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HomeMy WebLinkAbout23 - ExplorOceanCITY OF F NEWPORT REACH City Council Staff Report November 25, 2014 Agenda Item No. 23 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Dave Kiff, City Manager— (949) 644 -3002, dkiff @newportbeachca.gov PREPARED BY: Dave Kiff PHONE: (949) 644 -3002 TITLE: ExplorOcean Option to Lease City Parking Lot at Palm Street ABSTRACT: If approved, this agenda item would enable ExplorOcean to hold an option to lease City -owned property known as the Palm Street Parking Lot on the Balboa Peninsula, with the expected intent of ExplorOcean to pursue CEQA, funding, and other approvals for a parking structure at the location in conjunction with the development of their adjacent facility. RECOMMENDATION: Authorize the Mayor and City Clerk to execute an Option to Ground Lease Agreement with ExplorOcean for a future Ground Lease of the Palm Street parking lot at 209 Washington Street and 600 -608 East Balboa Boulevard on the Balboa Peninsula. FUNDING REQUIREMENTS: The Option to Lease would generate $2,500.00 in a one -time payment to the City. If the option was executed, the estimated current day revenue from the parking lot is about $198,000, less about $7,500 in expenses, obligating a payment from ExplorOcean to the City of at least $190,500.00 per year. DISCUSSION: The City of Newport Beach ( "City ") owns and operates the Palm Street parking lot ( "Lot ") at 209 Washington Street and 600 -608 East Balboa Boulevard on the Balboa Peninsula. The Lot is depicted in Attachment A. The City purchased land under what is about half of the Lot (209 Washington Street) for $3.5 million in 2010 to provide parking that supports the revitalization of the Balboa Village area. The City purchased the other half (600 -608 East Balboa Boulevard) about 20 years ago for $800,000 plus a provision for a 20 -year, $1 a year lease to Wells Fargo to operate an ATM at the Lot. Today, the Lot consists of 68 pay- station metered spaces, with 13 on- street parking spots (also metered) adjacent to the Lot. 23 -1 The Lot generates about $198,000 in parking revenue annually. As the $1 a year ATM lease transitions to a roughly $1,500 a month lease, the new ATM lease will generate an additional $18,000 annually. The Lot costs the City about $7,500 a year to maintain. The not - for - profit nautical and marine educational program called ExplorOcean ( "EO ") operates a one - story 26,219- square foot building nearby, and has plans for a significant new facility in the future. The new facility's construction and operation is subject to funding, permitting (including by the California Coastal Commission), and community and environmental review and approval. According to EO, the new facility is to be an "ocean literacy educational center" (for more information, see www.explorocean.org). A key aspect of EO's success is access to significant amounts of parking. Today, EO has an on -site subterranean parking area with about 55 parking spaces. To accommodate growth for the new facility, EO has asked the City to consider offering an option to lease the Lot to EO to help ensure that the new facility has the parking it needs. EO is interested in constructing a parking structure on the Lot, and the attached Option to Lease and Ground Lease are written to accommodate the parking structure, following appropriate community and environmental review. The City itself is not bound by either the Option to Lease or the Ground Lease to approve EO's new facility or the proposed parking structure. Proposed Terms of the Option to Lease the Lot Following discussions with City Council members, proposed for an Option to Lease (for the full Option Lot should the City Council see appropriate to do so: City staff, and EO officials, the following terms are to Ground Lease Agreement, see Attachment B) the • Grant of Option /Term of Option: The City would grant EO the right to enter into the attached Ground Lease with the City for the Lot from the execution date through December 31, 2021. • Options on the Option: EO would have three one -year options to extend the term of the Option to Lease (taking it through December 31, 2024), with a $2,500 fee per option extension. • Compensation: The option price is $2,500, paid whether or not the Option is exercised. This amount is creditable against rent should the Option be exercised. • CEQA: EO is responsible for all CEQA work and approvals. An Environmental Impact Report (EIR) is required. The City has the absolute discretion to approve or deny or modify any EO project, including the expansion and any parking structure. • Establishment of Fair Market Rental Value: At the time of the Ground Lease, the Fair Rental Value shall be the amount that the City would otherwise derive from the Lot if available on the open market for use as a surface parking lot (generally — see Section 4). • The City will continue to operate the surface lot and receive all revenues associated therewith until such time as the option is exercised. Conditions to be Met before Option can be Exercised • Final EIR is approved • All governmental approvals and permits are in hand, including City and Coastal Commission • EO demonstrates its financial capacity to proceed with its projects Proposed Terms of the Ground Lease of the Lot If the Option is exercised, the following is a summary of the Ground Lease associated with the Option to Lease (see Exhibit 1 of Attachment B for the full Ground Lease): • Term of the Ground Lease: 50 years • Premises: The Palm Street Parking Lot. • Improvements to be Constructed: A parking structure and ancillary structures, if permits, funding, and approvals are obtained. • Utility Removal: The City must relocate any utilities running through or under the Lot (at brief review, we believe that there is an 8" sewer line and a 6" water line running through the lot where the alleyway used to be). EO would reimburse the City for any re- location costs within 60 days. • Establishment of Rent: See term under Option to Lease (Section 5.1) • ATM Revenue: EO would receive any ATM revenue generated on the Lot. 23 -2 • Rent adjustment: Every five years, by CPI or 2.5 %, whichever is less. • Fair Market Rental Adjustment: At Year 25, an appraisal -based adjustment would occur. The appraisal would be based on the Lot in its current condition, not with the parking structure. • Temporary Rent Adjustment: During construction of any parking structure, rent would be temporarily reduced to $25,000 a year (generally — see Section 5.3) • Ownership of Improvements. EO would hold title to anything EO constructed on the Lot, including a parking structure (Section 3.3). At the termination of the Ground Lease the parking structure would pass at no cost to the City. • Public Parking: Following completion of the parking structure: • EO may maintain at least 55 parking spaces in the parking structure for the exclusive use of EO; • The remainder of the parking structure's spaces must be public spaces, including for members of the public visiting EO; and o Up to 12 times a year, all of the parking structure may be limited to private parking for EO's special events. • Right of First Refusal. In the event that the City wishes to sell the Lot, EO has the right of first refusal to purchase the Lot at fair market value (subject to City's compliance with surplus property law). • Construction of Improvements. EO must diligently pursue plans, regulatory approvals, and other permits within 5 years of the Ground Lease effective date. EO must complete construction within 3 years of starting construction. • Repairs and Maintenance. EO must keep the property in good order, with more detail in Article 9. Should the City Council approve the Option to Lease, the Option to Lease references and includes the Ground Lease. The City Council therefore would be approving both documents at this time. ENVIRONMENTAL REVIEW: The Option to Lease is explicit that the City Council has not approved and is not bound to approve the final EO project, or the proposed parking structure. The duty to go through the California Environmental Quality Act (CEQA) to approve any project is EO's duty and will be performed at EO's cost. The Option to Lease suggests that a full EIR will be required to consider and address the environmental impacts of the new EO facility and the parking structure. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Additionally, we informed the Balboa Peninsula Point Association and Central Newport Beach Association ( "Pier to Pier ") of this agenda item's consideration by the City Council. ATTACHMENTS: Description Attachment A - Diagram of Palm Street Parking Lot Attachment B - Ootion to Ground Lease Agreement 23 -3 ah O oa O bio CL m N c q .2 (D m m 0 E C14 ATTACHMENT B 101 2 1 111 67i I THIS OPTION TO GROUND LEASE AGREEMENT ( "Option Agreement ") is made this day of October, 2014 by and between the City of Newport Beach, a charter city and California municipal corporation ( "City ") and ExplorOcean, a California non - profit corporation ( "EO "). RECITALS A. City is the owner of a public parking lot located generally between Palm Street and Washington Street from Bay Avenue to Balboa Boulevard on the Balboa Peninsula in the City of Newport Beach that is commonly referred to as the Palm Street Parking Lot ( "Property "). B. The Property is currently improved with a sixty -eight (68) space surface public parking lot and an ATM kiosk, and is surrounded by thirteen (13) on- street parking spaces. C. EO is the owner of the real property located adjacent to the Property at 600 East Bay Avenue, Newport. Beach, California ( "EO's Property "). D. EO has submitted to the City development applications to construct and operate an expanded experiential ocean literacy center open to the general public on EO's Property ( "EO Project "). Referenced development applications include a request for General Plan Amendment, Coastal Land Use Plan. Amendment, Zone Change, Planned Community Development Plan, Site Development Review, and Coastal Development Permit ( "Entitlement Applications "), with a EO Project description. E. EO and City have engaged in pre - entitlement lease discussions regarding the development and use of the Property for construction of a multi -level parking structure to be used by EO in connection with the Project. Such parking facility is described in detail in the submitted project description and will be evaluated in the Initial Study /Notice of Preparation and Environmental Impact Report ( "EIR "). F. The parties desire to provide EO the right to lease the Property upon the terms and conditions set forth in the Ground Lease (defined below) in the event that certain conditions are satisfied, including, without limitation, compliance with the California Environmental Quality Act ( "CEQA ") following a full Environmental Impact Report ( "EIR ") certified by the City Council and all referenced project approvals by the City and other governmental agencies, including the California Coastal Commission. AGREEMENT In consideration of the promises herein and for other good consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows. PAR-1 1. Grant of Option. City hereby grants to EO the exclusive right and option (the "Option "), exercisable at any time following the satisfaction of the conditions set forth in Section 3 below and on or prior to December 31, 2021 (said period being the "Option Term "), to ground lease the Property more particularly described on Exhibit A to the form of Ground Lease (the "Ground Lease ") which is attached hereto as Exhibit 1. Capitalized terms used herein without definition shall have the respective meanings set forth therefor in the Ground Lease. EO shall have three (3) options to extend the Option Term for one (1) year each by notifying City in writing prior to the end of the then expiring Option Term and submitting an extension payment of $2,500 per option extension. Any extension payments shall be non - refundable and non - applicable towards any rent under the Ground Lease. 2. Option Price and Payment. The price (the "Option Price ") to be paid by EO to City for the Option is Two Thousand Five Hundred Dollars ($2,500). The Option Price shall be due within thirty (30) calendar days of the mutual execution of this Option Agreement ( "Effective Date'). The Option Price shall be paid in full whether or not the Option is exercised and EO's obligation to pay the Option Price shall survive any termination of this Agreement. The Option Price is non - refundable but shall be credited against the initial installment of rent under the Ground Lease in the event the Option is exercised. 3. City's Absolute Right to Approve or Deny EO Proiect; Conditions to Exercise: Exercise Notice. To comply with "CEQA" and provide the public the opportunity to be informed of the environmental impacts of the EO Project, including the proposed multi -level parking structure on the Property, City shall retain absolute discretion to (i) determine to approve or deny the EO Project application for legislative approvals and discretionary permits pending before the City; (ii) make any such modification to the proposed entitlements and the EO Project as the City may, in its sole discretion, determine to be necessary to comply with CEQA, including mitigating significant adverse environmental impacts of the EO Project (iii) select other feasible project or site alternatives or adopt feasible mitigation measures to avoid or substantially lessen significant environmental impacts; (iv) balance the benefits of the EO Project against any significant adverse environmental impacts not mitigated to a level of insignificance, prior to taking final action; and /or (v) determine not to proceed with the EO Project. This Option Agreement, including any and all of its Exhibits, is not intended to become a contractually binding ground lease unless and until: (A) the parties have identified, negotiated, executed and delivered mutually acceptable mitigation measures, conditions of approval (including statutory and /or customary indemnification provisions in favor of City) or agreements based upon information produced from the CEQA environmental review process or other public review and hearing processes; (B) EO has obtained all applicable governmental approvals; and (C) EO has satisfied the following conditions: 2 rxay (a) An EIR identifying all environmental impacts of the EO Project, related City- imposed mitigation measures and any necessary Statement of Overriding Considerations must be certified by the City Council; (b) All referenced land use entitlement application approvals and discretionary permits obtained from all agencies (including running of any appeal and statute of limitation periods) for the EO Project ( "Project Approval "); (c) EO has provided reasonable proof of financial ability to proceed with construction and completion of the EO Project, including the multi -level parking structure on the Property; (d) The Option Term, or any extension, shall not have expired. Provided the foregoing conditions are satisfied, EO may exercise the Option by providing written notice to City ( "Exercise Notice "). 4. Establishing Fair Rental Value. The rental rate to be inserted into the Ground Lease will be the fair rental value of the Property as of the date of Exercise Notice as determined in accordance with this Section 4 ( "FRV"): FRV shall be equal to the rent which the City could derive from the Property if it were then made available on the open market for leasing purposes for its use as a surface parking lot with sixty -eight (68) spaces. The parties agree that the above methodology for establishing the initial rent rate is based on the requirement under the Ground Lease that EO may maintain up to fifty -five (55) parking spaces for its exclusive use while keeping the remainder of the parking spaces available for general public parking. The FRV shall be determined as follows: (i) Within thirty (30) calendar days of receipt of the Exercise Notice, City shall calculate and inform EO of City's determination of the FRV. If EO rejects the FRV as calculated by City, EO shall inform City of its rejection within ten (10) calendar days after EO's receipt of City's calculation, and City and EO shall commence negotiations to agree upon the FRV. If EO accepts or fails to timely reject City's calculation of the FRV, City's calculation of the FRV will be binding on the parties. If City and EO are unable to reach agreement within thirty (30) calendar days after City's receipt of EO's notice of rejection, then the FRV shall be determined in accordance with (ii) below. (ii) If City and EO are unable to reach agreement on the FRV within said thirty (30) calendar day period, then within seven (7) calendar days, City and EO shall each engage an independent MAI appraiser with at least five (5) years of experience in appraising commercial leasehold properties in Orange County ( "Qualified Appraiser "). Each Qualified Appraiser shall determine the FRV within sixty (60) calendar days of being engaged; such determination shall be in writing. 3 PABFA If the higher of such estimates is not more than one hundred ten percent (110 %) of the lower, then the FRV shall be the average of the two. Otherwise, the FRV dispute shall be resolved in accordance with (iii) below. If one (1) of the parties does not timely engage a Qualified Appraiser or thereafter does not timely produce the required appraisal, then the appraisal submitted shall be binding on the parties. (iii) Within seven (7) calendar days after the exchange of appraisals under (ii) above, the two Qualified Appraisers engaged under (ii) above shall select a third Qualified Appraiser to be engaged by the parties. Unless required by law or court order, neither party nor their respective Qualified Appraiser shall share the previously provided appraisals or the FRV determined thereunder. The third Qualified Appraiser shall promptly provide his /her written appraisal of what the FRV should be to City and EO. In such event, the FRV to be used for the Ground Lease shall be the FRV determined by the Qualified Appraiser engaged by a party under (ii) above which is closest in absolute dollars to the third Qualified Appraiser's appraisal; provided however that if the third Qualified Appraiser's determination is within five percent (5 %) of the half -way point between the initial appraisals, then the FRV shall be the average of the two initial appraisals. By way of example, if the parties are not able to agree on the FRV and City's appraisal of FRV is $150,000 while EO's appraisal of FRV is $100,000, then the third Qualified Appraiser shall be engaged. In such event, the FRV would be determined as follows: EO's FRV determination $100,000 City's FRV determination $150,000 Half -way point $125,000 5% of half -way point $ 6,250 If third Qualified Appraiser's FRV is: Then FRV is: - Less than $118,750 $100,000 - $118,750 to $131,250 $125,000 - More than $131,250 $150,000 If the third Qualified Appraiser believes that expert advice would materially assist him /her, the third Qualified Appraiser may retain one or more qualified persons to provide expert advice. The fees of the third Qualified Appraiser and any expert advice shall be shared equally by the parties. Each party shall pay the fees of its respective Qualified Appraiser. Within thirty (30) calendar days of determining the FRV in accordance with this Section 4, the parties shall execute and deliver to each other the Ground Lease in the form attached hereto as Exhibit 1 (with the applicable FRV inserted therein). 4 P831 5. Title Matters: Operation of Property. (a) Condition of Title. City represents that the Property is free and clear of any monetary liens or other encumbrances that would or could adversely affect EO's intended use of the Property and covenants to keep the title of the Property in the same condition during the term of this Option Agreement. Nothing contained herein shall restrict City from maintaining the existing (or entering into a new) ATM kiosk lease provided that the same shall be cancellable within six (6) months of EO's exercise of the Option. (b) Operation of Property. During the term of this Option Agreement City covenants to maintain the Property in good condition and repair (excepting casualty and wear and tear) and to continue to use the Property as a parking lot substantially in accordance with how the same is presently operated. (c) Right of First Refusal. Subject to the City's obligation to first comply with the Surplus Lands Act (Cal. Gov. Code §§ 54220, et seq.), during the term of this Option Agreement, EO shall have the right of first refusal to purchase the Property prior to the sale to any third party. Within two (2) business days of entering into an agreement to sell the Property to a third party, City shall give EO written notice of the same along with a copy of the agreement. For a period of sixty (60) calendar days from receipt of said notice, EO shall have the option to purchase the Property on the same terms and conditions, including the purchase price, set forth in the third party agreement (provided that if non -cash consideration is involved, then EO shall have the right to pay a cash equivalent of the same, and provided further that in no event will the closing be less than ninety (90) calendar days from City's receipt of EO's election to purchase). Failure of EO to timely exercise its option hereunder shall be deemed to be EO's election to not purchase the Property (provided, however, that any rights to acquire the Property under the Ground Lease shall not be affected by EO's election not to acquire the Property under this Option Agreement). 6. Delivery of Information. As soon as practicable after the Effective Date hereof, except as otherwise set forth, City shall have delivered or shall have caused to be delivered to EO the following documents in City's or its agent's possession relating to the Property: (a) Copies of the most recent real property tax bills for the Property; (b) Maintenance records and any identified capital improvement programs listing identified replacement of any infrastructure on, under or across the subject Property; (c) Copies of any and all environmental reports, tests or studies for the Property in City's or its agent's possession; and (d) Copies of any documents, surveys or studies regarding the physical characteristics of the Property. 5 PAW] (e) A report by the City's public works department respecting the current offsite utility infrastructure that would require relocation if the Project is constructed; such report to show the age of the installation and useful life /replacement date thereof. 7. Inspections by EO. From and after the date hereof, EO and its agents, employees and contractors shall be accorded access by City to the Property during normal business hours for the purpose of making such investigations as EO deems prudent with respect to the physical condition of the Property, including, but not limited to, engineering and environmental tests. City shall cooperate fully to assist EO in completing such inspection provided, however, that City shall not be obligated to incur any cost as a result of such cooperation. EO agrees to hold City harmless from and against any loss, cost, damage, claim or expense suffered by City and caused by EO's said investigations, excluding the discovery of preexisting conditions and /or damages, claims or liabilities arising from the negligence or willful misconduct of City and its contractors, agents and employees. Prior to any inspections of the Property, EO shall coordinate the specific time and place(s) of the inspection(s) with the City and the EO shall provide City with a Certificate of Insurance from EO's insurance carrier in an amount of not less than $1,000,000 naming City as an additional insured for any damages caused to City as a result of EO's entry onto the Property exclusive of damages arising from the discovery of preexisting conditions and damages arising or resulting from the negligence or willful misconduct of City, its contractors, agents or employees. EO shall restore the Property to its condition immediately prior to such investigations. EO's obligation of indemnity hereunder shall survive the termination of this Agreement. 8. Representations and Warranties. City and EO hereby represent to one another that each has full legal power and authority to enter into and perform this Option Agreement in accordance with its terms, and this Option Agreement constitutes the valid and binding obligation of such party, enforceable in accordance with its terms, except as such enforcement may be affected by bankruptcy, insolvency and other laws affecting the rights of creditors generally. The execution, delivery and performance of this Option Agreement and all documents in connection therewith are not in contravention of or in conflict with any deed of trust, agreement or undertaking to which such party is a party or by which it may be bound or affected. 9. Assignment of Option. EO may not assign the Option at any time without the prior written consent of City, which consent may be withheld in City's sole and unfettered discretion, provided that EO may assign the Option to an affiliate, provided further that no such assignment shall relieve EO of its obligations hereunder. City may not assign this Option Agreement at any time without the prior written consent of EO. 6 fANK 10. Miscellaneous Provisions. (a) This Option Agreement shall be binding on, and shall inure to the benefit of, the parties to it, and their respective heirs, legal representatives, successors, and assigns. (b) All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter and to the singular or plural as the identity of the person or persons, firm or firms, or corporation or corporations referred to may require. (c) This Option Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, and understandings of the parties hereto with respect thereto. No claim of waiver, modification, consent or acquiescence with respect to any of the provisions of this Option Agreement shall be made against either party, except on the basis of a written instrument executed by or on behalf of such party. No waiver of any provision of this Option Agreement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. (d) This Option Agreement is to be governed by and construed in accordance with the laws of the State of California. (e) The heading of the several sections of this Option Agreement are inserted solely for convenience of reference and are not a part of and are not intended to govern, limit or aid in the construction or interpretation of any term or provision hereof. (f) All notices, requests, demands, and other communications required. or permitted to be given under this Agreement shall be given in writing (at the addresses set forth below) by any of the following means: (i) personal service; (ii) facsimile transmission (if confirmed by sending a copy by any other method specified herein); (iii) delivery by any reputable overnight courier service; or (iv) registered or certified mail, postage prepaid, return receipt requested. Any notice, demand or request sent pursuant to either (i), or (ii) hereof shall be deemed received upon such personal service or upon dispatch by electronic means and if sent pursuant to (iii) hereof shall be deemed received one (1) Business Day following delivery to such courier service and if sent pursuant to (iv) hereof shall be deemed received upon actual receipt thereof. To City: City of Newport Beach 100 Civic Center Drive P.O. Box 1768 Newport Beach, California 92658 Attn: City Manager Telephone No. 949.644 -3001 401xi3 ExplorOcean 600 East Bay Avenue Irvine, California 92660 Attn: President Telephone No. 949.675.8915 23 -11 Such addresses may be changed by notice to the other parties given in the same manner as provided above. For used herein, the term "Business Day" shall mean a day on which City is open for business to the general public. (g) If any provision of this Option Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Option Agreement and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. (h) Each party hereto agrees to do all acts and things and to make, execute and deliver such written instruments as shall be reasonably necessary to carry out the terms and provisions of this Option Agreement. This covenant of further assurances shall survive Closing. (i) Nothing in this Option Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Option Agreement on any persons other than the parties hereto and their respective heirs, legal representatives, successors, and assigns, nor is anything in this Option Agreement intended to relieve or discharge the obligation or liability of any third persons to any party to this Option Agreement, nor shall any provision give any third persons any right of subrogation or action over against any party to this Option Agreement. (j) This Option Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. All parties need not execute the same original, provided that each of them executes an original. (k) Each of the parties shall pay all costs and expenses incurred or to be incurred by him or her in negotiating and preparing this Option Agreement and the other agreements to be executed in carrying out the transactions contemplated hereby and thereby. In the event of a dispute under this Option Agreement, the prevailing party shall not be entitled to recover its costs and expense incurred in such dispute, including, without limitation, attorneys' fees and court costs. (I) The parties agree that each party and its counsel have had the opportunity to review and revise this Option Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Option Agreement or any subsequent amendment hereto or thereto or exhibits herein or therein. (m) The parties shall not record this Option Agreement in the Official Records of Orange County, however, the parties shall record the attached short form memorandum of this Option Agreement, attached hereto as Exhibit 2, within thirty (30) calendar days of request from one (1) of the parties. 0 PAI IN .1 (n) To the fullest extent permitted by law, and except to the extent resulting from the negligent acts by the City, its City Council, its boards and commissions, officials, officers, employees and'agents, EO shall indemnify, defend and hold harmless City, its City Council, its boards and commissions, officials, officers, employees, and agents from and against any and all claims, demands, obligations, damages, actions, causes of action, CEQA challenges, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including without limitation, attorney's fees, disbursements and court costs) of every kind and nature whatsoever which may arise from or in any manner relate (directly or indirectly) to City's approval of this Option Agreement, the Ground Lease, EO's use of the Property, or the EO Project. This indemnification shall include, but not be limited to, damages awarded against the City, if any, costs of suit, attorneys' fees, and other expenses incurred in connection with such claim, action, causes of action, suit or proceeding whether incurred by EO, City, and /or the parties initiating or bringing such proceeding. EO shall indemnify the City for all of City's costs, attorneys' fees, and damages which City incurs in enforcing the indemnification provisions set forth in this condition. EO shall pay to the City upon demand any amount owed to the City pursuant to the indemnification requirements prescribed in this condition. SIGNATURES ON FOLLOWING PAGE 41 Bleb&] IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Option Agreement effective as of the day and date first above written. "EO" EXPLOROCEAN a Californi profit corp T m Pollack C President "CITY" CITY OF NEWPORT BEACH a California municipal corporation Z Approved as to form: THE CIT TjTORNEY'S OFFICE I� Aaron C. Harp City Attorney Attest: Leilani I. Brown City Clerk Rush N. Hill, II Mayor Attachments: Exhibit 1 -Form of Ground Lease Exhibit 2 -Short Form Memorandum of Option Agreement 10 23 -14 EXHIBIT 1 Form of Ground Lease [Attached] 11 f 23 -15 RECORDING REQUESTED AND WHEN RECORDED RETURN TO: City Clerk's Office City of Newport Beach 100 Civic Center Drive P.O. Box 1768 Newport Beach, CA 92658 -8915 Space above this line for Recorder's use only. Exempt Recording Request per Government Code Section 27383 GROUND LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND EXPLOROCEAN rxacy GROUND LEASE BY AND BETWEEN THE CITY OF NEWPORT BEACH AND EXPLOROCEAN This Ground Lease ( "Lease "), entered into as of 20_ ( "Effective Date ") by and between the City of Newport Beach, a charter city and municipal corporation ( "Lessor" or "City ") and ExplorOcean, a nonprofit California Corporation ( "Lessee" or "EO "). The Lessor and Lessee may be individually referred to as "Party" and collectively as the "Parties ". RECITALS A. Lessor is the owner of real property bounded by East Bay Avenue, Palm Street, Balboa Boulevard and Washington Street in the Balboa Village area of the City of Newport Beach, commonly known as Palm Street Parking Lot and more particularly described and depicted in the attached Exhibit A ( "Property "). B. Lessee is a nonprofit corporation organized pursuant to and in compliance with the provisions of California law, and is presently in good standing. C. Lessee is owner of certain real property adjacent to the Property and more particularly described and depicted in the attached Exhibit B ( "EO Property "). D. Lessee desires to redevelop, and has received all necessary permits and approvals for the redevelopment of, the EO Property with an ocean literacy educational center ( "Project "). As part of the Project, Lessee intends to construct a multi -level parking structure on the Property ( "Parking Structure "). E. The City and Lessee desire to enter into this Lease to set forth terms under which Lessee will lease the Property for the purposes of constructing the Parking Structure and related improvements and operating the same in connection with the ocean literacy educational center. F. The City Council of the City of Newport Beach ( "City Council ") has determined that this Lease, Lessee's construction of the Project and Lessee's long term use of the Property in connection with Lessee's ocean literacy education center is consistent with the City Charter, the Newport Beach General Plan, the City's Municipal Code and all other applicable Federal, State and local laws. PANNIVJ G. In contemplation of this Lease, City and Lessee have entered into that certain Option to Ground Lease Agreement dated October _, 2014 ( "Option Agreement ") respecting Lessee's lease of the Property. By entering into this Lease, Lessee and City agree that the conditions to exercising the Option (as defined in the Option Agreement) have been satisfied or waived and that Lessee has duly exercised the Option. From and after the Effective Date, this Lease shall control the parties' rights and obligations with respect to the Property and the Option Agreement shall have no further force or effect (excepting any obligations that are intended to survive the expiration or termination of the Option Agreement). H. Pursuant to City Council Policy F -7, an open bid process was not utilized for this Lease because the Lessee's use of the Property serves to promote goals of the City related to providing and improving off - street parking opportunities in Balboa Village. NOW, THEREFORE, in consideration of the terms, mutual covenants and conditions in this Lease, Lessor and Lessee hereby agree as follows: ARTICLE 1 SUBJECT OF LEASE 1.1 Purpose of the Lease The purpose of this Lease is to provide for the lease and use of the Property by Lessee as a parking lot and Parking Structure in connection with the Lessee's operation of an ocean literacy educational center on the EO Property. 1.2 The Property The Property includes the land described and depicted in Exhibit A. During the term of this Lease, Lessee shall install and construct improvements on the Property as described in Exhibit C ( "Improvements ") pursuant to the terms of this Lease. 1.3 Lessor Lessor is the City of Newport Beach, a Charter City and municipal corporation. The principal office of Lessor is located at City Hall, 100 Civic Center Drive, Newport Beach, California 92660. For the purposes of this Lease, the term "Lessor" shall include all officers, employees, volunteers, agents or representatives of Lessor. 2 PAI ME.9 1.4 Lessee Lessee is ExplorOcean, a California non - profit corporation. The principal office of Lessee is 600 East Bay Avenue, Newport Beach, California 92661. For the purposes of this Lease, the term "Lessee" shall include all officers, employees, volunteers, agents or representatives of Lessor. ARTICLE 2 LEASE OF PROPERTY 2.1 Lease of Property Lessor leases the Property to Lessee, and Lessee leases the Property from Lessor for the Term (as defined in Article 4 below) and pursuant to the terms, provisions, covenants and conditions of this Lease. Lessor reserves all rights to substances below the surface of the Property and the right to produce or take any of those substances so long as the activities do not impair or interfere with the purpose of this Lease. 2.2 Condition of Title The Property is leased subject to the permitted exceptions listed in Exhibit D and incorporated herein by. reference, and other matters affecting title which do not inhibit, prevent or impair the purpose of this Lease. ARTICLE 3 POSSESSION OF PROPERTY; RIGHT OF FIRST REFUSAL 3.1 Quiet Eniovment Lessee shall be entitled to peaceably and quietly use and enjoy the Property for the Term, without hindrance or interruption by Lessor except for the exercise of Lessor's rights pursuant to this Lease. Lessor shall not be liable in damages or otherwise, because of the interruption or termination of any service provided by Lessor (such as, water or sewer service), or a termination, interruption or disturbance of any service attributable to any act or omission of Lessee. 3.2 Condition of Property 3.2.1 General Condition. Prior to date upon which Lessee takes possession of the Property (the "Date of Possession "), Lessee will investigate and research all physical conditions of the Property that could affect Lessee's use, enjoyment and improvement of the Property including soil conditions, the condition of structures, and the condition of utilities. Lessee shall indemnify, defend, and hold harmless Lessor from and against all claims, liabilities, or damages and including expert witness fees and reasonable PAI M ] attorney fees and costs, arising out of any such testing, inspection, or investigatory activity on the Property by Lessee. The Date of Possession shall be the earlier of (1) the date of the award of a construction contract for improvements on the Property; or (2) the date of receipt by Lessee of a surveyor certification from Lessor as the rough grade of the Property. 3.2.2 Relocation of Utilities. Prior to the Date of Possession, City shall remove and relocate any existing utilities running through or under the Property. Lessee agrees to reimburse City for any and all costs associated with such relocation. Lessee shall reimburse City's costs within sixty (60) calendar days of City's written demand to Lessee for reimbursement of costs. 3.3 'Ownership of Improvements During the Term of this Lease, Lessee shall hold title to the improvements constructed and installed on the Property by Lessee, including the Parking Structure (collectively, "Improvements ") and to all personal property necessary or convenient to Lessee's operation or maintenance of the Property, such as fixtures, machinery, lighting, staging, merchandise, trade fixtures (collectively, "Equipment ") that have been constructed or placed on the Property. Title to the Equipment shall remain with the Lessee at the expiration or termination of the Lease as provided in Section 3.4, title to the Improvements shall pass, at no cost, to the City. 3.4 Surrender of Property 3.4.1 On expiration of the Term or termination of this Lease, Lessee shall peaceably and quietly leave and surrender the Property to Lessor and leave all Improvements in good order, condition and repair, reasonable wear and tear and obsolescence excepted and free and clear of all liens and encumbrances other than those, if any, permitted hereby or otherwise created or consented to in writing by City and any leasehold mortgage permitted in writing by City. Lessee shall deliver to Lessor all contracts, agreements, books, records, and other documents related to the operation, maintenance or use of the Property and Improvements. 3.4.2 Upon the expiration of the Term or termination of this Lease and within ten (10) calendar days of a written request by Lessor, or reasonably necessary and as agreed to by Lessor, Lessee shall immediately remove the Equipment from the Property and deliver to Lessor the following: F1 PIM1i1 (i) Documents reasonably necessary for Lessor's ownership of the Property to be clearly reflected of record. (ii) Title insurance, surety bond, or other assurances reasonably acceptable to Lessor insuring Lessor against all claims and liens against the Property other than those incurred by Lessor or accepted by Lessor in writing. (iii) All plans, surveys, permits and other documents relating to the Property as may be in the possession of Lessee at the time. ARTICLE 4 TERM The Term of this Lease ( "Term ") shall commence on the Date of Possession and shall expire on the fiftieth (50 "') anniversary subject to early termination provided herein. ARTICLE 5 RENT /CONSIDERATION 5.1 Money Payable by Lessee Lessee shall pay ground rent to Lessor during the term of this Lease. The initial annual ground rent shall be flnsert FRV determined under Option Agreement as of the date of Lessee's exercise of the Option? Dollars ($ ). Thereafter, ground rent shall be increased every five (5) years by the cumulative percentage increase in the Consumer Price Index (All Urban Consumers — Los Angeles, Anaheim, Riverside — All items) from the Effective Date or the last ground rent change date, as applicable; provided, however, that in no event shall such increase be less than One Percent (1 %) per year or greater than Two and One Half Percent (2.5 %) per year. 5.1.1 Fair Market Adjustment of Ground Rent. Upon the twenty -fifth (25th) anniversary of the Effective Date ( "Market Adjustment Date "), the ground rent shall be increased or decreased, as the case may be, based upon the determination of the fair market rental value ( "FRV") of the Property. FRV shall be equal to the rent which the City could derive from the Property if it were then made available on the open market for leasing purposes for its use as a surface parking lot with sixty -eight (68) spaces (i.e., the condition of the Property as of the commencement of this Lease). The parties agree that the above methodology for establishing the initial rent rate is based on the requirement under Section 6.1.2 below that Lessee will maintain parking spaces available for general public parking. The FRV shall be determined as follows: (i) At least one hundred eighty (180) calendar days prior to the adjustment date, Lessor shall calculate FRV and inform Lessee of Lessor's 5 23 -21 determination of the FRV. If Lessee rejects the FRV as calculated by Lessor, Lessee shall inform Lessor of its rejection, in writing, within ten (10) calendar days after Lessee's receipt of Lessor's calculation, and Lessor and Lessee shall commence negotiations to agree upon the FRV. If Lessee accepts or fails to timely reject Lessor's calculation of the FRV, Lessor's calculation of the FRV will be binding on the parties. If Lessor and Lessee are unable to reach agreement within thirty (30) calendar days after Lessor's receipt of Lessee's notice of rejection, then the FRV shall be determined in accordance with (ii) below. (ii) If Lessor and Lessee are unable to reach agreement on the FRV within said thirty (30) calendar day period, then within seven (7) calendar days, Lessor and Lessee shall each engage an independent MAI appraiser with at least five (5) years of experience in appraising commercial leasehold properties in Orange County ( "Qualified Appraiser "). Each Qualified Appraiser shall determine the FRV within sixty (60) calendar days of being engaged; such determination shall be in writing. If the higher of such estimates is not more than one hundred ten percent (110 %) of the lower, then the FRV shall be the average of the two (2). Otherwise, the FRV dispute shall be resolved in accordance with (iii) below. If one (1) of the Parties does not timely engage a Qualified Appraiser or thereafter does not timely produce the required appraisal, then the appraisal submitted shall be binding on the Parties. (iii) Within seven (7) calendar days after the exchange of appraisals under (ii) above, the two (2) Qualified Appraisers engaged under (ii) above shall select a third (3rd) Qualified Appraiser to be engaged by the Parties. Unless required by law or court order, neither Party nor their respective Qualified Appraiser shall share the previously provided appraisals or the FRV determined thereunder, unless required by law or court order. The third (3rd) Qualified Appraiser shall promptly provide his /her written appraisal of what the FRV should be to Lessor and Lessee. In such event, the FRV to be used for the Ground Lease shall be the FRV determined by the Qualified Appraiser engaged by a Party under (ii) above which is closest in absolute dollars to the third (3rd) Qualified Appraiser's appraisal; provided however that if the third (3rd) Qualified Appraiser's determination is within five percent (5 %) of the half -way point between the initial appraisals, then the FRV shall be the average of the two (2) initial appraisals. By way of example, if the Parties are not able to agree on the FRV and Lessor's appraisal of FRV is $150,000 while Lessee's appraisal of FRV is $100,000, then the third (3rd) Qualified Appraiser shall be engaged. In such event, the FRV would be determined as follows: 0 `Ab "Pa Lessee's FRV determination $100,000 Lessor's FRV determination $150,000 Half -way point $125,000 5% of half -way point $ 6,250 If third Qualified Appraiser's FRV is: Then FRV is: - Less than $118,750 $100,000 - $118,750 to $131,250 $125,000 - More than $131,250 $150,000 If the third (P) Qualified Appraiser believes that expert advice would materially assist him /her, the third (3rd) Qualified Appraiser may retain one (1) or more qualified persons to provide expert advice. The fees of the third (3`d) Qualified Appraiser and any expert advice shall be shared equally by the Parties. Each Party shall pay the fees of its respective Qualified Appraiser. 5.2 Payment At Lessee's request, the ground rent payments shall be seasonally adjusted such that ground rent payments from November through April shall be fifty percent (50 %) lower and from May through October shall be fifty percent (50 %) higher than the current year's base ground rent divided by twelve (12). 5.2.1 Place for Payment of Ground Rent. All payments of ground rent shall be made in lawful money of the United States of America and shall be paid to Lessor in person or by United States' mail, or overnight mail service, at the Cashier's Office located at 100 Civic Center Drive, Newport Beach, CA 92660, or to such other address as Lessor may from time -to -time designate in writing to Lessee. If requested by Lessor, Lessee shall make payments electronically (at ww.newportbeachca.gov) or by wire transfer (at Lessee's cost). Lessee' assumes all risk of loss and responsibility for late charges and delinquency rates if payments are not timely received by Lessor regardless of the method of transmittal. 5.2.2 Late Charges and Delinquency Rates. A five percent (5 %) late charge shall be added to all payments due but not received by Lessor with ten (10) calendar days following the due date, unless another due date is specified in this Agreement. In addition, all unpaid amounts shall accrue at a delinquency rate of one percent (1 %) per month or any portion of a month until paid in full. Lessor and Lessee hereby agree that such late charges and delinquency rates represent a fair and reasonable estimate of the costs Lessor will incur by Lessee's late payment, including, without 7 FIID1193 limitation, lost opportunities and the cost of servicing the delinquent account. Lessee agrees that such late charges and delinquency rates are Additional Rent (defined below) and are not interest. Acceptance of such late charges and delinquency rates (and /or any portion of the overdue payment) by Lessor does not constitute a waiver of Lessee's default with respect to such overdue payment, or prevent Lessor from exercising any of the other rights and remedies granted in this Agreement. 5.2.3 Additional Rent. Lessee shall pay as Additional Rent for the Property, within ten (10) calendar days of Lessor's demand therefore (unless a different time for payment is expressly provided in this Agreement), all other amounts required by this Agreement, in addition to ground rent. Additional Rent does not reduce or offset Lessee's obligations to pay ground rent. 5.3 Temporary Reduction in Ground Rent Ground rent shall be reduced to twenty -five thousand dollars ($25,000) annually upon the issuance of a grading permit for the Parking Structure until the sooner to occur of: (i) completion of construction of the Parking Structure, or (ii) two (2) years from issuance of a grading permit for the Parking Structure. Notwithstanding the preceding, the parties intend that the Project be a private development project and not a public works project, as such terms are used in and interpreted under California Labor Code Section 1720. Accordingly, any amount of ground rent that would otherwise be abated under this Section 5.3 that is in excess of a de minimus amount of the cost of the Project (as interpreted under California Labor Code Section 1720(c)(3)) will not be reduced hereunder. 5.4 Determination of Ground Rent The parties acknowledge and confirm that the determination of ground rent was made based on the results of two (2) or more appraisals of the fair rental value from independent MAI appraisers pursuant to the terms of the Option Agreement. ARTICLE 6 USE OF PROPERTY 6.1 Uses 6.1.1 Permitted Uses. The Property shall be used primarily for the operation and maintenance of a Parking Structure for the Project, together with reasonable ancillary and occasional uses consistent with the approved activities on the EO Property (including signage for the Project and ATM) (hereafter referred to as "Permitted Uses "). Subject to compliance with applicable laws, Lessee shall have the right to adopt and administer T rxa�r� N! reasonable rules and restrictions applicable to the Parking Structure, including, without limitation, establishing operating hours, rates, validations and other parking accommodations. 6.1.2 Public Parking. Following completion of the Parking Structure, Lessee may maintain fifty -five (55) parking spaces within the Parking Structure for its exclusive use, representing the total amount of parking spaces currently available in Lessee's existing subterranean parking facility. The remainder of the parking spaces in the Parking Structure shall be available for use by the general public. Notwithstanding the preceding, Lessee shall have the right to temporarily restrict public parking in all or a portion of the Parking Structure for up to twelve (12) special events a year (subject to Lessee obtaining all required City permits and approvals, in which case the fees applicable thereto shall not reflect any compensation to Lessor on account of the temporary loss of public parking within the Parking Structure). 6.1.3 Prohibited Uses. Lessee shall not sell or permit any use that is inconsistent with or prohibited by any City ordinance, regulation or policy including, but not limited to, the City's Municipal Code, General Plan and Coastal Land Use Plan. Lessee shall not sell or permit to be kept, used, displayed or sold in or about the Property (a) pornographic or sexually explicit books, magazines, literature, films or other printed material, sexual paraphernalia, or other material that is considered lewd, obscene or licentious, (b) any article which may be prohibited by standard forms of fire insurance policies, or (c) any alcoholic beverages unless in accordance with the necessary permits and approvals. Lessee shall not use or permit the use of the Property in any manner that (a) creates a nuisance or (b) violates any law. Lessee shall not offer entertainment or broadcast music or entertainment through exterior speakers or other form of transmission without the written approval of City. In this event, Lessee shall obtain all required City permits and approvals. 6.1.4 Si ns. Lessee shall not place or permit to be placed any sign that is not in compliance with the regulations included in the Newport Beach Municipal Code pertaining to signs upon the exterior or in the windows of the Property. Change of Use Lessee shall not use, or conduct any activities on, the Property except the Permitted Uses without the prior written consent of Lessor, which consent may be withheld in Lessor's sole and absolute discretion. We PAMI 7 6.3 Compliance with Laws Lessee shall not use the Property in a manner liable to create a public or private nuisance or liable to cause structural injury to the Property or the Improvements. Lessee shall not conduct any operation that would invalidate any insurance coverage required of Lessee. Lessee shall comply with all applicable local, state and federal laws in the construction of Improvements, maintenance, or operation of the Property. Lessee shall obtain any required permit(s) from the City and any required approvals or permits from state or federal agencies. 6.4 Zoning and Planning Lessee shall be entitled to repair, alter, and modify the structures and improvements on the Property in accordance with the provisions of the Zoning Code provided Lessee complies with the provisions of this Lease. Approvals granted by Lessor pursuant to Article 8 of this Lease shall not substitute for land use and development approvals and permits required by the Newport Beach Municipal Code. 6.5 Nondiscrimination Lessee shall not discriminate against any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the renovation, operation, enjoyment or occupancy of the Property. ARTICLE 7 RIGHT OF FIRST REFUSAL Subject to the City's obligation to first comply with the Surplus Lands Act (Cal. Gov. Code §§ 54220, et seq.), Lessee shall have the right of first refusal to purchase the Property prior to the sale to any third party. Within two (2) business days of entering into an agreement to sell the Property to a third party, Lessor shall give Lessee written notice of the same along with a copy of the agreement. For a period of sixty (60) calendar days from receipt of said notice; Lessee shall the option to purchase the Property on the same terms and conditions, including the purchase price, set forth in the third party agreement (provided that if non -cash consideration is involved, then Lessee shall have the right to pay a cash equivalent of the same, and provided further that in no event will the closing be less than ninety (90) calendar days from Lessor's receipt of Lessee's election to purchase). Failure of Lessee to timely exercise its option hereunder shall be deemed to be Lessee's election to not purchase the Property. ARTICLE 8 REQUIRED IMPROVEMENTS 8.1 Lessee's Obligations 10 rxa�zy This Lease contemplates that Lessee shall cause construction of the Improvements on the Property so that it may be used by Lessee in connection with its operations on the EO Property ( "Required Improvements "). Lessee's construction of the Improvements shall be as generally described in Exhibit C and as identified in the Conceptual Design Plans dated , included in Exhibit E (the "Conceptual Design Plans "). The Conceptual Design Plans shall be consistent with the overall design of the Project and all regulatory approvals granted by City and any other regulatory agency and all plans approved by the City for both the Property and the EO Property. Any amendment or modification to the Conceptual Design Plans requires the prior written approval of the Lessor, which approval shall not be unreasonably withheld 8.2 Design Development Plans Lessee shall prepare, and submit for the Project Manager's (defined in Section 8.6.2) approval Design Development Plans that shall be based on and generally consistent with the Conceptual Design Plans. 8.3 Final Construction Plans Drawings and Related Documents Subsequent to the Project Manager's approval of the Design Development Plans, Lessee shall submit final construction plans, drawings and related documents ( "Final Construction Plans ") to the Project Manager for review and approval. Final Construction Plans shall be based on, and generally consistent with, and will detail the information provided in the Design Development Plans. The Final Construction Plans shall include all interior and exterior design details. 8.4 Building Permits Lessee will apply for all necessary building permits from Lessor. Lessee shall also obtain all permits or approvals required of any other governmental entity having jurisdiction over the Property or any modification to the Property. In the event that another governmental agency with jurisdiction over the Property requires modification of the Design Development Plans or Final Construction Plans, the modifications shall be submitted to the Project Manager for review and approval. City shall not unreasonably withhold or delay the issuance of building permits. 8.5 Schedule for Required Improvements 8.5.1 Regulatory Approvals. Lessee shall submit plans, diligently pursue their approval, and use reasonable efforts to obtain all regulatory approvals necessary for the construction of Improvements within five (5) years of the Effective Date. 11 PAI DIZA 8.5.2 Construction of Improvements. Lessee shall complete construction of the Improvements no later than three (3) years from Lessee's commencement of construction. To the extent that any City property including, but not limited to, the Property, public streets and sidewalks, is damaged by Lessee during Lessee's construction of the Improvements, Lessee agrees to repair all direct and related damage at its sole cost and expense to like new condition. 8.6 General Requirements 8.6.1 The Improvements shall be constructed in compliance with all applicable laws and the provisions of this Lease that regulate, or relate to, the construction, alteration or maintenance of improvements on the Property. Lessee acknowledges that the reviews and approvals required by this article are proprietary activities related to Lessor's ownership of the Property and are separate and distinct from any review or approval conducted by the City in its municipal capacity. Lessee also acknowledges that any approval given pursuant to this article does not bind Lessor when acting in its municipal charter city capacity. Consistent with this Lease, however, the Lessor and City agree to support the Lessee's efforts to obtain all necessary regulatory approvals and permits required for the full implementation of the Lease. In the event that Lessee is unable to obtain all necessary approvals and permits, or is subject to conditions that limit Lessee's ability to implement the Lease, the Parties agree to meet and discuss in good faith the impacts of such event(s) and negotiate an amendment of this Lease. If the Parties are unable to negotiate an amendment to the Lease within ninety (90) calendar days of meeting and conferring on the events, Lessee or Lessor may terminate this Lease. 8.6.2 Lessor designates the City Manager or his /her designee as the "Project Manager" to review, and approve or disapprove the Design Development Plans and the Final Construction Plans, or any changes thereto. Any disapprovals shall state in writing the reasons therefore and changes requested by the Project Manager. Such reasons and such changes shall be consistent with Exhibit C and Exhibit E and any items previously approved or deemed approved by Lessor, in its proprietary role, or by City in its municipal capacity. 12 PAI DI9 8.7 Extensions Lessee may request, and the Lessor may, but is not required to, grant, an extension with respect to any of the deadlines specified in this Lease. Lessor may not unreasonably withhold its consent for an extension provided that Lessee is proceeding in good faith and a reasonable manner as determined by Lessor in its sole and absolute discretion. All requests for extensions shall be submitted to the Project Manager for review and a determination whether to grant or deny the request. The Project Manager's determination shall be final. Extensions authorized by this Section are in addition to any extension resulting from force majeu re. ARTICLE 9 REPAIRS AND MAINTENANCE Lessee shall, at Lessee's expense, perform all routine and recurring maintenance necessary to keep the Property in good order and condition and shall exercise due diligence to protect the Property from damage and in accordance with the standards in this Lease. Lessee shall, at a minimum perform the following: (i) the maintenance of the exterior surfaces of the Parking Structure (including painting or other protective treatment of the exterior wall of the buildings); (ii) the maintenance of electrical systems solely serving the Property and the repair and replacement of components; and (iii) the maintenance of all building service equipment (including elevators, and fire, life safety, and emergency equipment) and the repair and replacement of components. During the term of the Lease, in the event that Lessor is unsatisfied with any maintenance or repairs performed by Lessee, the Parties shall meet and confer as soon as reasonably practicable to address Lessor's concerns promptly. Lessee shall not be responsible for the cost of and repair or maintenance required because of the acts or omissions of Lessor. ARTICLE 10 STATUS AND MANAGEMENT OF LESSEE 10.1 Nonprofit Status During the Term, Lessee shall maintain its status as a California public benefit nonprofit corporation in full compliance with the California Nonprofit Corporation Law (California Corporation Code Section 5000 et seq.). Lessee shall also maintain its qualification as a tax - exempt organization under 501(c)(3) of the Internal Revenue Code (or any successor statute). 10.2 By -Laws During the Term, Lessee shall maintain by -laws governing the management and operation of the nonprofit corporation, and provide Lessor with a current copy of the by -laws. 13 fAI M101 ARTICLE 11 ALTERATIONS 11.1 Written Consent Except as otherwise provided in Section 11.2, Lessee shall obtain the written consent of Lessor prior to making any structural or material nonstructural alterations to the Property. All structural and material nonstructural alterations to the Property shall conform to the approved plans for the Property. "Alterations" shall mean any modification, addition, or improvement to the Property or to the Improvements that will be undertaken by Lessee subsequent to construction of Improvements required by this Lease, whether by addition or deletion. Lessee shall be solely responsible for all costs and expenses incurred in making any alteration. All alterations shall be surrendered with the Property, at no cost to Lessor, when this Lease expires or terminates. 11.2 Minor Alterations Improvements including, maintenance, repairs and replacement shall be considered Minor Alterations so long as any Improvement replaced is of like kind and quality. Lessee may during the term of this Lease complete certain alterations and improvements to the Property (deemed "Minor Alternations ") without Lessor's prior approval, provided such Minor Alterations individually meet all of the following criteria: (1) Would not require Lessee to apply for a building permit for completion of such Minor Alteration; (2) Would not result in any violation of any provision of this Lease; (3) Would not result in a substantial change in the character of the Improvements or the use for which they were intended; (4) Would not involve or result in any change in the exterior of the Improvements that materially changes the design of the Improvements based on the approved Construction Plans; (5) Would not be of lesser quality or result in the diminution of the value of the Property; (6) Would not weaken the structural integrity of the Improvements or any portion thereof. Improvements and changes in the Property which meet the criteria contained herein and which involve the installation of fixtures, partitions, counters, shelving, and equipment as deemed necessary and appropriate by Lessee will not be considered "Alterations" or "Minor Alterations" and do not require Lessor's prior approval. 14 FIANC181 11.3 Demolition Lessee shall not, without prior written approval of City and any other required government entity, demolish, alter, or remove all of any structural part of the Property or any Improvements located upon the Property. 11.4 Notice of Non - responsibility Structural and nonstructural alterations which require Lessor approval shall not be commenced until ten (10) calendar days after Lessor has received written notice from Lessee stating the date work is to commence so that Lessor can post and record an appropriate Notice of Non - Responsibility. Structural alterations requiring a building permit shall be made as stipulated by the City's adopted Building Code. ARTICLE 12 PAYMENT OF UTILITIES, TAXES, CHARGES AND FEES 12.1 Public and Private Utility Services Lessee will pay all charges for all public or private utility services and all sprinkler systems and interior protective services provided to or for the Property. Lessee will comply with the terms and conditions of contracts relating to such services. Lessor shall not be liable for any failure or defect in the supply of any utility. 122 Refuse Lessee shall pay all charges applied to the Property for refuse collection services whether billed by the City or its refuse collection service provider. 12.3 Taxes, Assessments, Fees and Charges Lessee covenants to pay when due and prior to delinquency all applicable taxes, assessments, fees, charges, and levies of every type and character, including all interest and penalties, that are imposed, assessed or levied on the Property, any occupancy or use of the Property, or any income derived from the Property. Nothing herein shall be deemed to prohibit the Lessee from contesting the validity or amount of any tax, assessment, fee, charge, encumbrance or lien, or to limit the remedies available to the Lessee in respect thereto. 12.4 Proof of Payment Lessee agrees to furnish to Lessor, upon request, proof of the timely payment of any tax, assessment, levy, fee or charge or other. Lessee may pay any assessment or tax in installments if legally permissible to do so. In the event 15 23 -31 Lessee elects to pay assessments or taxes in installments, Lessee shall be liable only for those installments which become due and payable during the Term of this Lease. 12.5 Payment by Lessor In the event that Lessee fails to pay any assessment, tax, fee or charge levied on the Property, if any, Lessor may, at its option, pay any assessment, tax, fee or charge together with any penalties and /or interest before the due date if Lessor has a reasonable belief that Lessee is unwilling or unable to make the payment. In such event, Lessee shall fully reimburse Lessor within ten (10) calendar days of written notice of payment by Lessor. 12.6 Property Taxes not Valid The obligation of Lessee to pay taxes shall not be construed as evidence that Lessor or Lessee believe that any tax is legal. This Lease is intended only to obligate Lessee to pay taxes if legally imposed. 12.7 Notice of Possessory Interest; Payment of Taxes and Assessments on Value of Entire Lease Premises In accordance with California Revenue and Taxation Code Section 107.6(a) and Health and Safety Code Section 33673, Lessor states that by entering into this Lease, a possessory interest subject to property taxes may be created, and if so, that Lessee shall pay taxes upon the assessed value of the Property and not merely the assessed value of its leasehold interest. Lessee or other party in whom the possessory interest is vested may be subject to the payment of property taxes levied on such interest. ARTICLE 13 LIENS 13.1 Indemnification Lessee shall indemnify, defend and hold Lessor and the Property free, clear and harmless from any claims, liens, demands, charges, encumbrances or litigation arising directly or indirectly out of (1) Lessee's use, occupancy or operation of the Property or (2) any work performed on, or any material furnished to the Property at the request or direction of Lessee. Lessee shall pay, prior to delinquency, for all work performed on, and material furnished to, the Property which may result in a lien on the Property and shall use its best efforts to keep the Property free and clear of all mechanic's liens and similar liens. 16 PIMPA 13.2 Satisfaction of Liens Lessee shall fully pay and discharge a judgment or lien affecting the Property upon entry of final judgment in any action contesting any claim of lien (if final judgment establishes the validity of all or a portion of the lien). Lessee shall also pay any lien within fifteen (15) calendar days after notice of the filing of any lien that Lessee does not contest. Lessee shall reimburse Lessor upon demand for any and all loss, damage and expense, including reasonable attorneys' fees, incurred by Lessor with respect to any judgment or lien resulting from the acts or omissions of Lessee related to the Property. Lessor shall have the right to satisfy any judgment or lien if Lessee fails or refuses to do so and Lessee shall fully reimburse Lessor in such event. 13.3 Notice to Lessor Lessee shall give Lessor written notice of any claim or lien filed against the Property and any action or proceeding instituted affecting the title to the Property. 13.4 Notice of Non-Responsibility Lessor shall have the right to post and maintain on the Property any Notice of Non - Responsibility authorized by law. ARTICLE 14 INDEMNIFICATION 14.1 Indemnity Lessee shall defend, indemnify and hold harmless Lessor, its officers, directors, employees, volunteers, agents and representatives from and against any and all legal or administrative proceedings, claims, reasonable attorneys' fees and costs, expenses,. penalties, actual damages, including indemnity claims, in any way related to Lessee's (i) improvement, use, maintenance, or operation of the Property (ii) use, release, generation, storage or disposal of Hazardous Materials (as defined in Section 14.6) on the Property by Lessee or any agent of Lessee, (iii) non - compliance with any federal, state or local environmental law, ordinance, rule or regulation, and (iv) any accident or injury to, or death of, persons or damage to property occurring on or about the Property. If the storage, use and disposal of Hazardous Materials on the Property is caused by the Lessee or any agent of Lessee and results in contamination or deterioration of water or soil resulting in a level of contamination greater than maximum allowable levels established by any governmental agency having jurisdiction over such contamination, Lessee shall promptly take any and all action required by such agency to investigate and clean -up such contamination. 17 PANCIC] 14.2 fEWI IBM, 14.5 Lessor shall defend, indemnify, and hold harmless Lessee, its officers, directors, employees, agents and representatives from and against any and all legal or administrative proceedings, claims, reasonable attorney fees and costs, expenses, penalties, actual damages, including indemnity claims, in any way related to (i) intentional acts or negligence of Lessor, its officers, officials, consultants, agents, employees, contractors, or invitees arising with regard to use or entry onto the Property by Lessor,(ii) the use, release, generation, storage or disposal of Hazardous Materials (and defined in Section 14.6) on the Property by Lessor or any agent of Lessor; (iii) Lessor's non - compliance with any federal, state or local environmental law, ordinance, rule or regulation, (v) any accident or injury to, or death of, persons or damage to property occurring on or about the Property as result of Lessor's use of the Property, (vi) the removal, clean -up, encapsulation, detoxification or any other action taken by Lessor or any agent of Lessor, directly or indirectly arising out of the presence of Hazardous Materials in, on or around the Property (excepting any matter which Lessee is responsible for under the preceding paragraph). If the previous, current and future storage, use and disposal of Hazardous Materials on the Property is caused by the Lessor or any agent of Lessor and results in contamination or deterioration of water or soil resulting in a level of contamination greater than maximum allowable levels established by any governmental agency having jurisdiction over such contamination, Lessor shall promptly take any and all action required by such agency to investigate and clean -up such contamination. CERCLA Liability Lessee and Lessor mutually agree that this Lease is intended to operate as an indemnification of Lessor by Lessee under 42 U.S.C. Section 9607(e) (1) of the Comprehensive Environmental Response, Compensation and Liability Act ( "CERCLA "), as amended, and the California Hazardous Substances Act ( "CHSA "), as amended. Expense of Proceedings The defense of any suit, action, legal or threatened, brought or instituted against the indemnification provisions included i n respective Party's sole expense. Intentionally Omitted Intentionally Omitted 14.6 Definition of Hazardous Materials administrative proceeding that may be Lessor or Lessee that is the subject to this Lease shall be conducted at the iU FIANCE The term "Hazardous Materials" means, without limitation, gasoline, petroleum products, (excepting gasoline and petroleum products used in the ordinary course of operation by vehicles visiting the Property) explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls or related or similar materials, asbestos or any other substance or material that may be defined as a hazardous, toxic or dangerous substance, material, waste, pollutant or contaminant under any federal, state or local environmental law, ordinance, rule or regulation as now or at any time hereafter in effect, including, without limitation, (a) CERCLA, (b) the Federal Water Pollution Control Act, (c) the Clean Air Act (d) the Resource Conservation and Recovery Act, (e) the Toxic Substances Control Act, (f) the Hazardous Materials Transportation Act, (g) the Carpenter - Presley- Tanner Hazardous Substance Account Act, (h) Hazardous Waste Control Law, and the (i) the Porter - Cologne Water Quality Control Act (California Water Code Sections 13000 et seq.). ARTICLE 15 INSURANCE 15.1 Insurance to be maintained Lessee shall take out and maintain, no later than thirty (30) calendar days after the Effective Date and for the Term of this Lease, at Lessee's sole cost and expense, the insurance required by Lessor as set forth in Exhibit F attached hereto and incorporated herein by this reference. ARTICLE 16 DAMAGE BY FIRE OR CASUALTY 16.1 Lessee to give Notice In case of any material damage to or destruction of the Property, Lessee will promptly give written notice to Lessor generally describing the nature and extent of the damage or destruction. 16.2 Restoration Except as provided in Section 17.3, in the event of damage to or destruction of the Property, Lessee shall repair and restore the Property to its original condition (subject to changes necessary to comply with the existing laws and any changes in design approved by Lessor), at Lessee's sole cost and expense. To the extent the insurance proceeds received from an insurance carrier ( "Insurer ") are insufficient to cover the cost of such repair and restoration, Lessee shall make up the deficiency out of Lessee's own funds. The repair and restoration shall be commenced within a reasonable period of time following the casualty and shall be completed with due diligence. Lessee shall have the option to terminate this 19 i1ANCI7 Lease and surrender possession of the Property to Lessor in the event the cost of such repair and restoration exceeds the sum of (i) the amount of insurance proceeds available to Lessee plus (ii) the amount of the deductible by an amount which Lessee reasonably determines renders reconstruction of the Property economically infeasible. In the event of such a termination, Lessee shall pay to Lessor the amount of the deductible and assign to Lessor any and all rights Lessee may have to the insurance proceeds from claims related to the Property or the Improvements but specifically excluding insurance proceeds from claims related to Equipment. 16.3 Casualty Late in Term Lessee or Lessor shall have the right to terminate this Lease on ninety (90) calendar days written notice if (i) the Property is damaged or destroyed subsequent to the twenty fifth (25th) year of the Term, (ii) the costs of restoration and repair are estimated to exceed fifty percent (50 %) of the then full replacement cost of the Property (excluding land costs /value), and (iii) Lessee elects not to repair or restore the Property. In such event, Lessor shall have the right to receive and retain all insurance proceeds paid or payable to Lessee on account of any damage or destruction to the Property. 16.4 Application of Insurance Proceeds In the event that Lessee is required to restore the Property pursuant to Section 16.2, proceeds from policies of insurance required by Article 15 and which are received on account of any damage to or destruction of the Property (less the costs, fees and expenses incurred in the collection), shall be applied as follows: 16.4.1 Lessee shall furnish to Lessor satisfactory evidence to Lessor of the total cost of Restoration pursuant to Section 16.2. Lessee shall then furnish to Lessor satisfactory evidence that it has available the total amount of money which, when added to the insurance proceeds received, shall be sufficient to pay the cost of such restoration. 16.4.2 Assuming satisfaction of the conditions of subsection 16.4.1 net insurance proceeds shall be paid to Lessee, unless Lessee is in Default, to fund restoration. Payments from the proceeds of insurance for restoration shall be made only upon written request of Lessee to Insurer and verification by an Independent Adjustor assigned to the claim by the Insurer that the repairs are taking place and that work continues to progress. A copy of any such written request submitted to Insurer by Lessee shall also be provided to Lessor. Final payment of insurance proceeds by 411 rxaery Insurer will not be made until all repairs are completed and there are no mechanic's or similar liens for labor or material supplied in connection with the restoration to date. 16.4.3 Upon completion of restoration and assuming Lessee is not in default, excess insurance proceeds shall first be paid to Lessor to the extent of its actual expenses incurred by Lessor in the restoration, then to Lessee as working capital ARTICLE 17 EMINENT DOMAIN 17.1 Lease Governs The rights and obligations of the parties with respect to any Award (as defined in Section 17.4) shall be as provided in this Article if there is any taking during the Term of this Lease. 17.2 Termination of Lease This Lease shall terminate effective on the date of surrender of possession of the Property to the condemning authority in the event of a total taking of the Property or the EO Property. Lessee shall continue to observe and perform all of the terms, covenants and conditions of this Lease until the date of termination. 17.3 Partial Taking — Restoration If there is a partial taking (which shall mean a taking that does not, in Lessee's reasonable opinion, keep the Property or the EO Property to be used for Lessee's intended use; all other takings shall be deemed to be total takings), Lessee may, at its sole cost and expense, whether or not the condemnation award is sufficient for the purpose, promptly commence and diligently proceed to effect restoration of the Property as nearly as possible to the condition and character immediately prior to such taking. 17.4 Distribution of Award All awards and damages received on account of any taking of the Property, whether partial or total, including interest received ( "Award "), shall be paid promptly by the person(s) receiving the same to an escrow agent mutually acceptable to Lessor and Lessee to be distributed upon appropriate instruction from the Parties. 21 FIIHOA 17.5 Allocation of Award —Partial Taking Any Award in a partial taking shall be distributed by escrow in the following order of priority: 17.5.1 First, to Lessor and Lessee to reimburse all costs and expense incurred in the collection of the Award, including fees and expenses incurred in the condemnation proceeding; 17.5.2 Second, to Lessor, as reimbursement for the costs and expenses of restoration of the Property and as those costs and expenses are incurred by Lessee; 17.5.3 Third, if Lessor and Lessee are unable to agree upon the allocation of the balance of the Award, if any, it shall be deposited by escrow into a court of competent jurisdiction to be equitably allocated by the court. 17,6 Allocation of Award — Temporary Taking In the event of a taking for temporary use or occupancy, this Lease shall continue in full force and effect and Lessee shall be entitled to claim, recover and retain any Award made on account of such temporary taking. However, if the period of temporary taking extends beyond the Term, the Award shall be apportioned between Lessor and Lessee as of the date of expiration. 17.7 Allocation of Award — Total Taking Any Award in a total taking shall be distributed by escrow in the following priority: 17.7.1 First, to Lessor and Lessee to reimburse for all costs and expenses incurred by each in the collection of the Award; 17.7.2 Second, if Lessor and Lessee are unable to agree upon the allocation, the balance of the Award shall be deposited by escrow into a court of competent jurisdiction to be equitably allocated by the court. The determination of the value of Lessee's and Lessor's respective interests in the Property shall be made as if the Lease were to continue in full force and effect until the expiration of the term hereof. 22 PAI NCI9 17.8 Conduct of Proceedings Lessee and Lessor shall jointly participate in and prosecute /defend any action or proceeding involving a taking of the Property by condemnation or under the power of eminent domain and shall jointly make any compromise or settlement. 17.9 Notices Any party receiving notice of or becoming aware of any condemnation proceedings shall promptly give written notice to the other Party. ARTICLE 18 ASSIGNMENT AND SUBLETTING Lessee may not assign this Lease or any portion of the Property, without Lessor's prior written consent which consent may be withheld in Lessor's sole and absolute discretion. However, Lessee may grant such subleases, licenses, permits and concessions as are reasonable, appropriate and customary to promote a Permitted Use and are in accordance with this Lease. For the purposes of this Lease, assignment shall not be deemed to have occurred as result of (i) any transfer of this Lease to an entity controlled by or under common control with the originally named Lessee or any successor of the same (provided, in such event the originally named Lessee shall not be released from its obligations hereunder), or (ii) any transfer of this Lease on account of a foreclosure of any leasehold mortgage or deed in lieu thereof (provided in such event the acquiring party agrees to attorn to Lessor). ARTICLE 19 LEASEHOLD MORTGAGES Lessee shall have no right to encumber the Property without Lessor's prior written consent, which consent shall not be unreasonably withheld by Lessor. Lessee shall have the right to mortgage or encumber its interests in this Lease, and in such event Lessor agrees to execute a commercially reasonable non - disturbance and attornment agreement. Lessor agrees to consider reasonable amendments to this Lease requested by Lessee's lender to address its financing and security concerns. ARTICLE 20 PERFORMANCE OF LESSEE'S COVENANTS 20.1 Right of Performance If Lessee fails to pay any tax, fee or other charge in accordance with Article 12 within the time period required or shall fail to pay for or maintain any of the insurance policies provided for in Article 15 within the time required, or to make any other payment or perform any other act within the time required by this Lease, then Lessor may, after thirty (30) calendar days' written notice to Lessee (or without notice in case of an emergency) and without waiving or releasing 23 PAI NCk] Lessee: 20.1.1 Pay the tax, assessment, fee or charge payable by Lessee pursuant to this Lease; or 20.1.2 Pay for and maintain any insurance policies required by this Lease; or 20.1.3 Make any other payment or perform any other act that Lessee is required to pay or perform pursuant to this Lease. 20.2 Reimbursement and Damages Lessee shall reimburse Lessor for all costs and expenses incurred by Lessor in the exercise of its rights pursuant to Section 20.1. ARTICLE 21 REPRESENTATIONS 21.1 Lessor's Representations Lessor represents to Lessee that: 21.1.1 Lessor owns the Property in fee simple subject only to the permitted exceptions provided in Exhibit D and other matters affecting title that do not inhibit, prevent or impair the operation, maintenance or use of the Property for vehicle parking. 21.1.2 Lessor has the power and authority to enter into this Lease and perform all the obligations of Lessor hereunder. 21.2 Lessee's Representations Lessee represents to Lessor that: 21.2.1 Lessee has the right, power and authority to enter into this Lease and to perform all the obligations of Lessee. 21.2.2 Lessee is a California public benefit nonprofit corporation in full compliance with the provision of the California Nonprofit Corporation Law (California Corporation Code Section 5000 et seq.), and is a tax exempt organization under 501(c)(3) of the Internal Revenue Code, 24 FII1081 ARTICLE 22 DEFAULTS, REMEDIES AND TERMINATION 22.1 Legal Actions 22.1.1 Institution of Legal Actions In addition to any other rights or remedies, either Party may institute legal action to cure, correct, or remedy any default, to recover damages for any default, or to obtain any other remedy consistent with the purpose of this Lease. Any legal action shall be filed in the County of Orange, State of California. 22.1.2 Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease, with venue in Orange County. 22.2 Rights and Remedies are Cumulative Except with respect to rights and remedies expressly declared to be exclusive in this Lease, the rights and remedies of the parties are cumulative. 22.3 Occurrence of Default The following acts or omissions shall be considered material breaches of this Lease if Lessee fails to cure the default within sixty (60) calendar days after written notice of default from Lessor or, if cure is not feasible within sixty (60) calendar days, Lessee has failed to commence cure within sixty (60) calendar days or fails to diligently complete the cure: 22.3.1 The failure of Lessee to comply with the provisions of Articles 8 and 11 related to the design and construction of Improvements and alterations to the Property. 22.3.2 The failure of Lessee to use the Property as identified in Section 6.1. 22,3.3 The failure of Lessee to maintain the Property as specified in Article 9. 22.3.4 The failure of Lessee to restore or repair the Property in the event of damage or destruction as provided for in Article 16. 25 f'I ME 22.3.5 The failure of Lessee to pay any fee, tax, charge, or assessment prior to delinquency or the failure to reimburse Lessor in the event Lessor pays the fee, tax, charge or assessment. 22.3.6 The failure of Lessee to pay rent as set forth in Article 5. 22.4 Remedies If Lessee has materially breached this Lease after expiration of all applicable cure periods then a Default shall be deemed to have occurred, Lessor may give written notice to Lessee of Lessor's intent to terminate the Lease. The Notice of Intent to Terminate must include no less than ten (10) calendar days' notice to Lessee of the date and time of a meeting with the Project Manager at which time the Project Manager will decide if there has been a material breach in the Lease. The Lease shall terminate on the date of Project Manager's determination that the Lessee has materially breached the Lease, unless the Lessee appeals the decision of the Project Manager to the City Council. Any appeal shall be submitted in writing to the City Clerk and be scheduled for a regular or special meeting of the City Council. The decision of the City Council on appeal shall be final, provided the same shall not be deemed a waiver of Lessee's right to institute legal action based on such decision. In addition to the right of termination, Lessor shall have the following additional rights and remedies: 22.4.1 Lessor shall have the immediate right to reenter the Property, take possession of the Property. In the event of termination under this section Lessor shall owe no compensation to Lessee. 22.4.2 Lessor may, at its option, enforce all of its rights and remedies under this Lease, including the right to recover the consideration and all other sums payable as they become due. Lessor shall also be entitled to recover from Lessee all costs of maintenance and preservation of the Property , and all costs, including attorneys' and receiver's fees, incurred in connection with the appointment of and performance by a receiver to protect the Property. 22.4.3 Lessor shall be entitled to recover all money payable to Lessee related to the operation and use of the Property. 22.5 Option to Terminate Lessee shall have the option to terminate the Lease upon giving the Lessor written notice at least three hundred sixty -five (365) calendar days prior to a rxaya lease termination date which termination shall take effect on that lease termination date. 22.6 Waiver of Consequential Damages Lessee acknowledges that Lessor would not enter into this Lease if it were to be liable for consequential damages or loss of goodwill under, or relating to, this Lease or any of the matters referred to in this Lease, including, without limitation, any and all plans, permits, licenses or regulatory approvals, and CEQA documents. Accordingly, Lessee covenants and agrees on behalf of itself and its successors and assigns, not to sue Lessor (either in its capacity as lessor in this Lease or in its capacity as the City of Newport Beach) for consequential damages, or loss of goodwill for: (i) any breach of this Lease by Lessor; (ii) any dispute, controversy, or issue between Lessor and Lessee arising out of or connected with this Lease; or (iii) any of the matters referred to in this Lease, including, without limitation, any and all plans, permits, licenses or regulatory approvals, CEQA documents, or any future amendments or enactments thereto. Nothing herein shall waive Lessee's right to seek actual and direct damages caused by Lessor's breach, including actual and direct damages incurred by Lessee with respect to Lessee's operations on the Property and the EQ Property. For avoidance of doubt, the temporary closure of the public streets surrounding or leading to the Property for accidents, public events, or maintenance of such streets or utilities therein or on account of emergencies shall not be deemed a breach of this Lease by Lessor. ARTICLE 23 PERMITTED CONTESTS Lessee, at no cost or expense to Lessor, may contest (after prior written notice to Lessor), by appropriate legal proceedings conducted with due diligence, the amount or validity or application, of any Imposition or lien, and provided that the proceedings suspend collection from Lessor and any action against the Property. If Lessee fails to contest the matter, or fails to protect Lessor and Lessor's interest in the Property, Lessor may contest or settle the matter in its sole discretion and obtain reimbursement from Lessee. ARTICLE 24 ENTRY BY LESSOR Lessor may enter the Property at reasonable times for the purpose of inspecting, servicing or posting notices, protecting the Property, or for any other lawful purposes, including showing the Property to prospective purchasers or lessees. 27 PAINS] ARTICLE 25 FORCE MAJEURE Any prevention, delay, non- performance or stoppage due to any of the following causes shall be excused: any regulation, order, act, restriction or requirement or limitation imposed by any Federal, State or municipal government; acts of God; acts or omissions of Lessor; fire, earthquake, explosion or floods; strikes, walkouts or inability to obtain materials; war, riots, sabotage or civil insurrection; unusually severe weather; or any other causes beyond the reasonable control of Lessee. ARTICLE 26 MISCELLANEOUS 26.1 Notices All notices and other communications shall be in writing, shall be sent by first class registered or certified United States mail, postage prepaid, and shall be deemed to have been given two (2) calendar days after the day of mailing, addressed: To Lessor; City Manager City of Newport Beach 100 Civic Center Drive P.O. Box 1768 Newport Beach, CA, 92658 -8915 With a copy to both: City Attorney's Office Real Estate Division City of Newport Beach City of Newport Beach 100 Civic Center Drive 100 Civic Center Drive P.O. Box 1768 P.O. Box 1768 Newport Beach, CA, 92658 -8915 Newport Boulevard, CA 92658 -8915 or at such other addresses as Lessor shall have furnished to Lessee; and To Lessee; President ExplorOcean 600 East Bay Avenue Balboa, CA 92661 m Waif 26.2 No Claims Aoainst Lessor Nothing in this Lease constitutes any consent or request by Lessor for the performance of any labor or services or the furnishing of any materials to the Property 26.3 Integration This Lease, and the exhibits, is the entire Agreement between the Parties, and there are no agreements or representations between the Parties except those specified in this Lease. This Lease supersedes any prior negotiations, representations, discussions or agreements between the Parties with respect to the Property. Except as otherwise provided, no subsequent change or addition to this Lease shall be binding unless in writing and signed by the parties, and approved as to form by Lessor's City Attorney. 26.4 No Waiver by Lessor To the extent permitted by law, no failure by Lessor to insist upon the strict performance of any term of this Lease, or to exercise any right, power or remedy upon a Default under this Lease, shall constitute a waiver. 26.5 Severability If any term of this Lease or any application thereof shall be declared invalid or unenforceable by a court of competent jurisdiction, the remainder of this Lease shall not be affected. Unless otherwise expressly provided, any approval or consent of Lessor required shall not be unreasonably withheld or delayed. This Lease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the parties. 26.6 Holding Over A tenancy for month -to -month shall result if Lessee remains in possession of the Property with consent of Lessor after the expiration of the Term. The month-to- month tenancy shall be on the same terms and conditions as contained in this Lease. 26.7 No Partnership This Lease does not cause Lessor to be a partner of Lessee, a joint venture with Lessee, or a member of a joint enterprise of Lessee relative to the operations on the Property. 99 FII MR 26.8 Time of the Essence Time is of the essence relative to all of the terms, provisions, covenants and conditions of this Lease. 26.9 Authority Each individual executing this Lease on behalf of the Lessee represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of the foundation, in accordance with a duly adopted resolution of the Board of Directors, and that this Lease is binding upon the foundation in accordance with its terms. Lessee represents and warrants to Lessor that the entering into this Lease does not violate any provisions of any other agreement to which Lessee is bound. 26.10 City Authorization The City Manager of the City of Newport Beach is hereby authorized, on behalf of the City, to sign all documents necessary and appropriate to carry out and implement the Lease and to administer the City's obligations, responsibilities and duties to be performed under the Lease. 26.12 Counterparts This Agreement may be executed in two (2) or more counterparts, each of which shall be identical and may be introduced in evidence or used for any other purpose without any other counterpart, but all of which shall together constitute one (1) and the same agreement. 26.13 Attachments and Exhibits This lease includes the following Exhibits, which are attached hereto and made a part hereof: Exhibit A - Description and depiction of the Property Exhibit B - Description and depiction of EO Property Exhibit C - Description of Improvements Exhibit D - Permitted Exceptions Exhibit E - Conceptual Design Plans Exhibit F — Insurance Requirements 30 PAMR 26.14 Disputes Each of the Parties shall pay all costs and expenses incurred or to be incurred by it in negotiating and preparing this Lease and the other agreements to be executed in carrying out the transactions contemplated hereby and thereby. In the event of a dispute under this Lease, the prevailing party shall not be entitled to recover its costs and expenses incurred in such dispute, including, without limitation, attorneys' fees and court costs. [SIGNATURES ON NEXT PAGE] 31 FIIWYA FOR LESSOR CITY OF NEWPORT BEACH Rush N. Hill, II Mayor FOR LESSEE EXPLOROCEAN Dated Tom Pollack President APPROVED AS TO FORM THE CITY ATTORNEY'S OFFICE Dated Aaron C. Harp City Attorney ATTEST: Leilani I. Brown City Clerk Dated [END OF SIGNATURES] 32 PAI N1.9 STATE OF CALIFORNIA SS. COUNTY OF ORANGE On , 20 , before me, Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) isfare subscribed to the within instrument and acknowledged to me that he /she /they executed the same in his /her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature STATE OF CALIFORNIA ss. COUNTY OF ORANGE On —'20 , before me, Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is /are subscribed to the within instrument and acknowledged to me that he /she /they executed the same in hls✓her /their authorized capacity(ies), and that by his /her /their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature PAI M ] EXHIBIT A DESCRIPTION AND DEPICTION OF THE PROPERTY Description of Premises [Note: A metes and bounds legal description of the lease premises shall be drafted and attached to replace this 'Exhibit A' prior to lease execution.] Premises shall include portions of the following areas, as shown on the map exhibits: APN 048 - 116 -06 Parcel 1, as shown on Parcel Map PM 117/24 (also referred to as Resub 566), recorded 06/14/1978, excepting the following areas: A. A 5' wide alley easement, dedicated to the public. B. A 2' wide easement for sidewalk and pedestrian purposes, dedicated to the public. C. Two corner cutoffs for Palm Street, dedicated to the public for street purposes. APN 048 - 116 -05 2. Lot 7, Block 7, Balboa Tract, as recorded as MM 4/11, recorded 5/23/1905 APN 048 - 116 -04 Alley 3. Lots 8, 9, 10, and 11, Block 7, Balboa Tract, excepting the following area: A. A Grant of Easement for street and highway purposes over Lot 11, recorded in Official Records as 20020109515, dated 02/08/2002. 4. The Alley between Lots 1 -6 and Lots 7 -11, Block 7, Balboa Tract, as recorded in MM 4/11, recorded 05/23/1905, bound on the north by the prolongation of the northerly line of Lot 7, to the northeast corner of Lot 1 of said Tract, and on the south by the prolongation of the southerly line of Lot 11, to the southeast corner of Lot 6 of said Tract. PAI M81 Exhibit A r "Mr y. pd i1 OH 1 rkvu �, e,ortacu. Lease Premises - .� '•.h' Newport Beach Disclaimer Every reasonable Mort has been made to assure the xwrary or the data proNded. hoeewr. The Cey of GI$ 0 Newport Seam aM as enployees and agents Owl aim any and all responsibllty from or relating to s any recalls obtained m Its use e �^ 2,I 4,Wq 0 Imagery. X)092013 photos proNded by Eagle ear Feet anagng ewe eagleaenal com Page A -1 23 -51 Newport Beach GIS �a r o� Exhibit A b 0 0 40 80 Feet n R7 dsdakna Every reasonable eemt has been made to assure the aemmey of the data proNded, however. The Cdy of N"po t Brach and As amployeas and aoonts disclaim any and all responobgdy from or reWta,, to any n,v Its oNaii din Its osv Imagery . 2OM2013 photos proNded by Eade Imaging www.eagleaedal.com Page A -2 23 -52 Exhibit A 6 e E QP ALLEY RESUB 566 PCL 1 7 1J 8 9 10 ~ 0 y. 2 OF 8 Palm Street Parking Lot Parcels on maw„ Page A -4 23 -53 EXHIBIT B DESCRIPTION AND DEPICTION OF EO PROPERTY All that certain real property situated in the County of Orange, State of California, described as follows: Parcel 1 in the City of Newport Beach, County of Orange, State of California, as shown on a Map filed in Book 208, Pages, 4, 5, and 6 inclusive of Parcel Maps, in the office of the County Recorder of said County. PAI S f sxEEr a or a DUPLICATE Resus. Na >E* ONEC PASMeLNO0v.1 J,'J _Pn Mr-r.�EL WZ P M. �y�>. -MMS N9 ACRE6 vey eA'rr -� "aver /N THE GTY CF N0,41 IrT BEAC%1 GRANGE COL!NTY NARCH � it ^r CAL //'ORA/ /A scace r•. zo' MNMnruaWwvdw a.rori. JMromnl J " J m. 9Mry /'pr A "nW Nx ttltt'/Pq �xWJw��arb�«w ra �veHHiOJ roM>r a nrxx"naun uerTrm newer% .r"`..4irrraemrem r., nxmru>b iior w';wineJ !.'AG ✓M' £. F/oOLSEY L.S 4fA7 BASIS OF BfARINBS MONUMENT NOTES w ��� "i nrr°r X'••'d°°�r�e" mr «urrouw o ��>'riAi`e r`�"a non�rar.rwrro. r"1O. r " <i,r'oF eu�anuu Wr "ruin °"rr %w ie"u` r .rnn elc..r. E,a o unFi.ar rer >�ar n�.. RFFERENCf) �YwiseMmJV ranee "rare! -.•Y rrlr�+"F�ec.w: ` NEWPORT BAY yd a�nu ni�> `>J rwrrui resrnrnrmv'.Aar rortvmeuer vscw>: nnn wa<,e mvrY rwruJea q b'' "iJ�n"rM1r. Hb L3 /d YS 1 r ^ri_ PARCEL 1 h SLOCX t: I ¢ '� p' •.;ra., ! ;9 rho. I ? /.:f ,' e' iz ` bm &1YAt r „rivirvw fr: pax senlom ' BAYAW, • rom• .ln. —• r4 amerno:unrm 4 BAY o AVfNUi \R. BALBOA IOANA>RO •J J � �G % '` / "•r /� ro�'� {, li�j ([fNlftPt AVENUE) �� PAI B 7 EXHIBIT C DESCRIPTION OF IMPROVEMENTS [TO BE ADDED AT TIME OF LEASE EXECUTION] PIIB7y EXHIBIT D PERMITTED EXCEPTIONS [TO BE ADDED AT TIME OF LEASE EXECUTION] PAI B A EXHIBIT E CONCEPTUAL DESIGN PLANS [TO BE ADDED AT TIME OF LEASE EXECUTION] PAI M.9 EXHIBIT F INSURANCE REQUIREMENTS Lessee shall procure and maintain for the duration of the Lease insurance against claims for injuries to persons or damages to property which may arise from or in connection with Lessee's operation and use of the Property. The cost of such insurance shall be borne by Lessee. MINIMUM SCOPE AND LIMIT OF INSURANCE Coverage shall be at least as broad as: 1. Commercial General Liability (CGL): Insurance Services Office Form CG 00 01 covering CGL on an "occurrence" basis, including property damage, bodily injury and personal injury with limits no less than $2,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit. 2. Workers' Compensation insurance as required by the State of California, with Statutory Limits, and Employer's Liability Insurance with limits of no less than $1,000,000 per accident for bodily injury or disease (if Lessee has employees). 3. Property insurance against all risks of loss to any tenant improvements or betterments, at full replacement cost with no coinsurance penalty provision. If Lessee maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for the higher limits maintained. Other Insurance Provisions: The policies are to contain, or be endorsed to contain, the following provisions: For General Liability, the City, its officers, officials, employees, and volunteers are to be covered as additional insureds with respect to liability arising out of ownership, maintenance, or use of that part of the premises leased to the Lessee. 2. The Lessee's insurance coverage shall be primary insurance as respects the City, its officers, officials, employees and volunteers. Any insurance or self - insurance maintained by the City, its officers, officials, employees, or volunteers shall be excess of the Lessee's insurance and shall not contribute with it. 3. Each insurance policy required above shall contain, or be endorsed to contain, a waiver of all rights of subrogation against the City 4. Each insurance policy shall endeavor to provide thirty (30) calendar days' notice of cancellation (10 calendar days for non - payment) to the City. 5. The Property insurance shall name the City as Loss Payee as its interests may appear. PIAB] Acceptability of Insurers Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A: VII, unless otherwise acceptable to the City. Deductibles and Self- Insured Retentions Any deductibles or self- insured retentions must be declared to and approved by the City. At the option of the City, either: the Lessee shall obtain coverage to reduce or eliminate such deductibles or self- insured retentions as respects the City, its officers, officials, employees, and volunteers; or the Lessee shall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and related investigations, claim administration, and defense expenses. Notwithstanding the preceding, Lessee may carry deductibles or self- insured retentions of $100,000 without City's approval. Verification of Coverage Lessee shall furnish the City with original certificates and amendatory endorsements or copies of the applicable policy language providing the insurance coverage required above. All certificates and endorsements are to be received and approved by the City before work commences. However, failure to obtain the required documents prior to the work beginning shall not waive the Lessee's obligation to provide them. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements, required by these specifications, at any time. Waiver of Subrogation Lessee hereby grants to City a waiver of any right to subrogation which any insurer of said Lessee may acquire against the City by virtue of the payment of any loss under such insurance. This provision applies regardless of whether or not the City has received a waiver of subrogation endorsement from the insurer. Special Risks or Circumstances City reserves the right to modify these requirements at any time, including limits, based on the nature of the risk, prior experience, insurer, coverage, changes in the cost of living, or other special circumstances. r'Ie3Yo7 EXHIBIT 2 Short Form Memorandum of Option Agreement 12 RECORDING REQUESTED AND WHEN RECORDED RETURN TO: Office of the City Clerk City of Newport Beach 100 Civic Center Drive PO Box 1768 Newport Beach, CA 92658 [Exempt from Recordation Fee — Cal. Govt. Code §§ 6103 & 27383] MEMORANDUM OF OPTION AGREEMENT This Memorandum of _Option Agreement ( "Memorandum ") is dated 2014, and is made between the City of Newport Beach, a California municipal corporation and charter city ( "City ") and ExplorOcean, a California non - profit corporation ( "EO "), concerning the public parking lot located generally between Palm Street and Washington Street from Bay Avenue to Balboa Boulevard on the Balboa Peninsula certain property in the City of Newport Beach that is commonly referred to as the Palm Street Parking Lot ( "Property "). The Property is more particularly described on Exhibit A attached hereto. For good and adequate consideration, City grants EO an option to lease the Property, upon the satisfaction of certain conditions contained in the Option Agreement dated _, 2014, including without limitation provisions prohibiting assignment, without "the express written consent of City, all as more specifically set forth in said Option Agreement, which said Option Agreement is incorporated in this Memorandum by this reference. The Option Agreement's term is approximately seven (7) years, ending on December 31, 2021, unless extended by the parties. This Memorandum is not a complete summary of the Option Agreement. Provisions in this Memorandum shall not be used in interpreting the Option Agreement's provisions. In the event of conflict between this Memorandum and other parts of the Option Agreement, the other parts shall control. Execution hereof constitutes execution of the Option Agreement itself. [Signatures on the next page] PAI M A0 IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of Option Agreement as of the dates written below. CITY City of Newport Beach a California Municipal Corporation Date: Rush N. Hill, II Mayor ATTEST: Date: Leilani I. Brown City Clerk APPROVED AS TO FORM: THE CITY ATTORNEY'S OFFICE Date: 1 r'l q) Aaron C. Harp City Attorney ED ExplorOcean a California non - profit corporation 23 -63 CALI'OR LA. ALL - PURPOSE CERTIFICATE OF ACKNOWLEDGMENT State of California County of Orange On Ocj — 2 n'iiT before me Rrnr Tahmcresi, Notary Public (Borst mater =a and title of the amts) personally appeared I 4mai. s Da U&4 who proved to me on the basis of satisfactory evidence to be the person(a) whose name(e subscribed to the within instrument and acknowledged to me that ey execurted the same in � authorized capacity( -its , and that by ei: signature(s) on the instrument the person{), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. . WITNESS my hand and official Signature ROYA TANMORESI Commiealon • 2080684 = Notary Public - California Orange County (Notary Se M Comm. E Tres Se 16, 2018+ ADDTITONAL OPTIONAL DiFORMATTON DESCRIPTION OF TEE ATTACHED DOC NIENT (Title or desciption of attached detmmem) (Title s description of attached document continued) N=ber of Pages _ Docn neat Date (Additional information) CAPACITY CLAWW BY THE SIGNER • Individual (s) • Corporate Oft Critic) • Partner(s) • Attorney -in -Fad ❑ Tnmteq(s) ❑ Other 2008 Version CAPA v1210.07 800.873 -98fii wwwYataryClasses.tom 1NSTRi7CTIONS FOR COMPLETING THIS FORM Any actnowledgme»t camplered in Cabfornia sent canon verbiage emely as appears above m the notary section or a Jeporme acbmwledgment farm most be pmperry eemaleted and attached m dum dustmen The only ¢candan ti f a doermem ra in he recorded otumde of California In mch instances, any aiterwtnre acivmw/eagment verbiage as may be printed an such a dacunent m long as the verbiage aces not remtire ate notary X do samedung that is dlegnijbr a notary in Califamar i.s. c-mifytng the authorized capacity of the signer). Please chect the dacmtent carefullyfar proper notarial wording and attach this farm'f required • Stma and County information must be the State and County where the document signer(s) personally appeared before the notary public for acmowldgment • Late of notmiaztion must be the date that the signer(s) personally appeared which must also be the same dam the aa'mowledgmem is completed. • Tne notary public must prim his or her name as it appears within his or her commission followed by a comma and than yew title (notary, public). • Punt the names) of document signer(s) who personally appear at the time of norarieGoo. • Indicate the comet singular or plural forms by emssing off incorrect forms (.c. WsheA'aey,— is )are ) at circling the aomct forms. Failure to correctly indicate this iuformantm may lead to rejection of document recording. • The notary seal impression must be elm and photographically mproduable. Impression must nm cover text or lines. if seal impression smpdges, re-seal if a sufficient area permits, otherwise complete a different acknowledgment fond. • Signature of the notary public must match the signamme on file with the once of the county cletl-. Additional infrnmation is not required but could help to ensure this a6mawledgmem is not misused or attached to a di6sent datnurent Indicate title or type of attached document, number of pages and date. v Indicant the capacity claimed by the signer. If the claimed capacity is a eorporate affim indicate the title (I.e. CFA, CFQ, Secretary). • Securely attach this decament m the signed docament 23 -64 EXHIBIT A DESCRIPTION AND DEPICTION OF THE PROPERTY Description of Premises [Note: A metes and bounds legal description of the lease premises shall be drafted and attached to replace this'Exhibit A' prior to lease execution.] Premises shall include portions of the following areas, as shown on the map exhibits: APN 048 - 116 -06 Parcel 1, as shown on Parcel Map PM 117/24 (also referred to as Resub 566), recorded 06/14/1978, excepting the following areas: A. A 5' wide alley easement, dedicated to the public. B. A 2' wide easement for sidewalk and pedestrian purposes, dedicated to the public. C. Two corner cutoffs for Palm Street, dedicated to the public for street purposes. APN 048 - 116 -05 2. Lot 7, Block 7, Balboa Tract, as recorded as MM 4/11, recorded 5/23/1905 APN 048 - 116 -04 Alley 3. Lots 8, 9, 10, and 11, Block 7, Balboa Tract, excepting the following area: A. A Grant of Easement for street and highway purposes over Lot 11, recorded in Official Records as 20020109515, dated 02/08/2002. 4. The Alley between Lots 1 -6 and Lots 7 -11, Block 7, Balboa Tract, as recorded in MM 4/11, recorded 05/23/1905, bound on the north by the prolongation of the northerly line of Lot 7, to the northeast corner of Lot 1 of said Tract, and on the south by the prolongation of the southerly line of Lot 11, to the southeast corner of Lot 6 of said Tract. f�Ie31-1 Exhibit A T J t Y1& - nrm�1M APP. r F14, Ilil S.l y �t - �A.._n lO1J .. liiAYli a Lease Premises &' - � -` Newport B Beach Beach Clsclelmer Every reasonable Mort has been made to assure the acwmry or the data proAdecl however. The CAyW GI$ 0 htawpsn eeadi and As employees and agents ®sdalm any am all responabFlty hom a reletbq to e , any results obtained In Its use. e 0 4,�0 6 mff hnagery: MOD -2013 photos bioYWed by Eagle Feet Imagingw aegleaedal.cum Page A -1 23 -66 Exhibit A Page A -2 23 -67 u 7/ i 1 10, ;i c Exhibit A RESUB 566 PCL 1 / 11�, 84180q 81 F 1 ALLEY 7 \ 8 9 10 r��4' 19� 3P e Palm Street Parking Lot Parcels �'„ N 6Cq.ltlen yq�rnn ]; MI• Page A -4 23 -68