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HomeMy WebLinkAbout14 - Commercial Tidelands Usesp aEW Pp,47, CITY OF NEWPORT REACH C9CIFORNP City Council Staff Report Agenda Item No. 14 November 13, 2012 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: City Manager's Office Dave Kiff, City Manager 949 - 644 -3001, dkiff @newportbeachca.gov PREPARED BY: Dave Kiff – City Manager APPROVED:` —a -G TITLE: Commercial Tidelands Uses ABSTRACT: The City of Newport Beach ( "City ") acts as the trustee of the State of California ( "State ") in the administration of public tidelands property within Newport Harbor. In this capacity, the City is effectively a landlord and is empowered by the 1978 Beacon Bay Bill, as amended ( "Beacon Bay Bill "), to rent tidelands property to third parties for a period of 50 years or less. At the October 23, 2012 City Council meeting, the City Council adopted a fair market rent methodology for Large Commercial Marinas that was based upon 18.5% of Gross Slip Revenues. After the City Council's October 23, 2012 meeting and following a series of meetings with some affected stakeholders, the Council Ad Hoc Committee on Harbor Charges ( "Committee ") has modified its recommendations and now recommends: e That rent for Large Commercial Marinas be set at 16 % of Gross Slip Revenues, but set forth in a Marina Index that translates the 16% of GSR to an amount per square foot. ® That rental increases be phased in over six steps, with no change in the current rate of $0.36/SF in 2013, building to the fully indexed rate in 2018. ® That rent for other commercial harbor uses be established, with a phase -in period, as described in Attachment D to this staff report. Commercial Tidelands Uses November 13, 2012 Page 2 RECOMMENDATION: 1. Adopt Resolution No. 2012- 96 amending Resolution No. 2012 -91 and Resolution No. 2012 -92 relating to Large Commercial Marinas; 2. Adopt Resolution No. 2012-97 approving a model lease template and model permit for commercial tidelands uses; and 3. Adopt Resolution No. 2012 -98 setting fair market value rent for commercial tidelands uses. 4. That the Council direct the Ad Hoc Committee on Harbor Charges to review and make recommendations to the rents and other charges considered by the City Council to date (any other rents later proposed and adopted) to ensure that they are fair and equitable. This shall be done prior to December 31, 2013. FUNDING REQUIREMENTS: The current budget allows for the resources needed to implement the model lease permit templates. The City's income properties administrator as well as the City Attorney and City Manager's office will handle lease implementation. DISCUSSION: A majority of the waterways in Newport Harbor are tidelands, owned by the State on behalf of the people. The California Legislature through the Beacon Bay Bill granted the City trusteeship of most of the tidelands within Newport Harbor (the County of Orange also acts as trustee over some tidelands). The Beacon Bay Bill authorizes the City to allow third parties to use the tidelands, for a term not to exceed 50 years. Both the Beacon Bay Bill and the NBMC require the City to receive fair market rent as consideration for allowing a third party to use the tidelands. LARGE COMMERCIAL MARINA RENT — REVISED RECOMMENDATION At the Council's October 23`d, 2012 meeting, the Council on a 4 -3 vote directed that rent for Large Commercial Marinas reflect a value of 18.5% of Gross Slip Revenues derived from a Marina Index of nine marinas and that it be phased -in over eight periods, with 2013 and 2014 being frozen at the current rate of $0.36/SF. The Committee proposes a revised recommendation as follows: Commercial Tidelands Uses November 13, 2012 Page 3 Rent: Rent will be determined through the use of a Marina Index composed of nine commercial marinas located within Newport Harbor as a square footage rate reflective of 16.0% of slip revenue. Rent Phase In: The fair market rent for commercial marinas will be phased -in over six periods beginning March 1, 2013 at a flat $0.36/SF rate and starting March 1, 2014 be incrementally increased over five additional steps to reach the full fair market rental value on March 1, 2018. Rent Adjustment: The fair market rent will be recalculated every year by staff to ensure it is reflective of any increases or decreases within the Marina Index. There will be an appraisal -based adjustment following implementation of the final phase -in step on March 1, 2018, to ensure that the rate is reflective of fair market value. Table D in Resolution 2012--illustrates the phase -in for the Large Commercial Marina Index, in accordance with the revised recommendation of the Ad Hoc Committee. OTHER COMMERCIAL HARBOR USES The Beacon Bay Bill, California Constitution Article 16, Section 6, NBMC Section 17.60.060(D), NBMC Section 17.60.020(E), and City Council Policy F -7(D) require the City to receive fair market rent when renting tidelands to third parties. The fair market rent may be set by the City Council at any amount provided the amount is based on an appraisal prepared by a "City- selected" appraiser and is reflective of fair market value. The rental rate currently charged by the City for commercial tidelands uses under the annual permit system is well below the fair market rate due to a lack of regular rate increases. For example, the City currently charges commercial permit holders $0.36 for every square foot of tidelands rented per year. Following the Committee's work on Large Commercial Marinas, the Committee moved to determine appropriate rental charges for Other Commercial Harbor Uses. The Committee's final recommendations are shown in Attachment D. The development of the proposed rental charges shown in Attachment D was developed by the Committee after consideration of conclusions reached in appraisals the city has obtained from James Netzer (date of value and dated August 10, 2012 - updating a 2006 appraisal), and Gary Rasmuson (dated October 12, 2012 with a date of Commercial Tidelands Uses November 13, 2012 Page 4 value of June 28, 2012) as well as a review of other relevant material, including but not limited to marinas and commercial harbor uses in Newport Harbor and surrounding areas. The Netzer and Rasmuson appraisals indicated that the current rental ranges for fair market valuations of other commercial harbor uses are shown in Table #1: Table #1- Appraisal Results The Committee reviewed the appraisals, other materials and information, and have proposed the rental rates suggested in Attachment D. Information within the "Initial Proposal" section of Attachment D was shown to the public in the staff presentation about Large Commercial Marina rents on October 23rd, 2012. The Committee held a public workshop with the harbor stakeholders on October 31, 2012 (staff presentation for that workshop is shown as Attachment E). At the workshop, Committee members and the public discussed concerns and questions with the Committee's October 23, 2012 recommendations. -. Rea m Yacht Clubs 17% of $ 1.40 20% Of Sr $ 0.55 GSR. =Gross Slip Reuenue, base rent by GSR GSR SF/Year Either $0.99/51`/Year vs. $0.015 /gallon for Fuel Docks N/A $ 1.05 See $ 0.99 the first 100,000 gallons then $0.02 /gallon Notes in excess of 100,000 gallons (whichever is higher) "Short- Term" uses N/A N/A 4% of $0.99 (90 days or less) GSR Shipyards N/A $ 1.05 $ 0.99 GSRf Charters N/A $ 1,05 $ 0.99 GSRf Rental Boat Users N/A $ 1.05 SOf $ 0.99 Restaurants/Guest Slips N/A $1.05 $ 0.99 GSRf HCIAs 17% f $ 1.40 N/A $ 0.99 GSR Small Commercial 17% of $1.45 20% of $1.50 Marinas GSR GSR The Committee reviewed the appraisals, other materials and information, and have proposed the rental rates suggested in Attachment D. Information within the "Initial Proposal" section of Attachment D was shown to the public in the staff presentation about Large Commercial Marina rents on October 23rd, 2012. The Committee held a public workshop with the harbor stakeholders on October 31, 2012 (staff presentation for that workshop is shown as Attachment E). At the workshop, Committee members and the public discussed concerns and questions with the Committee's October 23, 2012 recommendations. Commercial Tidelands Uses November 13, 2012 Page 5 Following the workshop, the Committee prepared a revised chart of recommendations. Attachment D contains the rental charges that the Committee recommends be adopted by the City Council. Attachment D includes: 1. The Committee's initial recommendations (October 23, 2012) 2. Changes made since the October 31, 2012 workshop as well as reflecting the Committee's recommendation to change the Large Commercial Marina rent from 18.5% of Gross Slip Revenues to 16% of Gross Slip Revenues. 3. The recommended phase -in period for these rental charges. About Gas Docks In preparing its recommendation for gas docks, the Committee reviewed the appraisals, information from neighboring areas, and listened to concerns at the 10 -31 workshop. The Netzer appraisal notes the following about neighboring area rental rates: FLTL DOCK RENTAL SURVEY SULFI.AUGUST 2012 Upland lease Base Rent Percent Rein Data No, Lease Tideland Use Type Total Rent or Location Date (Sq.Fta 116+17t. s±gaBon Ii High Seas Fuel. Dock 1995 U: 13,800 Fuel Dock Base + $0.23 D: $0.0075iGal. San Diego Adj.2005 T:33,075 &Sales Fixed '$1-39 G:$0.04fGa1 conbbled Pearsan2ziaruze Fuel 1993 U: 4,000 Fuel Dock Base+ $0.623 D:$0.0075 /Gal. San Diego At-2004 T: 32,9W Fixed $1.21 G:$0_WGal. (conbineel 3i Oceanside Hiirbor Fuel 1989 U: 5,658 Fuel Dock Base+ Not D: MP.'o Dock Adj_ 2005 T N.At% +I'l ni Percent Disclosed G: 3.0'la Oceanside Mart 4' Dana Pount Fuel Dock 1995 U: "_2.040 Fuel Dock Base+ $137 D: 6.0%* Dana. Point Adj, 2008 T: 18,000 Percent $4,28 G6.0'1* colds 51 llcC-or 200 3 U: N. As. Fuel Dock Base+ $28,500 D. $0.04rhA Saxaa Bubare T: 13441 Fired N Ara. G: $0.04'Gal. 6' Del Rey Fwls 2006 U: 14,769 Fuel Docb Base+ $203 6.0% Marina del Rey T: 52,989 Percent N.Av. conrbied (all fuels) 7i '4lanner'5 Pout 2010 T: 7.500 Fuel Dock Base+ $L19 $0.0152*al. to Hun'ington'Harbor Fixed NAv. 100 000 Gals, $0.021001. over 100.000 Gals. orpaai y iT. a[ leas=_ comffi2II{emm a4ja6t = 2001TO to mSeiz a)eaeasmp [1w1- plans. Commercial Tidelands Uses November 13, 2012 Page 6 In the above chart, "D" means Diesel and "G" gasoline. Note that a typical rental charge associated with gas is $0.04 /gallon. The Committee proposes a base rent of $0.50 /SF /year versus $0.015 /gallon for the first 100,000 gallons sold in any one year, and $0.02 /gallon for the gallons sold above 100,000 (as an illustration, if a 3,600 SF gas dock sells more than 115,000 gallons in any one year, the dock's permit or lease- holder would pay the per gallon rate rather than the $0.50 /SF rate, with $1,800 being the threshold). Other relevant information considered by the Committee includes the State Lands Commission's approval (about two years ago) of a fuel dock lease in Huntington Harbor that set rent at the same per gallon rate recommended by the Committee but with a higher base rent than the Committee is proposing for Newport Harbor. More information about fuel dock values is shown in Pages 33 — 38 of Mr. Netzer's appraisal. ENVIRONMENTAL REVIEW: City staff recommends the City Council find the setting of Rent for commercial Tidelands uses and the adoption of an amended model lease template for Large Commercial Marinas is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Alternatively, City staff recommends the City Council find the setting of Rent for commercial Tidelands uses and the adoption of an amended model lease template for Large Commercial Marinas is entitled to a Class 1 Categorical Exemption pursuant to CEQA Regulation Section 15301 because the Rent contemplates the continued use of existing facilities, with no expansion of the proposed use. Further, City staff recommends the City Council find the setting of Rent for commercial Tidelands uses and the adoption of an amended model lease template for Large Commercial Marinas to implement the Rent is entitled to a Statutory Exemption pursuant to CEQA Regulation Section 15273(a)(1) because the fair market value Rent established by the City Council will be used to meet operating expenses within the Tidelands. Commercial Tidelands Uses November 13, 2012 Page 7 NOTICING: In addition to the stakeholder input noted above, this agenda item has been noticed according to the Brown Act (at least 72 hours in advance of the meeting at which the City Council considers the item). Submitted by: Jy- C�- M) Dave Kiff City Manager Attachments: A. Resolution No. 2012- B. Resolution No. 2012 - C. Resolution No. 2012 - D. Final Committee Recommendations E. Presentation made at 10 -31 -2012 Workshop Commercial Tidelands Uses November 13, 2012 Page 8 Attachment D — Final Committee Recommendations Nochange following New harborwide appraisals When Lg Commercial Marina rent Shipyards $0.50 /SF workshop right after 3- 1 -201H phase -in reaches $0.50/SF, this rent is fully Phased -in. $0.50/SF min rent offset by 1.5 No change following New harbomide appraisals No change to rent in 2013, but Fuel Docks cents /gallon to LOOK, then 2 workshop rightafter 3- 1.2018 goesto pergailon charge in 2014. cents /gallon above LOOK $0.50/SF for non - rented When Lg Commercial Marina rent slips, guest access, Newighta phase-in rhes$O50/SFhisr Yacht Clubs $1.02/SF for non - rented slips educational uses. right after 3 -2 -2018 after 3-1-2018 $1.68/SF.¢r rented slips), this rent is for Lg Commercial Index Rattler fuitY phased -in.. rented slip SF No change following New harbomide appraisals When Lg Commercial Marina rent Daily Rental Boats $1.02/SF phase -in reaches $1.02/SF, this rent workshop right after 3-1-2018 is fully phased -in- $1.02 1SF for member- rented $1.A2/SF for member -rented slips; Marina Index (small or New harborwide appraisals When Lg Commercial Marina rent. HOAS slips large) for slbli rented to right after 3 -1 -2928 phase -in reaches $1.02/SF, this rent public is fully phased -in. Guest Slips for 51.02 /SFfcr non -rented slips; No change following New harborwide appraisals When Lg Commercial Marina rent Restaurants Marina index (small or large) for workshop right agar 3 -1-2918 phase -in reaches $1.02/SF, this rent market-rented slips is fully phased -in. SpOrtfishing Charters No change following New harborwide appraisals When Lg Commercial Marina rent $1.02/SF phase -in reaches $1.02 /SF, this rent (6+ passengers) workshop right after 3 -1 -2028 isfully phased-in- Large Commercial marina New harborwide appraisals When Lg Commercial Marina rent Large Charter Boats index rate $102/5F right after 3 -1 -2018 phase -in reaches $1_02/5F, this rent is fully phased-in- Small Commercial Marina =< Small Commercial Marina= < 15,o90 5F of Total 3,000 SF of Total Waterways Waterways Small Commercial Newharborwideappraisats No Change in 2013, then steps upto Marinas 75% of Lg Commercial right after 3 -1 -2018 fully indexed rate by March 1, 2018. 75% of Large Commercial Marina Marina Index rate (now index rate or 19-5% of gross slip 51.68 /SF)or 16% of gross revenue with$1.45 /SF Min Rent (Min$1.26 /SF of tidelands used) Large Commercla l 18.5 %of Gross or$1.97/SF of 1656ofGrossorindex Rate New harborwide appraisals No Change in 2013, the stepsupto Marinas tide {ands used ($1.68 /SF of tidelands used) right after 3 -1 -2018 fully indexed rate by March 1, 2018. Attachment A RESOLUTION NO. 2012- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH AMENDING RESOLUTION NO. 2012 -91 AND RESOLUTION NO. 2012 -92 RELATED TO LARGE COMMERCIAL MARINAS LOCATED UPON TIDELANDS WHEREAS, pursuant to the 1978 Beacon Bay Bill, as amended, ( "Beacon Bay Bill ") the City of Newport Beach ( "City ") acts on behalf of the State of California as the trustee of tidelands located within the City's limits, including Newport Harbor; WHEREAS, Section 1(b) of the Beacon Bay Bill authorizes the City to allow third - parties to use the tidelands for commercial purposes for a term not to exceed fifty (50) years; WHEREAS, on October 23, 2012 the City Council adopted Resolution No. 2012- 91 entitled, "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH APPROVING A MODEL LEASE TEMPLATE AND MODEL PERMIT FOR LARGE COMMERCIAL MARINAS LOCATED UPON TIDELANDS'; WHEREAS, on October 23, 2012 the City Council adopted Resolution No. 2012- 92 entitled, "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH SETTING RENT FOR LARGE COMMERCIAL MARINAS LOCATED UPON TIDELANDS'; WHEREAS, following the adoption of Resolution No. 2012 -91 and Resolution No. 2012 -92 the Council Ad Hoc Committee on Harbor Charges ( "Committee ") continued to seek and receive input from Large Commercial Marina operators regarding possible improvements designed to protect and enhance Newport Harbor; WHEREAS, based upon this new information, the Committee recommends an amendment to Resolution No. 2012 -91 and Resolution No. 2012 -92, in part, to re- define Large Commercial Marinas, the Rent phase in schedule, correct scrivener's errors and revise the Market Adjustment Date, among other revisions; and WHEREAS, the City Council finds this resolution is a successor resolution to Resolution No. 2012 -91 and Resolution No. 2012 -92. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Be Section 1: The Recitals provided above are true and correct and are incorporated into the substantive portion of this resolution. The City Council incorporates the findings made in Resolution No. 2012 -91 and Resolution No. 2012 -92 into this resolution. Section 2: The City Council repeals and replaces in its entirety the model lease template for Large Commercial Marinas adopted by Resolution No. 2012 -91 with the model lease template for Large Commercial Marinas, attached to this resolution, and incorporated by this reference. The City Council finds that the attached model lease template for Large Commercial Marinas satisfies the requirement of Newport Beach Municipal Code ( "NBMC ") Section 17.60.060(A) covering the conversion of existing permits to leases. The City Council further finds that the Large Commercial Marinas subject to the attached model lease template for Large Commercial Marinas are not subject to the open bid process found in City Council Policy F -7 because redevelopment/reuse of the Tidelands by a third party would require excessive time, resources and costs which would outweigh other financial benefits. Section 3: The City Council repeals and replaces in its entirety the Commercial Marina Rent calculations (Large Commercial Marina Rent and Large Commercial Marina Rent Alternative) adopted by Resolution No. 2012 -92 with the Commercial Marina Rent calculations attached to this resolution (Amended Large Commercial Marina Rent and Amended Large Commercial Marina Rent Alternative), and incorporated by this reference. The City Council finds pursuant to NBMC Section 17.60.060(D) that the rent provisions contained in the attached Commercial Marina Rent calculations provide for the charging of fair market rent and that the rental rate (and adjustments) in the attachments constitute fair market rent for Large Commercial Marinas, which findings are made by the City Council in its exclusive discretion but are based on the information in the appraisals of its City - selected appraisers and, in addition, on other testimony and documents in the record for this matter. The City Council further finds and determines the rent for Large Commercial Marinas located upon City managed Tidelands, operating under an annual permit or a lease, shall be set in accordance with the attached Commercial Marina Rent calculations. Section 4: Except as expressly modified by this resolution, all other provisions, terms, and covenants set forth in Resolution No. 2012 -91 and Resolution No. 2012 -92 shall remain unchanged and shall be in full force and effect. Section 5: The City Council finds the setting of Rent for commercial Tidelands uses and the adoption of an amended model lease template for Large Commercial Marinas is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical -2- change to the environment, directly or indirectly. Alternatively, the City Council finds the setting of Rent for commercial Tidelands uses and the adoption of an amended model lease template for Large Commercial Marinas is entitled to a Class 1 Categorical Exemption pursuant to CEQA Regulation Section 15301 because the Rent and amended lease contemplates the continued use of existing facilities, with no expansion of the proposed use. Further, the City Council finds the setting of Rent for commercial Tidelands uses and the adoption of an amended model lease template for Large Commercial Marinas to implement the Rent is entitled to a Statutory Exemption pursuant to CEQA Regulation Section 15273(a)(1) because the fair market value Rent established by the City Council will be used to meet operating expenses within the Tidelands. Section 6: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. Section 7: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this day of 12012. Nancy Gardner, Mayor ATTEST: Leilani I. Brown, City Clerk Attachments: (1) Amended Large Commercial Marina Model Lease Template (2) Amended Large Commercial Marina Rent (3) Amended Large Commercial Marina Rent Alternative -3- Amended Large Commercial Marina Rent A. Beginning on the date a lease or permit is first effective (i.e., the date a lease is executed by all parties or a permit is issued by the City), a Commercial Marina Operator shall pay to the City, on a monthly basis, Rent (as defined below). 1. Rent: Rent shall be calculated on an annual basis as follows: First, the City shall determine the "Target Indexed Rate" as follows: the "Aggregate 16% Equivalent Rent" shall be determined, which is comprised of Gross Revenue for Slip Rentals for the preceding calendar year of all marinas included within the Marina Index multiplied by point one six (0.16) (i.e., if aggregate Gross Revenue for Slip Rentals is $14,730,000, multiply $14,730,000 by 0.16 to yield an Aggregate 16% Equivalent Rent of $2,356,800). If a Commercial Marina Operator of a marina included in the Marina Index fails to provide Gross Revenue for Slip Rentals for any calendar year the City shall use the Commercial Marina Operator's immediate prior Gross Revenue for Slip Rentals as adjusted by the Consumer Price Index ( "CPI "). The Aggregate 16 % Equivalent Rent shall then be divided by the aggregate Premises' square footage for all marinas included in the Marina Index to determine the Target Indexed Rate for the succeeding twelve (12) months of Rent beginning on March 1 (i.e., if the Aggregate 16% Equivalent Rent is $2,356,800 and the aggregate square footage for all waters of marinas in the Marina Index is 1,402,000 square feet, the Target Index Rate would be $1.68 a square foot [$2,356,800 divided by 1,402,000 square feet]). The Premises for the individual Marina Index marinas will be based on known amounts determined by reference to existing City or County permits or leases. The Target Index Rate shall be calculated annually by the City in accordance with this paragraph as soon as practicable after December 31 of each calendar year. For 2013, Rent shall remain at the current $0.36 a square foot. For a term year beginning March 1, 2019, and thereafter, monthly Rent shall equal the then applicable Target Index Rate, rounded to the nearest cent, times the Premises square footage as set forth in this resolution (i.e., if the Target Index Rate is $1.68 and the Premises is 10,000 square feet the annual Rent would be $16,800). Rent will be set in accordance with a six (6)- period phase -in procedure as follows: On March 1, 2013 Rent shall be set at $0.36 a square foot of the Premises. Beginning on March 1, 2014, Rent shall be calculated annually each March 1 by reference to the following 13 methodology: Target Index Rate minus the prior calendar year square footage rate divided by the number of years remaining with the phase -in period plus the prior calendar year square footage rate. An example of the Rent calculation is provided below in Table #1. In Table #1, the example assumes that the Targeted Index Rate in 2014 is one dollar and sixty -eight cents ($1.68) per square foot. In the actual calculation and subsequent years, the Targeted Index Rate will be adjusted annually, as set forth above, and may increase or decrease. This increase or decrease shall be reflected in the subsequent calculations using the same methodology as shown above. 2. Marina Index Composition: The Marina Index shall be comprised of the following marinas: 1) ,.•.. a 2) Bayshores Marina 3) Bayside Marina 4) Lido Yacht Anchorage 5) Harbor Towers Marina 20,1,2 =4 20 017 7) Newport Marina $ 0.36 $ 0.36 $ 0.56 $ 0.81 $ 1.09 $ 1.39 $ 1.72 $ 1.79 Assumed Index Rate $ 1.68 $ 1.71 $ 1.75 $ 1.77 $ 1.72 $ 1.72 $ 1.79 Previous Year's Rent Difference A ( ) - -- . No change in 2013 $ 0.36 $ 0.56 $ 0:81 $ 1.35 $ 1.19 $ 0.96 $ 1.09 $ 0.63 $ 1.39 $ 0.33 $ 132 $ 0.07 $ 0..20 $ 0.25 $ 0.28 $ 030. $ 0.33 $ 0.07 increase for Year (A(8) Harborwide Appraisal after 3-1-2018 ;....... The Marina Index suggests that 16% of Gross in 2012 = $1.68 /SF. This example assumes the FMV appraisal in 2018 = 17-A of Gross Slip Revenue (Index value today Notes: - $1.79/5F). Actual answer effective 3 -1 -19 will be based on the appraisal process. This example illustrates that the Assumed Index Rate can change every year - up or down. In Table #1, the example assumes that the Targeted Index Rate in 2014 is one dollar and sixty -eight cents ($1.68) per square foot. In the actual calculation and subsequent years, the Targeted Index Rate will be adjusted annually, as set forth above, and may increase or decrease. This increase or decrease shall be reflected in the subsequent calculations using the same methodology as shown above. 2. Marina Index Composition: The Marina Index shall be comprised of the following marinas: 1) Ardell 2) Bayshores Marina 3) Bayside Marina 4) Lido Yacht Anchorage 5) Harbor Towers Marina 6) Newport Dunes Marina 7) Newport Marina -5- 8) Bahia Corinthian Yacht Club 9) Balboa Yacht Basin The square footage weighting in the Marina Index will be based on the Tidelands square footage used by the Commercial Marina. To be included within the Marina Index, a Commercial Marina Operator must agree to the terms provided in this resolution. The marinas included in the Marina Index may be revised by the City Council at a regular or special meeting in the event that an index marina ceases operation, fails to comply with the terms provided in this resolution, or in the reasonable discretion of the City Council ceases to be meaningful for use in the Marina Index. In that event, the City Council shall strive to select a new marina whose operating characteristics, revenue, and Tidelands square footage is similar to the marina to be replaced. B. Fair Market Adjustment of Rent and Other Fees and Charges: At the Market Adjustment Date, the Rent shall be adjusted to reflect the then - current fair market value, as such value shall be determined by appraisals to be conducted in accordance with the provisions of this section following March 1, 2018. The Rent determined by the appraisals shall commence on March 1 of the year following the appraisals (i.e., the Rent determined by the appraisals following March 1, 2018 shall be effective March 1, 2019). The City shall retain one (1) independent MAI appraiser to conduct a harbor -wide appraisal of commercial uses. Within thirty (30) calendar days of the City's selection of an appraiser the Commercial Marina Operators included in the Marina Index may retain one (1) independent MAI appraiser to conduct a harbor -wide appraisal of commercial uses. Each party shall pay the costs of their selected appraiser. The City shall not participate in the selection of the Commercial Marina Operators' appraiser. If the Commercial Marina Operators are unable or unwilling to select and retain an appraiser within thirty (30) calendar days of the City's selection of an appraiser, the City may in its sole and absolute discretion select and retain an independent MAI appraiser on behalf of the Commercial Marina Operators to conduct a harbor -wide appraisal of commercial uses. If the two (2) appraisals return with a fair market value that is within five percent (5 %) of each other the two (2) appraisal fair market values shall be averaged to produce the then - current fair market value. For clarity, if one (1) appraiser concludes thirteen percent (13 %) and one (1) appraiser concludes fifteen percent (15 %) the difference in their conclusions is thirteen and 333 /1,000ths percent (13.333 %) and therefore a third appraisal would be needed. If the two (2) appraisers should fail to agree on the fair market value, and the difference between the two (2) appraisals exceeds five percent (5 %), then the two (2) appraisers thus appointed shall mutually appoint a third MAI designated appraiser, and in case of their failure to agree on a third appraiser within thirty (30) calendar days after their individual determination of the fair market value, in either party may apply to the Presiding Judge of the Superior Court for Orange County, requesting said Judge to appoint the third MAI designated appraiser. The costs of the third appraiser, if any, shall be split equally between the Lessor and the Lessees included in the Marina Index. The third appraiser so appointed shall meet and confer with the two (2) other appraisers and then conduct its own analysis to determine the then - current fair market value within sixty (60) calendar days of their appointment and the average of the fair market value per square foot as set forth in the appraisals of the two (2) closest appraisers shall be used as the then - current fair market value. All MAI appraisers appointed or selected pursuant to this subsection shall have at least ten (10) years experience appraising Tidelands in the Southern California area and shall be free of conflicts (i.e., no appraisers shall rent a boat slip or office space from Lessor or Lessees, etc.). C. To be included within the Marina Index, a Commercial Marina Operator must agree to be bound by the following terms: (1) Slip Rental Documentation: By February 1, 2014, a Commercial Marina Operator shall provide City with Gross Revenue for Slip Rentals and the slip rental rate schedule for the most recent calendar year and the two (2) preceding calendar years. For every subsequent calendar year, a Commercial Marina Operator shall provide the City its Gross Revenue for Slip Rentals and the slip rental rate schedule for the prior calendar year by February 1st of every year. The Gross Revenue for Slip Rentals shall be certified by the Commercial Marina Operator and its external auditor to be true and accurate to the City for purposes of calculation of the Marina Index. At the Commercial Marina Operator's option, the Gross Revenue for Slip Rentals may be provided directly to the City or to the City's designated certified public accountant ( "CPA ") for such purposes. The City's designated CPA shall exercise independent professional judgment and shall not be used by the City for any other purposes. The City shall use its best efforts to maintain such Gross Revenue for Slip Rentals information confidential. (2) Audit: If Gross Revenue for Slip Rental is submitted to City, City may, or if Gross Revenue for Slip Rentals is submitted to City's designated CPA, the CPA may, in its sole and absolute discretion, at any and all reasonable times, examine and audit Books and Records, financial statements, and documentation, without restriction, for the purpose of determining the accuracy of the Gross Revenue for Slip Rentals for the Premises reported to the City or the City's designated CPA for the prior year, and the accuracy of the Rent paid to City. If the Commercial Marina Operator's business operations conducted within or from the Premises are part of a larger business operation of the Commercial Marina Operator, and any part of the Books and Records, financial statements and documentation is prepared only for the larger operation, and not solely for the business -7- operations of the Premises, then the City shall also have the right to examine and audit that part of the Books and Records, financial statements, and documentation of the larger business operation. In the event the Commercial Marina Operator does not make available the original Books and Records, financial statements, and documentation at the Premises or within the limits of Orange County, Commercial Marina Operator shall pay all necessary travel expenses incurred by City (including, without limit, the cost of City's agent's time) in conducting an audit at the location where Books and Records are maintained. If the audit reveals a discrepancy in the Gross Revenue for Slip Rentals reported to City of ten percent (10 %) or less, City shall pay the cost of the audit. If the audit reveals a discrepancy in the Gross Revenue for Slip Rentals reported to City of greater than ten percent (10 %) the Commercial Marina Operator shall pay the cost of the audit. D. For the purposes of this Rent methodology the following terms have the following meanings: (1) Books and Records means full, complete, accurate and proper books, records and accounts of all business, use or occupation, or any combination thereof, transacted, arranged or performed, in whole or in part, on, from or for goods, services or events from or related to the Premises, whether by the Lessee or by a sublessee, licensee, concessionaire or other party, consistently applied, which shall include equipment to record all sales at the time of transactions and shall also include, without limit, income, sales and property tax returns and on a cash basis method of accounting information. (2) City means the City of Newport Beach. (3) Commercial Marina Operator(s) means a person or entity that rents Tidelands from the City under either a permit or a lease for the operation of a Large Commercial Marina. (4) Gross Revenue for Slip Rentals means all receipts of every kind and nature, whether for cash, credit or barter, received /due for the rental or use of a slip, dock, or pier on the Premises. Without limiting the breadth of the prior sentence, Gross Revenue for Slip Rentals shall include, without limitation, receipts of every kind and nature derived from any promotion, package deal, service, or other item that is associated in any way with the rental or use of a slip, dock, or pier on the Premises, excluding pass - through of direct third -party charges (e.g., electricity, cable TV, etc.) without markup by the Commercial Marina Operator. For purposes of determining Gross Revenue for Slip Rentals any fixed, annual, monthly U and /or recurring charge that a person or entity is required to pay shall be counted as part of the Gross Revenue for Slip Rentals. Gross Revenue for Slip Rentals shall not be offset or reduced for any reason, including, but not limited to, the payment of taxes, fees, repairs, maintenance, construction, or inability or failure to collect any cash, credit, or barter due for the use of a slip, dock, or pier on the Premises. (5) Large Commercial Marina means a "marina" as defined in Newport Beach Municipal Code Section 17.01.030(J)(3), which occupies fifteen thousand square feet (15,000 sf) or more of Tidelands and Private Waterways. (6) Market Adjustment Date means March 1, 2018 and every fifth (5th) anniversary year thereafter. (7) Premises means those Tidelands which are subject to the applicable permit/lease and are more particularly described and depicted in the applicable permit/lease, excluding any Private Waterways and improvements. (8) Private Waterways means privately held submerged lands. (9) Tidelands means certain tidelands and submerged land (whether filled or unfilled), located in the City of Newport Beach, County of Orange, State of California granted to the City of Newport Beach, as trustee, by the State of California pursuant to the Tidelands Grant. (10) Tidelands Grant means uncodified legislation related to the State of California's grant of certain rights in the Tidelands to the City of Newport Beach, including, without limitation, the Beacon Bay Bill (Chapter 74 of the Statutes of 1978, as amended [citations omitted]). In Amended Large Commercial Marina Rent Alternative A. Alternative Rent: As an alternative Rent methodology, commencing with March 1, 2014, on the date a lease or permit is first effective (i.e., the date a lease is executed by all parties or a permit is issued by the City), a Commercial Marina Operator shall pay to the City, on a monthly basis, the greater of Base Rent or Percentage Rent (as defined below). For the year March 1, 2013, Rent shall remain at the current thirty - six cents ($0.36) a square foot. (1) Base Rent Adjustment and Phasing: "Base Rent" shall be charged on a per square foot basis of the Premises, at the rate of seventy -five percent (75 %) of the Large Commercial Marina Target Index Rate, and shall be phased in as follows: (2) Percentage Rent Phasing: "Percentage Rent" shall be phased in as follows and shall equal sixteen percent (16 %) of annual Gross Revenue for Slip Rentals: -10- ♦ t • - A BasaiWeni. B a• -A- Keikppyiie 4620119 jdi& 2J 2- 20,15 $ 036 $ 036 $ 0.56 $ 0.81 $ 1.09 $ 126 $ 1.35 $ 1.39 Assumed Base Rent $ 1.26 $ 1.26 $ 1.29 $ 1.30 $ 1.29 $ 1.35 $ 1.39 Previous Year's Rent $ 0.36 $ 0.56 $ 0.81 $ 1.09 $ 1.26 $ 1.35 ...... ...... Difference (A) No Change $ 0.90 $ 0.73 $ 0.49 $ 0.20 $ 0.09 $ 0.04 ...... . m___...._.__.._ .._.....,.,..�._._.,.�.___...__ in 2013 $ 0.20 $ 015 $ 0.28 $ 0.17 $ 0.09 $ 0.04 _._. Increase for Year (A/B)l Harborwde Appraisal i......... Fully Phased -in at 2017 ........ after 3 -1-2018 This example illustrates that the Assumed Base Rent can change every year per Notes: 15ection B of this Alternative. Phased -in by 2017 in this illustration. (2) Percentage Rent Phasing: "Percentage Rent" shall be phased in as follows and shall equal sixteen percent (16 %) of annual Gross Revenue for Slip Rentals: -10- B. Fair Market Adjustment of Percentage Rent: At the Market Adjustment Date, the Percentage Rent shall be adjusted to reflect the then - current fair market value, as such value shall be determined by appraisal. The Rent determined by the appraisals shall commence on March 1 of the year following the appraisals (i.e., the Rent determined by the appraisals following March 1, 2018 shall be effective March 1, 2019). To avoid duplication and unnecessary expense, the appraisals performed for the Marina Index at the Market Adjustment Date shall be used for this fair market adjustment appraisal requirement. C. Reconciliation of Rent: At the end of every calendar year, City shall perform a reconciliation of the Rent paid by the Commercial Marina Operator to City to ensure the correct Rent was paid. The City shall credit the amount by which Rent actually received exceeds the amount of Rent determined to have been due and payable for such calendar year. A credit, if applicable, shall be made to the next installment of Rent due. However, nothing in this section shall require the City to provide a credit that would cause the Commercial Marina Operator to pay less than Base Rent for the calendar year being reconciled and, in such case, no credit will be due or applied. If the amount of Rent due for a calendar year is more than the Rent paid by the Commercial Marina Operator prior to reconciliation, then the Commercial Marina Operator shall pay the difference to City. The Commercial Marina Operator shall pay City, within five (5) days following such determination, the full amount of Rent determined to have been due for such calendar year. D. Reporting Requirements: To use this alternative rent methodology, a Commercial Marina Operator must agree to be bound by the following terms: -11- Q 0. i # 4.♦ B ZM 3.40% 3.40% M4 5.92% 2619 8.44% 3 201& 10.96% 31,11 2W 13.48% n1a 16.00% Qbo 16.00% Target Rate Previous Year's Rate Difference (A) ,...... ............ Periods Remaining (S) Increase for Year (A(6) No. Change in 2013 16.00% 16.00% 16.00% 16.00% 16.00% 16.00°% 3.40% 5.92% 8.44% 10.96% 13.48 °% 16.00% 12.60°.5 - u 10.1x6 _a v 7.6% 5.0% 2.5% 0.0% -- 5 4 _ 3 2 1 N/A ........ 2.52% 2.52% 2.52% 2.52°% 2.52°% N/A Harbomice Appraisal^ I after 33 -2078 B. Fair Market Adjustment of Percentage Rent: At the Market Adjustment Date, the Percentage Rent shall be adjusted to reflect the then - current fair market value, as such value shall be determined by appraisal. The Rent determined by the appraisals shall commence on March 1 of the year following the appraisals (i.e., the Rent determined by the appraisals following March 1, 2018 shall be effective March 1, 2019). To avoid duplication and unnecessary expense, the appraisals performed for the Marina Index at the Market Adjustment Date shall be used for this fair market adjustment appraisal requirement. C. Reconciliation of Rent: At the end of every calendar year, City shall perform a reconciliation of the Rent paid by the Commercial Marina Operator to City to ensure the correct Rent was paid. The City shall credit the amount by which Rent actually received exceeds the amount of Rent determined to have been due and payable for such calendar year. A credit, if applicable, shall be made to the next installment of Rent due. However, nothing in this section shall require the City to provide a credit that would cause the Commercial Marina Operator to pay less than Base Rent for the calendar year being reconciled and, in such case, no credit will be due or applied. If the amount of Rent due for a calendar year is more than the Rent paid by the Commercial Marina Operator prior to reconciliation, then the Commercial Marina Operator shall pay the difference to City. The Commercial Marina Operator shall pay City, within five (5) days following such determination, the full amount of Rent determined to have been due for such calendar year. D. Reporting Requirements: To use this alternative rent methodology, a Commercial Marina Operator must agree to be bound by the following terms: -11- (1) Slip Rental Documentation: By February 1, 2014, a Commercial Marina Operator shall provide the City with Gross Revenue for Slip Rentals and the slip rental rate schedule for the most recent calendar year and the two (2) preceding calendar years. For every subsequent calendar year, a Commercial Marina Operator shall provide the City its Gross Revenue for Slip Rentals and the slip rental rate schedule for the prior calendar year by February 1st of every year. The Gross Revenue for Slip Rentals shall be certified by the Commercial Marina Operator and its external auditor to be true and accurate to the City. The City shall use its best efforts to maintain such Gross Revenue for Slip Rentals information confidential. (2) Audit: The City may in its sole and absolute discretion, at any and all reasonable times, examine and audit Books and Records, financial statements, and documentation, without restriction, for the purpose of determining the accuracy of the Gross Revenue for Slip Rentals for the Premises reported to the City for the prior year, and the accuracy of the Rent paid to City. If the Commercial Marina Operator's business operations conducted within or from the Premises are part of a larger business operation of the Commercial Marina Operator, and any part of the Books and Records, financial statements and documentation is prepared only for the larger operation, and not solely for the business operations of the Premises, then the City shall also have the right to examine and audit that part of the Books and Records, financial statements, and documentation of the larger business operation. In the event the Commercial Marina Operator does not make available the original Books and Records, financial statements, and documentation at the Premises or within the limits of Orange County, Commercial Marina Operator shall pay all necessary travel expenses incurred by City (including, without limit, the cost of City's agent's time) in conducting an audit at the location where Books and Records are maintained. If the audit reveals a discrepancy in the Gross Revenue for Slip Rentals reported to City of ten percent (10 %) or less, City shall pay the cost of the audit. If the audit reveals a discrepancy in the Gross Revenue for Slip Rentals reported to City of greater than ten percent (10 %) the Commercial Marina Operator shall pay the cost of the audit. E. For the purposes of this alternative Rent methodology the following terms have the following meanings: (1) Books and Records means full, complete, accurate and proper books, records and accounts of all business, use or occupation, or any combination thereof, transacted, arranged or performed, in whole or in part, on, from or for goods, services or events from or related to the Premises, whether by the Commercial Marina Operator or by a sublessee, -12- licensee, concessionaire or other party, consistently applied, which shall include equipment to record all sales at the time of transactions and shall also include, without limit, income, sales and property tax returns and on a cash basis method of accounting information. (2) City means the City of Newport Beach. (3) Commercial Marina Operator(s) means a person or entity that rents Tidelands from the City under either a permit or a lease for the operation of a Large Commercial Marina. (4) Gross Revenue for Slip Rentals means all receipts of every kind and nature, whether for cash, credit or barter, received /due for the rental or use of a slip, dock, or pier on the Premises. Without limiting the breadth of the prior sentence, Gross Revenue for Slip Rentals shall include, without limitation, receipts of every kind and nature derived from any promotion, package deal, service, or other item that is associated in any way with the rental or use of a slip, dock, or pier on the Premises, excluding pass - through of direct third -party charges (e.g., electricity, cable TV, etc.) without markup by the Commercial Marina Operator. For purposes of determining Gross Revenue for Slip Rentals any fixed, annual, monthly and /or recurring charge that a person or entity is required to pay shall be counted as part of the Gross Revenue for Slip Rentals. Gross Revenue for Slip Rentals shall not be offset or reduced for any reason, including, but not limited to, the payment of taxes, fees, repairs, maintenance, construction, or inability or failure to collect any cash, credit, or barter due for the use of a slip, dock, or pier on the Premises. (5) Large Commercial Marina means a "marina" as defined in Newport Beach Municipal Code Section 17.01.030(J)(3), which occupies fifteen thousand square feet (15,000 sf) or more of Tidelands and Private Waterways. (6) Market Adjustment Date means March 1, 2018 and every fifth (5th) anniversary year thereafter. (7) Premises means those Tidelands which are subject to the applicable permit/lease and are more particularly described and depicted in the applicable permit/lease, excluding any Private Waterways and improvements. (8) Private Waterways means privately held submerged lands. (9) Rent means both Base Rent and Percentage Rent. -13- (10) Tidelands means certain tidelands and submerged land (whether filled or unfilled), located in the City of Newport Beach, County of Orange, State of California granted to the City of Newport Beach, as trustee, by the State of California pursuant to the Tidelands Grant. (11) Tidelands Grant means uncodified legislation related to the State of California's grant of certain rights in the Tidelands to the City of Newport Beach, including, without limitation, the Beacon Bay Bill (Chapter 74 of the Statutes of 1978, as amended [citations omitted]). -14- 111MA311411911 1 �T(�l �: !:I City of Newport Beach, a California municipal corporation ("Lessor") D' 1 , a ("Lessee") 1. Definitions ......................................................................................... ..............................2 2. Leased Premises ............................................................................... ..............................2 3. Term .................................................................................................. ..............................3 4. Rent .................................................................................................. ..............................3 5. Utilities, Taxes and Assessments ...................................................... ..............................4 6. Use of the Premises .......................................................................... ..............................4 7. Reserved .......................................................................... ..............................6 8. Acceptance of Condition of Premises - "As -1s" / Waiver / Release ..... ..............................5 9. Reserved ........................................................................................... ..............................6 10. Reconstruction or Removal ............................................................... ..............................6 11. Maintenance and Repair ................................................................... ..............................7 12. Liens ................................................................................................. ..............................8 13. Reserved ........................................................................................... ..............................9 14. Quitclaim Deed .................................................................................. ..............................9 15. Right to Enter the Premises for Inspection ......................................... ..............................9 16. Transfers / Hypothecation for Financing ............................................ ..............................9 17. Bankruptcy ....................................................................................... .............................13 18. Defaults ............................................................................................ .............................13 19. Remedies ......................................................................................... .............................14 20. Surrender of Premises ..................................................................... .............................16 21. Condemnation .................................................................................. .............................16 22. Indemnification ................................................................................. .............................18 23. Insurance ........................................................................ .............................19 24. Hazardous Substances .................................................................... .............................19 25. Quiet Possession ............................................................................. .............................20 26. Compliance with Applicable Laws .................................................... .............................21 27. Not Agent of Lessor .......................................................................... .............................21 28. No Third Party Beneficiaries ............................................................. .............................21 29. Limitation of Leasehold / Easements ................................................ .............................21 30. Notices ............................................................................................. .............................21 31. Entire Agreement/ Amendments ........................................................ .............................22 32. Waivers ............................................................................................ .............................23 33. Lessor's Authorized Representative ................................................. .............................23 34. City Business License ...................................................................... .............................23 35. Governing Law & Non - Binding Arbitration ........................................ .............................23 36. Interpretation .................................................................................. ............................... 24 37. Time is of the Essence ..................................................................... .............................24 38. California Labor Laws ....................................................................... .............................24 39. Joint and Several Liability ................................................... .............................25 40. Memorandum of Lease Agreement .................................................. .............................24 41. No Pre- commitment / Retention of Discretion / Assumption of Risk and Waiver.............................................................................. .............................25 42. No Damages .................................................................................... .............................25 43. Appraisals ......................................... ............................... Error! Bookmark not defined. 44. Reserved ......................................................................... .............................27 45. Late Charges and Delinquency Rates .............................................. .............................26 46. Reserved .......................................................................................... .............................27 47. Government Claims Act .................................................................... .............................27 This Lease Agreement [(With Options for Renewal)] ( "Agreement ") is entered into this 1st day of March, 2013 by and between the City of Newport Beach, a California municipal corporation and charter city ( "Lessor" or "City'), and a ( "Lessee "). RECITALS A. Pursuant to the Tidelands Grant, the State of California granted to Lessor, as trustee, certain Tidelands. The Tidelands must be used to promote the public's interest in water - dependent or water - oriented activities, as described more fully in the Tidelands Grant; B. The Tidelands Grant provides that the Tidelands shall not, at any time, be granted, conveyed, given, or alienated to any individual, firm or corporation for any purpose whatever except pursuant to Lessor's grant of either a franchise or lease; C. The Tidelands Grant authorizes Lessor to enter into leases of the Tidelands for a period not exceeding fifty (50) years so long as such leases are consistent with Lessor's obligations to hold the Tidelands in trust for the uses and purposes contained in the Tidelands Grant; D. On 20_ the City Council approved this Agreement by adopting Resolution No. _- , as required by Municipal Code section 17.60.060(A); therefore, subject to the terms and conditions of this Agreement, Lessor desires to lease a portion of the Tidelands defined as the Premises to Lessee and Lessee desires to lease the Premises; E. The City previously issued City Pier Permit Number ( "Permit ") for the Premises; City Pier Permit Number , which shall expire February 28, 2013 after which time the City has stated such Permit will not be renewed and Lessee or any other party has no continuing rights in such Permit after such date; and F. The parties desire to enter this Agreement for a term described herein and to grant Lessee an option to extend the term of this Agreement. In consideration of the mutual promises and obligations contained in this Agreement, the receipt and sufficiency of which is hereby acknowledged, and the Recitals above, which are incorporated by this reference, Lessee and Lessor hereby enter into this Agreement on the following terms and conditions: NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: Definitions Capitalized terms that are not otherwise defined in the body of this Agreement (which are identified in parentheses (" ")) have the meanings attributed in Exhibit "A ". 2. Leased Premises Lessor hereby leases to Lessee, for the Term specified in Section 3, the Premises. The rights granted to Lessee by this Agreement are subject to Lessee's compliance with the ba terms, covenants and conditions in this Agreement. Lessee covenants, as a material part of the consideration for this Agreement, to keep and perform each and every term, covenant and condition of this Agreement. 3. Term (a) Initial Term: The Term of this Agreement shall be (_) years commencing on the 1st day of March, 2013, which shall be the "Commencement Date," and terminating on the _ day of , 20_, unless sooner terminated as provided in this Agreement. (b) Option for Renewal Term(s): If Lessee is not in default of its obligations in this Agreement, then Lessee shall have the option to extend the Term of this Agreement for (_) additional successive "Renewal Term(s)" of _ (_) years each, on the same terms and conditions contained in this Agreement. As provided by the Tidelands Grant, in no event shall the Term and any Renewal Terms exceed a total of fifty (50) years. (i) Each Renewal Term for which an option is exercised shall commence at the expiration of the immediately preceding Term. Lessee must exercise its option to a Renewal Term by giving a written "Option Notice" of its election to Lessor no earlier than two hundred and seventy (270) calendar days and no later than ninety (90) calendar days prior to the expiration of the immediately preceding Term. (ii) Should Lessee fail to timely give an Option Notice, then the option for the Renewal Term and all subsequent Renewal Terms shall be null and void and of no further force and effect. Rent for the Renewal Term shall be determined and adjusted as described in Section 4 below. 4. Rent (a) Rent: Rent shall be calculated pursuant to Resolution No. 2012 -_, or any successor /amended resolution. Resolution No. 2012 -_ and any successor /amended resolution are automatically incorporated by reference into this Agreement, without any further action by the parties, when adopted by the Newport Beach City Council. (b) Periodic Payment of Rent: One - twelfth (1/12) of annual Rent for a particular Lease Term Year shall be payable on the first (1st) day of each month during the Term. (c) Place for Payment of Rent: All payments of Rent shall be made in lawful money of the United States of America and shall be paid to Lessor in person or by United States' mail, or overnight mail service, at the Cashier's Office located at 3300 Newport Boulevard, Newport Beach, CA 92658, or to such other address as Lessor may from time to time designate in writing to Lessee. If requested by Lessor, Lessee shall make payments electronically (at www.newportbeachca.gov) or by wire transfer (at Lessee's cost). Lessee' assumes all risk of loss and responsibility for late charges and delinquency rates -3- 5. a if payments are not timely received by Lessor regardless of the method of transmittal. (d) Additional Rent: Lessee shall pay as "Additional Rent" for the Premises, within ten (10) calendar days of Lessor's demand therefore (unless a different time for payment is expressly provided in this Agreement), all other amounts required by this Agreement, in addition to Rent. Additional Rent does not reduce or offset Lessee's obligations to pay Rent. (e) No Abatement or Reduction in Rent: Lessee has no right to any abatement, set- off or reduction in Rent or Additional Rent. No endorsement or statement on any check or any letter accompanying any check or payment will be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance or pursue any other available remedy. (f) Net Lease: Rent, as defined in this Agreement, is based upon Lessee's material representation and covenant that it will pay all expenses, costs, taxes; assessments, fees or charges, and incur all liabilities, of every kind in any way relating to, or in connection with, the Premises and the Improvements during the Term. Accordingly, Lessee will promptly pay all expenses, costs, taxes, assessments, fees or charges, and incur all liabilities, of every kind and description relating to, or in connection with, the Premises and the Improvements during the Term. Utilities Taxes and Assessments (a) Lessee is solely responsible for obtaining all utilities and paying all taxes, fees and assessments for the Premises or Improvements located thereon. Lessee shall promptly pay, and discharge prior to delinquency, any and all charges for services or utilities and all taxes, fees and assessments furnished to or due on the Premises or Improvements located thereon, or occupants thereof. (b) Lessor hereby gives notice to Les Section 107.6 that this Agreement subject of property taxes levied on shall be the sole obligation of Les sublessee, licensee, concessionaire requirements of Section 107.6. see, pursuant to Revenue and Tax Code may create a possessory interest that is the such interest, the payment of which taxes see. Lessee shall advise in writing any or third party using the Premises of the (c) Any payments under this Section shall not reduce or offset Rent payments. Lessor has no liability for such payments. Use of the Premises During the term of this Agreement, Lessee will use and occupy the Premises solely and exclusively for the operation of a marina or boat berthing facility and associated ancillary uses. -4- 7. Reserved. 8. Acceptance of Condition of Premises - "As -Is" / Waiver / Release (a) Lessee's Acknowledgment: Lessee acknowledges that Lessee, Lessor or unrelated third parties may have constructed improvements (some or all of which may be Improvements as specified on Exhibit "B ") on and adjacent to the Premises (including, without limit, bulkheads in the surrounding area adjacent to and /or abutting the Premises). Lessee agrees and acknowledges that it is relying solely on its own inspections and investigations regarding the Premises, the condition of the Premises, the surrounding area and all other matters related thereto. Lessee represents and warrants that it has obtained the advice of such independent professional consultants as it deems necessary in connection with its investigation and study of the Premises and surrounding area, including, without limitation, water quality, Improvement quality, soils, hydrology, seismology, archaeology, Applicable Laws (including, without limitation, the laws relating to the construction, maintenance, use and operation of the Premises and Improvements), and all environmental, zoning and other land use entitlement requirements and procedures, height restrictions, floor area coverage limitations and similar matters. (b) Only Lessor's Express Written Agreements Binding: Lessee acknowledges and agrees that no person acting on behalf of Lessor is authorized to make, and that except as expressly set forth in this Agreement, neither Lessor nor anyone acting for or on behalf of Lessor has made, any representation, warranty, statement, guaranty or promise to Lessee, or to anyone acting for or on behalf of Lessee, concerning the condition of the Premises, any other aspect of the Premises or the surrounding area. Lessee further acknowledges and agrees that no representation, warranty, agreement, statement, guaranty or promise, if any, made by any person acting on behalf of Lessor which is not expressly set forth in this Agreement will be valid or binding on Lessor. (c) Verification of Acceptance: Lessee further acknowledges and agrees that Lessee's execution of this Agreement constitutes Lessee's representation, warranty and covenant that the condition of the Premises and the surrounding area has been independently verified by Lessee to its full satisfaction, and that, except to the extent of the express covenants of Lessor set forth in this Agreement, Lessee will be leasing the Premises based solely upon and in reliance on its own inspections, evaluations, analyses and conclusions, or those of Lessee's representatives. As material inducement to Lessor's entering this Agreement, Lessee represents, warrants and covenants that LESSEE ACCEPTS AND IS LEASING THE PREMISES, AND IS AWARE OF THE SURROUNDING AREA, IN ITS "AS -IS, WITH ALL FAULTS" CONDITION AND STATE OF REPAIR INCLUSIVE OF ALL FAULTS AND DEFECTS, WHETHER KNOWN OR UNKNOWN, AS MAY EXIST AS OF THE LESSEE'S EXECUTION OF THIS AGREEMENT, AND WITH NO WARRANTY EXPRESS OR IMPLIED FROM LESSOR AS TO ANY LATENT, PATENT, FORESEEABLE AND UNFORESEEABLE CONDITIONS. Without limiting the scope or generality of the foregoing, Lessee expressly assumes the risk that the Premises do not or will not comply with any Applicable Laws now or hereafter in effect. -5- (d) Waivers, Disclaimers and Release: (i) Waiver and Disclaimer: Lessee hereby fully and forever waives, and Lessor hereby fully and forever disclaims, all warranties of whatever type or kind with respect to the Premises and Improvements, whether expressed, implied or otherwise including, without limitation, those of fitness for a particular purpose, tenant ability, habitability or use. (ii) Lessor's Materials: Lessee further acknowledges that any information and reports including, without limitation, any engineering reports, architectural reports, feasibility reports, marketing reports, soils reports, environmental reports, analyses or data, or other similar reports, analyses, data or information of whatever type or kind which Lessee has received or may hereafter receive from Lessor or its agents or consultants have been furnished without warranty of any kind and on the express condition that Lessee will make its own independent verification of the accuracy, reliability and completeness of such information and that Lessee will not rely thereon. Accordingly, Lessee agrees that under no circumstances will it make any claim against, bring any action, cause of action or proceeding against, or assert any liability upon, Lessor or any of the persons or entities who prepared or furnished any of the above information or materials as a result of the inaccuracy, unreliability or incompleteness of, or any defect or mistake in, any such information or materials. Lessee hereby fully and forever releases, acquits and discharges Lessor and each person furnishing such information or materials of and from, any such claims, actions, causes of action, proceedings or liability, whether known or unknown. (iii) Waiver of Civil Code Section 1542: With respect to all releases made by Lessee or Lessor under or pursuant to this Section 8, Lessee or Lessor hereby waives the application and benefits of California Civil Code Section 1542 and hereby verifies that it has read and understands the following provision of California Civil Code Section 1542: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Lessee: Lessor: 9. Reserved 10. Reconstruction or Removal Lessee will promptly cause the Improvements or any part thereof, which are (a) damaged or destroyed or (b) declared unsafe or unfit for occupancy or use by a public entity with the appropriate authority, to either be (i) removed or (ii) restored or reconstructed to their original design and layout, or to a good and safe condition as reasonably approved by Lessor, whether or not required to be insured against, at Lessee's sole cost and expense. Restoration or reconstruction shall commence within 0 ninety (90) calendar days from the date of issuance of all permits (City and Coastal), which permits Lessee will diligently pursue in a commercially reasonable timeframe, to repair, and Lessee shall diligently pursue reconstruction to completion. Lessee shall not be entitled to any abatement in Rent or other form of compensation from Lessor for loss of use of the Premises or Improvements in the event of damage or destruction of the Premises or Improvements. Damage to or destruction of the Premises or the Improvements shall not permit Lessee to terminate this Agreement. Alternatively, in the event of damage or destruction, Lessee may remove all Improvements from the Premises and terminate this Lease. The force majeure provisions in this Agreement shall apply to reconstruction. 11. Maintenance and Repair (a) Maintenance by Lessee: Lessee assumes full responsibility for operation and maintenance and repair of the Premises throughout the Term at its sole cost, and without expense to Lessor. (i) Without limiting Lessee's obligations to maintain the Premises, Lessee shall keep and maintain all Improvements in good order, condition and repair consistent with similar marinas in Newport Harbor. (ii) Maintenance dredging bayward of the property line, between the bulkhead line and the pierhead line, shall be the responsibility of Lessee. Lessee shall perform all maintenance in compliance with all Applicable Laws. (iii) Reserved. (iv) Reserved. (v) Lessee expressly waives (a) the right to require Lessor to make repairs; (b) any right to make repairs at the expense of Lessor; (c) the right to reduce or offset Rent as a consequence of the condition of the Premises or the Improvements; (d) the benefits of California Civil Code Sections 1932, 1941 and 1942, as amended from time to time; and (e) any law, judicial pronouncement, or common law principle similar thereto, which is now or hereafter in effect or is otherwise inconsistent with the provisions of this Agreement. (b) Reserved. (c) Reserved. (d) Maintenance Prior to Renewal Term: In addition to any other conditions to Lessee's exercise of the option to extend the Term (or Renewal Term) of this Agreement, no less than one hundred twenty (120) calendar days prior to the end of a Term that may be renewed, Lessee shall submit a maintenance report stating the condition of the Improvements on the Premises. Improvements shall be inspected, and the maintenance report shall be written, by a qualified marine engineer that is retained and paid for by Lessee but approved by Lessor. ra The maintenance report shall make repair and maintenance recommendations to ensure that the maintenance standards in this Agreement are met and will be maintained and the useful life of the Improvements will extend throughout the Renewal Term(s). At the time of providing the maintenance report to Lessor, Lessee shall sign a certification under penalty of perjury that Lessee shall, at its sole cost, make all repairs and perform all maintenance identified in the maintenance report to the reasonable satisfaction of, and on a schedule satisfactory to, Lessor. Any costs incurred by Lessee to make repair and maintenance recommendations is a qualification for the Term or Renewal Term of this Agreement and is not Rent. The cost of repair and maintenance recommendations shall not be considered by the parties or appraiser in determining any Rent or Rent adjustment during the term of this Agreement. (e) Maintenance by Lessor: Nothing in this Agreement requires Lessor to perform any maintenance or repair to the Premises or to any adjacent property or bulkheads; or to make any improvements whatsoever on or for the benefit of the Premises. However, with no less than twenty -four (24) hours written notice -from Lessor to Lessee, Lessor shall have the right, but not the obligation, to make any emergency repairs related to safety or hazard concerns to or on the Premises. Lessee shall reasonably cooperate with Lessor in any activity undertaken by Lessor on the Premises. Lessor may collect its cost for emergency repairs from the Lessee as Additional Rent. 12. Liens (a) Liens Prohibited: Lessee shall not permit to be imposed, recorded or enforced against the Premises, any portion thereof or any structure or Improvement thereon, any mechanics, materialmen's, contractors or other liens arising from, or any claims for damages growing out of, any work or repair, construction or alteration of improvements on the Premises. (b) Release /Removal of Liens: In the event any lien or stop notice is imposed or recorded on the Premises,. or an Improvement permanently affixed to the Premises, during the Term, Lessee shall pay or cause to be paid all such liens, claims or demands before any action is brought to enforce the same against the Premises or the Improvement. Notwithstanding the foregoing, if Lessee legitimately contests the validity of such lien, claim or demand, then Lessee shall, at its expense, defend against such lien, claim or demand provided that it provide Lessor the indemnity in Section 22 and provided Lessee shall pay and satisfy any adverse judgment that may be rendered before any enforcement against Lessor, the Premises, or the Improvement. (c) Reserved. (d) Exceptions: Section 12 shall not apply to a foreclosure of a Leasehold Mortgage encumbering the Leasehold Estate if the Leasehold Mortgage has previously received Lessor consent in accordance with this Agreement. 13. Reserved. 14. Quitclaim Deed Upon expiration or the earlier termination of this Agreement for any reason, including but not limited to termination because of default by Lessee, Lessee shall, at Lessee's sole expense, remove all fixtures, equipment, and Improvements installed by Lessee from the Premises. Unless another time line is agreed upon by Lessor, all fixtures, equipment and Improvements shall be removed by Lessee within ninety (90) calendar days following the expiration or termination of this Agreement. Lessee shall continue to pay Rent to Lessor during the time Lessee removes the Improvements from the Premises, as provided in Section 20(b). Alternatively, Lessee, with Lessor's written consent, may quitclaim all fixtures, equipment, and Improvements on the Premises to Lessor. Lessor acknowledges the bulkhead is owned by Lessee and Lessor has no rights to use any portion of such bulkhead. Notwithstanding any other provision of this Agreement as permitted by California Public Resources Code Section 6312, or any successor statute, the parties agree that upon expiration or earlier termination of this Agreement Lessor shall have no liability or obligation to pay compensation for any improvements made to the Premises. 15. Right to Enter the Premises for Inspection Lessor expressly reserves the right and shall be entitled to enter the Premises, and all Improvements, including a right of reasonable access to the Premises across Lessee owned or occupied lands adjacent to the Premises, to inspect the Premises for compliance with the terms of this Agreement. Unless otherwise provided in this Agreement, Lessee shall provide Lessor access to the Premises for such purposes, upon not less than seventy -two (72) hours written notice. 16. Transfers / Hypothecation for Financing (a) Transfers: Except as expressly provided herein, Lessee and its successors shall not either voluntarily, or by operation of law, engage in a Transfer without first providing written request to Lessor and obtaining Lessor's prior written consent which shall not be unreasonably withheld or delayed. Notwithstanding anything to the contrary set forth herein, Lessee may, without consent from the City, assign all or a portion of its interest in the Premises and /or this Agreement to any entity or person affiliated with Lessee or a partner member, shareholder or trustee of Lessee ( "Permitted Transferees "). Lessee agrees that Lessor's discretion to provide, withhold or condition consent to any Transfer (except for the Permitted Transfers to a Permitted Transferee in which the City has no consent) includes, without limitation, Lessor's discretion in administering the Tidelands, which are a valuable public resource held by Lessor in trust for the people of the State of California; therefore, Lessor's decision to grant, withhold or condition consent shall be reasonable. A Transfer made in violation of this Section 16, including without limitation the obligation to receive Lessor's prior consent, is a default subject to the cure right in Section 18(b). Lessee shall comply with the following requirements for any Transfer. Lessee agrees that failure to satisfy these requirements are reasonable bases for Lessor to deny consent (but is not exhaustive of the bases to deny consent): 0 (1) Lessee shall give Lessor at least thirty (30) calendar days written notice of its proposed Transfer and provide appropriate documentation demonstrating to Lessor's satisfaction the financial and operational responsibility and appropriateness of the proposed transferee. Lessee shall provide Lessor within five (5) calendar days such other or additional information and /or documentation as may be reasonably requested by Lessor. (2) Lessee shall provide the terms and provisions of the proposed Transfer. (3) Except as otherwise provided in this Agreement for a permitted Leasehold Mortgagee, the proposed transferee shall, in recordable form, expressly assume this Agreement. (4) In the event the proposed transferee is acquiring only a portion of the adjoining Other Real Property, the rights and obligations of Lessee and the proposed assignee shall be proportionately adjusted in the manner deemed appropriate by Lessor in light of its obligations under the Tidelands Grants; and (5) Lessee shall pay all Lessor's costs associated with Lessor's consideration of the Transfer, regardless of whether such transfer is consummated, or in connection with any other actions taken by Lessor pursuant to this Section 16. (b) Transfer if Appurtenant to Other Real Property (i) The Premises is appurtenant to the adjoining littoral or riparian land and /or uplands with required uplands support (e.g., parking, restrooms, etc.). The uplands property along with the location of the code required uplands support is more particularly described on Exhibit "C" as the "Other Real Property" and Lessee is the [fee title owner] [lessee of the Other Real Property pursuant to that certain , dated by and between Lessee as and as " "] of the Other Real Property. (ii) If Lessee Transfers its interest or rights to use such Other Real Property adjoining the Premises separately from the Premises or Lessee's interest in this Agreement, Lessee shall provide the following to the Lessor: (1) Lessee must provide Lessor with thirty (30) calendar days prior written notice of the proposed Transfer; and (2) Lessee, subject to Lessor's reasonable approval, must provide written documentation to Lessor describing in sufficient detail how access will be provided to the Premises and the required uplands support (e.g., parking, restrooms, etc.) and its respective location that will serve /benefit the Premises. -10- (c) Subletting Permitted to Boat Slip Renters (i) Notwithstanding other provisions of this Section 16, Lessee shall have the right to sublease the slips to Boat Slip Renters and to extend or renew any subleases with Boat Slip Renters. (d) Hypothecation for Financing: For the purpose of financing or refinancing the acquisition of the Premises, the Improvements, the fixtures and equipment located on the Premises, the alteration, construction or reconstruction of Improvements, Lessee may engage in a Transfer to a Leasehold Mortgagee only if, in addition to such other applicable provisions in this Agreement, the provisions in this Section 16(d) are satisfied. In no event shall Leasehold Mortgages either individually or collectively exceed a loan -to -value ratio of seventy -five percent (75 %) of the Premises. (i) Notice to Lessor. Lessee shall provide Lessor with a fully executed complete copy of each Leasehold Mortgage, and all related loan documents (including copies of all appraisals), any and all amendments thereto, and the name and address of each Leasehold Mortgagee. In the event of any assignment of a Leasehold Mortgage or in the event of a change of address of a Leasehold Mortgagee, Lessee shall provide the new name and address of the assignee or Leasehold Mortgagee to Lessor. Notices of default and notices of foreclosure shall be given to Lessor contemporaneously with service on Lessee. (ii) Notices to Leasehold Mortgagees. A Leasehold Mortgagee shall not be entitled to notice or a copy of any notice from Lessor unless Lessee provides Lessor with Leasehold Mortgagee's name and address and requests that such Leasehold Mortgagee receive notices. (iii) Leasehold Mortgagee Opportunity to Remedy Default. Any Leasehold Mortgagee who is entitled to notice as provided in Section 16(d)(ii) shall have the right, but not the obligation, to remedy the default or acts or omissions of Lessee within the period and in the manner specified in this provision. Upon Lessee's default and subsequent expiration of the applicable cure period in Section 18, a Leasehold Mortgagee shall be permitted to remedy such default(s) at any time within fifteen (15) calendar days (for nonmonetary defaults) and five (5) calendar days (for monetary defaults) following the expiration of the Lessee's cure period; provided, however, Lessor shall not be required to furnish any further notice(s) of default(s) to said Leasehold Mortgagee. (iv) Leasehold Mortgagee Procedure on Lessee's Default. (1) Upon Leasehold Mortgagee's remedy of Lessee's default to the reasonable satisfaction of Lessor, this Agreement shall continue provided that a Leasehold Mortgagee: a. Pays all Rent, and other monetary obligations of Lessee under this Agreement as the same becomes due, and 11- perform all of Lessee's other obligations under this Agreement; and b. If not enjoined or stayed, takes steps to acquire or sell Lessee's interest in this Agreement and in the Premises to an assignee, future transferee or purchaser by foreclosure of the Leasehold Mortgage or other appropriate means, and prosecutes the same to completion with reasonable diligence. (2) Nothing in this Section 16(d) shall extend this Agreement beyond the Term or any Renewal Term; nor to require a Leasehold Mortgagee to continue such foreclosure proceedings after a breach or default has been remedied. If Lessee's breach or default is remedied and the Leasehold Mortgagee discontinues such foreclosure proceedings, this Agreement, at Lessor's option and in its sole and absolute discretion, may continue as if no breach or default under this Agreement occurred. (3) Before a Leasehold Mortgagee, or any other assignee, future transferee or purchaser by foreclosure of the Leasehold Mortgage, acquires the Leasehold Estate, it shall, as an express condition precedent, agree in writing to assume each and every obligation under the Agreement. Regardless, with the exception of said Leasehold Mortgagee, no Transfer to an assignee, future transferee or purchaser by foreclosure of a Leasehold Mortgage shall be effective without Lessor's prior written consent, which shall not be unreasonably withheld. (4) The assignee, purchaser or future transferee at any sale of this Agreement or of the Leasehold Estate in any proceedings for the foreclosure of or trustee's sale under any Leasehold Mortgage, or pursuant to any deed in lieu of foreclosure, shall be deemed an assignee or transferee of this Agreement, and shall be deemed to have agreed to perform all of the terms, covenants and conditions on the part of Lessee to be performed in this Agreement but only from and after the date of such purchase and assignment, and only for so long as such purchaser; future transferee or assignee is the owner of the Leasehold Estate. (5) If Lessor denies consent to (a) the successful bidder or purchaser upon foreclosure or (b) a proposed future transferee, assignee or sublessee of the Leasehold Mortgagee, the sole and exclusive remedy shall be for such party or the Leasehold Mortgagee to seek relief in the nature of specific performance. (6) A Leasehold Mortgagee shall include a statement in any Notice of Foreclosure Sale that provides the requirements for Lessor's consent. -12- (v) Casualty Loss. A standard lender's loss payable endorsement naming each Leasehold Mortgagee may be added to any and all insurance policies required to be carried by Lessee hereunder. Nevertheless, the provisions in any Leasehold Mortgage for the application of insurance proceeds shall be subject to the provisions of this Agreement and, in the event of any conflict between the provisions of this Agreement and the provisions of any Leasehold Mortgage with respect thereto, the provisions of this Agreement shall control. (vi) Limitation on Lessee's Right to Encumber. Any Leasehold Mortgage now or hereafter placed on Lessee's interest in the Premises shall be subject and subordinate to any limitations in the Tidelands Grants, Lessor's interest in the Tidelands, this Agreement, and any mortgage now in existence on the Leasehold Estate. Lessee shall not use, encumber or Transfer this Agreement or the Premises as security or collateral for any action unless directly related to the Tidelands and the permitted uses allowed by this Agreement. (vii) No Rights to Encumber Interest of Lessor. The provisions of Section 16 do not give any entity the right to mortgage, hypothecate, cause a Transfer of, or otherwise encumber or cause any liens to be placed against the Lessor's interest in the Premises as trustee of the Tidelands, nor shall anything in this Agreement be construed as resulting in a subordination in whole or in part of Lessor's interests. (viii) Estoppel Certificate. Lessor shall, within ten (10) business days after written request from Lessee or any Leasehold Mortgagee, certify by written instrument to any Leasehold Mortgagee or proposed Leasehold Mortgagee: (a) as to whether this Agreement has been modified, supplemented, amended, extended or renewed; (b) as to the existence of any breach or default of this Agreement; and (c) as to the commencement and expiration dates of the term of this Agreement. 17. Bankruptcy Lessee agrees that if all, or substantially all, of Lessee's assets are placed in the hands of a receiver or trustee and remain so for a period of thirty (30) calendar days; or if Lessee makes an assignment for the benefit of creditors or be adjudicated bankrupt; or if Lessee institutes any proceedings under the Bankruptcy Act or similar law wherein Lessee seeks to be adjudicated bankrupt or to be discharged of its debts or seeks to effect a plan of liquidation or reorganization;. or if any involuntary proceedings be filed against Lessee and not dismissed or stayed within one hundred twenty (120) calendar days, then this Agreement or any interest in and to the Premises shall not become an asset in any such proceeding and, to the extent permitted by law (and in addition to the provisions of Section 18) Lessor may declare this Agreement terminated and take possession of the Premises. 18. Defaults The occurrence of any of the following constitutes a default of this Agreement by Lessee: -13- (a) Continued failure to operate, vacation or abandonment of the Premises except for casualty, damage, repair construction or Harbor dredging for three hundred (300) consecutive calendar days after the date of Lessor's written notice to Lessee. (b) Failure to make any payment required by this Agreement when such failure continues for a period of fifteen (15) calendar days after the date of Lessor's written notice that payment is due (unless another time period within which to make payment is specifically provided); provided that any such notice provided in this Section 18(b) or in Section 18(c) shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Code of Civil Procedure, as may be amended. (c) Failure of Lessee to observe or perform any of the covenants, conditions, or provisions in this Agreement, except for a monetary default specified in Section 18(b) above, where such failure continues for a period of thirty (30) calendar days after the date of Lessor's written notice of the default (unless another time period within which to perform is specifically provided in this Agreement); provided, however, that if the nature of Lessee's default is such that more than thirty (30) calendar days are reasonably required to complete its cure, then Lessee shall not be in default if Lessee commences to cure the default within thirty (30) calendar days after written notice and thereafter diligently and continuously pursues the cure to completion. (d) Any of the events in Section 17 occur; provided that this provision is not applicable or binding on a Leasehold Mortgagee which is of record and has been consented to by Lessor, or to said Leasehold Mortgagee's successors in interest consented to by Lessor, as long as (i) there remains any monies to be paid by Lessee to such Leasehold Mortgagee under the terms of such Leasehold Mortgage, (ii) that such Leasehold Mortgagee or its successors in interest, continuously and timely pays to Lessor all Rent due or coming due under the provisions of this Agreement and the Premises are continuously and actively used and (iii) that said Leasehold Mortgagee agrees in writing to assume and perform each and every obligation under the Agreement. 19. Remedies (a) Cumulative Nature of Remedies. If any default by Lessee continues without being cured in the time period specified in Section 18, then Lessor shall have the remedies described in this Section 19, which are in addition to all other rights and remedies provided by law, equity or elsewhere in this Agreement. Lessor shall have the right to elect its remedies and may resort to any such remedies cumulatively, or in the alternative. (i) Maintain Agreement. Lessor may maintain this Agreement in full force and effect and recover Rent, Additional Rent, payment or other charges or consideration as they become due, without terminating Lessee's right of possession, regardless of whether Lessee has abandoned the Premises. -14- Termination. Lessor may terminate this Agreement by giving Lessee thirty (30) calendar days written notice. If Lessor terminates this Agreement, Lessor may recover possession (which Lessee shall surrender and vacate upon demand) and remove all persons, and property and Improvements. Lessor shall be entitled to recover the following as damages: (1) The Worth at the Time of Award of the unpaid Rent, Additional Rent or other charges which had been earned at the time of termination; (2) The Worth at the Time of Award of the amount by which the unpaid Rent, Additional Rent or other charges which would have been earned after termination until the time of award exceeds the amount of such loss that Lessee proves could have been reasonably avoided; (3) The Worth at the Time of Award of the amount by which the unpaid Rent, Additional Rent or other charges for the balance of the Term of this Agreement after the time of award exceeds the amount of such loss that Lessee proves could have been reasonably avoided; (4) Any other amount necessary to reasonably compensate Lessor for the detriment proximately caused by Lessee's failure to perform its obligations under this Agreement; (5) At Lessor's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time -to -time by applicable California law; and (6) Lessor shall also be entitled to an award of the costs and expenses (including, without limitation, actual attorneys' fees and costs) incurred by Lessor in maintaining or preserving the Premises after default, preparing the Premises for re- letting, or repairing any damage caused by the act or omission of Lessee. The "Worth at the Time of Award" of the amounts referred to in "(1)" and "(2)" above shall be computed by charging interest at ten percent (10 %) per annum from the dates such amounts accrued to Lessor. The "Worth at the Time of Award" of the amount referred to in "(3)" above shall be computed by discounting such amount at ten percent (10 %0) per annum. (b) Waiver of Rights. Lessee waives any right of redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 or 1179, or under any other present or future law, if Lessee is evicted or Lessor takes possession of the Premises by reason of any default by Lessee. -15- 20. Surrender of Premises (a) Upon expiration or earlier termination, of this Agreement Lessee shall peaceably surrender the Premises to Lessor. (b) If Lessee elects to remove any fixtures, improvements (including all Improvements to which Lessee has title), or if Lessor declines Lessee's offer to accept ownership of the same, then Lessee shall restore the Premises to its natural state as deemed acceptable by Lessor. All plans for Lessee's subsequent removal shall be to the reasonable satisfaction of Lessor and shall be completed no later than ninety (90) calendar days after the expiration or sooner termination of this Agreement or other time line agreed upon by the Lessor. During any period of time employed by Lessee to remove fixtures, improvements (including all Improvements to which Lessee has title) Lessee shall continue to pay Rent to Lessor in accordance with this Agreement, which said Rent shall be prorated daily. (c) Any holding over by Lessee after either expiration or earlier termination shall not constitute a renewal or extension, or give Lessee any rights in or to the Premises. If Lessee, with Lessor's consent, remains in possession of the Premises after Agreement expiration or earlier termination (including for the purpose of Lessee's removal of Improvements), such possession shall be deemed a month -to -month tenancy terminable upon thirty (30) calendar days' notice furnished at any time by either party to the other. In addition, all provisions of this Agreement, except those pertaining to Term, shall apply to the month -to- month tenancy, and Lessee shall continue to pay all Rent required by this Agreement. Provided, however, Rent shall be paid monthly on the first (1st) day of the month. 21. Condemnation (a) Lessor shall notify Lessee of any Condemnation by providing written notice thereof no later than thirty (30) calendar days after the later of (i) the filing of a complaint in eminent domain by Condemnor or (ii) any voluntary final agreement by Lessor and Condemnor of the extent of the scope and extent of property interests in the Premises to be included within the Condemnation. (b) If the Premises are totally taken by Condemnation, this Agreement shall terminate as of the date on which Condemnor actually takes physical possession of the Premises, which date is referred to in this Section 21 as the "Termination Date." If less than all but more than fifty percent (50 %) of total area of the Premises are taken through Condemnation, Lessee shall have the option to terminate this Agreement by providing written notice to Lessor. Lessee's notice must be given within thirty (30) calendar days after Lessee's receipt of Lessor's notice provided pursuant to subparagraph (a) above, and if Lessee's notice of termination is not timely given, then Lessee shall conclusively be deemed to have elected not to terminate this Agreement. If this Agreement is terminated under this Section, the termination shall be effective on the Termination Date, and Lessor shall prorate Rent to that date. Lessee must pay Rent for the period up to, but not including, the Termination Date, as prorated by Lessor. Lessor 16- shall return to Lessee any prepaid Rent allocable to any period on or after the Termination Date. (c) If any part of the Premises is taken by Condemnation and this Agreement is not terminated, Rent shall be proportionately reduced based on the value of the actual portion of the Premises taken as a percentage of the value of the entire Premises, in its "before" condition and without regard to any injury to the remainder, or benefit to the remainder, resulting from the taking or the construction of the project for which the taking occurs. Lessor shall make such determination of the amount of reduction in Rent in its reasonable discretion, based upon either the appraisal for the Condemnation provided by the Condemnor, or pursuant to an appraisal prepared in the manner provided in Section 43, as Lessor shall determine. Lessor and Lessee agree to execute an amendment or other appropriate instrument modifying this Agreement within thirty (30) calendar days after a partial taking, confirming the reduction in Premises and reduction in Rent. (d) If a temporary taking of part of the Premises occurs through (i) the exercise of any government power by Condemnor or (ii) a voluntary sale or transfer by Lessor to any Condemnor, either under threat of exercise of eminent domain by a Condemnor or while legal proceedings for condemnation are pending, Rent shall abate during the time of such taking but only with respect to that physical portion of the Premises actually temporarily taken, and all Rent or other compensation paid by the Condemnor shall be the sole and exclusive property of Lessor. (e) In the event of a total or partial Condemnation, though the award shall belong and be paid to Lessor, Lessee shall be entitled to claim and receive, and Lessor hereby assigns to Lessee, from such award: (i) A sum attributable to the fair market value of any and all Improvements made to the condemned portion(s) of the Premises by Lessee in accordance with this Agreement, which Improvements Lessee has the right to remove, but elects not to remove; or, if Lessee elects to remove any such Improvements, a sum attributable to their reasonable removal and relocation costs not to exceed the fair market value of such Improvements; and (ii) A sum attributable to any excess of the present value at the date of taking of the fair market rental value of the condemned portion(s) of the Premises, exclusive of any of Lessee's Improvements for which it is compensated under subsection (i), above, for the remainder of the term over the present value at the date of taking of the actual Rent payable by Lessee hereunder for the condemned portion(s) for the remainder of the term; and (iii) A sum attributable to any diminution of the present value at the date of taking of the fair market rental value (i.e., that portion or those portions not condemned) for the remainder of the term; and 17- (iv) Any sum awarded or paid to Lessee by any Condemnor for damage to Lessee's business or for "loss of goodwill." 22. Indemnification In addition to any other indemnity provided for in this Agreement, and notwithstanding any other provisions of this Agreement to the contrary, Lessee indemnifies, defends (with counsel selected by Lessor) and holds harmless Lessor, its elected officials, officers, employees, agents, attorneys, volunteers and representatives from and against all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorney's fees, disbursements and court costs) of every kind that may arise from or in any manner relate to (directly or indirectly): (i) Lessee's rights, obligations, acts or omissions under this Agreement, (ii) Lessee's occupancy and use, or Lessee's guests, invitees, sublessees, or licensees occupancy and use, of the Premises, or Improvements (individually, each a "Claim" and, collectively, "Claims "). The indemnification in this Section 22 specifically includes, without limitation, all Claims arising by reason of: (a) The death or injury of any person or damage to real or personal property caused or allegedly caused by the condition of the Premises, Improvements, or an act or omission of Lessee or an agent, contractor, subcontractor, supplier, employee, servant, sublessee or concessionaire of Lessee; (b) Any work performed on the Premises, Improvements, or materials furnished to the Premises, Improvements, by or at the request of Lessee or any agent, contractor, subcontractor, supplier, employee, servant, sublessee or concessionaire of Lessee, with the exception of maintenance performed by City; and /or (c) Lessee's failure to perform any provision of this Agreement or to comply with any requirement of Applicable Law or any requirement imposed on the Premises or Improvements by any duly authorized governmental agency or political subdivision. Lessee's obligations in this Section (or any other provision providing indemnity in this Agreement) shall not extend to the degree any Claim is proximately caused by the sole negligence or willful misconduct of Lessor, subject to any immunities which may apply to Lessor with respect to such Claims. This indemnification provision and any other indemnification provided elsewhere in this Agreement shall survive the termination of this Agreement and shall survive for the entire time that any third party can make a Claim. 23. Insurance Without limiting Lessee's indemnification of Lessor, Lessee will obtain, provide and maintain at its own expense during the Term of this Agreement, a policy or policies of insurance of the type, amounts and form acceptable to Lessor. The policy or policies shall provide, at a minimum, those items described in Exhibit "D ". -18- 24. Hazardous Substances (a) From the Commencement Date and throughout the Term, Lessee will not use, occupy, or permit any portion of the Premises to be used or occupied in violation of any Hazardous Substance Laws. Notwithstanding any other provision in this Section 24, Lessee is not responsible /liable for any Hazardous Substances that are brought on to the Premises, through migration or other means, by third - parties not associated with Lessee. (b) Notwithstanding any contrary provision of this Agreement, and in addition to the indemnification duties of Lessee set forth elsewhere in this Agreement, Lessee indemnifies, defends with counsel reasonably acceptable to Lessor, protects, and holds harmless Lessor, its elected officials, officers, employees, agents, attorneys, volunteers and representatives from and against any and all losses, fines, penalties, claims, demands, obligations, actions, causes of action, suits, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs), damages, judgments, or liabilities, including, but not limited to, any repair, cleanup, detoxification, or preparation and implementation of any remedial, response, closure or other plan of any kind or nature which the Lessor, its officials, officers, employees, agents, attorneys, volunteers or assigns may sustain or incur, or which may be imposed upon them, in connection with any breach of Lessee's obligations or representations in this Agreement or the use of the Premises under this Agreement, arising from or attributable to the Lessee Parties (defined below) storage or deposit of Hazardous Substances in violation of Applicable Laws. This Section is intended to operate as an agreement pursuant to Section 107(e) of CERCLA, 42 USC Section 9607(e), and California Health and Safety Code Section 25364, to insure, protect, hold harmless, and indemnify Lessor for any claim pursuant to the Hazardous Substance Laws or the common law. (c) Lessee does not, and will not, authorize any third party to use; generate, manufacture, maintain, permit, store, or dispose of any Hazardous Substances in violation of Applicable Laws on, under, about or within the Premises. (d) Upon expiration or earlier termination of this Agreement, Lessee shall deliver possession of the Premises in compliance with Hazardous Substance Laws subject to the last sentence of Section 24(a) above. (e) If during the Term of this Agreement, Lessee becomes aware of (i) any actual or threatened release of any Hazardous Substances on, in, under, from, or about the Premises in violation of Hazardous Substance Laws; or (ii) any inquiry, investigation, proceeding, or claim by any government agency or other person regarding the presence of any Hazardous Substances in violation of Hazardous Substance Laws on, in, under, from or about the Premises, Lessee shall give Lessor written notice of the release or inquiry within five (5) calendar days after Lessee becomes aware or first has reason to believe there has been a release or inquiry and shall simultaneously furnish to Lessor copies of any claims, notices of violation, reports, warning or other writings received by Lessee that concern the release or inquiry. -19- (f) If the presence of any Hazardous Substances brought onto the Premises by Lessee or Lessee's employees, agents, sublessees, licensees, concessionaires, contractors, or invitees ( "Lessee Parties "), or generated by same during the Term of this Agreement, results in contamination of the Premises or adjacent properties or the Newport Harbor in violation of Hazardous Substance Laws, Lessee shall promptly take all necessary actions, at Lessee's sole expense, to remove or remediate such Hazardous Substances in full compliance with Applicable Laws. Lessee shall provide notice to Lessor prior to performing any removal or remedial action. Lessee shall not propose nor agree to any covenant of use restriction as part of any removal or remediation required as a result of this provision without Lessor's written consent. Lessee shall pay any costs Lessor incurs in performing Lessee's obligation to clean -up contamination resulting from Lessee's operations or use of the Premises. Any amounts not paid when due shall be subject to late charges and delinquency rates as provided in Section 45. (i) Should any clean -up of Hazardous Substances for which Lessee is responsible not be completed prior to the expiration or sooner termination of the Agreement, including any extensions thereof, then Lessee shall transfer the amounts required to complete clean -up into an escrow account, together with Lessor - approved instructions for the disbursement of such amount in payment of the costs of any remaining clean -up as it is completed, and. (ii) if the nature of the contamination or clean -up required of Lessee is of such a nature as to make the Premises untenable or unleaseable, then Lessee shall be liable to Lessor as a holdover lessee until the clean -up has been sufficiently completed to make the Premises suitable for lease to third parties. The estimated cost of the clean -up shall require approval of the Lessor. (ii) If Lessor determines, in its reasonable discretion, that Lessee does not have insurance or other financial resources sufficient to enable Lessee to fulfill its obligations under this provision, whether or not accrued, liquidated, conditional, or contingent, then Lessee shall, at the request of Lessor, procure and thereafter maintain in full force and effect such environmental impairment liability and /or pollution liability insurance policies and endorsements, or shall otherwise provide such collateral or security reasonably acceptable to Lessor as is appropriate to assure that Lessee will be able to perform its duties and obligations hereunder. (g) Lessee's obligations in this Section 24 shall survive the expiration or earlier termination of this Agreement. 25. Quiet Possession (a) So long as no default by Lessee has occurred and is continuing uncured under this Agreement, and subject to the Tidelands Grant or any amendment to that grant, Lessee shall peaceably and quietly use and enjoy the Premises for the Term, without hindrance or interruption by Lessor. (b) Lessor shall in no event be liable in damages or otherwise, nor shall Lessee be released from any obligations hereunder, because of the interruption or termination of any service provided by Lessor (such as water or sewer service), -20- 26. 27 M- 29. 30 or a termination, interruption or disturbance of any service attributable to any act or neglect (other than gross negligence or willful misconduct) of Lessor or its servants, agents, employees, licensees, business invitees, or any person claiming by, through or under Lessee. Compliance with Applicable Laws Lessee agrees that, in all activities on or in connection with the Premises, and in all uses thereof, it will comply with and conform, at its sole cost, to all Applicable Laws. Lessee is solely responsible for compliance with Applicable Laws. If City enacts a new tax or imposes a new fee, which exceeds the cost of providing the service, against the Premises, the Lessee has the right to terminate this Agreement upon thirty (30) calendar days notice to Lessor. Not Agent of Lessor Neither anything in this Agreement nor any acts of Lessee shall authorize Lessee or any of its employees, agents or contractors to act as agent, contractor, joint venturer or employee of Lessor for any purpose. The parties' relationship under this Agreement is exclusively that of a lessor and lessee. No Third Party Beneficiaries Lessor (both as a lessor and as the City of Newport Beach) and Lessee do not intend, by any provision of this Agreement, to create in any third party, any benefit or right owed by one party, under the terms and conditions of this Agreement, to the other party. Limitation of Leasehold / Easements This Agreement and the rights and privileges granted Lessee in and to the Premises and Improvements are subject to all covenants, conditions, restrictions, and exceptions of record, including those which are set out in the Tidelands Grant by the State of California to Lessor. Nothing contained in this Agreement or in any related document shall be construed to imply the conveyance to Lessee of rights in the Premises or Improvements that exceed those owned by Lessor. This Agreement and the rights and privileges granted Lessee in and to the Premises shall be further subject to future easements and rights -of -way for access, gas, electricity, water, sewer, drainage, telephone, telegraph, television transmission, and such other utilities as Lessor may determine from time to time to be in the best interests of the development of the lands within Lessor's jurisdiction, provided, however, that no easements, rights -of -way, or the installation of such facilities by Lessor, shall materially interfere with Lessee's business. Easements and rights -of -ways allowed by this section shall be limited in purpose to providing the utilities contemplated in this section. Nothing in this section gives a utility a right to attach any item to the Improvements. Lessee is not entitled to any monetary payment or other remuneration for any such future easements and rights -of -way. Notices All notices and other communications required or permitted to be given under this Agreement, including any notice of change of address, shall be in writing and given by personal delivery, or deposited with the United States Postal Service, certified and -21- postage prepaid, or by national overnight mail service addressed to the parties intended to be notified. Notice shall be deemed given as of the date of personal delivery, or if mailed, two (2) calendar days following the date of deposit with the United States Postal Service. Notice shall be given as follows: To Lessor: City of Newport Beach Attn: City Manager PO Box 1768 3300 Newport Boulevard Newport Beach, CA 92658 949 - 644 -3153 With Copy To: City Attorney (at same address) To Lessee: 31. Entire Agreement/Amendments (a) The terms and conditions of this Agreement, all exhibits attached hereto are incorporated by reference into this Agreement, and all documents expressly incorporated by reference, represent the entire Agreement of the parties with respect to the subject matter of this Agreement. (b) This Agreement may be executed in counterparts, including electronic counterparts, each of which, after all the parties have signed this Agreement, shall be deemed to be an original, and such counterparts shall constitute one Agreement binding on the parties. (c) This written Agreement shall supersede any and all prior agreements, oral or written, regarding the subject matter. Notwithstanding the foregoing sentence, with respect to City Pier Permit No. , nothing herein is a release of any violation of Lessee's duties or obligations, if any, with respect to City Pier Permit No. , whether known or unknown at this time or upon the effective date of this Agreement. Lessor acknowledges it is not aware of any known defaults by Lessee. (d) Except as permitted by Section 33 below, no other agreement, promise or statement, written or oral, relating to the subject matter of this Agreement, shall be valid or binding, except by way of a written amendment to this Agreement. (e) The terms and conditions of this Agreement shall not be altered or modified except by a written amendment to this Agreement signed by Lessee and Lessor. (f) If any conflicts arise between the terms and conditions of this Agreement, and the terms and conditions of the attached exhibits or the documents expressly incorporated by reference, the terms and conditions of this Agreement shall control. _22- (g) Any obligation of the parties relating to monies owed, as well as those provisions relating to limitations on liability and actions, shall survive termination or expiration of this Agreement. 32. Waivers The waiver by either party of any breach, default or violation of any term, covenant or condition of this Agreement, or of any Applicable Law, shall not be deemed a waiver of any other term, covenant, condition, or Applicable Law, or of any subsequent breach or violation of the same or other term, covenant, condition, or Applicable Law. The subsequent acceptance by either party of any fee, performance, or other consideration which may become due or owing under this Agreement, shall not be deemed to be a waiver of any preceding breach or violation by the other party of any term, condition, covenant of this Agreement or any Applicable Law. 33. Lessor's Authorized Representative Unless otherwise specified in this Agreement or unless Applicable Law requires action of the City Council or some other person or body of Lessor (in its capacity as the City of Newport Beach), Lessor shall maintain the authority to implement this Agreement on its behalf through the City Manager of the City of Newport Beach (or his or her designee). The City Manager (or his or her designee) shall have authority (but not the obligation) to issue interpretations, waive provisions (including, without limitation, imposition of late charges and delinquency rates, Lessee's payment of costs and times of performance), and /or enter into amendments of this Agreement on behalf of the Lessor. 34. City Business License Lessee shall obtain and maintain during the duration of this Agreement a City business license as required by the Newport Beach Municipal Code. 35. Governing Law & Non - Binding Arbitration (a) Prior to instituting any legal action in a court, in the event the Lessor and Lessee shall be unable to agree as to any matter provided for in this Agreement such dispute shall be submitted to three (3) disinterested arbitrators (unless the parties can agree on one (1) arbitrator). Such arbitration shall be conducted upon request of either the Lessor or the Lessee, before three (3) arbitrators (unless the Lessor or the Lessee agree to one (1) arbitrator) designated by the American Arbitration Association and in accordance with the rules of such Association. The decision(s) of the arbitrator(s) designated and acting under this Agreement shall be nonbinding and the arbitrator(s) have no power to depart from or change any of the provisions thereof. The expense of arbitration proceedings conducted hereunder shall be borne equally by the parties. (b) This Agreement shall be construed in accordance with the laws of the State of California. Any action brought relating to this Agreement shall be adjudicated in a court of competent jurisdiction in the County of Orange. Lessee is advised that Public Resources Code Section 6308 may require that the State of California be joined to any action against the City involving title to or boundaries of the Tidelands. -23- (c) The prevailing party in any non - binding arbitration or legal action authorized under this section shall not be entitled to attorneys' fees. 36. Interpretation The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of the Agreement or any other rule of construction which might otherwise apply. 37. Time is of the Essence Time is of the essence to the performance of each and every act required to be performed by this Agreement. 38. California Labor Laws It shall be the obligation of Lessee or any subcontractor under Lessee to comply with all State of California labor laws, rules and regulations and the parties agree that the Lessor shall not be liable for any violation thereof. 39. Joint and Several Liability The term "party' in this section shall mean either Lessor or Lessee, and if more than one (1) person or entity comprises either Lessor or Lessee, then the obligations imposed upon such "party' shall be both joint and several. 40. Memorandum of Lease Agreement A Memorandum of Lease Agreement, in a form and content similar to that contained in Exhibit "E" shall be recorded by the parties promptly upon execution of this Agreement. Upon execution by both parties, the Memorandum of Lease Agreement shall be recorded against the Premises in the office of the Orange County Clerk- Recorder, as required by Government Code Section 37393. 41. No Pre - commitment / Retention of Discretion / Assumption of Risk and Waiver (a) By its execution of this Agreement, Lessor is not committing itself or agreeing to undertake any activity requiring the subsequent exercise of discretion by the City of Newport Beach, or any department thereof, including but not limited to the approval of any CEQA documents, the approval of any development proposal or land use regulation governing the Premises, or any other act or approval. (b) Lessee understands and agrees that Lessor in its capacity as the City of Newport Beach reserves the right to exercise its discretion as to all matters which it is, by law, entitled or required to exercise its discretion, including, but not limited to, the consideration of CEQA documents the consideration of a final development, the consideration of any and all plans, permits, licenses or regulatory approvals, or any other acts or activities requiring the subsequent independent exercise of discretion by the City of Newport Beach or any agency or department thereof. Lessee understands and agrees that the City of Newport Beach may, in its sole -24_ and absolute discretion, certify or not certify a CEQA document and approve, approve with modifications, or not approve or may consider other alternatives, including those presented in the CEQA documents. (c) Lessee acknowledges and agrees that the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) may, at their sole and absolute discretion, approve any and all plans, permits, licenses or regulatory approvals, only upon the imposition and performance of additional conditions or mitigation measures. (d) Nothing in this Agreement shall obligate the Lessor in its capacity as the City of Newport Beach to exercise its discretion in any particular manner, and notwithstanding any provision of this Agreement to the contrary any exercise of discretion required by law or permitted by this Agreement shall not be deemed to constitute a breach of Lessor's duties under this Agreement. (e) Lessee accepts and assumes the risk that the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) will not approve or certify the CEQA documents or any and all plans, permits, licenses or regulatory approvals sought, that the City of Newport Beach may consider or approve other alternatives to the CEQA documents, any and all plans, permits, licenses or regulatory approvals, or CEQA documents might be approved or certified subject to modifications or the performance of certain additional conditions or mitigation measures imposed by the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) in their sole and absolute discretion, or that third parties may file litigation against or otherwise delay any and all plans, permits, licenses or regulatory approvals sought, or CEQA documents. Lessee agrees it has no claim, cause of action, or right to damages, compensation or reimbursement from Lessor or the City of Newport Beach if (i) CEQA documents or any and all plans, permits, licenses or regulatory approvals sought are not approved by the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) for any reason; (ii) other alternatives to the CEQA documents or any and all plans, permits, licenses or regulatory approvals sought are approved, (iii) CEQA documents are approved or certified subject to modification or the performance of certain additional conditions or mitigation measures, and /or (iv) third parties file litigation against or otherwise delay the CEQA documents. 42. No Damages Lessee acknowledges that Lessor would not enter into this Agreement if it were to be liable for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) under, or relating to, this Agreement or any of the matters referred to in this Agreement, including, without limitation, any and all plans, permits, licenses or regulatory approvals, CEQA documents, and Transfers. Accordingly, Lessee covenants and agrees on behalf of itself and its successors and assigns, not to sue Lessor (either in its capacity as lessor in this Agreement or in its capacity as the City of Newport Beach) for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other -25- revenues, loss of business opportunity, loss of goodwill or loss of use) or monetary relief for any breach of this Agreement by Lessor or for any dispute, controversy, or issue between Lessor and Lessee arising out of or connected with this Agreement or any of the matters referred to in this Agreement, including, without limitation, any and all plans, permits, licenses or regulatory approvals, CEQA documents, Transfers or any future amendments or enactments thereto, the parties agreeing that declaratory relief, injunctive relief, mandate and specific performance shall be Lessee's sole and exclusive judicial remedies. 43. Appraisals Except as otherwise provided in the applicable resolution for the Fair Market Adjustment of Rent, this Section governs the process for all appraisals required or permitted in this Agreement. Any time an appraisal is required or permitted by this Agreement, Lessor and Lessee shall each select an independent appraiser with qualifications of MAI to appraise Tidelands properties. Each party shall pay the costs of their selected appraiser. If the two (2) appraisals return with a fair market value that is within five percent (5 %) of each other the two (2) appraisal fair market values shall be averaged to produce the fair market value of the affected Premises. For clarity, if one (1) appraiser concludes thirteen percent (13 %) and one (1) appraiser concludes fifteen percent (15 %) the difference in their conclusions is thirteen and 333/1,OOOths percent (13.333°/x) and therefore a third appraisal would be needed. If the two (2) appraisers should fail to agree on the fair market value, and the difference between the two appraisals exceeds five percent (5 %), then the two (2) appraisers thus appointed shall mutually appoint a third MAI designated appraiser, and in case of their failure to agree on a third appraiser within thirty (30) calendar days after their individual determination of the fair market value, either party may apply to the Presiding Judge of the Superior Court for Orange County, requesting said Judge to appoint the third MAI designated appraiser. The costs of the third appraiser, if any, shall be split equally between the Lessor and the Lessee. The third appraiser so appointed shall meet and confer with the two (2) other appraisers and then conduct its own analysis to determine the fair market value of the affected Premises within sixty (60) calendar days of their appointment and the average of the fair market value per square foot as set forth in the appraisals of the two (2) closest appraisers shall be used as the fair market value. All MAI appraisers appointed or selected pursuant to this subsection shall have at least ten (10) years experience appraising Tidelands in the Southern California area and shall be free of conflicts (i.e., no appraisers shall rent a boat slip or office space from Lessor or lessees, etc.). 44. Reserved 45. Late Charges and Delinquency Rates A ten percent (10 %) late charge shall be added to all payments due but not received by Lessor with ten (10) calendar days following the due date, unless another due date is specified in this Agreement. In addition, all unpaid amounts shall accrue at a delinquency rate of one and a half percent (1'/� %) per month or any portion of a month until paid in full. Lessor and Lessee hereby agree that such late charges and delinquency rates represent a fair and reasonable estimate of the costs Lessor will incur by Lessee's late payment, including, without limitation, lost opportunities and the cost of servicing the delinquent account. Lessee agrees that such late charges and delinquency rates are Additional Rent and are not interest. Acceptance of such late -26- charges and delinquency rates (and /or any portion of the overdue payment) by Lessor does not constitute a waiver of Lessee's default with respect to such overdue payment, or prevent Lessor from exercising any of the other rights and remedies granted in this Agreement. 46. Reserved 47. Government Claims Act Lessee and Lessor agree that in addition to any claims filing or notice requirements in this Agreement, Lessee shall file any claim that Lessee may have against Lessor in strict conformance with the Government Claims Act (Government Code sections 900 et seq.). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate on the date and year first written herein. LESSOR LESSEE City of Newport Beach _ A Municipal Corporation a Mayor / City Manager ATTEST: Leilani Brown City Clerk APPROVED AS TO FORM: Aaron C. Harp City Attorney an IM "M _27_ EXHIBIT "A" DEFINITIONS Additional Rent is defined in Section 4 Agreement is defined in the Preamble. Applicable Law(s) mean and include, but are not limited to, those prescribed by Title 17 of the Newport Beach Municipal Code; any ordinances of the City of Newport Beach, including the Building Code thereof; the City Charter of Newport Beach; any regulations, policies and general rules of the City of Newport Beach; the Tidelands Grant; Hazardous Substances Laws; CEQA; and any other Federal, State or local statute, law, ordinance, resolution, code, rule, regulation, order or decree as any of the same now exist or may hereafter be adopted or amended. Boat Slip Renters is defined in Section 1(a)(i). CDP means a Coastal Development Permit. CEQA means the California Environmental Quality Act, codified at California Public Resources Code Sections 21000 et seq. as may be amended from time -to -time. Claim(s) is defined in Section 22. Commencement Date is defined in Section 3(a). Condemnation means a permanent taking of the Premises through (i) the exercise of any government power, by any public or quasi - public authority or by any other party having the right of eminent domain (Condemnor) or (ii) a voluntary sale or transfer by Lessor to any Condemnor, either under threat of exercise of eminent domain by a Condemnor or while legal proceedings for condemnation are pending. Gross Revenue for Slip Rentals means all receipts of every kind and nature, whether for cash, credit or barter, received /due for the rental or use of a slip, dock, or pier on the Premises. Without limiting the breadth of the prior sentence, Gross Revenue for Slip Rentals shall include, without limitation, receipts of every kind and nature derived from any promotion, package deal, service, or other item that is associated in any way with the rental or use of a slip, dock, or pier on the Premises, excluding pass- through of direct third -party charges (e.g., electricity, cable TV, etc.) without markup by Lessee. For purposes of determining Gross Revenue for Slip Rentals any fixed, annual, monthly and /or recurring charge that a person or entity is required to pay shall be counted as part of the Gross Revenue for Slip Rentals. Gross Revenue for Slip Rentals shall not be offset or reduced for any reason, including, but not limited to, the payment of taxes, fees, repairs, maintenance, construction, or inability or failure to collect any cash, credit, or barter due for the use of a slip, dock, or pier on the Premises. Hazardous Substance means: (i) any substance, product, waste or other material of any nature whatsoever which is or becomes listed, regulated, or addressed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (CERLCA); the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resource Conversation and Recovery Act, 42 U.S.C. Section 6901 et seq. "RCRA "); the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Water EXHIBIT "A" 1 Act, 33 U.S.C. Section 1251 et seq.; the California Hazardous Waste Control Act, Health and Safety Code Section 25100 et seq.; the California Hazardous Substance Account Act, Health and Safety Code Sections 25330 et seq.; the California Safe Drinking Water and Toxic Enforcement Act, Health and Safety Code Sections 25249.5 et seq.; California Health and Safety Code Sections 25280 et seq. (Underground Storage of Hazardous Substances); the California Hazardous Waste Management Act, Health and Safety Code Sections 25170.1 et seq.; California Health and Safety Code Sections 25501 at seq. (Hazardous Materials Response Plans and Inventory); or the Porter - Cologne Water Quality Control Act, Water Code Sections 13000 et seq., all as they, from time -to -time may be amended or re- codified, (the above -cited statutes are here collectively referred to as lithe Hazardous Substances Laws ") or any other Federal, State or local statute, law, ordinance, resolution, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect; (ii) any substance, product, waste or other material of any nature whatsoever which may give rise to liability under any of the above statutes or under any statutory or common law theory, including but not limited to negligence, trespass, intentional tort, nuisance, waste or strict liability or under any reported decisions of a state or federal court; (iii) petroleum or crude oil; and (iv) asbestos. Improvements are owned by Lessee and mean those items described on Exhibit "B" as they may be modified, altered, restored, or rebuilt pursuant to this Agreement. Leasehold Estate means Lessee's interest in the Premises created by this Agreement. Leasehold Mortgage means a Transfer or security instrument by which the Leasehold Estate is used to secure a debt or other obligation arising from or related to Lessee's use or operation of the Premises. Leasehold Mortgagee means a holder or holders of the Leasehold Mortgage. Lease Term Year means each twelve (12) month period beginning on the Commencement Date (or anniversary thereof) and ending on the day prior to the next anniversary of the Commencement Date. Lessee is defined in the Preamble. Lessor is defined in the Preamble. Marina Index is comprised of the marinas listed in the resolution incorporated by Section 4. Market Adjustment Date means March 1, 2018 and every fifth (5th) anniversary year thereafter. Option Notice is defined in Section 3(b)(i). Other Real Property is defined in Section 16(b). Premises means those Tidelands which is an independent site with no land access consisting of approximately f square feet water area located generally at in the City of Newport Beach, California, more particularly described in Exhibit F and depicted on the map set forth in Exhibit G, excluding any private water and Improvements. EXHIBIT "A" -2 Renewal Term(s) is defined in Section 3(b). Rent is defined in Section 4. Target Indexed Rate is defined in the resolution incorporated by Section 4 Term is defined in Section 3(a). Tidelands means certain tidelands and submerged land (whether filled or unfilled), located in the City of Newport Beach, County of Orange, State of California granted to the City of Newport Beach, as trustee, by the State of California pursuant to the Tidelands Grant. Tidelands Grant means uncodified legislation related to the State of California's grant of certain rights in the Tidelands to the City of Newport Beach, including, without limitation, the Beacon Bay Bill (Chapter 74 of the Statutes of 1978, as amended [citations omitted]). Transfer(s) means any attempt to sell, convey, assign, transfer, mortgage, pledge, grant, hypothecate or encumber this Agreement or any interest in this Agreement, or the Premises or any portion of the Premises, and any attempt to sublet (which shall also include management and /or operating agreements covering the Premises), license or grant any concession to the Premises, in whole or in part, or allow any person other than Lessee's employees, members, agents, servants and invitees to occupy or use all or any portion of the Premises. EXHIBIT "A" -3- EXHIBIT "B" EXHIBIT "B" -1- EXHIBIT "C" OTHER REAL PROPERTY EXHIBIT "C -1- EXHIBIT "D" INSURANCE Without limiting Lessee's indemnification of Lessor, Lessee will obtain, provide and maintain at its own expense during the Term of this Agreement, a policy or policies of insurance of the type, amounts and form acceptable to Lessor. The policy or policies shall provide, at a minimum, those items described below. (a) Coverage Requirements (i) Workers' compensation insurance providing statutory benefits and Employer's Liability Insurance in an amount not less than One Million Dollars ($1,000,000) each accident, each employee and policy limit. Coverage shall include USL &H and Maritime Coverages as appropriate. In addition, Lessee shall require each subtenant or subcontractor to similarly maintain workers compensation insurance and employer's liability insurance, including USL &H and Maritime Coverages as appropriate, in accordance with the laws of the State of California for all of the subtenant's or subcontractor's employees. The insurer shall agree to waive all rights of subrogation against Lessor, its officers, agents, employees and volunteers for losses arising from work performed by Lessee for Lessor, by endorsement to the policy. (ii) Commercial general liability insurance in an amount not less than Two Million Dollars ($2,000,000) per occurrence and Four Million Dollars ($4,000,000) General Aggregate for bodily injury, personal injury, and property damage. Coverage shall be at least as broad as that provided by Insurance Services Office form CG 00 01 and may be arranged through any combination of primary and excess insurance as required to achieve the limits specified provided that any excess liability policy does not restrict coverage provided in the primary policy. Other policy forms may be acceptable if more appropriate to the exposures, such as Marina Operator's Liability insurance. None of the policies required herein shall be in compliance with these requirements if they include any limiting endorsement that has not been first submitted to City and approved in writing. (iii) Contractor's pollution liability insurance for contractors or subcontractors performing construction work written on a form acceptable to City providing coverage for liability arising out of sudden, accidental and gradual pollution. The policy limit shall be no less than One Million Dollars ($1,000,000) per claim and in the aggregate for contractors and between Two Million Dollars ($2,000,000) and Five Million Dollars ($5,000,000) for Lessee, as determined by Lessor depending on services offered by Lessee on the Premises (e.g., fuel dock, boat repair, etc.). When this insurance is required, all activities comprising the work shall be specifically scheduled on the policy as "covered operations." The policy shall provide coverage for the hauling of waste from the Premises to the EXHIBIT "D" -1- final disposal location, including non -owned disposal sites. Products /completed operations coverage shall extend a minimum of three (3) years after completion of the work. (iv) Pollution legal liability applicable to bodily injury; property damage, including loss of use of damaged property or of property that has not been physically injured or destroyed; cleanup costs; and defense, including costs and expenses incurred in the investigation, defense, or settlement of claims; all in connection with any loss arising from the insured facility. Coverage shall be maintained in an amount of at least One Million Dollars ($1,000,000) per loss, with an annual aggregate of at least One Million Dollars ($1,000,000). (b) Endorsements: Policies shall contain or be endorsed to contain the following provisions: (i) Lessor, its elected or appointed officers, officials, employees, agents and volunteers are to be covered as an additional insured under all general and pollution liability policies with respect to liability arising out of lessee's activities related to this Agreement and with respect to use or occupancy of the Premises. (ii) The insurer waives all rights related to workers' compensation subrogation against Lessor, its elected or appointed officers, officials, employees, agents and volunteers. (iii) The insurance required by this agreement shall not be suspended, voided, canceled, or reduced in coverage or in limits. (c) Additional Requirements (i) All insurance shall be written on an occurrence -made form, except the Pollution Liability policy which is on a claims -made form of insurance requiring the Lessee to provide proof of coverage (extending reporting) for a minimum of three (3) years following termination of lease agreement; and (ii) In the event Lessor determines that (i) the Lessee's activities in the Premises creates an increased or decreased risk of loss to the Lessor, (ii) greater insurance coverage is required due to the passage of time, or (iii) changes in the industry require different coverages be obtained, Lessee agrees that the minimum limits of any insurance policy required to be obtained by Lessee may be changed accordingly upon receipt of written notice from Lessor; provided that Lessee shall have the right to appeal a determination of increased coverage to the City Council within fourteen (14) calendar days of receipt of notice from the Risk Manager in the manner provided in Municipal Code Section 17.65.010 et seq. (or any amended or successor Code section or ordinance) If Lessee fails to timely appeal a decision, it shall be deemed final. With respect to changes in insurance requirements that are available from Lessee's then - existing insurance carrier, Lessee shall deposit certificates evidencing EXHIBIT "D" -2- acceptable insurance policies with Lessor incorporating such changes within thirty (30) calendar days of receipt of such notice. With respect to changes in insurance requirements that are not available from Lessee's then- existing insurance carrier, Lessee shall deposit certificates evidencing acceptable insurance policies with Lessor, incorporating such changes, within ninety (90) calendar days of receipt of such notice. All insurance policies shall be issued by an insurance company currently authorized by the California Insurance Commissioner to transact business of insurance in the State of California, with an assigned policyholders'. Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best's Key Rating Guide, unless otherwise approved by Lessor. (iv) All licensees, sub - lessees (not including slip renters) and concessionaires shall be subject to the insurance requirements contained herein unless written approval is granted by the Lessor. (v) Lessee shall provide certificates of insurance, with original endorsements as required above, to Lessor as evidence of the insurance coverage required herein. Insurance certificates must be approved by Lessor prior to commencement of performance or issuance of any permit. Current certification of insurance shall be kept on file with Lessor at all times during the Term of this Agreement. (vi) All required insurance shall be in force on the Commencement Date, and shall be maintained continuously in force throughout the term of this Agreement. In addition, the cost of all required insurance shall be borne by Lessee. (vii) If Lessee fails or refuses to maintain insurance as required in this Agreement, or fails to provide proof of insurance, Lessor has the right to declare this Agreement in default without further notice to Lessee, and Lessor shall be entitled to exercise all available remedies. EXHIBIT "D" -3- EXHIBIT "E" RECORDING REQUESTED AND WHEN RECORDED RETURN TO: Office of the City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92658 [Exempt from Recordation Fee - Govt. Code Sec. 6103] MEMORANDUM OF LEASE AGREEMENT r(WITH OPTIONS FOR RENEWAL111 This Memorandum of Lease Agreement [(With Options for Renewal)] ( "Memorandum ") is dated , 20 , and is made between City of Newport Beach, a California municipal corporation and charter city ( "Lessor" or "City') and ( "Lessee "), concerning the Premises described in Exhibits A" and "B," attached hereto this reference made a part hereof. and by For good and adequate consideration, Lessor leases the Premises to Lessee, and Lessee hires them from Lessor, for the term and on the provisions contained in the Agreement dated , 20 including without limitation provisions prohibiting assignment, subleasing, and encumbering said leasehold without the express written consent of Lessor in each instance, all as more specifically set forth in said Agreement, which said Agreement is incorporated in this Memorandum by this reference. The term is ) years, beginning 20_, and ending 20_ [If needed, insert recitation of Options and Renewal Terms(s).] This Memorandum is not a complete summary of the Agreement. Provisions in this Memorandum shall not be used in interpreting the Agreement's provisions. In the event of conflict between this Memorandum and. other parts of the Agreement, the other parts shall control. Execution hereof constitutes execution of the Agreement itself. [Signatures on the next page] EXHIBIT "E" -1- LESSOR LESSEE City of Newport Beach _ A Municipal Corporation a Mayor 0 Name: ATTEST: Leilani Brown City Clerk APPROVED AS TO FORMA: Aaron C. Harp City Attorney [NOTE: Attach Exhibits A and B from Agreement as Exhibits to this Memorandum behind attached Notary form] EXHIBIT'S' -2- CALIFORNIA ALL - PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA COUNTY OF ORANGE On this _ day of , 2011, before me, the undersigned notary public, personally appeared NAME($) OF SIGNER(S) proved to me on the basis of satisfactory evidence to be the peraon(s) whose name(s) islare subscribed to the within Instrument , and acknowledged to me that helshefthey executed the same In tislherflheir authorized capacity(fes), and that by N91 hertiheir signatures) on the instrument the person(s), or the entity(ies) upon behalf of which the person(s) acted, executed the instrument. I caritfy under PENALTY OF PERJURY under the taws of the State of California that the foregoing paragraph 6 true and correct. WITNESS my hand and official sea]. SIGNATURE OF NOTARY OPTIONAL SECTION -- OPTIONAL SECTION- - CAPACITY CLAIMED BY SIGNER Though statute does not require the Notary to fill in the data below, doing so may prove Invaluable to persons retying on the document, ❑ INDIVIDUAL 0 CORPORATE OFFICER(S) TITLE(S) 0 PARTNER(S) LIMITED El GENERAL E3 ATTORNEY -IN -FACT D TRUSTEE(S) CJ GUARDIANICONSERVATOR O OTHER: SIGNER IS REPRESENTING; NAME OF PERSON(S) OR ENTITY(IES) THIS CERTIFICATE MUST BE ATTACHED TO THE TITLE OR TYPE OF DOCUMENT: DOCUMENT DESCRIBED. AT RIGHT:. Though the data requested here is not required by low, it could prevent fraudulent reattachment of this form. -1- NUMBER OF PAG ES: DATE OF DOCUMENT: OTHER SIGNER(S) THAN NAMED ABOVE: EXHIBIT "F" DESCRIPTION OF PREMISES EXHIBIT "F -1- EXHIBIT "G" DEPICTION OF PREMISES Attachment B RESOLUTION NO. 2012- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH APPROVING A MODEL LEASE TEMPLATE AND MODEL PERMIT TEMPLATE FOR COMMERCIAL USES LOCATED UPON TIDELANDS WHEREAS, pursuant to the 1978 Beacon Bay Bill, as amended, ('Beacon Bay Bill ") the City of Newport Beach ( "City ") acts on behalf of the State of California as the trustee of tidelands located within the City's limits, including Newport Harbor; WHEREAS, Section 1(b) of the Beacon Bay Bill and Section 17.60.060 of the Newport Beach Municipal Code ( "NBMC ") allow the City to authorize third parties to use tidelands for commercial purposes for a term not to exceed fifty (50) years; WHEREAS, on July 27, 2010 the City Council formed the Council Ad Hoc Committee on Harbor Charges ( "Committee ") and tasked the Committee with performing a comprehensive review of tidelands uses to consider the conversion of existing permits to leases and to assist the City Council in developing a template tideland lease /permit form; WHEREAS, the Committee and members of the Committee held public outreach meetings with commercial tidelands users to solicit their input and participation in the tidelands review process and these meetings afforded the public the opportunity to comment on this matter as well as provided the public information relating to this matter; WHEREAS, the City Council has considered all documents and comments in the record in connection with this resolution; and WHEREAS, after considering all public input, the Committee recommends adoption of a model lease and model permit to allow commercial tidelands users flexibility to determine the option that best suits their needs. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The Recitals provided above are true and correct and are incorporated into the substantive portion of this resolution. Section 2: The City Council finds that the model lease template for commercial tidelands users attached to this resolution, and incorporated by this reference, satisfies the requirement of NBMC Section 17.60.060(A) covering the conversion of existing -1- permits to leases. The City Council further finds that the commercial tidelands users subject to the attached model lease template are not subject to the open bid process found in City Council Policy F -7 because redevelopment/reuse of the tidelands by a third party would require excessive time, resources and costs which would outweigh other financial benefits. Section 3: The City Council further finds that the model commercial tidelands permit attached to this resolution, and incorporated by this reference, may be used by commercial tidelands users as an alternative to the model lease template. The City Council further finds that the commercial tidelands users subject to the attached model permit are not subject to the open bid process found in City Council Policy F -7 because redevelopment/reuse of the tidelands by a third party would require excessive time, resources and costs which would outweigh other financial benefits. Section 4: The City Council determines, even though it has discretion to make determinations regarding the form of template lease /permit and rental provisions therein, that the evidence in the record constitutes substantial evidence to support the actions taken and the findings made in this resolution, that the facts stated in this resolution are supported by substantial evidence in the record, including, without limit, testimony received at public hearings, the Staff presentations and Staff reports made in connection with this matter, all materials in project files, and the Netzer and Rasmuson appraisal reports. The City Council expressly declares that it considered all evidence presented and reached these findings after due consideration of all evidence presented to it and determines that evidence presented that was contrary to the findings made in this resolution was not sufficient or substantial enough to outweigh the evidence supporting this resolution. Section 5: Pursuant to NBMC Section 17.60.060(A) and its power under the Beacon Bay Bill, the City Council approves the attached model lease template and the attached model permit template for commercial tidelands uses. Notwithstanding City Council Policy F -7, the City Council authorizes the City Manager or his /her designee to enter into the attached lease /permit, in a form that is substantially similar to the attached model lease template and model permit with commercial tidelands users. At his /her discretion, the City Manager may refer any commercial tidelands lease /permit to the City Council for consideration. Section 6: The City Council finds the adoption of a model lease template and model permit template for commercial tidelands uses is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Alternatively, the City Council finds the adoption of a model lease template -2- and model permit template for commercial tidelands uses is entitled to a Class 1 Categorical Exemption pursuant to CEQA Regulation Section 15301 because the lease /permit contemplates the continued use of existing facilities, with no expansion of the proposed use. Further, the City Council finds the setting of Rent for commercial Tidelands uses and the adoption of a model lease template and model permit template for commercial tidelands uses to implement the Rent is entitled to a Statutory Exemption pursuant to CEQA Regulation Section 15273(a)(1) because the fair market value Rent established by the City Council and implemented by the lease /permit will be used to meet operating expenses within the tidelands. Section 7: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. Section 8: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this day of 2012. Nancy Gardner, Mayor ATTEST: Leilani I. Brown, City Clerk Attachments: (1) Model Lease Template for Commercial Tidelands Uses (2) Model Permit Template for Commercial Tidelands Uses -3- City of Newport Beach, a California municipal corporation ( "Lessor ") M til ("Lessee") 1. Definitions ......................................................................................... ..............................2 2. Leased Premises ............................................................................... ..............................2 3. Term .................................................................................................. ..............................3 4. Rent .................................................................................................. ..............................3 5. Utilities, Taxes and Assessments ...................................................... ..............................4 6. Use of the Premises .......................................................................... ..............................4 7. Reserved .......................................................................... ..............................6 8. Acceptance of Condition of Premises - "As-is" / Waiver / Release ..... ..............................4 9. Reserved ........................................................................................... ..............................6 10. Reconstruction or Removal ............................................................... ..............................6 11. Maintenance and Repair ................................................................... ..............................7 12. Liens ................................................................................................. ..............................8 13. Reserved ........................................................................................... ..............................8 14. Quitclaim Deed .................................................................................. ..............................8 15. Right to Enter the Premises for Inspection ......................................... ..............................9 16. Transfers / Hypothecation for Financing ............................................ ..............................9 17. Bankruptcy ....................................................................................... .............................13 18. Defaults ............................................................................................ .............................13 19. Remedies ......................................................................................... .............................14 20. Surrender of Premises ..................................................................... .............................15 21. Condemnation .................................................................................. .............................16 22. Indemnification ................................................................................. .............................17 23. Insurance ........................................................................ .............................18 24. Hazardous Substances .................................................................... .............................18 25. Quiet Possession ............................................................................. .............................20 26. Compliance with Applicable Laws .................................................... .............................20 27. Not Agent of Lessor .......................................................................... .............................20 28. No Third Party Beneficiaries ............................................................. .............................21 29. Limitation of Leasehold / Easements ................................................ .............................21 30. Notices ............................................................................................. .............................21 31. Entire Agreement / Amendments ........................................................ .............................22 32. Waivers ............................................................................................ .............................22 33. Lessor's Authorized Representative ................................................. .............................22 34. City Business License ...................................................................... .............................23 35. Governing Law & Non - Binding Arbitration ........................................ .............................23 36. Interpretation .................................................................................. ............................... 23 37. Time is of the Essence ..................................................................... .............................23 38. California Labor Laws ....................................................................... .............................24 39. Joint and Several Liability ................................................... .............................24 40. Memorandum of Lease Agreement .................................................. .............................24 41. No Pre- commitment / Retention of Discretion / Assumption of Risk and Waiver.............................................................................. .............................25 42. No Damages .................................................................................... .............................25 41 Appraisals ........................................................................................ .............................25 44. Reserved ........................................................................ .............................26 45. Late Charges and Delinquency Rates .............................................. .............................26 46. Reserved .......................................................................................... .............................26 47. Government Claims Act .................................................................... .............................26 This Lease Agreement [(With Options for Renewal)] ( "Agreement ") is entered into this 1st day of March, 2013 by and between the City of Newport Beach, a California municipal corporation and charter city ( "Lessor" or "City "), and a ( "Lessee "). RECITALS A. Pursuant to the Tidelands Grant, the State of California granted to Lessor, as trustee, certain Tidelands. The Tidelands must be used to promote the public's interest in water - dependent or water - oriented activities, as described more fully in the Tidelands Grant; B. The Tidelands Grant provides that the Tidelands shall not, at any time, be granted, conveyed, given, or alienated to any individual, firm or corporation for any purpose whatever except pursuant to Lessor's grant of either a franchise or lease; C. The Tidelands Grant authorizes Lessor to enter into leases of the Tidelands for a period not exceeding fifty (50) years so long as such leases are consistent with Lessor's obligations to hold the Tidelands in trust for the uses and purposes contained in the Tidelands Grant; D. On 20_ the City Council approved this Agreement by adopting Resolution No. _- ; therefore, subject to the terms and conditions of this Agreement, Lessor desires to lease a portion of the Tidelands defined as the Premises to Lessee and Lessee desires to lease the Premises; E. The City previously issued City Pier Permit Number ( "Permit ") for the Premises; City Pier Permit Number , which shall expire February 28, 2013 after which time the City has stated such Permit will not be renewed and Lessee or any other party has no continuing rights in such Permit after such date; and F. The parties desire to enter this Agreement for a term described herein and to grant Lessee an option to extend the term of this Agreement. In consideration of the mutual promises and obligations contained in this Agreement, the receipt and sufficiency of which is hereby acknowledged, and the Recitals above, which are incorporated by this reference, Lessee and Lessor hereby enter into this Agreement on the following terms and conditions: NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: Definitions Capitalized terms that are not otherwise defined in the body of this Agreement (which are identified in parentheses (" ")) have the meanings attributed in Exhibit "A ". 2. Leased Premises Lessor hereby leases to Lessee, for the Term specified in Section 3, the Premises. The rights granted to Lessee by this Agreement are subject to Lessee's compliance with the terms, covenants and conditions in this Agreement. Lessee covenants, as a material -2- part of the consideration for this Agreement, to keep and perform each and every term, covenant and condition of this Agreement. 3. Term (a) Initial Term: The Term of this Agreement shall be (_) years commencing on the 1st day of March, 2013, which shall be the "Commencement Date," and terminating on the _ day of , 20_, unless sooner terminated as provided in this Agreement. (b) Option for Renewal Term(s): If Lessee is not in default of its obligations in this Agreement, then Lessee shall have the option to extend the Term of this Agreement for (_) additional successive "Renewal Term(s)" of _ (_) years each, on the same terms and conditions contained in this Agreement. As provided by the Tidelands Grant, in no event shall the Term and any Renewal Terms exceed a total of fifty (50) years. (i) Each Renewal Term for which an option is exercised shall commence at the expiration of the immediately preceding Term. Lessee must exercise its option to a Renewal Term by giving a written "Option Notice" of its election to Lessor no earlier than two hundred and seventy (270) calendar days and no later than ninety (90) calendar days prior to the expiration of the immediately preceding Term. (ii) Should Lessee fail to timely give an Option Notice, then the option for the Renewal Term and all subsequent Renewal Terms shall be null and void and of no further force and effect. Rent for the Renewal Term shall be determined and adjusted as described in Section 4 below. 4. Rent (a) Rent: Rent shall be calculated pursuant to Resolution No. 2012 -_, or any successor /amended resolution. Resolution No. 2012 -_ and any successor /amended resolution are automatically incorporated by reference into this Agreement, without any further action by the parties, when adopted by the Newport Beach City Council. (b) Periodic Payment of Rent: One - twelfth (1/12) of annual Rent for a particular Lease Term Year shall be payable on the first (1st) day of each month during the Term. (c) Place for Payment of Rent: All payments of Rent shall be made in lawful money of the United States of America and shall be paid to Lessor in person or by United States' mail, or overnight mail service, at the Cashier's Office located at 3300 Newport Boulevard, Newport Beach, CA 92658, or to such other address as Lessor may from time to time designate in writing to Lessee. If requested by Lessor, Lessee shall make payments electronically (at www.newportbeachca.gov) or by wire transfer (at Lessee's cost). Lessee' assumes all risk of loss and responsibility for late charges and delinquency rates if payments are not timely received by Lessor regardless of the method of transmittal. -3- 5. R (d) Additional Rent: Lessee shall pay as "Additional Rent" for the Premises, within ten (10) calendar days of Lessor's demand therefore (unless a different time for payment is expressly provided in this Agreement), all other amounts required by this Agreement, in addition to Rent. Additional Rent does not reduce or offset Lessee's obligations to pay Rent. (e) No Abatement or Reduction in Rent: Lessee has no right to any abatement, set- off or reduction in Rent or Additional Rent. No endorsement or statement on any check or any letter accompanying any check or payment will be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance or pursue any other available remedy. (f) Net Lease: Rent, as defined in this Agreement, is based upon Lessee's material representation and covenant that it will pay all expenses, costs, taxes; assessments, fees or charges, and incur all liabilities, of every kind in any way relating to, or in connection with, the Premises and the Improvements during the Term. Accordingly, Lessee will promptly pay all expenses, costs, taxes, assessments, fees or charges, and incur all liabilities, of every kind and description relating to, or in connection with, the Premises and the Improvements during the Term. Utilities. Taxes and Assessments (a) Lessee is solely responsible for obtaining all utilities and paying all taxes, fees and assessments for the Premises or Improvements located thereon. Lessee shall promptly pay, and discharge prior to delinquency, any and all charges for services or utilities and all taxes, fees and assessments furnished to or due on the Premises or Improvements located thereon, or occupants thereof. (b) Lessor hereby gives notice to Lessee, pursuant to Revenue and Tax Code Section 107.6 that this Agreement may create a possessory interest that is the subject of property taxes levied on such interest, the payment of which taxes shall be the sole obligation of Lessee. Lessee shall advise in writing any sublessee, licensee, concessionaire or third party using the Premises of the requirements of Section 107.6. (c) Any payments under this Section shall not reduce or offset Rent payments. Lessor has no liability for such payments. Use of the Premises During the term of this Agreement, Lessee_ will use and occupy the Premises solely and exclusively for the operation of Reserved Acceptance of Condition of Premises - "As -Is" / Waiver / Release (a) Lessee's Acknowledgment: Lessee acknowledges that Lessee, Lessor or unrelated third parties may have constructed improvements (some or all of which -4- may be Improvements as specified on Exhibit "B ") on and adjacent to the Premises (including, without limit, bulkheads in the surrounding area adjacent to and /or abutting the Premises). Lessee agrees and acknowledges that it is relying solely on its own inspections and investigations regarding the Premises, the condition of the Premises, the surrounding area and all other matters related thereto. Lessee represents and warrants that it has obtained the advice of such independent professional consultants as it deems necessary in connection with its investigation and study of the Premises and surrounding area, including, without limitation, water quality, Improvement quality, soils, hydrology, seismology, archaeology, Applicable Laws (including, without limitation, the laws relating to the construction, maintenance, use and operation of the Premises and Improvements), and all environmental, zoning and other land use entitlement requirements and procedures, height restrictions, floor area coverage limitations and similar matters. (b) Only Lessor's Express Written Agreements Binding: Lessee acknowledges and agrees that no person acting on behalf of Lessor is authorized to make, and that except as expressly set forth in this Agreement, neither Lessor nor anyone acting for or on behalf of Lessor has made, any representation, warranty, statement, guaranty or promise to Lessee, or to anyone acting for or on behalf of Lessee, concerning the condition of the Premises, any other aspect of the Premises or the surrounding area. Lessee further acknowledges and agrees that no representation, warranty, agreement, statement, guaranty or promise, if any, made by any person acting on behalf of Lessor which is not expressly set forth in this Agreement will be valid or binding on Lessor. (c) Verification of Acceptance: Lessee further acknowledges and agrees that Lessee's execution of this Agreement constitutes Lessee's representation, warranty and covenant that the condition of the Premises and the surrounding area has been independently verified by Lessee to its full satisfaction, and that, except to the extent of the express covenants of Lessor set forth in this Agreement, Lessee will be leasing the Premises based solely upon and in reliance on its own inspections, evaluations, analyses and conclusions, or those of Lessee's representatives. As material inducement to Lessor's entering this Agreement, Lessee represents, warrants and covenants that LESSEE ACCEPTS AND IS LEASING THE PREMISES, AND IS AWARE OF THE SURROUNDING AREA, IN ITS "AS -IS, WITH ALL FAULTS" CONDITION AND STATE OF REPAIR INCLUSIVE OF ALL FAULTS AND DEFECTS, WHETHER KNOWN OR UNKNOWN, AS MAY EXIST AS OF THE LESSEE'S EXECUTION OF THIS AGREEMENT, AND WITH NO WARRANTY EXPRESS OR IMPLIED FROM LESSOR AS TO ANY LATENT, PATENT, FORESEEABLE AND UNFORESEEABLE CONDITIONS. Without limiting the scope or generality of the foregoing, Lessee expressly assumes the risk that the Premises do not or will not comply with any Applicable Laws now or hereafter in effect. (d) Waivers, Disclaimers and Release: (i) Waiver and Disclaimer: Lessee hereby fully and forever waives, and Lessor hereby fully and forever disclaims, all warranties of whatever type or kind with respect to the Premises and Improvements, whether -5- expressed, implied or otherwise including, without limitation, those of fitness for a particular purpose, tenant ability, habitability or use. (ii) Lessor's Materials: Lessee further acknowledges that any information and reports including, without limitation, any engineering reports, architectural reports, feasibility reports, marketing reports, soils reports, environmental reports, analyses or data, or other similar reports, analyses, data or information of whatever type or kind which Lessee has received or may hereafter receive from Lessor or its agents or consultants have been furnished without warranty of any kind and on the express condition that Lessee will make its own independent verification of the accuracy, reliability and completeness of such information and that Lessee will not rely thereon. Accordingly, Lessee agrees that under no circumstances will it make any claim against, bring any action, cause of action or proceeding against, or assert any liability upon, Lessor or any of the persons or entities who prepared or furnished any of the above information or materials as a result of the inaccuracy, unreliability or incompleteness of, or any defect or mistake in, any such information or materials. Lessee hereby fully and forever releases, acquits and discharges Lessor and each person furnishing such information or materials of and from, any such claims, actions, causes of action, proceedings or liability, whether known or unknown. (iii) Waiver of Civil Code Section 1542: With respect to all releases made by Lessee or Lessor under or pursuant to this Section 8, Lessee or Lessor hereby waives the application and benefits of California Civil Code Section 1542 and hereby verifies that it has read and understands the following provision of California Civil Code Section 1542: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." Lessee: Lessor: 9. Reserved 10. Reconstruction or Removal Lessee will promptly cause the Improvements or any part thereof, which are (a) damaged or destroyed or (b) declared unsafe or unfit for occupancy or use by a public entity with the appropriate authority, to either be (i) removed or (ii) restored or reconstructed to their original design and layout, or to a good and safe condition as reasonably approved by Lessor, whether or not required to be insured against, at Lessee's sole cost and expense. Restoration or reconstruction shall commence within ninety (90) calendar days from the date of issuance of all permits (City and Coastal), which permits Lessee will diligently pursue in a commercially reasonable timeframe, to repair, and Lessee shall diligently pursue reconstruction to completion. Lessee shall not be entitled to any abatement in Rent or other form of compensation from Lessor for loss of use of the Premises or Improvements in the event of damage or destruction of the 0 Premises or Improvements. Damage to or destruction of the Premises or the Improvements shall not permit Lessee to terminate this Agreement. Alternatively, in the event of damage or destruction, Lessee may remove all Improvements from the Premises and terminate this Lease. The force majeure provisions in this Agreement shall apply to reconstruction. 11. Maintenance and Repair (a) Maintenance by Lessee: Lessee assumes full responsibility for operation and maintenance and repair of the Premises throughout the Term at its sole cost, and without expense to Lessor. (i) Without limiting Lessee's obligations to maintain the Premises, Lessee shall keep and maintain all Improvements in good order, condition and repair consistent with similar uses in Newport Harbor. (ii) Maintenance dredging bayward of the property line, between the bulkhead line and the pierhead line, shall be the responsibility of Lessee. Lessee shall perform all maintenance in compliance with all Applicable Laws. (iii) Reserved. (iv) Reserved. (v) Lessee expressly waives (a) the right to require Lessor to make repairs; (b) any right to make repairs at the expense of Lessor; (c) the right to reduce or offset Rent as a consequence of the condition of the Premises or the Improvements; (d) the benefits of California Civil Code Sections 1932, 1941 and 1942, as amended from time to time; and (e) any law, judicial pronouncement, or common law principle similar thereto, which is now or hereafter in effect or is otherwise inconsistent with the provisions of this Agreement. (b) Reserved. (c) Reserved. (d) Maintenance Prior to Renewal Term: In addition to any other conditions to Lessee's exercise of the option to extend the Term (or Renewal Term) of this Agreement, no less than one hundred twenty (120) calendar days prior to the end of a Term that may be renewed, Lessee shall submit a maintenance report stating the condition of the Improvements on the Premises. Improvements shall be inspected, and the maintenance report shall be written, by a qualified marine engineer that is retained and paid for by Lessee but approved by Lessor. The maintenance report shall make repair and maintenance recommendations to ensure that the maintenance standards in this Agreement are met and will be maintained and the useful life of the Improvements will extend throughout the Renewal Term(s). At the time of providing the maintenance report to Lessor, Lessee shall sign a certification under penalty of perjury that Lessee shall, at its -7- sole cost, make all repairs and perform all maintenance identified in the maintenance report to the reasonable satisfaction of, and on a schedule satisfactory to, Lessor. Any costs incurred by Lessee to make repair and maintenance recommendations is a qualification for the Term or Renewal Term of this Agreement and is not Rent. The cost of repair and maintenance recommendations shall not be considered by the parties or appraiser in determining any Rent or Rent adjustment during the term of this Agreement. (e) Maintenance by Lessor: Nothing in this Agreement requires Lessor to perform any maintenance or repair to the Premises or to any adjacent property or bulkheads; or to make any improvements whatsoever on or for the benefit of the Premises. However, with no less than twenty -four (24) hours written notice -from Lessor to Lessee, Lessor shall have the right, but not the obligation, to make any emergency repairs related to safety or hazard concerns to or on the Premises. Lessee shall reasonably cooperate with Lessor in any activity undertaken by Lessor on the Premises. Lessor may collect its cost for emergency repairs from the Lessee as Additional Rent. 12. Liens (a) Liens Prohibited: Lessee shall not permit to be imposed, recorded or enforced against the Premises, any portion thereof or any structure or Improvement thereon, any mechanics, materialmen's, contractors or other liens arising from, or any claims for damages growing out of, any work or repair, construction or alteration of improvements on the Premises. (b) Release /Removal of Liens: In the event any lien or stop notice is imposed or recorded on the Premises, or an Improvement permanently affixed to the Premises, during the Term, Lessee shall pay or cause to be paid all such liens, claims or demands before any action is brought to enforce the same against the Premises or the Improvement. Notwithstanding the foregoing, if Lessee legitimately contests the validity of such lien, claim or demand, then Lessee shall, at its expense, defend against such lien, claim or demand provided that it provide Lessor the indemnity in Section 22 and provided Lessee shall pay and satisfy any adverse judgment that may be rendered before any enforcement against Lessor, the Premises, or the Improvement. (c) Reserved (d) Exceptions: Section 12 shall not apply to a foreclosure of a Leasehold Mortgage encumbering the Leasehold Estate if the Leasehold Mortgage has previously received Lessor consent in accordance with this Agreement. 13. Reserved 14. Quitclaim Deed Upon expiration or the earlier termination of this Agreement for any reason, including but not limited to termination because of default by Lessee, Lessee shall, at Lessee's sole expense, remove all fixtures, equipment, and Improvements installed by Lessee from the Premises. Unless another time line is agreed upon by Lessor, all fixtures, equipment i2 and Improvements shall be removed by Lessee within ninety (90) calendar days following the expiration or termination of this Agreement. Lessee shall continue to pay Rent to Lessor during the time Lessee removes the Improvements from the Premises, as provided in Section 20(b). Alternatively, Lessee, with Lessor's written consent, may quitclaim all fixtures, equipment, and Improvements on the Premises to Lessor. Lessor acknowledges the bulkhead is owned by Lessee and Lessor has no rights to use any portion of such bulkhead. Notwithstanding any other provision of this Agreement as permitted by California Public Resources Code Section 6312, or any successor statute, the parties agree that upon expiration or earlier termination of this Agreement Lessor shall have no liability or obligation to pay compensation for any improvements made to the Premises. 15. Right to Enter the Premises for Inspection Lessor expressly reserves the right and shall be entitled to enter the Premises, and all Improvements, including a right of reasonable access to the Premises across Lessee owned or occupied lands adjacent to the Premises, to inspect the Premises for compliance with the terms of this Agreement. Unless otherwise provided in this Agreement, Lessee shall provide Lessor access to the Premises for such purposes, upon not less than seventy -two (72) hours written notice. 16. Transfers / Hypothecation for Financing (a) Transfers: Except as expressly provided herein, Lessee and its successors shall not either voluntarily, or by operation of law, engage in a Transfer without first providing written request to Lessor and obtaining Lessor's prior written consent which shall not be unreasonably withheld or delayed. Notwithstanding anything to the contrary set forth herein, Lessee may, without consent from the City, assign all or a portion of its interest in the Premises and /or this Agreement to any entity or person affiliated with Lessee or a partner member, shareholder or trustee of Lessee ( "Permitted Transferees'). Lessee agrees that Lessor's discretion to provide, withhold or condition consent to any Transfer (except for the Permitted Transfers to a Permitted Transferee in which the City has no consent) includes, without limitation, Lessor's discretion in administering the Tidelands, which are a valuable public resource held by Lessor in trust for the people of the State of California; therefore, Lessor's decision to grant, withhold or condition consent shall be reasonable. A Transfer made in violation of this Section 16, including without limitation the obligation to receive Lessor's prior consent, is a default subject to the cure right in Section 18(b). Lessee shall comply with the following requirements for any Transfer. Lessee agrees that failure to satisfy these requirements are reasonable bases for Lessor to deny consent (but is not exhaustive of the bases to deny consent): (1) Lessee shall give Lessor at least thirty (30) calendar days written notice of its proposed Transfer and provide appropriate documentation demonstrating to Lessor's satisfaction the financial and operational responsibility and appropriateness of the proposed transferee. Lessee shall provide Lessor within five (5) calendar days such other or additional information and /or documentation as may be reasonably requested by Lessor. In (2) Lessee shall provide the terms and provisions of the proposed Transfer. (3) Except as otherwise provided in this Agreement for a permitted Leasehold Mortgagee, the proposed transferee shall, in recordable form, expressly assume this Agreement. (4) In the event the proposed transferee is acquiring only a portion of the adjoining Other Real Property, the rights and obligations of Lessee and the proposed assignee shall be proportionately adjusted in the manner deemed appropriate by Lessor in light of its obligations under the Tidelands Grants; and (5) Lessee shall pay all Lessor's costs associated with Lessor's consideration of the Transfer, regardless of whether such transfer is consummated, or in connection with any other actions taken by Lessor pursuant to this Section. (b) Transfer if Appurtenant to Other Real Property (i) The Premises is appurtenant to the adjoining littoral or riparian land and /or uplands with required uplands support (e.g., parking, restrooms, etc.). The uplands property along with the location of the code required uplands support is more particularly described on Exhibit "C" as the "Other Real Property" and Lessee is the [fee title owner] [lessee of the Other Real Property pursuant to that certain dated by and between Lessee as and as " "] of the Other Real Property. (ii) If Lessee Transfers its interest or rights to use such Other Real Property adjoining the Premises separately from the Premises or Lessee's interest in this Agreement, Lessee shall provide the following to the Lessor: (1) Lessee must provide Lessor with thirty (30) calendar days prior written notice of the proposed Transfer; and (2) Lessee, subject to Lessor's reasonable approval, must provide written documentation to Lessor describing in sufficient detail how access will be provided to the Premises and the required uplands support (e.g., parking, restrooms, etc.) and its respective location that will serve /benefit the Premises. (c) Reserved (d) Hypothecation for Financing: For the purpose of financing or refinancing the acquisition of the Premises, the Improvements, the fixtures and equipment located on the Premises, the alteration, construction or reconstruction of Improvements, Lessee may engage in a Transfer to a Leasehold Mortgagee only if, in addition to such other applicable provisions in this Agreement, the provisions in this Section 16(d) are satisfied. In no event shall Leasehold -10- Mortgages either individually or collectively exceed a loan -to -value ratio of seventy -five percent (75 %) of the Premises. (i) Notice to Lessor. Lessee shall provide Lessor with a fully executed complete copy of each Leasehold Mortgage, and all related loan documents (including copies of all appraisals), any and all amendments thereto, and the name and address of each Leasehold Mortgagee. In the event of any assignment of a Leasehold Mortgage or in the event of a change of address of a Leasehold Mortgagee, Lessee shall provide the new name and address of the assignee or Leasehold Mortgagee to Lessor. Notices of default and notices of foreclosure shall be given to Lessor contemporaneously with service on Lessee. (ii) Notices to Leasehold Mortgagees. A Leasehold Mortgagee shall not be entitled to notice or a copy of any notice from Lessor unless Lessee provides Lessor with Leasehold Mortgagee's name and address and requests that such Leasehold Mortgagee receive notices. (iii) Leasehold Mortgagee Opportunity to Remedy Default. Any Leasehold Mortgagee who is entitled to notice as provided in Section 16(d)(ii) shall have the right, but not the obligation, to remedy the default or acts or omissions of Lessee within the period and in the manner specified in this provision. Upon Lessee's default and subsequent expiration of the applicable cure period in Section 18, a Leasehold Mortgagee shall be permitted to remedy such default(s) at any time within fifteen (15) calendar days (for nonmonetary defaults) and five (5) calendar days (for monetary defaults) following the expiration of the Lessee's cure period; provided, however, Lessor shall not be required to furnish any further notice(s) of default(s) to said Leasehold Mortgagee. (iv) Leasehold Mortgagee Procedure on Lessee's Default. (1) Upon Leasehold Mortgagee's remedy of Lessee's default to the reasonable satisfaction of Lessor, this Agreement shall continue provided that a Leasehold Mortgagee: a. Pays all Rent, and other monetary obligations of Lessee under this Agreement as the same becomes due, and perform all of Lessee's other obligations under this Agreement; and b. If not enjoined or stayed, takes steps to acquire or sell Lessee's interest in this Agreement and in the Premises to an assignee, future transferee or purchaser by foreclosure of the Leasehold Mortgage or other appropriate means, and prosecutes the same to completion with reasonable diligence. (2) Nothing in this Section 16(d) shall extend this Agreement beyond the Term or any Renewal Term; nor to require a Leasehold Mortgagee to continue such foreclosure proceedings after a SEE breach or default has been remedied. If Lessee's breach or default is remedied and the Leasehold Mortgagee discontinues such foreclosure proceedings, this Agreement, at Lessor's option and in its sole and absolute discretion, may continue as if no breach or default under this Agreement occurred. (3) Before a Leasehold Mortgagee, or any other assignee, future transferee or purchaser by foreclosure of the Leasehold Mortgage, acquires the Leasehold Estate, it shall, as an express condition precedent, agree in writing to assume each and every obligation under the Agreement. Regardless, with the exception of said Leasehold Mortgagee, no Transfer to an assignee, future transferee or purchaser by foreclosure of a Leasehold Mortgage shall be effective without Lessor's prior written consent, which shall not be unreasonably withheld. (4) The assignee, purchaser or future transferee at any sale of this Agreement or of the Leasehold Estate in any proceedings for the foreclosure of or trustee's sale under any Leasehold Mortgage, or pursuant to any deed in lieu of foreclosure, shall be deemed an assignee or transferee of this Agreement, and shall be deemed to have agreed to perform all of the terms, covenants and conditions on the part of Lessee to be performed in this Agreement but only from and after the date of such purchase and assignment, and only for so long as such purchaser; future transferee or assignee is the owner of the Leasehold Estate. (5) If Lessor denies consent to (a) the successful bidder or purchaser upon foreclosure or (b) a proposed future transferee, assignee or sublessee of the Leasehold Mortgagee, the sole and exclusive remedy shall be for such party or the Leasehold Mortgagee to seek relief in the nature of specific performance. (6) A Leasehold Mortgagee shall include a statement in any Notice of Foreclosure Sale that provides the requirements for Lessor's consent. (v) Casualty Loss. A standard lender's loss payable endorsement naming each Leasehold Mortgagee may be added to any and all insurance policies required to be carried by Lessee hereunder. Nevertheless, the provisions in any Leasehold Mortgage for the application of insurance proceeds shall be subject to the provisions of this Agreement and, in the event of any conflict between the provisions of this Agreement and the provisions of any Leasehold Mortgage with respect thereto, the provisions of this Agreement shall control. (vi) Limitation on Lessee's Right to Encumber. Any Leasehold Mortgage now or hereafter placed on Lessee's interest in the Premises shall be subject and subordinate to any limitations in the Tidelands Grants, Lessor's interest in the Tidelands, this Agreement, and any mortgage now in existence on the Leasehold Estate. Lessee shall not use, encumber or _12_ Transfer this Agreement or the Premises as security or collateral for any action unless directly related to the Tidelands and the permitted uses allowed by this Agreement. (vii) No Rights to Encumber Interest of Lessor. The provisions of Section 16 do not give any entity the right to mortgage, hypothecate, cause a Transfer of, or otherwise encumber or cause any liens to be placed against the Lessor's interest in the Premises as trustee of the Tidelands, nor shall anything in this Agreement be construed as resulting in a subordination in whole or in part of Lessor's interests. (viii) Estoppel Certificate. Lessor shall, within ten (10) business days after written request from Lessee or any Leasehold Mortgagee, certify by written instrument to any Leasehold Mortgagee or proposed Leasehold Mortgagee: (a) as to whether this Agreement has been modified, supplemented, amended, extended or renewed; (b) as to the existence of any breach or default of this Agreement; and (c) as to the commencement and expiration dates of the term of this Agreement. 17. Bankruptcy Lessee agrees that if all, or substantially all, of Lessee's assets are placed in the hands of a receiver or trustee and remain so for a period of thirty (30) calendar days; or if Lessee makes an assignment for the benefit of creditors or be adjudicated bankrupt; or if Lessee institutes any proceedings under the Bankruptcy Act or similar law wherein Lessee seeks to be adjudicated bankrupt or to be discharged of its debts or seeks to effect a plan of liquidation or reorganization; or if any involuntary proceedings be filed against Lessee and not dismissed or stayed within one hundred twenty (120) calendar days, then this Agreement or any interest in and to the Premises shall not become an asset in any such proceeding and, to the extent permitted by law (and in addition to the provisions of Section 18) Lessor may declare this Agreement terminated and take possession of the Premises. 18. Defaults The occurrence of any of the following constitutes a default of this Agreement by Lessee: (a) Continued failure to operate, vacation or abandonment of the Premises except for casualty, damage, repair construction or Harbor dredging for three hundred (300) consecutive calendar days after the date of Lessor's written notice to Lessee. (b) Failure to make any payment required by this Agreement when such failure continues for a period of fifteen (15) calendar days after the date of Lessor's written notice that payment is due (unless another time period within which to make payment is specifically provided); provided that any such notice provided in this Section 18(b) or in Section 18(c) shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Code of Civil Procedure, as may be amended. OR (c) Failure of Lessee to observe or perform any of the covenants, conditions, or provisions in this Agreement, except for a monetary default specified in Section 18(b) above, where such failure continues for a period of thirty (30) calendar days after the date of Lessor's written notice of the default (unless another time period within which to perform is specifically provided in this Agreement); provided, however, that if the nature of Lessee's default is such that more than thirty (30) calendar days are reasonably required to complete its cure, then Lessee shall not be in default if Lessee commences to cure the default within thirty (30) calendar days after written notice and thereafter diligently and continuously pursues the cure to completion. (d) Any of the events in Section 17 occur; provided that this provision is not applicable or binding on a Leasehold Mortgagee which is of record and has been consented to by Lessor, or to said Leasehold Mortgagee's successors in interest consented to by Lessor, as long as (i) there remains any monies to be paid by Lessee to such Leasehold Mortgagee under the terms of such Leasehold Mortgage, (ii) that such Leasehold Mortgagee or its successors in interest, continuously and timely pays to Lessor all Rent due or coming due under the provisions of this Agreement and the Premises are continuously and actively used and (iii) that said Leasehold Mortgagee agrees in writing to assume and perform each and every obligation under the Agreement. 19. Remedies (a) Cumulative Nature of Remedies. If any default by Lessee continues without being cured in the time period specified in Section 18, then Lessor shall have the remedies described in this Section 19, which are in addition to all other rights and remedies provided by law, equity or elsewhere in this Agreement. Lessor shall have the right to elect its remedies and may resort to any such remedies cumulatively, or in the alternative. (i) Maintain Agreement. Lessor may maintain this Agreement in full force and effect and recover Rent, Additional Rent, payment or other charges or consideration as they become due, without terminating Lessee's right of possession, regardless of whether Lessee has abandoned the Premises. (ii) Termination. Lessor may terminate this Agreement by giving Lessee thirty (30) calendar days written notice. If Lessor terminates this Agreement, Lessor may recover possession (which Lessee shall surrender and vacate upon demand) and remove all persons, and property and Improvements. Lessor shall be entitled to recover the following as damages: (1) The Worth at the Time of Award of the unpaid Rent, Additional Rent or other charges which had been earned at the time of termination; (2) The Worth at the Time of Award of the amount by which the unpaid Rent, Additional Rent or other charges which would have been earned after termination until the time of award exceeds the -14- amount of such loss that Lessee proves could have been reasonably avoided; (3) The Worth at the Time of Award of the amount by which the unpaid Rent, Additional Rent or other charges for the balance of the Term of this Agreement after the time of award exceeds the amount of such loss that Lessee proves could have been reasonably avoided; (4) Any other amount necessary to reasonably compensate Lessor for the detriment proximately caused by Lessee's failure to perform its obligations under this Agreement; (5) At Lessor's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time -to -time by applicable California law; and (6) Lessor shall also be entitled to an award of the costs and expenses (including, without limitation, actual attorneys' fees and costs) incurred by Lessor in maintaining or preserving the Premises after default, preparing the Premises for re- letting, or repairing any damage caused by the act or omission of Lessee. The "Worth at the Time of Award" of the amounts referred to in "(1)" and "(2)" above shall be computed by charging interest at ten percent (10 %) per annum from the dates such amounts accrued to Lessor. The "Worth at the Time of Award" of the amount referred to in "(3)" above shall be computed by discounting such amount at ten percent (10 %) per annum. (b) Waiver of Rights. Lessee waives any right of redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 or 1179, or under any other present or future law, if Lessee is evicted or Lessor takes possession of the Premises by reason of any default by Lessee. 20. Surrender of Premises (a) Upon expiration or earlier termination, of this Agreement Lessee shall peaceably surrender the Premises to Lessor. (b) If Lessee elects to remove any fixtures, improvements (including all Improvements to which Lessee has title), or if Lessor declines Lessee's offer to accept ownership of the same, then Lessee shall restore the Premises to its natural state as deemed acceptable by Lessor. All plans for Lessee's subsequent removal shall be to the reasonable satisfaction of Lessor and shall be completed no later than ninety (90) calendar days after the expiration or sooner termination of this Agreement or other time line agreed upon by the Lessor. During any period of time employed by Lessee to remove fixtures, improvements (including all Improvements to which Lessee has title) Lessee shall continue to pay Rent to Lessor in accordance with this Agreement, which said Rent shall be prorated daily. -15- (c) Any holding over by Lessee after either expiration or earlier termination shall not constitute a renewal or extension, or give Lessee any rights in or to the Premises. If Lessee, with Lessor's consent, remains in possession of the Premises after Agreement expiration or earlier termination (including for the purpose of Lessee's removal of Improvements), such possession shall be deemed a month -to -month tenancy terminable upon thirty (30) calendar days' notice furnished at any time by either party to the other. In addition, all provisions of this Agreement, except those pertaining to Term, shall apply to the month -to- month tenancy, and Lessee shall continue to pay all Rent required by this Agreement. Provided, however, Rent shall be paid monthly on the first (1st) day of the month. 21. Condemnation (a) Lessor shall notify Lessee of any Condemnation by providing written notice thereof no later than thirty (30) calendar days after the later of (i) the filing of a complaint in eminent domain by Condemnor or (ii) any voluntary final agreement by Lessor and Condemnor of the extent of the scope and extent of property interests in the Premises to be included within the Condemnation. (b) If the Premises are totally taken by Condemnation, this Agreement shall terminate as of the date on which Condemnor actually takes physical possession of the Premises, which date is referred to in this Section 21 as the "Termination Date." If less than all but more than fifty percent (50 %) of total area of the Premises are taken through Condemnation, Lessee shall have the option to terminate this Agreement by providing written notice to Lessor. Lessee's notice must be given within thirty (30) calendar days after Lessee's receipt of Lessor's notice provided pursuant to subparagraph (a) above, and if Lessee's notice of termination is not timely given, then Lessee shall conclusively be deemed to have elected not to terminate this Agreement. If this Agreement is terminated under this Section, the termination shall be effective on the Termination Date, and Lessor shall prorate Rent to that date. Lessee must pay Rent for the period up to, but not including, the Termination Date, as prorated by Lessor. Lessor shall return to Lessee any prepaid Rent allocable to any period on or after the Termination Date. (c) If any part of the Premises is taken by Condemnation and this Agreement is not terminated, Rent shall be proportionately reduced based on the value of the actual portion of the Premises taken as a percentage of the value of the entire Premises, in its "before' condition and without regard to any injury to the remainder, or benefit to the remainder, resulting from the taking or the construction of the project for which the taking occurs. Lessor shall make such determination of the amount of reduction in Rent in its reasonable discretion, based upon either the appraisal for the Condemnation provided by the Condemnor, or pursuant to an appraisal prepared in the manner provided in Section 43, as Lessor shall determine. Lessor and Lessee agree to execute an amendment or other appropriate instrument modifying this Agreement within thirty (30) calendar days after a partial taking, confirming the reduction in Premises and reduction in Rent. -16- (d) If a temporary taking of part of the Premises occurs through (i) the exercise of any government power by Condemnor or (ii) a voluntary sale or transfer by Lessor to any Condemnor, either under threat of exercise of eminent domain by a Condemnor or while legal proceedings for condemnation are pending, Rent shall abate during the time of such taking but only with respect to that physical portion of the Premises actually temporarily taken, and all Rent or other compensation paid by the Condemnor shall be the sole and exclusive property of Lessor. (e) In the event of a total or partial Condemnation, though the award shall belong and be paid to Lessor, Lessee shall be entitled to claim and receive, and Lessor hereby assigns to Lessee, from such award: (i) A sum attributable to the fair market value of any and all Improvements made to the condemned portion(s) of the Premises by Lessee in accordance with this Agreement, which Improvements Lessee has the right to remove, but elects not to remove; or, if Lessee elects to remove any such Improvements, a sum attributable to their reasonable removal and relocation costs not to exceed the fair market value of such Improvements; and (ii) A sum attributable to any excess of the present value at the date of taking of the fair market rental value of the condemned portion(s) of the Premises, exclusive of any of Lessee's Improvements for which it is compensated under subsection (i), above, for the remainder of the term over the present value at the date of taking of the actual Rent payable by Lessee hereunder for the condemned portion(s) for the remainder of the term; and (iii) A sum attributable to any diminution of the present value at the date of taking of the fair market rental value (i.e., that portion or those portions not condemned) for the remainder of the term; and (iv) Any sum awarded or paid to Lessee by any Condemnor for damage to Lessee's business or for "loss of goodwill." 22. Indemnification In addition to any other indemnity provided for in this Agreement, and notwithstanding any other provisions of this Agreement to the contrary, Lessee indemnifies, defends (with counsel selected by Lessor) and holds harmless Lessor, its elected officials, officers, employees, agents, attorneys, volunteers and representatives from and against all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorney's fees, disbursements and court costs) of every kind that may arise from or in any manner relate to (directly or indirectly): (i) Lessee's rights, obligations, acts or omissions under this Agreement, (ii) Lessee's occupancy and use, or Lessee's guests, invitees, sublessees, or licensees occupancy and use, of the Premises, or Improvements (individually, each a "Claim" and, collectively, "Claims "). The indemnification in this Section 22 specifically includes, without limitation, all Claims arising by reason of: _f 7_ 23. 24. (a) The death or injury of any person or damage to real or personal property caused or allegedly caused by the condition of the Premises, Improvements, or an act or omission of Lessee or an agent, contractor, subcontractor, supplier, employee, servant, sublessee or concessionaire of Lessee; (b) Any work performed on the Premises, Improvements, or materials furnished to the Premises, Improvements, by or at the request of Lessee or any agent, contractor, subcontractor, supplier, employee, servant, sublessee or concessionaire of Lessee, with the exception of maintenance performed by City; and /or (c) Lessee's failure to perform any provision of this Agreement or to comply with any requirement of Applicable Law or any requirement imposed on the Premises or Improvements by any duly authorized governmental agency or political subdivision. Lessee's obligations in this Section (or any other provision providing indemnity in this Agreement) shall not extend to the degree any Claim is proximately caused by the sole negligence or willful misconduct of Lessor, subject to any immunities which may apply to Lessor with respect to such Claims. This indemnification provision and any other indemnification provided elsewhere in this Agreement shall survive the termination of this Agreement and shall survive for the entire time that any third party can make a Claim. Insurance Without limiting Lessee's indemnification of Lessor, Lessee will obtain, provide and maintain at its own expense during the Term of this Agreement, a policy or policies of insurance of the type, amounts and form acceptable to Lessor. The policy or policies shall provide, at a minimum, those items described in Exhibit "D ". Hazardous Substances (a) From the Commencement Date and throughout the Term, Lessee will not use, occupy, or permit any portion of the Premises to be used or occupied in violation of any Hazardous Substance Laws. Notwithstanding any other provision in this Section 24, Lessee is not responsible /liable for any Hazardous Substances that are brought on to the Premises, through migration or other means, by third - parties not associated with Lessee. (b) Notwithstanding any contrary provision of this Agreement, and in addition to the indemnification duties of Lessee set forth elsewhere in this Agreement, Lessee indemnifies, defends with counsel reasonably acceptable to Lessor, protects, and holds harmless Lessor, its elected officials, officers, employees, agents, attorneys, volunteers and representatives from and against any and all losses, fines, penalties, claims, demands, obligations, actions, causes of action, suits, costs and expenses (including, without limitation, attorneys' fees, disbursements and court costs), damages, judgments, or liabilities, including, but not limited to, any repair, cleanup, detoxification, or preparation and implementation of any remedial, response, closure or other plan of any kind or nature which the Lessor, its officials, officers, employees, agents, attorneys, volunteers or assigns may sustain or incur, or which may be imposed upon them, in connection with any breach of Lessee's obligations or representations in this Agreement or the use of or -2 the Premises under this Agreement, arising from or attributable to the Lessee Parties (defined below) storage or deposit of Hazardous Substances in violation of Applicable Laws. This Section is intended to operate as an agreement pursuant to Section 107(e) of CERCLA, 42 USC Section 9607(e), and California Health and Safety Code Section 25364, to insure, protect, hold harmless, and indemnify Lessor for any claim pursuant to the Hazardous Substance Laws or the common law. (c) Lessee does not, and will not, authorize any third party to use, generate, manufacture, maintain, permit, store, or dispose of any Hazardous Substances in violation of Applicable Laws on, under, about or within the Premises. (d) Upon expiration or earlier termination of this Agreement, Lessee shall deliver possession of the Premises in compliance with Hazardous Substance Laws subject to the last sentence of Section 24(a) above. (e) If during the Term of this Agreement, Lessee becomes aware of (i) any actual or threatened release of any Hazardous Substances on, in, under, from, or about the Premises in violation of Hazardous Substance Laws; or (ii) any inquiry, investigation, proceeding, or claim by any government agency or other person regarding the presence of any Hazardous Substances in violation of Hazardous Substance Laws on, in, under, from or about the Premises, Lessee shall give Lessor written notice of the release or inquiry within five (5) calendar days after Lessee becomes aware or first has reason to believe there has been a release or inquiry and shall simultaneously furnish to Lessor copies of any claims, notices of violation, reports, warning or other writings received by Lessee that concern the release or inquiry. (f) If the presence of any Hazardous Substances brought onto the Premises by Lessee or Lessee's employees, agents, sublessees, licensees, concessionaires, contractors, or invitees ( "Lessee Parties "), or generated by same during the Term of this Agreement, results in contamination of the Premises or adjacent properties or the Newport Harbor in violation of Hazardous Substance Laws, Lessee shall promptly take all necessary actions, at Lessee's sole expense, to remove or remediate such Hazardous Substances in full compliance with Applicable Laws. Lessee shall provide notice to Lessor prior to performing any removal or remedial action. Lessee shall not propose nor agree to any covenant of use restriction as part of any removal or remediation required as a result of this provision without Lessor's written consent. Lessee shall pay any costs Lessor incurs in performing Lessee's obligation to clean -up contamination resulting from Lessee's operations or use of the Premises. Any amounts not paid when due shall be subject to late charges and delinquency rates as provided in Section 45. (i) Should any clean -up of Hazardous Substances for which Lessee is responsible not be completed prior to the expiration or sooner termination of the Agreement, including any extensions thereof, then Lessee shall transfer the amounts required to complete clean -up into an escrow account, together with Lessor - approved instructions for the disbursement of such amount in payment of the costs of any remaining clean -up as it is completed, and (ii) if the nature of the contamination or clean -up required of Lessee is of such a nature as to make the Premises untenable or -19- unleaseable, then Lessee shall be liable to Lessor as a holdover lessee until the clean -up has been sufficiently completed to make the Premises suitable for lease to third parties. The estimated cost of the clean -up shall require approval of the Lessor. (ii) If Lessor determines, in its reasonable discretion, that Lessee does not have insurance or other financial resources sufficient to enable Lessee to fulfill its obligations under this provision, whether or not accrued, liquidated, conditional, or contingent, then Lessee shall, at the request of Lessor, procure and thereafter maintain in full force and effect such environmental impairment liability and /or pollution liability insurance policies and endorsements, or shall otherwise provide such collateral or security reasonably acceptable to Lessor as is appropriate to assure that Lessee will be able to perform its duties and obligations hereunder. (g) Lessee's obligations in this Section 24 shall survive the expiration or earlier termination of this Agreement. 25. Quiet Possession (a) So long as no default by Lessee has occurred and is continuing uncured under this Agreement, and subject to the Tidelands Grant or any amendment to that grant, Lessee shall peaceably and quietly use and enjoy the Premises for the Term, without hindrance or interruption by Lessor. (b) Lessor shall in no event be liable in damages or otherwise, nor shall Lessee be released from any obligations hereunder, because of the interruption or termination of any service provided by Lessor (such as water or sewer service), or a termination, interruption or disturbance of any service attributable to any act or neglect (other than gross negligence or willful misconduct) of Lessor or its servants, agents, employees, licensees, business invitees, or any person claiming by, through or under Lessee. 26. Compliance with Applicable Laws Lessee agrees that, in all activities on or in connection with the Premises, and in all uses thereof, it will comply with and conform, at its sole cost, to all Applicable Laws. Lessee is solely responsible for compliance with Applicable Laws. If City enacts a new tax or imposes a new fee, which exceeds the cost of providing the service, against the Premises, the Lessee has the right to terminate this Agreement upon thirty (30) calendar days notice to Lessor. 27. Not Agent of Lessor Neither anything in this Agreement nor any acts of Lessee shall authorize Lessee or any of its employees, agents or contractors to act as agent, contractor, joint venturer or employee of Lessor for any purpose. The parties' relationship under this Agreement is exclusively that of a lessor and lessee. -20- 28. No Third Party Beneficiaries Lessor (both as a lessor and as the City of Newport Beach) and Lessee do not intend, by any provision of this Agreement, to create in any third party, any benefit or right owed by one party, under the terms and conditions of this Agreement, to the other party. 29. Limitation of Leasehold / Easements This Agreement and the rights and privileges granted Lessee in and to the Premises and Improvements are subject to all covenants, conditions, restrictions, and exceptions of record, including those which are set out in the Tidelands Grant by the State of California to Lessor. Nothing contained in this Agreement or in any related document shall be construed to imply the conveyance to Lessee of rights in the Premises or Improvements that exceed those owned by Lessor. This Agreement and the rights and privileges granted Lessee in and to the Premises shall be further subject to future easements and rights -of -way for access, gas, electricity, water, sewer, drainage, telephone, telegraph, television transmission, and such other utilities as Lessor may determine from time to time to be in the best interests of the development of the lands within Lessor's jurisdiction, provided, however, that no easements, rights -of -way, or the installation of such facilities by Lessor, shall materially interfere with Lessee's business. Easements and rights -of -ways allowed by this section shall be limited in purpose to providing the utilities contemplated in this section. Nothing in this section gives a utility a right to attach any item to the Improvements. Lessee is not entitled to any monetary payment or other remuneration for any such future easements and rights -of -way. 30. Notices All notices and other communications required or permitted to be given under this Agreement, including any notice of change of address, shall be in writing and given by personal delivery, or deposited with the United States Postal Service, certified and postage prepaid, or by national overnight mail service addressed to the parties intended to be notified. Notice shall be deemed given as of the date of personal delivery, or if mailed, two (2) calendar days following the date of deposit with the United States Postal Service. Notice shall be given as follows: To Lessor: City of Newport Beach Attn: City Manager PO Box 1768 3300 Newport Boulevard Newport Beach, CA 92658 949 - 644 -3153 With Copy To: City Attorney (at same address) To Lessee: -21- 31. Entire Agreement/Amendments (a) The terms and conditions of this Agreement, all exhibits attached hereto are incorporated by reference into this Agreement, and all documents expressly incorporated by reference, represent the entire Agreement of the parties with respect to the subject matter of this Agreement. (b) This Agreement may be executed in counterparts, including electronic counterparts, each of which, after all the parties have signed this Agreement, shall be deemed to be an original, and such counterparts shall constitute one Agreement binding on the parties. (c) This written Agreement shall supersede any and all prior agreements, oral or written, regarding the subject matter. Notwithstanding the foregoing sentence, with respect to City Pier Permit No. , nothing herein is a release of any violation of Lessee's duties or obligations, if any, with respect to City Pier Permit No. , whether known or unknown at this time or upon the effective date of this Agreement. Lessor acknowledges it is not aware of any known defaults by Lessee. (d) Except as permitted by Section 33 below, no other agreement, promise or statement, written or oral, relating to the subject matter of this Agreement, shall be valid or binding, except by way of a written amendment to this Agreement. (e) The terms and conditions of this Agreement shall not be altered or modified except by a written amendment to this Agreement signed by Lessee and Lessor. (f) If any conflicts arise between the terms and conditions of this Agreement, and the terms and conditions of the attached exhibits or the documents expressly incorporated by reference, the terms and conditions of this Agreement shall control. (g) Any obligation of the parties relating to monies owed, as well as those provisions relating to limitations on liability and actions, shall survive termination or expiration of this Agreement. 32. Waivers The waiver by either party of any breach, default or violation of any term, covenant or condition of this Agreement, or of any Applicable Law, shall not be deemed a waiver of any other term, covenant, condition, or Applicable Law, or of any subsequent breach or violation of the same or other term, covenant, condition, or Applicable Law. The subsequent acceptance by either party of any fee, performance, or other consideration which may become due or owing under this Agreement, shall not be deemed to be a waiver of any preceding breach or violation by the other party of any term, condition, covenant of this Agreement or any Applicable Law. 33. Lessor's Authorized Representative Unless otherwise specified in this Agreement or unless Applicable Law requires action of the City Council or some other person or body of Lessor (in its capacity as the City of _22_ 34. 35 36. CYA Newport Beach), Lessor shall maintain the authority to implement this Agreement on its behalf through the City Manager of the City of Newport Beach (or his or her designee). The City Manager (or his or her designee) shall have authority (but not the obligation) to issue interpretations, waive provisions (including, without limitation, imposition of late charges and delinquency rates, Lessee's payment of costs and times of performance), and /or enter into amendments of this Agreement on behalf of the Lessor. City Business License Lessee shall obtain and maintain during the duration of this Agreement a City business license as required by the Newport Beach Municipal Code. Governing Law & Non - Binding Arbitration (a) Prior to instituting any legal action in a court, in the event the Lessor and Lessee shall be unable to agree as to any matter provided for in this Agreement such dispute shall be submitted to three (3) disinterested arbitrators (unless the parties can agree on one (1) arbitrator). Such arbitration shall be conducted upon request of either the Lessor or the Lessee, before three (3) arbitrators (unless the Lessor or the Lessee agree to one (1) arbitrator) designated by the American Arbitration Association and in accordance with the rules of such Association. The decision(s) of the arbitrator(s) designated and acting under this Agreement shall be nonbinding and the arbitrator(s) have no power to depart from or change any of the provisions thereof. The expense of arbitration proceedings conducted hereunder shall be borne equally by the parties. (b) This Agreement shall be construed in accordance with the laws of the State of California. Any action brought relating to this Agreement shall be adjudicated in a court of competent jurisdiction in the County of Orange. Lessee is advised that Public Resources Code Section 6308 may require that the State of California be joined to any action against the City involving title to or boundaries of the Tidelands. (c) The prevailing party in any. non - binding arbitration or legal action authorized under this section shall not be entitled to attorneys' fees. Interpretation The terms of this Agreement shall be construed language used and shall not be construed for c authorship of the Agreement or any other rule apply. Time is of the Essence in accordance with the meaning of the r against either party by reason of the of construction which might otherwise Time is of the essence to the performance of each and every act required to be performed by this Agreement. -23- 38. California Labor Laws It shall be the obligation of Lessee or any subcontractor under Lessee to comply with all State of California labor laws, rules and regulations and the parties agree that the Lessor shall not be liable for any violation thereof. 39. Joint and Several Liability The term "party' in this section shall mean either Lessor or Lessee, and if more than one (1) person or entity comprises either Lessor or Lessee, then the obligations imposed upon such "party' shall be both joint and several. 40. Memorandum of Lease Agreement A Memorandum of Lease Agreement, in a form and content similar to that contained in Exhibit "E" shall be recorded by the parties promptly upon execution of this Agreement. Upon execution by both parties, the Memorandum of Lease Agreement shall be recorded against the Premises in the office of the Orange County Clerk- Recorder, as required by Government Code Section 37393. 41. No Pre - commitment / Retention of Discretion / Assumption of Risk and Waiver (a) By its execution of this Agreement, Lessor is not committing itself or agreeing to undertake any activity requiring the subsequent exercise of discretion by the City of Newport Beach, or any department thereof, including but not limited to the approval of any CEQA documents, the approval of any development proposal or land use regulation governing the Premises, or any other act or approval. (b) Lessee understands and agrees that Lessor in its capacity as the City of Newport Beach reserves the right to exercise its discretion as to all matters which it is, by law, entitled or required to exercise its discretion, including, but not limited to, the consideration of CEQA documents the consideration of a final development, the consideration of any and all plans, permits, licenses or regulatory approvals, or any other acts or activities requiring the subsequent independent exercise of discretion by the City of Newport Beach or any agency or department thereof. Lessee understands and agrees that the City of Newport Beach may, in its sole and absolute discretion, certify or not certify a CEQA document and approve, approve with modifications, or not approve or may consider other alternatives, including those presented in the CEQA documents. (c) Lessee acknowledges and agrees that the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) may, at their sole and absolute discretion, approve any and all plans, permits, licenses or regulatory approvals, only upon the imposition and performance of additional conditions or mitigation measures. (d) Nothing in this Agreement shall obligate the Lessor in its capacity as the City of Newport Beach to exercise its discretion in any particular manner, and notwithstanding any provision of this Agreement to the contrary any exercise of discretion required by law or permitted by this Agreement shall not be deemed to constitute a breach of Lessor's duties under this Agreement. -24- (e) Lessee accepts and assumes the risk that the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) will not approve or certify the CEQA documents or any and all plans, permits, licenses or regulatory approvals sought, that the City of Newport Beach may consider or approve other alternatives to the CEQA documents, any and all plans, permits, licenses or regulatory approvals, or CEQA documents might be approved or certified subject to modifications or the performance of certain additional conditions or mitigation measures imposed by the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) in their sole and absolute discretion, or that third parties may file litigation against or otherwise delay any and all plans, permits, licenses or regulatory approvals sought, or CEQA documents. Lessee agrees it has no claim, cause of action, or right to damages, compensation or reimbursement from Lessor or the City of Newport Beach if (i) CEQA documents or any and all plans, permits, licenses or regulatory approvals sought are not approved by the City of Newport Beach or other governmental agencies (including without limitation the Coastal Commission) for any reason, (ii) other alternatives to the CEQA documents or any and all plans, permits, licenses or regulatory approvals sought are approved, (iii) CEQA documents are approved or certified subject to modification or the performance of certain additional conditions or mitigation measures, and /or (iv) third parties file litigation against or otherwise delay the CEQA documents. 42. No Damages Lessee acknowledges that Lessor would not enter into this Agreement if it were to be liable for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) under, or relating to, this Agreement or any of the matters referred to in this Agreement, including, without limitation, any and all plans, permits, licenses or regulatory approvals, CEQA documents, and Transfers. Accordingly, Lessee covenants and agrees on behalf of itself and its successors and assigns, not to sue Lessor (either in its capacity as lessor in this Agreement or in its capacity as the City of Newport Beach) for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) or monetary relief for any breach of this Agreement by Lessor or for any dispute, controversy, or issue between Lessor and Lessee arising out of or connected with this Agreement or any of the matters referred to in this Agreement, including, without limitation, any and all plans, permits, licenses or regulatory approvals, CEQA documents, Transfers or any future amendments or enactments thereto, the parties agreeing that declaratory relief, injunctive relief, mandate and specific performance shall be Lessee's sole and exclusive judicial remedies. 43. Appraisals This Section governs the process for all appraisals required or permitted in this Agreement. Any time an appraisal is required or permitted by this Agreement, Lessor and Lessee shall each select an independent appraiser with qualifications of MAI to appraise Tidelands properties. Each party shall pay the costs of their selected appraiser. If the two (2) appraisals return with a fair market value that is within five -25- percent (5 %) of each other the two (2) appraisal fair market values shall be averaged to produce the fair market value of the affected Premises. For clarity, if one (1) appraiser concludes thirteen percent (13 %) and one (1) appraiser concludes fifteen percent (15 %) the difference in their conclusions is thirteen and 333 /1,OOOths percent (13.333 %) and therefore a third appraisal would be needed. If the two (2) appraisers should fail to agree on the fair market value, and the difference between the two appraisals exceeds five percent (5 %), then the two (2) appraisers thus appointed shall mutually appoint a third MAI designated appraiser, and in case of their failure to agree on a third appraiser within thirty (30) calendar days after their individual determination of the fair market value, either party may apply to the Presiding Judge of the Superior Court for Orange County, requesting said Judge to appoint the third MAI designated appraiser. The costs of the third appraiser, if any, shall be split equally between the Lessor and the Lessee. The third appraiser so appointed shall meet and confer with the two (2) other appraisers and then conduct its own analysis to determine the fair market value of the affected Premises within sixty (60) calendar days of their appointment and the average of the fair market value per square foot as set forth in the appraisals of the two (2) closest appraisers shall be used as the fair market value. All MAI appraisers appointed or selected pursuant to this subsection shall have at least ten (10) years experience appraising Tidelands in the Southern California area and shall be free of conflicts (i.e., no appraisers shall rent a boat slip or office space from Lessor or lessees, etc.). 44. Reserved 45. Late Charges and Delinquency Rates A ten percent (10 %) late charge shall be added to all payments due but not received by Lessor with ten (10) calendar days following the due date, unless another due date is specified in this Agreement. In addition, all unpaid amounts shall accrue at a delinquency rate of one and a half percent (1% %) per month or any portion of a month until paid in full. Lessor and Lessee hereby agree that such late charges and delinquency rates represent a fair and reasonable estimate of the costs Lessor will incur by Lessee's late payment, including, without limitation, lost opportunities and the cost of servicing the delinquent account. Lessee agrees that such late charges and delinquency rates are Additional Rent and are not interest. Acceptance of such late charges and delinquency rates (and /or any portion of the overdue payment) by Lessor does not constitute a waiver of Lessee's default with respect to such overdue payment, or prevent Lessor from exercising any of the other rights and remedies granted in this Agreement. 46. Reserved 47. Government Claims Act Lessee and Lessor agree that in addition to any claims filing or notice requirements in this Agreement, Lessee shall file any claim that Lessee may have against Lessor in strict conformance with the Government Claims Act (Government Code sections 900 et seq.). -26- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate on the date and year first written herein. LESSOR City of Newport Beach A Municipal Corporation Mayor/ City Manager ATTEST: Leilani Brown City Clerk APPROVED AS TO FORM: Aaron C. Harp City Attorney LESSEE go _27_ ame: EXHIBIT "A" DEFINITIONS Additional Rent is defined in Section 4 Adjustment Date means the fifth anniversary of the Commencement Date ( _, 20_), and every subsequent fifth anniversary thereafter ( 20_, 20_) [including, any fifth anniversary during a Renewal Term]. Agreement is defined in the Preamble. Applicable Law(s) mean and include, but are not limited to, those prescribed by Title 17 of the Newport Beach Municipal Code; any ordinances of the City of Newport Beach, including the Building Code thereof; the City Charter of Newport Beach; any regulations, policies and general rules of the City of Newport Beach; the Tidelands Grant; Hazardous Substances Laws; CEQA; and any other Federal, State or local statute, law, ordinance, resolution, code, rule, regulation, order or decree as any of the same now exist or may hereafter be adopted or amended. CDP means a Coastal Development Permit. CEQA means the California Environmental Quality Act, codified at California Public Resources Code Sections 21000 et seq. as may be amended from time -to -time. Claim(s) is defined in Section 22. Commencement Date is defined in Section 3(a). Condemnation means a permanent taking of the Premises through (i) the exercise of any government power, by any public or quasi - public authority or by any other party having the right of eminent domain (Condemnor) or (ii) a voluntary sale or transfer by Lessor to any Condemnor, either under threat of exercise of eminent domain by a Condemnor or while legal proceedings for condemnation are pending. Hazardous Substance means: (i) any substance, product, waste or other material of any nature whatsoever which is or becomes listed, regulated, or addressed pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (CERLCA); the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resource Conversation and Recovery Act, 42 U.S.C. Section 6901 et seq. "RCRA "); the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Water Act, 33 U.S.C. Section 1251 et seq.; the California Hazardous Waste Control Act, Health and Safety Code Section 25100 et seq.; the California Hazardous Substance Account Act, Health and Safety Code Sections 25330 et seq.; the California Safe Drinking Water and Toxic Enforcement Act, Health and Safety Code Sections 25249.5 et seq.; California Health and Safety Code Sections 25280 et seq. (Underground Storage of Hazardous Substances); the California Hazardous Waste Management Act, Health and Safety Code Sections 25170.1 et seq.; California Health and Safety Code Sections 25501 et seq. (Hazardous Materials Response Plans and Inventory); or the Porter - Cologne Water Quality Control Act, Water Code Sections 13000 et seq., all as they, from time -to -time may be amended or re- codified, (the above -cited statutes are here collectively referred to as lithe Hazardous Substances Laws") or any other Federal, State or local statute, law, ordinance, resolution, code, rule, regulation, order EXHIBIT "A" -1- or decree regulating, relating to, or imposing liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereafter in effect; (ii) any substance, product, waste or other material of any nature whatsoever which may give rise to liability under any of the above statutes or under any statutory or common law theory, including but not limited to negligence, trespass, intentional tort, nuisance, waste or strict liability or under any reported decisions of a state or federal court; (iii) petroleum or crude oil; and (iv) asbestos. Improvements are owned by Lessee and mean those items described on Exhibit "B" as they may be modified, altered, restored, or rebuilt pursuant to this Agreement. Leasehold Estate means Lessee's interest in the Premises created by this Agreement. Leasehold Mortgage means a Transfer or security instrument by which the Leasehold Estate is used to secure a debt or other obligation arising from or related to Lessee's use or operation of the Premises. Leasehold Mortgagee means a holder or holders of the Leasehold Mortgage. Lease Term Year means each twelve (12) month period beginning on the Commencement Date (or anniversary thereof) and ending on the day prior to the next anniversary of the Commencement Date. Lessee is defined in the Preamble. Lessor is defined in the Preamble. Option Notice is defined in Section 3(b)(i). Other Real Property is defined in Section 16(b). Premises means those Tidelands which is an independent site with no land access consisting of approximately ( square feet water area located generally at in the City of Newport Beach, California, more particularly described in Exhibit F and on the map set forth in Exhibit G, excluding any private water and Improvements. Renewal Term(s) is defined in Section 3(b). Rent is defined in Section 4. Target Indexed Rate is defined in the resolution incorporated by Section 4. Term is defined in Section 3(a). depicted Tidelands means certain tidelands and submerged land (whether filled or unfilled), located in the City of Newport Beach, County of Orange, State of California granted to the City of Newport Beach, as trustee, by the State of California pursuant to the Tidelands Grant. Tidelands Grant means uncodified legislation related to the State of California's grant of certain rights in the Tidelands to the City of Newport Beach, including, without limitation, the Beacon Bay Bill (Chapter 74 of the Statutes of 1978, as amended [citations omitted]). EXHIBIT "A" -2- Transfer(s) means any attempt to sell, convey, assign, transfer, mortgage, pledge, grant, hypothecate or encumber this Agreement or any interest in this Agreement, or the Premises or any portion of the Premises, and any attempt to sublet (which shall also include management and /or operating agreements covering the Premises), license or grant any concession to the Premises, in whole or in part, or allow any person other than Lessee's employees, members, agents, servants and invitees to occupy or use all or any portion of the Premises. EXHIBIT "A" -3- EXHIBIT "B" IMPROVEMENTS EXHIBIT "B" -1- EXHIBIT "C" OTHER REAL PROPERTY EXHIBIT "C' -1- EXHIBIT "D" INSURANCE EXHIBIT "D" -1- EXHIBIT "E" RECORDING REQUESTED AND WHEN RECORDED RETURN TO: Office of the City Clerk City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92658 [Exempt from Recordation Fee - Govt. Code Sec. 6103] MEMORANDUM OF LEASE AGREEMENT r(WITH OPTIONS FOR RENEWAL)] This Memorandum of Lease Agreement [(With Options for Renewal)] ( "Memorandum ") is dated 20 , and is made between City of Newport Beach, a California municipal corporation and charter city ( "Lessor' or "City ") and ( "Lessee "), concerning the Premises described in Exhibits "A" and "B," attached hereto and by this reference made a part hereof. For good and adequate consideration, Lessor leases the Premises to Lessee, and Lessee leases them from Lessor, for the term and on the provisions contained in the Agreement dated 20_, including without limitation provisions prohibiting assignment, subleasing, and encumbering said leasehold without the express written consent of Lessor in each instance, all as more specifically set forth in said Agreement, which said Agreement is incorporated in this Memorandum by this reference. The term is ( —) years, beginning 20 , and ending 20_ [If needed, insert recitation of Options and Renewal Terms(s).] This Memorandum is not a complete summary of the Agreement. Provisions in this Memorandum shall not be used in interpreting the Agreement's provisions. In the event of conflict between this Memorandum and other parts of the Agreement, the other parts shall control. Execution hereof constitutes execution of the Agreement itself. [Signatures on the next page] EXHIBIT "E" -1- LESSOR LESSEE City of Newport Beach _ A Municipal Corporation a Mayor 0 Name: ATTEST: Leilani Brown City Clerk APPROVED AS TO FORM: Aaron C. Harp City Attorney [NOTE: Attach Exhibits A and B from Agreement as Exhibits to this Memorandum behind attached Notary form] EXHIBIT "E -2- cAUFORNIA ALL - PURPOSE ACKNOWLEDGMENT STATE OF CALIFORNIA ss: COUNTY OF ORANGE On this _ day of , 2011, before me, the undersigned notary public, personally appeared NAME(S) OF SIGNER(S) proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) Were subscrbed to the within Instrument, and acknowledged to me that helsherthey executed the same in htsfherltheir authorized capacity(les), and that by histherfthelr signature(s) on the instrument the person(s), or the entity(ies) upon behalf of which the person(s) acted, executed the instrument I cartify under PENALTY OF PERJURY under the taws of the State of California that the foregoing paragraph is true and correct, WITNESS my hand and official seal. SIGNATURE OF NOTARY OPTIONAL SECTION —OPTIONAL SECTION — CAPACITY CLAIMED BY SIGNER Though statute does not require the Notary to fill in the data below, doing so may prove invaluable to persons retying on the document. • INDIVIDUAL • CORPORATE OFFICER(S) TITLE(S) • PARTNER(S) 13 LIMITED © GENERAL • ATTORNEY -IN -FACT E3 TRUSTEE(S) El GUARDIANICONSERVATOR O OTHER: SIGNER IS REPRESENTING: NAME OF PERSON(S) OR ENTfTY(IES) THIS CERTIFICATE MUST BE ATTACHED TO THE TITLE OR TYPE OF DOCUMENT: DOCUMENT DESCRIBED AT RIGHT: Though the data requested here is not required by . taw, it could prevent fraudulent; reattachment of this NUMBER OF PAGES form. DATE OF DOCUMENT: OTHER SIGNER(S) THAN NAMED ABOVE: 1- EXHIBIT "F" DESCRIPTION OF PREMISES EXHIBIT "F" -1- EXHIBIT "G" DEPICTION OF PREMISES Commercial Tidelands Permit (1) Commercial Permittee: This Permit is issued on to ( "Permittee ") to operate a located upon City of Newport Beach ( "City ") tidelands, as more particularly described in Attachment 1 and depicted in Attachment 2 ( "Premises "). Both Attachment 1 and Attachment 2 are incorporated by reference into this Permit. By acceptance of this Permit, the Permittee agrees to be bound by the terms contained in this Permit. (2) Term: This Permit shall be valid for a period of twelve (12) calendar months beginning on March 1, 20_ and expiring on February _, 20_, unless terminated earlier as provided herein. (3) Rent: Rent shall be calculated pursuant to Resolution No. 2012 - , or any successor /amended resolution. Resolution No. 2012 -_ and any successor /amended resolution are automatically incorporated by reference into this Permit, without any further action by the parties, when adopted by the Newport Beach City Council. (A) Periodic Payment of Rent: One - twelfth (1/12) of annual rent for a particular year shall be payable on the first (1st) day of each month during the term. (B) Place for Payment of Rent: All payments of rent shall be made in lawful money of the United States of America and shall be paid to City in person or by United States' mail, or overnight mail service, at the Cashier's Office located at 3300 Newport Boulevard, Newport Beach, CA 92658, or to such other address as City may from time to time designate in writing to the Permittee. If requested by City, the Permittee shall make payments electronically (at www.newportbeachca.gov) or by wire transfer (at the Permittee's cost). The Permittee assumes all risk of loss and responsibility for late charges and delinquency rates if payments are not timely received by the City regardless of the method of transmittal. (C) Late Charges: A ten percent (10 %) late charge, or the maximum rate allowable under State law, shall be added to all payments due but not received by City with fifteen (15) calendar days following the due date. In addition, all unpaid amounts shall accrue at a delinquency rate of one and a half percent (1'h %) per month or any portion of a month until paid in full. (4) Utilities and Taxes: The Permittee is solely responsible for obtaining all utilities and paying all taxes, fees and assessments for the Premises or improvements located thereon. (5) Possessory Interest Tax Notice: The City hereby gives notice to the Permittee, pursuant to Revenue and Tax Code Section 107.6 that this Permit may create a possessory interest that is the subject of property taxes levied on such interest, the payment of which taxes shall be the sole obligation of the Permittee. The Permittee 1 shall advise in writing any sublessee, licensee, concessionaire or third party using the Premises of the requirements of Section 107.6. (6) Compliance With Applicable Laws: The Permittee is required at its sole expense to comply with all applicable City, County, State and Federal laws and regulations. (7) Maintenance: The Permittee assumes full responsibility for operation and maintenance and repair of the Premises and associated improvements throughout the term of this Permit at its sole cost, and without expense to the City. (8) Transfer /Assignment: This Permit may not be transferred or assigned by the Permittee without the City's prior written consent. Transfer /assignment without the City's prior written consent is null and void. (9) Termination: This Permit may be terminated for cause (e.g., failure to abide by the terms of this Permit, etc.) by the City with no less than seven (7) calendar days prior written notice to the Permittee. In the event of termination under this section, the City shall owe no compensation to the Permittee and the Permittee shall remove all improvements from the Premises within ninety (90) calendar days. The Permittee shall continue to pay rent to the City during the period in which the improvements are removed. Alternatively, the Permittee, with the City's prior written consent, may quitclaim all fixtures, equipment, and improvements on the Premises to the City. Notwithstanding any other provision of this Permit as permitted by California Public Resources Code Section 6312, or any successor statute, the parties agree that upon expiration or earlier termination of this Permit the City shall have no liability or obligation to pay compensation for any improvements made to the Premises. (10) Inspection: Upon seventy -two (72) hours notice, the City may enter the Premises, and all improvements thereon, including a right of reasonable access to the Premises across the Permittee's owned or occupied lands adjacent to the Premises, to inspect the Premises for compliance with the terms of this Permit. (11) Indemnification: To the fullest extent permitted by law, Permittee shall indemnify, defend (with counsel selected by the City) and hold harmless the City, its elected officials, officers, employees, agents, attorneys, volunteers and representatives from and against any and all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses of every kind and nature whatsoever (individually, a "Claim" or collectively, "Claims "), which may arise from or in any manner relate (directly or indirectly) to this Permit including, but not limited to, Permittee's occupancy and use, or Permittee's guests, invitees, sublessees, or licensees occupancy and use, of the Premises, or improvements including, but not limited to, any use involving petroleum based products, hazardous materials, hazardous waste and /or other hazardous substances as defined by City, County, State or Federal laws and regulations. The Permittee's obligations in this section shall not extend to the degree any Claim is proximately caused by the sole negligence or willful misconduct of the City, subject to any immunities which may apply to the City with respect to such Claims. This indemnification provision and any other indemnification provided 2 elsewhere in this Permit shall survive the termination of this Permit and shall survive for the entire time that any third party can make a Claim. (12) Insurance: The Permittee shall maintain insurance for the Premises during the term of this Permit, issued by a company authorized to transact business in California with a rating of A- (or higher) and Financial Size Category Class VII (or larger), in at least the following amounts provided in Attachment 3, which is incorporated by this reference. (13) No Damages: The Permittee acknowledges the City would not have issued this Permit if it were to be liable for damages under, or relating to, this Permit. The parties agree that declaratory relief, injunctive relief, mandate and specific performance shall be the Permittee's sole and exclusive judicial remedies. (14) Uplands Support: The location of the parking spaces serving the Premises as required by NBMC Section 20.40.040, or any successor statute, shall be depicted on Attachment 2. 3 Attachment 9 Description of Premises 0 Attachment 2 Depiction of Premo ses & Uplands Support Attachment 3 Insurance Attachment C RESOLUTION NO. 2012 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH SETTING RENT FOR COMMERCIAL USES LOCATED UPON TIDELANDS WHEREAS, pursuant to the 1978 Beacon Bay Bill, as amended, ( "Beacon Bay Bill ") the City of Newport Beach ( "City ") acts on behalf of the State of California as the trustee of Tidelands located within the City's limits, including Newport Harbor; WHEREAS, Section 1(b) of the Beacon Bay Bill authorizes the City to allow third - parties to use the Tidelands for commercial purposes for a term not to exceed fifty (50) years; WHEREAS, the City allows commercial Tidelands uses to operate upon the Tidelands under either a permit or a lease; WHEREAS, the Beacon Bay Bill, California Constitution Article 16, Section 6, Newport Beach Municipal Code ( "NBMC ") Section 17.60.060(D), NBMC Section 17.60.020(E), and City Council Policy F -7(D) require the City to receive fair market value Rent from third parties using the Tidelands; WHEREAS, NBMC Section 17.060.060(D) vests the City Council with the exclusive discretion to determine fair market value Rent based upon the findings of a City - selected appraiser; WHEREAS, an appraisal report by Rasmuson Appraisal Services, and an appraisal report by Netzer & Associates, were prepared and delivered to the City and have been reviewed and considered by the City Council, which reports are part of the record for this matter; WHEREAS, the Council Ad Hoc Committee on Harbor Charges ( "Committee ") and members of the Committee held public outreach meetings with commercial Tidelands users to solicit their input and participation in the Tidelands review process and these meetings afforded the public the opportunity to comment on this matter as well as provided the public information relating to this matter; WHEREAS, the City Council has considered all documents and comments in the record in connection with this resolution; -1- WHEREAS, all previous resolutions and actions regarding the fair market rent for commercial Tidelands uses that are in conflict with the Rent established by the City Council in this resolution are hereby repealed. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: The Recitals provided above are true and correct and are incorporated into the substantive portion of this resolution. Section 2: The City Council finds pursuant to NBMC Section 17.60.060(D), that the Rent provisions contained in the attached Commercial Tidelands Rent Calculations, which is incorporated by reference, provide for the charging of fair market value Rent and that the rental rate (and adjustments) in the attachment constitute fair market value Rent for commercial Tidelands uses, which findings are made by the City Council in its exclusive discretion but are based on the information in the appraisals of its City - selected appraisers and, in addition, on other testimony and documents in the record for this matter. The City Council further finds and determines the Rent for commercial Tidelands uses located upon City managed Tidelands, operating under an annual permit or a lease, shall be set in accordance with the attached Commercial Tidelands Rent Calculations. Section 3: The Rent charged under this resolution for Shipyards and complimentary guest slips, not associated with a restaurant, is for less than fair market value. The City Council specifically finds that the charging of less than fair market value Rent for these uses promotes public recreation facilities and marine services to the general public and furthers the policies and objectives of the Tidelands Grant. Charging less than fair market value Rent for these uses allows for continued operation and improved accessibility to the public. Thus, the charging of less than fair market value Rent for these uses of the Tidelands is a matter of state -wide concern that benefits the citizens of the State of California. Pursuant to City Council Policy F- 7(E)(6), the City Council further finds that the charging of less than fair market value Rent promotes the goals of the City to further marine related services and activities. Section 4: The City Council finds the setting of Rent for commercial Tidelands uses is not subject to the California Environmental Quality Act ( "CEQA ") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. Alternatively, the City Council finds the setting of Rent for commercial Tidelands uses is entitled to a Class 1 Categorical Exemption pursuant to CEQA Regulation Section 15301 because the Rent contemplates the continued use of existing facilities, with no expansion of the proposed -2- use. Further, the City Council finds the setting of Rent for commercial Tidelands uses is entitled to a Statutory Exemption pursuant to CEQA Regulation Section 15273(a)(1) because the fair market value Rent established by the City Council will be used to meet operating expenses within the Tidelands. Section 5: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses and phrases be declared unconstitutional. Section 6: This resolution shall take effect immediately upon its adoption by the City Council and the City Clerk shall certify the vote adopting the resolution. ADOPTED this day of 2012. Nancy Gardner, Mayor ATTEST: Leilani I. Brown, City Clerk Attachment: Commercial Tidelands Rent Calculations -3- Commercial Tidelands Rent Calculations Commercial Tidelands Uses (1) Fuel Docks shall pay as fair market rent the greater of Base Rent at Fifty Cents ($0.50) per square foot of the Premises, as adjusted pursuant to this resolution, or One and One Half Cents ($0.015) per gallon of fuel pumped and sold annually for every gallon up to and including One Hundred Thousand Gallons (100,000) or Two Cents ($0.02) per gallon for every gallon of fuel pumped and sold annually over One Hundred Thousand and Gallons (100,000). (2) Shipyards shall pay as Base Rent Fifty Cents ($0.50) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. (3) Home Owners' Associations ( "HOA ") which provide slips for the exclusive use of its members, shall pay as fair market Base Rent One Dollar and Two Cents ($1.02) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. In the event an HOA rents slips to non - members, depending upon the size of the Premises, the HOA shall pay fair market Rent for those slips equal to the "Large Commercial Marina Rent" or "Large Commercial Marina Rent Alternative" as established by Resolution No. 2012 -92, or any successor resolution, or the Small Commercial Marina Rent established by this resolution. Depending upon the Rent applicable to, or selected by, a HOA, the HOA shall be subject to all of the applicable terms accompanying the Rent (e.g., audit, etc.). (4) Yacht Clubs shall pay as fair market Base Rent the "Large Commercial Marina Rent" or "Large Commercial Marina Rent Alternative" as established by Resolution No. 2012 -92, or any successor resolution. Depending upon a Yacht Club's Rent selection, the Yacht Club shall be subject to all of the applicable terms accompanying the selected Rent (e.g., audit, etc.). Yacht Clubs shall pay as fair market Rent for complimentary Guest Slips Fifty Cents ($0.50) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. (5) Small Commercial Marinas shall pay as fair market rent for use of the Premises, seventy -five percent (75 %) of the "Large Commercial Marina Rent" or "Large Commercial Marina Rent Alternative" as established by Resolution No. 2012 -92, or any successor resolution. If a Small Commercial Marina elects to pay rent according to the "Large Commercial Marina Rent Alternative" methodology, the Base Rent provided in Resolution No. 2012 -92 shall be applicable to the Small Commercial Q Marina without any reduction in square footage costs. Depending upon a Small Commercial Marina's Rent selection, the Small Commercial Marina shall be subject to all of the applicable terms accompanying the selected Rent (e.g., audit, etc.). (6) Unless otherwise provided in this resolution, a commercial Tidelands use which provides complimentary (free of charge) public access slips to the general public shall be exempt from the payment of Rent to the City for use of the Premises occupied by the complimentary public access slips. (7) A Vessel Rental Facility shall pay as fair market Base Rent One Dollar and Two Cents ($1.02) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. (8) A Sport Fishing Charter business shall pay as fair market Base Rent One Dollar and Two Cents ($1.02) per square foot of the Premises, as phased in and adjusted pursuant to this resolution.. (9) Restaurants shall pay a fair market Base Rent for its Guest Slips at the rate of One Dollar and Two Cents ($1.02) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. (10) A Vessel Charter Business shall pay as fair market Base Rent One Dollar and Two Cents ($1.02) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. (11) Any commercial Tidelands use not covered by this resolution, or another resolution, shall pay as fair market Base Rent One Dollar and Two Cents ($1.02) per square foot of the Premises, as phased in and adjusted pursuant to this resolution. (12) To the extent a Premise contains two (2) or more commercial Tidelands uses, the Rent shall be apportioned according to the use and the Premises occupied by the use (i.e., if half (1/2) of a Premises is operated as a Vessel Rental Facility and the other half (1/2) as a Small Commercial Marina the half (1/2) of the Premises used as a Vessel Rental Facility shall pay the applicable Vessel Rental Facility rent and the half (1/2) operated as a Small Commercial Marina shall pay the applicable Small Commercial Marina rent). Periodic Adjustments of Base Rent And Phase In Base Rent for commercial Tidelands uses provided by this resolution, shall be phased in and adjusted pursuant to the Marina Index provided in Resolution No. 2012- -5- 92, or any successor resolution. For illustrative purposes, the Base Rent phase in and adjustment shall be as follows: Fifty Cent ($0.50) Base Rent Phase In Table and Adjustment One Dollar and Two Cent ($1.02) Base Rent Phase In Table and Adjustment r, ,p isdin P 112- 2on ImA 3pis 6 t6l 7 P• ppt F $ 0.36 $ 0.36 ,� 50 $ 0.51 S 0.52 $ 0.51 -:1612 0.55 2014 201�� a"£flzsv? _ Assumed Rental Rate $ 0.50 mr$„`+05 $ 0.51 $ 0.52 $ 0.51 $ 0.56 $ 0.81 0.55 $ Previous Year's Rent �., �0' -36 $ 0.50 $ 0.51 $ 0.52 Assumed Rental Rate OS4 $ No Change n ,,..;,. 5:102 1� $ 0.01 $ 0.01 $ (0.01) $ 1.05 TApprmsal 0.02 $ 1.09 ... - Difference (A) Increase for Year AA/e) in 2013 Q. 4�r $ 0.01 $ 0.01 $ (0.01) $ 0.35 0.02 $ 0.81 $ - Phased -In at 2014 earborwiFully $ 1.09 Previous Years Rent This example illustrates that the Assumed Rental Rate can change every year- up $ Notes; or down. Phased -in by 2014 in this illustration. $ 0.24 $ (0.01) $ 0.05 One Dollar and Two Cent ($1.02) Base Rent Phase In Table and Adjustment H. F ppt F -:1612 2613 2014 201�� P $ 0.36 $ 0.36 $ 0.56 $ 0.81 $ 1.05 $ 1.04 $ 1.09 $ 1.13 Assumed Rental Rate $ .1.02 $ 1.02 $ 1.04 $ 1.05 $ 1.04 $ 1.09 $ 1.13 $ 0.35 $ 0.56 $ 0.81 $ 1.05 $ 1.04 $ 1.09 Previous Years Rent ...... _.. _....... Difference (A) No Change In 2013 $ 0.66 $ 0.48 $ 0.24 $ (0.01) $ 0.05 $ 0.03 .$ 0.20 $ 0.25 $ 0.24 $ (0.01) $ 0.05 $ 0.03 Increase for Year(A1B) Fully Phased in at 2016 Rarborwide Appraisal after 3 1 -2018 { Noses: This example illustrates that the Assumed Rental Rate can change every year- up or down. Phased -in by 2016 in this Illustration. J1 I H. Definitions Unless otherwise provided, the terms provided in the Newport Beach Municipal Code ( "NBMC ") shall apply to this resolution. The singular of any term also includes the plural. (1) Base Rent and Rent, unless otherwise provided, means the annual fair market rent charged on a square footage basis for the use of the Premises. (2) Fuel Dock means a facility that provides fuel (e.g., gasoline; diesel, oil, etc.) to vessels. (3) Guest Slip means a "slip ", as defined in NBMC Section 17.01.030(0)(8), or any successor statute, that is provided, with or without charge, for the use of the patrons while visiting the business. (4) Home Owners' Association ( "HOX) means an organization of homeowners of a particular residential subdivision, condominium or planned unit development. (5) Premises means those Tidelands which are subject to the applicable permit/lease and are more particularly described and depicted in the applicable permit/lease, excluding any Private Waterways and improvements. (6) Private Waterways means privately owned submerged lands. (7) Shipyards means "marine sales and services, uses and vessels" as defined in NBMC Section 17.01.030(J)(5), or any successor statute. (8) Small Commercial Marina(s) means a "marina" as defined in NBMC Section 17.01.030(J)(3), or any successor statute, which occupies less than fifteen thousand square feet (15,000 sf) of Tidelands and Private Waterways. (9) Sport Fishing Charter means a business that charters vessels for use by seven (7) or more persons to sport fish outside of Newport Harbor. (10) Tidelands means certain tidelands and submerged land (whether filled or unfilled), located in the City of Newport Beach, County of Orange, State of California granted to the City of Newport Beach, as trustee, by the State of California, pursuant to the Tidelands Grant. -7- (11) Tidelands Grant means uncodified legislation related to the State of California's grant of certain rights in the Tidelands to the City of Newport Beach, including, without limitation, the Beacon Bay Bill (Chapter 74 of the Statutes of 1978, as amended [citations omitted]). (12) Vessel Charter Business is a business that provides a vessel (including professional captain and crew) which has been hired or leased by the owner, directly or through an authorized representative, to any person for a voyage in exchange for the payment of money, the receipt of something of value, or the forgiveness of a debt. (13) Vessel Rental Facility(ies) means a person that rents or leases vessels to another person for a period of less than twenty -four (24) consecutive hours in exchange for the payment of money, the receipt of something of value, or the forgiveness of a debt. (14) Yacht Club(s) means an organization operating from a fixed location, comprised of a private membership, and principally engaged to promote, coordinate or facilitate boating and yachting. Attachment D Final Committee Recommendations B 0 B sG r .: No change following New harbarwide a ppralsais When Lg Commercial Marina rent Shipyards $D.50 /SF Phase -in reaches $0.50 /SF,this rent workshop p ight after 3 -i -2018 is fully phased-in. $0.50 /SF min rent offset by 1.5 No change following New harborwide appraisals No change to rent in 2013, but Fuel Docks cents /galion to 100K, then workshop right after 3 -1 -2018 goes toper ga l Ion charge in 2014. cents(gallon abom 100K $0.50 /SFfor non- rented When Lg Commercial Marina rent slips, guest access, New harborwide appraisals phase -in reaches $0.5o/SF(and Yacht Clubs $1.02 1SFfor non - rented slips educational uses. right after 3 -1 -2018 $1.68 /SF for rented slips), this rent is Lg Commercial Index Rate for fully Phased -in. rented slip SF No change following New harborwide appraisals When Lg Commercial Marina rent Daily Rental Boats $1.02 /SF workshop right after 3-1 -2016 phase -in reaches $1.021SF, this rent Is fully phased -in. $1..02/5F for member - rented SID2 /SF far member- rented slips, Marina Index Ismail or New harborwide appraisals When Lg Commercial Marina rent HCAS slips large) slips rented to right after 3.1 -20£8 phase-in reaches$1.02ISF, this rem public is fully phased-in- Guest Slips for $1.02 /SF for non - rented slips; No change following New harborwide appraisals When Lg Commercial Marina rent Restaurants Marina Index (small or large) for Marina right after 31 -2018 phase -in reaches $102 /SF, this rent market - rented slips is fully haled -in. S ortfishin Charters p g No change g g New hartrartvidea appraisals When Lg Commercial Marina rent C6 +passengerst $SA2fSF workshop right after 3 -1 -2018 $IA2JSF, this rent pfully preaches is fully phased-m- Large Large Commercial marina Gross cr $I -68/SF of New harborwide appraisals No Change in 2613, then steps up to Large Charter Boats index rate tidelands used (could be right after 3-1-2018 full indexed rate b March 1., 2018. y y Small CM rate if <15,000 SF). Small Commercial Marina= Small Commercial Marina ='- 25,000 SF. of Total 3,W0 SF of Total Waterways Waterways. Small Commercial New harborwide appraisals No Change in 2013, then steps upto Marinas 75% of Lg Commercial right after 3-1 -2018 fully indexed rate by March 1, 2016. 75 %of Large Cammar<iai Marina Marina index fate (now index rate or 185% of gross slip $1.68 /SF)or 16% of gross reuenue with $1.45151' Min Rent (min$1.28 /5FOftidelands used] Large Commercial 18.5% of Gross or$1.97 /SFof 16 %of Gross or index Race New harborwide appraisals No Changem 2013, then steps upto Marinas tidelands used ($1.68JSF Of tidelands used) right after 3 -? -2016 fully indexed rate by March 1, 2018. A A 4/ t� .1 f ��t 41 1 I `M lPff i i • • • • a • a • • s • Y` 'Y • • { { r III i ,0i • I_ t%�� �. - W� VI P • ii ' i r �._._.._ aft 4•j rvf. �i �..t mot• `1 •Y t• r f� UTZ i Vf '•i 0 I . � •� r �r I Y " I Y Y • r Y •y r {s k •Y 4 T• � ;1 as i •' OR- Rl A-- q y, �� 4 1. i4r- 0 O LL N w Sf � 6 tll � W A Q L N m > U C } e � f0 y O E ai CL }a N 471 W O 40 N VI {i'Y pq V N C? i5 8 N CJ t 7 y z N 4' � p W LO cn 0) C) 0) (n 05 f1) C C> C'i 6 d 6 d 6 to V), vi V). -L s yr to u? 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"._.- �' __ ;',, .. r. ,. __ -;- �,. _ _ _ a �. - +, l i!i _ �__. 1' F171 Ef T4 c w y�i ^d� i t SM 4 t�j{pyf fi '!I U4iewI.J' 8`1 f- ,^ -iY['A i f .Y• R �Y ✓3 ga a jq } o Y 1A Y it L. 4�� '>:„ -i• tits( t+« Y. _ 4 Y1 C� ��J Y } �, •. µ1 4 M1 . � y p k (4 Z f { t tvy �� '� g'Yt e+�k�4 4 G t �`fYti x� i x•�y fiY aNY. aye •� v Ytj � \�F• � 11 ;� F171 Ef T4 c w y�i ^d� i t SM 4 t�j{pyf fi '!I U4iewI.J' 8`1 f- ,^ -iY['A i f .Y• R �Y ✓3 ga a i- �! �% �, ._- �i �! 'i ,. ��� 1 �'. ;,y -, •� (. Xd�l 4i 33y O Oe �ie a E O E i O® pqg� W O� N ,N VI D OeY, £R C ft� 114 }i 4 / \ CN C ® O •.'fi3 V V ® ® LO 99 AL � li VV' •i ® 0 clq W p 1I \ \ pL d �• 4— �. ® � U a .. ® LO a�® 40 `b N 0. a� 0 V) 77 ® El Xd�l 4i 33y O Oe �ie a E O E i O® pqg� W O� N ,N VI D 'j A a "a'y3? �+ t I� #M I C7 ry 1 i1) i. ION V f ' r FeW I x u ") r — �h �I `v I� 1 v I l �� N 111-2-1 0 ® o At I ` V 1� I f'. L— r. tl n V+'3 4 �E U P AM, ■ AW Mill ( U ,\OW mill, x 1-1 (f _ 16 4� it FS 0 o� V 1— .= o� E E VI O ♦�A �vAI VI N c D M 1 Rf r ' a 1��� I Elm r }} "RECEIVED AFTER AGENDA r Rf!M i ED" -.--�� / / /57 5- OTHEFRCOMMERCIA HARBOR USES i Other Uses — Proposed Recommendation C Workshop Changes from 10-31-12 Initial Proposal • _ • _ e _ Period (October 1 s General No change following New harborvide appraisals When Lg Commercial Marina rent Shipyards $0.50 /SF - vaorkshpp right after 3 -1 -2018 phase -in reaches $0.50 /SF, this rent is fully phased -in. $0.50 /SF min rent offset by 1.5 No change following New harbonvide appraisals No change to rent in 2013, but Fuel Docks cents /gallon to 100K, then 2 cents /gallon above 100K workshop right after 3 -1 -2018 goes to per gallon charge in 2014. $0.50 /SF for non - rented When Lg Commercial Marina rent Yacht Clubs $1.02/SF for non - rented slips slips, guest access, educational uses. New harbcroJide appraisals phase -in reaches $0.50/SF (and right after 3 -1 -2018 g for rented slips), this rent is Lg Commercial Index Rate for fully phased -in. fuIIV ph a rented slip SF Other Uses — Proposed Recommendation M Changes from 10-31-12 Workshop Initial Proposal Type of Use Phase-In Period (October General No change following New harborwide appraisals When Lg Commercial Marina rent Daily Rental Boats $1.02 /SF workshop right after 3 -1 -2618 phase -in reaches $1.02 /SF, this rent is fully phased -in. $1.02 /SF for member- rented $1.02 /SF for member - rented slips; Marina Index (small or NeLV harbarwide appraisals When Lg Commercial Marina rent HOAs slips � large) 'or slips rented to right after 3 -1 -2018 phase -in reaches $1.02J5F, this rent public is fully phased -in. Guest Sli s for Slips $1 -02 /SF for non - rented slips; No change following g g New harbonvide a appraisals When Lg Commercial Marina rent Restaurants Marina Index small or large) for (small � workshop right after 3 -1 -2015 Phase -in reaches $1.02/SF, this rent market - rented slips I is fully phased -in. Sportfishing Charters No change following New harborvride appraisals When Lg Commercial Marina rent $1.02/SF phase -in reaches $1.02 /SF,this rent (Frt passengers) workshop right after 3 -1 -2018 is fully phased -in. Other Uses — Proposed Recommendation Changes .. Proposal Initial Type of Use I i Phase-in Period (Octo General Large Commercial marina New harborwide appraisals when lg Commercial Marina rent Large Charter Boats index rate $102/SF right after 3 -1 -2018 phase -in reaches $1.02 /SF,.this rent is fully phased-in- Small Commercial Marina = Small Commercial Marina = < < 15,060 SF of Tota I 3,000 SF of Total 4Vaterarays Waterways Small Commercial New harborwide appraisals No Change in 2013, then steps up to Marinas 7 Commercial right after 3 -1 -2018 fully indexed rate by March 1, 2018. 751 of Large Commercial Marna marina Index rate (no�ai Mariri index .rate or 18.546 of gress slip $i.68 /SF) or 16% of gross revenue with $1.45/SF Min Rent (min $1.26 /SF of tidelands used) Large Commercial 18.5% of Gross or $1.97 /SF of 16% of Gross or Index. Rate New harborwide appraisals No Change in 2013, then steps up to Marinas tidelands used ($1.68 /SF oftideiands used) right after 3 -1 -2018 fully indexed rate by March 1, 2018. M What the Appraisals Said Type of Use Yacht Clubs % Rent 17% of GSR Base Rent by SF $ 1.40 % Rent 20% of GSR Base Rent by SF $ 0.55 Notes GSR = Gross Slip Revenue, base rent by SF /Year Fuel Docks N/A $ 1.05 See Notes $ 0.99 Either $0.99/Sr /Year or $0.015 /gallon forthe first 100,000 gallons then $0.02 /gallon in excess of 100,000 gallons (whichever is higher) "Short- Term" uses (90 days or less) N/A N/A 4% of GSR $ 0.99 Netzer's term for a variety of uses. Shipyards N/A $ 1.05 4% of GSR $ 0.99 Charters N/A $ 1.05 4% of GSR $ 0.99 Rental Boat Users N/A $ 1.05 4% of GSR $ 0.99 Restaurants /Guest Slips N/A $ 1.05 4% of GSR $ 0.99 HOAs 17% of GSR $ 1.40 NIA $ 0.99 Important: Examples based on early assumptions of uses as well as square footages of uses — subject to refonement1dialogueo Newport Bay Management — Larson's Current Rent = $20330 Propose! Rent - $7,314 . , - e 4• p�Y C Ott � r 2��3 r , �" s. I % � r f k n ae w+ e Commercial plal FP2Imit5 fv•Bulkhead "Pierhedd Lines Newport Bay Management © City Tidelands (Bulkhead - Pierhead) y l�` J City Tidelands (Bdyu•drd of Pie(head fine) Larson s 1 d� s Explor®cean Current Rent = Proposed Rent ••0 $231180* * may be lower if more space dedicated to educational uses 1�1 h ti l' /0 X R � a- r 1J� V_ DQ �y L,-:�V/ A007 M Newport Landing Current Rent = $3,276 Proposed Rent = $3, 039010 Newport Harbor Yacht Club Current Rent = $15,075 Proposed Rent = $46,181 VMA Mariner's Mile Current Rent = $3,636 Proposed Rent = $22,665 Rents, Appraisals, Pricing About Gas Dock Rents 13 $0.99/SF base rent against $0.01 5/gallon <I OOK, then $0.02/gallon >I OOKO o $1.05 /SF base rent w/n® per gallon pricing ■ $0.50/SF base a i against $0.01 5 1gg a I I o n I (,; O K __ About Gas Dock Rents (Netter) FUEL DOCK RENTAL SURVEY JULY /AUGUST 2012 Upland Lease Data No.. Lease Location Date if High Seas Fuel Dock 1995 San Diego Adj. 200 2/ Pearson Marine Fuel San Diego 3/ Oceanside Harbor Fuel Dock Oceanside 4/ Dana Point Fuel Dock Dana Point 5/ McComvx 2003 Santa Barbara 6/ Del Rey Fuels 2006 Marina del Rey 7/ Mariner's Point 2010 Huntington Harbor Tideland Use T3W (Sq.Ft.) U: 13.800 Fuel Dock Base + 5 T: 33,075 & Sales Fixed 1994 U: 4,000 Fuel Dock Base + Adj. 2004 T: 31900 1 1 Fixed 1989 U: 5,658 Fuel Dock Base + Adj. 2005 T: N.Av. + Mini Percent Mart 1995 U: 22.000 Fuel Dock Base + Adj. 2008 T: 18,000 Percent Base Rent Total Rent S /Sq.Ft. $0.23 $1.49 $0.623 $1.21 combined Not Disclosed $1.77 $4.28 Percent Rent. or S /gallon D: 50.0075 /Gal. G: $0.04 /Gal. D: $0.0075 /Gal. G: $0.04/Gal. D: 3.0% G: 3.0% D: 6.0 %* G: 6.0 %* U: N. Av. Fuel Dock Base + $28.500 D: $0.04 /Gal. T: 1,344 Fixed N.Av. G $0.04 /Gal. U: 14.769 Fuel Dock Base + $2.03 6.0% T: 52,989 Percent N.Av. (all firels) T:7,500 Fuel Dock Base+ Fixed $1.19 50.015 /Gal. to N.Av. 100,000 Gals. $0.02 /Gal. over 100.000 Gals. Gas Dock Pricing i-----Lo-c-a-tio-n-----]F-G-a-s-orin-e----�1 San Diego $ 5.15 - Deisell -- -1 N/A San Diego N/A $5.45 - $430 Oceanside Harbor $ 5.29 $ 4.99 Dana Point $ 4.97 $ 4.59 San Pedro (Jankovich) $ 4.46 $ 3.90 Island Marine Fuel (NH) $ 4,58 $ 3.88 Hill's Boat Service (NH) $ 4.64 $ 3.91 PetroSea (NH) $4.19 - $4.29 $3.69 - $3.82 Alamitos Bay Marina $ 4.69 $ 4.46 Mariner's Point (HH) $ 5.60 $ 4.45 ❑ Generally pricing reflects today's date (1 1 /13/12), with some exceptions. ❑ Data gathered by phone and via marinefuel.com ❑ Range indicates known volume discounting. Others may have volume discounting as well, but securing that information can be difficult. ❑ Gasoline grade is generally Premium, but can be 87 grade. Summary o Large Cornmercia� Marina rent; Go from 8 , 1 rte' 16.0% of Gross _1 p Revenue a Flat in 2013, I en phase-in ' o 2018 New a r b o ' d appraisal I, ' i March 2018 for 0 + rep 1 Recommended a c o n today o L ! W change 1 0 2 1 r 2 Council resolutions. o Other r e ` ' t a rates as proposed t o d a y J phase-ins i 0 For Large Commercial Marinas Rent and Phase -In -Oct 23, 2012 $ 0.361 $ 0.3151 $ 0.36 1 $ 0.63 1 $ 0.90 1 $ 1.19 1 $ 1.46 1 $ 1.78 1 $ 2.171 $ 2.22 Assumed Index Rate $ 1.97 $ 2.01 $ _ 2.03 $ 2.01 $ 2.11 $ 2.17 $ 2.22 $ 036 $ 0.63 $ 0.90 $ 1.19 $ 1.46 $ 1.78 N /A -At Full Index Rate Previous Year's Rent Difference (A) Periods Remaining (B) No Change duringthis year No Change during this year $ 1.61 $ 1.38 $ 1.12 $ 0.82 $ 0.65 $ 0.39 6 5 4 3 2 1 $ 0.27 $ 0.28 $ 0.28 $ 0.27 $ 0.32 $ 0.39 Increase for Year (A /B) Italicized text denotes assumptions. Assumed scenario for Target Marina Index rate 2015 -2020 suggests Note: increases some years, decreases others. Rent and Phase -In —Nov 13, 2012 0.361 $ 0.361$ 0.561$ 0.81 1$ 1.091$ 1.391$ 1.721$ 1.68 Assumed Index Rate $ 1.681 $ 1.71 $ 1.75 $ Previous Year's Rent $ 0.36 $ 0.56 $ - Difference (A) No change in 2013 $ 1.35 $ 1.19 $ Increase for Year (A/B) $ 0.20 $ 0.25 $ 1.77 $ 1.72 $ 1.72 $ 1.68 0.81 $ 1.09 $ 1.39 $ 1.72 0.96 $ 0.63 $ 0.33 $ (0.04) 0.28 $ 0.30 $ 0.33 $ (0.04) Harbonvide Appraisal after 3 -1 -2018 The Marina index suggests that 16% of Gross in 2012 = $1.68 /SF. This example assumes the FMV appraisal in 2018 = 17% of Gross Slip Revenue (Index value today Notes: ` $1.79/SF). Actual answer effective 3 -1 -19 will be based on the appraisal process. This example illustrates that the Assumed Index Rate can change every year- up or down. Comparing Alternatives zou T :,. IF ,. :, i, 112019 11 zon-1--2oz, 0.36 7.33 s` 0.63 0.90 L13 ME j 1.78 2.17 2.22 V.A.P a NAR j n Ely 0.36 x].53 0.81 1.09 �r L33 1.72 Appraisal charge in C10P�21n aC? (NkRI Carina marina index index 0.20 5 0. 12, $ 0.19 $ 7.27 $ 0.26 Unk.rlo wn Unknown Ur;,4:nowr; Brown, Leilani From: Harp, Aaron S -nt: Monday, November 05, 2012 7:12 AM Brown, Leilani t c: Torres, Michael Subject: FW: Windward Sailing Club Pier Permit From: Henn, Michael [ mailto :mhenn(aOnewoortbeachca.gov Sent: Sunday, November 04, 2012 10:26 AM To: windwardsa(cbaol.com Subject: RE: Windward Sailing Club Pier Permit Thanks for your thoughts Larry. I will make sure the sub - committee gives consideration to points. Mike From: windwardsaCabaol.com [windwardsa @aol.com] Sent: Sunday, November 04, 2012 9:39 AM To: Henn, Michael Subject: Windward Sailing Club Pier Permit Sir, My name is Larry Morgan, I own Windward Sailing Club here in Newport Beach. I have attended the last 4 city council meetings and the last workshop on Oct 31. I'm a small business owner in Newport, a small guy compared to the other business owners at the meetings so I really just listen observe. I want to say that I do believe that you are at least trying to understand the "Unintended Consequences" and work v.... the business owners, a few of the other council members not so much. You said at the last workshop to email you, that you read them all, so I hope I don't get too "long winded ", get it a sailor long winded.... When I took over Windward Sailing in 2001 there were 5 Sailing Clubs in the harbor. The city liked the sailing clubs because they were an "Entry Level" for people all over Southern California into Newport Bay. You didn't have to be wealthy to own a boat and come down to the harbor and go sailing. While they were here of course they would go to the restaurants, go shopping, pay for parking and just spend money here, win win. The city always wanted it to be a working harbor. By 2005 there were 2 sailing clubs in the harbor, Windward & Lido Sailing Club. In 2007 Lido Sailing fell and I ended up with the only real sailing club in the harbor. I picked up the pieces from Lido Sailing and continued on. By the end of 2007, I'm sure you remember, started the worst economic down turn in our lifetimes. For over 4 years I worked 7 days a week, I used my business line of credit and maxed out my credit cards just to stay afloat! At the end of the summer of 2012 was the first time I could start paying more than the minimum payment on those credit lines. I calculate I can pay off the credit lines in 4 years if things don't change too much. I'm sure I'm not the only business owner that has had to do this and I think that is one of the reasons you guys are getting so much flak about this. As I look at the Proposed Recommendations and try and understand them I think I would be in "Daily Boat Rentals" group? Which would be $1.02 /SF. I lease the property at 3300 via Lido with 10900 sq ft and 2 of the big Lagoons at Lido Village approx 11000 sq ft, total of 21900 sq ft. If my calculations are correct 21900sgft x .36 = $7884, is what I pay now a year: 21900sgft x $1.02 = $22338.00 - $7848.00 = $14490 a year increase, is that a 200% increase? Ouch! Not too mention the increase in fuel dock prices and shipyard increases for us from the Pier Permit raises. I ran always try and raise my rates, but again with the economy not great will I lose more members than it's worth? It seems to `.hat an increase of 100 %, to $0.72sgft, across the board would make more sense and be way easier to implement. Even if it was a short term like 3 or 4 years and then re look at it as the economy gets stronger or weaker. Thank You for your time. Lairy Morgan Windward Sailing Club i� November 1, 2012 Mayor Nancy Gardner And City Council City of Newport Beach 3300 Newport Blvd. Newport Beach, CA 92663 Re: Other Commercial Harbor Uses Dear Mayor Gardner and Council: At the workshop for other commercial harbor uses, I put forth the following points regarding Newport Harbor Yacht Club as to the area proposed to be charged $1.02 /sq ft (27,620 sq ft). We are a non - profit. 2. We derive no income from this area. In fact, we lose money subsidizing our sailing program. 3. Our programs include: a. Youth sailing (200) (A large number of children have non - member parents.) b. High school sailing Corona del Mar Newport Harbor High Regattas involving schools throughout the nation C. Regattas drawing sailors throughout the world who come to Newport Beach to spend money d. College regattas e. Free guest docks for visiting yachtsmen 4. It appears that this category of $1.02 /sq ft includes a number of uses that are for profit. 720 WEST BAY AVENUE, BALBOA, CALIFORNIA 92661 a TELEPHONE (949) 673 -7730 o FAX(949)673-3972 Mayor Nancy Gardner And City Council City of Newport Beach November 1, 2012 Page 2 I would like you to consider the above to adjust our rent to non- profit status for our non -marma space. I would be happy to discuss this further with any of you. Please feel free to contact me at (949) 476 -5226 or rick.robinson@lyonhomes.com. Richard S. Robinson Commodore Newport Harbor Yacht Club 10WOKIR 720 WEST BAY AVENUE, BALBOA, CALIFORNIA 92661 o TELEPHONE (949) 673 -7730 o FAX(949)673-3972