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HomeMy WebLinkAbout23 - C-1772 - American Legion Lease - 215 15th Street0 CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 23 November 26, 2002 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Attorney's Office Robert H. Burnham, City Attorney, 644 -3131 rburnham(a)-city.newport- beach.ca.us SUBJECT: Lease for American Legion Post 291, Located at 215 15`' Street RECOMMENDATION: Authorize the Mayor to execute the new lease with the American Legion that is attached as Exhibit B. • DISCUSSION: The American Legion has, for many years, leased from the City a parcel of land on 15� Street between Newport Bay and Balboa Blvd. The American Legion is currently occupying the property as a holdover tenant pursuant to a lease that was approved in 1975 and expired in March 2002. Mayor Ridgeway and Mayor Pro Tern Bromberg were designated to meet with American Legion representatives to discuss the terms and conditions of a new lease. The chart attached to this memo (Exhibit A) summarizes the key provisions of the proposed new lease and the old lease. The proposed new lease is attached as Exhibit B. Environmental Review: Class 1 — Categorical exemption. Subyflitted by: H. Burnham, City Attorney Attachments: Exhibit A — Chart • Exhibit B — New Proposed Lease EXHIBIT A Provision Proposed Lease Old Lease Term 25 years with an option 25 years to extend for 25 more years. Use Authorizes current uses American Legion Hall, marina, dry Legion Post boat storage, parking. Taxes Legion pays Legion pays Utilities Legion pays Legion pays Maintenance Legion pays Legion pays Insurance $2 million $200,000/500,000 Rent Base rent — $96,000 plus Percentage rent — percentage rent $103,000 in 2001 Renovation $250,000 renovation No requirement Membership Minimum Membership (1200) No requirement Cooperation Requires cooperation in any City can build redevelopment/no relocation Aquatic Center n U CJ • EXHIBIT B LEASE THIS LEASE between the CITY OF NEWPORT BEACH, a Charter City (City) and NEWPORT HARBOR POST NO. 291 OF THE AMERICAN LEGION, a California corporation (Lessee) is effective on the day of , 2002 ( "Effective Date ") and is made with reference to the following: RECITALS A. City is the owner of a parcel consisting of tidelands and /or uplands that is generally located at 15`h Street and West Bay in the City of Newport Beach (Premises). The Premises is depicted on Exhibit A and legally described in Exhibit B. B. Lessee has continuously occupied the Premises pursuant to a Lease dated March 10, 1975 that has been amended on two occasions to extend the term to March 2002 (Original Lease). C. Lessee is currently in possession of the Premises and has constructed improvements on the Premises including a marina, legion hall, parking area, dry boat storage facilities and lockers. • D. Lessee is a non -profit public benefit corporation with approximately 2051 members as of the Effective Date including many Newport Beach residents. American Legion Membership is available to all persons who served in any branch of the armed forces of the United States. The marina and dry boat storage facilities are currently available only to members of Lessee but the legion hall is rented to members of the public on a "first come first served basis" for weddings, parties and special occasions. E. On November 3, 1992, a majority of the electors of the City of Newport Beach approved Measure M. Measure M authorizes the Newport Beach City Council to lease tidelands and waterfront property consistent with the provisions of State law. F. The City has entered into an agreement with Sutherland -Talla Hospitality (STH) pursuant to which STH has been given the exclusive right to apply for and seek approval of all permits and approvals necessary to construct a hotel (Hotel Project) on City own -ed property that is adjacent to the Premises (Adjacent Property). This agreement between the City and STH also obligates City, assuming STH obtains all required permits and approvals, to negotiate, in good faith, with STH in an effort to agree on the terms and conditions of a long term ground lease for some or all of the Adjacent Property. G. State Lands Commission (Commission) approval of this Lease is not required. Commission staff has determined that this Lease conforms to the all statutes and constitutional provisions relevant to the City administration and use of tide and submerged lands. • H. The City Council of the City of Newport Beach has determined that this Lease is consistent with the Charter of the City of Newport Beach, the Newport Beach -1- General Plan, the Land Use Plan of the Local Coastal Program and all • ordinances, resolutions, and policies presently in effect. The City Council of the City of Newport Beach has determined that it is in the best interests of the citizens of the City of Newport Beach to grant Lessee a long -term ground lease of the Premises on the terms and conditions specified in this Lease. NOW, THEREFORE, in consideration of the mutual promises and covenants in this Lease, the Parties agree as follows: 1. DEFINITIONS 1.1 General Definitions. As used in this Lease, the following words and phrases shall have the following meanings: (a) Alteration — means any addition or change to or modification of, the Premises made by Lessee including, without limitation, fixtures. (b) Annual Total Rent — means Base Rent and Percentage Rent for a Lease Year. (c) Authorized Representative — means any officer, agent, employee, or independent contractor retained or employed by either Party and acting within authority given by that Party. (d) City — means the CITY OF NEWPORT BEACH. • (e) Damage — means an injury to or death of any Person, or the damage destruction, or loss of Premises caused by another Person's acts or omissions. (f) Damages — means monetary compensation or indemnity that can be recovered in the courts by any Person who has suffered Damage. (g) Day or Days — means calendar day(s), subject to extension for weekends or any day when banks are not open in California if a deadline occurs on any such Day. (h) Expiration — means the lapse of the time specified as the Term of this Lease. (i) Good Condition — means the clean, safe, physical condition of the Premises and each portion of the Premises in compliance with all applicable governmental laws and regulations. Q) Hazardous Materials — means any substance the nature of which, whether in terms of quantity, existence, storage, use, manufacture, disposal or effect, renders the substance and /or the user or the owner of real property affected by the substance, subject to or controlled by federal, state or local law, or regulation because (i) the substance is actually or potentially injurious, or a threat, to the • public's health or welfare or to the environment; or (ii) because the substance requires, pursuant to federal, state or local law, -2- • remediation, removal, cleanup or other action to bring the substance and /or the Premises into conformance with applicable law. (k) Hold Harmless — means to protect, defend, indemnify and hold harmless the other party (including employees, officers and, agents) from all liability, losses, penalties, Damages, costs, attorney fees or expenses arising out of or related to any Damage to any Person or property. (1) Law — means any judicial decision, statute, constitution, ordinance, resolution, regulation, rule, administrative order, or other requirement of any municipal, county, state, federal, or other government agency or authority having jurisdiction over the Parties and /or the Premises. (m) Lease Year — means each twelve (12) month period subsequent to the Rent Commencement Date and during the Term. (n) Maintenance or Maintain — means repairs, replacement, maintenance, repainting, and cleaning. (o) Material Default — means the failure of Lessee to cure a default pursuant to Section 16 on or before the applicable cure deadline. • (p) Person — means one or more natural persons, or legal entities, including, without limitation, partnerships, corporations, trusts, estates, associations, or a combination of natural persons and legal entities. (q) Provision — means any term, covenant, condition, or clause in this Lease that defines, establishes, or limits the performance required -3- or permitted by either Party. (r) Redevelopment (with or without "of Adjoining Property ") — means any study, planning, design, construction or operation of any portion of all or a portion of the City owned property, other than the Premises, bounded by 15'" Street, Balboa Boulevard, 19'h Street and Newport Bay (including any public facility on or serving the Premises or Adjoining Property) for any purpose or project including the Hotel Project. (s) Rent — means Base Rent, Percentage Rent, late payment penalties, interest, taxes, and other monetary amounts and charges payable by Lessee under the Provisions of this Lease. (t) Rent Commencement Date — means the first day of the first full month following the Effective Date. (u) Successor — means any assignee, transferee, personal representative, heir, or other Person succeeding lawfully, and pursuant to the provisions of this Lease, to the rights or obligations • of either Party. -3- 2. 3. (v) Termination — means the termination of this Lease, for any reason, • prior to Expiration. 1.2 "Gross Sales Revenue" The term Gross Sales Revenue means: (a) The entire amount of the actual consideration paid to Lessee for all sales of merchandise, labor, service and materials and all charges made by or on behalf of Lessee from or upon the Premises, including orders taken on the Premises and filled elsewhere and sales by any sublessee, or subcontractor in or from the Premises. (b) The gross receipts of all coin - operated devices that are placed on the Premises by Lessee or pursuant to any rent concession, percentage or other arrangement but excluding revenue collected by a public and /or private utility from telephones. Each sale upon installment or credit shall be treated as a sale for the full price in the month during which the sale is made, irrespective of the time when Lessee receives payment (whether in full or in part) from the customer. Gross Sales Revenue shall not include sales and use taxes, so- called luxury taxes, consumers' excise taxes, and other similar taxes now or in the future imposed on the sale of merchandise or services, provided the taxes are separately stated on the invoice and added to the selling price and collected from customers. Gross Sales Revenue shall not include the amount of any cash or credit paid by a customer to the • extent that a cash or credit refund is given to the customer. Gross Sales Revenue shall not include uncollectible credit accounts and other bad debts or the proceeds of sale of Lessee's personal property, trade fixtures or business equipment. The term gross sales shall not include any gift, donation, bequest or other transfer of property to Lessee for charitable purposes. 1.3 Rules of Construction. The language in this Lease shall be construed simply, according to its fair meaning, and not strictly for or against either City or Lessee. The term "permit" shall be interpreted to include "cause to be permitted or allowed to be permitted." The term "include" or "including" shall be interpreted to comprise the term 'Without limitation" and shall not imply any limitation unless otherwise expressly provided. LEASE OF PREMISES City leases the Premises to Lessee and Lessee leases the Premises from City for the Term and on and subject to the terms and conditions in this Lease. TERM The initial Term of this Lease shall be twenty -five (25) years from the Effective Date unless earlier terminated (Term). Lessee shall have the option to extend the term for an additional twenty -five years (subsequent Term) from the date of expiration of the initial term if Lessee (a) gives City written notice, at least sixty • (60) days before expiration of the initial term, of its intention to exercise the option; and (b) Lessee is not in default at the time the written notice is given and ea • is not in default when the initial term expires. Should Lessee hold over and continue in possession of the Premises after Expiration of the initial Term or the subsequent Term, Lessee's continued occupancy of the Premises shall be considered a month -to -month tenancy subject to termination by either Party upon thirty (30) days prior written notice and subject to all the terms and conditions of this Lease except the provisions of this Section. 4. RENT Lessee shall pay Base Rent (as adjusted periodically pursuant to Section 4.1(b)) to City each month from and after the Rent Commencement Date. Lessee shall also pay Percentage Rent to the City if and to the extent that, during any Lease Year, Percentage Rent exceeds the Base Rent. The following provisions govern the calculation and payment of Base Rent and Percentage Rent. 4.1 Base Rent. (a) Base Rent. Lessee shall pay Base Rent to City in the sum of ninety -six thousand dollars ($96,000.00) per year beginning on the Rent Commencement Date. Base Rent shall be paid in equal monthly installments of eight thousand dollars ($8,000). Base Rent for each full month shall be due on the Tenth (10'h) day of that month (Rent Due Date) and late on the Twentieth (20`h) day of the month. Base Rent for any partial month shall be prorated in accordance with the actual number of days in that month. • (b) Periodic Adiustment. After the end of every fifth Lease Year, the Base Rent shall increase by ten percent (10 %) or seventy five percent (75 %) of the percentage increase in the Consumer Price Index (Los Angeles — Anaheim — Riverside (1967 = 100) All Urban Consumers) the average Annual Total Rent (the total of Base Rent and Percentage Rent) for the previous five (5) Lease Years, whichever is greater. The calculation of the Periodic Adjustment shall be made within ninety days after the end of every fifth Lease Year and the increase in Base Rent shall be effective and paid to the City as of the first Rent Due Date after calculation of the Periodic Adjustment and each month thereafter until Base Rent is increased pursuant to the next Periodic Adjustment. �J 4.2 Percentage Rent. (a) Calculation. Lessee shall also pay Percentage Rent if and to the extent that Percentage Rent exceeds, for any Lease Year, the Base Rent. Percentage Rent shall equal the total of the sums derived from multiplying the annual Gross Sales Revenue from the following Revenue Categories by the corresponding Percentage Rates. REVENUE CATEGORY PERCENTAGE RATE -5- Hall Rental Revenues 20% Manna Revenues 40% • Storage Revenues 50% Parking Lot 100% The Gross Sales Revenue used to calculate Percentage Rent shall include the proceeds of business interruption or rental loss insurance to the extent the proceeds are based on and to compensate for, the loss of any Gross Sales Revenue from which Percentage Rent is calculated. (b) Charges for Goods and Services. Lessee agrees to charge prices for all goods, services and facilities (including boat slip rentals) offered at or provided on or from the Premises that are, taking into consideration when appropriate the relative size, location and condition of the facility, comparable with prices for similar goods, facilities and services charged at other locations in Newport Beach. Lessee may charge less than amounts charged by similar locations if, in the exercise of Lessee's reasonable business judgment, a lower charge will stimulate revenue increases or is offered in connection with advertising, promotions, discounts to employees, guests or charitable functions. (c) Annual Statement/Payment of Percentage Rent. Lessee shall, within sixty (60) days following the end of each Lease Year, provide City with a statement, in reasonable detail, of the amount of Lessee's Gross Sales Revenue for each Revenue Category during • the preceding Lease Year. The statement shall also calculate the Percentage Rent due for the preceding Lease Year based on the Gross Sales Revenue in each Revenue Category multiplied by the corresponding Percentage Rates. The statement shall be accompanied by payment of the amount, if any, of the Percentage Rent due for the preceding Lease Year. (d) Failure to Submit. Lessee shall be in default, and City shall have the right, in addition to any other rights or remedies, to conduct an audit at Lessee's expense if Lessee fails to provide City with the annual statement and /or the Percentage Rent as specified in Subsection (c). (e) Termination. City may terminate this Lease upon written notice given at any time within thirty (30) days after receipt of an audit that concludes that the Annual Gross Sales Revenue and/or Percentage Rent is three percent (3 %) or more above the amount shown on the Annual Statement and /or Percentage Rent paid to City. 4.3 Payment Location. Rent shall be payable at the office of the City's Revenue Division at 3300 Newport Boulevard, Newport Beach, California, or at such other place or places as City may from time to time designate by written notice delivered to Lessee. 4.4 Production of Statement, Records and Audit. Lessee agrees to make • available for inspection by City, or its Authorized Representative, at the C� • Premises a complete and accurate set of books and records of all sales of merchandise and revenue derived from the conduct of business or activity in, at or from the Premises from which Gross Sales Revenue can be determined. Lessee shall also make available, upon City's request, all supporting records, including federal, state and local tax returns. Lessee shall also furnish City's Authorized Representative, upon request, with copies of its quarterly California sales and use tax returns filed with the State of California. Lessee shall retain and preserve for at least Three (3) years all records, books, bankbooks or duplicate deposit books and other evidence of Gross Sales Revenue. City and its Authorized Representative shall have the right, upon reasonable notice, during the Term or any Option Term, to inspect and audit Lessee's books and records and to make transcripts to verify the Rent due City. The audit may be conducted at any reasonable time during normal business hours. Lessee shall cooperate with City in making the inspection and conducting the audit. City shall also be entitled, once during each Lease Year and within Two (2) years after its end, and once within one hundred eighty (180) days after Expiration or Termination of this Lease, to an independent audit of Lessee's books of account, records, cash receipts, and other pertinent data to determine Lessee's Gross Sales Revenue. The audit shall be conducted at City's sole cost and expense by a certified public accountant designated by City. The audit shall be limited to the determination of Gross Sales Revenue and shall be conducted during usual business hours in a manner that minimizes any interference with the conduct of Lessee's regular business operations. If the audit concludes that there is a deficiency in the payment of any Rent, the deficiency shall • become due and payable within twenty (20) days and if there is an overpayment, City shall refund the amount of the overpayment within twenty (20) days. City shall bear its costs of the audit unless the audit shows that Lessee understated Gross Sales Revenue by more than three percent (3 %), in which case Lessee shall pay the reasonable cost of the audit. City and City's Authorized Representative shall be required to keep confidential to the maximum extent permitted by law any information gained from such documents, statements, inspections or audits confidential. City and its Authorized Representative shall not disclose financial information received in confidence and pursuant to this Lease except to carry out the purposes of this Lease unless the law requires, as opposed to permits, disclosure. However, City may disclose the results of any audit in connection with any financing arrangements, the sale or transfer of City's interest in the Premises, or pursuant to order of a court or administrative tribunal. 4.5 Lessee's Gross Sales Revenue Audit. In the event of any audit by City in accordance with this Lease, Lessee may contest the results of City's audit by performing a confirming audit within thirty (30) days of receipt of City's audit results and supporting evidence, using an independent public accountant reasonably acceptable to City. If Lessee's audit discloses that City's audit was incorrect by more than three percent (3 %), then City shall pay the cost of Lessee's contesting audit. 4.6 Late Payment Penalty. Rent shall be late if paid on or after the Twentieth • (20) day of the month due. Late Rent shall be assessed a One (1) time penalty of five percent (5 %) of the amount due and shall bear interest at the rate of ten percent (10 %) per annum on the unpaid balance (including -7- Rent, late payment penalty and accrued interest) calculated from the date • that Rent was due to the date that the balance is fully paid. 5. USE OF PREMISES 5.1 Approved Uses. Lessee shall use the Premises only for the purposes specified in this Section (Approved Uses). Lessee may not use the Premises for any other use except with prior written consent of the City Manager. Lessee may temporarily utilize a portion of the Premises for uses not authorized by this Section upon securing any required permit from City acting in its governmental capacity. Lessee shall be entitled to maintain the following: (a) A Legion Hall of approximately 10,000 square feet and an ancillary food /drink service area. (b) A marina consisting of 49 slips with 34 lockers. (c) Dry boat storage and lockers consisting of 47 spaces and 43 dinghy racks. (d) Parking lot consisting of 26 spaces. 5.2 City /Community Use. When Lessee is not using the Premises, the Premises and structures shall be available for use as a community center and recreation instruction facility by the City on a first priority- basis, and by local organized community or civic organizations in accordance with • reasonable rules, regulations, fees and scheduling to be established by Lessee with the approval of the City Manager. 5.3 Operation of Premises. Lessee shall operate and manage the Premises in a manner comparable to a similar organization providing similar facilities or services. Lessee shall not use the Premises in any manner that: (a) creates a nuisance; (b) violates any Law; or (c) is not in compliance with all statutes, laws, permits, use restrictions and regulations of City applicable to the Premises, Lessee and /or Lessee's use of the Premises. 5.4 Advertising Display. Lessee may, at its own expense, place signs in or upon the Premises subject to the prior written consent of the City Manager as to the size, type, design and method of installation. All signage placed by Lessee on, in or about the Premises shall be removed by Lessee upon Termination or Expiration of this Lease and any damage caused by removal shall be repaired at Lessee's expense. Any permanent signage in place as of the Execution Date of this Lease shall be deemed approved by the City. 5.5 Independent Contractor. City shall have no interest in the business of Lessee and no liability for the business operations or diminution /loss of Gross Sales Revenue whether or not caused by City's enforcement of Law. 5.6 Parking. Lessee shall provide a total of 26 off - street parking spaces. The • provision of these spaces satisfies the requirements of Title 20 of the 91 • Newport Beach Municipal Code. Lessee shall not permit any repair of vehicles on the Premises. 5.7 No Discrimination. Lessee shall allow members of the general public, through a reservation system, to use the Legion Hall for special events on a non - discriminatory basis. Lessee shall not discriminate on the basis of gender, race, religion, or other criteria that violates constitutional or statutory law with respect to the use or occupancy of the Premises. 6. SPECIAL PROVISIONS The provisions of this Section represent special and unique circumstances and consideration related to this Lease and the proposed Redevelopment of all or any portion of the Adjoining Property. The terms and conditions of this Section are material and the failure to comply shall constitute a material breach on the part of Lessee or, in the case of the charter and minimum membership provisions, cause a forfeiture of this Lease. 6.1 Charter /Membership. City has entered into this Lease based on Lessee's representation that Lessee is a an American Legion Post that is chartered by the American Legion, that Lessee's membership consists of a substantial number of persons and that membership in the American Legion and Newport Harbor Post No. 291 is contingent only upon having served in an active duty capacity in the military forces of the United State. Lessee acknowledges that the minimum membership provisions of this Lease are crucial to the finding by the City Council that this Lease is • consistent with City's obligations pursuant to statutory, constitutional and decisional law related to the permitted use of tide and submerged lands. Accordingly, Lessee agrees to maintain a minimum membership of one thousand two hundred (1200) natural persons. Lessee shall, within thirty days after the end each Lease Year, provide City with access to a list of all active members so City can confirm compliance with the minimum membership requirement. Lessee agrees to forfeit all of its rights and interests under this Lease if, at any time during the Term, Lessee fails to satisfy the minimum membership provisions of this Lease or fails to maintain its current affiliation and relationship with the American Legion. 6.2 Cooperation. Lessee shall fully cooperate with City, and City's tenants (other than Lessee), contractors, representatives and assignees (Agents) in the Redevelopment of the Adjoining Property. Lessee's obligation to cooperate with the Redevelopment includes the general and specific requirements in this Section. (a) General. Lessee shall allow City and /or its Agents to take any action, including the right to enter to conduct tests, surveys and studies with respect to the Premises in conjunction with the Redevelopment of Adjoining Property provided the tests, surveys or studies do not unreasonably interfere with Lessee's ability to conduct business on the Premises. Lessee shall allow City and /or its Agents to enter onto the Premises subject only to the obligation of City and its Agents to give Lessee seventy two (72) hours prior • written notice and the obligation of the City to, at its sole cost, to commence repair of any Damage to the Premises caused by the City or its Agents, within twenty -four (24) hours after causation. EM (b) Occupation of Premises. In addition to the general obligation of • Lessee to cooperate in Redevelopment, City and /or its Agents shall have the right to occupy any portion of the Premises, except the Legion Hall, Marina and necessary access to each, for: (i) a period of up to 12 consecutive months once during the term of this Lease; and (ii) a total of twenty -four (24) months during the Term. The right of City and /or its Agents to occupy a portion of the Premises is contingent upon City's execution of, and compliance with, an agreement that (i) compensates Lessee for the period of occupation; and (ii) holds Lessee harmless from any claim, loss, damage or liability proximately caused by the occupation. City or its Agents shall, in the course of any occupation of a portion of the Premises, ensure that at least 13 on -site parking spaces remain accessible to Lessee and its invitees. City shall also take all reasonable action to mitigate the impact of any occupation on Lessee such as temporary suspension of on street parking charges or the issuance of short term "no -fee" parking permits to Lessee and /or its invitees. The compensation for occupation shall be calculated on the basis of the average revenue during the six (6) months prior to occupation that was derived from for the use of that portion of the Premises being occupied. For example, if the occupation is four (4) months and the average month revenue for the preceding six (6) months from that portion of the Premises was one thousand dollars ($1000.00), the compensation would be four thousand dollars ($4,000.00). • In the event of an occupation of a portion of the Premises, City may authorize Lessee to conduct its operations from facilities located on the Adjoining Property during the term of the occupation. 6.3 RENOVATION (a) Plans /Permits. Lessee shall, within thirty (30) days after receipt of written notice from City and at its sole cost and expense, commence preparation of plans for the remodeling and renovation of the structures on the Premises (Renovation). The Renovation shall be designed and constructed in a manner that ensures architectural compatibility with any structures to be constructed on Adjoining Property pursuant to any Redevelopment. The written notice to proceed shall generally specify the architectural criteria for compatibility and Lessee shall submit conceptual designs for the Renovation to the City for approval or modification within sixty (60) days after notice. The conceptual designs shall assume a construction cost of not less than two hundred and fifty thousand dollars ($250,000.00) subject only to a credit in the sum of ten thousand dollars ($10,000) for maintenance performed between the Effective Date and the date of the notice to proceed. City shall approve or conditionally approve the conceptual designs, taking into consideration the assumed construction costs, within thirty (30) days after submittal. Lessee shall, within sixty days after City approval or conditional approval, prepare final construction plans • and specifications that are consistent with the approval or conditional approval as well as the assumed construction costs and -10- • submit the plans to the City for issuance of permits. City shall waive all fees related to the issuance of permits for the plans. (b) Construction. Lessee shall not be obligated to commence construction of the Renovation until final approval of all necessary permits and City has given Lessee written notice to proceed. The written notice to proceed shall specify the date on which construction is to commence but in no event shall Lessee be required to commence construction less than sixty (60) days after the notice to proceed. Lessee shall commence construction on or before the date specified in the notice to proceed and diligently pursue construction to completion. Lessee shall construct the Renovation at Lessee's sole cost and expense. (c) Undergrounding. Lessee shall, in conjunction with the Renovation, underground all utilities on the Premises at Lessee's sole cost and expense. The cost and expense of undergrounding utilities is exclusive of, and in addition to, the minimum cost of Renovation as specified in this Subsection. (d) Water Main. In the event City undertakes a project to increase the size of, or replace, the water main in Balboa Blvd or 15' Street, City shall install, at its sole cost and expense, a "tee connection" and /or any other facility that will enable Lessee to improve its fire suppression capacity and /or fire suppression facilities. • 6.4 Tidelands Agreement. The State Lands Commission staff contends that a substantial portion of the property bounded by Balboa Blvd., 15'" Street, 18' Street and Newport Harbor is tidelands. City and the State Lands Commission may, at some time in the future, consider approval of a boundary line agreement to resolve any dispute relative to the appropriate tidelands boundary. City commits not to approve any boundary line agreement that would materially alter the rights of Lessee pursuant to this Lease. Lessee acknowledges that a boundary line agreement that does not impact its rights pursuant to this Lease would be in Lessee's best interests and agrees to support approval of any such agreement. 7. TAXES, LICENSES AND OTHER OBLIGATIONS 7.1 Payment of Taxes. Lessee acknowledges that this Lease may create a possessory interest subject to taxation. Lessee shall pay, before delinquency, all taxes, assessments, license fees and other charges (Taxes) that are levied or assessed Lessee's interest in this Lease or any fixture, improvement, equipment and other property on the Premises. Lessee shall pay directly to the appropriate taxing authorities all Taxes at least Ten (10) days before delinquency and before any fine, interest or penalty is due or imposed by operation of law. Lessee shall provide City with a copy of the check used to pay any Taxes with the Rent payment due immediately after Lessee receives with the monthly bank statement the check used to pay the Taxes. Lessee shall not be required to pay any • Taxes based on City's ownership interest in the Premises. -11- 51 7.2 Payment of Obligations. Lessee shall promptly pay, when due, any and • all bills, debts, liabilities and obligations incurred by or charged to Lessee in connection with Lessee's occupation and use of the Premises. However, the provisions of this subsection shall not prevent Lessee from contesting the validity of any lien, claim or demand, provided that in such event, Lessee shall, at its expense, defend itself and City against the same and shall pay and satisfy any adverse judgment that may be rendered before enforcement against City or the Premises. 7.3 Challenge to Taxes. Lessee shall have the right in good faith, at its sole cost and expense, to contest the amount or legality of any Taxes including the right to apply for reduction. If Lessee contests payment of Taxes, Lessee's failure to pay the Taxes shall not constitute a default as long as Lessee complies with the provisions of this Section. City shall not be required to join in any proceeding or contest brought by Lessee unless the Law requires joinder of the City and in that case City shall join in the proceeding, permit it to be brought in City's name and shall execute any necessary or appropriate document necessary so long as City is not required to bear any cost or liability for payment of Taxes. Lessee shall, on final determination of the proceeding or contest, immediately pay such disputed tax and also discharge any decision or judgment rendered, together with all related costs, charges, interest and penalties and provide City with a copy of Lessee's payment as and when provided in Section 7.1. Lessee shall Indemnify and Hold Harmless the City and its officers and employees from and against any liability, claim, demand, penalty, cost or expense arising out of or in connection with any contest or proceeding prosecuted by Lessee pursuant to this Section. • 7.4 License. Lessee shall maintain in good standing all required licenses and permits required for operation of the business on the Premises, including but not limited to a City Business License. UTILITIES AND REFUSE COLLECTION 8.1 Basic Utilities. Lessee shall make all arrangements for and pay for all utilities furnished to or used on the Premises, - including, gas, electricity, water, telephone service and cable TV. Any repair to utility lines within the Premises is the sole responsibility of Lessee. Lessee bears all risk of interruption, cancellation and /or disruption of utility services, as well as the cost of all utilities Lessee requires for its use of the Premises. 8.2 Refuse Collection. Lessee shall make arrangements for and pay for all refuse collection and Hazardous Materials disposal. Lessee shall keep the Premises free and clean of rubbish and litter and shall deposit accumulated rubbish and litter in containers designated by City. Trash containers shall be kept in an approved enclosed area and shall be emptied on a regular basis. Lessee shall comply with the provisions of the Newport Beach Municipal Code and all other Laws regarding the use, storage and disposal of Hazardous Materials. In no event shall Lessee allow Hazardous Materials related to the Premises to enter, be disposed of into, seep or otherwise be released into any sewer line, soil, storm drain and /or waterway on, under or adjacent to the Premises. • -12- • 8.3 Undergrounding. Lessee shall fully cooperate in, and support, any effort to underground utilities on and in the vicinity of the Premises such as the formation of any district for the purpose of funding or implementing a program to underground utilities. Lessee shall, upon formation of any such district, pay all costs and assessments required in conjunction with the undergrounding of utilities. 9. ALTERATIONS TO THE PREMISES 9.1 Alterations Requiring Building Permits. Any alteration that requires a building permit from City shall require the written consent of the City Manager. The City Manager's written consent shall not be unreasonably withheld so long as the permit is requested in conjunction with and furtherance of an Approved Use. The provisions of Section 6.2 shall control with respect to alterations made in conjunction with the Renovations. 9.2 Non - Structural Alterations. Lessee shall have the right to make, at its sole expense, such non - structural changes, alterations, improvements and additions in and to the interior of the buildings, or to the piers, slips, floats and ramps on Premises, and Lessee may install any trade fixtures and equipment as it may deem advisable for the conduct of any Approved Use of the Premises. 9.3 Alterations Costing More than $50,000. Except as otherwise provided in Section 6.2 pertaining to Renovations, Lessee shall not make any • Alterations (other than non - structural Alterations costing less than fifty thousand dollars [$50,000.00]) to the Premises without the prior written consent of the City Manager which shall not be unreasonably withheld if in conjunction with and in furtherance of any Approved Use. In granting or withholding consent to proposed Alterations by Lessee, the City Manager shall consider the impact of the proposed Alterations on public views adjacent Premises owners, compliance of City codes and the impact of the proposed Alterations on any private or public use of the Adjoining Property. The City Manager may require, as a condition of approval, that Lessee agree to amendments to this Lease, including amendments increasing the amount of Rent payable under this Lease if the proposed Alterations would materially increase the floor area or size of the building structures on the Premises. The City Manager may also require Lessee to provide, at Lessee's expense, appropriate engineering and feasibility studies regarding the structural integrity of the Premises. Any damages or destruction to the structural improvements or Lessee equipment at the Premises shall not reduce or excuse Lessee's obligation to pay Rent in full and on time. 9.4 Quality of Work Performed. All work shall be performed in a good and workmanlike manner, shall substantially comply with the plans and specifications submitted to City and shall comply with all applicable governmental permits and Laws in force at the time permits are issued. 9.5 Payment of Costs. Lessee shall pay all costs related to the construction • of any Alterations by Lessee or its agents. Lessee shall use its best efforts to keep the Premises free and clear of all mechanics' liens resulting from construction performed at the direction of Lessee. All construction -13- improvements shall, upon completion, become part of the Premises, • owned by City. However, the provisions of this subsection shall not prevent Lessee from contesting the validity of any lien, claim or demand, provided that in such event, Lessee shall, at its expense, defend itself and City against the same and shall pay and satisfy any adverse judgment that may be rendered before enforcement against City or the Premises. 9.6 Indemnification. Lessee shall Hold Harmless City and its officers and employees with respect to any Damage or Damages related to any work performed on the Premises by Lessee. City shall promptly provide Lessee with a copy of any claim filed by any third party with respect to work performed by Lessee. City has no obligation to or liability to Lessee incident to City's approval of Lessee's plans or issuance of permits for any improvements to the Premises. 9.7 Disposition of Alterations at Expiration or Lease Termination. Any Alterations made to the Premises shall remain on, and be surrendered with, the Premises on Expiration or Termination of this Lease (Excluding Lessee's fixtures, equipment, furniture, movable decorations and the like). However, City may elect not less than thirty (30) days prior to Expiration or Termination of this Lease, to require Lessee to remove, at Lessee's cost, any Alterations that Lessee has made to the Premises, except those Alterations existing as of the date of this Lease or approved by City excluding any Lessee related Hazardous Materials or other clean -up of any environmental contamination which shall remain a Lessee obligation. If City requires removal of Alterations, Lessee shall, at its cost, remove the • Alterations and restore the Premises to its condition prior to installation of such Alterations, ordinary wear and tear excepted, before the last day of the Term, or within thirty (30) days after notice is given, whichever is later. Prior to Expiration or within fifteen (15) days after Termination of this Lease, Lessee may remove any movable partitions, machinery, equipment, furniture, and trade fixtures previously installed by and solely paid for by Lessee, provided that Lessee repairs any damage to the Premises caused by removal and the structural integrity of the foundation and bulkhead areas of the Premises are not adversely impacted. 10. REPAIRS AND MAINTENANCE OF PREMISES 10.1 Maintenance and Repair by Lessee and City. Lessee agrees that it will maintain the Premises in Good Condition. City shall be responsible solely for the maintenance of the vertical bulkheads serving the Premises excluding damage or deterioration caused to any bulkhead by Lessee or Lessee's operations for which Lessee shall be responsible. Lessee shall also, at its sole cost and expense, at all times during the Term, maintain all other improvements and equipment on the Premises including entrances and exits, plate glass, roofs, doors, exterior and interior painted areas, HVAC equipment, electrical circuits and switchgear, utility supply lines, plumbing and other fixtures, equipment, interior walls, ceilings and floors, piers, concrete foundations, fencing, gates, asphalt areas, slips, floats and ramps, in good order, condition and repair. City may perform Maintenance or repairs in the event Lessee fails to commence required • Maintenance or repairs within fifteen (15) days after receipt of notice to do so. The cost of any Maintenance or repairs by the City pursuant to this -14- • Section shall be payable upon billing by City as additional Rent with the Lessee's next monthly Rent payment. 10.2 Entry by City. City may enter upon and inspect the Premises at any reasonable time for Maintenance or other purposes. In case of emergency, City or its Authorized Representatives may enter the Premises by the master key if Lessee is not present to open and permit an entry. During entry, City shall exercise reasonable care relative to the Premises and to Lessee's Property. Any entry to the Premises by City shall not be construed as a forcible or unlawful. 10.3 Acceptance As Is. Lessee is the long -time tenant of the Premises, is fully aware of the condition of the Premises and accepts the condition of the Premises "as is" on the date of this Lease without any City warranty, representation or repair obligation. 11. LIENS Lessee shall use its best efforts to prevent the enforcement against all or a portion of the Premises of any mechanics', materialman's, contractors' or other liens arising from, or any claims for damages growing out of, any work or repair or alteration (except from the actions of City), and Lessee use its best efforts to pay or cause to be paid the liens and claims before any action is brought to enforce the same against Lessee or the Premises, or shall adequately indemnify City and the Premises by payment bonds acceptable to City and as provided for by Law. However, the provisions of this Section shall not prevent Lessee from • contesting the validity of any lien, claim or demand, provided that in such event, Lessee shall, at its expense, defend itself and City against the same and shall pay and satisfy any adverse judgment that may be rendered before enforcement against City or the Premises. 12. INDEMNITY AND EXCULPATION: INSURANCE 12.1 Exculpation of City. Except as otherwise expressly provided in this Lease, City shall not be liable to Lessee for any damage to Lessee or Lessee's Premises (including any boat owned by any Lessee customer) goodwill, increased Lessee operating costs, or loss of business or income by Lessee from any cause other than the gross negligence or intentional or willful acts of City. Except as otherwise expressly provided in this Lease, Lessee releases and also waives all claims against City for Damages arising for any reason other than the gross negligent, intentional or willful acts of City or its Authorized Representatives. City shall not be liable to Lessee for any Damage to the Premises, Lessee's Premises, Lessee's goodwill, or Lessee's business income, caused in whole or in part by acts of nature including, without limitation, waves, wind and tidal flows. 12.2 Lessee Release and Hold - Harmless. Lessee releases the City and also agrees to Hold Harmless the City, its elected officials, officers and employees from any and all claims, liability, loss, Damage, or expenses resulting from Lessee's occupation and use of the Premises, specifically including, without limitation, any claim, liability, loss, or Damage arising by • and Lessee assumes all corresponding risk because of -15- (a) The death or injury of any Person caused or allegedly caused by • the condition of the Premises or an act or omission of Lessee or an agent, contractor, employee, servant, sublessee or concessionaire of Lessee; and (b) Any work performed on the Premises or materials furnished to the Premises at the request of Lessee or any agent or employee of Lessee, with the exception of Maintenance performed by City; and (c) Lessee's failure to perform any provision of this Lease or to comply with any requirement of Law or any requirement imposed on the Premises by any duly authorized governmental agency or political subdivision. Lessee's obligations pursuant to this Subsection shall not extend to any claim, loss, liability, Damages, costs or fees that are proximately caused by the sole gross negligence, willful misconduct, or unlawful or fraudulent conduct on the part of the City or its officers or employees. 12.3 Insurance Limits. (a) Liability Insurance. Lessee shall, at its own cost and expense, secure and maintain during the entire Term a broad form commercial general liability insurance policy issued by an insurance company reasonably acceptable to City covering the acts and omissions of Lessee, any Lessee employee, agent customer, independent contractor or visitor to the Premises. The • policy shall name City, and its officers, employees and agents as additional insureds and protect, against loss or liability caused by or connected with Lessee's occupation and use of the Premises under this Lease in amounts not less than: combined single limit bodily injury and Premises damage, including products /completed operations liability and blanket contractual liability, of two million dollars ($2,000,000.00) per occurrence, subject to increased limits in accordance with Section 12.3(b). (b) City's Ability to Increase Amount of Public Liability and Premises Damage Insurance. Not more frequently than once every five (5) years, Lessee shall increase the insurance coverage as reasonably required by City so that at all times, the amount of public liability and Premises damage insurance coverage maintained by Lessee reasonably and fully protects the City. (c) Deductibles. Any deductible amount under each insurance policy shall not exceed seven thousand five hundred dollars ($7,500.00) without the express written consent of the City Manager and Lessee is responsible for payment of such amount in the event of any Damage. 12.4 Fire Insurance on Building and Other Improvements. Lessee at its cost shall maintain on the Buildings and other improvements that are or become a part of the Premises a policy of standard broad form all -risk fire . • and extended coverage insurance, with vandalism and malicious mischief endorsements, to the extent of at least full replacement value, with -16- • coverage for demolition and compliance with future Building Codes in a form acceptable to the City Manager. The insurance policy shall be issued in the names of City and Lessee, as their interests appear. The insurance policy shall provide that any proceeds shall be made jointly payable to City and Lessee. 12.5 Determination of Replacement Value. The "full replacement value" of the Buildings and other improvements to be insured under Section 12 shall be determined by the company issuing the insurance policy at the time the policy is initially obtained. Not more frequently than once each year, either Party shall have the right to notify the other Party that it elects to have the replacement value re- determined by such underwriting insurance company. The re- determination shall be made promptly and in accordance with the rules and practices of the Board of Fire Underwriters, or a like board recognized and generally accepted by the insurance company. Each Party shall be promptly notified of the re- determination by the company. The insurance policy shall be adjusted according to the re- determination. 12.6 Loss of Rent Insurance. Lessee at its cost shall maintain loss of rent insurance (or business interruption insurance) insuring that the Base Rent will be paid to City for a period up to Twelve (12) months if the Premises are destroyed or rendered unusable or inaccessible for commercial purposes by a risk insured under a special form Premises coverage policy including vandalism and malicious mischief endorsements. • 12.7 Workers' Compensation. Lessee shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California and the applicable provisions of Divisions 4 and 5 of the California Labor Code. 12.8 Waiver of Subrogation. The parties release each other, and their respective Authorized Representatives, from any claims for Damage to any Person or to the Premises and to the fixtures, personal Premises, and Alterations of either in or on the Premises that are caused by or result from risks insured against under any insurance policies carried by the parties and in force at the time of any Damage or required to be carried under this Lease. Lessee shall cause each insurance policy obtained by it to provide that the insurance company waives all rights of recovery by way of subrogation against the City in connection with any Damage covered by any policy of Premises insurance. Neither party shall be liable to the other for any Damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. If any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by the payment of an additional premium charge above that charged by the insurance company issuing policies without a waiver of subrogation, the Party undertaking to obtain the insurance shall notify the other Party of this fact. The other Party shall have a period of twenty (20) days after receiving the notice either to place the insurance with a company that is reasonably satisfactory to the other Party and that will carry the insurance with a waiver of subrogation, or to agree to pay the • additional premium. The Party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance -17- 13. involved if the insurance cannot be obtained with a waiver of subrogation • or the other Party refuses to pay the additional premium. 12.9 Other Insurance Matters. All the insurance required under this Lease shall: (a) Be issued by insurance companies authorized to do business in the State of California, with a minimum Best Insurance Guide or financial rating of A -VII unless otherwise approved in advance by City Risk Manager; (b) Be issued as a primary policy; (c) Be noncontributing with any insurance that may be carried by City; (d) Contain an endorsement requiring Thirty (30) days written notice from the insurance company to both Parties before cancellation or material change in the coverage, scope or amount of the policy; and (e) Lessee shall maintain insurance for all boats being repaired or stored at the Premises to protect City from any liability concerning third party property located at the Premises. Each policy, or a certificate of the policy, together with evidence of payment of premiums, shall be deposited with City and on renewal of the policy not less than thirty (30) days before expiration of the term of the policy. Either Party may • maintain for its own account any insurance not required under this Lease, but any such policy shall be separate from and non - contributory in the event of loss covered by insurance carried by the Party responsible for said loss as required by this Lease. DAMAGE OR DESTRUCTION OF PREMISES 13.1 Destruction of Premises. If the Premises are totally or partially destroyed, rendering the Premises or any portion totally or partially inaccessible or unusable, Lessee shall restore the Premises, at Lessee's sole cost and effort, to substantially the same condition as immediately prior to such destruction (including all trade fixtures, personal Premises, improvements and Alterations as are installed by Lessee, which shall be replaced by Lessee at its expense, unless Lessee elects to terminate this Lease pursuant to this Section. Lessee can elect to terminate this Lease by giving notice of such election to City within sixty (60) days after the date of the occurrence of any casualty and also proving to the reasonable satisfaction of City that each of these conditions are satisfied: (a) The cost of the restoration exceeds the amount of any available insurance proceeds by at least twice the Total Annual Rent for the most recent two (2) completed Lease Years; (b) At the time of such casualty Lessee maintained all insurance required by this Lease; and • SH • (c) No act attributable to Lessee voided insurance coverage otherwise available concerning the Damage or loss. If the Lease is terminated, all insurance proceeds applicable to reconstruction (excluding Lessee's personal in the Premises) shall be assigned by Lessee to City and Lessee shall pay any policy deductible to City. Lessee shall Hold Harmless the City from any expenses, liability or loss regarding damage or loss to boats being repaired or stored by Lessee at the Premises and any other liability or loss incurred by Lessee concerning such casualty and event. 13.2 Replacement of Lessee's Premises. In the event of the damage or destruction of improvements located on the Premises not giving rise to Lessee's option to terminate this Lease under Section 13.1, Lessee shall, at its own expense, replace and repair all Lessee's trade fixtures, equipment, furnishings and inventory as soon as reasonably possible to permit the prompt continuation of Lessee's business at the Premises for the Approved Use. 14. ABATEMENT OF RENT In the event of Damage or destruction of the Premises and this Lease is not terminated, Lessee shall continue to utilize the Premises for the operation of its business for the Approved Use to the extent it may be practicable and commercially reasonable. Base Rent shall abate in proportion to the area of the Premises that is rendered unusable for the Approved Use. The abatement of • Rent shall commence on the date that use of the Premises is impacted and continue until the completion of those repairs necessary to restore full use of the Premises and Lessee s re- opening of the Premises. Lessee's obligation to pay Taxes and other monetary obligations pursuant to this Lease shall not be abated or reduced. Rent shall not abate if the Damage or destruction to the Premises is the result of the negligence or willful conduct of Lessee or its employees, officers or agents. Lessee's right to abatement of Base Rent is contingent on payment of insurance proceeds, if any, equal to the amount of Base Rent pursuant to the coverage required by this Lease. 15. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT, SUBLETTING AND ENCUMBERING 15.1 Prohibition. The Parties acknowledge that City is entering into this Lease in consideration of the unique nature of Lessee and special circumstances pertaining to Lessee's prior history as a tenant. Consequently, Lessee shall not voluntarily delegate, assign or encumber its interest in this Lease or in the Premises, or sublease substantially all or any part of the Premises, or allow any other person or entity (except Lessee's Authorized Representatives) to occupy or use all or any part of the Premises without the prior written consent of City, which may be withheld at the sole discretion of the City. 15.2 Effect of Consent. City's consent to any assignment, encumbrance, or sublease shall not relieve Lessee from its obligations or liabilities under • this Lease nor act as a waiver of the requirement that such consent be obtained to any subsequent assignment, encumbrance or sublease. -19- 15.3 Lessee Financing. If Lessee is not then in Material Default, and Lessee • gives City forty -five (45) days advance notice to City, then City shall sign a commercial reasonable non - disturbance and attomment agreement from an institutional commercial lender of Lessee's choice, in a form reasonably acceptable to the City. City's interest in the Premises shall be senior to and not security for such a loan. 16. DEFAULT 16.1 Default by Lessee. The occurrence of any one or more of the following events shall constitute a "Material Default" of this Lease by Lessee: (a) The vacating or abandonment of the Premises by Lessee (b) The failure by Lessee to make any payment of Rent or any other payment required by this Lease, as and when due, when such failure shall continue for a period of Ten (10) days after written notice of default from City to Lessee. (c) The failure of Lessee to observe or perform any of the "material" (meaning costing five thousand dollars ($5,000.00) or more to fully remedy covenants, conditions or provisions of this Lease to be observed or performed by Lessee where the failure continues for a period of thirty (30) days after written notice from City to Lessee; provided, however, that if the nature of Lessee's default is such that more than thirty (30) days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee • commences such cure within said thirty (30) day period and then diligently prosecutes the cure to completion. However, no thirty (30) day cure period is allowed for any Lessee caused environmental event involving Hazardous Substances at the Premises or otherwise caused by Lessee or Lessee's agents or customers that is estimated to cost fifteen thousand dollars ($15,000.00), or more, to fully remediate. Immediately following any environmental event, Lessee shall use Lessee's best efforts to fully remediate or prove to the reasonable satisfaction of City that remediation is underway and will be completed in ninety (90) days without any risk of further environmental damage to the Premises and/or surrounding area. (d) The making by Lessee of any general arrangement or assignment for the benefit of creditors. (d) Lessee becomes a "debtor' as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days). (e) The appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such appointment is not discharged within sixty (60) days. (f) The attachment, execution or the judicial seizure of substantially all • of Lessee's assets located at the Premises or of Lessee's interest -20- • in this Lease, where such seizure is not discharged within sixty (60) days. 16.2 Remedies. (a) Cumulative Nature of Remedies. If any Material Default by Lessee shall not be cured as required in Section 16.1, City shall have the remedies described in this Subsection, in addition to all other rights and remedies provided by law or equity, to which City may resort cumulatively or in the alternative. (1) Reentry without Termination. City may reenter the Premises, and, without terminating this Lease, re -let all or a portion of the Premises. City may execute any leases made under this provision in City's name and shall be entitled to all rents from the use, operation, or occupancy of the Premises. Lessee shall nevertheless pay to City on the dates specified in this Lease the equivalent of all sums required of Lessee under this Lease, plus City's expenses in conjunction with re- letting, less the proceeds of any re- letting or attomment. No act by or on behalf of City under this provision shall constitute a Termination of this Lease unless City gives Lessee specific notice of Termination. (2) Termination. City may terminate this Lease by giving Lessee • notice of Termination. In the event City terminates this Lease, City may recover possession of the Premises (which Lessee shall surrender and vacate upon demand) and remove all Persons and Premises. City shall be entitled to recover the following as damages: (i) The value of any unpaid Rent or other charges that are unpaid at the time of Termination; (ii) The value of the Rent and other charges that would have accrued after Termination less the amount of Rent and charges the City received or could have received through the exercise of reasonable diligence as of the date of the award; (iii) Any other amount necessary to reasonably compensate City for the detriment proximately caused by Lessee's failure to perform its obligations under this Lease: and (iv) At City's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time -to -time by applicable California law. City shall be entitled to interest at the rate of ten percent (10 %) per annum on all Rent and other charges from the date due or the date • they would have accrued. City shall also be entitled to an award of the costs and expenses incurred by City in maintaining or preserving the Premises after default, preparing the Premises for -21- re- letting, or repairing any damage caused by the act or omission • of Lessee. (3) Use of Lessee's Personal Premises. City may use Lessee's personal property and trade fixtures located on the Premises without compensation or liability to Lessee for use or damage. In the alternative City may store the Premises and fixtures at the cost of Lessee. City shall not operate the Premises in any manner tending to indicate that the Premises is affiliated with, part of or operated in conjunction with Lessee's business. (b) City's Right to Cure Lessee's Default. Upon continuance of any material default beyond applicable notice and cure periods, City may, but is not obligated to, cure the default at Lessee's cost. If City pays any money or performs any act required of, but not paid or performed by, Lessee after notice, the payment and /or the reasonable cost of performance shall be due as additional Rent not later than five (5) days after service of a written demand accompanied by supporting documentation. No such payment or act shall constitute a waiver of default or of any remedy for default or render City liable for any loss or damage resulting from performance. (c) Waiver of Rights. Lessee waives any right of redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 or 1179, or under any other present or future law, in the event • Lessee is evicted or City takes possession of the Premises by reason of any default by Lessee. 17. CONDEMNATION 17.1 Termination of the Lease. Lessee or the City shall have the right to terminate this Lease as of the date a public agency with lawful authority to condemn obtains possession or title to ten percent (10 %), or more of the land area at the Premises, or the condemnation materially affects the conduct of Lessee's business in the Premises, or the Premises will no longer be suitable for the conduct of Lessee's business for the Approved Use. In the event of Termination pursuant to this Subsection, Base Rent shall be prorated to the date of Termination, any unearned Rent shall be refunded to Lessee and Lessee shall have no further obligations under this Lease. Lessee shall not grant a right of entry to any potential condemnor without the written consent of City. 17.2 No Termination of Lease. If this Lease is not terminated under Section 17.1, then this Lease shall terminate as to the portion of the Premises taken upon the date that possession is taken, but this Lease shall continue in force and effect as to the remainder of the Premises. Lessee shall, in the event of a taking of any portion of the Premises, be entitled to a reduction in the Base Rent in reasonable proportion to the area of the Premises taken. • -22- • 17.3 Allocation of Award. In the event that an award is made for an entire or partial taking of the Premises pursuant to the power of eminent domain, the award or compensation paid shall be as follows: (a) City shall be entitled to that Portion of the award received for the taking of the real property, the value of this leasehold, including all buildings and other improvements to which City is entitled on Expiration or Termination of this Lease, and for severance damages. (b) Lessee shall be entitled to any award that may be made for the taking of or injury to Lessee's business and profits, including any amount attributable to Lessee's personal Premises, fixtures, installations, or improvements in or on the Premises, Lessee's relocation expenses, but excluding any "bonus value" attributable to this Lease. (c) Any interest payable on the total award shall be divided between City and Lessee in the same ratio as the awards are allocated pursuant to this Section. 18. SUBJECT TO STATE LANDS COMMISSION GRANT The Premises are located on property that may, in whole or in part, be subject of a grant from the State of California to the City that is administered by the State Lands Commission. Lessee shall not take any action that would cause the City • to be in violation of any provisions of that grant. If the State Lands Commission or the State Legislature terminates or modifies the tidelands grant or any related legislation in a manner that prevents the Premises from being used for any Approved Use, this Lease shall terminate as a result and the Parties shall be released from all liabilities and obligations under this Lease. 19. WASTE OR NUISANCE Lessee shall not commit or permit the commission of any waste on the Premises. Lessee shall not maintain, commit, or permit any nuisance as defined in Section 3479 of the California Civil Code on the Premises. Lessee shall not use or permit the use of the Premises for any unlawful purpose. 20. PRIOR LESSEE USE AND HAZARDOUS MATERIALS The Parties acknowledge that Lessee has been in possession of the Premises pursuant to the provisions of a Lease since at least 1975. Lessee represents and warrants that, to the best of Lessee's knowledge: (i) Lessee's continued use of the Premises does not conflict with applicable Laws; (ii) the Premises is not and has not been operated in violation of any environmental laws, rules or regulations and Lessee's contemplated uses will not cause any such violation; and (iii) the land underlying the Premises is free of any and all Hazardous Materials as of the date of this Lease caused by the Lessee. In the event that the presence of any Hazardous Material caused by Lessee is detected in the land underlying the Premises or the bay or any tidelands' areas adjacent to this • Premises at any time during the Term of this Lease and any Option Term all remedial or clean up work shall be immediately performed by Lessee at Lessee's expense to fully remediate such environmental condition so that the Premises -23- 21 22 23. 24. and such affected area(s) are promptly brought into full compliance with all Laws. • This clause and this lease does not restrict or limit Lessee's right to lawfully use Hazardous Materials on the Premises, if in strict conformance with all Laws. CITY'S DEFAULTS /LESSEE'S REMEDIES City shall be in Material Default if Lessee gives notice of nonperformance specifying the nature of such default and /or City nonperformance and City either does not cure such noticed item(s) within thirty (30) days or City does not commence such cure performance within said thirty (30) days and then diligently completes said cure to City's reasonable best efforts. In the event of City's Material Default, Lessee may: (a) Upon fifteen (15) days notice to City cure any such default by City and City shall reimburse Lessee the amount of all costs and expenses incurred by Lessee in curing the default, together with interest and expenses at the maximum rate then allowed by law; (b) Terminate this Lease if City's default materially interferes with Lessee's use of the Premises for their intended purpose and City fails to cure such default within fifteen (15) days after a second demand by Lessee in which case Lessee shall have no further or continuing obligations and City shall have no liability to Lessee; or NOTICES Any notice, demand, request, consent, approval or communication that either • Party desires or is required to give shall be in writing and shall be deemed given three (3) days after deposit into the United States registered mail, postage prepaid, by registered or certified mail, return receipt requested or upon delivery if personally served or upon transmission if sent by facsimile. Unless notice of a different address has been given in accordance with this Section, all notices shall be addressed as follows: If to City: CITY OF NEWPORT BEACH Attention: City Manager 3300 Newport Boulevard Newport Beach, CA, 92658 If to Lessee: AMERICAN LEGION POST 291 Attention: Newport Beach, CA, SURRENDER OF PREMISES At the Expiration or earlier Termination of this Lease, Lessee shall surrender to City the possession of the Premises. Lessee shall leave the surrendered Premises, required personal property and fixtures in good and broom -clean condition, reasonable wear and tear excepted. All property that Lessee is not required to surrender, but that Lessee does abandon shall, at City's election, become City's property upon Expiration or Termination. • WAIVER -24- • The waiver by City or Lessee of any breach of this Lease by the other shall not be deemed to be a waiver of any term, covenant, or condition or any subsequent breach. The acceptance of Rent by City shall not be deemed a waiver of any breach by Lessee other than the failure to pay the particular rent accepted. 25. PARTIAL INVALIDITY If any term or Provision of this Lease is declared invalid or unenforceable, the remainder of this Lease shall not be affected. 26. GOVERNING LAW This Lease shall be governed by the laws of the State of California. Neither City's execution of this Lease nor any consent or approval given by City in its capacity as City shall affect City's powers and duties as a governmental body. Any consent or approval Lessee is required to obtain from City pursuant to this Lease is in addition to any permits or approvals Lessee is required to obtain pursuant to law or ordinance. However, City shall attempt to coordinate its procedures for giving contractual and governmental approvals so that Lessee's requests and applications are not unreasonably denied or delayed. 27. ENTIRE AGREEMENT; MODIFICATION This Lease contains the entire agreement between the Parties. No verbal agreement or implied covenant shall be held to vary the provisions of this Lease. • Each Party has relied on its own inspection of the Premises and examination of this Lease, the counsel of its own attorney or other advisors, and has a complete understanding of the overall warranties, representations, and covenants in this Lease. The failure or refusal of either Party to inspect the Premises, to read this Lease or other documents, or to obtain legal or other advice relevant to this transaction shall not be the basis for later claim that all or part of this Lease is not enforceable or was not understood by a Party when this Lease was signed. No provision of this Lease may be amended or varied except by an agreement in writing signed by the Parties or their respective Successors. Upon execution of this Lease by both Parties, the previous lease will be terminated and have no further force and effect. 28. TIME OF ESSENCE Time is of the essence with respect to the performance of every Provision of this Lease in which time of performance is a factor. All time deadlines are meant to be strictly construed. A "day" means a calendar day, with extension if a deadline occurs on a weekend or day when banks are not open in California. 29. SUCCESSORS Subject to the Provisions of this Lease on assignment and subletting, each and all of the covenants and conditions of this Lease shall be binding on and shall inure to the benefit of the heirs, successors, executors, administrators, assigns, and personal representatives of the respective parties. • 30. NO BROKERS -25- Each party warrants to and for the benefit of the other than it has had no • dealings with any real estate broker or other agent (attorneys excepted) in connection with the negotiation or making of this Lease, and that no commission, fee or other compensation is owed regarding this Lease by such other Party. 31. GENDER; NUMBER The neuter gender includes the feminine and masculine, the masculine includes the feminine and neuter, and the feminine includes the neuter, and each includes corporation, partnership, or other legal entity whenever the context requires. The singular number includes the plural whenever the context so requires. 32. EXHIBITS All exhibits to which reference is made in this Lease are incorporated by reference. Any reference to "this Lease" includes matters incorporated by reference. 33. PROPRIETARY CAPACITY The provisions of this Lease do not, and shall not be construed, to alter or impair the rights and duties of City when acting in its capacity as a govemmental entity. This Lease has been approved and executed by City in its proprietary capacity as the owner /grantee of the Premises. IN WITNESS WHEREOF, the parties have executed this Lease as of the date first written above. • ATTEST: LaVonne Harkless City Clerk -26- CITY OF NEWPORT BEACH, a Municipal Corporation By: Tod W. Ridgeway, Mayor NEWPORT HARBOR POST NO. 291 OF THE AMERICAN LEGION, a Califomia Corporation ( "Lessee ") Its: President • • APPROVED AS TO FORM: • City Attorney FAusers�catsnaredWa\Ag\Ame rican Leg ion1112202c]n. d oc -27-