Nimitz Motel Operating Subsidy Agreement_executed

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4 3.3 Annual Operating Budget. The Annual Operating Budget attached hereto as Exhibit B sets forth Operator's anticipated Operating Costs, Project Income and Shortfall for the Term of the Agreement. The Parties expect to refine the Annual Operating Budget following commencement of rehabilitation of the Project and will amend Exhibit B to reflect the updated costs, if any. Operator shall pay Operating Costs in conformity with the approved Annual Operating Budget. City’s prior written consent shall not be required before Operator can spend funds on Operating Costs that differ in amount from the amounts in the Annual Operating Budget, so long as Operator satisfies all other terms and conditions set forth herein. Operator can submit requests to change the amount of the Annual Operating Budget and corresponding Subsidy Payment for any year during the term by supplying a written proposal to City. Such proposals should include a variance analysis that includes a quantitative assessment of the difference between projected annual income and expenses and actual annual income and expenses, and explanations for the cause of any significant variances. City will approve or disapprove Operator's request for a change in the Annual Operating Budget within thirty (30) days of receipt of Operator's request. Any City disapproval of the Operator's request shall be in writing and with sufficient specificity regarding the basis of the City's disapproval. ARTICLE 4 USE AND DISBURSEMENT OF GRANT FUNDS 4.1 Grant Funds; Disbursement of Subsidy Payments. For every Fiscal Year during the Term, provided that Operator is in compliance with all of the conditions for receipt of a Subsidy Payment, City shall deliver the Subsidy Payment for such Fiscal Year to Operator on or before the commencement of the applicable Fiscal Year. In no event shall the total amount of Grant Funds disbursed hereunder exceed Two Million Two Hundred Thousand Dollars ($2,200,000) in any Fiscal Year of this Agreement, or a total of more than Nine Million Six Hundred Thousand Dollars ($9,600,000) during the Term of this Agreement, subject to annual appropriations by City (the "Grant Amount"). Subject to Operator's performance of its obligations under this Agreement and City’s receipt of sufficient funds, the Grant Funds shall be disbursed through Subsidy Payments. The amount of each Subsidy Payment shall be based upon the City's annual review and approval of the applicable Annual Operating Budget. The City shall reduce the subsequent Subsidy Payments by the amount of any prior Subsidy funds contributed to the Operating Reserve Account 4.2 Reserved. 4.3 Use of Grant Funds. Operator shall use the Grant Funds only for Operating Costs and for no other purpose. Operator shall expend the Grant Funds in accordance with the Annual Operating Budget. 4.4 Conditions Precedent to Payment of Subsidy Payments. Operator shall fully satisfy each of the following conditions prior to delivery of each Subsidy Payment: (a) A final or temporary Certificate of Occupancy shall have been issued for the Project. DocuSign Envelope ID: FD5B6EFC-4700-4210-9102-207694C552B7