by and between
City ofRedondo Beach,
a chartered municipal corporation
and
Zislis Boutique Hotels, LLC,
a California limited liability company
Dater October 6, 2009
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C09-87
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TABLE OF CONTENTS
1. DEFINITIONS ............................................................................................................................................... - 2 -
2. LEASE OF PREMISES; INITIAL SUBLEASES ....................................................................................9 -
3. TERM .:..................................................................................:...................................................................... 10 -
4. RENT ......................................................................................................:..................................................... 10 -
5. USES ............................................................................................................................................................. 17 -
6. IlVIPROVEMENTS TO THE PREMISES ................................................................................................ 21-
7. SECURITY ..........................................................................................................................................~........ 25 -
8. NEGATION OF WARRANTIES, LESSEE WAIVERS, LITIGATION LIlVIITATIONS AND STIPULATION ............................................................................................................................................ 27 -
9. LESSEE'SOBLIGATION TO MAINTAIN AND REPAIIt ................................................................... 28 -
10. MAINTENANCE AND REPAIR BY LESSOR ................................................................................:....... 29 -
11. SURRENDER OF PREMISES ................................................................................................................... 30 -
12. TITLE AND WA,RRAPTTIES ..................................................................................................................... 31 -
13. ENCUMBRANCE OF LEASEHOLD ....................................................................................................... 32 -
14. INDEMNIFICATION, HOLD FiARMi.ESSAND INSURANCE .......................................................... 38 -
15. ASSIGNMENT AND SUBLETTING ........................................................................................................ 44 -
16. DEFAULT .................................................................................................................................................... 52 -
17. APPRECIATION RENT ............................................................................................................................ 58 -
18. CONDEMNATION ..................................................................................................................................... 60 -
19. DESTRUCTION .......................................................................................................................................... 61 -
20. ABANDONMENT ...................................................................... ......... ............................................ 64 -
21. WAIVER OF BREACH .............................................................................................................................. 64 - 22: COMPLIANCE WITH THE LAW ........................................................................................................... 64 -
23. OPERATIONS ............................................................................................................................................. 65 -
24. PRICE POLICIES .:.......:.........................................:................................................................................... 66 -
25. TAXES .......................................................................................................................................................... 66 -
26. LESSEE'SASSOCIATION ........................................................................................................................ 66 -
27. WASTE ......................................................................................................................................................... 67 -
28. HOLDING OVER ....................................................................................................................................... 67 -
29. OPTIONS TO EXTEND TERM ................................................................................................................ 67 -
30. NONDISCRIlyIINATION .......................................................................................................................... 68 -
31. NOTICES ...............................................................................................................................:..................... 68 -
32. COASTAL COMMISSION PERNIITS .......................:............................................................................. 69 -
33. RESERVATIONS TO LESSOR.. ......... ......... ......... ......... ........ ......... _......... ......:.. .......... 69 -
34. LESSOR'SREVERSIONARY OPTION .................................................................................................. 70 -
35. SUCCESSORS ............................................................................................................................................. - 70 - C09-87
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36. CAPTIONS ................................................................................................................................................... 70 -
37. TIlVIE .................. .................................................................................. ............................................ 70 -
38. CONSTRUCTION ....................................................................................................................................... 70 -
39. SAVINGS CLAUSE .................................................................................................................................... 71-
40. RECORDATION OF MEMORANDUM OF LEASE ............................................................................. 71-
41. ESTOPPEL CERTIFICATE .....................:................................................................................................ 71-
42. AMENDMENTS ......................................................,................................ .................................. .......... 72 -
43. SIGNATURES ..........................................................:.................................................................................. 72 -
44. EXECUTION IN COUNTERPARTS ........................................................................................................ 72 -
45. FORCE MAJEURE ..................................................................................................................................... 73 -
46. RESERVED] ............................................................................................................................................... 73 -
47. ADJUSTMENT OF INSURANCE COVERAGES .................................................................................. 73 -
48. PAYMENTS AS ADDITIONAL RENT .................................................................................................... 73 -
49. NO BROKER ............................................................................................................................................... 74 -
50. AUTHORI' Y ................I' 74 -
51. VENUE ...................:..................................................................................................................................... 74-
52. ASSUMPTION OF RISK ........................................................................................................................... 74 -
53. EXHIBITS .................................................................................................................................................... 75 - EXHIBIT "A" .................................................................... 78 -
EXHIBIT "B" .................:.................................................... 79 -
EXHIBIT "C" ......................................................................... 80 -
EXHIBIT "D" ......................................................................... 85 -
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LEA5E AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into as of the 6~' day of October, 2009, by and between the City of Redondo Beach, a chartered municipal corporation Lessor") and Zislis Boutique Hotels, LLC, a California limited liability company ("Lessee").
RECITALS
A. The State of California has granted to Lessor certain tide and submerged lands which are held by Lessor in trust on condition that Lessor develop, improve and operate said lands in accordance with such trust for the promotion and . accommodation of commerce and navigation the "Tidelands, Grant").
B. The real property which is the subject of this Lease is located in the City of Redondo Beach, California, and more particularly described on Exhibit "A" attached hereto (the "Premises"). The Premises is adjacent to property which is subject to the terms and conditions of the Tidelands Grant.
C. Lessor has developed, improved and is currently operating the area commonly known as Redondo Beach King Harbor, which includes tide and submerged lands and uplands, of which the Premises is a part the "Harbor Area").
D. The Harbor Area was developed and constructed in large part prior to enactment of .California. Environmental Quality Act ("CEQA"). The parties acknowledge, however, that the leasing of parcels in the Harbor Area and the granting of entitlements .for the further development of the Harbor Area, whether done by Lessor, Lessee or others, would be a "project" within the meaning of CEQA and requires appropriate environmental assessment and study under CEQA.
E. Lessee and Lessor now desire to enter into a new lease for the Premises in order to maintain, further develop and improve a portion of the Harbor Area and to provide facilities for the accommodation of the public in a portion of the Harbor Area.
F. Concurrent with or following execution of this Lease, Lessee may sublease the Premises to the Real Estate Sublessee (as defined herein) and Lessee or the Real Estate Sublessee in turn will sublease all or a portion of the premises to the Hotel Operating Company (as defined herein). Pursuant to such subleases, the Real Estate Sublessee and the Hotel Operating Company will agree to be subject to applicable laws, ordinances, Entitlements, regulations, and the terms of this Lease.
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G. The Parties contemplate that up to 100% of the guest rooms in such Hotel may qualify under laws, ordinances, Entitlements, regulations, rules and restrictions. applying to Condominium Hotels.
NOW, THEREFORE, Lessor and Lessee agree as follows:
1. DEFI1~iITIONS
The following are definitions applicable to this Lease:
1.01 Annual Financial Statement: balance. sheet, income and other annual financial statements prepared, reviewed or audited by an independent certified public accountant, reflecting all business transacted on or from the Premises by Lessee and its Sublessees during the preceding calendar year using industry standard accounting practices and methods;
1.02 Applicable Percentage: the percentage applicable to each permitted use separately considered in calculating Percentage Rent. The Applicable Percentage rates for each category of permitted use is set forth in Exhibit "B" attached hereto, subject to adjustment as provided in Paragraph 4.9 below;
1.03 Appreciation Rent: the sum described in Paragraph 4.3 below;
1.04 Audit Charge: Audit costs, including all, reasonable and necessary outside accounting, auditing, bookkeeping and computer fees and expenses, administrative, financial and economic consultant fees, related legal fees, and the reasonable value of the. services provided by Lessor's employees, elected officials, lease administrators and/or auditors and in-house counsel provided that the listing of an item in this paragraph shall not suggest whether or not such item is necessary);
1.05 Average Monthly Room Rate: The total Idotel room or Condominium Unit rental revenue for a given month divided by the average number of occupied rooms excluding House and Complimentary Use;
1.06 Banlu-uptcy Code: applicable federal bankruptcy laws;
1.07 Base Value: the sum of (i) either (A) Eight Million Dollars ($8, 000) 00,upon completion of the Development Program, or (B) such other amount as Lessee and Lessor may otherwise establish by mutual agreement as the costs expended in carrying out the Development Program and (ii) sums invested for Permitted Capital Expenditures and Permitted Renovations.
Notwithstanding the foregoing, for any Condominium Unit, such Condominium Unit's pro rata share of Base Value shall be the purchase price paid by the owner of the Condominium Unit; 2-
r't .:,
1.08 Capital Improvement Fund: an impound account to be created, funded and held by Lessee or its Sublessees of a sum equal to two percent (2%) of Gross Receipts each quarter and which shall be used only for Permitted Capital Expenditures ( this account shall be maintained at a reputable commercial financial institution and Lessee shall provide a monthly statement of the account to the Harbor Director);
1.09 CEQA: California Environmental Quality Act;
1.10 Coastal Commission: California Coastal Commission;
1.11 Commencement Date: October 6, 2009;
1.12 Condominium Hotel: a hotel in which rooms are sold in the manner contemplated by Redondo Beach Ordinance 3013-08, including Sections 10- 811( 2) 5.b}(and 10- 811( 4), 5.b(and subject to all applicable laws, ordinances, Entitlements, regulations, rules and restrictions.
1.13 Condominium Unit: a room in the Hotel if converted. to a Condominium Hotel which (along with appurtenant rights) may be sold to a purchaser subject to all applicable laws, ordinances, Entitlements, regulations, and the terms and restrictions of this Lease;
1.14 CPI Indez: Consumer Price. Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for All Urban Consumers, Los Angeles -Riverside -Orange County, California (all items), or its successor index;
1.15 Deposit: Twenty Six Thousand Dollars ($26,000), payable to Lessor as a security deposit for the Lease;
1.16 Development Program: shall mean the program described in Exhibit "C" attached hereto;
1.17 Entitlements: means all of the land use approvals and permits required for substantial construction of the Improvements, including but not limited to as appropriate, specific plan, precise plan, tract map or parcel map, conditional use permit, variance, site plan, development permit, architectural review, on-site and off-site permits (including but not limited to grading and building permits), compliance with CEQA and Coastal Commission approval related to all of the foregoing;
1.18 Fair Market Value: market value, as defined by the current edition of the Appraisal Standards Board of the Appraisal Foundation, Uniform Standards of Professional Appraisal Practice (Washington, D.C), or its successor;
1.19 First Class: a standard of maintenance and repair at least equal to the standard maintained for similar uses in other publicly-owned marinas and harbor areas in Southern California such as Marina del Rey and Newport Beach, and in any event consistent with the 3-
standards normally observed by operators of similar types of properties seeking to maximize profits from the operation of such properties (e.g. Shade Hotel located in Manhattan Beach, CA);
1.20 Food and Beverage Sales: Gross Receipts from food and beverage service consumed within the Premises;
1.21 Force Majeure: an occurrence beyond the control and without the fault or negligence of the party affected and by which said party is unable to prevent or provide against by exercise of reasonable diligence, including acts of God or the public enemy, expropriation or confiscation of facilities, changes in applicable law, war, legal disputes, rebellion, sabotage, riots, floods, unusually severe weather, fires, explosions, or other catastrophes, strikes or lockouts, or similar occurrences;
1.22 Gross Receipts: the total amount of all revenue including but not Zimited to Food and Beverage Sales and Hotel Sales, from leases of facilities and sales of merchandise and services made in, upon, or from the Premises or Improvements, whether made by Lessee, any and all Sublessees (as defined below), or any licensee, agent, or concessionaire of Lessee or of Sublessees, whether for cash or credit, whether delivered from the Premises or elsewhere, including, without limitation, rentals, fees, licenses, royalties, and any and all other payments of any kind subject to the following:
a) If any guest room is sold as a Condominium Unit, no amount shall be included in Hotel Sales or Gross Receipts with respect to the owner's use of such room for up to thirty (30) days in a calendar year (and any days in excess of that limit shall be valued at the Average Monthly Room Rate pursuant to clause (b) below).
b) If any rooms are provided to any person or entity at (i) no rent, (ii) rent below anarms-length charge, or (iii) rent below 50% of the Average Monthly Room Rate, then Gross Receipts shall include the Average Monthly Room Rate for the month the. room is provided at no rent, rent below an arms-length charge, or rent below 50% of the Average Monthly Room Rate. c) To the extent Lessee or any agent, Sublessee, licensee, or concessionaire of Lessee or Sublessee ( a "Multi-Facility Entity") derives revenue from membership fees or similar fees that permit access to one or more facilities outside the Premises as well as a facility within the Premises, e.g. a membership health club with on and off Premises locations, Lessor may, in Lessor'sreasonable discretion, require a reasonable portion of such revenue to be included in Gross Receipts, regardless of whether such revenues are charged or collected on the Premises or not. Lessee shall make reasonable efforts, including filing and pursuing suit, to cause the Multi-Facility Entity to provide to Lessor such records and other evidence as Lessor may reasonably require to enable Lessor to determine the appropriate proportion to be included in Gross Receipts. The failure of Lessor to require such an allocation in any year shall not be deemed a waiver of Lessor'sright C09-87
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to ', require such an allocation in any other year; similarly, Lessor's determination of the appropriate proportion for one year shall not impair the right of Lessor to determine a different. appropriate proportion for any other year.
d) The following shall not be included in Gross Receipts:
i. Taxes collected from customers. and. paid by Lessee, its agents, Sublessees, concessionaires or licensees;
ii. Income derived from the sale or disposal of capital assets, the sale of which will not diminish the value of the Premises or Improvements; iii. Refundable deposits, unless converted to a sale or nonrefundable deposit;
iv. Tips, gratuities and reasonable service fees paid to employees, however paid (including by credit card), so long as such service fees are paid in cash or separately stated on customer'sbills, paid to employees without deduction (except taxes or similar deductions required by law), and do not replace wages previously paid to any such employees or comparable employees;
v. ' Reimbursements paid to Lessee for to the Lessee's Association defined in Article 26 by its agents, Sublessees, concessionaires or licensees for advertising and publicity, which are not paid in lieu of or reduction of rent and do not otherwise constitute a disguised payment of rent to Lessee where the funds axe at all times segregated from Lessee's other funds and are paid to and spent by the Lessee's Association; and vi., Credit and cash refunds. made on any sale.
vii. Pass through fees charged without markup to customers by service providers who are not related to Lessee, or its Sublease for occasional services provided at the Premises (such as temporary equipment rentals, clergy, and musicians hired for events);
viii. Rent or license fees (such as that paid by the Hotel Operating Company) ifthe revenue of the payer is already included in Gross Receipts.
1.23 Harbor Enterprise: As defined as "Harbor" under Redondo Beach Municipal Code section 12-081.or as amended from time, to time, and as depicted in Redondo Beach Municipal Code section 10- 2512; . 2.
1.24 Hazardous Substance: any substance, the presence of which on the Premises is i) potentially injurious to the public health, safety or welfare, the environment on the Premises, or (ii) regulated or monitored by any governmental authority, or (iii) a potential basis for liability of Lessor to any governmental agency or third party, or (iv) a potential basis for-cancellation of any insurance policy' covering the Premises, or (v) petroleum and petroleum products and fractions thereof;
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1.25 Hotel: the Hotel to be established and operated on the Premises subject to applicable laws, ordinances, Entitlements, regulations, and the terms and conditions of this Lease;
1.26 Hotel Operating Company: that company that will own and operate a hotel and lounge business at the Premises subject to applicable terms of this Lease;
1.27 Hotel Sales: All Gross Receipts other than. those included in Food and Beverage Sales, including parking receipts ( net of any amount retained by any independent valet company), and that portion of banquet receipts that is not Food and Beverage Sales.
1.28 House ,and Complimentary Use: The use of the Hotel rooms and/or Condominium Units at no rent, reduced rent, or rent below anarms-length charge;
1.29 Improvements: all buildings, structures, installations and other improvements on the Premises, including without limitation the improvements described in the Development Program, and any replacements, reconstructions or restorations thereof during the Lease Term, except removable trade fixtures owned or installed by or on behalf of Lessee or its Sublessees;
1.30 Initial Minimum Rental Period: the period beginning on the Rent Commencement Date 'sand ending on the first December 31 which is more than three years after such date;
1.31 Initial Percentage Rental Adjustment Date: the first January 1 which is at least twenty (20) years after the Commencement Date;
1.32 Institutional Lender: any person being granted a purchase money mortgage, any insurance company, savings and loan association, commercial bank, mutual savings bank, pension fund, welfare fund, retirement fund, endowment fund, fraternal organization, college, university, commercial lender which regularly makes first mortgage loans, or charitable organization or any combination thereof or entity controlled thereby which has net assets of not less than One Hundred Million Dollars ($100, 00); 00,
1.33 Lease Term: term of this Lease which shall commence on the Commencement Date and end on the fifty-fifth (55~') anniversary of the Rent Commencement Date; or on such later date to which the Lease Term is extended pursuant to Section 29.1;
1.34 Lender: any Premises mortgage lender, its successors and assigns, including any Institutional Lender;
1.35 Lessee: Zislis Boutique Hotels, LLC, a California limited liability company, its permitted successors and assigns;
1.36 Lessor: The City of Redondo Beach, a chartered municipal corporation; C09-87
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1.37 Lessor Parties: Lessor, its officers, elected officials, agents, attorneys or employees;
1.38 Minimum Monthly Rental: the sum equal to Thirteen Thousand Dollars 13,000), subject to adjustment as set forth herein;
1.39 Monthly Financial Statement: a statement in the form reasonably prescribed by Lessor and certified as correct by Lessee, which sets forth the Gross Receipts of each separate business of Lessee and,_its Sublessees operating on the Premises for the month just concluded;
1.40 Net Financing Proceeds: for any loan described in Section 17.2, the principal amount of the loan reduced by the sum of the following: (i) the Base Value; (ii) any prior Net Financing Proceeds as to which Lessor was paid Appreciation Rent and (iii) any prior Net Sale Proceeds as to which Lessor was paid Appreciation Rent;
1.41 Net Sale Proceeds: for any assignment described in Section 17.3, the current cash value of all consideration paid or to be paid for the conveyance of the leasehold interest (net of transaction and closing costs}, reduced by the greater of (a) the Base Value; or (b) any prior Net Financing and Net Sales Proceeds as to which the Lessor was paid Appreciation Rent;
1.42 Notice of Exercise of Right of First Offer: Lessor's written notice to Lessee of its decision to exercise a right of first offer following receipt ofNotice of Intention to Offer from Lessee;
1.43 Notice of Intention to Offer: Lessee's notice to Lessor of its intention to sell or assign Lessee's leasehold interest and, which shall include in the notice reasonably detailed terms, including purchase price, financing requirements, closing requirements and material terms and conditions upon which Lessee will sell or assign its leasehold interest;.
1.44 Percentage Rental: the sums described in Paragraph 4.2 below;
1.45 Percentage Rental Adjustment Date: the Initial Percentage Rental Adjustment Date, and each ten (10) year anniversary following that date;
1.46 Permit Holders: Lessee, Sublessees, their respective successors and assigns, and any other holder of the possessory interest in the development authorized by the Coastal Commission Permit;
1.47 Permitted Capital Expenditures: capital expenditures benefiting the Premises which are approved in advance by the Harbor Director or his/her successor as defined by the City of Redondo Beach Municipal Code Title 12 (as the same may be amended from-time to time), which approval shall be made in accordance with the then current policy within the Harbor Area, shall be commercially reasonable and shall not be unreasonably withheld,. conditioned or delayed;
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1.48 Permitted Renovations: renovations benefiting the Premises which are approved in advance by the Lessor'sHarbor Director or his/her successor as defined by the City of Redondo Beach Municipal Code Title 12 (as the same may be amended from time to time), which approval shall be made in accordance with the then current policy within the Harbor Area, shall be commercially reasonable and shall not be unreasonably withheld, conditioned, or delayed, and which shall maintain the Improvements in first class condition and repair;
1.49 Plans: plans, specifications, or other designs;
1.50 Plan Revisions: any revisions, modifications, or corrections to Plans proposed by Lessee and requested by Lessor;
1.51 Premises: those parcels of land legally described in Exhibit "A" attached hereto;
1.52 Real Estate Sublessee: that person or company (or those persons or companies), if any, to which Lessee at its option may lease part or all of the Premises (on or prior to the Rent Commencement Date) and which will hold any such interests passively as lessors, including any permitted assignees of such interests;
1.53 Records: complete and accurate books, records and accounts of Gross Receipts and all financial transactions for all. business and commercial activities of any kind conducted on or connected with the Premises, including all transactions of Lessee and its Sublessees. Records must be supported by source documents such as sales .slips, cash register tapes, computerized sales records, purchase invoices, or other pertinent documents, including contracts and agreements related to the financial transactions;
1.54 Renovation Fund: an impound account to be created, funded and held by or on behalf of Lessee of a sum equal to two percent (2%) of Gross Receipts each quarter and which shall be used only for Permitted Renovations (this account shall be maintained at reputable commercial financial institutions and Lessee shall provide a monthly statement of the account to Harbor Director);
1.55 Rent Commencement Date: the sooner of (i) thirty (30) months after all necessary Entitlements for construction of the Development Program are obtained, (ii) the completion of construction of the Development Program, or (iii) the first month any Gross Receipts are earned;
1.57 Restoration: the reasonable costs and expenses of restoring the Premises to the surrender condition as specified in Paragraph 7.c); 1(
1.58 Sublessees: the Hotel Operating Company, the Real Estate Sublessee, and all businesses and individuals occupying or using any portion of the Improvements on the Premises for purposes of conducting business, whether pursuant to a license, a sublease, or an occupancy - agreement of any kind. The term Sublessees shall not include residential occupants or users of hotel rooms, meeting rooms and other public spaces for group meetings and events; C09-$7
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1.59 Subsequent Minimum Rental Period: the three (3) year period beginning on a January 1St at the end of (a) the Initial Minimum Rental Period; or (b) any Subsequent Minimum Rental Period;
1.60 Transfer: any sale, transfer, conversion, redemption or encumbrance of any voting stock or ownership interest in Lessee (but not the initial issuance of any capital interest prior to the Rent Commencement Date) which either separately or in the aggregate with other such sales, transfers, conversions, redemptions, or encumbrances after the effective date of this Lease or since the last.. assignment of this Lease, whichever event is the last to occur, and results in a change in control of Lessee;
1.61 Transient Occupancy Tazes: taxes to be charged pursuant to Chapter 2, Title 8 of the Redondo Beach Municipal Code or its amendment pertaining to the collection of Transient Occupancy Tax.
2. LEASE OF PREMISES; INITIAL SUBLEASES
2.1 The Lease. Lessor hereby leases the Premises to Lessee, and Lessee leases the Premises from Lessor; for the period of time and upon the terms and conditions set forth herein.
This Lease and all rights and privileges granted Lessee in the Premises are subject to all covenants, conditions; restrictions and exceptions of record or apparent, including those which are set out in the Tidelands Grant referred. to in Recital A above, and the City Charter of Lessor, as originally adopted and thereafter amended, or as may hereafter be amended from time to time, and all applicable laws, ordinances, codes and regulations.
2.2 Initial Subleases.
a) Concurrent with or following execution of this Lease, and subject to Section 15. a)1( below, Lessee may sublease the Premises to the initial Real .Estate Sublessee. Pursuant to such sublease, such Real Estate Sublessee shall agree to be bound by all terms of this Lease. b) Concurrent with or following the execution of this Lease, and subject to Section
15. b) 1(below, the Real Estate Sublessee may sublease a portion of the Premises to the Hotel Operating Company, 'to be operated as a hotel, restaurant, and lounge business in a manner consistent with the terms of this Lease. The Hotel Operating Company shall agree to be bound by applicable laws, ordinances, Entitlements, regulations, and the terms of this Lease. c) Subject to the terms of Article 15, the Real Estate Sublessee may assign and transfer all or fractional interests in its rights regarding the Premises.
2.3 Condominium Sales. Subject to the terms of Article 15, Lessee or the Real Estate Sublessee may sell and transfer Condominium Units in the Hotel.
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3. TERM
The term of this Lease shall be the Lease Term, subject to prior termination as herein provided.
4. RENT
In consideration for the leasing of the Premises to Lessee by Lessor and Lessor's obligations under this Lease, Lessee shall pay Lessor rent as follows:
4.1 Minimum Montlily Rental
During the Initial Minimum Rental Period, and each Subsequent Minimum Rental Period Lessee agrees to pay the Minimum Monthly Rental to Lessor in advance on or before. the first day of each calendar month. The Minimum Monthly Rental is subject to adjustment as provided in this Lease.
4.2 Percentage Rental
a) For each calendar year during the Lease Term, Lessee shall also pay to Lessor, at the times and in the manner hereinafter specified, Percentage Rental to the extent that the aggregate amount of Percentage Rental calculated under this paragraph for such calendar year exceeds the Minimum Monthly Rental paid by Lessee for such calendar year. b) The Percentage Rental attributable to each category of sales of the Premises that generates Gross Receipts (i.e., Food and Beverage Sales and Hotel Sales) shall be calculated by multiplying the Gross Receipts for such use derived on, in, or from business activities conducted on the Premises or Improvements by the Applicable Percentage for the use generating such Gross Receipts; provided, however, that if a Sublessee; licensee, agent, or concessionaire of Lessee generates Gross Receipts, the Percentage Rental with respect to the portion of the Premises occupied by that Sublessee, licensee, agent, or concessionaire shall be the greater of (i) the product of Sublessee's Gross Receipts times the Applicable Percentage for the use that generated the Gross Receipts or (ii) the product of Lessee's Gross Receipts with respect to that Sublessee (i.e., the rent paid by the Sublessee) times the Applicable Percentage Rent for such use.
c) If Gross Receipts for the first full calendar year after the Rent Commencement Date total less than Five Million Dollars ($5, 000), 00,Lessee at its option may defer payment of the Percentage Rent for such calendar year and pay such deferred amount, plus - interest at a rate of eight percent (8%) per annum in eight quarterly installments beginning twelve (12) months after the end of such. year.
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4.3 Appreciation Rent
In addition to the Minimum Monthly .Rental and Percentage Rental specified above, Lessee shall pay to Lessor such amounts as may be calculated and determined to be due as and for Appreciation Rent pursuant to, at the times and in the manner specified in Article 17 below. Lender shall not pay Appreciation Rent at the time of foreclosure; however Lender shall pay Appreciation Rent in the event. of a Transfer where, and on the amount that, the sale price paid to Lender (net of transaction and closing costs) from the subsequent buyer exceeds the Base Value to the extent provided in Article 17.
4.4 Penalties, Late Charges, Interest and Place ofPayment If Lessee fails to make any payment to Lessor of any sum of money when due under this Lease, and such delinquency continues for ten (10) days following the due date thereof, there shall be imposed a late charge equal to four percent (4%) of the payment, which shall be added to the amount due and the total sum shall become immediately due and payable to Lessor. An interest charge equal to ten percent (10%) per year or the maximum rate allowed by law, whichever rate is less, of the total sum due and unpaid, (including the principal amount, late charges and any interest previously assessed), shall be added for each month, or portion thereof, that such amount remains unpaid but the total interest charges shall not exceed the maximum amount permitted by law. All payments to Lessor required under this Lease shall be made at the office ofthe City Treasurer of Lessor.
4.5 Maintenance of Records
a) Lessee and its Sublesssees shall at all times keep Records. b) All retail sales and charge Records shall be recorded by means of cash registers, point- saleof--computers or other comparable devices which display to the customer the amount of the transaction and automatically issue a sales receipt. The registers shall be equipped with devices that customarily lock in sales totals and other transaction records, or with counters that cannot be reset and. that record transaction numbers and sales details. Totals. registered shall be read and recorded at the beginning and end of each day. If point- saleof--computers are used, the software must not permit modification of transactions once they are recorded. Back-up copies of all such data, records and reports must be made at least weekly in acomputer-readable medium and stored off-site.
c} In the event of admission charges or fees, Lessee shall use a system, e.g. serially numbered tickets, for each such admission or fee that shall enable Lessee to keep an adequate and accurate record of said admissions. .
d) Lessee and its Sublessees shall keep all of their respective Records related to . this Lease at one location within the County of Los Angeles. Lessor may examine and audit the Records at any and all reasonable business times subject to reasonable notice. Lessor may disclose publicly all information, data and documents made available to Lessor in connection with the exercise of its right to examine and audit such Records, subject to claim of C09-87
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confidentiality under applicable law. All Records, including any sales tax reports that Lessee and its Sublessees may be required to furnish to any governmental agency, shall be open to the inspection of and copying (at Lessor's expense) by Lessor, Lessor's auditor, or other authorized representative or agent of Lessor at all reasonable times during business hours.
4.6 Monthly, and Annual Statements by Lessee, Verification ofRecords, Computation, Payment and Correction ofAdditional Percentage Rental a) Within thirty (30) days after the end of each calendar month during the Lease Term, Lessee shall furnish Lessor with the Monthy Financial Statement. Each+ quarter, concurrently with delivery of the applicable Monthly Financial Statements for March, June, September, and December, Lessee shall pay Lessor an amount equal to the excess, if any, of the cumulative Percentage Rental due, for the calendar year, as determined through the end of such quarter over the amounts previously paid as Minimum Monthly Rent and as Percentage Rent for such calendar year.
b) Within one hundred eighty (180) calendar days after the end of each calendar year during the Lease Term, Lessee (and its Sublessees) shall submit to Lessor an Annual Financial Statement. Lessee shall attest that such Annual Financial Statement is an accurate representation of the Records of Lessee (and of such Sublessees) as reported for income tax purposes.
c) Concurrently with the Annual Financial Statement, Lessee shall submit to Lessor a statement, certified as to its accuracy by Lessee, classifying the total Gross Receipts from the Premises for the calendar year according to the separate categories of business or permitted use established for Percentage Rental purposes. Within each business category or permitted use, Lessee shall separately identify each source of Gross Receipts by business name including Lessee and its Sublessees conducting any business activities on the Premises), or other appropriate identification, and specifying the exact amount of Gross Receipts derived from that source during the calendar year. The statement shall also specify all amounts received by Lessee from its Sublessees, including a separate specification of all amounts paid as deposits, fees, rents, common area charges, monetary equivalents, pass through rents or other consideration with a monetary equivalent.
d) If the Annual Financial Statement for a calendar year discloses that the Percentage Rental on the Gross Receipts from the Premises for such calendar year exceeds -the total amount of Minimum Monthly and Percentage Rentals paid by Lessee during such calendar year, Lessee shall pay the amount of the deficiency in additional Percentage Rental to Lessor concurrently with the submission of the Annual Financial Statement. If the Annual Financial Statement discloses an overpayment of Percentage Rental for the preceding calendar year, the amount of such overpayment shall be retained by Lessor, bear no interest, and be credited against future rent under this Lease as and when rent becomes payable to Lessor. e) Lessor may audit any Monthly Financial Statement or Annual Financial Statement at any time, and Lessee and its Sublessees shall provide access to all its books and records as provided herein. If any audit conducted by Lessor discloses that the Gross Receipts C09-87
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reported by Lessee for any calendar quarter was understated by five percent (5%) or more or that the Gross Receipts reported by Lessor for any calendar year was understated by three percent 3%) or more, Lessee shall promptly pay the Audit Charge in addition to any amounts due as rent; otherwise Lessor shall bear all costs of such audit. Lessor's billings for the Audit Charge shall be sufficiently detailed so that Lessee may determine the fees for the various participants in the audit for whom Lessee is required to pay. Prior to Lessee's obligation to pay any Audit Charge, Lessor shall have provided Lessee with the audit which is the basis for such Audit Charge, access to documents. supporting such audit, and a reasonable opportunity to review and discuss the audit with Lessor and the auditor.
4.7 Acceptance Not Waiver; Retention ofRecords
a) Lessor's acceptance of any money paid by Lessee under this Lease, whether shown by any statement furnished by Lessee or otherwise specified in this .Lease, shall not constitute an admission of the accuracy or the sufficiency of the amount of such payment.
Lessor may, at any time within five (5) years after the receipt of any such payment, question the sufficiency of the amount thereof and/or the accuracy of any underlying statement furnished by Lessee.
b) Lessee shall retain, for five (5) years after submission to Lessor of any such statement, all of Lessee's Records. relating to the Gross Receipts shown by any such statement, and shall make them available to Lessor for examination to the extent provided herein during that period. Lessee shall require that all its Sublessees keep, maintain and retain Records of their business activities conducted on the Premises for such five (5) year period, which Records shall be made available to Lessor, Lessor's auditor, or other authorized representative or agent of Lessor for inspection and copying (at Lessor'sexpense) as provided herein. Lessor'srequest for access to Sublessee'srecords may be made directly by Lessor to the Sublessee, but Lessor shall give Lessee advance or simultaneous notice thereof.
c) Lessee shall also furnish, or require its Sublessees to furnish, all information reasonably requested by Lessor relating to the costs, expenses, earnings and profits of Lessee and/or its Sublessees related in any way to operations conducted on or connected with the Premises.
4.8 Adjustment ofMinimum Monthly Rental
The Minimum Monthly Rental shall be adjusted as follows:
a) On or before the July 1st immediately following the end of the Initial Minimum Rental Period, the monthly average of the combined Minimum Monthly Rentals and Percentage Rentals payable during the Subsequent Minimum Rental Period shall be calculated.
The Minimum Monthly Rental to be paid in equal monthly installments for the Subsequent .
Minimum Rental Period shall be an amount equal to the greater of (i) seventy five percent (75%) of such average total monthly rental paid during the prior three (3) year period or (ii) the Minimum Monthly Rental paid by Lessee during the Initial Minimum Rental Period adjusted by C09-87
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the increase, if any, in the CPI Index as of the April 1st immediately preceding such adjustment compared to the index as of the Commencement Date.
b) At the expiration of each succeeding Subsequent Minimum Rental Period, the Minimum Monthly Rental shall again be subject to adjustment in the manner provided above, except that the average total rentals for purposes of adjustment of the Minimum Monthly Rental under clause (a) shall be the rentals paid during the immediately preceding three (3) year period, and the adjusted rent shall in no event be less than the Minimum Monthly Rental paid by Lessee during the previous Subsequent Minimum Rental Period.
c) The first Minimum Monthly Rental payment made after the calculation the Minimum Monthly Rental for any Subsequent Minimum Rental Period shall retroactively bring current Minimum Monthly Rental payments. The calculated Minimum Monthly Rental shall be effective for the duration of the current Subsequent Minimum Rental Period.
4.9 Adjustment and Renegotiation ofPercentage Rental
On the Initial Percentage Rental Adjustment Date and each Percentage Rental Adjustment Date thereafter, Lessor and Lessee agree to renegotiate an adjustment in the Percentage Rental provided for above for purposes of maintaining the overall commercial reasonableness of the economics of the Lease, taking into consideration both the interests of Lessor and Lessee provided that the percentage rate increase for any category of sales shall not increase or decrease by more than one (1) percentage point (for example from 5% to 6%) on any such date. Such renegotiation shall be conducted in accordance with the following procedure:
a) On or before any October 1, but no earlier than August 1, that immediately precedes a Percentage Rental Adjustment Date, Lessee or Lessor shall submit to the other party in writing its proposed adjustment, if any, in the applicable Percentage Rental rates. Within sixty 60) days after receipt of such written proposal, the party receiving the proposed adjustment shall accept, reject or counter such proposal. If the receiving party fails to accept, reject or counter the proposal within the sixty (60) day period, the proposing party may send a second notice stating that a failure to respond to the proposal within an additional thirty (30) days will be deemed approval. The failure of the party to respond to the second notice within such time shall be deemed an approval of the written proposal. Except as to a deemed approval pursuant to the preceding sentence, any response must be in writing. After receipt of the response, Lessor and Lessee shall enter into good faith negotiations to agree upon Percentage Rental. b) In the event that the parties do not reach an agreement on the amount of increase or decrease, if any, of the Percentage Rental rates on or before the Percentage Rental Adjustment Date, the adjustment of the Percentage Rental rates for the Subsequent Rental Period next succeeding shall be determined by arbitration as hereinafter set forth.
ARBITRATION OF PERCENTAGE RENTAL RENEGOTIATION DISPUTES i) On or before the March lst immediately following the Percentage Rental Adjustment Date, Lessor and Lessee shall jointly appoint a single neutral arbitrator to a
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determine the Percentage Rental rates to be charged by Lessor and paid by Lessee for the uses, businesses, activities and operations conducted by Lessee and its Sublessees on the Premises.
T'he fees of such arbitrator shall be divided equally between the parties. Ifthe parties are unable to agree on one arbitrator before the March ls` identified above, on or before ten days later, each party shall appoint one arbitrator and the two arbitrators together shall then determine the Percentage Rental rates to be paid by Lessee for the uses, businesses, activities, and operations conducted by Lessee and its Sublessees upon the Premises. Each party shall pay the fees of the arbitrator appointed by it.
ii) If the two (2) arbitrators so appointed are unable to agree on all Percentage Rental rates for the uses and operations conducted by Lessee and its Sublessees on the Premises on or before the June 1S` immediately following the Percentage Rental Adjustment Date, then they shall, in writing, immediately appoint a third arbitrator and the third arbitrator so appointed shall determine the Percentage Rental rates in the manner provided in subparagraph iii) of this paragraph (b), for the uses, businesses, activities and operations conducted by Lessee and its Sublessees on the Premises on or .before the July 31S` immediately following the Percentage Rental Adjustment Date. The fees of the third arbitrator shall be divided equally between the parties.
iii) If the Percentage Rental rates are to be determined by the third arbitrator so appointed, the arbitrators appointed by the separate parties shall, within seven (7) days following the acceptance of the appointment of the third arbitrator, jointly prepare a statement of the disputed Percentage Rental rates to be determined and the final offer by each party with respect to each percentage rental rate in dispute and shall deliver same to the third arbitrator within such seven (7) day period. The third arbitrator, after conducting such hearing as he may in his sole discretion determine to be necessary or appropriate, but which shall include an opportunity for each party to be reasonably -heard on the issues (including telephonically) shall determine the Percentage Rental rates in dispute, which determination shall be made on or before the July 31S` immediately following the Percentage Rental Adjustment Date. In making such determination, the third arbitrator may only select the final offer of either Lessee or Lessor as to each category of Percentage Rental rate in dispute, and no other alternative or compromise Percentage Rental rate may be selected, unless the parties otherwise agree in writing that such a determination shall be within the power and authority of the arbitrator to make. iv) The arbitrator or arbitrators shall determine the Percentage Rental rates, assuming that Lessee and its Sublessees would rent the Premises to use for business uses similar to those of Lessee and Sublessees in a commercially reasonable and cost-effective way with the goal of maximizing the rate of return from those operations for both Lessor and Lessee and taking into consideration the proper performance of the obligations of Lessor and Lessee under the Lease butwithout reference. to the particular financial results and intangible business value of the Lessee and Sublessee. Said arbitrator or arbitrators shall consider only the Percentage Rental rates to be paid until the next Percentage Rental Adjustment Date during the Lease Term and shall not take into account any past occurrences, breaches, defaults or claims of Lessor or Lessee, one against the other. The arbitrator or arbitrators shall reduce the decision to writing and shall deliver to each of the parties a statement of that decision, specifying each of the Percentage Rental. rates determined by the arbitrator(s). The arbitrator(s) so appointed pursuant 15-
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c) The determination of adjustment, if any, in Percentage Rental rates pursuant to this Article shall be final and conclusive and shall apply as of the first day of the applicable Percentage Rental Adjustment Date (e.g. January 1St). Lessee agrees to pay Percentage Rental at the prior rates until the new Percentage Rental rates are determined, at which time the parties will make a retroactive cash adjustment in the amount paid to reflect the new Percentage Rental rates.
d) At each Percentage Rental Adjustment Date, the Percentage Rental rates shall again be subject to adjustment in the manner hereinabove provided.
4.10 Demolition Credit
Lessor shall provide to Lessee a credit without interest against Percentage Rental equal to the cost of demolition of existing structures on the Premises. The credit shall be used to offset Percentage Rental payments until the total amount of Percentage Rental offset is equal to the sum of such costs. No existing structures on the Premises shall be demolished; and no shoring shall be undertaken, without Lessor's prior written consent, and without obtaining all necessary permits and approvals. The demolition of existing structures, and any such shoring, shall be performed for a fixed price which the Lessor shall approve in writing prior to the commencement of such demolition or such shoring.
4.11 Lessee'sCovenant
Lessee shall use commercially reasonable efforts to maximize profits derived from all activities and uses conducted or permitted to be conducted on the Premises.
4.12 Negation ofPartnership
Nothing in this Lease, including the provisions relating to Appreciation Rent, Percentage Rent and standards of conduct related to Lessee's employees, shall be construed to render Lessor and Lessee in any way or for any purpose a partner, joint venturer, fiduciary or associate in any relationship with each other. The relationship of Lessor and Lessee is landlord and tenant, and this Lease shall not be construed to authorize either party to act as agent for the other, except as otherwise expressly provided in this Lease.
4.13 Deduction or Offset
a) All payments of rent of any kind under this Lease shall be made without deduction or offset, and without abatement except as specifically provided in this Lease.
5. USES
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5.1 Permitted Uses.
Subject to Sections 5.2 and 5.3 and Exhibit "D", Lessee and its Sublessees shall use the Premises as a
luxury boutique hotel, restaurant, lounge and facility for meetings and events.
5.2 Condominium Units.
a) The Hotel is subject to compliance with all applicable federal, state and local laws, rules, ordinances, orders and regulations in effect from time to time, including but not limited to those promulgated by the California Coastal Commission and those set forth in the Redondo Beach Municipal Code. For example, Lessee acknowledges that pursuant to Coastal Commission rules and the Redondo Beach Municipal Code, the number of guest rooms in the Hotel that may be used during any portion of the Lease Term as Condominium Units individually owned hotel unit) is subject to restriction. Further, each individually owned hotel unit, to the extent allowable, is subject to further restrictions relating to the number of days (per calendar year, seasonally, and consecutively) its owner (no matter how many owners there are) may use any such unit.
b) Transient Occupancy Taxes and other taxes shall apply to use of Condominium Units to the extent provided in applicable laws and ordinances as in effect from time to time, including Chapter 2, Title 8 of the Redondo Beach Municipal Code. c) Financing of any such Condominium Unit shall be subject to the terms of Paragraph
13.3. 5.3 Prohibited Uses
a) Lessee shall not use, or permit the Premises or any part thereof to be used, for any purpose or purposes, other than the purposes set forth in Section 5.1 and 5.2. Except as otherwise set forth in subparagraph (b) below, the permitted uses for the Premises are nonexclusive to Lessee as to the Harbor Area and Lessor reserves the right to conduct or to permit other lessees to conduct or permit the same or similar uses on property leased from Lessor in the Harbor Area. Notwithstanding any provision contained in this Lease to the contrary, no portion of the Premises shall be used for any purpose that will interfere with commerce, navigation or fishery, or be inconsistent with any trusts under which the Premises are now or may hereafter be held by Lessor.
b) During the first two (2) years following the Rent Commencement Date, Lessor agrees not to enter into a lease with any new developer or operator of a hotel containing 100 or fewer rooms within the Harbor Enterprise.
5.4 Other Uses
Lessee may, with Lessor's prior written consent which consent shall not be unreasonably withheld, conditioned or delayed, use the Premises for any other lawful purposes in C09-87
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addition to or in place of those enumerated above; provided, however, that prior to the commencement of such use by Lessee, the parties shall have agreed in writing upon a Percentage Rental rate to be applied to such use, which agreement shall be in the form of an amendment to this Lease, duly executed by the parties.
5.5 Use of Tidelands
If at any time during the Lease Term, or any extension thereof, the tenancy permitted hereunder, without a default by Lessee, is or becomes inconsistent with the trust under which the Premises or any portion thereof are held by Lessor pursuant to the Tidelands Grant from the State of California, as determined by a court of competent jurisdiction, Lessor may terminate this Lease upon giving twelve (12) months written notice to Lessee of the details of the inconsistency and the basis therefor. If such inconsistency affects only a portion of the Premises, Lessor shall give Lessee notice of such inconsistency and Lessee shall have a reasonable time under the circumstances to turn that portion ofthe Premises into a consistent use; provided that if Lessee does not do so, this Lease may be terminated upon such written notice only as to the portion of the Premises so affected and the Minimum Monthly Rental set forth above shall be abated in the proportion which Percentage Rental applicable to the portion of the Premises so affected payable hereunder for the full twelve (12) month period immediately preceding the month in which such notice is given bears to the total Percentage Rental payable hereunder for such twelve (12) month period. Upon such termination, in whole or in part, Lessee shall be entitled to the Fair Market Value of the Improvements constructed by Lessee on the Premises, or the portion thereof as to which the Lease is terminated, assuming for the purpose of such value said Improvements were capable of being utilized on the Premises for the uses permitted under this Article 5 prior to their becoming inconsistent with the trust and, in addition, Lessee shall be entitled to such amount of damages, if any, as may be allowed by the law then in force. The parties intend that such damages would include reasonable compensation for amounts actually invested by Lessee in intangibles and general business development to the extent not included in Improvements under the preceding sentence, provided that, the amount of any such additional compensation shall, in no event, exceed thirty percent (30%) of the Fair Market Value of the improvements. The Fair Market Value of such .Improvements and the method of payment therefore, including the source of funds for such payment, shall be determined in accordance with Paragraph 5.6 below; provided, however, that such inconsistency shall not be taken into consideration in determining the Fair Market Value of such Improvements. Except as provided in this Article 5, neither Lessee nor its Sublessees, nor any other person claiming under or through Lessee, shall have any claim against Lessor for damages, whether consequential, incidental or compensatory, arising from a termination of this Lease as to all or any portion of the Premises under this Paragraph 5.5.
5.6 Valuation of Improvements Upon Termination for Inconsistency with Tidelands Grant
The parties shall agree in .writing on the amount to be paid for the buildings, structures, installations, and other Improvements constructed by Lessee if, pursuant to Section
5.5, they are able to do so. If within ninety (90) days after the date on which Lessee receives C09-87
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notice from Lessor of Lessor's decision to terminate this Lease as a result of tidelands inconsistency, or portion thereof, the parties are unable to agree on the amount to be paid, then the dispute shall be determined by arbitration as hereinafter set forth.
ARBITRATION OF VALUATION DISPUTES
a) The arbitration procedure for determination of valuation disputes between Lessor and Lessee following a termination of this Lease pursuant to Paragraph 5.5, above, shall be the same procedure specified for resolution of Percentage Rental renegotiation disputes set forth in Paragraph 4.9 above, except that the period as provided above within which the parties are to jointly appoint a single neutral arbitrator, shall be thirty (30) days commencing to run from the date on which Lessee receives notice from Lessor of its decision to terminate this .Lease, or portion thereof. Further, the arbitrator(s) shall determine the Fair Market Value of the buildings, structures, installations and other Improvements constructed by Lessee, rather than the Percentage Rental rates.
b) The amount owing to Lessee shall be paid by Lessor in equal monthly installments commencing on the first (lst) day of the fifth (5th) month after termination of this Lease, or portion thereof, but in all events shall be paid in full before expiration of the term of any Lender'smortgage loan. Interest shall accrue on said amount for the benefit of Lessee at the rate often percent (10%) per annum.
NOTICE: BY INITIALING IN .THE SPACE BELOW,
YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN
THE KARBITRATION OF VALUATION DISPUTES"
PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR BY JURY TRIAL. BY
INITIALING IN THE. SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, UNLESS THOSE
RIGHTS ARE SPECIFICALLY INCLUDED IN THE
ARBITRATION OF VALUATION DISPUTES"
PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA . CODE OF CIVIL PROCEDURE.
YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.
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WE HAVE READ AND UNDERSTAND THE
FOREGOING AND AGREE TO SUBMIT .DISPUTES
ARISING OUT OF THE MATTERS .INCLUDED IN
THE "ARBITRATION OF PERCENTAGE RENTAL
RENEGOTIATION DISPUTES"' PROVISION TO
NEUTRAL ARBITRATION.
Lessor'sInitials Lease Initials
6. IMPROVEMENTS TO THE PREMISES
6.1 Construction of Leasehold Improvements
a) As a further and material part of the consideration for execution of this Lease, Lessee shall, at its sole cost and expense, construct and install (or cause its Sublessees to construct and install) Improvements on the Premises in compliance with the Development Program.
b) Lessee shall complete the Development Program within forty two (42) months following the Commencement Date or, if sooner, within thirty (30) months of the later of the date Lessee receives its (i) permit from the Coastal Commission for the Development Program and (ii) its building permits from the City ofRedondo Beach for the same. Lessee covenants and agrees to make reasonable efforts to obtain (or cause its Sublessees to obtain) all necessary permits and other Entitlements relating to the Development Program as soon as possible, but in no event later than eighteen (18) months following the Commencement Date.
Any failure by Lessee to obtain permits and to complete the Development Program according to this timetable, iffor reasons within its reasonable control, shall constitute a breach of this Lease; upon written notice by Lessor of such a breach, Lessee shall have twenty (20) days to begin to cure the breach, and ninety (90) days to complete the cure. If Lessee fails to cure such breach, the Term of this Lease shall be automatically amended to expire at the end of such cure period, but Lessee shall have no other remedies. The periods described in this paragraph (b) shall be extended to the extent of any delays that may result from any legal challenges to the validity or legality ofthe Development Program or related Entitlements, but in no event shall such extension be greater than thirty (30) months from the Commencement Date. If Lessee reasonably incurs Fifty Thousand Dollars ($50,000) or more in legal and/or other professional fees and costs as a result of any legal proceedings or challenge to the validity and legality of this Lease and/orthe Development Program as approved by Lessor, Lessee shall have the option to terminate this lease by giving thirty (30) days written notice to Lessor, but Lessee shall have no other remedies. Lessor will cooperate with Lessee (and Lessor shall execute applications, certificates and like documents) as shall reasonably be required in Lessor'scapacity as owner of the Premises to enable and facilitate Lessee's. filing for and receipt of all Entitlements necessary to complete the Development Program. Nothing in this Section 6.b) 1(shall require Lessor, in its capacity as a governing body, to approve, consent to or otherwise grant any permit or Entitlement which may be necessary or useful in conjunction with the Development Program so C09-87
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long as Lessor is acting in good faith and so long as such refusal and/or denial constitutes a discretionary decision in the ordinary course of Lessor'sgoverning obligations. c) Lessee agrees to spend at least Eight Million Dollars ($8, 000) 00,for reasonable, out- pocket of-costs with respect to such Development Program. Such costs shall include costs associated with the. architecture, design, engineering, survey, legal, planning and permitting related to the work reflected in the CUP and Coastal Commission application and may include certain additional costs also incurred prior to execution of this Lease, if approved in writing by Lessor.
d) The essence of this construction provision is to develop and maintain First Class facilities which equal or exceed the quality level of other first class facilities in Southern California and which are compatible with the harbor environment of Redondo Beach King Harbor and the Harbor Area for the full Lease Term. To the extent commercially reasonable, all construction of Improvements on the Premises shall be completed in an environmentally friendly manner.
e) All work required under the Development Program shall be subject to the approval of Lessor which shall not be unreasonably withheld, land any other agency or governmental authority which has jurisdiction over said work, and Lessee shall secure, at its own expense, all permits and other approvals required for said work, including all actions, studies, assessments and reports that may be required in order to comply with all requirements of CEQA and the California Coastal Act. Notwithstanding the foregoing, the parties contemplate that the Coastal Commission may impose an in-lieu fee of Thirty Thousand Dollars ($30,000) per unit applicable to twenty five percent (25%) of the total number of proposed units in the Development Program in order to support the establishment of lower cost overnight visitor accommodations within the coastal .area of Los Angeles County and/or Lessor's coastal zone.
Lessor agrees to bear the financial burden of any such in-lieu fees imposed on Lessee in conjunction with the Development Plan (through the direct payment of such fees instead of Lessee, or alternatively, through reimbursement for any payments actually made by Lessee).
Nothing herein shall relieve Lessee from the obligation to pay any other fees or to comply with any other mitigation measures imposed or required in conjunction with CEQA or the California Coastal Act.
6.2 Planning, Design and Construction of Improvements
a) In connection with Lessee'sconstruction of any Improvements, alterations or modifications on the Premises. during the Lease Term, including but not limited to those set forth in the Development Program, Lessee shall first submit a written request for conceptual approval of such Improvements by the Harbor Commission. The proposal shall include the proposed use and location thereof in relation to the particular portion of the Premises upon°which Lessee proposes to construct said Improvements. Concurrently therewith, Lessee shall pay Lessor a non-refundable processing fee which shall be reasonable under the circumstances in light of the size, complexity and expertise required to review said Improvements. If required, following approval of the proposed Improvements by the Harbor Commission and other required City of Redondo Beach offices (which approval shall be delivered in writing), Lessee shall apply C09-87
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promptly to the California Coastal Commission for approval of the proposed Improvements and Lessor shall cooperate with such application in the manner described in Section 6.b) 1(above.
Thereafter, the procedure for submission of designs, plans, drawings and other documents for the additional Improvements shall be as Lessor shall from time to time reasonably specify in writing as requested' by Lessee.
b) Any approval by Lessor of plans, specifications or other designs under this Article shall not constitute approval by Lessor of an application for any building or other permit.
In its review of any plan, specification or other design submitted pursuant to the terms of this Lease, Lessor shall be guided by the provisions of this Lease as well as the Building Code, design,. architectural and construction standards applicable to the Premises and in force by the Lessor. In the event of an inconsistency or conflict between the terms and provisions of this Lease, the Building Code of Lessor and other applicable standards, the terms and provisions of this Lease shall control and supersede such standards; provided, however, as between the Lease and the Building Code, the one with the most strict provisions relating to the conflicting terms shall control and provided, further, nothing herein shall allow design or construction on the Premises inconsistent' with applicable law, code and regulations (taking into account normal practices regarding variances and conditional use permits). c) In addition to all submissions to be made and approvals to be obtained by Lessee as required in this Article, Lessee shall secure, at Lessee's sole cost and expense, all necessary permits and approvals from any other governmental entities and agencies with jurisdiction over the planning, design and construction of any additional Improvements. d) If Lessor rejects or requests modifications in any Plans, it will notify Lessee in writing of the. reasons for such rejection or request. If Lessor requests Plan Revisions, Lessee shall have forty-five (45) days from the request by Lessor to submit such Plan Revisions. In the event the Plans are neither approved nor rejected by Lessor within forty-five (45) days after the submission of the Plan Revisions, they shall be deemed approved by Lessor. If Lessee fails to submit any Plan Revisions within the specified period, such failure will be deemed a withdrawal of Lessee'srequest for approval, and all processing thereof by Lessor shall cease. e) If Lessee withdraws, or is deemed to have withdrawn, its request for any approval under this Article, or ifthis Lease is terminated pursuant to its terms while a request for approval hereunder is pending, Lessee shall immediately deliver to Lessor, at Lessee'ssole cost and expense, copies of all tests, studies, inspections, plans, blueprints, reports, investigations, renderings and other documents and things made or prepared by or for Lessee in connection with the request for approval, all of which documents shall thereafter be and become the property of Lessor, subject to any ownership rights of the authors of the same. Lessee shall transfer to Lessor, or Lessor's nominee, all permits, licenses, and other approvals obtained by Lessee in connection with the proposed Improvements on the Premises.
6.3 Utilities
a) Lessee agrees that any utility company has the right, subject to Lessor's written approval, "to place utility lines, cables, pipes, wires, poles, conduits, or ductwork where C09-87
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e
necessary, through or on the Premises in any manner which will not interfere (visually or otherwise) with use and enjoyment of the Premises by Lessee and its Sublessees, concessionaires, licensees, tenants, customers and invitees. Lessee and Lessor shall each cooperate with the other in the prosecution or defense of any claims against or by any utility company related to the Premises.
b) Lessee shall connect -the utilities provided on or to the Premises to its facilities, and shall furnish, install and maintain, at its own expense, all necessary ducts, pipes, wires, cables, lines and conduits to service adequately its own installations and shall relocate at its cost and expense all existing utilities required to be relocated by reason of -Lessee's development and operation of the Premises.
c) All utilities shall be underground.
6.4 As-Built Plans and Substantial Compliance
Within ninety ( 90) days following completion of the construction of any Improvements to or on the Premises required or permitted hereunder, Lessee shall furnish to Lessor a complete set of "as-built" plans depicting the Improvements as constructed, which construction shall be in substantial compliance with approved working drawings.
6.5 Signs
Neither Lessee nor any of its Sublessees may construct, maintain, or allow any sign upon the Premises except pursuant to applicable Lessor specifications and as approved by Lessor.
6.6 Capital Improvement Fund
Commencing no later than the first day after the end of the Initial Minimum Rental Period, Lessee shall create the Capital Improvement Fund and, thereafter, shall deposit the required amount into such fund every quarter no later than the end of the first month succeeding such quarter. Lessee shall furnish to Lessor an annual accounting of the Capital Improvement Fund no later than April 1st of each year. In addition, upon request of Lessor, Lessee shall provide Lessor with evidence of quarterly deposits into the Capital Improvement Fund. The Capital, Improvement Fund shall be fully expended for Permitted Capital Expenditures at a time which is or times which are no later than ten (10) years prior to the termination of the. Lease Term. To the extent any Lender requires a capital reserve that accomplishes the same objectives in a manner consistent with the Capital Improvement Fund, Lessee shall be credited with amounts paid into such reserve but shall meet the other obligations stated in this paragraph, including annual accounting and timing of expenditures. The Capital Improvement Fund shall not be pledged to any third party, except any Lender, nor shall it be spent for any purposes other than Permitted Capital Expenditures. x~,_.
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7. SECURITY
7.1 Security Deposit
a) Lessee shall deposit the Deposit with Lessor on or before commencement of the Initial Minimum Rental Period as security under this Lease. The Deposit shall be held by Lessor as a deposit to secure the performance of this Lease under Section 1950.7 of the California Civil Code.. If at any time during the Lease Term, any of the rent herein reserved is overdue and unpaid, or any other sum payable by Lessee to Lessor hereunder is overdue and unpaid, then Lessor may, at its option, apply any portion of the Deposit to the payment of any such overdue rent or other sum. Upon any failure of Lessee to keep and perform all of the terms, covenants and conditions of this Lease, Lessor may, at its option, apply the Deposit, or so much thereof as may be necessary, to compensate Lessor for all loss, cost, expense or damage sustained by Lessor due to such breach on the part of Lessee, including fees incurred on account of services rendered or work performed at the request of Lessor by independent accountants, attorneys and other consultants, or the value of services provided by employees of Lessor, Lessor'selected officials, in-house counsel, lease administrators and/or lease auditors. b) If the entire Deposit, or any portion thereof, is applied by Lessor for the payment of overdue rent or other sums due and payable to Lessor by Lessee hereunder, then Lessee shall, within five (5) days after Lessor's written demand, immediately remit to Lessor a sufficient amount in cash to restore the Deposit to its original amount. c) Unless the Lessee is or has at any time been in breach of this Lease, the Deposit shall be returned in full to Lessee within thirty (30) days following the sooner of (i) the fifth (5~') anniversary 'of the commencement of the Initial Minimum Rental Period or (ii) upon termination of this Lease. Notwithstanding the foregoing, Lessor may retain the Deposit for a reasonable time after termination of this Lease as security for the surrender of the Premises by Lessee in substantially the same condition as when first occupied by Lessee, taking into account subsequent construction, maintenance, repair, alteration, modification and modernization as required or allowed by this Lease and commercially normal wear and tear. Lessor may reserve, apply or appropriate said deposits, or so much thereof as may be necessary to compensate Lessor for Restoration. In the event Lessor wishes to charge Lessee for the costs of Restoration, Lessor shall reasonably detail said charges in writing to Lessee, or Lessor shall within sixty (60) days following termination pay Lessee the Deposit. Further, should Restoration costs exceed the amount of the Deposit, Lessee shall, within thirty (30) calendar days after receiving a written statement therefore from Lessor, pay Lessor such amount as may be specified in the statement as being reasonably necessary to restore the Premises to said condition. d) Lessor is not a trustee of the Deposit and may commingle it, use it in the ordinary course of business, transfer, or assign it. No interest shall accrue on the Deposit for the benefit of Lessee.
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7.2 Security for Compliance with Commencement, Development, and Completion of Construction ofRequired and Additional Improvements orAlterations on the Premises
a) With respect to any financing from an Institutional Lender, Lessee shall utilize a draw and payment process during construction of Improvements on the Premises that is consistent with sound construction management processes and real estate lending under the circumstances and taking into consideration the cost, duration, size, complexity, scope and contractors working on the Improvements, including utilization of conditional and unconditional lien releases and two-party checks. The draw and payment process shall be designed to protect the interests of Lessee and Lessor in the Premises, including from liens, and to cause the timely completion ofthe project.
b) Unless expressly waived by written instrument signed by the Harbor Director and approved by the City Attorney for Lessor, if the construction involves funding from a government or public .entity .Lessee shall provide to Lessor prior to commencement of construction of any Improvements on the Premises either: (i) an unconditional written personal or corporate guaranty, in a form approved by and reasonably acceptable to Lessor, that the construction involving funding from a government or public entity will be completed as required provided the identity and the net worth of the guarantor are acceptable to Lessor in its sole and absolute discretion); or (ii) a bond of a
responsible surety company approved in advance by
Lessor and licensed to do business in California, in an amount equal to one hundred percent 100%) of the cost of constructing said Improvements. Notwithstanding the foregoing obligation to provide a bond or bonds, Lessor may eliminate or reduce the amount of the bond(s) if it is satisfied, within its reasonable discretion, that procedures are in place by Lessee to protect the interests of Lessor from liens being filed on the Premises and / or the construction not being completed. If Lessee provides such a bond, it shall remain in effect until the entire cost of the work has been paid in full and the Improvements have been insured as provided in this Lease.
The bond shall state that it is for the purpose of securing the completion of the proposed construction, free of all claims and liens of contractors, subcontractors, designers, mechanics, laborers and materialmen. The bond shall state that the construction work shall be effected by Lessee, its general contractor, or in the event of their default, by the surety. The bond shall also provide that the surety will defend -and indemnify Lessor against all loss, cost, damages, expenses, and liability arising out of or connected with the construction of the Improvements, including the cost of any professional, investigative, accounting, legal or other services which may reasonably be required by Lessor, plus the value of services provided by employees of Lessor, Lessor's elected officials, in-house counsel, lease administrators and/or lease auditors.
For purposes of this paragraph, funding from a government or public entity shall mean any funds provided by Lessor or by any other governmental entity such as a county, the state or the federal government.
c) Lessee shall, at all times, indemnify and hold Lessor harmless from all claims for design, labor or materials in connection with construction, repair, alteration or installation of structures, Improvements, equipment or facilities within or on the Premises, and from the cost of defending against such claims, including attorneys' fees. Lessee shall carry, or assure that its contractor or contractors carry, statutory coverage in Workers' Compensation and Longshoremen C09-$7
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and Harbor Workers' Insurance, as appropriate, to protect all workers employed by all contractors involved with the construction, renovation or modernization of any Improvements on the Premises at any time during the Lease Term.
d) If a lien is imposed on the Premises as a result of any construction, repair, alteration, or installation work on the Premises, Lessee shall procure and record a bond which frees the Premises from the claim of the lien and from any action brought to foreclose the lien.
Such bond shall be recorded. within thirty (30) days after Lessee receives written notice of the filing of such a lien.
e) The providing of security and insurance by Lessee under this Article shall not be construed to, limit Lessee's liability or responsibility for .completing .construction of any required or additional Improvements on the Premises, nor to fulfill the indemnification provisions and requirements of this Lease. Notwithstanding the provision of any bond or guaranty, as between Lessor and Lessee, Lessee shall be obligated for the full and total cost of constructing required or additional Improvements on the Premises and the full amount of any damage, injury, or loss, including all costs, expenses and attorneys' fees, caused by negligence or neglect arising out of any act or omission of Lessee, its agents, employees and Sublessees connected with this Lease or with the use or occupancy of the Premises and related to construction of said Improvements.
8. NEGATION OF WARRANTIES, LESSEE WAIVERS, LITIGATION
LIMITATIONS AND STIPULATION
a) The parties recognize and agree that this Lease, the development process contemplated by this Lease and the business operations Lessee proposes to conduct on the Premises pursuant to this Lease, contain elements of risk, especially with respect to permits, approvals and financing. Subject to the specific terms of this Lease, Lessee acknowledges and agrees: (i) that this risk shall be borne by Lessee alone; (ii) that Lessor does not and cannot guarantee permits or approvals will be secured from all required agencies; and (iii) that Lessor does not warrant or guarantee financeable title, financing or feasibility, except for any specific agreements or commitments made by Lessor in this Lease and the fact that Lessor covenants and agrees that it will not voluntarily encumber or place any cloud on Lessee'stitle to the Premises. b) Lessee further covenants, acknowledges and agrees as follows:
i) 'That Lessor is a charter city formed under and pursuant to the terms and provisions of the Government Code of the State of California. The powers and authority of Lessor to act are governed by the Government Code and other applicable laws and regulations of the State of California, including the City Charter, and other county and municipal laws and regulations.
Lessee accepts this Lease, subject to the terms and provisions of such Code and such other applicable laws and regulations now existing or hereafter enacted, and, as they may be amended from time to time.
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ii) That the Premises are within the coastal zone and subject to the California Coastal Act, that any proposed further development of the Premises is subject to compliance with CEQA and the California Coastal Act and that this Lease is subject to the grant of tidelands from the State of California to Lessor as set forth above.
iii) That, in the event of a breach of this Lease by Lessor, the remedy of Lessee. shall be limited to an action at law for damages actually incurred by Lessee by reason of said breach. In the event of such a breach by Lessor, Lessee waives all right to claim any interest in the Premises in any judicial proceeding, including but not limited to a claim. for specific performance, quiet title, declaratory relief, equitable lien or constructive trust.
9. LESSEE'SOBLIGATION TO MAINTAIN AND REPAIR
9.1 Normal Repairs
Except for Lessor's obligations to maintain and repair as stated in Paragraph 10.1 below, Lessee shall, at its sole cost and expense, maintain the Premises and all Improvements of whatever kind that may be now or hereafter erected, installed or otherwise made thereon, in First Class condition and repair and in accordance with all applicable laws, rules, ordinances, orders and regulations relating to any part of the Premises or the Improvements thereon, and shall make all necessary repairs and alterations thereto. Lessee further shall provide proper containers for trash and garbage and'keep the Premises at all times free and clear of rubbish, debris and litter.
To the extent commercially reasonable, all maintenance and repair of the Premises shall be conducted in an environmentally friendly manner. Lessee shall not be responsible for any revetted slopes, bulkheads, breakwaters, quaywalls, moles, piers, wharves, pilings or docks, unless part of the Development Program.
9.2 Renovation Fund
On the Rent Commencement Date, Lessee shall create the Renovation Fund and shall deposit the required amounts into such fund every quarter no later than the end ofthe first month succeeding such quarter. Lessee shall furnish to Lessor an annual accounting of the Renovation Fund no later than April 1St of each year. In addition, upon request of Lessor, Lessee shall provide Lessor with evidence of quarterly deposits into the Renovation Fund. Deposits into the Renovation Fund shall cease on June 30, 2036, and the Renovation Fund shall be fully expended no later than October 1, 2036, on Permitted Renovations. To the extent any Lender requires a capital reserve that accomplishes the same objectives in a manner consistent with the Renovation Fund, Lessee shall be credited with amounts paid into such reserve but shall meet. the other obligations stated in this paragraph, including .annual accounting and timing of expenditures. The Renovation Fund shall not be pledged to any third party, except any Lender, nor shall it be used for any purpose other than Permitted Renovations.
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10. MAINTENANCE AND REPAIR BY LESSOR
10.1 Lessor'sRight ofEntry for Purposes ofRepair
a) Lessor covenants and agrees to keep in proper- maintenance and repair, all bulkheads, seawalls and quaywalls which ,are situated in the Harbor Area and which, if not properly maintained, would have an adverse impact on the Premises, and to keep all sidewalks adjacent to such bulkheads, seawalls, and quaywalls in proper maintenance and repair at all times. .Lessor further covenants and agrees to do or cause to be done, at its sole cost and expense, any and all dredging required in the Redondo Beach King Harbor.. If, in Lessor's opinion, it ever becomes necessary for the safety of the Harbor to extend any bulkhead, mole or quaywall, Lessor shall have the right to do so at its sole cost and expense. All maintenance, repair and other work by or on behalf of Lessor required or permitted under this paragraph shall be undertaken, using best efforts, in a manner so as to reasonably minimize the negative impacts of the same upon the Premises, Lessee, Lessee'sguests, marina tenants, subtenants and invitees. b) Except as stated in the preceding paragraph, Lessor shall not be required to maintain or repair any Improvements or facilities on the Premises. Lessor may enter upon the Premises, or any portion thereof, from time to time, for the purpose of inspecting, establishing, extending, repairing or rebuilding a seawall, quaywall, pier, wharf, pilings, bulkhead, breakwater or mole, or conducting dredging operations, or to inspect and/or cure an actual or suspected breach of this Lease by Lessee that reasonably requires entry upon the Premises. In so doing, Lessor shall use reasonable efforts to minimize disruption to Lessee or its Sublessees. Lessor shall not be liable to Lessee, or its Sublessees, or any person or entity claiming through Lessee or its Sublessees, or to the occupant of any portion of the Premises for any loss, damage or harm arising out of Lessor's exercise of the rights reserved herein except to the extent the same is due to the willful misconduct or gross negligence of Lessor, its agents, contractors and employees provided that Lessee, shall not be required to indemnify Lessor againt any claim relating to Lessor's right of entry hereunder, except, and only to the extent of, Lessee's own negligence, recklessness, or willful misconduct, including that of any of its Sublessees, agents, concessionaires, and licensees). Except for damages arising from the willful misconduct or gross negligence of Lessor, its agents, contractors or employees, neither Lessee nor any Sublessee, or other person claiming under or through Lessee, shall be entitled to any consequential damages arising therefrom.
c) If Lessee fails to make repairs or replacements as required in this Lease, Lessor may notify Lessee of said failure in writing. If Lessee fails to make the repairs or replacements within a reasonable time thereafter, as established by Lessor, Lessor may make such repairs and replacements at Lessee's expense. Lessee shall reimburse Lessor for the costs thereof within ten (10) days after Lessor's notice specifying such costs. Such costs may include, without limitation, the cost of design, labor, material, equipment, the value of services provided by employees of Lessor, its officers, elected officials, in-house counsel and lease administrators, and the cost of professional services such as attorneys, accountants, contractors and other consultants as may be reasonably incurred or paid by Lessor. Lessor, at its option, may commit C09-$7
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all or part of the Deposit to cover the cost of making such repairs and replacements. If Lessor makes such repairs or replacements, Lessee shall indemnify and hold Lessor harmless from and against all claims, demands, loss or liability of any kind arising out of or connected in any way with such work, including, but not limited to claims by Lessee, its officers, employees, agents, Sublessees and the patrons or visitors of Lessee or its Sublessees.
10.2 Limitations on Lessor'sObligation to Repair
Except for Lessor's obligations as stated in Paragraph 10. a) 1(above, Lessor shall have no duty, obligation or liability to care for or maintain the Premises. If, by any express provision of this Lease, Lessor agrees to care for or maintain the whole or any part of the Premises, such agreement on the part of Lessor shall constitute a covenant only, and no obligation or liability whatsoever shall exist on .the part of Lessor to Lessee by reason thereof unless Lessor fails to commence performance of such obligation with reasonable diligence after receipt of a written notice from Lessee, specifying (a) the provisions of this Lease under which such duty is claimed to exist on the part of Lessor, and (b) the facts that require the performance of such duty. In such event, Lessor's liability shall be limited to the costs and expenses of performing such obligation and neither Lessee nor its Sublessees, nor any person claiming under or through Lessee, shall be entitled to consequential damages arising therefrom except to the extent the same is due to the willful misconduct or gross negligence of Lessor, its agents, contractors and employees.
11. SURRENDER OF PREMISES
11.1 Lessee'sObligation to Surrender upon Expiration of Lease Term or upon Termination
Lessee ... hereby covenants that upon the expiration of the Lease Term, or any sooner termination of this Lease, Lessee shall surrender the Premises to Lessor along with any Improvements. Lessee shall surrender the Premises in the condition required under Paragraph 7.c) 1(above. Upon such expiration or sooner termination of the Lease Term, the title to all of the Improvements shall automatically vest in Lessor and shall become the absolute property of Lessor without cost or expense to Lessor. Lessee agrees to execute any and all documents necessary to transfer title to the Improvements to Lessor and hereby appoints Lessor as its attorney- fact in-to execute such documents on its~behalf.
11.2 Ownership of Trade Fixtures upon Expiration or Termination All trade fixtures owned or installed in or about the Premises by Lessee or its Sublessees may, at the option of Lessee or its Sublessees, be removed within thirty (30) days following the expiration or termination of this Lease, whichever occurs first; provided, however, that in such event Lessee shall pay Lessor a sum of money equal to one and one-half times the Minimum Monthly Rental in effect at the expiration or termination of this Lease for the thirty 30) day period; and Lessee shall repair any damage to the Premises resulting from such C09-87
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removal. The free and unencumbered. title to all trade .fixtures located. in or about the Premises not so removed within... the thirty (30) day period shall automatically vest in Lessor and become the absolute property of Lessor without cost or expense to Lessor. In such event, Lessee agrees to execute and deliver, or cause to be executed and delivered, any and all documents necessary to transfer title to such .trade fixtures. to Lessor free and clear of all encumbrances and hereby appoints Lessor as its attorney- fact in-to execute said documents on its behalf.
12. TITLE AND WARRANTIES
12.1. Disclaimer ofWarranties
Lessee acknowledges that the Premises are subject to trusts, covenants, conditions, easements and restrictions. ofrecord._Lessor warrants that it has the authority to lease the Premises to Lessee in accordance with the terms of this Lease for uses not inconsistent with the trusts under which the Premises are held by Lessor pursuant to the California Coastal Act of 1976 and other grants from the State of California and the public trust, including but not limited to the Tidelands Grant.. Lessor and Lessee agree and acknowledge that no warranties, covenants, promises or representations as to the title, possession or use of the Premises are made by Lessor in this Lease, or in any other form or manner, except as provided in this Article. It is expressly agreed and understood that notwithstanding any provision in this Lease to the contrary, if the tenancy hereunder is or becomes inconsistent with the trusts under which the Premises are held by Lessor pursuant to' the grants from the State of California, including but not limited to the Tidelands Grant, the rights and obligations of the parties will be governed solely and exclusively by the provisions of Paragraph 5.5 and 5.6, above.
12.2 Lessee'sQuiet Possession
Except as specifically provided herein, if Lessee performs and observes all of the covenants and conditions. on its part to be performed hereunder, including payment of all sums payable to Lessor or others by Lessee, Lessor shall secure to Lessee during the Lease Term, the quiet and peaceful possession of the .Premises against all persons. Lessor shall, upon acquiring actual knowledge of the claims of any such person, which claims disturb or interfere with the quiet, peaceful and lawful possession of the Premises by Lessee, at Lessor's own cost and expense and with reasonable diligence, file such proceedings and take such actions as may be reasonably necessary to remove the claim of such person and the actual interference and disturbance thereby with the quiet, peaceful and 1'awful possession by Lessee; but aside therefrom, neither Lessee nor its Sublessees, nor any other person claiming under or through Lessee, shall have any claim against Lessor for any damages, whether consequential, incidental or compensatory, nor shall Lessee be released or discharged from any of its obligations, liabilities, or indebtedness hereunder unless and until Lessee is legally, actually,Mand physically as distinguished from constructively) evicted from the Premises by such person or persons.
12.3 Lessee Acluiowledgments and Waiver
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Lessee acknowledges that from time to time during the term of the Lease, and at such times and intervals as may be determined by Lessor in its sole discretion, construction, rehabilitation, replacement, repair and restoration activities may be conducted by or under the authority of Lessor within the Harbor Area. Lessee acknowledges that said activities and related operations, including the staging, storage and docking activities on other parcels in and around the Harbor Area are necessary and for the benefit of Lessee, its Sublessees, other lessees and the public, and that the conduct of such activities shall not be deemed to have disturbed or interfered with the possession and use of the Premises by Lessee or its Sublessees, or anyone claiming under Lessee or its Sublessees, or to have caused Lessee or its Sublessees to be evicted, either actually or constructively, from the Premises, and shall, under no circumstances, entitle Lessee, its Sublessees or others claiming under or through Lessee or any Sublessee, to claim or recover incidental or consequential damages from Lessor on account of such activities. Notwithstanding the foregoing, Lessor agrees to use commercially reasonable efforts to ensure that unreasonably loud and disruptive construction activities do not occur at adjacent properties within the Harbor Area.
13. ENCUMBRANCE OF LEASEHOLD
13.1 Lessee'sRight to Encumber and Finance Construction ofImprovements or Renovation Program
a) If it becomes necessary or desirable for Lessee or its Sublessees to secure interim or permanent financing for the construction of any required or additional Improvements on the Premises or to complete the renovation program under Paragraph 9.2, above, or otherwise, Lessee or Sublessees shall, subject to the terms and provisions of this Article, have the right to subject their leasehold estate in the Premises, and any and all of Lessee's and/or Sublessee's Improvements on the Premises, to one or more mortgages (including trust deeds) as security for a loan or loans from an Institutional Lender, subject to Paragraph 13.2 below, provided among other things, that:
i) The mortgage, all related documents and instruments and all rights acquired under the mortgage documents shall be subject and subordinate to the covenants, conditions and restrictions set forth in this Lease and to all rights and interests of Lessor, except as may be expressly provided in this Lease;
ii) The mortgage shall not be placed upon or encumber the tide or submerged lands or the fee simple title to the Premises; iii) The amount of indebtedness secured by the proposed mortgage, plus the amount of indebtedness secured by all other approved mortgages, if any, encumbering Lessee's interest in the Premises, shall not exceed seventy five percent (75%) of the Fair Market Value of Lessee's interest in this Lease and the Improvements on the Premises, and Lessee's projections of net operating income C09-87
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derived from all operations conducted on or from the Premises for the next five (5) calendar years of the Lease Term .shall be in excess of one hundred twenty percent (120%) of all debt service including all costs and expenses related to the debt service) payable by Lessee during such calendar year for all mortgages encumbering Lessee'sinterest in this Lease, and the Improvements on the Premises. For purposes of this subparagraph ( iii), if requested by Lessor acting in its reasonable discretion, the Fair Market Value of Lessee's interest in this Lease and the Improvements on the Premises, shall be determined by an appraiser selected by Lessee and subject to the reasonable approval of Lessor, and who shall be a member in good standing of the American Institute of Real Estate Appraisers holding an M. I.A designation and be primarily engaged in the business or occupation of appraising or evaluating business real property and
Improvements. All costs and fees of obtaining such market value determination shall be at Lessee'ssole expense;
iv) The mortgage shall encumber only Lessee's interest in the Improvements on the Premises and Lessee's. interest in this Lease and no other real property;
v) The mortgage shall not be cross-defaulted with agreements relating to other property or transactions;
vi) The mortgage shall expressly provide that it shall not be modified, extended, renewed or otherwise revised, nor shall the mortgage, or any interest therein, be further mortgaged, pledged, encumbered, hypothecated or any security otherwise granted therein, without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned or delayed;
vii) The mortgage shall not, by its terms or effect, be used to transfer ownership of this Lease or Lessee's interest herein, or in the Improvements on the Premises (except a security interest therein) nor to change control of Lessee, except in connection with .the exercise of Lender's rights and remedies under any applicable security instrument; and
viii) The mortgage and related documents shall state that:
A) the terms and provisions of this Lease shall prevail, govern and control in any instance where an inconsistency or conflict exists between the terms and _ provisions ofthis Lease and the terms and provisions of any mortgage document; 33 -
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B) any proceeds from fire or extended .coverage insurance shall first be used for the repair, rebuilding, restoration or reconstruction of Improvements on the Premises and only the remaining proceeds, if any, may then be used to repay any part of the outstanding indebtedness secured by the mortgage;
C) should the encumbrance holder or any successor- interest in-to it, succeed to the interests of Lessee in the Premises or under this Lease by any means or proceedings whatsoever, and regardless of whether or not the encumbrance holder actually enters into and takes possession of the Premises, then the encumbrance holder shall be obligated to keep and perform all of the covenants and conditions of this Lease required to be kept and performed by Lessee; and
D) unless prohibited by Lender, the encumbrance holder, regardless of whether or not a
request for notice shall have been recorded by Lessor, shall give Lessor written notice of any default under the mortgage and related documents, which notice shall be given within twenty (20) calendar days after the encumbrance holder declares an event of default or otherwise commences the exercise of its rights and remedies under the applicable security instrument. Notwithstanding the requirements of this subparagraph, Lessor agrees to consider acceptance of alternate methods of .compliance with this provision, provided the effect of such alternate methods achieve the same legal effect as it relates to Lessor's rights and requirements under the Lease.
b) For purposes of this Article, the extension or renewal of existing financing, unless explicitly provided for in the original financing documents or this Lease, shall be considered a new loan, or encumbrance, subject to all criteria set forth in this Article and Lessor's approval thereof pursuant to the provisions hereof. In such event, Lessor shall have the right to require that Lessee invest additional capital and equity to bring the loan or encumbrance within the debt service coverage standards set forth in subparagraph (iii) of paragraph (a). c) Whenever the words "mortgage", " deed of trust" or "encumbrance" appear herein, the words "security instrument" may be substituted in their place.
13.2 Lessor'sApproval ofEncumbrance and Processing Fee
Prior to the making of any such lien or encumbrance under Paragraph 13.1 above, Lessee must submit to Lessor the proposed terms and conditions of the loan, setting forth the total amount thereof, the interest rate, the payment schedules and a description of the security for repayment, and shall obtain the consent of Lessor for such encumbrance, which consent may not be unreasonably withheld, conditioned or delayed. Any such encumbrance without Lessor's consent shall be immediately void and shall constitute a default hereunder. Anon-refundable fee, which shall be reasonable under the circumstances in light of the size, nature, complexity and expertise required to review said proposed encumbrance, shall be paid by Lessee to Lessor for processing each request for consent to such mortgage or encumbrance submitted to Lessor.
Such fee shall be paid concurrently with the initial submission of encumbrance documents and C09-$7
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loan information, is deemed earned by Lessor when paid, and shall not be refundable. Lessee acknowledges that Lessor may deny approval of any encumbrance if Lessee or any of its successors or assigns is then in default of any obligation under this Lease or if, Lessee is not in compliance with Paragraph 13.1 above. Lessee shall provide and make available to Lessor all documents and information related to its operations, past and/or contemplated business activities and other information which Lessor may request and reasonably require in order to determine the commercial reasonableness of the proposed encumbrance. Lessor's consent to any such encumbrance or mortgage shall not be deemed to be, nor construed as, Lessor's consent to any other encumbrance or mortgage, regardless of whether such other encumbrance is secured in whole or in part by the same collateral or property interests as an encumbrance or mortgage to which Lessor has previously consented.
13.3 Lessee'sRight to Refinance
During the Lease Term and provided Lessee is not in default under the Lease and provided Lessee complies and only with Lessor'sprior written consent, Lessee may refinance the existing debt structure secured by Lessee's leasehold estate under this Lease, or any portion thereof (including interests of Lessee as sublessor under any sublease of a portion of the Premises), and/or Lessee'sinterest in Improvements on the Premises, or any portion thereof and the owner of any Condominium Unit may finance or refinance that unit provided that, in each such case, such financing shall comply with paragraphs 13.1 and 13.2 above and Article 17 below in regard to Appreciation Rent, if applicable. Lessor shall not unreasonably withhold, condition or delay its consent to any such refinancing and such approval shall be in writing.
13.4 Rights of the Encumbrance Holder
a) Nothing contained in this Lease shall be deemed to preclude the transfer of this Lease without the consent of Lessor as a .result of a judicial foreclosure or a foreclosure through the exercise of a power of sale under any deed of trust or mortgage executed to obtain financing referred to in this Article 13, or by a deed in lieu thereof, or any subsequent transfer by the Lerider subject to the requirements hereof, if:
i) the Lender is the purchaser at such foreclosure sale; ii) the Lender is an Institutional Lender at the time it succeeds to Lessee'sinterests under this Lease; or
iii) the transfer by the Lender is approved in writing by Lessor. b) Ifthe Lender purchases Lessee'sinterest in the Premises under,this Lease at a foreclosure sale or acquires such interest by a deed in lieu thereof, the Lender shall promptly cure all defaults then existing under this Lease which are not personal to Lessee, e.g. bankruptcy of Lessee, including maintaining the Deposit, and until Lender transfers Lessee'sinterest in this Lease, shall thereafter comply with all of the terms and conditions of this Lease during the period the Lender, or a receiver appointed at its instance and request, is in possession, or entitled to possession, of the Premises, or retains the leasehold interest so acquired. If the Lender is an C09-87
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Institutional Lender at the time it acquires Lessee'sinterest in the Premises under this Lease, or acquires its interest in the Premises through awholly-owned subsidiary, and certifies to Lessor in writing at the time it proposes to make a transfer of its interest in the Premises, that it is an Institutional Lender or the entity acquiring the interest is a wholly-owned subsidiary of an Institutional'Lender, as defined herein and, provided further, that the Lease is not. then in default other than defects which are personal to Lessee), the Lender may transfer the leasehold interest so acquired to a third party. However, as a condition of such transfer, the transferee shall assume and expressly agree in a writing in a form acceptable to Lessor to be bound by all of the terms, covenants, conditions and agreements of this Lease and, contemporaneously with said transfer, the transferee shall execute and deliver to Lessor an unconditional lease assumption agreement in a form reasonably acceptable to Lessor.
c) If the purchaser at foreclosure or entity that acquires the interest in the Lease by means of a deed- liuin-of foreclosure or similar type of assignment is not either (i) an Institutional Lender or (ii) a wholly-owned subsidiary of an Institutional Lender, then no such subsequent transfer by the purchaser can be made without obtaining the prior written consent of Lessor pursuant to the terms and provisions of Article 15 below. In the event of any transfer, and in addition to the requirements of paragraph (b), above, the transferor shall immediately give written notice to Lessor of such transfer, including the name and address of the transferee and the effective date of such transfer.
d) Notwithstanding any provision of this Lease to the contrary, Lessor agrees that it will not terminate this Lease because of any default or breach thereunder on the part of Lessee, if the Lender, within thirty (30) days after service of written notice from Lessor of its intention to terminate this Lease for such default or breach (or within sixty (60) days after receipt by the Lender of written notice from Lessor stating that Lessee has commenced curing said default but is not diligently prosecuting the same to completion) shall cure such default or breach and thereafter keep and perform all of the covenants and conditions of this Lease provided herein to be kept and performed by Lessee. In the event that the cure requires Lender to obtain a receiver and Lender otherwise cures any default related to non-payment of rent, Lender'stime to cure shall not expire until sixty (60) days after the appointment of the receiver, provided the Lender has instituted judicial proceedings required for the appointment of a receiver and is diligently pursuing same.
e) If the breach or default is not curable, or if there are multiple defaults, some being curable and some. not (in which case the. Lender shall cure the curable defaults within sixty (60) days), the Lender, within said sixty (60) day period, shall commence and thereafter diligently pursue to completion proceedings for the foreclosure and sale under and pursuant to the terms of its encumbrance, which shall be accomplished within one hundred eighty (180) days or such longer period as may be required for Lender to obtain an order of sale or other judicial remedy, including but not limited to relief from a stay under the Bankruptcy Cade, in order to permit under applicable law the foreclosure or sale ( the "Foreclosure Period"), after service of written notice by Lessor of its intention to terminate this Lease. The actions required under the preceding sentence may include, but are not limited to the initiation and prosecution of proceedings under the Bankruptcy Code, 11 USC §§101 et seq., to lift any stay or other order C09-87
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which may be in effect. During the Foreclosure Period, the Lender shall perform all of Lessee's obligations required under the Lease.
f) Notwithstanding any provisions of this Lease to the contrary, Lessor further agrees that it will not terminate this Lease because of any default or breach by Lessee specified in Article 16 below, if, prior to expiration of the Foreclosure Period, the Lender gives written notice to Lessor agreeing to cure all curable defaults under this Lease as defined in paragraph (d) of this Paragraph 13.4, and expressly assuming all obligations of Lessee under this Lease during such period that the Lender, or a receiver appointed at its instance and request, shall be in possession or entitled to possession of the Premises. Ifthe Lender fails or refuses to comply with any or all of the terms of this paragraph (f) of Paragraph 13.4, Lessor shall be released from the covenants of forbearance contained herein.
g) In the event a "First Encumbrance Holder" as defined herein succeeds to all interests of Lessee under this Lease and, within thirty (30) days thereafter gives Lessor written notice of its request to enter into a new lease covering the Premises as lessee on the same terms and conditions as provided in this Lease, Lessor shall execute and deliver a new lease to the First Encumbrance Holder as lessee for the .remainder the Lease Term hereunder provided the First Encumbrance Holder shall have:
i) paid to Lessor all rent and other charges due under this Lease, up to and including the date of the commencement of the term of such new lease, together with all reasonable expenses incurred by Lessor in connection with the request for and negotiation of the new lease (including without limitation reasonable administrative, financial, economic, accounting and/or legal costs and fees and the reasonable value of services provided by Lessor's employees, elected officials, in-house counsel, lease administrators and/or lease auditors);
ii) cured or commenced to cure any and all other defaults under this Lease; and
iii) executed and delivered to Lessor a lease assumption agreement as would be required of an assignee of Lessee's interest under this Leasepursuant to the terms hereof,
The First Encumbrance Holder shall not be required to cure any default or event of default under this Lease, which is exclusively personal to Lessee and which no encumbrance holder has the power to cure (such as, for example, the bankruptcy of Lessee), as a prerequisite to the exercise of the rights to a new lease provided herein. The term "First Encumbrance Holder" as used in this Paragraph 13.4 shall mean the Lender demonstrated to Lessor'sreasonable satisfaction to be holding the most senior lien on the interest of Lessee under this Lease, or any portion thereof, as consolidated, renewed, extended, modified or replaced from time to time. Lessor' shall have no obligation whatsoever to offer a new lease to any Lender other than a First. Encumbrance Holder, and if for any reason the First Encumbrance Holder fails C09-87
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to request or to sign a new lease within thirty (30) days after Lessor'sdelivery of the new lease as executed by Lessor pursuant to the terms hereof, Lessor shall have no further obligations to enter into or offer a new lease pursuant to this paragraph (g). h) Any notice to the Lender provided for in this Lease may be given contemporaneously with any notice to Lessee.
i) Nothing herein contained shall be deemed to impose any obligation on the part of the Lessor to deliver physical possession of the Premises or any part thereof to any Lender, or any successor thereto, provided, however, that if Lessor is fully indemnified therefore by such Lender to Lessor's satisfaction (including without limitation indemnification for reasonable attorneys' fees), Lessor shall cooperate with such Lender (by joining as a party in any appropriate action or proceeding, or otherwise) at the sole cost and expense of such Lender, and at no cost, expense, risk or liability to Lessor, for the purpose of enabling such Lender to obtain possession of the Premises.
j) Any such new lease, and the leasehold estate thereby created, are intended to continue to maintain the same priority as this Lease, with regard to any encumbrance or mortgage on the Premises, or any part thereof, or any other lien, charge or encumbrance thereon caused or made by the Lessor whether or not the same shall then be in existence; provided, however, that although the provisions of this sentence are intended to be self-executing, Lessor shall not be obligated to expend any funds or take any other action to accomplish or obtain such priority for any such new lease or leasehold estate.
k) Lessee shall be deemed to have agreed to apply the rents, issues and profits of the Premises to fulfill Lessee's obligations under this Lease before applying them for any other purpose.
14. INDEMNIFICATION, HOLD HARMLESS AND INSURANCE
14.1 Indemnification
Lessee shall defend, protect, indemnify and hold harmless Lessor, its officers, elected officials, agents, attorneys, volunteers and employees, from and against any and all claims, demands, loss. or liability of any kind that Lessor, its officers, elected officials, agents, attorneys and employees, may sustain or incur or which may be imposed upon them, or any of them, for injury to or death of persons, or damage to property, as a result of or arising out of this Lease or with occupancy and use of the Premises by Lessee, its officers, agents, employees, Sublessees, patrons, visitors, or trespassers. If any action or proceeding is brought against Lessor, its officers, elected officials, agents, attorneys or employees as provided irI the preceding sentence, Lessee shall, upon notice from Lessor, defend the claim at Lessee'ssole expense with counsel reasonably satisfactory to Lessor.
14.2 Waiver of Claims
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Except for areas for which Lessor has retained maintenance and repair as provided in Paragraph 10.1 above, Lessee accepts the Premises in their "as is" and "where is" condition, including without limitation, standard risks of subsidence and liquefaction. Lessee acknowledges that it is' not relying on any representations or warranties of Lessor with respect to the Premises or condition thereof. As a material part of the consideration for this Lease, Lessee hereby waives all claims against Lessor for damages to goods, wares, merchandise, buildings, installations or other Improvements in, upon, or about the Premises and for injuries to Lessee, its Sublessees or third persons in or about the Premises from any cause arising at any time, except claims for damages or injuries arising out of or to the extent of the active negligence of Lessor.
14.3 Hazardous Substances and Environmental Indemnity
a) Lessee shall not engage in any use of Hazardous Substances in, on or about the Premises (including the installation or use of any above-ground or underground storage tank) without Lessor'sprior written consent, which consent is hereby given related to the requirements and conditions of the Coastal Commission Permit, to ordinary commercially available Hazardous Substances, related to emergency generator tanks and related equipment, other similar tankage.
Lessor shall exercise its. discretion in a commercially reasonable manner and may condition its consent upon Lessee giving Lessor such- additional assurances or deposits as Lessor, in its commercially reasonable discretion, deems necessary to protect Lessor, the public, the Premises, Redondo Beach King Harbor, the Harbor Area, and the environment against damage, contamination, injury or liability, including, without limitation, the deposit of additional security under Article 7 above.
b) If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance, or a condition involving or resulting from a Hazardous Substance, is present on, under, or about the Premises, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, together with copies of all reports or notifications to or from governmental agencies or private parties concerning the same. c) Lessee hereby represents that it has conducted all testing, inspection and analysis Lessee deems: reasonably necessary with regard to the condition of the Premises.. Lessee therefore takes possession of the Premises, and its leasehold interest in the Premises and any Improvements now existing on the Premises, in their "as is" condition and with all faults and Lessee hereby specifically waives any rights Lessee may have against Lessor with regard to the condition of the Premises including, but not limited to. soils, toxic or Hazardous Substances, fill material, compaction, geologic constraints and faults.
d) Lessee shall indemnify, protect, defend and hold harmless Lessor Parties against any losses, liabilities, damages, demands, actions, judgments, causes of action, assessments, penalties, costs and expenses (including, without limitation, the reasonable fees and disbursements of legal counsel and accountants) and all applicable damages, at law and in equity, as a result of a storage tank brought onto the Premises by Lessee or its Sublessees, or their predecessors, or under Lessee's control, or a claimed violation of any and all present and future federal, state and local laws (whether under common law, statute, rule, regulation or otherwise), including, without limitation, the Comprehensive Environmental Response, Compensation and C09-87
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Liability Act of 1980 and the applicable provisions of the California Health and Safety Code and the California Water Code, relating to the environment or to any Hazardous Substance, activity or material connected.with the condition of the Premises. If any such action or proceeding is brought against Lessor, its officers, elected officials, agents, attorneys or employees, Lessee, upon notice~from Lessor, shall defend the claim at Lessee'ssole expense with counsel reasonably satisfactory to Lessor. Lessee's obligations under this subparagraph (d) shall include, without limitation, loss of rents to Lessor the effects of any contamination or injury to person, property or the environment, the cost of investigation, remediation, restoration and abatement. Further, Lessee's obligations hereunder shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this paragraph (d), unless specifically stated in writing in the agreement and signed by Lessor. Nothing in this Lease .shall release or waive Lessee's rights against any third persons with respect to its obligations and liabilities under this paragraph (d), including against Lessee'sSublessees, their predecessors and insurers. In the event of any claim hereunder, Lessor Parties shall fully cooperate with Lessee in the defense, prosecution and resolution of such claims.
e) Lessee shall, at its sole cost and expense, comply with (i) any and all requirements necessary for the maintenance of reasonable fire and general liability insurance covering the Premises; and (ii) any and all rules, regulations, requirements and mandates of those federal, state and local public agencies now existing or as may hereafter be established or modified, with jurisdiction, power and authority to monitor, enforce and administer matters relating to air and water quality, waste management and disposal, storage tanks, fish and game, commerce and navigation and other matters of the environment, especially those of a marine nature, within and connected with Redondo Beach King Harbor and the Harbor Area. f) Lessor shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all applicable laws and regulations. The cost of the inspection shall be borne by Lessor unless a default under this I.,ease violation of law, or a contamination caused or contributed to by Lessee, is found to exist, in which case Lessee shall reimburse. Lessor on demand for all reasonable costs of inspection, investigation, remediation, restoration or abatement, including all reasonable legal, accounting and other professional consulting fees and expenses incurred or paid by Lessor and the value of services provided by employees of Lessor, its officers, elected officials, in-house counsel and lease administrators. Except in the case of an emergency, Lessee shall not undertake remediation, restoration, or abatement without first ~ providing a reasonable opportunity for Lessee to do the same and in such cases, Lessor and Lessee shall each cooperate with the other, including in providing access to the Premises. Such payment shall be made to Lessor within ten 10) days after Lessee receives Lessor'sreasonably detailed written demand for payment.
14.4 General Liability and Property Damage Insurance
a) In addition to and independently of all other provisions of this Lease, Lessee shall, at its own cost and expense, maintain insurance in full force and effect throughout the Lease Term. The policy or policies of insurance shall provide coverages which shall be C09-87
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c) Each policy of insurance shall contain a clause substantially similar to the following clause (with such modifications as may be standard in commercially available policies):
It is agreed that this policy shall not be canceled nor the coverage reduced until thirty (30) calendar days after the Harbor Director of the City of Redondo Beach has received written notice of such cancellation or reduction. The notice shall be sent by certified or registered mail and shall be deemed effective the date delivered to said Harbor Director, as evidenced by a properly validated return receipt."
d) Lessee agrees to deposit with Lessor, at or before the times at which they are required to be in effect, two copies each of the endorsements, policies, certificate or certificates of insurance, necessary to satisfy the insurance provisions of this Lease and to keep such insurance in effect and the policy or policies, or certificate or certificates therefore on deposit with Lessor during the entire Lease Term. All policies of insurance shall be issued by insurance companies licensed to do business in the State of California and rated not less than Best'sA:VII, or such other rating service as Lessor shall select in its reasonable. commercial discretion if Best's is no longer available or providing such rating service. Further, all policies of insurance shall contain language to the effect that: (i) the insurer waives the right of subrogation against Lessor and Lessor's elected officials, officers, employees, agents, attorneys and members of all boards and commissions and all employees of Lessor performing services for or under this Lease; ii) the policies are primary and noncontributing with any insurance that may be carried by Lessor;; and (iii) the inclusion of any person or entity as an insured is not to affect any right such person or entity would have as a claimant against another insured. e) Lessor shall retain the right at any time to review the coverage, form and amount ofthe insurance, required to be maintained by Lessee under this Lease. If in the. opinion of Lessor, applying Lessor'sthen current standards, the insurance provisions in this Lease do not provide adequate protection for Lessor and for members of the public using the Premises, Lessor may require Lessee at Lessee'ssole expense to obtain insurance sufficient in coverage, form and amount to provide adequate protection. In such case, Lessor's requirements shall be commercially reasonable and designed to assure protection from and against the kind and extent of the risks which exist at the time a change in insurance is required. Further, insurance coverages specified in this Article 14 are subject to adjustment pursuant to Article 47, below. f) Lessor shall notify Lessee in writing of changes in the insurance requirements pursuant to subsection (e), and, if Lessee does not deposit copies of acceptable insurance policies or certificates of insurance with Lessor incorporating such changes within thirty (30) calendar days ofreceipt of such notice, Lessee shall be in default of this Lease.
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g) The procuring of such required policy or policies of insurance shall not be construed to limit Lessee's liability hereunder, nor to fulfill the indemnification provisions and requirements of this Lease. Notwithstanding said policy or policies of insurance, Lessee shall be obligated for the full and total amount of any damage, injury, or loss, including all costs, expenses and attorneys' fees caused by negligence or neglect arising out of any act or omission of Lessee, its agents, employees and Sublessees connected with this Lease or with the use or occupancy of the Premises.
14.5 Worl~ers' Compensation Insurance
Lessee shall procure, at its own expense, and shall keep in force during the Lease Term, adequate insurance against liability arising on account of injuries or death to workers or employees on the Premises or any installation or other Improvements of Lessee. Such workers' compensation insurance. to be provided by Lessee shall be in the statutory amounts obtainable against liability under the Workers' Compensation Insurance and Safety Act of the State of California as well as Employer'sLiability Insurance.
14.6 Rental Insurance
During the first year of the Lease Term, Lessee shall procure, at its own expense, and keep in force during said year, commercially available business interruption insurance payable to Lessor in an amount equal to twelve (12} times the initial Minimum Monthly Rental specified above. Effective on the one hundred twentieth (120`) day after the first anniversary date of this Lease, and the one hundred. twentieth (120`) day after each anniversary date thereafter during the Lease Term, Lessee shall procure and maintain in force at its own expense, rental interruption insurance (or, as the case may be, use and occupancy insurance) and business interruption or disruption insurance, exclusive of pollution, with benefits payable to Lessor in an amount not less than the.. total of the Minimum Monthly Rental and Percentage Rental payable by Lessee to Lessor for the twelve (12) month period immediately preceding the anniversary date of xhis Lease. The amount of such insurance shall be so adjusted each year of the Lease Term so that the amount of such insurance payable to Lessor shall at all times be at least equal to the total of the Minimum Monthly Rental and Percentage Rental payable to Lessor for the twelve (12) month period immediately preceding such adjustment.
14.6 Other Insurance
Lessee shall procure, at its sole cost and. expense, and shall keep in force during the Lease Term:
a) Boiler and machinery insurance if at any time such equipment is located on the Premises.
b) Course of construction insurance. at all times during which any Improvements to be located on the Premises are under construction and not yet otherwise insured.
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c) Other insurance in amounts from time to time reasonably required by Lessor against other insurable risks if, at the time, they are commonly insured against for premises similarly situated and containing comparable Improvements.
15. ASSIGNMENT AND SUBLETTING
15.1 Permitted Subleases.
a) On or before the Rent Commencement Date, Lessee may sublease the Premises to one or more Real Estate Sublessees who shall be entitled to receive rent (which may include participation in proceeds of any permitted sale of all or part of the Premises) provided that such Real Estate Sublessees shall not exercise any management or control over hotel, restaurant, or other operations at the Premises.
b) On or before the Rent Commencement Date, Lessee (or the Real Estate Sublessees} shall enter into a sublease or operating agreement of any duration with the Hotel Operating Company to operate the Hotel and Lounge, provided that Michael Zislis shall initially have principal executive control over the operations of the Hotel Operating Company. Such subleases or other operating agreements shall contain such. terms.. as Lessor may reasonably require to assure Lessor that any such Sublessee shall conduct operations in a manner that carries out all of the terms of this Lease related to the use and operation of the Premises and reporting to Lessor.
c) Such agreement may be amended, terminated, or superseded provided that any amendment, termination or superseding document shall remain subject to the terms of this Lease and futher provided that any such document (and any change in the person with principal executive control with, respect to any such company) shall be subject to prior written approval by Lessor, to be exercised in Lessor'sreasonable discretion.. d) Lessee or the Real Estate Sublessee may sublease and transfer to other persons rights applicable to individual Condominium Units. Such transfers, and subsequent retransfers of such Condominium Units, shall be subject to the terms of Paragraph 15.2 through
15.9 provided that such paragraphs shall be applied with due regard to customary practices with similar condominium units.
15.2 Restrictions on Assignment
a) Except as otherwise permitted by Section 15.1, in connection with assignments as security for an encumbrance under Article 13 above or as otherwise provided in Paragraph 13. b), 4(Lessee may assign, transfer, convey or otherwise sell this Lease, or Lessee's interest in this Lease: or in the Premises, or any portion thereof only with the prior written consent of Lessor, which consent may not be unreasonably withheld, conditioned or delayed. As a condition precedent to Lessor'sreview for consent, the following requirements must be met:
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i) Lessee shall have given Lessor reasonable advance written notice of the proposed assignment sufficient to enable Lessor to conduct an investigation and review of the transaction and the proposed assignee;
ii) Lessee shall have provided Lessor with such appropriate documentation as Lessor may require, including (1) all transaction, financing, and escrow documents, which shall specify any brokerage commissions, finder's fees or other charges and payments to third persons not parties to the proposed assignment, (2) if the proposed assignee is a corporation, but note a publicly traded corporation, the name and address of each shareholder and his or her shareholding interests in the proposed assignee, (3} if the proposed assignee is a partnership, limited liability company or joint venture, the name and address of each general partner; member, or joint venturer, and a statement of his or her equity interest in the proposed assignee, (4) evidence'ofthe proposed assignee's business history, including information relative to its status as aMulti-Facility Entity, (5) current financial statement(s) for the proposed assignee(s), ( 6) the last three (3) years' income tax returns for the proposed assignee(s), or general partners or members thereof, if the proposed assignee is a partnership, (7) the .business plan and financial projections of the proposed assignee(s), ( 8) a statement of any litigation affecting the proposed assignee(s) or general- partners or members thereof, if the proposed assignee is a partnership or limited liability company, (9) identification of each operator or independent contractor the proposed assignee intends to use in its business operations on the Premises, including name, address, business experience and references, (10) copies of any management or operation agreements between the proposed assignee and its independent contractors which shall be subject to specific prior approval by Lessor applying commercially reasonable standards, (11) such other information and material that evidences. that proposed assignee has the experience, reputation, business background and financial capacity to reasonably ensure the continued prompt performance of the obligations of Lessee under this Lease after such assignment is to become effective and, (12) such other documents and information as may be reasonably required by Lessor to determine the commercial reasonableness of the proposed assignment;
iii) The proposed assignee shall expressly agree in a writing in a form acceptable to Lessor to be bound by all of the terms, covenants, conditions and agreements of this Lease;
iv) Lessee is not in default;
v) Lessee shall pay Lessor a non-refundable fee for processing each request for approval of assignment in a reasonable amount under the circumstances in light of the size, nature, complexity and expertise required to review said proposed assignment, plus Lessor's out- pocket of-costs and overhead expense that may be incurred in connection with the processing of said assignment, including without limitation the cost of making investigations as to the acceptability of the proposed assignee, together with any and all other reasonable administrative, financial, economic, accounting and/or legal costs and fees (including without limitation the value of services provided by employees of Lessor, elected officials, in-house counsel, lease administrators and/or lease auditors) incurred or expended in connection with any such proposed assignment;
s
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vi) The proposed assignee shall, in Lessor's commercially reasonable business judgment, have sufficient business reputation and/or experience to operate a successful business of the type and quality permitted under this Lease; vii) Concurrently with the initial submission of assignment documents and information specified in subparagraph (ii) above, Lessee shall demonstrate to .Lessor the ability to pay, or cause to be paid, the amount of real estate transfer tax, if any, due the appropriate governmental entities under the applicable laws, ordinances, rules and regulations of those entities;
viii) The proposed assignee(s) shall provide all funds necessary and shall open all appropriate accounts to hold any Renovation Fund and Capital Improvement Fund required to be made under this Lease;
ix) The proposed assignee(s) shall provide to Lessor all funds necessary to replace, replenish, or increase any security deposit required to be made under this Lease; and x) The Lessee shall pay Lessor all sums due as "Appreciation Rent" for an assignment of this Lease, if any, under and pursuant to Article 17 below. b) If Lessee proposes to assign this Lease to any third party, person or entity, except Lender or a wholly-owned subsidiary of Lender, Lessee shall give Notice of Intention to Offer. Lessor shall have ninety (90) days from receipt of the Notice of Intention to Offer within which to give Lessee Notice of Exercise of Right of First Offer. If Lessor fails to give timely Notice of Exercise of, Right of First Offer, Lessee shall be free to sell or assign its leasehold interest to a third party, person or entity on the terms stated in the Notice of Intention to Offer. If Lessor gives a Notice of Exercise of .Right of First Offer it shall be considered an offer to purchase or take assignment of Lessee's interest in the leasehold on the terms and conditions contained in the Notice of Intent to Offer and the closing shall take place within thirty (30) days.
For clarity, nothing in this paragraph shall be applicable either to an assignment to Lender or a wholly-owned subsidiary of Lender, any assignment to Lender's first assignee or to any other assignment, sublease, or transfer that is expressly permitted by any term of this lease. c) Unless expressly waived in writing by Lessor in connection with granting its approval of a proposed assignment of this Lease, the Minimum Monthly Rental and Percentage Rental shall be adjusted. effective as of the first day of the first full calendar month following the effective date of the assignment according to the procedures specified for the adjustment and renegotiation ofrentals in Article 4 above.
d) If Lessee is a corporation, a partnership of any kind or an unincorporated association, any Transfer shall constitute an assignment. If Lessee is a corporation, but not a publicly traded corporation, Lessee shall concurrently with the execution of this Lease deliver to Lessor a list of all shareholders of the .corporation, which list shall be certified to be true and correct by the secretary of the corporation, and Lessee shall give Lessor written notice of any proposed Transfer at least ten (10) days prior to such Transfer taking place and regardless of C09-87
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whether said Transfer,is itself an assignment or will be deemed to be an assignment under this Article 15. If Lessee is a partnership, limited liability company, joint venture or unincorporated association, Lessee shall. concurrently with the execution of this Lease deliver to Lessor a list of all partners, members, joint venturers or owners constituting Lessee, specifying the type of partner, membership and percentage ownership interest of each partner, member, joint venturer or owner, which list shall be certified to be true and correct by at least one general partner or managing owner of Lessee. Further, if any proposed transferee is a partnership, limited liability company, joint venture or unincorporated association, a similar certified list of partners, joint venturers or owners in the proposed transferee shall be delivered to Lessor .together with the written notice of proposed transfer specified above. Notwithstanding the foregoing, the holders of equity interests in Lessee, in whatever form held, may make transfers for estate planning purposes without notice to Lessor, provided that control of Lessee does not change with such transfer.
e) Except as expressly stated above, any assignment without Lessor's prior written consent shall be void and, at the option of Lessor ifthe same is material, may be grounds for terminating this Lease.
f) Neither an assignment of this Lease by Lessee nor Lessor's consent to any assignment shall operate to release or discharge Lessee from any obligations under this Lease unless Lessor'swritten consent to assignment expressly so states.
15.3 Assignments Pursuant to the Bankruptcy Code
The restrictions on assignments of this Lease and other terms and conditions set forth in Paragraph 15.1, and the provisions relating to Appreciation Rent set forth in Article 17, below, shall, to the extent allowed by law, apply to any assignment, transfer, conveyance or sale of this Lease, or any interest of Lessee under this Lease, pursuant to the Bankruptcy Code, or by operation of law. In addition, the following restrictions shall be conditions precedent to the effectiveness of the assignment or other transfer, conveyance or sale ofthis Lease:
a) Any person or entity to which this Lease, or any interest herein, is so assigned, transferred, conveyed or sold, shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment.
Any such assignee shall, upon demand by Lessor, execute and deliver to Lessor a written document confirming such assumption, in a form reasonably acceptable to Lessor. b) Such assignee shall provide Lessor with cash deposits, appropriate bond or bonds, personal guarantees or other forms of security acceptable to Lessor to ensure the future performance of the obligations of Lessee remaining to be performed under this Lease, provided such cash, bond or security is in commercially reasonable amounts, taking into account Lessee's past performance under this Lease and the extent and nature of the proposed assignee's future
obligations hereunder.:
c) Any and all money, cash equivalents, or other consideration payable or otherwise to be delivered in connection. with each assignment, shall be paid or delivered to C09-87
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Lessor, shall be and remain the exclusive property of Lessor and shall not constitute property of Lessee or of the estate of Lessee within the meaning of the Bankruptcy Code. Any and all money or other consideration constituting Lessor's property under the preceding sentence not paid or delivered to Lessor, shall be held in trust for the benefit of Lessor and be promptly paid or delivered~toLessor.
15.4 Restrictions on Subletting
Except as provided in Section 15.1, Lessee shall not sublet the Premises, or any portion thereof, or any right or privilege appurtenant thereto, and shall not sublet any buildings, or other structures on the Premises, without the prior written consent of Lessor; provided, however, no such approval is required for and the requirements of this Paragraph 15.4 shall be inapplicable to, the ordinary rental of hotel rooms, and rooms for group meetings and events.
Lessor shall act reasonably and promptly in reviewing and granting or denying its approval of subleases pursuant to .this paragraph. Lessor need not approve any sublease if, among other reasons, Lessee is in default under any provision of this Lease at the time Lessor's consent is requested or at the time the sublease is to be or become effective, or if Lessor has a reasonable belief that the sublease has been so structured and.. negotiated to avoid the sublease being considered as an assignment under Paragraph 15.1, nor must Lessor approve any sublease which does not, as a minimum, submit to the following criteria:
a) Lessee shall give Lessor reasonable advance written notice of the proposed sublease, providing appropriate documentation to Lessor as Lessor may reasonably require relating to the financial capacity and reputation of the proposed sublessee (excluding limited partners and shareholders), including but not limited to a statement of pending litigation involving the proposed sublessee, past employment and business history of sublessee and its managing agents or officers, and a listing of felony convictions of sublessee, or each separate entity or person making up sublessee.
b) Sublessee must acknowledge in writing that sublessee has had an opportunity to review and has reviewed the terms and provisions of this Lease. c) Sublessee must acknowledge in writing that the sublease is subordinate and subject to this Lease and that sublessee shall. attorn to Lessor in the event Lessor succeeds to the interests of Lessee/sublessor. All subleases entered into after the Commencement Date shall include a provision that expressly makes the Sublessee subject and subordinate to this Lease, including without limitation the provisions regarding reporting Gross Receipts and the keeping of Records related thereto; provided, however, at Lessor's option this subordination may be waived by Lessor. For clarity, a sublease provision as required by the preceding sentence shall mean that in the event of termination of this Lease, at the option of the Lessor, Sublessee's sublease may be terminated by Lessor even where Sublessee is not in default under its sublease. d) By consenting to the sublease, regardless of whether or not the sublease contains provisions for the renegotiation of the rental to be paid by sublessee to Lessee/sublessor, Lessor shall not be deemed to have waived its right to renegotiation of rentals under this Lease and Lessee/sublessor shall be bound by all rent renegotiation provisions of this Lease applicable C09-87
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to Gross Receipts generated pursuant to each sublease. All subleases entered into by Lessee as sublessor shall provide that:
i) the Sublessee shall be subject to all rental revisions arising out of any rental renegotiation between Lessor and Lessee under Article 4 above, as applied to the business operations ofthe sublessee and all Gross Receipts derived therefrom; or ii) effective upon any attornment by the Sublessee to Lessor, the sublease will be deemed to have expressly provided for the renegotiation of rentals, both minimum and percentage, if applicable, concurrently with the time period when Lessor and Lessee would be required to renegotiate said rentals under this Lease and the procedures for the conduct of such renegotiations between Sublessee and Lessor shall be those specified in Article 4 above. e) If the business activities of the proposed Sublessee to be conducted on the sublet portion of the Premises will generate Gross Receipts as that term is defined in this Lease, the sublease shall contain an express provision obligating the proposed Sublessee to conduct its business activities as a ,continuous operation during all normal business hours as .required by Article 23 below.
f) No sublease term shall exceed or extend beyond the Lease Term. g) The Sublessee must acknowledge in writing that Sublessee waives all claims against Lessor for damages to goods, wares, merchandise, buildings, installations or other Improvements in, upon, or about the sublet portion of the Premises, and agrees that Sublessee shall indemnify and save harmless Lessor Parties from and against any and all claims, demands, loss or liability of any kind or nature which Lessor Parties may sustain or incur or which may be imposed upon them or any of them (i) for injury or death of persons, or damage to property as a result of, arising out of, or in any manner connected with the sublease or with the occupancy and use of any portion of the Premises by Sublessee, its officers, agents, employees, contractors, concessionaires, licensees, patrons or visitors, and (ii) in connection with any and all liens for labor, services, supplies or materials arising out of the design, construction, repair, alteration or installation of structures, Improvements, equipment or facilities within the Premises caused by Sublessee.
h) Any mortgage, pledge, hypothecation, encumbrance, transfer, sublease or assignment of Sublessee'sinterest in the Premises, or any portion thereof, whether voluntarily or by operation of law, shall first be approved in writing by Lessor, and if not so approved, shall be void.
i) Sublessee shall not discriminate against any person or class of persons by reason of sex, race, color, religious creed, ancestry, national origin, age, disability, physical handicap, sexual orientation, medical condition or marital status, and shall make its accommodations and services available to all persons on anon-discriminatory basis.
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j) No .alterations, Improvements, or erecting of signs may be accomplished by Sublessee on the Premises .without the prior written approval of Lessor and such other governmental agencies as may have jurisdiction over said work. k) Lessee pays anon-refundable fee to Lessor for processing each request for consent to a sublease in an amount which under the circumstances in light of the size, nature, complexity and expertise required to review said proposed sublease, plus Lessor's reasonable out- pocket of-expenses paid to unrelated third parties such as attorneys, accountants and other consultants connected with the processing of the request for consent to sublease, and the value of services provided by employees of Lessor, its elected officials, in-house counsel and lease administrators.
1) Under the sublease, Sublessee shall expressly agree in writing to maintain and make available for inspection by Lessor all Records required by Article 4 above, in the manner set forth in that Article.
m) Lessee/sublessor shall grant Sublessee only non-exclusive rights for the conduct of any business activities and operations on the Premises, unless Lessor shall expressly agree otherwise in writing.
15.5 Sublease Form
Lessee may prepare, and submit to Lessor for Lessor's approval, a standard form of sublease to be used by Lessee in subletting any portion of the Premises. Upon approval of such standard form by Lessor, nothing shall relieve Lessee of the requirement to provide Lessor with such information.. about the proposed sublease and Sublessee as required in Paragraph 15.4.
Lessor may, acting in good faith and for legitimate business reasons, require that said sublease form previously approved by Lessor be modified or changed to reflect new or different circumstances connected with the Premises or changes in Lessor's subleasing requirements or procedures. Lessee shall pay anon-refundable fee to Lessor for processing the initial review of Lessee'ssublease form and for each modification to Lessee'ssublease form thereafter under this Paragraph 15.5 in an amount which is reasonable under the circumstances in light of the size, nature, complexity and expertise required to review said proposed lease, plus Lessor's out- pocket of-expenses paid to third parties such as attorneys, accountants and other consultants connected with the processing of Lessor's review, and the value of services provided by employees of Lessor, its elected officials, in-house counsel and lease administrators.
15.6 Restrictions on Sublessees' Right to Encumber
a) No Sublessee shall mortgage, pledge, hypothecate, encumber, sublet or assign its interest in the Premises as security, whether voluntarily or by operation of law, without obtaining Lessor's and Lessee's prior written consent. Lessor and Lessee each reserve the right to consent or withhold its consent to any such proposed encumbrancing as Lessor and Lessee shall determine, in their respective commercially reasonable discretion. Any such encumbrancing shall only be on such terms as may be satisfactory to Lessor and Lessee. Lessee shall submit to Lessor the proposed terms and conditions of any such encumbrancing by a C09-87
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Sublessee, including the terms of any loan connected therewith, and shall deliver to Lessor any other documents and information Lessor may reasonably request in determining whether or not to consent or withhold its consent to such encumbrance. b) Lessee shall pay anon-refundable fee to Lessor for processing each request for consent to an encumbrancing of a subleasehold estate in an amount which is reasonable under the circumstances in light of the size, nature, complexity and expertise required to review said proposed encumbrance, plus Lessor's out- pocket of-expenses paid to third parties such as attorneys, accountants .and other consultants connected with the processing of the request for consent, and the value of services provided by employees of Lessor, its elected officials, in-house counsel and lease administrators.
15.7 Lessor'sDiscretion
a) In granting its consent to any sublease or related encumbrancing, Lessor shall have the right to impose upon the proposed Sublessee, as a condition to its consent, compliance with all terms, covenants, conditions and agreements in this Lease. Any subletting or encumbrancing of a subleasehold estate by a sublessee, or by Lessee as sublessor, without such consent, shall be considered an event of default under this Lease. b) Lessee acknowledges and understands that Lessor cannot closely monitor all activities of Lessee and its Sublessees connected with their operations on the Premises and must depend on Lessee'sgood faith monitoring and reports of such activities.
15.8 Assignment and Sublease Documents
It shall be the sole responsibility of Lessee to ensure that all documents relating to any assignment or sublease of all or any portion of the Premises (including any document referred to in Section 15.1) shall be consistent with the terms and provisions of this Lease, and particularly this Article 15.
15.9 Consent Not a Waiver
a) Any consent by Lessor to one assignment, transfer, conveyance, sale, subletting, occupation or use by any person shall riot be deemed to be a consent to any subsequent assignment, transfer, conveyance, sale, subletting, occupation or use, nor shall such consent constitute or operate as a waiver, release, modification or abandonment by Lessor of any rights or claims of Lessor under this Lease.
b) Notwithstanding any provisions herein to the contrary, for purposes of this Article 15, the terms `tassignment" and "subletting" shall not be construed or interpreted to mean or include the renting or leasing of hotel accommodations, meeting or event space. However, the renting or leasing of hotel accommodations, meeting space, shall come under any applicable operating rules and regulations of Lessor. If Lessee rents or subleases any hotel accommodations, or meeting spaces contrary to the rules and regulations of Lessor, or in uTMC09-87
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violation of any other applicable rules or regulations, Lessor reserves the right to require that Lessee cancel the lease of any such hotel accommodations, or meeting space rented contrary to such operating rules and regulations by delivering written notice of required cancellation to Lessee. Lessee shall thereafter cancel the. rental within ten (10) days after delivery of said notice.
If Lessee fails to effect the cancellation within said ten-day period, such failure shall be considered an event of default under this Lease.
c) Lessee. acknowledges and understands that Lessor cannot closely monitor all activities connected with the renting or leasing of hotel accommodations, or any month-tomonth rental, and must depend on Lessee'sgood faith monitoring and reports of such activities.
16. DEFAULT
16.1 Definition of Default
Subject to the rights of an encumbrance holder as stated in Paragraph 16.2, the following shall be deemed a default by Lessee and, subject to Paragraph 16.2, a material breach of this Lease:
a) Failure to pay Minimum Monthly Rental, Percentage Rental, Appreciation Rent, taxes of any type or nature connected with the Premises or the possession, use or occupation of the Premises, or any other sum, fee, or assessment specified under this Lease to be paid by Lessee to Lessor;
b) Failure to pay principal and/or interest, or any other sum when due, to a Lender approved by Lessor, taking into account any grace period or rights of waiver or deferral contained in the applicable mortgage documents;
c) Failure to furnish any Monthly Financial Statement or Annual Financial Statement pursuant to Article 4 above, within the time required; d) Failure to reimburse Lessor within the time required for the cost of auditing any Monthly Financial Statement or Annual Financial Statement pursuant to Article 4, above;
e) .Permitting the Premises, or any portion thereof, to be used for any purpose or purposes not authorized by or in violation of Article 5, above or causing a violation of the trust referenced in Paragraph 5.5 above;
f) Failure to submit Plans, environmental assessments or draft supplemental or subsequent environmental impact reports for the required Improvements to be constructed on the Premises pursuant to Article 6, above, within the time required; C09-87
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g) Failure to obtain permits and/or Entitlements and to complete construction of the Development Program and/or other required Improvements to be constructed on the Premises pursuant to Article 6, above, within the time required; h) Failure to replenish or increase the Deposit pursuant to Article 7, above, within the time required;
i) Failure to provide any bond required to be provided by Lessee under Article 7, above, according to all terms, provisions and conditions specified therein; j) Failure to provide any additional Deposit, or any sums required for the annual adjustment thereof, pursuant to Article 7, above; k) Failure to keep, maintain and repair the Premises, and all Improvements on the Premises pursuant to the requirements specified in Article 9, above; 1) Failure to replenish the additional security and/or to pay Lessor required sums to cover the cost of removing debris within the Premises pursuant to Article 9 above within the time required;
m) Failure to pay Lessor for the cost of repairs and replacements made by Lessor pursuant to Paragraph 10.1 above, within the time required; n) Encumbering, or attempting to encumber, Lessee's interest in the Premises, or any part thereof, or in the Improvements on the Premises, or any part thereof, without first obtaining Lessor'sprior written consent to such encumbrance pursuant to Article 13, above;
o) Encumbering, or attempting to encumber the tide and submerged lands or fee simple title to the Premises, or any part thereof;
p) Failure to reimburse Lessor for all costs associated with a Hazardous Substance contamination of the Premises caused or contributed to by Lessee, or its Sublessees, pursuant to Paragraph 14. f) 3(above, within the time required; q) Failure to maintain required insurance or insurance coverages, or to implement changes in such insurance or insurance coverages, pursuant to Article 14, above, within the time required;
r) Voluntarily assigning, or attempting to voluntarily assign, Lessee'sinterest under this Lease in the Premises, or any part thereof, or Improvements thereon, without first obtaining Lessor's prior written consent to such assignment where required, pursuant to Article 15, above.
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n
s) Subletting, or attempting to sublet, all or any portion of the Premises, or Improvements thereon, without first obtaining Lessor's prior written consent to such subletting pursuant to Article 15 above within the time required;
t) Permitting any Sublessee to encumber, its subleasehold estate without Lessor'sprior written consent in violation ofArticle 15, above within the time required; t) Failing to cancel or cause the cancellation of any hotel room arrangement pursuant to Article 15 .above, which is contrary to Lessor'srules and regulations therefore, within the time required;
v) Failure to maintain and use the Renovation Fund .in accordance with Paragraph 9.2 above;
w) Abandonment of the Premises by Lessee at any time during the Lease Term;
x) Failure of Lessee to commence the repair, construction, reconstruction, replacement or restoration of the Premises, or any part thereof, or any building, structure or other improvement thereon, within the time required, and/or to diligently prosecute such work to completion, pursuant to Article 6 above or Articles 18 or 19 below; y) Failure of Lessee or its Sublessees to conduct business operations on the Premises in full compliance with the effective schedules and procedures therefore, pursuant to Article 23 below;
z) Failure to maintain and use the Capital Improvement Fund in accordance with Paragraph 6.6 above;
aa) Failure to maintain membership in any association for lessees within the harbor Area and/or failure to pay dues or other charges or assessments as may be imposed on Lessee by said association;
bb) Failure to do, observe, keep and perform any of the covenants, conditions and agreements ofthis Lease to be done, observed, kept or performed by Lessee; cc} Submission by Lessee to Lessor of any financial statement, balance sheet, income statement or other financial information including, without limitation, any schedule of aged accounts payable, containing any misleading or materially false information; dd) Failure to immediately commence curing of any default involving action other than the payment of money, and promptly to proceed in good faith to rectify the same and prosecute the same to completion with diligence;
a
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ee) Any involuntary assignment or transfer of Lessee'sinterest in the Premises under this Lease or any part thereof, or Improvements thereon, without first obtaining the prior written consent of Lessor;
ff) Appointment of a receiver of the business or assets of Lessee, or of a member or partner of Lessee, if Lessee is a general partnership or joint venture, or of a general partner of Lessee, if Lessee is a limited partnership, except a receiver appointed at the instance and request of an approved encumbrance holder; and
gg) The making of a general assignment or an assignment for the benefit of creditors, whether voluntarily or involuntarily, by Lessee, by a member or partner of Lessee, if Lessee is a general partnership or joint venture, or by a general partner of Lessee, if Lessee is a limited partnership.
hh) Failure to obtain all permits and other approvals required from the Harbor Commission, Lessor and any other agency or govemmental authority with jurisdiction, including all actions, studies, assessments and reports that may be required in order to comply with all requirements of CEQA and the California Coastal Act prior to constructing improvements or operating a business in violation of the same.
As used in this Lease, the word "default" includes the word "breach."
16.2 Lessee'sRight to Cure a Default
a) As to any default identified in Paragraph 16.1, above, which can be cured by the payment of money to Lessor, an encumbrance holder or other governmental entity or agency, Lessee may cure such default by making the required payment within ten (10) days after receiving written notice from Lessor to remedy or cure such default, b) As to any default identified in Paragraph 16.1, above, which cannot be cured by the payment of money, and excluding the events of default identified in subparagraph (ff), above, Lessee may cure such default by promptly taking such action and doing such things as may be necessary to cure such default within thirty (30) calendar days after receipt of written notice from Lessor; provided that in the event the cure shall take more than thirty (30} days, the time shall be extended for a reasonable time so long as Lessee continuously pursues the cure. c) As to any default identified in subparagraph (ff), above, Lessee may cure such default by obtaining and delivering to Lessor, a dismissal of the legal proceedings upon which the event of default is based within sixty (60) calendar days after receipt of written notice from Lessor to remedy or cure such default.
16.3 Lessor Remedies
a) If Lessee fails to cure. a default within the time and in the manner specified in Paragraph 16.2 above, then, in addition to any other remedy Lessor may have by operation of law, including all rights available to Lessor under Sections 1951.2 and 1951.4 of the Civil Code C09-87
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of the State of California (where a lessor is given the right, among others, to continue the lease in effect after a lessee's breach and abandonment and recover rent as it becomes due, if the lessee has a
right to sublet or assign, subject to reasonable limitations), or otherwise provided herein, Lessor shall have the right and option, upon notice, to:
i) Declare this Lease at an end, in which event Lessee shall immediately pay Lessor a sum of money equal to the amount, if any, by which the then cash value of the rent reserved under this Lease for the balance of the Lease Term exceeds the then cash reasonable rental value of the Premises for the balance of the Lease Term; or ii) Without terminating this Lease, Lessor may give the Sublessees written notice of default and collect all rents, issues, profits, fees, charges, deposits and other sums from the Sublessees otherwise due, owing and payable to Lessee and to apply said sums against obligations owing to Lessor by Lessee under this Lease; and/or iii) Without terminating this Lease, relet the Premises, or any part of the Premises, as the agent for and for the account of Lessee, upon such terms and conditions as Lessor may deem advisable, in which event the rents received on such reletting shall be applied first to the expenses of Lessor in such reletting and collection, including the cost of advertising, any necessary renovation and alterations of the Premises to accommodate. the requirements of the new tenant, reasonable attorneys' fees, the reasonable value of services provided by Lessor's employees, officers, elected officials, lease administrators and in-house counsel, any real estate commissions paid, and thereafter to payment of all sums due or to become due Lessor under this Lease. If a sufficient sum is not realized to pay all such costs and expenses and other charges, Lessee shall immediately pay Lessor, upon demand, any deficiency, even though Lessor may have received rental in excess of the rental stipulated to in this Lease in previous or subsequent months. Lessor may bring an action therefor as such monthly deficiency shall arise. Lessor shall in no event be liable in any way whatsoever for failure to relet the Premises, or in the event that the Premises are relet, for failure to collect the rent therefor under such reletting; or iv) At the option of Lessor, this Lease shall continue in effect for the remainder of the Lease Ternz so long as Lessor does not terminate Lessee'sright to possession, and Lessor may enforce all of the rights and remedies under this Lease, including, but not by way of limitation, the right to recover from Lessee the rent, and all other sums and amounts as they become due hereunder.
16.4 Right ofRe-Entry
The exercise of any right ofre-entry by Lessor under Paragraph 16.3 above, shall be allowed by Lessee without hindrance, and Lessor shall not be liable in damages to Lessee or its Sublessees for any such re-entry, or be guilty of trespass or forcible entry.
16.5 Percentage Rental upon Default
For purposes of this Article 16 and in addition to the Minimum Monthly Rental otherwise payable to Lessor, the additional Percentage Rental for any period after default C09-87
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payable to Lessor by Lessee shall be at a monthly rate, equal to the average monthly Percentage Rental that Lessee was obligated to pay Lessor during the thirty six (36) months immediately preceding the month during which the default occurs (taking into account Minimum Monthly Rentals paid by Lessee during that period) or the actual Percentage Rental due hereunder, whichever amount is greater.
16.6 Lessor'sRight to Ctire Default
In the event of Lessee's breach or default of any term, covenant or condition in this Lease, Lessor may, at any time after ten (10) calendar days written notice of default to Lessee and Lessee'sfailure to cure, act to cure such default for the account of and at the expense of Lessee. If .Lessor at any time by reason of such breach or default is compelled to pay, or elects to pay, any sum of money or to do any act which will require the payment of any sum of money, or is compelled to incur any expense, including fees on account of services rendered or work performed by accountants or consultants, or reasonable attorneys' fees in instituting, prosecuting, or defending any actions or proceedings to enforce Lessor's rights under this Lease or otherwise, the sum or sums paid by Lessor shall bear interest at the lesser of ten percent 10%) per year or the maximum rate then allowed by law, and all such interest, costs and damages shall be deemed to be additional rent under this Lease and shall be due from Lessee to Lessor on the first day of the month following the incurring of such expenses
16.7 Attorneys' Fees
In the event of the bringing of any action by either party hereto against the other by reason of the breach of any covenant or condition on the part of the other party or arising out of this Lease, then the prevailing party in whose favor final judgment shall be entered shall be entitled to recover attorneys' fees and costs.
16.8 Right to Legal and Equitable Remedies, Waiver and Judicial Reference a) In the event of a default or threatened default.. by either party of any term, covenant, condition or agreement of this Lease, the other party shall have the right of injunction and the right to invoke any remedy allowed by law or in equity. Mention in this Lease of any particular remedy shall not preclude either party from any other remedy at law or in equity. b) Lessor and Lessee waive all rights to trial by jury in any action, proceeding or counterclaim brought by either of them against the other on any matters arising out of this Lease or the use and occupancy of the Premises (except claims in unlawful detainer or for personal injury or property damage). If Lessor commences any summary proceeding for nonpayment of rent or other sums due, under this Lease, Lessee will not interpose (and waives the right to interpose if any such right exists) any counterclaim in any such proceeding.
16.9 Rights of Sublessee
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Subject to Paragraph 16. c), 2(any Sublessee shall have the right, at its election, to cure a curable default under this Lease. If any such Sublessee cures all defaults then existing which are capable of being cured, Sublessee's possession and use shall not be disturbed by Lessor as long as (a) Sublessee performs in accordance with the terms of its sublease, and (b) Sublessee attorns to Lessor.
16.10 No Lessee Rights After Termination
Except as otherwise provided in Paragraphs 16.3 and 16.4, above, should Lessor exercise rights available to it by law, specifically granted to it under this Article 16 or reserved or granted to it elsewhere under this Lease, to terminate this Lease and all of Lessee's rights and interest in and to this Lease, the Premises, or the Improvements on the Premises, such termination shall be without compensation to Lessee for any remaining value of this Lease or the leasehold Improvements now existing or hereafter constructed on the Premises by or under the authority of Lessee, and title to such Improvements will automatically revert to Lessor as provided in Paragraph 11.2, above. Lessee shall execute such documents as may be necessary to effectuate the transfer of title to the Improvements and hereby appoints Lessor as its attorney- fact in-to execute such documents on Lessee'sbehalf.
17. APPRECIATION RENT
17.1 Intention of the Parties
The parries agree that upon the occurrence of certain events as set forth in Paragraphs 17.2 and 17.3, if Lessee or its Sublessees receives cash proceeds as a result of such events, Lessor shall receive a portion of such proceeds as Appreciation Rent. For these purposes, receipt by Lessee or its Sublessees of value in a form other than cash will be treated as receipt of the cash equivalent of such value.
17.2 Payment Upon Financing
If Lessee or its Sublessees borrows .money whose repayment is secured, directly or indirectly, by Lessee'sleasehold interest hereunder, Lessee shall pay Lessor a sum equal to ten percent (10%) of the Net Financing Proceeds as Appreciation Rent. Such Appreciation Rent shall be due and payable immediately upon the funding of the loan, and shall be payable in addition to any other sums payable by Lessee under this Lease.
17.3 Payment Upon Assignment
If Lessee or its Sublessees sells or assigns all or any portion of its interest in this _ Lease, directly or indirectly (including the sale or assignment of any membership or other equity interest in Lessee or .its Sublessees to the extent such sale or assignment results in Net Sale Proceeds to the seller/assignor vis-isa-such seller/ sassignor' original investment or capital contribution and pro-rata share of Base Value), Lessee shall pay Lessor a sum equal to ten C09-87
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percent (10%) of the Net Sale Proceeds as Appreciation Rent. Such Appreciation Rent shall be due and payable immediately upon the closing of the sale or assignment, and shall be payable in addition to any other sums payable by Lessee under this Lease. The foregoing provisions of this Paragraph 17.3 shall not apply to the first sale or assignment of any" interest in this Lease, provided it ~ closes during the first five (5) years of the Lease Term, nor shall it apply in connection with any acquisition of the leasehold interest either at foreclosure or by means of a deed- liuin-of foreclosure.
17.4 Arbitration ofAppreciation Rent Disputes
a) The arbitration procedure for determination of Appreciation Rent disputes between Lessor and Lessee following a refinancing, sale or assignment of this Lease pursuant to Paragraphs 17.2 or 17.3 above, shall be the same procedure specified for resolution of Percentage Rental renegotiation disputes set forth in Paragraph 4.9 above, except that the period as provided above within which the parties are to jointly appoint a single neutral arbitrator, shall be thirty (30) days commencing to run from the Appreciation Rent deadline. Further, the arbitrator(s) shall determine the Lessee's interest in the Premises and thereafter calculate the Appreciation Rent.
b) The amount owing to Lessor as Appreciation Rent shall be paid out of escrow upon joint instructions of Lessor and Lessee using the arbitrators' decision as the basis of the instruction, within ten (10) days following delivery of the arbitrators' written decision to Lessee and Lessor.
NOTICE: BY INITIALING IN THE SPACE BELOW,
YOU ARE AGREEING TO HAVE ANY DISPUTE
ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF APPRECIATION RENTS
DISPUTES" PROVISION DECIDED BY NEUTRAL
ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR BY JURY TRIAL. BY
INITIALING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO
DISCOVERY AND APPEAL, ~ UNLESS THOSE
RIGHTS ARE SPECIFICALLY INCLUDED IN THE
KARBITRATION OF VALUATION DISPUTES"
PROVISION. IF YOU REFUSE TO SUBMIT -TO
ARBITRATION AFTER AGREEING TO THIS
PROVISION, YOU MAY BE COMPELLED TO
ARBITRATE UNDER THE AUTHORITY OF THE
CALIFORNIA . CODE OF CIVIL PROCEDURE.
YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.
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WE HAVE READ AND UNDERSTAND. THE
FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN
THE KARBITRATION OF APPRECIATION RENT
DISPUTES" PROVISION TO NEUTRAL
ARBITRAT ON.
Lessor'sInitials Lessee'sInitials
17.5 Transfers of Condominium Units.
Paragraph 17.1 through 17.4 shall not apply to any transfer of a Condominium Unit.
Upon each such transfer (except the transfer to the first Condominium Unit Owner for each unit), the transferor shall pay Lessor a fee equal to one percent (1%) of the value of the consideration paid or payable by the transferee to such transferor.
18. CONDEMNATION
18.1 Termination on Total Taking
If title to all of the Premises is taken for any public or quasi-public use under any statute, or by right of eminent domain, by any duly empowered public entity, including Lessor, then this Lease shall terminate on the date that possession of the Premises is taken.
18.2 Termination on Partial Taking
Subject to Article 34 below, iftitle to so much of the Premises is taken for any public or quasi-public use under any statute or by right of eminent domain by any duly empowered public entity, including Lessor, such that it is economically infeasible for Lessee to use and operate the remaining portion of the Premises for the purposes contemplated by this Lease, Lessee may, at its option, terminate this Lease as of the date that possession of such part of the Premises is taken, provided Lessee shall give .written notice to Lessor of its intention, within thirty (30) days following the date that possession of such part of the Premises is taken.
18.3 Adjustment of Rent on Partial Taking
Subject to Article 34 below, if any part of the Premises shall be so taken and this Lease is not terminated pursuant to the provisions of Paragraph 18.2, above, then this Lease shall, as to the part so taken, terminate as of the date that possession of such part is taken, and the Minimum Monthly Rental payable hereunder shall be abated in the proportion which the Percentage Rental applicable to the portion of the Premises so taken, payable hereunder for the full twelve (12) month period immediately preceding the month in which such part of the C09-87
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Premises is taken, bears to the total percentage rental payable hereunder for said twelve (12) month period. Pursuant to Paragraph 9.1 above, Lessee shall make all necessary repairs or alterations to the buildings and Improvements on that portion of the Premises not taken which is reasonably suitable for Lessee's continued occupancy for the purposes and uses for which the Premises are leased, at its own expense and subject to Lessor's prior approval. Any plans, designs or specifications for such work shall be promptly submitted to Lessor for its review and approval prior to commencement of work by Lessee and Lessee shall secure, at its own expense, all permits and other approvals required for said work from the Harbor Commission, Lessor and any other agency or governmental authority with jurisdiction over said work, including all actions, studies, assessments and reports that may be required in order to comply-with all requirements of CEQA and the California Coastal Act. Further in the carrying out of all such work, Lessee shall comply with and abide by all laws, ordinances, rules .and regulations applicable thereto.
18.4 Allocation ofAward
Lessor shall be entitled to receive and shall receive all compensation for the condemnation of all or any portion of the Premises by exercise of eminent domain as may be allowed by the law then in force, except as hereinafter provided. Subject to Article 34 below, Lessee shall be entitled to that portion of the compensation which is granted for (i) costs associated with necessary repairs or alterations as stated in paragraph 18.3 above and (ii) the loss of use of the Premises, or Improvements by Lessee and its affiliates pursuant to this Lease for the remainder of the Lease .Term, plus any amount specifically awarded for costs or losses Lessee may sustain or incur.. in the relocation or removal of Lessee's trade fixtures. The amount allocated to Lessee for the loss of use of Improvements as above provided shall not be less than the greater of (a) the actual amounts stated in (i) and (ii) above reduced in the percentage that the proportion ofthe expired Lease Term bears to the original Lease Term or (b) the debt secured by Lender'ssecurity interest in the Premises.
18.5 Proration of Rent and Repayment ofSecurity Deposit If this .,Lease is terminated pursuant to this Article 18, the rent and all other obligations of Lessee hereunder shall be prorated to the date of termination, including in the event of any partial taking. If Lessee has paid, performed and observed all of Lessee'scovenants and obligations hereunder, Lessor shall repay to Lessee the Deposit and any refundable fees and other payments hereunder paid by Lessee for any period beyond the date of termination, including for any partial taking (i.e. Lessee shall be entitled to a partial refund of the Deposit due to a partial taking}.
19. DESTRUCTION
19.1 Destruction by Non-Insurable Peril
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In the event of the destruction, whether total or partial, of any building, structure or other improvement on the Premises, which destruction results from a peril for which Lessee is not required to secure: and maintain insurance under the provisions of Article 14 above, and against which Lessee has no insurance in effect at the time of such destruction, hereafter referred to as a "non insurable peril", Lessee shall be under no obligation to repair, construct, reconstruct or restore said building, structure or other improvement.
19.2 Destruction ofLessor Owned, Controlled or Maintained Improvement In the event of the destruction of an improvement or facility owned, controlled or maintained by Lessor, of which the Premises or Improvements on the Premises are a part, and which results in the destruction of the Premises, or all or a portion of any building, structure or other improvement on the Premises, Lessor shall be under no obligation to repair, construct, reconstruct, rebuild, or restore its improvement or facility. If Lessor elects not to rebuild or restore its Improvements, then, for purposes of this Article 19, the destruction applicable to the Premises shall be deemed to have been caused by anon-insurable peril. Conversely, if Lessor elects to rebuild or restore its Improvements and gives written notice of its intention to do so within thirty (30} calendar days from the date of such destruction and, further, provided that the destruction applicable to the Premises was as a result of a peril for which Lessee has insurance or for which Lessee is required to secure and maintain insurance under Article 14, above, then the destruction as to the Premises, whether total or partial, shall be deemed to be by an insurable peril subject to Paragraph 19.6 below.
19.3 Termination or Destruction by Non-Insurable Peril
Subject to Article 34 below, if the Premises are destroyed as a result of a non-insurable peril to such an extent that it is economically infeasible for Lessee to operate and use the remaining portion of the Premises for the purposes contemplated by this Lease, Lessee may, at its option, terminate this Lease as of the date of such destruction, upon Lessee giving written notice to Lessor of its intention. Such notice must be given, if at all, within thirty (30) days following the date on which such destruction occurs.
19.4 Proration of Rent and Repayment of Security Deposit and Fees on Termination
If this Lease is terminated pursuant to the provisions of Paragraph 19.3 above, or Article 34, below, the rent and all other obligations of Lessee hereunder shall be prorated to the date of termination. If,Lessee has paid, performed and observed all of Lessee's covenants and obligations hereunder, Lessor shall repay to Lessee the Deposit referred to in Article 7, above, and any refundable fees and other payments to Lessor hereunder paid by Lessee for any period beyond the date oftermination.
19.5 Adjustment of Rent Upon Less Than Total Destruction by Non-Insurable Peril
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If any part of the Premises shall be destroyed by anon-insurable peril and this Lease is not terminated pursuant to this Article 19 or Article 34, below, then this Lease shall, as to the part so destroyed, terminate as of the date of such destruction and the Minimum Monthly Rental payable hereunder shall be abated in the proportion which the Percentage Rental applicable to the portion of the Premises so destroyed, payable hereunder for the full twelve (12) month period immediately preceding the month in which such destruction occurs, bears to the total percentage rental payable hereunder for such twelve (12) month period immediately preceding the month in which such destruction occurs. In such, event, Lessee shall, at its own expense, promptly make all necessary repairs or alterations to the buildings or Improvements on the Premises which were not destroyed and which are reasonably suitable for Lessee'scontinued occupancy for the purposes and uses for which the Premises are leased. In so doing, Lessee shall comply with all applicable laws, rules, regulations and procedures, and shall obtain all necessary permits and govemmental approvals and the plans for such work shall be submitted to and approved by the Harbor Commission in accordance with the procedure set forth in Paragraph 6.2 above.
19.6 Destruction by Insurable Peril
Subject to Article 34 below, in the event of the destruction, whether total or partial, of any building, structure or Improvements on the Premises as a result of a peril for which Lessee has insurance or for which Lessee is required to secure and maintain insurance under Article 14 above, Lessee, within thirty (30) days from the date of such destruction, or within thirty (30} days from the date Lessor substantially completes its restoration or rebuilding work if the provisions:. of Paragraph 19.2 are applicable to the destruction, shall commence the repair, construction, reconstruction or restoration of said building, structure or other improvement and shall prosecute the same diligently to completion. Such repair, construction, reconstruction or restoration shall be completed in accordance with plans prepared by Lessee and submitted to and approved by the Harbor Commission pursuant to procedures set forth in Paragraph 6.2, above, and for which Lessee shall have obtained all necessary permits and governmental approvals. Any such destruction, whether total or partial, shall in no way annul or void this Lease, except that Lessee may be entitled to a reduction of the minimum monthly rental from the date of such ,destruction and continuing to the completion of such repair, construction, reconstruction or restoration, not to exceedthirty-six (36) months. Such reduction shall be based upon the extent to which the making of such repair, construction, reconstruction or restoration shall interfere with the business conducted by Lessee on the Premises. Lessor shall determine the amount of the rent reduction, if any, in its commercially reasonable discretion, taking into account all rental insurance benefits connected with the Premises and payable to the parties. If the rental insurance required under Paragraph 14.6 above is not in effect at the time of such destruction for any reason, Lessee shall not be entitled to any rent reduction under this Paragraph 19.6.
19.7 Controlling Agreement
This Lease shall be considered an express agreement governing any case of damage to or destruction of buildings, structures or Improvements on the Premises. by fire or other casualty, and any law which purports to govern the rights of Lessor and Lessee in such a C09-87
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contingency in the absence of express agreement, and any successor or other law of like import, shall have no application.
20. ABANDONMENT
Lessee shall not abandon the Premises at any time during the Lease Term. If Lessee shall abandon the Premises, or be dispossessed by process of law or otherwise, any personal property, including trade fixtures, belonging to Lessee and left on the Premises, or in any building, structure, or other Improvements previously existing or made by Lessee on the Premises,-shall, at the option of Lessor, be deemed to have been abandoned within the meaning of the California Civil Code and Code of Civil Procedure and, in addition to all rights and remedies allowed by law, Lessor shall have the right to recover from Lessee all costs and expenses incurred and paid by Lessor in disposing of such property, including attorneys' fees and the reasonable value of all services provided by Lessor's employees, elected officials, lease administrators and/or auditors and in-house counsel, connected therewith.
21. WAIVER OF BREACH
No waiver of any breach or default by Lessor or Lessee shall constitute a waiver of any other breach or default, whether of the same or any other covenant or condition. No waiver, benefit or privilege voluntarily given or performed by Lessor or Lessee shall give Lessee or Lessor, as the case may be, any contractual right by custom, estoppel or otherwise. The subsequent acceptance'. of rent or any other payment pursuant to this Lease shall not constitute a waiver of any preceding .default by Lessee other than the default in the payment of the particular rental or other payment so accepted, regardless of Lessor'sknowledge of the preceding breach at the time of accepting said payment. Nor shall the acceptance of rent or any other payment due hereunder after termination constitute a reinstatement, extension or renewal of this Lease or revocation of any notice or other act by Lessor, except as expressly agreed to in writing and signed by Lessor.
22. COMPLIANCE WITH THE LAW
22.1 Rules, Statutes and Ordinances
Lessee and all of its Sublessees shall, in all activities on or in connection with the Premises and in all .uses thereof, including the making of any Improvements, alterations or changes and the installation of any equipment, abide by and conform to all rules and regulations prescribed by Lessor, the City Charter of Lessor, any ordinances of said Lessor, including, but not limited to, the Building Code, any general rules of the Harbor Department of Lessor, the Harbor Commission, Fire Department and Police Department of Lessor, and any applicable federal or state statutes.. or municipal laws now in force or which may hereafter be in force.
Further, in the event a violation of any such rule, regulation, ordinance, statute or other law is attributable to actions or conduct of any Sublessee of Lessee, Lessee shall not be deemed to be in C09-87
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default under this Lease so long as Lessee acts with diligence to obtain compliance or, if unable to do so, promptly takes steps necessary to remove such Sublessee or cure the violation.
22.2 Judicial Decrees
The final judgment of any court of competent jurisdiction, or the admission of Lessee in any action or proceeding, including arbitrations or administrative proceedings to which Lessee is a party, whether Lessor is a party thereto or not, that Lessee has violated such rules and regulations, ordinance; statute, or other law in the use or occupancy of the Premises, shall be conclusive of the fact as between Lessor and Lessee.
23. OPERATIONS
23.1 Continuous Operation
Lessee .and its Sublessees shall continuously conduct business operations on the Premises and shall keep the Premises open for business and cause such businesses to be conducted thereon during usual business hours of each business. day that is customary for businesses of like character in Southern California. All businesses.. conducted on the Premises shall maintain adequate stocks of merchandise and shall employ sufficient personnel on the Premises to operate all businesses in accordance with sound business practices.
23.2 Public Purpose
In implementing this Article 23, the Harbor Director shall give primary consideration to the public purposes for which Redondo Beach King Harbor and the Harbor Area were established and are. maintained.
23.3 Operating Rules
Lessee agrees that it will operate and manage the services and facilities offered on, from or in connection with the Premises in a competent and efficient manner at least comparable to other well-managed, First Class operations of similar type. Lessee shall at all times retain active, qualified, competent and experienced personnel to supervise Lessee's operation and to represent and act for Lessee. Lessee shall .further require its attendants and employees to be properly dressed, clean, courteous, efficient and neat in appearance at all times while on the Premises; Lessee shall not employ any person(s) in or about the Premises who shall use offensive language or act in a loud, boisterous or otherwise improper manner Lessee shall maintain a close check,. over. attendants. and employees to insure the maintenance of a high standard of service to .the public and shall replace any employee whose conduct is detrimental to the best interests of the public. Further, Lessee shall indemnify, defend and hold Lessor free and harmless from any and all claims, suits, demands, actions and causes of action arising out of this Lease and which may be made or asserted against Lessor by any employee, or former employee, agent, representative or other person, firm or entity connected with Lessee; provided, however, C09-87
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no obligation of Lessee to defend or indemnify Lessor shall exist to the extent Lessor requires, over the reasonable objection of Lessee, the termination, demotion, or punishment of Lessee's employee.
24. PRICE POLICIES
a) One of the purposes of this Lease is to promote development of the Premises to serve public uses by providing needed facilities available to the public at fair and reasonable prices.
Prices charged at the Premises shall be commercially fair and reasonable. b) Lessee is entitled to a fair and reasonable return upon its investment pursuant to the Lease.
c) Consistent with subparagraphs (a) and (b) above, Lessee shall utilize commercially reasonable efforts to maximize profits generated on and from the Premises and Improvements, and cause the activities at and uses of the Premises and Improvements to be conducted in a businesslike manner for the mutual benefit of both Lessor, and Lessee.
25. TAXES
Lessee shall pay or cause to be paid before delinquency all taxes, assessments or fees levied, assessed or charged upon Lessee or the Premises including those levied, assessed or charged by reason of any buildings, structures, equipment, appliances or other Improvements of any nature whatever utilized, erected, installed, or maintained on the Premises, or by reason of the business or other activities of Lessee or its Sublessees upon or in connection with the Premises. Lessee shall further pay or cause to be paid any fees imposed by law for licenses or permits for any business or activity of Lessee or its Sublessees upon or in connection with the Premises or under this Lease. Lessor states and Lessee acknowledges that the interest created in favor of Lessee under this Lease may be a possessory interest subject to taxation under the California Revenue and Taxation Code.
26. LESSEE'SASSOCIATION
a) Lessee agrees to maintain membership and pay dues, fees, and other charges hereafter "Fees"} in any organization that may be organized, formed or sponsored by Lessor for substantially all lessees within the .Harbor Area ("Association") and to pay such Fees, if any, as may be established by the membership, to be used at the direction of the officers of such organization for the promotion of the business and public operations located within the Harbor Area; provided, that under the bylaws of such organization, no matters (including, without limitation, the election of officers and the establishment of Fees) shall be deemed to have been adopted by such organization for purposes of this Article 26 unless approved by a majority of the members of the Association at the time of adoption.
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b) The percentage of payment of Fees to be made by Lessor and Lessee shall be reasonable and the voting power of Lessor or Lessee shall be computed pursuant to the policy set forth by the Association, which policy is subject to modification and amendment from time to time upon the majority vote of the Association members and with Lessor'sconsent.
27. WASTE
Lessee and Lessor shall not commit, or suffer to be committed, any waste or nuisance upon the Premises.
28. HOLDING OVER
This Lease shall terminate without further notice at the expiration of the Lease Term.
Any holding over after the expiration of the Lease Term, or extension thereof, without the prior written consent of Lessor which shall be exercised with commercially reasonable discretion, shall be construed to be a
tenancy from month to month, on the terms and conditions herein specified, so far as applicable, provided that the Minimum Monthly Rental shall be equal to three 3) times the minimum monthly rental rate in effect at the expiration ofthis Lease. Such holding over shall not include any time reasonably employed by Lessee in the removal of trade fixtures in the manner provided in Paragraph 11.2 for such removal. Any holding over by Lessee after expiration of the Lease Term shall not constitute a renewal or extension of this Lease or give Lessee rights in or to the Premises, except as otherwise expressly provided in this Lease.
29. OPTIONS TO EXTEND TERM.
29.1 Grant ofOptions
Lessor hereby grants to Lessee the option to extend the Lease Term for two (2) additional option periods. The first option period shall be a five (5) year period commencing when the initial Lease Term expires. The second option period shall be a second five (5) year period commencing when the first option period expires. Lessee shall deliver written notice of such election to Lessor at least twelve (12) months but not more than twenty-four (24) months prior to the date that the option period would commend. If proper notification of the exercise of an option is not given; such option shall automatically expire. Options may only be exercised consecutively so that the Lease Term shall be without interruption and a later option cannot be exercised unless the prior option has been validly exercised.
29.2 Effect of Default on Options
Lessee shall have no right to exercise an option granted pursuant to Paragraph 29.1 above under any of the following conditions:
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a} during any period commencing with the giving of any notice of default and continuing until said default is cured;
b) during any period in which all or a portion of rent remains unpaid; c) during any period in which Lessee is in breach of this Lease; or d) in the event Lessee has been given three (3) or more notices of separate default, whether or not the defaults are cured, during the twelve (12) month period immediately preceding the exercise of the option.
Except as otherwise expressly set forth in this Article 29, Lessee shall have no other right or option to extend the Lease Term.
30. NON-DISCRIMINATION
Lessee shall not discriminate against any person or class of persons by reason of sex, race, color, religion, creed, national origin, ancestry, age, disability, physical handicap, sexual orientation, medical condition or marital status. Lessee shall make its .accommodations, services and facilities available to the public on fair and reasonable terms, as further specified in Article
24. 31. NOTICES
a) Any and all notices or demands by or from Lessor to Lessee, or Lessee to Lessor, shall be in writing. They shall be served either personally, by pre-paid commercial courier providing receipt or by certified mail, postage prepaid, return receipt requested. If personally served, service shall be conclusively deemed made at the time of service. If served by certified mail or commercial courier, service shall be conclusively deemed upon delivery addressed to the party to whom such notice or demand is to be given, as hereinafter provided. Any notice or demand shall be given as follows:
Ifto Lessor:
City of Redondo Beach
City Hall
415 Diamond Street
Redondo Beach, CA 90277
Attention: City Clerk
If to Lessee:
Zislis Boutique Hotels, LLC
321 12th Street
Suite 101
Manhattan Beach, CA 90266
Attention: Michael Zislis "
With copies to the following at the same
address: City Attorney and Harbor
Department Director
With a copy to the following:
Law Offices of John A. Strain
John A. Strain, Esq.
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321 12~' Street
Suite 101
Manhattan Beach, CA 90266
b) Any notice or demand given to Lessee by Lessor shall also be given contemporaneously to any encumbrance holder of Lessee at such addresses as Lessee shall specify to Lessor in writing.
All addresses provided herein may be changed by written notice given in the manner provided herein. Any such written notice may provide that notices may be delivered by email to a specified email address in addition to the form of notice otherwise provided in this Article 31.
32. COASTAL COMMISSION PERMITS
Upon surrender, expiration or termination of this Lease, Lessee shall assign to Lessor all of Lessee'sright and interest in and to any coastal permits issued in connection with the Premises and Improvements and shall execute any and all documents required by Lessor or any other governmental entity to complete said assignment.
33. RESERVATIONS TO LESSOR
a) The Premises are accepted by Lessee subject to any and all existing easements, encumbrances, trusts, covenants and restrictions of record. Lessor reserves the .right to install, lay, construct, maintain, repair and operate such sanitary sewers, drains, storm water sewers, pipelines, manholes and connections; water, oil and gas pipelines; telephone, telegraph, cable television and power lines; and the appliances and appurtenances necessary or convenient in connection therewith, in, over, upon, through, across and along the Premises or any part thereof, and to enter the Premises for any and all such purposes. Lessor also reserves the right to grant franchises, easements, rights of way and permits in, over, upon, through, across and along any and all portions ofthe Premises, including all rights to air space above the Premises, provided the same do not materially interfere with Lessee's quiet possession as provided above in Paragraph
12.2. b) Lessor agrees that rights granted to third parties by reason of this clause shall contain provisions, among others provided for herein, that the surface shall be restored as nearly as practicable to its original condition upon the completion of any construction. c) Lessor reserves to itself, for the benefit of the public, an easement over any walkways, bikeways, roadways, waterways, parking areas and other portions of the Premises which must be open and accessible to the public in order to facilitate and promote the pubic's use and patronage of the Premises and Harbor Area.
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34. LESSOR'SREVERSIONARY OPTION
In the event of a taking of the Premises, or any part thereof under Article 18, above, or a total destruction of the Premises, or a partial destruction of the Premises or any Improvements thereon, as described in Article 19, above, to the extent that it is economically infeasible for Lessee fo continue to operate and use the remaining portion of the Premises pursuant to this Lease, which condemnation or destruction occurs within the last five (5) years of the Lease Term, Lessee or Lessor may declare a reversion of the leasehold by delivering written notice thereof to Lessee within ninety (90) days from the date of such condemnation or destruction.
Should a reversion be declared pursuant to this Article 34, Lessor shall be entitled to the immediate possession'and control of the entire Premises, subject to Lessee'sright to remove its trade fixtures pursuant to Paragraph 11.2 above. Further, this Lease shall be cancelled and terminated upon transfer of possession or entitlement to possession of the Premises to Lessor and the parties agree that all compensation for the condemnation and all insurance proceeds payable to either party arising out of or connected with the destruction shall belong to and be the property and entitlement of Lessor after payment of all sums then due Lender, including any loan balance secured by a security instrument on the Premises. Lessee shall thereafter be excused from any further performance under this Lease except for cooperating with and assisting Lessor in taking such action as may be necessary or appropriate to obtain prompt and timely payment of the condemnation award or any insurance proceeds due as a result ofthe destruction.
35. SUCCESSORS
Subject to the provisions herein relating to assignment and subletting, each and all of the terms, conditions, and agreements herein contained shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of any and all of the parties hereto; and all of the parties hereto shall be jointly and severally liable hereunder.
36. CAPTIONS
The titles or headings to the Articles/Paragraphs of this Lease and any table of contents of this Lease are not a part of this Lease, and shall have no effect upon the construction or interpretation of any part hereof.
37. TIME
Time is of the essence of this Lease. Any reference in this Lease to "days" shall refer to calendar days, and not business days or working days unless otherwise specified. "
38. CONSTRUCTION
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a) With respect to all words used herein, the masculine, feminine or neuter gender, and the singular or plural number shall each be deemed to include the others whenever appropriate to the context.
b) 'T'he. use of the terms "including," " include," and "includes" followed by one or more examples is intended to be illustrative and shall not be deemed or construed to limit the scope of the classification or category to the examples listed.
c) All exhibits that are referenced as "attached hereto" are incorporated in this Lease and made part of this Lease for all purposes. -
d) This Lease has been prepared by Lessor and its professional advisors and reviewed by Lessee and its professional advisors. The parties and their advisors believe this Lease is the product of all of their .efforts, that it expresses their agreements and that it should not be interpreted in favor of :either Lessor or Lessee merely because oftheir efforts in preparing it. e) The laws of the State of California shall govern the validity, interpretation, performance and enforcement of this Lease, without giving effect to its conflicts of laws principles.
39. SAVINGS CLAUSE
In the event that any provision or provisions of this Lease .are, or are hereafter adjudged to be, for any reason, invalid or unenforceable, the remaining provisions of this Lease shall continue to exist and remain in full force and effect provided the material intent of the parties is not frustrated by such invalidity or unenforceability.
40: RECORDATION OF MEMORANDUM OF LEASE
This Lease need not be recorded. A Memorandum of Lease may be recorded in lieu of the recording of the entire Lease. If the Lease is not recorded, the parties agree to execute a Memorandum of Lease .which must be recorded within 90 days of the Commencement Date at Lessee's
expense.
41. ESTOPPEL CERTIFICATE
a) Within twenty (20) days after notice from Lessor, Lessee agrees to execute and deliver to Lessor a certificate addressed to such person as Lessor shall specify, stating (i) that this Lease is in full force and effect, (ii) the modifications, if any, to this Lease, (iii) all other agreements between Lessor and Lessee, and (iv) whether Lessee claims any default or breach of this Lease on the part of Lessor. The certificate shall also state (v) the amount of Minimum Monthly Rental then in effect, (vi) the dates to which Minimum Monthly Rental and Percentage Rental have been paid, (vii) the amount of any security deposits or prepaid rent, and (viii) the C09-87
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e
fact that percentage rental payments are subject to audit under Paragraph 4.6 above. If Lessee fails to deliver the certificate within twenty (20) days, it shall be conclusively presumed for the benefit of Lessor and the addressee that this Lease is in full force and effect and has not been modified except as may be represented by Lessor, and Lessee shall be deemed to have waived any breach or default of Lessor.
b) Lessor shall, at no charge, at any time and from time to time hereafter, within forty-five (45) days after written notice from Lessee, execute, acknowledge and deliver to any holder or proposed holder, or any other person, or entity specified in such request, a statement certifying that (i) this Lease is in full force and effect, (ii) the modifications, if any, to this Lease, iii) all other agreements between Lessor and Lessee, and (iv) whether Lessee claims any default or breach of this. Lease on the part of Lessor. The certificate shall also state (v) the amount of Minimum Monthly Rental then in effect, (vi) the dates to which Minimum Monthly Rental and Percentage Rental have been paid, (vii) the amount of any security deposits or prepaid rent, (viii) the fact that percentage rental payments are subject to audit under Paragraph 4.6 above and (ix) the existence of any offsets, counterclaims or defenses on the part of Lessor, (x) the commencement and expiration dates of the term of the Lease, and (xi) any other matters that may reasonably be requested.
42. AMENDMENTS
This Lease sets forth all of the agreements and understandings of the parties and supersedes all prior agreements, if any, between the parties concerning the Premises. Any amendments must be written and signed by the parties and Lessor reserves the right to require that Lessee reimburse Lessor for all costs and .expenses incurred in connection with the processing of any amendment to this Lease requested or required by Lessee, including any accounting, auditing, bookkeeping and computer fees, and expenses, administrative, financial and economic consultant fees, legal fees and the reasonable value of the services provided by Lessor's employees, elected officials, lease administrators, and/or lease auditors and in-house counsel.
43. SIGNATURES
This Lease shall be signed by the Mayor and City Clerk of Lessor and by Lessee following due authorization thereof.
44. EXECUTION IN COUNTERPARTS
This Lease may be executed in two (2) or more counterparts, each of which shall bean original and all of which shall constitute one and the same instrument.
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45. FORCE MAJIEURE
No delay or failure in performance by either Lessee or Lessor shall constitute default hereunder or give rise to any claim for damages, if, and to the extent, such delay or failure is Force Majeure. Unless such Force Majeure substantially and materially frustrates performance of this contract, it shall not operate to excuse but only delay performance hereunder.
46. [ RESERVED]
47. ADJUSTMENT OF INSURANCE COVERAGES
a) The minimum insurance coverages specified in Article 14 shall be adjusted as of the beginning of each Subsequent Minimum Rental Period by the increase, if any, from the CPI Index.
b) The particular insurance coverage specified as identified in subparagraph (a), above, shall be calculated as follows: the sum or amount specified in this Lease shall be multiplied by a fraction, the numerator of which shall be the CPI Index of the. calendar month prior to the month during which the amount is to be .paid or insurance obtained, and the denominator of which shall be the CPI Index for the calendar month of .the Commencement Date. The sum so calculated shall be the particular coverage required under this Lease, but in no event shall the particular insurance coverage be less than the coverage as specified in this Lease. c) In the event the compilation and/or publication of the CPI Index shall be transferred to any other governmental department or agency, or shall be discontinued, then the substitute index most nearly the same as the CPI Index shall be used to make the calculation, as the parties shall agree. If a substitute index is not specified by the governmental agency or department involved, and the parties cannot agree on a substitute index to be used in place of the CPI Index, then, for purposes of the calculations herein, it shall be assumed that the numerator of the fraction identified in subparagraph (b), above, shall have increased by a factor of three (3) points for each twelve (12) month period after the effective date ofthis Lease.
48. PAYMENTS AS ADDITIONAL RENT
All fees,. payments, assessments, charges, deposits, damages and other sums payable to Lessor by Lessee under this Lease, including any interest due or accruable thereon, shall be deemed to be additional. rent due and payable to Lessor hereunder. The failure to make payment of any such sum when due shall be a default under Paragraph 16. a) 1(above, in addition to being a breach of the provision of this Lease wherein the obligation to make said payment is specified.
Upon such breach or default, Lessor shall have available to it all rights and remedies provided by law and under this Lease, including the right to terminate this Lease.
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49. NO BROKER
Lessor and Lessee represent that they have not dealt with or through a broker or other agent with respect to the negotiation and entering into this Lease, and that neither party is aware of any such person or entity who claims or is entitled to a finders fee or commission arising out of this Lease.
50. AUTHORITY
If Lessee is a corporation, limited liability company, or a partnership, those persons executing this Lease for and on behalf of Lessee represent that they have been authorized and directed to execute this Lease for and on behalf of such corporation, limited liability company, or partnership. Further, if Lessee is a corporation or limited liability company, Lessee shall provide Lessor with a certified copy of the resolution approving this Lease and authorizing the persons signing this Lease to do so for and on behalf of Lessee.
51. VENUE
Unless otherwise agreed by Lessor and Lessee, venue for any litigation between the parties shall be exclusively in the federal or state courts with subject matter jurisdiction in Los Angeles County, California.
52. ASSUMPTION OF RISK
As a condition of acceptance of the issuance of the Coastal Commission Permit, the Coastal Commission requires Lessee to include in this Lease, in a form and content acceptable to the Executive Director, an acknowledgement and agreement of Permit Holders with regard to assumption of risks associated with development covered by the Permit. As so required, Lessee hereby acknowledges. and agrees on behalf of Permit Holders, that (i) the Premises may be subject to hazards from. waves, storm waves, flooding and erosion, (ii) Permit Holders assume the risks to the applicant and the Premises of injury or damage from such hazards in connection with the development which is the subject of the Coastal Commission Permit, (iii) Permit Holders unconditionally waive any claim of damage or•liability against Coastal Commission, its officers, agents and employees for injury or damage from such hazards, (iv) Permit Holders indemnify and hold harmless the Commission, its officers, agents, and employees with respect to the Commission'sapproval of the project covered by the Permit against any and all liability, claims, demands, damages, costs (including costs and fees incurred in defense of such hazards, and (v) Permit Holders agree to include a provision in any subsequent sublease orassignment of the development authorized by the Coastal Commission Permit requiring the sublessee or assignee to submit a written agreement to Coastal Commission for the review and approval of the Executive Director incorporating all of the forgoing restrictions identified in (i) through (iv) above.
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b
53. EXHIBITS
The following are exhibits to this Lease:
Paragraph First
A earin
Description
A Recital B Premises
B 1 b A licable Percenta a /Percenta a Rent
C 1(m) Develo ment Pro ram
D 5.a)1( Permitted Uses
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IN WITNESS WHEREOF, the CITY OF REDONDO BEACH, Lessor herein, has duly authorized this Lease to be executed by its Mayor and City Clerk, and the seal of said City to be affixed, and Lessee has duly authorized and signed this Lease on the date day and year first hereinabove written.
KLESSOR"
TENANT:
ZISLIS BOUTIQUE HOTELS, LLC,
A California limited liability company
By: ~~
Name: ~ c~~ ~ 1 A, i. (..;~ 5
Its: ~' 1c:~,~ t c c1 ~ ~
J
APPROVED AS TO FORM:
ichael ebb
ttorney
ATTEST:
By:
Eleanor Manzano
City Clerk
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b
STATE OF CALIFORNIA )
ss.
COUNTY OF LOS ANGELES )
On ~~~'~~'~ ~ ~ ~ i{~~ , before me, ~~%~~ (~" t~ ~ ~~' l' b' ~ ~ ~ L`~l ~C. , ( here insert name and title ofthe officer), personally appeared ~ ,[ " f , who proved to me on the basis of satisfactory evidence to be the erson whose name subscribed to the within ;instrument and aclcnowled _ed to me tha~~'/ tryexecuted the same in h~rt~authorized capacity(~), and that by is tl signature(~nthe instrument the person, or the entity upon behalf of which the person(acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws ofthe State ofCalifornia that the foregoing paragraph is true and correct. -
WITNESS my hand and official seal. S~ElEImo. AA Hi1u
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Signature ofNotary ( Seal)
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EXHIBIT KA"
PREMISES
That certain parcel of land in the City of Redondo Beach, County of Los Angeles, State of California, more particularly described as follows:
Beginning at a point on a Record of Survey "Control Line" as described in Book 78, Page 100 of Record of Surveys in the Office ofthe Recorder of said County, designated as H-2 on said line, thence North 79°- 33" 57'-West a distance of 39.19 feet to a point, said point being the intersection of the centerlines of Hermosa Avenue and Sixth Street as .shown on the map of Ocean Beach Subdivision recorded in Map Book 2, Page 35 Records of said County, thence South 24°-37'- 24" East a distance of 256.89 feet to a point, said point being the beginning of a curve, a radial line through said point bearing South 65°- 36" 22'-West, thence Westerly a distance of 39.00 feet along said radial line to a point, said point being the beginning point of a curve concave to the Northeast, having a radius of 1, 00989.feet and a central angle ofOS°- 56" 08'-thence southeasterly along the arc of said curve a distance of 178.74 feet to the end of said curve, thence tangent to said last mentioned curve South 29°-0" 46'-East a distance of 109.94 feet to the True Point ofBeginning, thence continuing South 29°-0" 46'-East a distance of 239.33 feet, thence South 60°- 40" 13'-West a distance of 259.39 feet, thence North 16°- 36" 41'-West a distance of 291.82 feet, thence North 73°- 24" 18'-East a distance of 198.50 feet to the True Point ofBeginning.
Containing therein approximately 60, 9001.square feet.
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EXHIBIT KB"
APPLICABLE PERCENTAGE /PERCENTAGE RENT
All annual terms begin upon the Rent Commencement Date
Food and Beverage Sales
For Food and Beverage Sales included in Gross Receipts:
a} Years 1-6: 2.5% of that portion of such Gross Receipts below two million dollars 2, 000); 00,and
b) 3.5% ofthat portion of such Gross Receipts equal to or exceeding two million dollars 2, 000) 00,
c) For Years 7 through. the end of the Lease Term, 3.5% of such Gross Receipts.
Hotel Sales
For Hotel Sales included in Gross Receipts:
a) Years 1-6: 5% of that portion of such Gross Receipts below three million dollars 3, 000); 00,and
b) 7.5% of that portion of such Gross Receipts equal to or exceeding three million dollars 3, 000) 00,
c) For Years 7 through the end ofthe Lease Term, 7.5% of such Gross Receipts generated by Hotel Sales.
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EXHIBIT uC"
DEVELOPMENT PROGRAM
A. General. Lessee (in conjunction with its Sublessees) will develop and construct a luxury hotel of similar quality to Shade Hotel in Manhattan Beach. The structure shall not exceed 39,000 square feet and shall include approximately 54 rooms (but such limits will be subject to adjustment by the parties). The structure will also include a restaurant serving food and beverages, orie or more facilities for meetings and events, and at the Lessee's discretion a pool or spa.
B. Entitlement Steps. Following execution of this Lease, the parties will cooperate in using their best efforts to promptly obtain all approvals and Entitlements necessary or convenient for completion of the project including (but not limited to) any Coastal Commission approvals. Any of Landlord'sfees otherwise chargeable for expedited reviews shall be waived.
C. Demolition. Demolition of the existing structure shall begin no sooner than November 1, 2009 following approval of such step by the Landlord and the obtainment of all applicable regulatory permits and approvals. Lessee (in conjunction with its Sublessees) shall manage all such demolition work, subject to receiving the credit described in Section 4.10 and subject to Landlords' obligations specified in Section D below.
D. Ground and Walkways.
1. Lessor may develop a 12 foot wide walkway and bike path along the length of the marina to the west of the Premises. and adjoining properties as part of the California Coastal Trail ieferred to in Municipal Code 10- 815(5. 8). Until such time as the Lessor completes such development to connect to the edge of the Premises, Lessee shall establish and maintain landscaping in such area in a manner consistent with the .intended quality and appearance of the Premises.
2. Lessee may develop a portion of the Premises as public open space, as contemplated by current Municipal Code § 10- 815( 1)-5.a)( b If so, such development shall be subject to reasonable approval by the Lessor and Lessee or its Sublessee may oversee and manage scheduling of use of such public space.
E. Adjacent Properties.
The Parties shall discuss potential arrangements for the Hotel Operating Company to have access for special events at the park located on the peninsula to the Northwest ofthe Premises.
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2. To the extent the parking lot to the North of the property becomes available the parties will negotiate for possible uses of such property to expand the Hotel subject to providing parking adequate for marina and other purposes.
3. ~ Lessor will make reasonable efforts to ensure uses and maintenance of adjacent properties on ground leases controlled by Lessor remain in conformance with respecrive lease terms. Lessor understands Lessee and Sublessee's desire that adjacent property uses and configurations be consistent with the intended quality and attractiveness of the .Hotel and the intended long term use of the walkway/bike path adjoining the Premises.
F. Proposed Site Plan. A proposed site plan related to the development and use of the Premises follows on the next three (3) pages.
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Proposed Ground Floor/Site Layout
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EXHIBIT KD"
PERMITTED USES
Lessee and its Sublessees shall use the Premises as a luxury boutique hotel, restaurant, lounge and. facility for meetings and -events.
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