11055804.6
TERM SHEET BETWEEN THE CITY OF SANTA MONICA (“LANDLORD”) AND EPR PARKS, LLC (“TENANT”) WITH RESPECT TO PACIFIC PARK Set forth below are the principal business terms for the amendment and restatement of that certain Amended and Restated Lease Agreement between Landlord and Tenant dated as of January 1, 2000 (the “Current Lease”). The parties contemplate that a new lease will be signed based on the Current Lease, as amended by the terms set forth herein and additional minor modifications as appropriate to eliminate any inconsistencies and conflicting provisions in the Current Lease.
1. PREMISES: Tenant will continue to lease the 70,000 square foot area of the Newcomb Pier known as Pacific Park. Tenant also occupies a small area adjacent to the Premises pursuant to a License Agreement, renewed by mutual agreement on an annual basis, which is not considered as part of the Premises.
2. TERM/GRANT OF EXTENSION OPTIONS: The term of the Current Lease will be extended by four (4) years and will expire on May 25, 2030. The Current Lease provides for two (2) ten (10) year extension options. Landlord will grant Tenant two (2) additional ten (10) year options to extend the term of the Current Lease, potentially extending the term until May 25, 2070
3. RENT:
3.1. Base Rent: Annual Base Rent is currently Five Hundred and One Thousand, Two Hundred Ten Dollars ($501,210), and Tenant’s Annual Share of Operating Expenses (“CAM Charges”) is One Hundred and Seventy Eight Thousand, Four Hundred and Forty Five Dollars ($178,445), payable in equal monthly installments. Base Rent and CAM Charges will continue to be adjusted annually by increases in the Consumer Price Index (though not less than two percent (2%) and not more than five (5%) per year).
3.2. Percentage Rent: Percentage Rent shall continue in the amount of ten percent (10%) of gross receipts in excess of $11,000,000 per calendar year.
Certain provisions in the Current Lease will be amended to eliminate exclusions from the definition of Tenant’s Gross Receipts. These modifications will increase the amount of Tenant’s Gross Receipts for the purpose of calculating the amount of Percentage Rent due Landlord.
3.3. Base Rent Credit: The provision granting Tenant a credit for the cost of certain police services described in the Settlement Agreement and Release, between Landlord and Tenant, dated as of March 27, 2000, will be eliminated.
3.4. Rent During Option Terms: The fair market rent adjustments at the commencement of each option term will be eliminated to facilitate long-term financing opportunities for Tenant.
11055804.6 -2-
4. MAINTENANCE AND REPAIR OF PIER AND PREMISES:
4.1. Pier Common Area: The areas comprising the Pier Common Area will be clarified, specifically to exclude the Pier Bridge. Landlord will continue to be responsible for the maintenance, repair and replacement of the Pier Common Area, subject to CIP budget appropriation. Prior to execution of the New Lease, Tenant will conduct an inspection of the Pier Common Area. Absent the identification of any issues which Landlord declines to address, Tenant will accept the Pier Common Area in “As-Is” condition as of the date of execution of the New Lease.
4.2. Pier Substructure: The Current Lease will be amended to resolve the ongoing dispute between Landlord and Tenant with respect to responsibility for maintenance, repair and replacement of the improvements (i.e., pilings and caps) underlying the Pier and supporting Tenant’s rides. The provisions in the Current Lease allocating responsibility for maintenance, repair and replacement of the Pier Substructure to Landlord will be eliminated, except as noted below in the event of a Pier Casualty. Tenant will be solely responsible for the maintenance, repair and replacement of all improvements which support Tenant’s rides, except as noted below in the event of a Pier Casualty. Landlord will be responsible for all maintenance, repair and replacement of all other improvements supporting the Pier, subject to CIP budget appropriation. An exhibit identifying the physical components of each party’s substructure responsibilities will be attached to the New Lease.
4.3. Pier Decking: The Current Lease will be amended to resolve the ongoing dispute between Landlord and Tenant with respect to responsibility for maintenance, repair and replacement of Pier decking located inside Pacific Park.
Provisions in the Current Lease allocating responsibility for maintenance, repair and replacement inside Pacific Park will be eliminated, except as noted below in the event of a Pier Casualty. Tenant will be solely responsible for the maintenance, repair and replacement of all Pier Decking located on the Premises, except as noted below in the event of a Pier Casualty. Landlord will be responsible for the maintenance, repair and replacement of all other decking located on the Pier. If a party initiates replacement of decking boards which would naturally extend beyond its area of responsibility, it will extend repair so that the full length of a board is replaced.
4.4. Pier Casualty: In the event of a casualty (e.g. fire, earthquake) Landlord will continue to be required to repair all components of the Pier, including all decking and substructure, subject to the availability of insurance proceeds and CIP budget allocation. The Current Lease requires the Landlord to spend up to Eight Million Dollars ($8,000,000) in excess of available insurance proceeds in the event of a Pier casualty. This requirement will be eliminated.
4.5. Waivers: The parties will waive all claims against each other with respect to liabilities that have accrued for the maintenance, repair and replacement of the Pier Substructure and decking, with neither party admitting responsibility for 11055804.6 -3-
prior repairs. Tenant’s waiver to include claims for all amounts spent to date on the Pier Substructure and decking. The parties will waive the right to consequential damages (e.g. lost profits) against the other party, the scope of which will be negotiated in the New Lease.
5. FUTURE IMPROVEMENT TO PREMISES:
5.1. Capital Improvement and Capital Repairs: Tenant will spend at least Ten Million dollars ($10,000,000) in capital improvements/capital repairs during the five (5) year period commencing in the calendar year after Tenant’s annual revenue returns to pre-pandemic levels (i.e. greater than $40,000,000).
Thereafter, Tenant will commit to capital improvements/repairs of at least Five Million Dollars ($5,000,000) during each succeeding five (5)year period, adjusted for periods Pacific Park is closed, for events of “force majeure” e.g. casualty, prohibited access, governmentally ordered closure and pandemic. The Five Million dollar requirement will be adjusted every five (5) by increases in the Construction Cost Index published by the Engineering News Report, (though not less than two percent (2%) and not more than five (5%) per year). The minimum commitments will not be a cap on Tenant’s obligations if the cost to fulfill its maintenance, repair and replacement obligations exceeds such amounts. No later than ninety (90) days after the end of each calendar year, Tenant shall deliver to Landlord a report of capital improvements/capital repairs performed during the previous calendar year.
6. PERMITTED USE:
6.1. Food Service: Landlord will acknowledge that operation of a restaurant on the Premises is a permitted use.
6.2. Alcoholic Beverages: The New Lease will clarify that the service of alcoholic beverages will be permitted, subject to regulatory approvals. Upon Landlord’s approval of this Term Sheet, Landlord, will cooperate with Tenant’s effort to secure regulatory approvals, including the immediate signing of Tenant’s CUP application.
6.3. Virtual Reality Rides: The New Lease will clarify that Landlord will be permitted to operate and allow the operation of virtual reality rides in the Pier Commercial Area, provided that Tenant is afforded the right of first opportunity to operate such rides, per the provisions of the Current Lease.
7. SALE/TRANSFER FEE: Tenant will pay Landlord a sum equal to one quarter of one percent (0.25%) of the Net Sales Proceeds, to be defined in the Amended Lease, upon the future sale of Tenant’s entire interest in the New Lease.
8. DEBT SERVICE COVENANT: Tenant will covenant that principal amount of any new leasehold mortgage loan may not exceed the higher of: (A) the outstanding balance on an existing loan which it replaces; or (B) a loan with scheduled annual payments of principal and interest such that the debt service coverage ratio (DSCR) at the time of incurrence does not exceed 120%. DSCR is calculated by dividing the Adjusted Income for the 12 calendar month period preceding incurrence (or, if lower, the 11055804.6 -4-
Adjusted Income for the 12 calendar month period before that) by the scheduled annual payments of principal and interest under the new debt. For the purposes hereof, "Adjusted Income" means Net Income + Depreciation/Amortization + all other non-cash and discretionary items + Interest Expense.
9. OBLIGATIONS AT THE END OF THE TERM: Per the Current Lease, Tenant will continue to be obligated to remove all rides and other improvements from the Premises at the end of the term, provided, however that Landlord will be afforded the right to purchase said rides and improvements at the then current fair market value pursuant to an agreed upon appraisal process, to be completed no later than six (6) years before the end of the term. If City declines to exercise its right to purchase the rides and other improvements, Tenant will post a bond or other reasonably acceptable security to guarantee its removal obligations.
10. CLEAN-UP PROVISIONS: The parties recognize that certain provisions in the Current Lease must be updated and/or revised to remove ambiguities and conflicts.
Such provisions include audit rights, dispute resolution procedures, including a meet and confer process, and other conflicts in agreed upon terms for the New Lease.