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L. Lessor has determined it is in the best interests of the citizens of Newport Beach to maintain the <br />residential character of Beacon Bay and to enter into new leases with Current Lessees under the terms <br />and conditions specified in this agreement. <br />NOW, THEREFORE, in consideration of the foregoing recitals and the covenants in this lease, the parties <br />agree as follows: <br />LEASED LAND. <br />Lessor hereby leases to Lessee the real property commonly known as Beacon Bay Lot 56 (the "Leased <br />Land"), which is more particularly described in Exhibit B, and generally depicted on Exhibit A, each <br />attached hereto and incorporated by reference, subject to the limitations on use specified in Section 6. <br />As used in this Lease, the term "Premises" shall refer to the Leased Land and any improvements <br />constructed thereon. <br />Lessor expressly reserves all oil, oil rights, gas, minerals, mineral rights, natural gas rights and other <br />hydrocarbon substances in and under the Leased Land and the right to grant and transfer the same, <br />together with all necessary and convenient rights to explore for, develop, produce and extract and take the <br />same, subject to the express limitation that any and all operations for the exploration, development, <br />production, extraction and taking of any such substance shall be carried on at levels below the depth of <br />five hundred feet (500') from the surface of the land by means of wells, derricks and other equipment from <br />surface locations on adjoining or neighboring land, and subject further to all restrictions and regulations <br />concerning the drilling for, and production of, oil, gas, minerals, petroleum and other hydrocarbon <br />substances specified in the Newport Beach City Charter or the Newport Beach Municipal Code. <br />2. TERM. <br />The term of this Lease shall commence on the Execution Date, but in no event prior to the Effective Date, <br />and shall expire on the date fifty (50) years following the Effective Date, unless earlier terminated as <br />provided in this Lease. <br />3. RENTAL. <br />A. Definitions. For the purposes of this Lease, the following terms shall be defined as <br />specified in this paragraph. In certain cases, the definition of the term contains operative <br />language that affects the rights of the parties: <br />(1) "Actual Sales Value" shall mean the total of all consideration paid for the <br />non-exempt transfer of this Lease or the Pre-existing Lease, including the improvements <br />on the Leased Land, from the Current Lessee, or Subsequent Lessee, to another person, <br />excluding any consideration paid for the transfer of personal property in connection with <br />such transaction. <br />(2) "Average Actual Sales Value Rent" shall mean two and one-half percent (2.5 <br />%) of the mean of the Actual Sales Value of the non-exempt transfer of a similarly <br />situated (waterfront or interior) Beacon Bay parcels as specified in this subparagraph. <br />Average Actual Sales Value Rent shall be the mean of the Actual Sales Value of the three <br />similarly situated parcels most recently transferred. Exempt transfers, as defined in <br />Paragraph 3.13(3), shall not be used to calculate Average Actual Sales Value rent. <br />(3) "CPI" shall mean the Consumer Price Index - Los Angeles -Anaheim -Riverside <br />Area, All Urban Consumers, All Items, published by the United States Department of <br />Labor, Bureau of Labor Statistics (1982-1984=100). If the 1982-1984 base of said <br />Consumer Price Index should hereafter be changed, then the new base shall be <br />converted to the 1982-1984 base and the base as so converted shall be used. In the <br />event that the Consumer Price Index, as now compiled and published, shall cease to be <br />published, then the successor index shall be used provided that an appropriate <br />conversion from the old index to the new index can feasibly be made. If such conversion <br />