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Home My WebLink About16 - Lease of City Office Space at 503 32nd StreetCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 16 May 13, 2008 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Planning Department Leigh M. De Santis, Economic Development Administrator, 949 - 644 -3207, Idesantis @ci.newport - beach.ca.us SUBJECT: Lease with Jakosky Properties for City Office Space at 503 32nd Street ISSUE: There is not enough space to accommodate additional staff approved by the City Council for the Building Department and implementation of the group residential ordinance in City Hall or the on -site trailers. Should the City approve the attached lease for 750 square feet of office space off site? RECOMMENDATION: 1. Approve the attached lease with Jakosky Properties for an office suite at 503 32 "d Street and authorize the City Manager and City Clerk to sign the lease. 2. Approve a budget amendment transferring $21,560 for computer equipment and office furniture from unappropriated general fund reserve to Code and Water Quality Enforcement and Building Department capital outlay accounts. 3. Appropriate $29,468 from unappropriated fund balance in fiscal year 2008 -09 for rent and utilities, with $14,734 to the Building Department and $14,734 to Code and Water Quality Enforcement. DISCUSSION: There is not adequate space for additional staff in City Hall or the on -site trailers. There is an immediate need for space for two building plan check engineers approved by the City Council on December 11, 2007, as well as part -time staff and consultants approved to work on implementation of the group residential ordinance. Lease with Jakosky Properties for City Office Space at 503 32nd Street May 13, 2008 Page 2 Staff has found available office space at 503 32nd Street, which is just across Via Oporto from the Fire Station and is a two minute walk from City Hall. The available office suite will provide four office spaces. It will be relatively inexpensive and easy to provide computer and telephone linkage to the City Hall systems at this location. The proposed lease is for two years with two, two -year options. During the second two - year option, the lease may be terminated by the City with one hundred twenty (120) days notice. The starting lease rate is $3.00 per square foot plus utilities and a portion of the property tax. A survey of other vacant properties in the City Hall area confirms that $3.00 per square foot is the market rate. The rent escalates 3% annually on its anniversary during the initial term and both options. The first year of the lease is $2,250 per month for a twelve month total of $27,000. The second year will be $2,318 per month for a twelve month total of $27,816. The lease includes two parking spaces among those exclusive to 503 32 "d Street in the parking lot between City Hall and the 503 building. It also contains a one -time right of first refusal for another ground floor office suite in the 503 building should it become available. The City may take possession of the property on May 15, 2008, and rent will begin on June 1. In addition to the rent, the City will need to spend money to furnish the offices. Two existing work stations will .accommodate the group residential staff, but they will need chairs and computer equipment. Desks, chairs and bookcases are needed for the engineers, but computer equipment for this staff was included in the budget amendment approved when these positions were authorized in December. Finally, an IT network connection to City Hall systems is needed. These items are estimated to have a one- time cost of $21,560, as detailed on the attached estimate sheet. ENVIRONMENTAL REVIEW: Entering into a lease is not a project as defined by CEQA FUNDING AVAILABILITY: One month's rent and utilities ($2,250 and approximately $200, respectively) needs to be paid from the current fiscal year budget. Sufficient funds are available in the Building Department Maintenance and Repair account, 2920 -8030; the recommended budget amendment transfers these funds to account 2910 -8070 Rental Property and Equipment. A budget amendment is also required for furniture and computer equipment, transferring $21,560 from unappropriated general fund reserve to the following capital outlay accounts: CodeANater Quality Enforcement Office Equipment 0330 -9000 $8,980 Building Computer Equipment 2910 -9010 4,780 Building Office Furniture 2910 -9400 7,800 Lease with Jakosky Properties for City Office Space at 503 32ntl Street May 13, 2008 Page 3 Staff is recommending that funds be appropriated to the 2008 -09 Building Department and Code and Water Quality Enforcement budgets for rent and utilities during next fiscal year. Eleven months of rent will be at the rate of $2,250 and one month will be at the rate of $2,318. The utilities estimate is $200 per month. Total funds needed for 2008- 09 are $29,468. ALTERNATIVES: Alternatives to leasing office space off site include adding a trailer to the City Hall campus, asking group residential staff to work from home or other offices of their own, and delaying filling plan check engineer positions. Prepared by: igh . De Santis, Economic Development Administrator Attachments: 1. Lease 2. Estimate 3. Budget Amendment Submitted by: ZgAA�� Sharon Wood, Assistant City Manager 3 32nd Street Estimate Item Code Enforcement Computers, printers, monitors, screens Chairs, office Building Desks Chairs, office Book cases, 4 shelves each Guest chairs Plan baskets (wire) Number Cost (2) x $1,700 = $ 3,400 (2) x $400 = 800 Sub Total: (2) $ 5,000 (2) x $400 = 800 (2) x $400 - 800 (3) x $200 = 600 (6) x $100 - 600 Sub Total: IT Network Installation (shared by Building and Code Enforcement) Grand Total: Fai$02008 \32nd St. estimate 4 -25 -08 $ 4,200 $ 7,800 9,56 City of Newport Beach 503 32nd Sheet #130 OFFICE BUILDING LEASE This Lease between 503 32nd Street LLC, a California limited liability company ( "Landlord"), and The City of Newport Beach. ("Tenant"). is dated 20_ 1. LEASE OF PREMISES In consideration of the Rent (as defined at Section 5.4) and the provisions of this Lease. Landlord leases to Tenant and Tenant leases from Landlord the Premises described In Section 2(1) below. The Premises are located within the Building. and Project described in Section 2m. Tenant shall have the non - exclusive right (unless otherwise provided herein) in common with Landlord. other tenants. subtenants and invitees. to use the Common Areas (as defined at Section 2e). 2. DEFINITIONS As used in this Lease, the fallowing terms shall have the following.meanings: (a) Base Rent llinitlal term): Twenty seven Thousand and 00/100 Dollars ($27.000.00) per year. payable in monthly installments of Two Thousand Two Hundred Fifty and 00 /100 Dollars ($2,250.00) per month commencing on June 1. 2008 and continuing through May 31.2009: then Twenty Seven Thousand Eight Hundred Sixteen and 00/100 Dollars ($27,816.00) per year, payable in monthly installments of Two Thousand Three Hundred Eighteen and 00/100 Dollars ($2.318.00) per month commencing on June 1, 2009 and continuing through the Expiration Date of the initial term. (b) Base Year. [Not applicable] (c) Broken(s) Landlord's: None Tenant's: None (d) Commencement Date: June 1. 2008 (e) Common Areas: The Building lobbies, common corridors and hallways, restrooms. parking areas, stairways. and other generally understood public or common areas. Landlord shall have the right to regulate or restrict the use of the Common Areas. '(f) Expense Stop: [Not applicable] (g) Expiration Date: May 31, 2010, unless otherwise sooner terminated in accordance with the provisions of this Lease. (h) Index (Section 5.2): [Not Applicable] (1) Landlord's Maifmg Address: 503 32nd Street I.I.C. Attn: Jack Jakosky 503 32nd Street Suite #200 Newport Beach. CA 92663 Tenant's Mailing Address: City of Newport Beach Attn: City Manager 3300 Newport Blvd. Newport Beach, CA 92663 0) Monthly Installments of Base Rent (initial term): See paragraph 2(a) above (k) Parking: Tenant shall be permitted to park two (2) cars on a non - exclusive basis in the area(s) designated by Landlord for parking. Tenant shall abide by any and all parking regulations and rules established from time to time by Landlord or Landlord's parking operator. Landlord reserves the right to separately charge Tenants guests and visitors for parking. (1) Premises: that portion of the Bulding containing approximately Seven Hundred Fifty (750) square feet of Rentable Area, located on the 1st floor of the Building and known as Suite 130. Page 1 5 City of Newport Beach 503 32nd Street #130 (m) Project: the building of which the Premises are a part (the "Building ") and any other buildings or improvements on the real property (the "Property') located at 603 32nd Street, Newport Beach, California 92663. (n) Rentable Area: as to both the Premises and the Project, the respective measurements of Floor area as may from time to time be subject to lease by Tenant and all tenants of the Project, respectively, as determined by Landlord and applied on a consistent basis throughout the Project. (o) Security Deposit: None (p) State: the state of California (q) Intentionally Deleted (r) Intentionally Deleted. (s) Tenant's Use Ciause (Article 8): Tenant shall use the Premises for general office purposes (excluding medical, dental or similar office uses) and for no other purpose without the prior written consent of Landlord, which Landlord may withhold in its sole discretion. (t) Teat: the period commencing on June 1, 2008 and expiring on May 31, 2010. 3. EXHIBITS AND ADDENDA The exhibits and addenda listed below are incorporated by reference in this Lease: a. Exhibit "A" - [ Intenfionally Deleted] b. Exhibit "B" - [Intentionally Deleted] c. Exhibit "C" - Building Standard Work Letter d. Exhibit "D" - Rules and Regulations e. Exhibit "E" - [Intentionally Deleted) f. Addendum to Lease 4. DELIVERY OF POSSESSION If for any reason landlord does not deliver possession of the Premises to Tenant on the Commencement Date, Landlord shall not be subject to any liability for such failure, the Expiration Date shall not change and the validity of this Lease shall not be impaired, but Rent shall be abated until delivery ofpossession. "Delivery of possession"shall be deemed to occuron the date Landlord completes Landlord's Work as defined in Exhibit "C ". Landlord shall permit Tenant to enterupon the Premises beginning May 14, 2008 for the purpose of making tenant improvements prior to the Commencement Date. Such possession shall be subject to the provisions of this Lease except that no Rent shall accrue until the Commencement Date. 5. RENT 5.1 Payment of Base Rent. Tenant agrees to pay the Base Rent for the Premises. Monthly Installments of Base Rent shall be payable in advance on the first dayofeach calendarmonth of the Term. If the Term begins (or ends) on other than the first (or last) day of a calendar month, the Base Rent for the partial month shall be prorated on a perdiem basis. Tenant shall pay Landlord the first Monthly Installment of Base Rent when Tenant executes the Lease. 5.2 [Intentionally Deleted] 5.3 [Intentionally Deleted] 5.4 Definition of Rent. All costs and expenses which Tenant assumes or agrees to pay to Landlord under this Lease shall be deemed additional rent (which, together with the Base Rent is sometimes referred to as the "Rent "). The Rent shall be paid to the Building manager (or other person) and at such place, as Landlord may from time to time designate in writing, without any prior demand therefore and wiffrout deduction or offset, in lawful money of the United States of America 5.5 Rent Control. If the amount of Rent or any other payment due under this Lease violates the terms of any governmental restrictions on such Rent or payment, then the Rent or payment due during the period of such restrictions shalt be the maximum amount allowable under those restrictions. Upon Page 2 City of Newport 13 ach 503 32nd Street #130 termination of the restrictions, Landlord shall, to the extent it is legally permitted, recover from Tenant the difference between the amounts received during the period of the restrictions and the amounts Landlord would have received had there been no restrictions. 5.6 Taxes Payable by Tenant. In addition to the Rent and any other charges be paid by Tenant hereunder, Tenant shall reimburse Landlord upon demand for any and all tames payable by Landlord (other than net income taxes) which are notdthe. n ise reimbursable under this Lease, whetheror not now customary or within the contemplation of the parties, where such taxes are based upon, measured by or reasonably attributable to (a) the cost or value of Tenants equipment, furniture, fixtures and other personal property locatedr'in the Premises, or the cost of value of any leasehold improvements made in or to.the Premises by or for Tenant, other than Building Standard Work made by Landlord, regardless of whether titre to such improvements, alterations, or additions is held by Tenant or Landlord; (b) the gross or net Rent payable under this Lease, including, without limitation, any rental or gross receipts tax levied by any taxing authority with respect to the receipt of Rent hereunder, (c) the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or (d) this transaction or any document to which Tenant is a parlycreating ortransfemng an interestor an estate in the Premises. If it becomes unlawful for Tenant to reimburse Landlord for any costs as required under this Lease, the Base Rent shall be revised to net Rent after imposition of any fax or other charge upon Landlord as would have been payable to Landlord but for the reimbursement being unlawful. 6. INTEREST AND LATE CHARGES If Tenant falls to pay when due any Rent or other amounts or charges which Tenant is obligated to pay under the terms of this Lease, the unpaid amounts shall bear interest at the mandmum rate then allowed by law. Tenant acknowledges that the late payment of any monthly installment of Base Rent will cause Landlord to lose the use of that money and incur costs and expenses not contemplated under this Lease, including, without limitation, administrative and collection costs and processing and accounting expenses, the exact amount of which is extremely difficult to ascertain. Therefore, in addition to interest, if any such installment is not received by Landlord within ten (10) days from the date it is due, Tenant shall pay Landlord a late charge equal to ten percent (10%) of such installment Landlord and Tenant agree that this late charge represents a reasonable estimate of such costs and expenses and is fair compensation to Landlord for the loss suffered from such nonpayment by Tenant Acceptance of any interest or late charge shall not constitute a waiver of Tenant's default with respect to such nonpayment by Tenant nor prevent Landlord from exercising any other rights or remedies available to Landlord under this Lease. 7. SECURITY DEPOSIT Tenant agrees to deposit with Landlord the Security Deposit set forth at Section 2.0 upon execution of this Lease, as security for Tenant's faithful performance of its obligations under this Lease. Landlord and Tenant agree that the Security Deposit may be commingled with funds of Landlord and Landlord shall have no obligation or liability for payment of interest on such deposit. Tenant shall not mortgage, assign, transfer or encumber the Security Deposit without the prior written consent of Landlord and any attempt by Tenant to do so shall be void, without force or effect and shall riot be binding upon Landlord. If Tenant fails to pay any Rent or other amount when due and payable underthis Lease, or fails to perform any of the terms hereof, Landlord may appropriate and apply or use all crony portion of the Security Deposit for Rent payments or any other amount then due and unpaid, for payment of any amount for which Landlord has become obligated as a result of Tenants default or breach, and for any loss or damage sustained by Landlord as a result of Tenant's default or breach, and Landlord may so apply or use this deposit without prejudice to any other remedy Landlord may have by reason of Tenant's default or breach. If Landlord so uses any of the Security Deposit, Tenant shall, within ten (10) days after written demand therefore, restore the Security Deposit to the full amount originally deposited; Tenant's failure to do so shall constitute an act of default hereunder and Landlord shall have the right to exercise any remedy provided for at Article 27 hereof. Within fifteen (15) days after the Tenn (or any extension thereof) has expired or Tenant has vacated the Premises, whichever shall last occur, and provided Tenant is not then in default on any of its obligations hereunder, Landlord shall return the Security Deposit to Tenant, or, if Tenant has assigned its interest under this Lease, to the last assignee of Tenant If Landlord sells its interest in the Premises, Landlord may deliver this deposlt to the purchaser of Landlord's interest and thereupon be relieved of any further liability or obligation with respect to the Security Deposit Page 3 7 City of Newport Beach 503 32nd Street #130 8. TENANT'S USE OF THE PREMISES Tenant shall use the Premises solelyfor the purposes setforth in Tenant's Use Clause. Tenantshall not use or occupy the Premises in violation of law or any covenant, condition or restriction affecting the Building or Project or the certificate of occupancy issued for the Building or Project, and shall, upon notice from Landlord, immediately discontinue any use of the Premises which is declared by any govemmental authority having jurisdiction to be a violation of law or the certificate of occupancy. Tenant, at Tenants own cost and expense, shall comply with all laws, ordinances, regulations, rules, and/or any directions, of any govemmental agencies or authorities having jurisdiction which shall, by reason of the nature of Tenant's use or occupancy of the Premises, establish any duty in Tenant or Landlord with respect to the Premises or Its use or occupation. Ajudgment of any court of competent jurisdiction or the admission by Tenant in any action or proceeding against Tenant that Tenant has violated any such laws, ordinances, regulations, rules andfor any directions in the use of the Premises shall be deemed to be a conclusive determination of that fact as between Landlord and Tenant. Tenant shall not do or permit to be done anything which will invalidate or increase the costal any fire, extended coverage or other insurance policy covering the Building or Project antUorproperty located therein, and shall comply with all rules, orders, regulations, requirements and recommendations of the Insurance Services Office or any other organization performing a similar function. Tenant shall promptly upon demand reimburse Landlord for any additional premium charges for such policy by reason of Tenants failure to ComPlywith the provisions of this Article. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with Vie rights of other tenants or occupants of the Building or Project, or injure or annoy them, or use or allow the Premises to be used for any improper, Immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. 9. SERVICE AND UTILITIES Provided that Tenant is not in default hereunder, Landlord agrees to fumish to the Premises during generally recognized business days; and during hours determined by Landlord in its sole discretion, and subject to the Rules and Regulations of the Building or Project, reasonable amounts of electricity for normal lighting by Building Standard overhead fixtures, and for normal desk top office equipment and normal copying equipment, and heating, ventilation and air conditioning ("HVAC") as required in Landlord's judgment for the comfortable use and occupancy of the Premises and water for lavatory and drinking purposes. If Tenant desires HVAC at any other time, Landlord shall use reasonable efforts to fumish such service upon reasonable notice from Tenantand Tenant shall pay Landlord's charges therefor on demand. Landlord shall also maintain and keep lighted the common stairs, common entries and restrooms in the Building. Landlord shalt not be in default hereunderor be liable for any damages directly or indirectly resulting from, nor shall the Rent be abated by reason of (i) the installation, use or interruption of use of any equipment in connection with the furnishing of any of the foregoing services, (ti) failure to famish or delay in fumishing any such services where such failure or delay is caused by accident or any condition or event beyond the reasonable control of Landlord, or by the making of necessary repairs or improvements to the Premises, Building or Project, or (iii) the limitation, curtailment or rationing of, or restrictions on, use of water, electricity, gas or any other forth of energy serving the Premises, Building or Project The failure of Landlord to provide such services in accordance with the foregoing shall not constitute a constructive or other eviction of Tenant. Landlord shall not be liable under any circumstances for a loss of or injury to property or business, howeveroccuning, through or in connection with or incidental to failure to fumish any such services. If Tenant uses heat generating machines or equipment in the Premises which affect the temperature otherwise maintained by the HVAC system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation, operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. Tenant shall not, without the written consent of Landlord, which may be refused, consume water or electric current in excess of, or use any apparatus or device in the Premises (including, without limitation, electronic data processing machines, punch card machines or machines using in excess of 120 volts) which consumes electricity in excess of, or which will in any way increase the amount of cooling or ventilation or water to an amount in excess of, that usually furnished or supplied for the use of Premises as general office space, as determined by Landlord. In the event of consent, Landlord may have installed a water, electrical current or other meter in the Premises to measure the amount . of water, electric current, or other resource consumed. The cost of any such meter and of its installation, maintenance and repair shall be paid for by the Tenant and Tenant agrees to pay Landlord promptly upon demand for all such water, electric current or other resource consumed as shown by said meters, at the rates charged for such services by the local public utility plus any additional expense incurred in keeping account of the water and electric current so consumed. If a separate meter is not installed, the excess costfor such resource shall be established by an estimate made by a utility company or electrical engineer hired by Landlord at Tenant's expense. Page 4 City of Newport Beach 503 32nd Street ttf3o Nothing contained in this Article shall restrict Landlord's right to require at any time separate metering of utilities famished to the Premises. In the event utilities are separately metered, Tenant shall pay promptly upon demand for all utilities consumed at the Premises at utility rates charged by the local public utility. Tenant shall be responsible for the maintenance and repair of any such meters at its sole cost Landlord shall furnish lighting replacement for building standard lights, restroom supplies, and exterior window washing in a manner thatsuch services are customarily furnished to comparable office buildings in the area. 10. CONDITION OF THE PREMISES Tenant's taking possession of the Premises shall be deemed conclusive evidence that as of the date of taking possession the Premises are in good order and satisfactory condition, except for such matters as to which Ten ant gave Landlord notice on orbefore the Commencement Date. No promise of Landlord to alter, remodel, repair or improve the Premises, the Building or the Project and no representation, express or implied, respecting any matter or thing relating to the Premises, Building, Projector this Lease (including, without limitation, the condition of the Premises, the Building or the Project) have been made to Tenant by Landlord, other than as may be contained herein or in a separate exhibit or addendum signed by Landlord and Tenant. 11. CONSTRUCTION, REPAIRS AND MAINTENANCE a. Landlord's Obligations. Landlord shall perform Landlord's Work to the Premises as described in Exhibit C. Landlord shall maintain in good order, condition and repair the Building and all other portions of the Premises not the obligation of Tenant or of any other tenant in the Building. b. Tenant's Obligations. (1) Tenant shall perform Tenant's Work to the Premises as described in Exhibit C. (2) Tenant at Tenant's sole expense shall, except for services furnished by Landlord pursuant to Article 9 hereof, maintain the Premises in good order, condition and repair, including the interior surfaces of the ceilings, walls and floors, all doors, all Interior windows, all plumbing, pipes and fixtures, electrical wiring, switches and fixtures, Building Standard furnishings and special items and equipment installed by or at the expense of Tenant (3) Tenant shall be responsible for all repairs and alterations in and to the Premises, Building and Project and the facilities and systems thereof, the need for which arises out of (i) Tenant's use or occupancy of the Premises, (ii) the installation, removal, use oroperatlon of Tenant's Property (as defined in Article 13) in the Premises, (iii) the moving of Tenant's Property into or out of the Building, or (iv) the act, omission, misuse or negligence of Tenant, Its agents, contractors, employees or invitees. (4) If Tenant fails to maintain the Premises in good order, condition and repair, Landlord may give Tenant notice to do such acts as are reasonably required to so maintain the Premises. If Tenant fails to promptly commence such work and diligently prosecute it to completion, then Landlord shall have the right to do such acts and expend such funds at the expense of Tenant as are reasonably required to perform such work. Any amount so expended by Landlord shall be paid by Tenant promptly after demand with interest at the prime commercial rate then being charged by Bank of America NT & SA plus two percent (2%) per annum, from.the date of such work, but not to exceed the maximum rate then allowed by law. Landlord shall have no liability to Tenant for any damage, inconvenience, or interference with the use of the Premises by Tenant as a result of performing any such work. a Compliance with Law. Landlord and Tenant shall each do all acts required to comply with all applicable laws, ordinances, and rules of any public authorityreloting to their respective maintenance obligations as set forth herein. d. Waiver by Tenant. Tenant expressly waives the benefits of any statute now or hereafter in effect, which would otherwise afford the Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises in good order, condition and repair. e. Load and Equipment Limits. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord Page 5 9 City of Newport Beach 503 32nd Sheet #130 or Landlord's structural engineer. The cost of any such determination made by Landlord's structural engineer shall be paid for by Tenant upon demand. Tenant shall not install business machines or mechanical equipment which cause noise or vibration to such a degree as to be objectionable to Landlord or other Building tenants. f. Except as otherwise expressly provided in this Lease. Landlord shall have no liabililyto Tenant nor shall Tenant's obligations under this Lease be reduced or abated in any manner whatsoever by reason of any inconvenience, annoyance. interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required by this Lease or by any other tenant's lease or required by law to make In or to any portion of the Building or the Premises. Landlord shall nevertheless use reasonable efforts to minimize any interference with Tenant's business in the Premises. g. Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Building's mechanical. electrical, plumbing. WAC or other systems serving. located in. or passing through the Premises. h. Upon the expiration or earlier termination of this Lease. Tenant shall return the Premises to Landlord clean and in the same condition as on the date Tenant took possession. except for normal wear and tear. Any damage to the Premises. Including any structural damage. resulting from Tenant's use or from the removal of Tenant's fixtures. furnishings and equipment pursuant to Section 13b shall be repaired by Tenant at Tenant's expense. 12. ALTERATIONS AND ADDITIONS (a) Tenant shall not make any additions. alterations or improvements to the Premises without obtaining the prior written consent of Landlord. Landlord's consent maybe conditioned on Tenant's removing any such additions. alterations or improvements upon the expiration of the Term and restoring the Premises to the same condition as on the date Tenant took possession. fN work with respect to any addition. alteration or improvement shall be done in a good and workmanlike manner by properly qualified and licensed personnel approved by Landlord. and such work shall be diligently prosecuted to completion. Landlord may. at Landlord's option, require that any such work be performed by Landlord's contractor. in which case the cost of such work shall be paid for before commencement of the work. Tenant shall pay to Landlord upon completion of any such work by Landlord's contractor. an administrative fee of fifteen percent (15°x,) of the cost of the work. (b) Tenant shall pay the costs of any work done on the Premises pursuant to Section 12(a). and shall keep the Premises, Building and Project free and Clear of liens of any kind. Tenant shall indemnify, defend against and keep Landlord free and harmless from. all liability. loss. damage. costs. attomeys' fees and any other expense incurred on account of claims by any person performing work or furnishing materials or supplies for Tenant or any person claiming under Tenant. (c) Landlord may require, at Landlord's sole option. that Tenant provide to Landlord. at Tenants expense. a lien and completion bond in an amount equal to at least one and one-half (1 -1/2) times the total estimated cost of any additions. aterabons or improvements to be made in or to the Premises. to protect landlord against any liability for mechanic's and materialmen's liens and to insure timely completion of the work. Nothing contained in this Section 12 (c) shall relieve Tenant of its obligation under Section 12(b) to keep the Premises. Building and Project free of all liens. (d) Unless their removal is required by landlord as provided in Section 12(a). all additions, alterations and improvements made to the Premises shall become the property of Landlord and be surrendered with the Premises upon the expiration of the Term: provided. however. Tenants equipment, machinery and trade fixtures which can be removed without damage to the Premises shall remain the property of Tenant and may be removed. subject to the provisions of Section 13b. 13. LEASEHOLD IMPROVEMENTS; TENANT'S PROPERTY (a)AII fixtures, equipment, improvements and appurtenances attached to or built into the Premises at the commencement of or during the Term. whether or not by or at the expense of Tenant ( "Leasehold Improvements "), shall be and remain a part of the Premises. and shall be the property of Landlord and shall not be removed by Tenant, except as expressly provided in Section 13(b). (b) All movable partitions. business and trade fixtures. machinery and equipment. communications equipment and office equipment located in the Premises and acquired by or for the account of Tenant. without expense to Landlord, which can be removed without structural damage to the Building. and all furniture. furnishings and other articles of movable personal property owned by Tenant and located in the Premises (collectively "Tenants Properly") shall be and shall remain the Page 6 10 City of Newport Beach 503 32nd Street #130 Prop" of Tenant and may be removed by Tenant at any time during the Term; provided that if any of Tenant's Property is removed, whether pursuant to this Article orany other provision of this Lease, Tenant shall promptly, and prior to expiration or termination of this Lease, repair, at Tenant's expense, any damage to the Premises or to the Building resulting from such removal. 14. RULES AND REGULATIONS Tenant agrees to comply with (and cause its agents, contractors, employees and invitees to comply with) the rules and regulations attached hereto as Exhibit V arid with such reasonable modifications thereof and additions thereto as Landlord may from time to fime make. Landlord shall not be responsible for any violation of said rules and regulations by other tenants or occupants of the Building or Project. 15. CERTAIN RIGHTS RESERVED BY LANDLORD Landlord reserves the following rights, exercisable without liability to Tenant for (a) damage or injury to property, person or business, (b) causing an actual or constructive eviction from the Premises, or (c) disturbing Tenanfs use or possession of the Premises: (a) To name the Building and Project and to change the name or street address of the Building or Project; (b) To install and maintain all signs on the exterior and Interior of the Building or Project; (c) To have pass keys to the Premises and all doors within the Premises, excluding Tenants vaults and safes; (d) At any time during the Term, and on reasonable prior notice to Tenant, to inspect the- Premises, and to show the Premises to any prospective purchaser or mortgagee of the Building or to any assignee of any mortgage on the Building or to others having an interest in the Projector Landlord, and dump the last six months of the Tenn, to show the Premises to prospective tenants thereof; and (e) To enter the Premises for the purpose of making inspections, repairs, alterations, additions or improvements to the Premises or the Building (including, without limitation, checking, call rating, adjusting or balancing controls and other parts of the HVAC system), and to take all steps as necessary or desirable for the safety, protection, maintenance or preservation of the Premises ortite Building or Landlord's interest therein, or as may be necessary or desirable for the operation or improvement of the Building or in order to comply with laws, orders or requirements of govern mental or other authority. Landlord agrees to use its best efforts (except in any emergency) to minimize interference with Tenanfs business in the Premises in the course of any such entry. 16. ASSIGNMENT AND SUBLETTING No assignment of this Lease or sublease of all or any part of the Premises shall be permitted, except as provided in this Article 16. a. Tenant shall not, without the prior written consent of Landlord, assign this Lease or any interest herein or sublet the Premises or any part thereof, or permit the use of the Premises by any party other than Tenant which consent shall not be unreasonably withheld. Any of the foregoing acts without such consent shall be void and shall, at the option of Landlord, terminate this Lease. This Lease shall not nor shall any interest of Tenant herein, be assignable by operation of law withoutthe written consent of Landlord. b. If at any time or from time to time during the Tern Tenant desires to assign this Lease or sublet all or any part of the Premises, Tenant shall give notice to Landlord setting forth the terms and provisions of the proposed assignment or sublease, and the identity of the proposed assignee or subtenant. Tenant shall promptly supply Landlord with such Information concerning the business background and financial condition of such proposed assignee or subtenant as Landlord may reasonably request Tenant may assign the Lease or sublet such space to such proposed assignee or subtenant on the following further conditions: (1) Landlord shall have the right to approve such proposed assignee or subtenant which approval shall not be unreasonably withheld; (2) The assignment or sublease shall be on the same terms set forth in the notice given to Landlord; Page 7 City of Newport Beach 503 32nd Street #130 (3) No assignment or sublease shall be valid and no assignee or sublessee shall take possession of the Premises until an executed counterpart of such assignment or sublease has been delivered to Landlord; (4) No assignee or sublessee shall have a further right to assign or sublet except on the terms herein contained; and (5) Any sums or other economic consideration received by Tenant as a result of such assignment or subletting, however denominated under the assignment or sublease, which exceed, in the aggregate, (i) the total sums which tenant is obligated -.to pay Landlord under this Lease (prorated to reflect obligations allocable to any portion of the Premises subleased), plus (ii) any real estate brokerage commissions or fees payable in connection with such assignment or subletting, shall be paid to Landlord as additional rent under this Lease without affecting or reducing any other obligations of Tenant hereunder. c. Notwithstanding the provisions of paragraphs a and b above, Tenant may assign this Lease or sublet the Premises or any portion thereof, without Landlord's consent and without extending any recapture or termination option to Landlord, to any corporation which controls, is controlled by or is under common control with Tenant, or to any corporation resulting from a merger or consolidation with Tenant, or to any person or entity which acquires all the assets of Tenant's business as a going concern, provided that (i) the assignee or sublessee assumes, In full, the obligations of Tenant under this Lease, (ii) Tenant remains fully liable under this Lease, and. (III) the use of the Premises under Article 8 remains unchanged. d. No subletting or assignment shall release Tenant of Tenant's obligations under this Lease or alter the primary liability of Tenant to pay the Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment orsubletling shall not be deemed consent to any subsequent assignment or subletting. In the event of default by an assignee or subtenant of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies. against such assignee, subtenant or successor. Landlord mayconsentto subsequent assignments of the Lease or sublettings or amendments or modifications to the Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto and any such actions shall not relieve Tenant of liability under this Lease. e. If Tenant assigns the Lease or sublets the Premises or requests the consent of Landlord to any assignment or subletting or if Tenant requests the consent of Landlord for any act that Tenant proposes to do, then Tenant shall, upon demand, pay Landlord an administrative fee of One Hundred Fifty and No /100ths Dollars ($150.00) plus any attorneys fees reasonably incurred by Landlord in connection with such act or request. 17. HOLDING OVER If after expiration of the Term, Tenant remains in possession of the Premises with Landlord's permission (express or implied), Tenant shall become a tenant from month to month only, upon all the provisions of this Lease (except as to term and Base Rent), but the "Monthly Installments of Base Rent" payable by Tenant shall be increased to one hundred fifty percent (150 %) of the Monthly Installments of Base Rent payable by Tenant at the expiration of the Term. Such monthly rent shall be payable in advance on or before the first day of each month. If either party desires to terminate such month to month tenancy, it shall give the other party not less than thirty (30) days advance written notice of the date of termination. 18. SURRENDER OF PREMISES a. Tenant shall peaceably surrender the Premises to Landlord on the expiration or termination of this Lease, in broom -dean condition and in as good condition as when Tenant took possession, except for (i) reasonable wear and tear, (ii) loss by fire or other casualty, and (ii) loss by condemnation. Tenant shall, on Landlord's request remove Tenant's Property on orbefore the Expiration Date and promptly repair all damage to the Premises or Building caused by such removal. b. If Tenant abandons or surrenders the Premises, or is dispossessed by process of law or otherwise, any of Tenant's Property left on the Premises shall be deemed to be abandoned, and, at Landlord's option, title shall pass to Landlord under this Lease as by a bill of sale. If Landlord elects to remove all or any part of such Tenant's Property, the cost of removal, including repairing any damage to the Premises or Building caused by such removal, shall be paid by Tenant. On the Page 8 , City of Newport Beach 503 32nd Street #130 expiration or termination of this Lease Tenant shall surrender all keys to the Premises. 19. DESTRUCTION OR DAMAGE a. H the Premises or the portion of the Building necessary for Tenant's occupancy is damaged by fire, earthquake, act of God, the elements orothercasually; Landlord shall, subject to the provisions of this Article, promptly repair the damage; If such repairs can, in Landlord's opinion, be completed within ninety (90) days. If landlord dete' miites�thatrepairs can be completed within ninety days, this Lease shall remain in full force and effect, except that if such damage is not the result of the negligence or willful misconduct of Tenantbr Tenants agents, employees, contractors, ficensees or invitees, the Base Rent shall be abated to the extent Tenant's use of the Premises is Impaired, commencing with the date of damage and continuing unfit completion of the repairs required of Landlord under Section 19d. b. If in Landlord's opinion, such repairs to the Premises or portion of the Building necessary for Tenant's occupancy cannot be completed within ninety (90) days, Landlord may.eled, upon notice to Tenant given within thirty (30) days after the date of such fire or other casualty, to repair such damage, in which event this Lease shall continue in full force and effect. but the Base Rent shall be partially abated as provided In Section 19a. If Landlord does not so elect tO make such repairs, this Lease shall terminate as of the date of such fire or other casualty. c. If any other portion of the Building or Project is totally destroyed or damaged to the extent that in Landlord's opinion repair thereof cannot be completed within ninety (90) days, Landlord may elect upon notice to Tenant given within thirty (30) days after the date of such fire or other casualty, to repair such damage, in which event this Lease shall continue in full force and effect but the Base Rent shall be partially abated as provided in Section 1ga. If Landlord does not elect to make such repairs, this Lease shall terminate as of the date of such fire or other casualty. d. If the Premises are to be repaired under this Article, Landlord shall repair at its cost any injury or damage to the Building and Building Standard Work In the Premises. Tenant shall be responsible at its sole cost and expense for the repair, restoration and replacement of any other Leasehold Improvements and Tenant's Properly. Landlord shall not be liable for any loss of business, inconvenience or annoyance arising from any repair or restoration of any portion of the Premises, Building or Project as a result of any damage from fire or other casualty. e. This Lease shall be considered an express agreement governing any case of damage to or destruction of the Premises or Building byfire orothercesualty, and any present orfuture law which purports to govern the rights of Landlord and Tenant in such circumstances in the absence of express agreement, shall have no application. 20. EMINENT DOMAIN a. If the whole of the Building or Premises is lawfully taken by condemnation or in any other manner for any public or quasi - public purpose, this Lease shall terminate as of the date of such taking, and Rent shall be. prorated to such date. If less than the whole of the Building or premises is so taken, this Lease shall be unaffected by such taking, provided that (ill Tenant shall have the right to terminate this Lease by notice to Landlord given within ninety (90) days after the date of such taking if twenty percent (20 %) or more of the Premises is taken and the remaining area of the Premises is not reasonably sufficient for Tenant to continue operation of its business, and (ii) Landlord shall have the right to terminate this Lease by notice to Tenant given within ninety (90) days after the date of such taking. If either Landlord or Tenant so elects to terminate this Lease, the Lease shall terminate on the thirtieth (30th) day after either such notice. The Rent shall be prorated to the date of termination. If this Lease continues in force upon such partial taking, the Base Rent shall be equitably adjusted according to the remaining Rentable Area of the Premises and Project. b. In the event of any taking, partial or whole, all of the proceeds of any award, judgment or settlement payable by the condemning authority shall be the exclusive property of Landlord, and Tenant hereby assigns to Landlord all of its Fight, tifle and interest in any award, judgment or settlement from the condemning authority. Tenant, however, shall have the Fight, to the extent that Landlord's award is not reduced or prejudiced, to claim from the condemning authority (but not from Landlord) such compensation as may be recoverable by Tenant in its own Fight for relocation expenses and damage to Tenant's personal property. c. In the event of a partial taking of the Premises which does not result in a termination of this Lease, Landlord shall restore the remaining, portion of the Premises as nearly as practicable to its condition prior to the condemnation or taking, but only to the extent of Building Standard Work Tenant shall be responsible at its sole cost and expense for the repair, restoration and replacement of any other Page 9 16 City of Newport Beach 503 32nd Street #130 Leasehold Improvements within the Premises and Tenant's Property. 21. INDEMNIFICATION a. Tenant shall indemnify and hold Landlord harmless against and from liability and claims of any kind or loss for damage to property of Tenant or any other, person, or for any injury to or death of any person, arising out of., (1) Tenants use and occupancy of the Premises, oranywork,activilyorother things allowed or suffered by Tenant to be done in, on or about the Premises; (2) any breach or default by Tenant of any of Tenant's obligations under this Lease; or (3) any negligent or otherwise tortious act or omission of Tenant, its agents, employees, invitees or contractors. Tenant shall at Tenant's expense, and by counsel satisfactory to Landlord, defend Landlord in any action or proceeding arising from any such claim and shall indemnify Landlord against all costs, attomeys' fees, expert witness fees and any other expenses incurred in such action or proceeding. As a material part of the consideration for Landlord's execution of this Lease, Tenant hereby assumes all risk of damage or injury to any person or property in, on or about the Premises from any cause. b. Landlord shall not be liable for injury or damage which maybe sustained bythe person or property of Tenant, its employees, invitees or customers, or any other person in or about the Premises, caused by or resulting from fire, steam, electricity, gas, water or rain which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, whether such damage or injury results from conditions arising upon the Premises or upon other portions of the Building or Projector from other sources. Landlord shall not be liable for any damages arising from any actor omission of any other tenant of the Building or Project. 22. TENANTS INSURANCE Tenant is a public entity and is self - insured with respect to general liability and automobile coverage. Tenant has a self -insured retention limit of $500,000 with excess coverage of $50,000,000. To the extent that Tenant's excess coverage is decreased below $1,000,000, Tenant shall be required to obtain general, automobile or excess coverage insurance of at least $1,000,000. Tenant shall maintain Workers Compensation Insurance and Employers Liability Insurance in accordance with the laws of the State of Califomia and shall provide proof of insurance upon demand by Landlord. 23. WAIVER OF SUBROGATION Landlord and Tenant each hereby waive any and all rights of recovery against the other or against the officers, partners, employees, agents and representatives of the other, on account of loss or damage of such waiving party or its property, or the property of others under its control to the extent that such loss or damage is insured against under any fire and extended coverage insurance policy which either may have in force at the time of such loss or damage. Tenant shall, upon obtaining the policies of insurance required under this Lease, give notice to its insurance carrier(s) that the foregoing mutual waiver of subrogation is contained in this Lease. 24. SUBORDINATION AND ATTORNMENT Upon written request of Landlord, or any first mortgagee or first deed of trust beneficiary of Landlord, or ground lessor of Landlord, Tenant shall, in writing, subordinate its rights under this Lease to the lien of any first mortgage or first deed of trust, or to the interest of any lease in which Landlord is lessee, and to all advances made or hereafterto be made thereunder. However, before signing any subordination agreement, Tenant shall have the rightto obtain from any lenderor lessor or Landlord requesting such subordination, an agreement In writing providing that, as long as Tenant is not in default hereunder, this Lease shall remain in effect for the full Term. The holder of any securily interest may, upon written notice to Tenant, elect to have INS Lease prior to its security interest regardless of the time of the granting or recording of such security interest (b) In the event of any foreclosure sale, transfer in lieu of foreclosure or termination of the lease in which Landlord is lessee, Tenant shall attom to the purchaser, transferee or lessor as the case may be, and recognize that party as Landlord underthis Lease, provided such party acquires and accepts the Premises subject to this Lease. Page 10 ly City of Newport Beach 503 32nd Street #130 25. TENANT ESTOPPEL CERTIFICATES Within ten (10) days after written request from Landlord, Tenant shall execute and deiiverto Landlord or Landlord's designee, a written statement odnifying.(a) that this Lease is unmodified and in full force and effect or is in full force and effectas madifieA and stating the modifications; (b) the amount of Base Rent and the date to which base Rent ancl-adifitIchal rent have been paid in advance; (c)t to amount of any security deposited with Landlord; and (d)thatLandlord is not in default hereunder or, If Landlord is dabmed to be in default. Any such statement may be conclusively relied, upon by any prospective or actual purchaser, assignee, or lehider. Tenant's failure to execute and deliver such statement within the time required shall, at Landlords election, be a default under this Lease and shall also be conclusive upon Tenant that (1) this Lease in full force and effect and has not been modified except as represented by Landlord; (2) there are no urowred defaults in Landlord's performance and that Tenant has no right of offset, counterclaim or deduction against Rent; and (3) not more than one month's Rent has been paid in advance. 26. TRANSFER OF LANDLORD'S INTEREST If Landlord sells or transfers its interest in the Premises, Building or Project, Landlord shall be and is hereby entirely freed and relieved of any and all liability and obligations contained in or derived from this Lease arising out of any act, occurrence or omission relating to the Premises, Building, Project, or Lease occurring after the consummation of such sale or transfer, providing the purchaser shall expressly assume all of the covenants and obligations of Landlord under this Lease. If any security deposit or prepaid Rent has been paid by Tenant, Landlord may transfer the security deposit or prepaid Rent to bandlorcfs successor and upon such transfer, Landlord shall be relieved of any and all further liability with respect thereto. 27. DEFAULT 27.1 Tenant's Default. The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant a. If Tenant abandons or vacates the Premises; or b. If Tenant fails to pay any Rent or any other Barges required to be paid by Tenant under this Lease and such failure continues for five (5) days after such payment is due and Payable; or a If Tenant fails to promptly and fully perform arry other covenant . condition or agreement contained in this Lease and such failure continues for thirty (300 days after written notice thereof from Landlord to Tenant; or d. If a writ or attachment or execution is levied on this Lease or on any of Tenants Property, or e. If Tenant makes a general assignment for the benefit of creditors, or provides for an arrangement, composition, extension or adjustment with its creditors; or I. If Tenant files a voluntary petition for relief or if a petition against Tenant in a proceeding under the federal bankruptcy taws or other insolvency taws is filed and not withdrawn or dismissed within forty-five (45) days thereafter, or If under the provisions of any law providing for reorganization or winding up of corporations, any court of competent jurisdiction assumes jurisdiction, custody or control of Tenant or any substantial part of its property and such jurisdiction, custody or Control remains in force unrefnquished, unstayed or unterminlated for a period of forty-five (45) days; or g. If any proceeding or action in which Tenant is a party, a trustee, receiver, agent or custodian is appointed to take charge of the Premises or Tenant's Property (or has the authority to do so) forthe purpose of enforcing a lien against the Premises or Tenant's Property; or h. If Tenant is a partnership or consists of more than one (1) person or entity, if any partner of the partnership or other person or entity is involved in any of the acts or events described in subparagraphs d through g above. 27.2 Remedies. In the event of Tenant's default hereunder, then in addition to any other rights or remedies Landlord may have under any law, Landlord shall have the right, at Landlord's option, wto do any of the following: a. Terminate this Lease and Tenant's right to possession of the Premises and reenter the Premises and take possession thereof, and Tenard shall have no further dams to the Premises of under this Lease; or Page 11 15 City of Newport Beach 503 32nd Street #130 b. Continue this Lease in effect, reenter and occupy the Premises for the account of Tenant, and collect any unpaid Rent or other charges which have or thereafter become due and payable; or c. Reenter the Premises under the provisions of subparagraph b, and thereafter elect to terminate this Lease and Tenant's right to possession of the Premises, If Landlord reenters the Premises under the provisions of subparagraphs b or c above, Landlord shall not be deemed to have terminated this Lease or the obligation of Tenant to pay any Rent or other charges thereafter accruing, unless Landlord notifies Tenant in writing of Landlord's election to terminate this Lease. In the event of any reentry. or retaking of possession by Landlord, Landlord shall have the right, but not the obligation, to remove all or any part of Tenant's Property In the Premises and to place such property in storage at a public warehouse at the expense and risk of Tenant If Landlord elects to relet the Premises for the account of Tenant, the rent received by Landlord from such reletfing shall be applied as follows: first, to the payment of any indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs of such reletting; third, to the payment of the cost of any alterations or repairs to the Premises; fourth to the payment of Rent due and unpaid hereunder, and the balance, if arty, shall be held by Landlord and applied in payment of future Rent as it becomes due. If that portion of rent received from the retelting which is applied against the Rent due hereunder is less than the amount of the Rent due, Tenant shalt pay the deficiency to Landlord promptly upon demand by Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall also pay to Landlord, as soon as determined, any costs and expenses incurred by Landlord in connection with such reletting or in making alterations an repairs to the Premises, which are not covered by the rent received from the reletting. Should Landlord elect to terminate this Lease under the provisions of subparagraph a or c above, Landlord may recover as damages from Tenant the following: 1. Past Rent. The worth at the time of the award of any unpaid Rent which had been earned at the time of termination; plus 2. Rent Prior to Award. The worth at the time of the award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus 3. Rent After Award. The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of the rental loss that Tenant proves could be reasonably avoided; plus 4. Proximately Caused Damages. Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant's failure to perform its obligations under this Lease orwhich in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses (including amomeys' fees), incurred by Landlord in (a) retaking possession of the Premises, (b) maintaining the Premises afterTenanfs default, (c) preparing the Premises for reletting to a new tenant, including any repair or alterations, and (d) retelling the Premises, including broker's commissions. The "worth at the time of award" as used in subparagraphs 1 and 2 above, is to be computed by allowing interest at the rate often percent (10 %) per annum. "The worth at the time of the award" as used in subparagraph 3 above, is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank situated nearest to the Premises at the time of the award plus one percent (1 %). The waiver by Landlord of any breach of any term, covenant or condition of this Lease shall not be deemed a waiver of such term, covenant or condition or of any subsequent breach of the same or any other term, covenant or condition. Acceptance of Rem by Landlord subsequent to any breach hereof shall not be deemed a waiver of any preceding breach other than the failure to pay the particular Rent so accepted, regardless of Landlord's knowledge of any breach at the time of such acceptance of Rent. Landlord shall not be deemed to have waived any term, covenant or condition unless Landlord gives Tenant written notice of such waiver. 27.3 Landlord's Default. If Landlord Fails to perform anycovenant, condition or agreement contained in this Lease within thirty (30) days after receipt of written notice from Tenant specifying such delult, or if such default cannot reasonably be cured within thirty (3D) days, if Landlord fails to commence to cure within that thirty (30) day period, then Landlord shall be liable to Tenant for any damages sustained by Tenant as a result of Landlord's breach; provided, however, it is expressly understood and agreed that if Tenant obtains a money judgment against Landlord resulting from any default or other claim arising under this Lease, that judgment shall be satisfied only out of the rents, issues, profits, and other income actually received on account of Landlord's right, title and interest in the Page 12 City of Newport Beach 503 32nd Street #130 Premises, or Building, or Project and no other real, personal or mixed property of Landlord (or of any of the partners which comprise Landlord, if any) wh6revee. situated, shall be subject to levy to satisfy such judgment. ff, after notice to Landlord cif def iulL Landlord (or any first mortgagee or first deed of trust beneficiary of Landlord) fails to cure the defaiat`asprovided herein, then Tenant shall have the right to cure that default at Landlord's expense. Teriak'shall not have the right to terminate this Lease or to withhold, reduce or onset any amourit agaiirstany. payments of Rent or any other charges due and payable under this Lease except as otherwise specifically provided herein. 28. BROKERAGE FEES Tenant warrants and represents that it has not dealt with any real estate broker or agent In connection with this Lease or its. negotiation except those noted in Section 2.c. Tenant shall indemnify and hold Landlord harmless 'fromany cost, expense or liability (induding costs of suit and reasonable attomeys' fees) for any compensalioh, commission or fees claimed by any other real estate broker or agent in connection with this Lease or its negotiation by reason of any act of Tenant 29. NOTICES All notices, approvals and demands permitted or required toile given under this Lease shall be in writing and deemed duty served orgiven if personallydellvered orsent by certified orregistered U.S. mail, postage prepaid, and addressed as follows: (a) If to Landlord; to Landlord's Maiing Address and to the Building manager, and (b) if to Tenant, to Tenant's Mailing Address; provided, however, notices to Tenant shall be deemed duty served or given if delivered or mailed to Tenant at the Premises. Landlord and Tenant may from time to time by written notice to the other designate another place for receipt of future notices, except that Landlord may in any event use the Premises as Tenant's address for notice purposes. Notice shall be effective when mailed ordelivered as above specified. 30. GOVERNMENT ENERGY OR UTILITY CONTROLS In the event of imposition of federal, state or focal government controls, rules, regulations, or restrictions on the use or consumption of energy orother utilities during the Tern, both Landlord and Tenant shall be bound thereby. In the event of a difference in interpretation by Landlord and Tenant of any such controls, the interpretation of Landlord shalt prevail, and Landlord shall have the right to enforce compliance therewith, including the right of entry into the Premises to effect compliance. 31. RELOCATION OF PREMISES Landlord shall have the right to relocate the Premises to another part of the Building in accordance with the following: (a) The new premises shall be substantially the same in size, dimensions, configuration, d6cor and nature as the Premises described in this Lease, and, If the relocation occurs after the Commencement Date, shall be placed in that condition by Landlord at its cost. (b) Landlord shall give Tenant at least thirty (30) days written notice of Landlord's intention to relocate the Premises. (c) As nearly as practicable, the physical relocation of the Premises shall take place on a weekend and shall be completed before the following Monday. If the physical relocation has not been completed in that time, Base Rant shall abate in full from the time the physical relocation commences to the time It is completed. Upon completion of such relocation, the new premises shall become the "Premises' under this Lease. (d) All reasonable costs incurred by Tenant as a result of the relocation, shall be paid by Landlord. (a) If the new premises are smaller than the Premises as it existed before the relocation, Base Rent shall be reduced proportionately. (f) The parties hereto shall immediately execute an amendment to this Lease setting forth the relocation of the Premises and the reduction of Base Rent, If any. 32. QUIET ENJOYMENT Tenant, upon paying the Rent and performing all of its obligations under this Lease, shall peaceably and quietly enjoy the Premises, subject to the terms of this Lease and to any mortgage, lease, or Page 13 17 City of Newport Beach 503 32nd Street 9130 other agreement to which this Lease maybe subordinate. 33. OBSERVANCE OF LAW Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in anyway conflict with any law, statute, ordinance or gavemmental rule or regulation now in force or which may hereafter be enacted or promulgated. Tenant shalli at its sole cost and expense, promptly comply with all laws, statutes, ordinances and 'govenmental.rules, regulations or requirements now in force or which may hereafter be in force, and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the condition, use or occupancy of the Premises, excluding structural changes not related to or affected by Tenant's improvements or acts. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord is a party thereto or not, that Tenant has violated any law, ordinance or govemmentaf rule, regulation or requirement, shall be conclusive of that fact as between Landlord and Tenant. 34. FORCE MAJEURE Any prevention, delay or stoppage of work to be performed by Landlord or Tenant which is due to strikes, labor disputes, inability to obtain labor, materials, equipment or reasonable substitutes therefor, acts of God, governmental restrictions or regulations or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform hereunder, shall excuse performance of the work by that party for a period equal to the duration of that prevention, delay or stoppage. Nothing in this Article 34 shall excuse or delay Tenant's obligation to pay Rent or other charges under this Lease. 35. CURING TENANT'S DEFAULTS If Tenant defaults in the performance of any of Its obligation under this Lease, Landlord may (but shall not be obligated to) without waiving such default, perform the same for the account at the expense of Tenant Tenant shall pay Landlord all costs of such performance promptly upon receipt of a bill therefor. 36. SIGN CONTROL Tenant shall not affix, paint, erect or inscribe any sign, projection, awning, signal or advertisement of any kind to the exterior of the Premises, Building orPtoject, including without limitation, the inside or outside of windows or doors, without the written consent of Landlord.. Landlord shag have the rightto remove any signs or other matter, installed without Landlord's permission, without being liable to Tenant by reason of such removal, and to charge the cost of removal to Tenant as additional rent hereunder, payable within ten (10) days of written demand by Landlord. 37. MISCELLANEOUS (a) Accord and Satisfaction; Allocation of Payments. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent provided for in this Lease shall be deemed to be other than on account of the earliest due Rent, nor shall any endorsement or statement on any check or letter accompanying any check orpayment as Rent be deemed an accord and satisfaction, and Landlord mayaccept such check or payment without prejudice to Landlord's rightte reooverthe balance of the Rent or pursue any other remedy provided for in this Lease. In connection with the foregoing, Landlord shall have the absolute right in its sole discretion to apply any payment received from Tenant to any account or other payment of Tenant then not current and due or delinquent. (b) Addenda. If any provision contained in an addendum to this Lease is inconsistent with any other provision herein, the provision contained in the addendum shall control, unless otherwise provided in the addendum. (c) Attomeys' Fees. If any action or proceeding is brought by either party against the other pertaining to or arising out of this Lease, the finally prevailing party shall be entitled to recover all costs and expenses, including reasonable attomeys' fees, incurred on an account of such action orproceeding. (d) Captions, Articles and Section Numbers. The captions appearing within the body of this Lease have been inserted as a matter of convenience and for reference only and in no way define, limit or enlarge the scope or meaning of this Lease. All refereces to Article and Section numbers refer to Articles and Sections in this Lease. (e) Changes Requested by Lender. Neither Landlord or Tenant shall unreasonably withhold its Page 14 19 City of Newport Beach 503 32nd Sheet #130 consent to changes or amendments to this Lease requested by the lenderon Landlord's interest, so long as these changes do no alter the basic business terms of this Lease or otherwise materially diminish any rights or materially increase any obligations of the party from whom consent to such charge or amendment is requested. (f) Choice of Law; Construction. This Lease shall be construed and enforced in accordance with the laws of the State. (g) Consent. Notwithstanding anything contained in this Lease to the contrary, Tenant shall have no claim, and hereby waives the right to any claim, against Landlord for money damages by reason of any refusal, withholding or delaying by Landlord of Myc orisent, approval or statement of satisfaction, and in such event, Tenant's only remedies therefor shall be an action for specific perfomance, injunction or declaratory judgment to enforce any right to such consent, etc. (h) Corporate Authority.. If Tenant is a corporation, each individual signing this Lease on behalf of Tenant represents and warrants that he is duty autlrorized to execute and deliverthis Lease on behalf of the corporation, and that this Lease is binding on Tenant in accordance with its terms. Tenant shall, at Landlord's request, defuvera certified copy of a resolution of its board of directors authorizing such execution. (i) Counterparts. This Lease may be executed in multiple counterparts, all of which shall constitute one and the same Lease. (j) Execution of Lease; No Option. The submission of this Lease to Tenant shall be for examination purposes only, and does not and shall not constitute a reservation of oroption for Tenant to lease, or otherwise create any interest of Tenant in the Premises or any other premises within the Building or ProjecL Execution of this Lease by Tenant and Its return to Landlord shall not be binding on Landlord, notwithstanding anytime interval, until Landlord has infactsigned and delivered this Lease to Tenant (k) Furnishing of Financial Statements; Tenant's Representations. In order to Induce Landlord to enter into this Lease Tenant agrees that it shall promptly furnish Landlord, from time to time, upon Landlord's written request, with financial statements reflecting Tenant's current financial condition. Tenant represents and warrants that all financial statements, records and information furnished by Tenant to Landlord in connection with this Lease are true, correct and complete In all respects. (1) Further Assurances. The parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Lease. (m) Mortgagee Protection. Tenant agrees to send by certified or registered mail to any first mortgagee or first deed of trust beneficiary of Landlord whose address has been furnished to Tenant, a copy of any notice of default served by Tenant on Landlord. If Landlord fails to cure such default within the time provided for in this Lease, such mortgagee or beneficiary shall have an additional thirty (30) days to pure such default; provided that if such defaufi cannot reasonably be cured within that thirty (30) day period, then such mortgagee or beneficiary shall have such additional time to cure the default as is reasonably necessary under the circumstances. (n) Prior Agreements; Amendments. This Lease contains all of the agreements of the parties with respect to any matter covered or mentiened in this Lease, and no prior agreeme nt or understanding pertaining to any such matter shall be effective for any purpose. No provisions of this Lease may be amended or added to except by an agreement in writing signed by the parties or their respective successors in interest (o) Recording. Tenant shall not record this Lease without the prior written consent of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a `short fpm" memorandum of this Lease for recording purposes. (p) SeveuabiTty. A final determination by a court of competent jurisdiction that any provision of this Lease is invalid shall.not affect the validity of any other provision, and any provision so determined to be invalid shall, to the extent possible, be construed to accomplish its intended affect. (q) Successors and Assigns. This Lease shall apply to and bind the heirs, personal representatives, and permitted successors and assigns of the parties. (r) Time of the Essence. Time is of the essence of this Lease and each and every provision hereof. (s) Waiver. No delay or omission in the exercise of any fight or remedy of Landlord upon any default by Tenant shall impair such right or remedy or be construed as a waiver of such default. Page 15 19 City of Newport Beach 543 32nd Street #130 (t) Compliance. T the parties hereto agree to compiywith all applicable federal, state and local laws, regulations, codes, ordinances and administrative orders having jurisdiction overthe parties, property or the subject matter of this Lease, including, but not limited to, the 1964 Civil Rights Act and all amendments thereto, the Foreign investment In Real Property Tax Act, the Comprehensive Environmental Response Compensation and Liability Act, and The Americans with Disabilities Act. The receipt and acceptance by Landlord of delinquent Rent shall not constitute a waiver of any other default; it shall constitute only a waiver of timely payment for the particular Rent payment involved. No actor conduct of Landlord, including, without limitation, the acceptance of keys to the Premises, shall constitute an acceptance of the surrender of the Premises by Tenant before the expiration of the Term. Only a written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Premises and accomplish a termination of the Lease. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent orapproval shall not be deemed to waive or render unnecessary Landlord's consent to or approval of any subsequent act by Tenant Any waiver by Landlord of any default must be in writing and shall not be waiver of any other default conceming the same or any other provision of the Lease. The parties hereto have executed this Lease as of the dates set forth below. IN WITNESS WHEREOF, Landlord and Tenant have executed this lease as of the last date indicated below. J VID AS TO FORK- .00%- C . CITY ATTORNEY CITY OF NEWPORT BEACH "LANDLORD" 503.32nd Street, LLC, a Califomia limited liability company By Jack Jakosky, Manager "TENANT" The City of Newport Beach By. Print By. Print Name: Page 16 00 CRY M Mawmd Beach 503 32nd Street #130 EXHIBIT "A" [intentionally Deleted] Exhibit A. Page 1 (�I CM1y of Newport Beach 503 32nd Street #130 EXHIBIT'S" [Intentionally Deleted] Exhibit B, Page 1 City of Newport Beach 503 32nd Street #130 EXHIBIT "C" Building Standard Work Letter DESCRIPTION OF LANDLORD'S WORK None. Tenant shall accept the Premises in its current "as -is" condition. II. DESCRIPTION OF TENANT'S WORK Tenant shall, at Tenant's sole cost and expense, perform all work in the Premises and install such furniture, trade fixtures and equipment as Tenant.deems necessary for the operation of Tenant's business from the Premises (collectively, "Tenant's Work "). To the extent Tenant's Work constitutes alterations which require the consent af'Lamdlord pursuant to Section 12 of the Lease, such Tenant's Work shall be Wormed in accordance with plans and specifications therefor which shall be subject to Landlord's prior written approval (which approval shall riot be unreasonably withheld or delayed). All Tenant's. Work shall be performed in a good and workmanlike manner and in accordance with all applicable laws. Exhibit C, Page 1 City of Newport Beach 503 32nd Street #130 D(HfBIT D Rules and Regulations 1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the building without the written consent of Landlord first had and obtained and Landlord shall have the right to remove and destroy any such sign, placard, picture, advertisement, name or notice without notice to and at the expense of Tenant. All approved signs or lettering on doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by the Landlord Tenant shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside of the Premises, provided, however, that the Landlord may furnish and install a Building standard window covering at all exterior windows. Tenant shall not, without prior written consent of Landlord, cause to be installed or otherwise install sunscreen on any window. 2. The sidewalks, halls passages, exits, entrances, elevators and stairways, driveways, and parking areas shall not be obstructed by any of the tenants or used by them for any purpose other than for ingress and egress from their respective Premises. 3. Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises, without prior written consent of Landlord and subsequent delivery of a duplicate key to Landlord. 4. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be bome by the Tenant who, or whose employees or invitees, shall have caused it 5. Tenant shall not overload the floor of the Premises or in any way deface the Premises or any part thereof. 6. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substances in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to the Landlord or other occupants of the Building by reason of noise, odors andfor vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building. 7. No cooking, except for a coffee machine and microwave, shall be done or permitted by any Tenant on the Premises, nor shall the Premises be used for washing clothes for lodging, or for any improper, objectionable or immoral purposes. 8. Tenant shall not keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied or approved in writing by the Landlord. 9. Landlord will direct electricians as to where and how telephone and telegraph wires are to be introduced. No boring or cutting for wire will be allowed without the consent of the Landlord. The locations of the telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Landlord. 10. Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner does any act in violation of any of the rules and regulations of the Building. 11. Tenant shall not disturb, solicit, or canvass any occupant of the Building and shall cooperate to prevent same. 12. Without the written consent of Landlord, Tenant shalt not use the name of the Building in connection with or in promoting or advertising the business of Tenant, except as Tenant's address. 13. Landlord shall have the right to control and operate the public portions of the Building, and the public facilities, and heating and conditioning, as well as facilities fumished for the common use of the tenants in such manner as it deems best for the benefit of the tenants Exhibit D, Page 1 cr i City of NMPGn (leach 503 32nd Sheet #130 generally. 14. All garbage and refuse shall be placed by Tenant in the containers at the location prepared by Landlord for refuse collection, in the manner and at the times and places specified by Landlord. Tenant shall not bum any trash or garbage of any kind in or about the Premises of the Building. All cardboard boxes must be `broken down" prior to being placed in the bash container. All styrofoam chips must be bagged or otherwise contained prior to placement in the trash container, so as not to constitute a nuleanee. Pallets may not be disposed of in the trash bins or enclosures. It is the Tenanfs responsitiitlly to dispose of pallets by alternative means. Should any garbage or refuse not be deposited in the manner specified by Landlord, Landlord, may, after three (3) hours verbal notice to Tenant, take whatever action necessary to correct the infracture at Tenants expense. 15. No aerial antenna shall be erected on.the roof or exterior walls of the Premises, or on the grounds, without in each instance, obtaining written consent of Landlord. Any aerial or antenna so installed without such written consent shall be subject to removal by Landlord at any time without notice. 16. No bud speakers, televislons, phonographs, radios or other devices shall be used in a manner so as to be heard or seen outside of the Premises or in neighboring space without the prior written consent of Landlord. 17. The outside areas immediately adjoining the Leased Premises shall be kept clean and free from dirt and rubbish by the Tenant to the satisfaction of the Landlord, and Tenant shall not place or permit any obstruction or materials in such areas: No exterior storage shall be allowed. 18. Tenant shall use at Tenant's cost such pest extermination contractor as Landlord may direct and at such intervals as Landlord may require. Tenant agrees to comply with all such rules and regulations at all times. Should Tenant not abide by these Rules and Regulations, landlord may serve a three (3) day notice to correct deficiencies. If Tenant has not corrected deficiencies by the end of the notice period, Tenant will be in default of the Lease. Landlord reserves the right to amend or supplement the foregoing rules and regulations and to adopt and promulgate additional rules and regulations applicable to the Premises. Notice of such rules and regulations and amendments and supplements thereto, if any shall be given to the Tenant. Exhibit D, Page 2� City of Newport Beach 503 32nd SUeet #130 EXHIBIT E [Intentionally Deleted] Exhibit E, Page 7 City of Newport Beach 503 32nd Street #130 ADDENDUM TO LEASE ADDENDUM TO OFFICE BUILDING LEASE DATED .20_BYAND BETWEEN 503 32ND STREET LLC, A CALIFO$NIA LIMITED LIABILITY COMPANY, AS LANDLORD AND THE CITY OF NART BEACH, AS TENANT ( "ADDENDUM ") FOR THE OFFICE SPACE LOCATED AT 503 3g19O'STREET SUITE 130, NEWPORT BEACH, CA 92663. THIS ADDENDUM IS INTENDED TO. MODIFY AND WHERE APPLICABLE TO SUPERSEDE AND OTHERWISE TAKE PR6DE QVL"7t, Ttl j'%!R 61S AND PROVISIONS OF THE OFFICE BUILDING LEASE TO Wl=, ,il IT IS ATTACHED AND MADE A PART OF FOR ALL PURPOSES BY THIS REFERENCE. 1. Option to Extend. Tenant shall have the option to extend the Tenn of this Lease (the 'Renewal Option") on the same terms and conditions (except as set forth herein) for two (2) consecutive periods of two (2) years each (the "Option Tenn(sr). commencing on June 1. 2010 and continuing through May 31. 2012 (the "First Option Tenn "); and commencing on June 1, 2012 and continuing through May 31. 2014 (the "Second Option Tenn ") as follows: a. Tenant shall exercise each Renewal Option by written notice given to Landlord in accordance with Section 29 not less than one hundred twenty (120) days prior to the expiration of the then current Term; b. Tenant shall not have the right to exercise a Renewal Option if it is has at any time been in Default (as defined in Section 27) of any of the terms and provisions of this Lease; C. Any exercise of an Option shall be null and void and of no force and effect if as of the last.day of the then current Tenn prior Id the commencement of the applicable Option Term Tenant is in Default of any of the terms and provisions of the Lease to be performed by Tenant; d. The Options granted herein shall be null and void and of no force or effect if Tenant shall not be the occupant of the Premises on the date that the Renewal Option is exercised, or on the last day of the then current Tenn prior to the commencement of the Option Term. if the Renewal Option applicable thereto has been previously exercised; e. The Options set forth herein are personal to The City of Newport Beach (`Original Tenant") and may be exercised only so long as the Original Tenant occupies the Premises without assigning this Lease or subletting the Premises or any part thereof; Tenant shall have no further Options) to extend the Term of the Lease; g. If more than one (1) Option is granted, Tenant shall have no right to exercise any Option unless each preceding Option has been exercised In accordance with the terms and provisions hereof and has not been made null and void, as it is intended that the Options shall be for consecutive periods only. h. The Base Rent in each of the First Option Tenn, and the Second Option Tenn, shall be as follows: First Option Term: Twenty Eight Thousand Six Hundred Forty Four and 00 1100 Dollars ($28.644.00) per annum; payable in installments of Two Thousand Three Hundred Eighty Seven and 00 /100 Dollars ($2,387.00) per month commencing on June 1. 2010 and continuing through May 31, 2011; then Twenty Nine Thousand Five Hundred Eight and 00/100 Dollars ($29.508.00) per annum, payable in installments of Two Thousand Four Hundred Fifty Nine and 00 /100 Dollars ($2.459.00) per month, commencing on June 1. 2011 and continuing through the remainder of the First Option Term. Second Option Term: Thirty Thousand Three Hundred Ninety Six and 00/100 Dollars ($30,396:00) per annum. payable In monthly installments of Two Thousand Five Hundred Thirty Three and 00/100 Dollars ($2,533.00) per month commencing on June 1. 2012 and continuing through May 31, 2013; then Thirty One Thousand Three Hundred Eight and 00 /100 Dollars ($31,308.00) per annum. payable in monthly installments of Two Thousand Six Hundred Nine and 00/100 Dollars ($2,609.00) per month commencing on June 1, 2013 and continuing through the remainder of the Second Option Term. 2. Utllties/Janitorial Services. Addendum to Lease, Page 1 - 3 1 City of Newport Beach 503 32nd Street 4930 (a) Utility Services: Tenant shall contract and pay utility companies directly for its utilities, including electricity, telephone, computer Internet, DSL line, and rubbish hauling, together with any taxes thereon_ (b) Janitorial Services: Tenant shall contract and pay directly for its own janitorial services. 3. Right of First Offer for Additional Premises: (a) Provided that Tenant has not at any time been in default of any of the terms, covenants.or conditions of this Lease, is operating its business in the Premises in accordance with all of the terms of this Lease, and this Lease has not been assigned or any portion of the Premises sublet, in the event that the office space in the Building currently Identified as 503 32nd Street Suite 120, containing approximately 750 square feet (Suite 120') becomes available for lease prior to expiration of the Tenn, Landlord shall notify Tenant, in writing, that the adjacent premises is available; and Tenant shall have the right from a period of ten (10) days following, receipt of such notice from Landlord to lease Suite 120 (Right of First Offer"). The lease terms applicable to Suite 120 shall be the exact terms and conditions, including Base Rent applicable to the Premises on a per-square-foot basis, and vehicle packing. Landlord will provide Suite 120 in its then current as-is condition. (b) In the event Tenant elects to lease Suite 120, Tenant shall sonofity Landlord in writing within the ten (10) day period described in (a) above. Multiple counterparts of a lease amendment shall than be delivered to Tenant Tenant shall execute said amendment. without modification and in the same form as delivered to Tenant, within ten (10) days of Tenant's receipt thereof. Failure to notify Landlord In writing within the ten (10) daypeftd.described in (a) above shall automatically terminate Tenant's Right of First Offer and Landlord will have no further obligations to Tenant and shall be free to lease and re -lease Suite 120 to others; (c). In the event Tenant shall exercise its Right of First Otferbut shall thereafterfat to execute and deliver the lease amendment in the manner and /or within the time limits setforth in (b) above, then Landlord may lease and re-lease Suite 120 to any other prospective tenant without first offering the same to Tenant; (d). In no event shall Tenant have a Right of First Offer more than once during the Term; and (e). Nothing herein shall prohibit Landlord from showing or marketing Suite 120 to third parties prior to the time Tenant receives Landlord's notice or while Landlord awaits Tenant's response or the signed lease amendment as described above, and Landlord shall not be deemed in default under this Article unless and until Landlord enters into a fully- executed lease with a third party for Suite 120 prior to providing Tenant with the required notice and opporlunityto exercise the Right of First Offer. 4. Tenant's Right To Terminate during Second Option Term Notwithstanding anything to the contrary contained elsewhere in this Lease, provided that the Second Option Tenn has commenced, Tenant has not at any time been in default of any of the terms, covenants or conditions of this Lease, is operating its business in the Premises in accordance with all of the terms of this Lease, Tenant, at its sole option and discretion shall have the right to cancel and terminate this Lease upon One Hundred Twenty (120) days prior written notice given to Landlord. AGREED AND ACCEPTED AGREED AND ACCEPTED LANDLORD TENANT 503 32nd Street LLC, a California The City of Newport Beach limited liability company Jack Jakosky, Manager Addendum to Lease, Page 2 � G� TENAN-P.Cily of Newport Beach PROPERTY". 503 32nd Street SUITE: 130 OFFICE BUMNS.LEASE TABLE OF CONTENTS I LEASE OF PREMISES ..................... .. . ................................................ .......... I 2. DEFINITIONS..._.._...._.._._.. . ........ .. I A EAWBIMAND ADDENDA .............. . . ................. . .................................... 2 4. DELIVERYOF POSSESSION ........... . .. ........... . ....... . .................................. 2 1 RENT.._._........._.... . .. ..................................... 2 & INTEREST AND LATE CHARGES ......... .. . ............. . ...... . .......................... _3 7. SECURITYDEPOSIT ... . ........ 3 & TENANTS USE OF THE 4 9. SERVICE AND UT1LITZES ............... . .............. . ........... 4 X CONDITION OF THE PREMISES_...._.. ......... . ..................... IL CONSTRUCTION, REPAIRS AND MAINTENANCE . ................. 5 6 11 LEASEHOLD IMPROVEMENTS, TENANT'S PROPERTY ....... . . . . . .................. . ..... 6 14. RULESANDREGULATIONS ................................ . ....... ................. 7 15. CERTAINRIGHTS RESERVED BYLAXI)LORD ........... ..... . .............................. 7 16 ASSIGNMENT AND SUBLETTING__..........._._.._._......._ ........... ......_.._._.._._....._._...... 7 17. HOLDING OVER....__._.._..._...._.._._....._.._._.._.._._._ ................. ..._._....._.._........_._.._.. 8 I& SURRENDER OF PREMISES_._........_.._._._.. 8 19. DESTRUCTION OR 9 20. EMINENTDOMAIN ........ .. . ............................................................ ....................... 9 21, . ............ 10 22. TENANT'S INSURANCE......._........_._......_._.._._.._.._.._._.._._ ........ ...................._......_. 10 23. WAIVER OF SURROGA TION .......... ............. . ................................................... 10 24; SUBORDINA TIONAXI) A TTORIVMENT ......................... . ... . ............................ 10 25. TENANT ESTOPPEL CERTIFICATES_............_._.._.._._.._....._ ...... ............................ 11 26 TRANSFER OF LANDLORD rS INFTEREST .............................................. ............... 11 27 DEFAULT ................................... . ....................... ........................................ 11 2& BROKERAGE FEES ...................................................... ............ ....................... 13 29. NOTICES ............................................................... ................ .................. . ...... . 13 30. GOVERAFNENTENERGYOR UTILITYCONTROLS ........ . ........... .............................13 31. RELOCATION OF PREMISES ................... . ... . ........................ ....................... 13 32- QUIET ENJOYMENT .......................................................... ; .... ..... . ........ .......... . 13 33. OBSERVANCE OF LAW .... ............... _ .._..........._...... ........_..................._14 34. FORCE MAJEURE ..................................................................................... .......... 14 31 CURING TENANT'S DEFAULTS....._ .................................................................. 14 36. SIGN CONTROL_._..__......_....._.._._._.._.._._...._.._ ................_._... .._._............_. ......... 14 37. MISCELLANEOUS.........._.._.._._........_.._....._ ................ ..................... . ................... 14 City of Newport Beach NO. BA- 08BA -067 BUDGET AMENDMENT 2007 -08 EFFECT ON BUDGETARY FUND BALANCE: Increase Revenue Estimates NX Increase Expenditure Appropriations AND Transfer Budget Appropriations SOURCE: Ix from existing budget appropriations from additional estimated revenues from unappropriated fund balance EXPLANATION: This budget amendment is requested to provide for the following: AMOUNT: $za,oto.00 Increase in Budgetary Fund Balance X Decrease in Budgetary Fund Balance No effect on Budgetary Fund Balance To increase and transfer expenditure appropriations for the lease with Jakosky Properties for City office space at 503.32nd Street. ACCOUNTING ENTRY: BUDGETARY FUND BALANCE Amount 'Fund Account Description Debit Credit 010 3605 General Fund - Fund Balance $21,560.00 ' REVENUE ESTIMATES (3601) Fund /Division Account Description EXPENDITURE APPROPRIATIONS (3603) Description Division Number 0330 City Manager - Code/Water Quality Enforcement Account Number 9000 Office Equipment $8,980.00 Division Number 2910 Building - Administration Account Number 9010 Computer Equipment $4,780.00 Account Number 9400 Office Furniture $7,800.00 Account Number 8030 Maintenance & Repair of Equipment $2,450.00 Account Number 8070 Rental Property & Equipment $2,450.00 Division Number Account Number ' Automatic System Entry. Signed: Financial Approval: Administrativ ervicas Director Date Signed: =5 Administrative Approval: Cit anger to Signed: City Council Approval: City Clerk Date