand, provided based on the

number of years left on the Term, as provided below

(eu.bject, however, to the rights of any mortgagee ot

the leasehold or of any other rights or interest• ot

Tenant hereunder or the righte of any mortgagee or

the buildings and Improvements on the Land);------

----(iv) The Landlord's interest will consist ot (a)

thio Lease, (b) the Rent, as applicable, (c) the

Oemised Premises, without Improvements, and {d} its

interest in Iatproven;ente;-------------------------
(v) 'M1e Tenant's intereat will consist of: (al

thie Lease, (b) its propriet:ary inc.erest in the

Improvements and in the ongoing business, throughout

tho Term, and (c) the Operator• s interest in the

Project, which the Tenant ia obligated to pay to the

(vi) Any compensation awuded on account of che

taking of the Improvements shall be distributed

between Tenant, on the one hand, and Landlord, on

I
the other hand (subject, however. to the rights of

any mortgagee of the leasehold or of any other righto

or interests of Tenant hereunder or t.he rights of

any 1110rtgagee of the buildings and Iiq>rove...,nts on

the Land) . The amounts corresponding to the Landlord

and Tenant will be divided as follows: (a) during

the firat thirty ona (31) yearn of the Term, a.ny

compensation awarded on account of the taking of the

Improvem&nts shall co=espond to the Tenant, and (bl

frCll year thirty two (32) through year fifty (SO),

any compensation awarded on account of the taking of

73
 the Improvement-s shall be diatribuced between Tenant

and Landlord, with Tenant• o share at nJ.Jlety five

percent (95\) on year thirty two (32) and reduced by

five percentage points (St) every year until it is

five percent (St) on year fifty (SO) . --- ---- ----

----- Section Tb~rty-S•V9n . Miace11aneous . ------

-·-···(&) Litigation with the COGlmOnwealth of

Puerto Rico. Tenant certif iea thac. as of the date

ot execucion of thia Leaee. it has no litigat.ion

whatsoever wi th the Commonwealth of Puerto Rico ,

its agencies or instrumental ities.--

- - - - - - {b) E"c"o"n"'o"m"'i"c'--'I"n""t"e"r"e"a"t"a'---'o"f' - -Go=v'-e'-'rn=m"'e

"'n"'t"'a"'l;
!i!nployees. --- --------- --

-····-------Ii) Tenant certifies that as of the

I /~ da.Le of execution of thia Lease, no officer or
v public employee with authority to assess, consider,

approve, authorize or execute this Lease in

representation of Landlord. nor any member of it•

fam,i ly unit. has or baa had during the previous

I
four (4) years before aseuming his posi~ion , direct

or indirect economic i nterest i n Tenant or in any

ot its aubaidiaries , parent company or officers. --

(ii) Tenant certifies for itself and for ita

members, agents and employees. and the mem.bere ot

their family units, as defined by Ac• twelve (12)

of July cwency-four (24 ,, nine~een eighty-five

!1985), as amended, that they have not held any

position as an employoe of t l'le Landlord, duri ng the

two (2) years prior to the execution of thi a Lease.-

--------~---( iii) Tenant certit ies for itself, and

for ita meo.bers, agent• and employees, and the

mend>era of their famil y unit•. as defined by Ac~

74
twelve (12) of July twenty-four (24), nineteen

eighty-five (1985), as am~nd&d, that no official or

employee of Landlord has or has held during the

four (4) years prior to occupying U>eir position,

a direct or indirect economic interest in Tenant,

and Tenant further certifiee thac i t does not know

of any employee of Landlord who is part of or has

any interest in the profits or benefits of thie

- ------------(iv) Tenant acknowledges, represents

and warrants that no official or employee of

L.a.ndlord bas a direct or indirect economic interest

in Tenant ' s righta under this Lease in accordance

with the provieione of Act eigh~y-four (84) of June

eighteenth (18Lh) two thousand two (2002), as

amended, as aloo known aa the Code of Ethics for

Contractors ~the "Code of Bthics") • '"hich Code of

Ethics Tenant herein certifies it has received a

copy of, read, und•r•tood and complied with at all

times prior to the execution of this Lease and will

subsequently cornply with it in its entirety. - - - - - -1

- - -- -- (c) Crim1"nal Convictions. Tenant certifiea

and ·..,arrants t.bat, on the date of execuc.ion of t.hia

Lease, neith~r Tenant nor any of ita members,

directors, otficero or management employees, have

been convicted, and that Tenant has no knowledge ot

the above said or that any of the above mentioned

individuals hae been investigated. accused or

convicted in a criminal process in a scat.e or

federal cour~ for crimi.nal charges or an offense

that invol ves the actua~ misuse of funds or public

propert.y, or for any felony or misdemeanor

?$
...ntioned in Act four hundred twenty-eight (428) of

two thousand four (2004). It is expresaly

recogni2ed that this certification is an essential

condition for this Leaee. If the certification ie

false, it: shall constitute sufficient. cause to

empower Landlord to immediately te.rmi.n ate thi•

Lease. and, if such conviction were relaced ~o thia

particular transaction, Landlord will have the

right to require Tenant to reimburse any amount ot

money that would have been received from Landlord

········(i) If the status of Landlord or it•

members. directors. officers or management

employees regarding the aforementioned criminal

convictions changes at any point during tha Term of

this Lease, Tenant shall notify Landlord

immediately. Failure to comply with such obligation

to notify will constitute a violation of thie

clause and will result in the termination of this

·--·(d) rncome Tax Return. Tenanc certifies that

on the date of execution of this Lease, Tenant has

submitted all income tax returns required in Puerto

Rico, during t:.he last five CS) years, and t:.hat

Tenant has no debt Cas detined herein) with the

Commonwealth of Puerto Rico. or, if any eueh debt

exiato, it is subject to a payment plan approved by

the appropriate governmental agency, and thaL

Tenant or its principals, aa applicable, are up to

date .,ich the terms of auch payment plan. Por

pu.rpoaee of ~his Lease, a tax debt means any debt

or income, excise tax, property taxes (peraon.&l or

76
real), special assessnente, lice~se fees, and

withholding t.axes. aa required by law.

unemployment. disability and motor vehicle driver•a

insurance (if applicable).-· · · · · · ··----------

. · ........... (e) Submission of Certificates . Tenant

agrees, wi~h respect to itoelf, to su.bru.t to

Landlord, simultaneously with the execution of thl.e

lAaaa: (i) che Filing Certification Form (fonn SC

two thouoand eight hundred eighty eight (2888)) for

tho past five (5) yearn, (ii) a Debt Cert ificate

(Porm SC three thousand seven hundred thirty seven

(3737) or any other form that could be adopted for

euch purpose by the Treasury Departinentl, (iii) any

I
applicable debt: certificate• regarding Tenant

ia1ued by the Municipal Revenues Collection Center

(CRIM), (iv} any applicable debt certificate issued

by the Department of Labor and Human Resources

related to unemployment, disability, and motor

vehicle driver's insurance, (v) any applicable debt

certificate by the Seate :rnsurance Fund

Corporation, and (vi) any applicable debt

certificate by the correaponding municipality, aa

applicable; provided however, that if Tenant

requested such cer-tificacee but has not r:eceived

them AS of i:_he date hereof, Teruont will submit

copiee of che applicationa filed at the appropriate

governmental office, duly stamped as filed;

provided th!!> Tenant submits said certificates no

later than sixcy (60) daye from the date of

execution of this Lease. This Lease may be

terrainat.ed by Landlord, and Tenant hereby consent•,

77
in the event that Tenant fails to submit the

certoificates within eaid sixty (60) day period.---

--- --- (f) Govenu.n51 Lav . This Lease and the

perfonnance thareot ahall be governed, interpreted,

construad and regulated by the laws of the

Commonwealth of Puerto Rico.--------- ------- ------

- - ----(g) Partial Inv&ll.dity. If any term,

covenant, condition or provision of this Lease or

the application thereot to any person or

circumstance shall, at any time or to any extent, be I
invalid or unenforceable, the remai,n der o f this

Lease, or the application of such term or provision

to persons or circumaeancea other than those as to

which i t ia held invalid or unenforceable , sh.all not

be affected theraby, and each term, covenant ,

condition and provision of this Lease shal l be valid

and be enforced to the fullest extent permitted by

law.---------------
------- (h) Intexpr•tation . Wherever the singular

number is used in th1e Lease. the same shall include

the plural , and the llA&culine gender shall include

che feminine and neuter genders, and vice versa, as

the context shall require. The term 11

Landlord"

whenever used in this i..eaae shall mean only the owner

at the time of Landlord's interest in chis Leaae,

and upon a sale of the interest of Landlord in this

Lease, the purchaser ehall, during the term of it•

ownership of its eeeate in thia LeaBe~ be deemed to

be Landlord and to have assumed tbe obligations of

Landlord in this IAaae. The table of contents,

captions, beading• and tit.les in this Lease are

$Olely for convenience of reference and ehall not

78
 affect its int.e.!"pretation. 'Mi.is Lease sball be

construed without r egard to any presumption or other

rule requi ring construction agains t c.he party

causin g this Lease t o be drafted. If any words or

phrases in chis Lease s hall have been stricke n out

or otherwise e l iminated, whether or not any other

words or phrases have been added, this Lease shall

be construed as i f the words or phrases s o stricken I

out or otherwise elimi nated were never i nc luded in

this Lease and no i mplicatt.011 or inference s hall be

drawn from the f ac t that said words or phra s e s were

so atr1cken out or otherwi•• eliminat ed . The term.a

•herein,• •hereby,• •hereunder, • •hereof• and other

words of ei=lar import used in tlus Lease, shall be

Ji conatrued co refer to thia Leaae as a whole and not

to a ny

subdivision,
particul ar section ,

expressly
parag raph , or

unless so s tat ed . All

exhibits attached to ehi• Lease shall be dee""'d to

be a part of ehis Lease.---- - ---- ----- - -- ------- --

- -- -- - (i) Ent.l.re are no

repreeentations , a greements, arrangeme n ts or

UJldctretandings , o r a l or wri tten, be twee n t h e parties

relating to cile subject matter o f chis Lea se which

are not ful ly expressed in this Lease . This Leaoe

cannot be changed or teruiiNlted orally or in any

manner other t.han by a written agreement. executed by

both parties . ---- - - -------- - ~ - --- ----- -- - ------ - - -

---- (j) Parties. Except as expressl y p rovided

to the contrary in t hia Lease , the covenante,

condi tions and agreement• contained in this Leaee

sha l l bind and inure to the benefit of Landlord and

Tenant and their respective heirs . succeasor• ,

79
administrators and assigns. ---- ------ -- ----- - · -

------ - (k) Brok•r aqe. La,n dlord represents and

t.'a.rrants to Tenant that it. ha.a not deal& with any

broker in connection wit.h, nor has any broker had

any part in bringing about, this Lease transaction.

Landlord does hereby agree to indemni fy, defend and

hold Tenant harmless from and against an y and all

claims by any broker or other person for a commission

or other compensation in connection with this Leaoe

if such claim ie based in whole or in pare. upon any

act of Landlord or its representatives. and from all

losses, liabilitiee. costs and in

connection with ouch claims. including. without

limitation, reasonable attorneys• fees.-----------

-------(1} Con sent•. Whenever the consent of

Landlord is required or permitted co be given under

this Lease, Landlord covenants that auch consent

shall not be unreasonably withheld, denied,

condicioned or delayed. ·-- · -· ------- - -------- ·····

- - ---FIFTH : Bxpen••• of the Deed. Tenant. shall

pay the cost of (i) all nocarial fees for the

preparation of thia Deed and (ii) all internal

revenue stamps required to be affixed and cancelled

on the original and tiret certified copy of this

Deed and the fees tor the prese ntation and

recor dation of the first certified copy of this

Deed in the Registry. •

----- SIXTH :. R!qu••t to the 'Registrar . The partiee

hereco request that the Registrar record the Lease

effectuated herein in favor of Tenant and the

constitution of a Right of Pirst Refusal in favor

of Tenant. --- - ---- -

80
......... • ... SBVENTB. Consent to Fixture Fil.i.ng • The

Landlord h@reby consents to the execution and

recording of the neceooary fixture filings and/or

any extension or moditicationa thereof over the

Property in favor of any lender or guarantor of the

Tenant in regards to the development of t.he Demised

· · · · -&IGHTB : Valuation . P'or recordation purposes

only, the pat"ties hereto attribute a value of ONB

THOOSANO DOLLARS ($1, 000) to the r ight of fit"at

refusal' and ONE THOOSANO DOLLARS ( $ 1 , 000) to the

consent to fl.XtUl"e filing . - - ------- --- -------

NTI<TH : Additional. Documenution . The partiee

hereto agree to execute and deliver any additional

inatruments and documenta that may be necessary to

record the transactions eontemplaced by this Deed in

the Registry . Any cost and expenses incurred in

eoMection with the execution of any additional

inatniments and documente shall be for the accow>t

of the requesting party, except that each party shall

bear the feea of their respective counsel.----

··-·- TENTH : Internal Revenue Stamp s and Voucher•.

Pursuant to the terms of Act. Number Seventy·Pour

(74) of July ten (10), two thousand ten (2010),

this Lease, ics cert.itied copies and it•

recordation in the Registry ia ninety percent (90t)

exempt from che payment of internal revenue stamps,

legal assistance stamps and ~ecord ing fees

applicable to ics execution and recording, An

original duplicate certificate of exempt.ion

execut.ed by the Execut.1 ve

Director of the PUerto Rico Tourism Company. 1•

81
attached to the original of this Deed and made to

form a part hereof.------------------ ------- -----

-- ------- ---· ... ........... WAR:NrNGS ................ ........................ ..

I, che authorizing Notary. made to the appearing

parties the necessary legal warnings concerning the

execution of this Deed and they were fully advised

by me thereon. I further advised t he appearing

part>.es as to their righ t to read this Deed by

themselves, which they did, and to have witnesses

pr~sent at itE execution, which they waived. -----

I
- - •• - - - - - - - - -ACCl!PTAllCE llJID IXECIJTZON - - - - - - • • - - - -

-- ---After having read the contents of this Deed,

as stated in all preceding paragraphs, the

appearing parties fully accept this Deed and ratify

and confirm the statements contained herein as the

true and exact embodiment of c.heir stipulations,

terms and conditions, whereupon the appearing

parties sign this Deed before me, the authori•ing

Notary, and pl&ce their initials on ea ch and every

page ot this Deed.------------------- ----- -----

---- - To all of which, as well as to everything

contained or related in this Deed, =, the Notary,

DO CERTIFY AND GZVll FAITH . ---- - -- -- --····--------

82
 EXHIBIT B

URBANA: Barrio San Juan de San Juan Antigua, C!blda: 9,904.608 metros
cuadrados. Llnderos: Norte, by the "Manlcomlo Annex• property of the Institute of
Puerto Rico Culture. Sur, by Parcel B· 1 of the Campo del Morro area property of the
Commonwealth or Puerto Rico. Este, by El Morro road which separates the described
parcel from the Ballaja Barracks property. Oeste, by Parcel B·l of the Campo del
Morro area property of the Commonwealth of Puerto Rico.

S3