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Full title: Objection of the City of Long Beach to the Assumption, Assignment and Sale of Leases Between the City of Long Beach and Debtor Urban Commons Queensway, LLC in the Motion of Debtors for Entry of Orders (I) Approving (A) Bidding Procedures, (B) Designation of Stalking Horse Bidder and Stalking Horse Bidder Protections, (C) Form and Manner of Notice of Sale, Auctions, and Sale Hearing, and (D) Assumption and Assignment Procedures, (II) Scheduling Auction and Sale Hearing, (III) Approving (A) Sale of Substantially All of Debtors Assets Free and Clear of Liens, Claims, Interests, and Encumbrances, and (B) Assumption and Assignment of Executory Contracts and Unexpired Leases, and (IV) Granting Related Relief (related document(s)334) Filed by City of Long Beach and the City of Long Beach, Harbor Department, acting by and through its Board of Harbor Commissioners (Attachments: # 1 Certificate of Service) (Busenkell, Michael) (Entered: 05/14/2021)

Document posted on May 13, 2021 in the bankruptcy, 31 pages and 0 tables.

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ASAP Cayman Atlanta Hotel LLC (2088); ASAP Cayman Denver Tech LLC (7531); ASAP Cayman Salt Lake City Hotel LLC (7546); ASAP Salt Lake City Hotel, LLC (7146); Atlanta Hotel Holdings, LLC (6450); CI Hospitality Investment, LLC (7641); Eagle Hospitality Trust S1 Pte Ltd. (7669); Eagle Hospitality Trust S2 Pte Ltd. (7657); EHT Cayman Corp Ltd. (7656); Sky Harbor Atlanta Northeast, LLC (6450); Sky Harbor Denver Holdco, LLC (6650); Sky Harbor Denver Tech Center, LLC (8303); UCCONT1, LLC (0463); UCF 1, LLC (6406); UCRDH, LLC (2279); UCHIDH, LLC (6497); Urban Commons 4th Street A, LLC (1768); Urban Commons Anaheim HI, LLC (3292); Urban Commons Bayshore A, LLC (2422); Urban Commons Cordova A, LLC (4152); Urban Commons Danbury A, LLC (4388); Urban Commons Highway 111 A, LLC (4497); Urban Commons Queensway, LLC (6882); Urban Commons Riverside Blvd., A, LLC (4661); and USHIL Holdco Member, LLC (4796).The trustee may not assume or assign any executory contract or unexpired lease of the debtor, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties, if-- (1)(A) applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to an entity other than the debtor or the debtor in possession, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties; and (B) such party does not consent to such assumption or assignment… The “applicable law” cited to in § 365(c)(1) includes both California law related to tidelands trust lands for which the City is a fiduciary for the State of California (see case law cited infra) and the City of Long Beach City Charter, which requires consent to assignment of the tidelands trust lands as the City is a fiduciary for the State of California as to the tidelands trust lands.To the extent that the Motion seeks a determination that restrictions or limitations of transfers in leases do not apply based on the Bankruptcy Code or applicable law, the City requests that such requested determination expressly exclude the Leases and contracts between the Debtor and the City, as provided for in Section 4.2(b) of the Stalking Horse Agreement. leases between debtor Urban Commons Queensway, LLC and the City of Long Beach: (1) “Park Lease”; (2) “Submerged Land Lease”; and (3) “Ship Lease.The Debtor’s Failure to Comply with the Requirement to Make the Debtor’s Books and Records Available to the City for Audit and Inspection, and Having Not Provided Requested Documents in Relation to the Debtor’s Use of Funds for Historical Preservation and Capital Improvement Projects on the Queen Mary Despite numerous requests, the Debtor has not provided requested financial information, books and records to the City demonstrating that approximately $23 million in City funds from bond proceeds and tidelands trust funds provided to the Debtor to be used for Historical Preservatio

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IN THE UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE In re: Chapter 11 EHT US1, INC., et al., Case No. 21-10036 (CSS) Debtors1. (Jointly Administered) Re: D.I. 334 OBJECTION OF THE CITY OF LONG BEACH TO THE ASSUMPTION, ASSIGNMENT AND SALE OF LEASES BETWEEN THE CITY OF LONG BEACH AND DEBTOR URBAN COMMONS QUEENSWAY, LLC IN THE MOTION OF DEBTORS FOR ENTRY OF ORDERS (I) APPROVING (A) BIDDING PROCEDURES, (B) DESIGNATION OF STALKING HORSE BIDDER AND STALKING HORSE BIDDER PROTECTIONS, (C) FORM AND MANNER OF NOTICE OF SALE, AUCTIONS, AND SALE HEARING, AND (D) ASSUMPTION AND ASSIGNMENT PROCEDURES, (II) SCHEDULING AUCTIONS AND SALE HEARING, (III) APPROVING (A) SALE OF SUBSTANTIALLY ALL OF DEBTORS’ ASSETS FREE AND CLEAR OF LIENS, CLAIMS, INTERESTS, AND ENCUMBRANCES, AND (B) ASSUMPTION AND ASSIGNMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES, AND (IV) GRANTING RELATED RELIEF The City of Long Beach (the “City”) and the City of Long Beach, a municipal corporation acting by and through its Board of Harbor Commissioners (the “Port”) (the City and the Port are collectively referred to herein as the “City”), hereby file this objection to the 1 The Debtors in these chapter 11 cases, along with the last four digits of each debtor’s tax identification number, as applicable, are as follows: EHT US1, Inc. (6703); 5151 Wiley Post Way, Salt Lake City, LLC (1455); ASAP Cayman Atlanta Hotel LLC (2088); ASAP Cayman Denver Tech LLC (7531); ASAP Cayman Salt Lake City Hotel LLC (7546); ASAP Salt Lake City Hotel, LLC (7146); Atlanta Hotel Holdings, LLC (6450); CI Hospitality Investment, LLC (7641); Eagle Hospitality Trust S1 Pte Ltd. (7669); Eagle Hospitality Trust S2 Pte Ltd. (7657); EHT Cayman Corp Ltd. (7656); Sky Harbor Atlanta Northeast, LLC (6450); Sky Harbor Denver Holdco, LLC (6650); Sky Harbor Denver Tech Center, LLC (8303); UCCONT1, LLC (0463); UCF 1, LLC (6406); UCRDH, LLC (2279); UCHIDH, LLC (6497); Urban Commons 4th Street A, LLC (1768); Urban Commons Anaheim HI, LLC (3292); Urban Commons Bayshore A, LLC (2422); Urban Commons Cordova A, LLC (4152); Urban Commons Danbury A, LLC (4388); Urban Commons Highway 111 A, LLC (4497); Urban Commons Queensway, LLC (6882); Urban Commons Riverside Blvd., A, LLC (4661); and USHIL Holdco Member, LLC (4796). The Debtors’ mailing address is 3 Times Square, 9th Floor New York, NY 10036 c/o Alan Tantleff (solely for purposes of notices and communications).

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assumption, assignment and sale of leases2 between the City and debtor Urban Commons Queensway, LLC in the Motion of Debtors for Entry of Orders (I) Approving (A) Bidding Procedures, (B) Designation of Stalking Horse Bidder and Stalking Horse Bidder Protections, (C) Form and Manner of Notice of Sale, Auctions, and Sale Hearing and (D) Assumption and Assignment Procedures, (II) Scheduling Auctions and Sale Hearing, (III) Approving (A) Sale of Substantially All of Debtors’ Assets Free and Clear of Liens, Claims, Interests, and Encumbrances, and (B) Assumption and Assignment of Executory Contracts and Unexpired Leases, and (IV) Granting Related Relief (Docket No. 334) (the “Motion”). I. INTRODUCTION Debtor Urban Commons Queensway, LLC dba Queen Mary (the “Debtor”) (the Debtor and its other related debtor entities are referred to herein as the “Debtors”) may not assume, assign and sell the leases between the City and the Debtor because there are significant monetary and nonmonetary defaults under the leases and the Debtor has not complied with 11 U.S.C. § 365(b)(1). The Debtor has pressed forward with seeking approval of the Motion as to assumption, assignment and sale of leases between the City and the Debtor even though the Debtor has ignored and has not proposed any cure as to the nonmonetary defaults under the leases3 and even though the proposed cure as to monetary defaults is understated. Among other things, the Debtor has not cured, or provided adequate assurance that the Debtor will promptly cure, the nonmonetary defaults based on the Debtor’s failure to maintain the Queen Mary and leased premises in first class condition and repair, as required in the master lease between the City and the Debtor.4 The nonmonetary defaults related to the Queen Mary relate to immediate 2 The City previously filed a limited objection to the Motion as to the bidding procedures (Docket No. 384) and an objection to the Debtor’s proposed cure of leases between the City and the Debtor (Docket No. 566). This objection to the assumption, assignment and sale of the leases is pursuant to the deadline set forth in Docket No. 503 at ¶ 21. 3 Weber Declaration, ¶ 3 and Exhibit A thereto, e-mail from Shlomo Maza on March 31, 2021 (“[t]he above amounts do not include any non-rent (including non-monetary) defaults.”). 4 As discussed herein, there are additional nonmonetary defaults under the leases that also must be cured.

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and essential repair items relating to life safety and health issues, structural integrity issues, basic functioning of the Queen Mary as an operating hotel and compliance with applicable laws. See 11 U.S.C. § 365(b)(1)(A). The Debtor has provided no explanation as to how it can assume, assign and sell the leases without curing, or providing adequate assurance of prompt cure, of the nonmonetary defaults. The City has set forth the Debtor’s monetary and non-monetary defaults under the leases in the City’s objection to the Debtor’s proposed cure (Docket No. 566) and in an adversary complaint filed by the City against the Debtor (Adv. No. 21-50316-CSS). This Objection, the Vallejo Declaration and the Jaradat Declaration provide updated information related to the monetary and nonmonetary defaults. Based on an inspection on the Queen Mary that recently took place, the total estimated cost for the Debtor to repair the critical items on the Queen Mary is $41,278,708 and the estimated cost for City to repair the items (to the extent that the Debtor provides a monetary cure as to these nonmonetary defaults rather than repairing and replacing the items) is $58,165,451.5 The updated range is significantly higher than the range in the City’s objection to the Debtor’s proposed cure (which included a range between $20,446,436 and $28,810,886—see Docket No. 566 at pp. 10-16 of 28) primarily because a recent inspection showed that the critical issues related to watertight condition on the Queen Mary are more extensive than previously estimated based on issues related to leaks and potential flooding.6 Meanwhile, the Debtor has not responded to the City’s previously filed objection to the proposed cure, has not presented any evidence as to the monetary and nonmonetary defaults and has not yet responded to the adversary complaint. 5 To the extent that the Debtor does not complete the repairs and the Debtor instead proposes a monetary cure for the nonmonetary defaults, and the City completes the repairs, the costs will be higher. The reason for the higher costs if the City completes the repairs is given that the City, as a public entity, requires payment of the prevailing wage (a wage rate determined by the Director of the State of California Department of Industrial Relations for workers employed on public works projects), and municipalities, including the City, apply higher standards for construction, bidding, contractor selection and oversight than private entities such as the Debtor.24 For the avoidance of doubt, if the Debtor is required to pay prevailing wage, the estimates for the Debtor to complete the repairs would be higher than stated herein. See Jaradat Declaration, ¶ 10. 6 Jaradat Declaration, ¶ 11.b.

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As discussed in the City’s objection to the Debtor’s proposed cure (Docket No. 566) and herein, the Debtor has also not provided adequate assurance of future performance by any proposed bidder under the leases as required by 11 U.S.C. § 365(b)(1)(C). To date, the City has not received any documents from the Debtor or from any bidders demonstrating any bidder’s financial ability to perform under the leases or demonstrating the operational experience and capability to perform under the leases. Based on the foregoing, the Debtor may not assume or assign the leases because the Debtor has not met the requirements set forth in 11 U.S.C. § 365(b)(1). In addition, the Debtor has not complied with 11 U.S.C. § 365(d)(3) in that the Debtor is not timely performing the obligations of the Debtor under the leases, including basic requirements such as the payment of post-petition possessory interest taxes due to the Los Angeles County Treasurer and Tax Collector in the amount of $848,112.77 (see Claim 124). In addition to the Debtor not complying with 11 U.S.C. § 365(b)(1) or § 365(d)(3), and as discussed herein, other issues must be addressed by the Debtor prior to any assumption, assignment and sale of the leases, including: (a) the requirement of City consent to the assignment (as provided for in the Motion, Stalking Horse Agreement, the leases and in 11 U.S.C. § 365(c)(1) based on “applicable law”); (b) the requirement for bidders to provide the City with information and documents demonstrating financial ability, operational experience and ability and character requested to ensure adequate assurance of future performance under the leases; (c) additional safeguards regarding vetting of the bidders given national security issues related to the leases of land and water that are part of the City’s Harbor District, the proximity to the Port of Long Beach and as the leases relate to land and water used for a cruise ship docking area and terminal; and (d) that at least one portion of the Stalking Horse Agreement violates the terms of the leases. The City is the landlord under that certain Amended and Restated Lease and Operations Agreement of Queen Mary, Adjacent Lands and Improvements, Dome and Queen’s Marketplace dated November 1, 2016 (the “Lease”). The City is also the landlord under the Submerged Land and Water Area Lease (the “Submerged Land Lease”) and the Special Events Park Lease (the

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Lease, Submerged Land Lease and Special Events Park Lease are collectively referred to herein as the “Leases”). There are multiple subleases, and in some cases, sub-subleases and sub-sub-subleases related to the Leases. The Debtor is the tenant under the Leases and leases the RMS Queen Mary (a retired ocean liner that operated between the 1930s and 1960s; it now operates as a hotel, museum and attraction and is one of the most iconic landmarks and attractions in the City), the water surrounding it within the enrockment, the land adjacent to the Queen Mary and improvements on that land, and certain additional water rights adjacent to the Queen Mary, collectively located at 1126 Queens Hwy, Long Beach, California 90802. Included within the premises leased by the City to the Debtor is land, submerged land and water used, through subleases, to develop and operate a cruise ship docking area and terminal for Carnival Corporation. The land and water leased from the City to the Debtor is located within the City’s Harbor District and consists of tidelands trust property which is held in trust by the City on behalf of the State of California. The City manages the tidelands as a fiduciary on behalf of the State of California for the benefit of all people of California. See, e.g., Martin v. Smith, 184 Cal.App.2d 571 (1960), Mallon v. City of Long Beach, 44 Cal.2d 199, 209 (1955), and City of Long Beach v. Morse, 31 Cal.2d 254, 257 (1957). The Leases are not general commercial leases and reflect the issues unique to the leased premises, including that the property is tidelands trust property held in trust and managed by the City on behalf of the State of California, that the property includes a retired ocean liner sitting in sea water that has specific operational, security and maintenance challenges and requirements, and that the property includes an operating cruise ship docking area, terminal and associated facilities (also known as Pier H). Based on the grounds stated herein, in the declaration of Johnny Vallejo (the “Vallejo Declaration”), the declaration of Dr. Omar Jaradat (the “Jaradat Declaration”), the declaration of Corey R. Weber (the “Weber Declaration”), and the Request for Judicial Notice, the City respectfully requests that the Court enter an order: 1. Denying the Motion as it relates to the Leases; and

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2. Granting the City such other and further relief as the Court deems appropriate. II. CITY CONSENT IS REQUIRED IN ORDER FOR THE DEBTORS TO ASSIGN THE LEASES A. The Debtor Recognizes That City Consent Is Required to Assign the Leases, and Provides for a Requirement of City Consent, But Also Includes a General Request That the Court Determine That Leases or Contracts Limiting the Debtor’s Ability to Assign Leases Are Unenforceable The Motion recognizes and agrees that the City’s consent is necessary for proposed bidders to purchase the Debtor’s interest as lessee under the Lease.7 However, the Motion also requests that “the Court find that all anti-assignment provisions in the Designated Contracts and Designated Leases, whether such provisions expressly prohibit or have the effect of restricting or limiting assignment of such contract or lease, are unenforceable under section 365(f) of the Bankruptcy Code.”8 The premises subject to the Leases are not general commercial property and instead include tidelands trust property held in trust by the City for the State of California9, the property includes a retired ocean liner sitting in sea water and the property has specific operational, security and maintenance challenges and requirements, including premises that operate as a cruise ship docking area and terminal. Under such circumstances, restrictions as to landlord consent are appropriate and enforceable. In addition, the City has the right as a matter of law to approve or disapprove any proposed assignee pursuant to 11 U.S.C. § 365(c)(1). The City’s requirement in the Leases of consent to assign the Leases is a specific exclusion identified in 11 U.S.C. § 365(c)(1) where the Bankruptcy Code provides that a trustee (or debtor) cannot assign an unexpired lease if “applicable law” prohibits or restricts assignment: 7 Stalking Horse Agreement, Docket No. 334-5 at p. 29 of 187, Section 2.1(e) and (f). See also Docket No. 334-5 at p. 47 of 186, Section 6.1(a); Docket No. 334-5 at p. 48 of 186, Section 6.2(b). See also, Stalking Horse Agreement, Docket No. 334-5 at p. 39 of 187, Section 4.2(b). 8 Motion, p. 34 of 40 at ¶ 47. See also, Motion, p. 34 of 40 at fn. 14; Notice of Filing Proposed Revised Sale Order (Docket No. 668-2), ¶ 20 (providing that Designated Leases shall be transferred to the buyer notwithstanding any provision that “prohibits, restricts, or conditions such assignment or transfer,” etc.). 9 See, e.g., Martin v. Smith, 184 Cal.App.2d 571 (1960), Mallon v. City of Long Beach, 44 Cal.2d 199, 209 (1955), and City of Long Beach v. Morse, 31 Cal.2d 254, 257 (1957).

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The trustee may not assume or assign any executory contract or unexpired lease of the debtor, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties, if-- (1)(A) applicable law excuses a party, other than the debtor, to such contract or lease from accepting performance from or rendering performance to an entity other than the debtor or the debtor in possession, whether or not such contract or lease prohibits or restricts assignment of rights or delegation of duties; and (B) such party does not consent to such assumption or assignment… The “applicable law” cited to in § 365(c)(1) includes both California law related to tidelands trust lands for which the City is a fiduciary for the State of California (see case law cited infra) and the City of Long Beach City Charter, which requires consent to assignment of the tidelands trust lands as the City is a fiduciary for the State of California as to the tidelands trust lands. The City Charter and California statutes and case law provide for the City to be the fiduciary for the tidelands trust property held in trust for the State of California. Applicable case law confirms that where the statute provides that the identity of the contracting party is crucial, that the applicable law permits the contracting party to refuse to permit an assignment. See, e.g., Matter of West Electronics Inc., 852 F.2d 79, 82 (3d Cir. 1988) (in relation to the federal government’s required consent). See also, In re ANC Rental Corp., Inc., 277 B.R. 226, 236 (Bankr. D. Del. 2002) (“Consequently, we follow the majority of courts addressing this issue and conclude that, for section 365(c)(1) to apply, the applicable law must specifically state that the contracting party is excused from accepting performance from a third party under circumstances where it is clear from the statute that the identity of the contracting party is crucial to the contract or public safety is at issue.”) The City Charter includes Section 1207 in regard to leasing of tidelands trust property, which permits the City’s Board of Harbor Commissioners (defined as the “Commission” in Section 1200, et seq. of the City Charter) to authorize leases of tidelands and submerged lands within the City’s Harbor District.10 Sections 1207(a) through (c) and (f) further provide requirements for the transfer of leases by the City: 10 See Request for Judicial Notice, Exhibit 1, City Charter at Section 1207(a).

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(a) All tidelands and submerged lands within the Harbor District, whether filled or unfilled, now owned or hereafter acquired by the City are hereby declared to be required for use for purposes in connection with, or for the promotion and accommodation of commerce, navigation, recreation or fishery, and shall, except as herein provided, continue to be withheld for such purposes. It shall be unlawful to grant, sell, convey, alienate, transfer or otherwise dispose of, except as herein provided, any part of or any interest in the waterfront, tidelands, submerged lands, or appurtenances thereto belonging, owned, controlled, possessed or held by the City in the Harbor District; provided that grants of such lands may be made to the State of California, or to the United States of America, for public purposes, when authorized by a majority vote of the qualified voters of the City, voting upon the question of authorizing any such grant at an election. (b) Notwithstanding any other provision of this Charter to the contrary, the Commission shall not be required to operate directly all of the properties, facilities and utilities under its control or jurisdiction, and shall have the power to authorize the operation of any of such properties, facilities and utilities by a private person, firm, association or corporation, whether by lease, franchise, license, assignment, permit or otherwise, upon such terms and conditions as the Commission shall prescribe, which terms and conditions shall include control over the rates, charges and practices of said private party to the extent permitted by law. (c) The Commission shall have power to grant to any person, firm or corporation, franchises, leases, assignments and permits of any properties and facilities belonging to or possessed by the City under the jurisdiction of the Commission for public uses and purposes consistent with the trusts upon which said lands are held for periods not exceeding sixty-six (66) years, as hereinafter provided. Whenever it shall be determined by the Commission, by ordinance, that such properties therein described may not be required at such time for use for purposes in connection with, or for the promotion and accommodation of commerce, navigation, recreation or fishery the Commission shall have power to grant leases of such properties for periods not exceeding fifty (50) years, pursuant to competitive bidding, for any and all purposes, which shall not interfere with commerce, navigation, recreation or fishery, and are not inconsistent with the trusts upon which said lands are held by the City. … (f) No total or partial assignment, transfer, sublease, gift or grant of control shall be valid for any purpose unless first approved by the Commission. Based on the California statutes and case law related to tidelands trust property and the City Charter, including Section 1207(f) of the City Charter, 11 U.S.C. § 365(c)(1) permits the City to require approval prior to assignment of the Leases. In addition to the requirements in the Leases, the “applicable law” in the City Charter and in relation to the tidelands trust lands, whether “adequate assurance of future performance” has

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been shown depends on, among other things, the proposed assignee’s financial condition and its ability to comply with the Debtor’s obligations under the Lease. See, e.g., In re R.B.B., Inc., 211 F.3d 475, 477-480 (9th Cir. 2000). To the extent that the Motion seeks a determination that restrictions or limitations of transfers in leases do not apply based on the Bankruptcy Code or applicable law, the City requests that such requested determination expressly exclude the Leases and contracts between the Debtor and the City, as provided for in Section 4.2(b) of the Stalking Horse Agreement. B. The Information Requested from Bidders Does Not Include Certain of the Information Required to Be Provided to the City In Order for the City to Determine Whether the Bidders Are Qualified to Become the Lessee The material terms of the Bidding Procedures include providing financial and other information related to a determination as to a bidder’s financial and other capabilities.11 The Lease provides for requirements related to the transfer of the Debtor’s interest in the Lease12 because, as stated in Section 9.2 of the Lease, “Tenant’s qualifications are of particular concern to Landlord, and Landlord has entered into this Lease in reliance upon Tenant’s qualifications, skill, reputation and experience.”13 Section 9.2.1.1 of the Lease includes not just financial qualifications, but also operational experience and qualifications given the unique leasehold involved in the Lease (as discussed above): Except as otherwise expressly provided in this Lease, Tenant shall not Transfer all or any part of its interest in or rights under this Lease and/or any part of its interest in or rights to the Leased Premises and/or any of the improvements constructed thereon, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Without limitation of the foregoing Landlord’s refusal to consent to a proposed Transfer shall be considered reasonable if such refusal is because (i) the proposed Transfer would, in Landlord’s good faith judgment, result in a material reduction of the revenues received directly or indirectly by Landlord from the operation of the Leased Premises or (ii) the proposed Transferee (a) does not have sufficient net worth or liquidity to comply with its obligations under this Lease, or (b) is not able to 11 Motion, pp. 19-20 of 40. 12 See also Section 21 of the Submerged Land Lease in relation to the assignment requirements in the Submerged Land Lease. Vallejo Declaration, ¶ 4 and Exhibit B thereto at Section 21. 13 Vallejo Declaration, ¶ 4 and Exhibit A thereto, Lease, Section 9.2.

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demonstrate the capability to manage or provide for the management of developments of the size and character of the Improvements located on the Leased Premises, or (c) cannot demonstrate a history of ownership and operation of comparable projects or hotels operating at a qualify level at least equal to the requirements for the Leased Premises.14 As discussed in the section below, the Stalking Horse Agreement and Motion do provide for making certain financial information available to the City in order for the City to review the information and provide consent. However, specific mention of operational qualifications and experience is absent from the Motion and such information and documents are required in order for the City to determine whether the proposed bidders are qualified to become lessees under the Lease and in order for the City to provide consent. C. Given the Security and National Security Issues Related to the Leased Premises and Port, the City Requests Confirmation That the Bidders Are Not Subject to Any Economic Sanctions Administered by the U.S. Department of the Treasury, Office of Foreign Assets Controls (“OFAC”), Including Listing on the Specially Designated Nationals and Blocked Persons List (“SDN List”) and Address Issues Related to the Committee on Foreign Investment in the United States (“CFIUS”) The premises subject to the Leases are part of the City’s Harbor District, are adjacent to the Port of Long Beach, and include cruise ship docking and terminal. Ports are recognized by the U.S. Department of Homeland Security as a critical infrastructure sector that is so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof. Based on the security and national security issues related to the Port and Port activities, the City requests not only representations, but also relevant documents from bidders confirming that neither the bidders nor any beneficial owners of bidders are: (a) subject to any economic sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), or any other U.S. Government agency; (b) listed on the Specially Designated Nationals and Blocked Persons List (“SDN List”) maintained OFAC or on any other list of restricted or sanctioned parties maintained by OFAC or any other similar U.S. Government 14 Vallejo Declaration, ¶ 4 and Exhibit A thereto, Lease, Section 9.2.1.1. See also, Section 9.2.4.

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agency (such lists are collectively referred to as the “Lists”); or (c) is owned or controlled by, or acts for or on behalf of, any person or entity included on the Lists. Section 14.24 of the Stalking Horse Agreement provides for some protections regarding the above.15 However, further information and documents may be required by the City in order to confirm that there are no security or national security-related issues with potential bidders that seek to become the lessee under the Leases. To address this issue, the City requests that bidders making bids as to the Leases agree to the following addition to Paragraph (N) as a new subparagraph (v) under the “Form and Content of Qualified Bids” section in the Stalking Horse Agreement. (N) Representations and Warranties. Each Bid must include the following representations and warranties: . . . (v) a written statement certifying the Potential Bidder is neither subject to any economic sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), or any other U.S. Government agency, nor is it owned or controlled by any individual or entity that is subject to economic sanctions, including designation on OFAC’s Specially Designated Nationals and Blocked Persons List (“SDN List”); Additionally, to ensure that any foreign bidders are properly vetted by the U.S. Government with regard to any national security-related concerns, the City also requests that the Debtor and the Court add the bolded modification below to Paragraph (H) under the “Form and Content of Qualified Bids” section in the Stalking Horse Agreement: (H) Required Approvals. A statement or evidence (i) that the Potential Bidder has made or will make in a timely manner all necessary filings under applicable antitrust laws and pay the fees associated with such filings; (ii) that if the Potential Bidder is a “foreign person” under 31 C.F.R. Part 800 or 802, all notices, declarations, and filings shall be made with the Committee on Foreign Investment in the United States (“CFIUS”), as necessary and/or required, to allow for the review and investigation of any potential purchase pursuant to Section 721 of the Defense Production Act, as amended; . . . [remainder of provision would remain unaltered]. 15 Motion, Exhibit 4, Stalking Horse Agreement, Docket no. 334-5 at p. 76 of 186, Section 14.24.

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The foregoing would resolve potential issues related to the Committee on Foreign Investment in the United States and economic sanctions related to potential bidders. III. THE DEBTOR MAY NOT ASSUME AND ASSIGN THE LEASES BECAUSETHE CITY HAS NOTIFIED THE DEBTOR OF DEFAULTS UNDER THE LEASES BUT THE DEBTOR HAS NOT COMPLIED WITH 11 U.S.C. § 365(b)(1) IN CURING, OR PROVIDING ADEQUATE ASSURANCE OF A PROMPT CURE, OF THE DEFAULTS UNDER THE LEASES A. The City Has Notified the Debtor of Defaults Under the Lease, Has Filed an Objection to the Debtors’ Proposed Cure and Has Submitted Evidence as to the Monetary and Nonmonetary Defaults That Must Be Cured, But the Debtor Has Ignored the Significant Nonmonetary Defaults and Has Understated the Monetary Defaults On March 4, 2021, prior to the Debtor filing the Motion, the City, through its counsel, sent a detailed letter to the Debtor’s counsel providing notice of the Debtor’s defaults under the Leases.16 The City’s objection to the Debtor’s proposed cure (Docket No. 566) provided further detail regarding the defaults, discussed additional defaults, and stated that it should be treated as an amendment to the default letter sent on March 4, 2021.17 On May 6, 2021, the City sent a supplemental default letter18 (the default letters are collectively referred to as the “Letters”).19 On March 26, 2021, the Debtors filed the Cure Notice (Docket No. 521). The Cure Notice states that “[e]ach of the Designated Contracts and Designated Leases that may be assumed and assigned in connection with a Sale Transaction with a Successful Bidder and the Debtors’ calculation of the Cure Costs with respect thereto are set forth on Exhibit A hereto. The Cure Costs are the only amounts proposed to be paid upon the assumption and assignment of the Designated Contracts and Designated Leases.”20 Exhibit A to the Cure Notice lists three 16 Vallejo Declaration, ¶ 5 and Exhibit C thereto. 17 Docket No. 566 at p. 10 of 28, FN 22. 18 Vallejo Declaration, ¶ 7 and Exhibit E thereto. 19 Notices of defaults alerting a debtor as to defaults to be cured has been held not to require relief from the automatic stay. See, e.g., Am-Haul Carting, Inc. v. Contractors Cas. and Sur. Co., 33 F.Supp.2d 235, 242 (S.D.N.Y. 1998) and In re Sixteen to One Mining Corp., 9 B.R. 636, 638 (Bankr. D. Nev. 1981)). 20 Cure Notice at p. 2 of 6.

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leases between debtor Urban Commons Queensway, LLC and the City of Long Beach: (1) “Park Lease”; (2) “Submerged Land Lease”; and (3) “Ship Lease.”21 The leases referenced in the Cure Notice are the Leases. On May 12, 2021, the Debtors filed their Third Supplemental Notice of Cure Costs and Potential Assumption and Assignment of Executory Contract and Unexpired Leases in Connection with Sale Transactions (Docket No. 682) (the “Supplemental Cure Notice”). The Supplemental Cure Notice, in Exhibit A, lists the same three Leases with the City and lists the same proposed cure amount to the City of $748,157.40. The Cure Notice and Supplemental Cure Notice are collectively referred to herein as the “Cure Notice.” As to what the Debtors describe as the “Ship Lease,” the Debtors list $748,157.40 as the proposed cure amount.22 The Debtors provide no breakdown in the Cure Notice as to how the amount is calculated. However, the Debtor’s counsel confirmed in an e-mail that the Debtor is not proposing any cure of the nonmonetary defaults under the Leases.23 To date, the Debtor has not proposed any cure as to the nonmonetary defaults. Under 11 U.S.C. § 365(b)(1), cure or adequate assurance of prompt cure of defaults under the Leases is a prerequisite to the Debtor’s assumption and assignment of the Leases. The requirement to cure or provide adequate assurance of prompt cure includes nonmonetary defaults. See, e.g., In re Carterhouse, Inc., 94 B.R. 271, 273 (Bankr. D. Conn. 1988) (“If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of the assumption of such contract or lease, the trustee—(A) cures, or provides adequate assurance that the trustee will promptly cure, such default.... This provision extends to nonmonetary as well as monetary breaches.”) See also, In re Yardley, 77 B.R. 643, 645 (Bankr. M.D. Tenn. 1987) (“On the face of the statute, Congress contemplated that non-monetary defaults would be curable under § 365. Section 365(b)(1) begins with a general power to assume or reject an executory contract or unexpired lease. “If 21 Cure Notice at Exhibit A, p. 3 of 4. 22 Cure Notice at Exhibit A, p. 3 of 4. 23 Weber Declaration ¶ 3 and Exhibit A thereto, e-mail from Shlomo Maza on March 31, 2021.

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there has been a default,” the trustee cannot assume the contract or lease without curing “such default” or providing adequate assurance of a prompt cure”) and In re Claremont Acquisition Corp., Inc., 113 F.3d 1029, 1033 (9th Cir. 1997). As set forth in the City’s objection to the proposed cure (Docket No. 566), the Cure Notice does not provide any proposed cure of the significant nonmonetary defaults under the Lease and understates the monetary defaults under the Lease. Pursuant to 11 U.S.C. § 365(b)(1), the Debtor’s monetary and nonmonetary defaults must be cured or the Debtor must provide adequate assurance of a prompt cure, prior to assumption and assignment of the Leases. B. The Debtor Has Not Answered the City’s Adversary Complaint and Has Not Responded to the Evidence Submitted by the City as to the Nonmonetary and Monetary Defaults Under the Leases The City filed its adversary complaint for declaratory relief against the Debtor on April 9, 2021 (Adv. No. 21-50316-CSS). The complaint includes claims for declaratory relief as to: (1) monetary defaults; and (2) nonmonetary defaults. The Debtor’s answer or responsive pleading is currently due on May 13, 2021, but the City stipulated with the Debtor to extend the time to respond to the complaint for two weeks (Adv. Docket No. 4 in Adv. No. 21-50316-CSS). The issues related to the monetary and nonmonetary defaults will be addressed in the adversary proceeding, but as of the present, the Debtor has not provided any response as to the monetary or nonmonetary defaults either in the Debtor’s bankruptcy case or in the adversary proceeding. The Debtor has not filed any response to the City’s objection to the Debtor’s proposed cure (Docket No. 566), which was supported by the declarations of Johnny Vallejo and Dr. Omar Jaradat as to the defaults, and the Debtor has not presented any evidence as to the default issues raised in the City’s objection. The only evidence filed with the Court to date as to the monetary and nonmonetary defaults has been filed by the City. C. Overview of Monetary and Nonmonetary Defaults Set Forth in the City’s Objection to Proposed Cure and Update as to Cure Amounts Based on a Recent Inspection The Debtor’s monetary and nonmonetary defaults under the Leases are set forth in the City’s objection to the Debtor’s proposed cure (Docket No. 566). For the convenience of the

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Court, an overview of the defaults is discussed below, together with updated amounts as to both the nonmonetary defaults (estimated amounts necessary to cure nonmonetary defaults under the Leases in regard to the Queen Mary and surrounding improvements) and as to the monetary defaults (including updates as to the rent due since the City filed the objection to the proposed cure). Based on inspections that have taken place on the Queen Mary since the City’s objection to proposed cure was filed, some of the nonmonetary defaults related to watertight condition issues on the Queen Mary are more significant than previously estimated and one item regarding ADA compliance is anticipated to be less costly to fix than previously estimated. 1. Monetary Defaults Amounts currently due to the City for rent and bounced checks (which checks were for pass-through rent) include the following amounts: a. 2020 base rent for April, May, July, August, September and Decembertotaling $150,000.00. Lease, Section 4.1.1. b. 2021 base rent for January and February totaling $50,000. The City is inreceipt of base rent payments for March and April 2021. In addition, baserent continues to accrue in the amount of $25,000 each month. Lease,Section 4.1.1. c. 2020 per passenger fee rent totaling $636,447.40. Lease, Section 4.1.4. d. Bounced Catalina Express pass-through checks totaling $65,336.12. Lease, Section 4.1.2. e. The total of the foregoing is $901,783.52.24 The rent that is due pursuant to the Leases has been subject to a temporary County of Los Angeles rent abatement due to the COVID-19 pandemic, but will become due and owing immediately following the termination of the temporary county rent abatement ordinances.25 In addition to the foregoing, the City’s records also reflect that the Debtor owes amounts to Long 24 Vallejo Declaration ¶ 10. 25 Vallejo Declaration ¶ 10.

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Beach utilities in the amount of $14,263.80 pre-petition and $44,226.78 post-petition.26 The Lease requires that the Debtor indemnify, defend and hold the City harmless as to amounts due for utilities used, rendered or supplied to or on the premises subject to the Lease.27 In addition, the Debtor also has an outstanding balance of $9,558.66 owed to the City based on special events.28 Additional amounts will become due and owing to the City each month in addition to the above-listed amounts. 2. Nonmonetary Defaults The Debtor’s nonmonetary defaults under the Lease include: (a) failure to maintain the Queen Mary and leased premises in first class condition and repair; (b) failure to comply with the requirement to make the Debtor’s books and records available to the City for audit and inspection (as they relate to the Debtor’s use of bond proceeds and tidelands trust funds for capital improvement projects on the Queen Mary); (c) gaps in insurance coverage and in naming the City as an additional insured and loss payee; (d) failing to indemnify, defend and hold the City harmless as to personal injury claims that allegedly occurred on the leased premises; and (e) failure to timely provide audited financial statements to the City, all as required under the Lease. The nonmonetary defaults are discussed below. a. The Debtor’s Failure to Maintain the Queen Mary and Leased Premises in First Class Condition and Repair, as Required in the Lease Section 7.2 of the Lease requires the Debtor to maintain the Leased Premises in first class condition and repair: Throughout the Term, Tenant shall, at Tenant's sole cost and expense, maintain or cause to be maintained the Leased Premises (including the Improvements) and the improvements now or hereafter located on the Leased Premises in first class condition and repair. Such improvements shall be maintained and operated in material compliance 26 Vallejo Declaration ¶ 11. 27 Vallejo Declaration ¶ 11. 28 Vallejo Declaration ¶ 11.

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with all Governmental Restrictions and Tenant shall make or cause to be made whatever repairs and replacements are required by any Governmental Restrictions or this Lease.29 The Debtor is not meeting its obligations pursuant to Section 7.2 of the Lease. The issues have also been discussed during monthly meetings/calls between the City, the Debtor (or Queen Mary personnel) and an international maritime engineering firm, Moffatt & Nichol, over the past year tracking progress toward making repairs as issues that were deemed urgent in January 2017 (over four years ago).30 Each of the following were noted as urgent repairs in an inspection that took place during 2015-2016 and are contained in the Marine Survey of the Queen Mary dated January 17, 2017 prepared by Simpson Gumpertz & Heger Inc. (the “Marine Survey”), which was prepared during the Debtor’s operation of the ship in January 2017, over four years ago. Those issues noted as urgent in 2017 and with a time horizon deadline of five years, and which are more urgent now with the passage of time and as the five-year time horizon is ending at the beginning of 2022.31 Each of these items were also noted by the Historic Preservation and Capital Improvement Plan (“HPCIP”) project numbers in the Debtor’s spreadsheets tracking urgent repairs, which spreadsheets were circulated as part of the monthly meetings regarding the Queen Mary repairs. The issues include those related to life safety and health issues, structural integrity issues, basic functioning of the Queen Mary as an operating hotel and compliance with laws as follows: The Queen Mary Sideshell, Bridge Wings and Lifeboat Structural Issues.32 Urgent repairs are necessary for the Queen Mary’s side shell (shell plating on the side of the ship) and bridge wings (a narrow walkway that extends outward from the pilot’s house) due to significant structural concerns that are life safety issues. As part of the repairs, the lifeboats need to be removed and replaced. The lifeboats on the Queen Mary overhang public walkways, are heavy 29 Vallejo Declaration ¶ 4 and Exhibit A thereto. 30 Jaradat Declaration ¶ 7. 31 Jaradat Declaration ¶¶ 6-9. 32 Jaradat Declaration ¶ 11.a.

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and are causing stress on the supports (the bridge wing supports are anchored to the side shell of the ship). Based on the stress on the supports, the side shell has started to separate from deck supports. Issues include that gusset plates (plates for connecting beams and girders to columns) are severely corroded, lifeboat to davit connections (davits are small cranes on board a ship for suspending a lifeboat) show signs of significant deterioration, lifeboats are not supported in the cradle of the davit arm, davit lock mechanisms are not engaged and lifeboats have deteriorated hull painting. This is a critical life safety issue because the failure of the lifeboat support structure may cause injury or fatalities to guests, visitors or employees walking under the lifeboats and may cause further structural damage to ship sidewalls. The lifeboats need to be removed to lessen the weight and to avoid injuries or fatalities, and then the support structures need to be repaired or replaced. The cost estimate for the Debtor as to these items is $8,371,509. The cost estimate for the City as to these items is $11,796,217.33 Underwater hull, exhibition hall, tank tops and watertight bulkhead doors.34 There are several categories of structural work needed to maintain the vessel’s hull integrity and watertight integrity. This includes a structural review of girders in the bottom tank, repairs to the outer hull around the propeller and added structural reinforcements. Among other things, these items relate to repairs needed to stop leaking, stop degradation of steel, prevent flooding of the vessel in the event of a water leak and ensure the structural integrity of the vessel. Further studies of the cost estimate were recently completed by Moffatt & Nichol and Elliott Bay Design Group (“EBDG”), a naval architecture and marine engineering firm retained by Moffatt & Nichol. EBDG reviewed available information and visited and engaged in an inspection of the ship as to these issues on April 28, 2021. EBDG identified hull integrity and watertight integrity urgent category work items that should be addressed immediately for safety from flooding in the 33 As discussed in the Jaradat Declaration, EBDG also included a lower estimated cost to complete near-term emergency repairs related to the lifeboat, side shells and bridge wings issues. The near-term emergency repairs are a subset of the amount estimated to fully repair the issues. See Jaradat Declaration ¶ 11.a. 34 Jaradat Declaration ¶ 11.b.

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next two years (to the extent that flooding occurred, EBDG’s inspection and report confirmed that the current status of bulkheads and lack of a functioning bilge pump system and flood alarm system could lead to flooding throughout the ship, potential capsizing of the ship and life safety and environmental issues to the extent that flooding occurred). The updated cost estimate for the Debtor as to these items is $19,569,550. The cost estimate for the City as to these items is $27,575,275. Based on the information obtained during the recent inspection, these cost estimates are greater than originally anticipated of $4,604,819 to $6,488,608, which were the amounts listed in the City’s objection to the Debtor’s proposed cure. Relocate sewage and mechanical room.35 The sewage holding tanks are compromised and are not readily accessible per current health and safety and OSHA guidelines. This is a hull structural and watertight integrity issue. The cost estimate for the Debtor as to these items is $368,386. The cost estimate for the City as to these items is $519,089. Bilge system repairs.36 New pumps, floats, pickups and control panels are required. This is a hull structural and watertight integrity issue. The updated cost estimate for the Debtor as to these items is $3,974,428. The cost estimate for the City as to these items is $5,600,330. Based on the information obtained during the recent inspection, these cost estimates are greater than originally anticipated of between $276,289 and $389,317, the amounts listed in the City’s objection to the Debtor’s proposed cure. These amounts relate to the watertight condition issues discussed above in relation to the underwater hull, exhibition hall, tank tops and watertight bulkhead doors. EBDG confirmed priority need for a working bilge system to be installed to deal with minor hull leakage or minor fire flow. This item should be addressed immediately for safety from flooding in the next two years. Sewer system repairs.37 Temporary sewage tanks have been installed until permanent units can be installed. The current piping system has leaks. This is a hull structural and 35 Jaradat Declaration ¶ 11.c. 36 Jaradat Declaration ¶ 11.d. 37 Jaradat Declaration ¶ 11.e.

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watertight integrity issue. The cost estimate for the Debtor as to these items is $1,657,735. The cost estimate for the City as to these items is $2,335,899. Storm drain system repairs.38 Multiple drains are plugged, covered and abandoned, creating in-wall leaks and pooling. This is a watertight integrity issue. The cost estimate for the Debtor as to these items is $460,482. The cost estimate for the City as to these items is $648,861. Miscellaneous safety issues.39 Repairs to the various trip, slip and fall hazards are present. The cost estimate for the Debtor as to these items is $184,193. The cost estimate for the City as to these items is $259,544. In addition to the urgent repairs noted above (which were also contained in the 2017 Marine Survey), additional urgent repairs are needed on the Queen Mary and wharf for the following issues related to life safety, public health, structural integrity issues, maintaining basic operations of the ship and/or compliance with applicable laws: Emergency generator.40 An emergency generator is necessary for the Queen Mary as a life safety system for public operations on the ship, but the current emergency generator is not functioning properly and needs to be replaced. Fire departments require an operating emergency generator as a life safety system. The cost estimate for the Debtor as to the generator (including the parts and installation) is $493,350. The cost estimate for the City as to the generator (including the parts and installation) is $695,175. Boiler replacement.41 Working boilers are needed to provide heat and hot water throughout the hotel and for food services and the current boiler is not functioning properly and needs to be replaced. Without an operating boiler, the Queen Mary cannot operate as a hotel, conference space or have operating restaurants. The cost estimate for the Debtor as to the boiler 38 Jaradat Declaration ¶ 11.f. 39 Jaradat Declaration ¶ 11.g. 40 Jaradat Declaration ¶ 12.a. 41 Jaradat Declaration ¶ 12.b.

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(including the parts and installation) is $959,278. The cost estimate for the City as to the boiler (including the parts and installation) is $1,351,710. Queen Mary Village demolition.42 The Queen Mary Village area (an area that was previously used for shops but now is abandoned) is in clear disrepair, creating numerous health and safety issues. Moffatt & Nichol performed a rough order of magnitude cost evaluation for the removal of the existing Queen Mary Village and construction of a new parking lot in its place. In addition, Moffatt & Nichol contacted several local contractors to verify the cost estimates the internal team produced. The updated cost estimate provided by Moffatt & Nichol, which include demolition and the Debtor’s planned replacement including a parking lot and landscaping is $2,960,100. The cost estimate for the City as to these items is $4,171,050. Based on recent information obtained by Moffatt & Nichol, these amounts are greater than the original cost estimate range of between $1,659,133 and $2,337,870, as stated in the City’s objection to the Debtor’s proposed cure. Dome cleaning and caulking.43 Cleaning and maintenance of the geodesic dome used for loading for Carnival cruises is necessary given the significant dirt and debris on the dome. After cleaning, the dome needs to be re-caulked to prevent structural integrity issues. Given that the geodesic dome is used for cruise passenger loading, the structural integrity issues for the dome structure is important. The cost estimate for the Debtor as to these items is $549,609. The cost estimate for the City as to these items is $774,449. ADA Compliance.44 The Queen Mary should be in full compliance with the Americans with Disabilities Act. There are several issues with ADA compliance that have not been completed on the Queen Mary. The adjusted cost estimate for the Debtor as to these items is $164,450. The cost estimate for the City as to these items is $231,725. Based on further inspection, the anticipated repairs and upgrades for ADA compliance are estimated to be less 42 Jaradat Declaration ¶ 12.c. 43 Jaradat Declaration ¶ 12.d. 44 Jaradat Declaration ¶ 12.e.

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costly than originally estimated (the City’s objection to proposed cure listed between $861,653 and $1,214,147). An additional issue noted in the EBDG report is that the condition of the handrails throughout the ship must be retrofitted to meet health and safety codes and standards if the ship is to be reopened to the public.45 The handrails have incurred significant corrosion and do not appear to be compliant with current standards.46 This issue was not included in the chart contained the City’s objection to the Debtor’s proposed cure, but, based on the recent EBDG inspection report, it was identified as an urgent repair and is contained in the chart in the paragraph below.47 The chart below summarizes the above-listed repairs and compares the estimated cost for the Debtor to repair the items with the cost for the City to repair the items (the reasons for the higher cost estimates for the City to undertake the repairs is discussed herein). The total estimated cost for the Debtor to repair the items is $41,278,708 and the estimated cost for City to repair the items (to the extent that the Debtor provides a monetary cure as to these nonmonetary defaults rather than repairing and replacing the items) is $58,165,451. A more detailed breakdown is contained in the exhibits to the Jaradat Declaration. The cost estimates are conservative estimates and the actual repair costs are likely to be higher.
Table 1 on page 22. Back to List of Tables
Repair Item Cost for Debtor to Repair Cost for City to Repair
Side shell repairs, bridge wings
repairs and removal and
replacement of lifeboats.
$8,371,509 $11,796,217
Underwater hull, exhibition hall,
tank tops and watertight bulk head
doors.
$19,569,550 $27,575,275
Relocate sewage and mechanical
room.
$368,386 $519,089
45 Jaradat Declaration ¶ 13. 46 Jaradat Declaration ¶ 13. 47 Jaradat Declaration ¶ 13.

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Table 1 on page 23. Back to List of Tables
Bilge system repairs. $3,974,428 $5,600,330
Sewer system repairs. $1,657,735 $2,335,899
Storm drain system repairs. $460,482 $648,861
Miscellaneous safety issues. $184,193 $259,544
Emergency generator. $493,350 $695,175
Boiler replacement. $959,278 $1,351,710
Queen Mary Village demolition. $2,960,100 $4,171,050
Dome cleaning and caulking. $549,609 $774,449
ADA Compliance. $164,450 $231,725
Handrails on public decks. $1,565,638 $2,206,127
TOTAL $41,278,708 $58,165,451
Each of the above-listed repairs and replacements have been listed as urgent or critical and involve life safety, health and/or structural integrity issues, compliance with laws, or essential basic operations.48 To the extent that the issues were not urgent or critical items related to those categories, they are not listed herein.49 In addition to all of the foregoing, some of the repairs to the Queen Mary undertaken by the Debtor appear to have been performed incorrectly or not pursuant to applicable standards, and will likely need to be fixed or re-done in the near term.50 The foregoing also does not include all necessary repairs, improvements or maintenance on the Queen Mary, including but not limited to all items listed in the Marine Survey (the items in the Marine Survey will need to be completed over time based on their relative urgency and as the condition of the items deteriorate given normal wear and given the impact of maritime conditions on the items), and does not include certain items listed on the Debtor’s urgent work list that were categorized as “mid-term” urgency or where further information may be needed. 48 Jaradat Declaration ¶ 15. 49 Jaradat Declaration ¶ 15. 50 Jaradat Declaration ¶ 15.

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To the extent that any of the foregoing are not determined to be current defaults, assumption of the Leases must be cum onere and the Debtor or any assignee of the Leases will be subject to the terms and conditions of the Leases, with all of their benefits and burdens, including maintaining the Queen Mary in first class condition and repair, and the assignee may not “cherry pick” favorable pieces of the Leases while disregarding others. See, e.g., AGV Productions, Inc. v. Metro-Goldwyn-Mayer, Inc., 115 F.Supp.2d 378 (S.D.N.Y. 2000), 391, aff'd 37 Fed.Appx. 555 (2d Cir. 2002). b. The Debtor’s Failure to Comply with the Requirement to Make the Debtor’s Books and Records Available to the City for Audit and Inspection, and Having Not Provided Requested Documents in Relation to the Debtor’s Use of Funds for Historical Preservation and Capital Improvement Projects on the Queen Mary Despite numerous requests, the Debtor has not provided requested financial information, books and records to the City demonstrating that approximately $23 million in City funds from bond proceeds and tidelands trust funds provided to the Debtor to be used for Historical Preservation and Capital Improvement Projects (“HPCIP”) on the Queen Mary were properly used and accounted for by the Debtor. Section 4.3 of the Lease states that the Debtor shall maintain records including “all unbilled accounting documents, ledgers, bank deposit receipts, bank books, bank statements, federal, state and local tax returns, and other records reasonably necessary to verify the above matters for each calendar year.”51 Section 4.3 further states that the City shall have the right “to audit the Records; to cause an audit of the Records to be made; to make copies of any and all of the Records; to examine any or all Subleases; and to make copies of any or all Subleases.”52 The City has made requests for financial information and documents from the Debtor. The City provided funds for the Debtor to address critical and urgent repairs and upkeep projects on the Queen Mary as part of the HPCIP. However, despite repeated requests to the Debtor, the 51 Vallejo Declaration ¶ 4 and Exhibit A thereto. 52 Vallejo Declaration ¶ 4 and Exhibit A thereto.

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Debtor has not provided documents demonstrating that the amounts incurred and expended by the Debtor on the HPCIP projects using City funds were properly used and accounted for by the Debtor. Notwithstanding that the City has now been requesting documents as part of an audit and inspection of the Debtor’s records since early 2020, over a year now, the Debtor has still not provided certain basic documents requested, including the Debtor’s electronic check register, cash account detail, bank statements and cancelled checks, cashier’s checks, wire transfers or other payments paid to vendors and subcontractors relating to approximately $23 million funded by the City primarily through bond proceeds and tidelands trust funds.53 This is a continuing post-petition default under the Lease. To the extent that City funds were not properly used by the Debtor, additional amounts will be due and owing by the Debtor to the City. c. Potential Gaps in Insurance Coverage and in Naming the City as an Additional Insured and Loss Payee The requirements for insurance coverage are set forth in Section 12 of the Lease and the Debtor is required to procure and maintain the insurance for the duration of the Lease.54 As discussed in the Letter, the City noted potential gaps in insurance coverage and lack of insurance certificates provided showing that the City is named as an additional insured and loss payee as required under the Lease.55 Sections 12.7 and 12.9 of the Lease require that evidence of the insurance be provided to the City.56 The City has received certain insurance certificates and information from the Debtor’s counsel following the Letter, but has requested additional required information that has not yet been provided.57 To the extent that there are gaps in insurance coverage, or issues in regard to the City not being properly named as an additional insured or loss payee, the issues caused thereby may increase the necessary cure amount. 53 Vallejo Declaration ¶ 8. 54 Vallejo Declaration ¶ 4 and Exhibit A thereto. 55 Vallejo Declaration ¶ 5 and Exhibit C thereto. 56 Vallejo Declaration ¶ 4 and Exhibit A thereto. 57 Vallejo Declaration ¶ 8.

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d. Non-compliance with the Requirement in the Lease for the Debtor toIndemnify, Defend and Hold the City Harmless as to Injuries to Persons thatAllegedly Occurred on the Premises Subject to the Lease Section 12.1 of the Lease requires that the Debtor indemnify, defend and hold the City harmless from injuries, losses, claims, causes of action, demand or damages while on the Leased Premises.58 On January 28, 2021, counsel for the City sent a letter advising counsel for the Debtor that lawsuits and claims had been filed against the City relating to alleged injuries sustained while on the leased premises.59 The letter further advises the Debtor that it is “required to indemnify, defend and hold the City harmless as to pending claims and lawsuits against the City.” On February 9, 2021, counsel for the City sent a follow-up letter advising the Debtor’s counsel that new lawsuits had been filed against the City relating to alleged injuries sustained while on the Leased Premises.60 The letter states that “[t]he City is hereby tendering the matters to the Debtor, and requires that the Debtor indemnify, defend and hold the City harmless, as required under the Lease. As noted in my first letter, time is of the essence with regard to these claims. Please confirm that the Debtor is honoring its obligations under the Lease to indemnify, defend, and hold the City harmless regarding these lawsuits.” Counsel for the City sent a follow-up e-mail on February 17, 2021 “following up on my two letters to you regarding the City’s request for confirmation that Urban Commons is honoring its obligations under the lease to indemnify, defend and hold the City harmless regarding the lawsuits. Time is of the essence given that the claims are part of pending litigation.”61 Following the letters and e-mails, of the seven claims referenced in the letters, the City has only received a response as to one of the claims.62 On February 24, 2021, counsel for the City received an e-mail from Liberty Mutual Insurance regarding the tender of the lawsuit and claims by one plaintiff acknowledging receipt of the tender letter and requesting a copy of the 58 Vallejo Declaration ¶ 4 and Exhibit A thereto. 59 Weber Declaration ¶ 4. 60 Weber Declaration ¶ 5. 61 Weber Declaration ¶ 6. 62 Weber Declaration ¶ 7.

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Lease. Counsel for the City provided a copy of the Lease to Liberty Mutual Insurance the same day.63 There has been no substantive response regarding the remaining claims. To the extent that the Debtor fails to comply with its requirement to defend, indemnify and hold the City harmless as to the claims and lawsuits, as required under the Lease, the issues caused thereby may increase the necessary cure due. e. The Debtor Has Not Complied with the Requirement to Timely Provide Audited Financial Statements to the City Schedule 1 to the Lease requires that the Debtor provide audited financial statements to the City within 90 days after the end of the Debtor’s fiscal year, which was on March 31, 2021.64 The deadline in the Lease for the Debtor to provide its calendar year 2020 audited financial statements to the City has passed and the City has not received the audited financial statements or any information or timeline as to when the audited financial statements will be provided.65 There is therefore no information from the Debtor as to the cure of this nonmonetary default. III. THE DEBTOR HAS ALSO NOT COMPLIED WITH 11 U.S.C. § 365(d)(3) IN FAILING TO, AMONG OTHER THINGS, PAY POST-PETITION POSSESSORY INTEREST TAXES DUE TO LOS ANGELES COUNTY In addition to the requirement for the Debtor to comply with the terms of the Leases, which the Debtor has not done (as discussed in the section above regarding monetary and nonmonetary defaults), the Debtor has also not paid post-petition taxes due related to the Leases. On or about April 7, 2021, the Los Angeles County Treasurer and Tax Collector filed two proofs of claim in the Debtor’s bankruptcy case for possessory interest taxes and/or other taxes that are past due and owing by the Debtor, including amounts as to the post-petition period (Claim Nos. 121 and 12466). Claim 124 lists an amount due of $848,112.77. The attachment to Claim 124 lists taxes for the period of July 1, 2020 to June 30, 2021 and states that the first installment was 63 Weber Declaration ¶ 7. 64 Vallejo Declaration ¶ 4 and Exhibit A thereto. 65 Vallejo Declaration ¶ 6. 66 Vallejo Declaration, ¶ 6 and Exhibit D thereto.

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paid but that the second installment of $848,112.77 is due. The second installment that has not been paid by the Debtor includes the post-petition period through June 30, 2021. Claim 121 lists an amount due of $5,202,168.39. The attachments to Claim 121 reference the periods of July 1, 2019 to July 30, 2020, July 1, 2020 to June 30, 2021, and include certificates of tax liens that appear to have been recorded and/or filed on September 18, 2020. The tax payments that are for the post-petition period are administrative expenses that must be paid pursuant to 11 U.S.C. § 365(d)(3) regardless of whether the Leases are assumed or rejected by the Debtors. See, e.g., In re Montgomery Ward Holding Corp., 268 F.3d 205, 211-212 (3rd Cir. 2001). Based on the proofs of claim filed by Los Angeles County Treasurer and Tax Collector (Claim Nos. 121 and 124), the Debtor has not complied with Sections 10.1 or 10.3 of the Lease, which require taxes, assessments and other charges to be timely paid by the Debtor.67 The Debtor has ignored its obligation to timely pay post-petition taxes to Los Angeles County and is not meeting its obligations under 11 U.S.C. § 365(d)(3) or the Lease. IV. THE DEBTOR AND POTENTIAL BIDDERS HAVE NOT PROVIDED ADEQUATE ASSURANCE OF FUTURE PERFORMANCE UNDER THE LEASES As set forth in the City’s objection to the proposed cure (Docket No. 566), the Debtor, bidders or potential bidders have not provided any documents or information demonstrating adequate assurance of future performance under the Leases pursuant to 11 U.S.C. § 365(b)(1)(C). The Debtors have thus far solely relied on a two sentence statement in the Cure Notice that is based on information and belief. The Cure Notice states that in regard to adequate assurance of future performance, “the Stalking Horse Bidder has informed the Debtors as follows: The Stalking Horse Bidder is owned by investment funds advised by Monarch Alternative Capital LP, a private investment firm with approximately $9 billion in assets under management. The Stalking Horse Bidder has access to sufficient capital to satisfy any Cure Costs and assure future performance under any Designated Contract or Designated Lease.”68 67 Vallejo Declaration, ¶ 6. See also, Vallejo Declaration, ¶ 4 and Exhibit A thereto. 68 Cure Notice at p. 2 of 6.

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The Debtor’s statement on information and belief does not constitute adequate assurance of future performance under the Leases, and the Debtor has not provided information or documents providing adequate assurance of future performance as to any other bidders. V. CERTAIN PROVISIONS REQUESTED BY THE DEBTOR IN THE STALKING HORSE AGREEMENT VIOLATE THE TERMS OF THE LEASE Section 3.3(b) in the Stalking Horse Agreement states that: Buyer hereby acknowledges that each Hotel (other than the Open Hotels), as of the Effective Date, is closed to the general public and has a skeleton crew due to the ongoing COVID-19 pandemic and no such Hotel shall re-open or its operations be restored prior to the Closing…69 That covenant of the Debtor violates section 5.2 in the Lease, which states: Accordingly, Tenant agrees and covenants that, subject to Force Majeure Delays described in Section 14.9, it will operate the Leased Premises continuously (subject to temporary, partial interruptions reasonably required for periodic maintenance, repair and necessary replacements or for the purposes of further developing the Queen Mary, the Dome, and the Development Lease Area) in light of these objectives, consistent with the operation of the project for its permitted uses, and that it will use commercially reasonable efforts so that Tenant and Landlord may obtain maximum direct and indirect revenue therefrom as contemplated by this Lease. In the event of any dispute or controversy relating hereto, this Lease shall be construed with due regard to the aforementioned objectives. The term “Operate” means Tenant will diligently and continuously pursue all commercially reasonable efforts necessary to maximize the effective use of all available commercial space within the Leased Premises.70 The City understands that the COVID-19 pandemic has caused significant issues, including disruptions for hotels and tourist destinations. Based on the pandemic and County of Los Angeles guidelines and restrictions, the City does not take issue with the Debtor’s prior decision to temporarily close the Queen Mary Hotel. However, and without requesting that any determination be made at this time as to whether and for what period force majeure previously 69 Motion, Exhibit 4, Stalking Horse Agreement, Docket no. 334-5 at p. 37 of 186, Section 3.3(b). 70 Vallejo Declaration, ¶ 4 and Exhibit A thereto, Lease, Section 5.2; see also, Lease Section 14.1(c) regarding a default based on the abandonment, vacation or discontinuance of use of a substantial portion of the leased premises.

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applied or applies at present or applies prior to the close of sale, as conditions change with vaccinations more readily available and with hotels now permitted to operate with restrictions, Section 3.3 in the Stalking Horse Agreement is problematic in that it affirmatively requires the non-operation of the Queen Mary Hotel without regard to the current status or conditions related to the pandemic and in violation of Section 5.2 in the Lease. Any closure of the Queen Mary Hotel and other facilities subject to the Lease must be based on current conditions related to the pandemic rather than a covenant in the Stalking Horse Agreement that is contrary to what is required in the Lease. VI. RESERVATION OF RIGHTS The City reserves any and all rights under the Leases and applicable statutes and case law, including those set forth in the pending adversary proceeding and any potential motion, including but not limited to a potential motion for relief from the automatic stay, and no such rights or other rights of the City are waived as a result of the filing of this objection. [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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VII. CONCLUSION Based on the foregoing, the Vallejo Declaration, the Jaradat Declaration, the Weber Declaration and the Request for Judicial Notice, the City respectfully requests that the Court enter an order: 1. Denying the Motion as it relates to the Leases; and 2. Granting the City such other and further relief as the Court deems appropriate. Respectfully Submitted, Dated: May 14, 2021 GELLERT SCALI BUSENKELL & BROWN LLC Wilmington, Delaware By: /s/ Michael Busenkell Michael Busenkell (DE bar # 3933) 1201 N. Orange Street, Suite 300 Wilmington, DE 19801 (302) 425-5812 (302) 425-5814 (fax) -and- Corey R. Weber (admitted pro hac vice) Jessica L. Bagdanov (admitted pro hac vice) BRUTZKUS GUBNER 21650 Oxnard Street Woodland Hills, CA 91367 (818) 827-9000 (818) 827-9099 (fax) E-mail: cweber@bg.law and jbagdanov@bg.law Counsel to the City of Long Beach and the City of Long Beach, a municipal corporation acting by and through its Board of Harbor Commissioners

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