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HomeMy WebLinkAboutPoseidon Resources (Surfside) LLC - 2010-09-07 fiPP,gO Via s-/ 1 (PUs /—,/ZI 6 E- 8 2000 Main Street, p�UNSitiGro Huntington Beach,CA F9 92648 o.__ Q; City of Huntington Beach • o \ OUNTY CP,/ File #: 22-961 MEETING DATE: 11/15/2022 REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Al Zelinka, City Manager VIA: Ursula Luna-Reynosa, Director of Community Development PREPARED BY: Ricky Ramos, Principal Planner Subject: Adopt Resolution No. 2022-77 approving the decertification of Subsequent Environmental Impact Report (SEIR) No. 10-001; rescission of Conditional Use Permit (CUP) No. 02-004, Entitlement Plan Amendment (EPA) No. 10-001, Coastal Development Permit (CDP) No. 10-014, and Tentative Parcel Map (TPM) No. 10-130; and termination of related agreements (Poseidon) Statement of Issue: In May 2022, the California Coastal Commission denied a Coastal Development Permit for the Poseidon Desalination Plant proposed at 21730 Newland Street. This denial effectively prevents the plan's construction and operation in Huntington Beach. As such, City Council is requested to adopt Resolution No. 2022-77,which would rescind local project approvals: decertify SEIR No. 10-001; rescind CUP No. 02-004, EPA No. 10-001, CDP No. 10-014, and TPM No. 10-130; and terminate related agreements for the Poseidon seawater desalination project. Financial Impact: Not applicable. Recommended Action: Approve decertification of SEIR No. 10-001; rescission of CUP No. 02-004, EPA No. 10-001, CDP No. 10-014, and TPM No. 10-130; and termination of related agreements by adopting Resolution No. 2022-77 "A Resolution of the City Council of the City of Huntington Beach Decertifying Final Subsequent Environmental Impact Report No. 10-001 and Repealing Resolution No. 2010-63 and Rescinding all City Entitlement Approvals and Terminating All Agreements (Attachment No. 1)." Alternative Action(s): The City Council may make the following alternative motion(s): Do not approve the recommended action, and direct staff accordingly. This may include not accepting any or all of the recommendations listed above. City of Huntington Beach Page 1 of 2 Printed on 11/10/2022 powered by LegistarTM' File #: 22-961 MEETING DATE: 11/15/2022 Analysis: In May 2022, the California Coastal Commission denied a CDP for the Poseidon Desalination Plant, ending its bid to construct and operate in Huntington Beach. On November 1, 2022, the City Council directed staff to prepare an agenda item to decertify the EIR and withdraw all local approvals issued by the City for the Poseidon project. On November 7, 2022 Poseidon Water submitted a letter requesting termination of all City agreements and permits (see Attachment 2), which include: • SEIR No. 10-001 • Conditional Use Permit No. 02-004 • Entitlement Plan Amendment No. 10-001 • Coastal Development Permit No. 10-014 • Tentative Parcel Map No. 10-130 • Franchise agreement • Owner participation agreement • Exchange agreement and escrow instructions and lease agreement for water storage purposes As such, staff has prepared Resolution No. 2022-77, which will withdraw local approvals for each of the items above, since the subject project is no longer viable on the proposed project site. Environmental Status: The recommended action is not subject to further environmental review because there is no project being approved. Strategic Plan Goal: Financial Sustainability, Public Safety or Other Attachment(s): 1. Resolution No. 2022-77 2. November 7, 2022 Poseidon Water Letter City of Huntington Beach Page 2 of 2 Printed on 11/10/2022 powered by Legistar''' RESOLUTION NO. 2022-77 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH DECERTIFYING FINAL SUBSEQUENT ENVIRONMENTAL IMPACT REPORT NO. 10-001 AND REPEALING RESOLUTION NO. 2010-63 AND RESCINDING ALL CITY ENTITLEMENT APPROVALS AND TERMINATING ALL AGREEMENTS WHEREAS,the City of Huntington Beach("City"),as lead agency,has completed and certified that certain Final Subsequent Environmental Impact Report(SEIR)No. 10-001 for the Poseidon Seawater Desalination project("Project"),which project is more fully described in Final SEIR No. 10-001 which has been assigned State Clearinghouse#2001051092; and WHEREAS, on September 7,2010,the City Council adopted Resolution No. 2010-63,which certified Final SEIR No. 10-001 for the Project;and WHEREAS,on September 7 and September 20,2010,the City Council approved the Project, pursuant to Entitlement Plan Amendment No. 10-001 to Conditional Use Permit No. 02-004, Coastal Development Permit No. 10-014, and Tentative Parcel Map No. 10-013 to permit a 50 million gallons per day seawater desalination project on a 13-acre site and to subdivide three parcels totaling 19.5 acres info four parcels conditioned upon California Coastal Commission approval; and WHEREAS,on September 7,2010, the City Council approved an Amended and Restated Owner Participation Agreement,an Exchange Agreement and Escrow Instructions, and a Pipeline Franchise Agreement with Poseidon Resources(Surfside)LLC; and WHEREAS, in May 2022,the California Coastal Commission denied a Coastal Development Permit for the Project;and WHEREAS,on November 7, 2022, Poseidon Water submitted a letter requesting termination of all approvals,permits and agreements with the City of Huntington Beach(Attached hereto and incorporated herein by this reference). NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington Beach as follows: 1. The Above recitals are incorporated herein. 2. The final SEIR No. 10-001 for the Project is decertified. 3. Resolution No. 2010-63,which certified Final SEIR No. 10-001 for the Project,is repealed. RESOLUTION NO. 2022-77 4. Conditional Use Permit No. 02-004,Entitlement Plan Amendment No. 10-001, Coastal Development Permit No. 10-014, and Tentative Parcel Map No. 10-130 are rescinded. 5. The Amended and Restated Owner Participation Agreement, Exchange Agreement and Escrow Instructions, and Pipeline Franchise Agreement with Poseidon Resources (Surfside) LLC are hereby terminated. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 15th day of - November ,2022. • Mayor REVIE ' ►\ AND API)! ED: INITIATED AND APPROVED: • it' ager Director of Community Development APPROVED AS FORM: City Attorney 11.I.b ATTACHMENTS Exhibit A: November 7, 2022 Poseidon Water Letter of Termination 2 22-12038/95384 EXHIBIT A Resolution No. 2022-77 Exhibit A rei POSEIDON WATER November 7, 2022 VIA EMAIL ONLY City of Huntington Beach Public Works Department 2000 Main Street Huntington Beach, CA Dear City of Huntington Beach: On May 12,2022,the California Coastal Commission voted to deny Poseidon Resources (Surfside) LLC ("Poseidon") the Huntington Beach Desalination Facility's ("Facility") Coastal Development Permit application following a public hearing on the issue. As a result, the Facility will not be constructed, and Poseidon has terminated its interest in the Facility. Poseidon therefore requests termination of the agreements/permits listed below, between Poseidon and the City of Huntington Beach. • SEIR No. 10-001 • Conditional Use Permit No. 02-004 • Entitlement Plan Amendment No. 10-001 • Coastal Development Permit No. 10-014 • Tentative Parcel Map No. 10-130 • Franchise agreement • Owner participation agreement • Exchange agreement and escrow instructions and lease agreement for water storage purposes Poseidon waives the right to any noticing and opportunity to be heard before City Council on the termination of the Franchise Agreement,dated September 7, 2010. Thank you for your attention to this matter. 4. r3uAuJ Keith A. Bukowski Poseidon Water Corporate Controller cc: [Via email only] Ricky Ramos, City of Huntington Beach (rramosAsurfcity-hb.orq) Poseidon Water LLC 5780 Fleet Street,Ste 140,Carlsbad,CA 92008 Phone:(760)655-3900 www.poseidonwater.com Res. No. 2022-77 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, ROBIN ESTANISLAU, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a Regular meeting thereof held on November 15, 2022 by the following vote: AYES: Peterson, Bolton, Delgleize, Moser, Kalmick NOES: Posey ABSENT: Carr RECUSE: None e6htniatu) City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California CITY OF HUNTINGTON BEACH - Interoffice Communication w TO: Honorable Mayor and Members of the City Council VIA: Fred A.Wilson, City Administrator FROM: Travis Hopkins, Director of Public W Stanley Smalewitz, Director of Economic Development55 DATE: September 7, 2010 SUBJECT: Late Communication for Items 4-3, 4-4,4-5 Regarding Poseidon Agreement Additional Language Based upon further review of the Owner Participation Agreement (Agency),Exchange Agreement and Escrow Instructions (City) and the Pipeline Franchise Agreement(City), the City Attorney's Office would like to include the following language for each motion, if the three items are approved by the Redevelopment Agency/City Council. Item 4-3 — Owner Participation Agreement The City Council finds that the Final SEIR serves as adequate and appropriate environmental documentation for approval of the Amended and Restated Owner Participation Agreement. The City Council finds that the unavoidable significant adverse effects of the Project as identified in Section 5.0 of the Statement of Facts and Findings (growth inducement outside of Orange County and short-term construction related impacts in regards to air quality)have been lessened in their severity by the application of standard conditions,the inclusion of Project design features and the imposition of the mitigation measures. The City Council finds that the remaining unavoidable significant impacts are clearly outweighed by the economic, social, and other benefits of the Project, as set forth in the"Statement of Overriding Considerations"included as Section 7.0 of the Statement of Facts and Findings. The City Council adopts the recitation of overriding considerations which justify approval of the Project notwithstanding certain unavoidable significant environmental effects which cannot feasibly be substantially mitigated as set forth in the Statement of Overriding Considerations. '. Item 4-4—Exchange Agreement and Escrow Instructions The City Council finds that the Final SEIR serves as adequate and appropriate environmental documentation for approval of the Exchange Agreement/Escrow Instructions, including the Lease Agreement. The City Council finds that the unavoidable significant adverse effects of �-i� Ca•�m u,,t,�cs►-,7a the Project as identified in Section 5.0 of the Statement of Facts and Findings (growth inducement outside of Orange County and short-term construction related impacts in regards to air quality)have been lessened in their severity by the application of standard conditions, the inclusion of Project design features and the imposition of the mitigation measures. The City Council finds that the remaining unavoidable significant impacts are clearly outweighed by the economic, social, and other benefits of the Project, as set forth in the"Statement of Overriding Considerations" included as Section 7.0 of the Statement of Facts and Findings. The City Council adopts the recitation of overriding considerations which justify approval of the Project notwithstanding certain unavoidable significant environmental effects which cannot feasibly be substantially mitigated as set forth in the Statement of Overriding Considerations. Item 4-5 —Pipeline Franchise Agreement The City Council finds that the Final SEIR serves as adequate and appropriate environmental documentation for approval of the Pipeline Franchise Agreement. The City Council finds that the unavoidable significant adverse effects of the Project as identified in Section 5.0 of the Statement of Facts and Findings (growth inducement outside of Orange County and short- term construction related impacts in regards to air quality)have been lessened in their severity by the application of standard conditions,the inclusion of Project design features and the imposition of the mitigation measures. The City Council finds that the remaining unavoidable significant impacts are clearly outweighed by the economic, social, and other benefits of the Project, as set forth in the "Statement of Overriding Considerations"included as Section 7.0 of the Statement of Facts and Findings. The City Council adopts the recitation of overriding considerations which justify approval of the Project notwithstanding certain unavoidable significant environmental effects which cannot feasibly be substantially mitigated as set forth in the Statement of Overriding Considerations. 1-2 Council/Agency Meeting Held:_ � O Deferred/Continued to: p ove = l]® d tion ly Arov d ��0 en' "City le ' Signau e Council Meeting Date: September 7, 2010 Department ID Number: ED 10-40 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Fred A. Wilson, City Administrator PREPARED BY: Stanley Smalewitz, Director of Economic Development Travis Hopkins, Director of Public Works SUBJECT: Approve an Exchange Agreement and Escrow Instructions between the City of Huntington Beach and Poseidon Resources (Surfside) LLC for properties located south of Edison Avenue and east of Newland Street Statement of Issue: Poseidon Resources (Surfside) LLC (Poseidon) has submitted to the City a request for amendments to the Conditional Use Permit (CUP) and Coastal Development Permit (CDP) regarding construction of on-site facilities for the seawater desalination project. As part of the amendments, Poseidon and the City have proposed an Exchange Agreement/Lease Agreement for separate properties that AES and the City own adjacent to the site. Financial Impact: The City will receive rent for a minimum of two (2) years in the annual amount of $290,025. Poseidon has the option to purchase the City's property for up to seven (7) years after execution of the Agreement. After seven years, the properties would need to be re-appraised to determine fair market value for the purchase. Recommended Action: Motion to: 1. Approve an Exchange Agreement/Lease Agreement and Escrow Instructions between the City of Huntington Beach and Poseidon Resources (Surfside) LLC for properties located south of Edison Avenue and east of Newland Street; and 2. Authorize the Mayor and City Clerk to sign all related documents. Alternative Action(s): Do not approve the Exchange Agreement/Lease Agreement and direct staff accordingly. -489- Item 7. - Page 1 REQUEST FOR COUNCIL ACTION MEETING DATE: 9/7/2010 DEPARTMENT ID NUMBER: ED 10-40 Analysis: The previously approved Poseidon Seawater,Desalination Plant calls for on-site facilities to be constructed on the current AES property adjacent to the power plant (noted in diagram below as Tank site 3 and 4 [APN 114-150-961). Poseidon planned to purchase the properties (sites 3 & 4) from AES to build the on-site facilities. Poseidon has since submitted revisions to the on-site facilities location. In 2004, the City purchased the Tank 2 (APN 114-150-94) parcel for $350,000. The City purchased the parcel in order to construct a future water reservoir for emergency water storage in the Southeast area (Attachment 2 — Current Site Map). The City had plans to remove Tank 2 and construct a water storage tank on the Tank 2 parcel for a total -construction cost of approximately $9,500,000. The current plan has Poseidon removing existing Tanks 3 and 4 and constructing the on-site facilities at those sites and building a water storage tank at the Tank site 1 location. The proposed Exchange Agreement would allow for the construction of the on-site facilities to be reconfigured and located on Tank 2 (City) and Tank 3 (AES) parcels. Tank site 1 would remain a water storage facility. In reviewing the reconfiguration proposed by Poseidon, the City had an appraisal completed for Tank 1 and Tank 2 sites. Based upon the appraisal and the tentative parcel map dedications/easements, the parcels will be similar in size. AES Tank 1 (APN 114-150-95) will be 3.48 acres or 151,588 square feet valued at $3,867,009 and the City Tank 2 site is 4.5 acres 196,020 square feet valued at $3,920,000. The difference in value is due to the AES Tank site 1 being on a corner lot with easier access which has an increased value from the City's inferior parcel. In addition, Poseidon will be required to improve Edison Way including road widening, street lights, a hammerhead turnaround, and landscaping. The Exchange Agreement transfers the parcels referred to as Tank 1 to the City and Tank 2 to Poseidon. As an exhibit to the Exchange Agreement, there is a Lease Agreement which sets forth a minimum of a two year lease of the Tank 1 site to Poseidon, subsequent to the Item 7. - Page 2 -490- REQUEST FOR COUNCIL ACTION MEETING DATE: 9/7/2010 DEPARTMENT ID NUMBER: ED 10-40 financing of the seawater desalination project and Poseidon purchasing the parcels/tank from AES. The lease amount is $24,168 per month or $290,025 annually. After two years, which is the timeframe for construction on the site and obtaining financing for the overall project, Poseidon has the option to purchase Tank 1 from the City. For the first seven years of the Exchange Agreement, the purchase price would be the $3,867,009, after the seventh year, a reappraisal of the land would be required to determine-the sale price. As with previous approvals, Poseidon will build and maintain a 10 million gallon water storage tank which is consistent with the City's Water Master Plan to build a 10 million gallon water storage tank for emergency storage. With the Poseidon water storage tank, the City through the Lease Agreement and Water Purchase Agreement, will have access to the water in case of an emergency; therefore, eliminating the need for the City to build a water storage tank. Environmental Status: The Planning Department is processing all related environmental documents, including the Subsequent EIR. Strateqic Plan Goal: Maintain financial viability and our reserves Attachment(s): Description 1. Exchange Agreement and Escrow Instructions between the City of Huntin ton Beach and Poseidon Resources Surfside LLC 2. Site Ma -491- Item 7. - Page 3 ATTACHMENT # 1 x / EXCHANGE AGREE NT AND ESCROW INS UCTIONS CITY OF ' UNTINGTON BEACH, a municipal co r'oration of the State of California "CITY" P 4 SEIDON RESOURCES (SURFSIDE) LLC, a Delaware limited liability company "Poseidon" f f EXCHANGE AGREEMENT AND ESCROW INSTRUCTIONS' f" THIS EXCHANGE AGREEMENT AND ESCROW ,INSTRUCTIONS ("Agreement"), dated as of September , 2010, is between the CITY OF HUNTINGTON BEACH, a municipal corporation of the State ©f?California ("City"), and POSEIDON RESOURCES (SURFSIDE) LLC, a Delaware.limited liability company ("Poseidon"). This Agreement is entered into with reference,-to the recitals set forth in Article 1 below and constitutes (i) a contract to exchan t real property between the parties, and (ii) escrow instructions to STEWART TITLE COMPANY ("Escrow Holder"),the consent of which appears at the end of thi,g Agreement. ARTICLE 1. REC ALS 1.1 The Exchange Properties City s the owner of the real property referred to herein as the "City Tank Site" consistin of 4.5 acres, located in Huntington Beach, California, which real property is mo particularly described in the applicable Preliminary Report(defined in Article 2 elow, as are other initially capitalized terms not defined when first used). The legal d cription of the City Tank Site is set forth on the attached Exhibit A-1. The City Tani Site includes all right, title and interest of City in such real property, including,withcit limitation, all easements, appurtenances,privileges, rights, profits and preferences, t ether with all intangible rights, warranties, guaranties, contract rights and/or other c ins, permits and licenses, related to, arising out of or benefitting, the real propert comprising the City Tank Site, to the extent of City's interest therein and subje to all of the terms and provisions of this Agreement. Poseidon holds an option purchase the real property referred to herein as the"Poseidon Tank Site" consisting of approximately 3.5 acres, located in Huntington Beach, California, which re property is more particularly described in the applicable Preliminary Report tid also depicted as Parcel 1 on the Tentative Parcel Map attached hereto as Exhibit -2. AES Huntington Beach Development, LLC, ("Poseidon") is the current owner of,,the Poseidon Tank Site. The Poseidon Tank Site includes all right, title and interest off ES in such real property, including, without limitation, all easements, appurtenance; privileges, rights, profits and preferences, together with all intangible rights, warranties, guaranties, contract rights and/or other claims, permits and licenses, related to,/arising out of or benefitting, the real property comprising the Poseidon Tank Site, to ,the extent of Poseidon's interest therein and subject to all of the terms and provisions of this Agreement. The City Tank Site and the Poseidon Tank Site will be collectively referred to herein as the "Exchange Properties." 1.2 Intention of the PartiesThe parties desire to Exchange the Exchange Properties so that the City will be the owner of the Poseidon Tank Site and Poseidon will Abe the owner of the City Tank Site, all subject to the terms and conditions of this Agreement. ARTICLE 2. DEFINITIONS 2.1 Definitions 1 2.2 Unless the context otherwise indicates, whenever used in this Agreement: 2.2.1 "AES"means AES Huntington Beach Development, LLC, a Delawar united liability company. 2.2.2 "Business Day" means Monday through Friday excluding ederal and state holidays. 2.2.3 "City"means the City of Huntington Beach, California. 2.2.4 "Close of Escrow" or "Closing" means the date t Grant Deeds are filed for record with the County Recorder of Orange County, exchan ng the Exchange Properties between City and Poseidon. 2.2.5 "Closing Date" means a date which is ten 1) days following Escrow Holder's receipt of the CUP/CDP Financing Approval Notice; an• notice of AES transfer of interest in property to Poseidon, provided, however, in no event hall the Closing Date occur later than December 31,2020. 2.2.6 "Contingency Date" means the •.to which is sixty (60) days from the full execution of this Agreement, as confirmed by 'tten notice to City and Poseidon from Escrow Holder. 2.2.7 "County"means the County of Orange, California. 2.2.8 "CUP/CDP" means t amended Conditional Use Permit and the amended Coastal Development Permit approv:1 by City as part of Entitlement Plan Amendment 10-001, approving and permitting the const ction and operation of a seawater desalination facility on or adjacent to the City Tank Site an. the Poseidon Tank Site. 2.2.9 "CUP/CDP Financing Approval Notice" means written notice from Poseidon to Escrow Holder, to be sent • Poseidon to Escrow Holder not later than ten (10) Days prior to December 31, 2020, ce ' ying that (i) Poseidon has accepted the CUP/CDP conditions of approval and (ii) Poseid• has obtained all approvals necessary for financing and construction of the seawater desalinati'n facility on or adjacent to the City Tank Site and the Poseidon Tank Site and acquired the Site n fee from AES.. 2.2.10 "Escrow"means the escrow created hereby. 2.2.11 Escrow Holder"means Stewart Title Company. 2.2. "Escrow Opening Date" means the date upon which Escrow Holder has received this Agre ent, originally signed by Poseidon and City. 2.2.13 "Exchange" means an exchange qualifying for nonrecognition of gain uncle- Internal Revenue Code Section 1031 and the applicable provisions of the California Re -nue and Taxation Code. 2 2.2.14 "Exchange Properties" means the City Tank Site and the/r Poseidon Tank Site. 2.2.15 "Existing Option Agreement" means that certain Bi Wended and Restated Second Option Agreement dated as of October 29, 2009, between/AES as "Lease Optioner",AES Huntington Beach, LLC, as "Easement Optionor," and Poseick n as"Optionee". 2.2.16 "General and Special Real Estate Taxes" melans all statutory real property taxes levied against the Exchange Properties evidenced by the secured tax bills issued by the Tax Collector of the County, including, without limitation, under any assessment district or Community Facilities District. rr 2.2.17 "Grant Deed" means a fully execute and acknowledged original grant deed in the form of Exhibit B, conveying the Poseidon Ta Site to the City and the City Tank Site to Poseidon, respectively. 2.2.18 "Hazardous Materials" mea any substance, material or other thing regulated by or pursuant to any federal, state or cal statute or ordinance by reason of its potential for harm to human health or the enviro ent, or because of its flammability, toxicity, reactivity or corrosiveness, including but not li • ted to those substances defined as "hazardous substances", "hazardous materials", or "toxic • bstances" in the Comprehensive Environmental Response, Compensation and Liability Act o'1980, as amended, 42 U.S.C. Section 9601 et seq.; or the Hazardous Materials Transportation ' ct, 49 U.S.C. Section 1801 et seq.; or the Resource Conservation and Recovery Act, 42 U ..C. Section 6901 et seq.; and also including those substances defined as "hazardous was •s" in Section 25117 of the California Health & Safety Code or as "hazardous substances" i9ection 25316 of the California Health & Safety Code; in the regulations adopted and publi tions promulgated pursuant to all such current and future federal and state laws and local dinances; and those chemicals to which reference is made in the Safe Drinking Water and xic Enforcement Act of 1986, Section 25249.5 et seq. of the California Health& Safety Co e. 2.2.19 " ease Agreement for Water Storage Purposes" means the fully executed Lease Agreem:. t between the City and Poseidon for Water Storage Purposes at the Newland Tank Site in e form attached hereto as Exhibit C. The Lease Agreement for Water Storage Purposes, w• ch shall take effect immediately after the Closing, leases the Poseidon Tank Site back to P•seidon for purposes of construction and operation of a water storage facility and ancillary facil' ies. .2.20 "Natural Hazard Disclosure" means the disclosure required to be delivered pur• ant to the Natural Hazard Disclosure Act, California Government Code Sections 8589.3, 858!.4, and 51183.5, and California Public Resources Code Sections 2621.9, 2694, and 4136. 2.2.21 "Official Records" means the Official Records of the County Recorder of the ounty. 2.2.22 "Permitted Exceptions" means those covenants, conditions, eservations, restrictions, easements and other matters that are listed as exceptions to coverage in 3 a pro forma Title Policy approved by Poseidon / City prior to expiration of the"Contingency Date. 2.2.23 "Poseidon" means Poseidon Resources (Surfside) LLC, a Delaware limited liability company. 2.2.24 "Preliminary Report" means the respective preliminary title reports for the Exchange Properties issued by Title Insurer. 2.2.25 "Property Documents" means information, surveys, third party reports and studies and other materials in City's / Poseidon's possession, as applicable, regarding the Exchange Properties, but excluding any information or rriaterials considered proprietary or privileged. 2.2.26 "Title Insurer"means Stewart Title Company. 2.2.27 "Title Policy" means a the respective CLTA owner's policy of title insurance, with liability in the amount of $34867,009.00 insuring that the fee title to the Exchange Properties vests in the City and Poseidon (or its designee) as applicable, subject only to the Permitted Exceptions. At their own election and sole expense, Poseidon or the City may elect that their respective Title Policy be written with ALTA Extended Coverage pursuant to Paragraph 8.2 below. 2.2.28 "Warranties' means each of the matters set forth in Paragraph 12.2 below as pertains to City and each of the matters set forth in Paragraph 12.6 below as pertains to Poseidon. ARTICLE 3. AGREEMENT TO EXCHANGE PROPERTY 3.1 Agreement to Exchange Propertvin consideration of the covenants contained in this Agreement, City an i Poseidon shall Exchange the Exchange Properties so that the City will be the owner of the Poseidon Tank Site and Poseidon will be the owner of the City Tank Site, all upon the terms and subject to the conditions of this Agreement. ARTICLE 4. POSEIDON'S DELIVERIES TO ESCROW HOLDER 4.1 / Deliveries Before Closing DatePoseidon shall (i) convey to City the fee estate to the Pose)fdon Tank Site, together with all other right, title and interest, tangible and intangible, in and`'to the real property comprising the Poseidon Tank Site, free and clear of all encupibrances and matters subject only to the Permitted Exceptions, and (ii) no later than 3:00 p.n}e of the last Business Day before the Closing Date deliver to Escrow Holder each of the following: 4.1.1 Poseidon's Grant Deed. Poseidon's Grant Deed, conveying the Poseidon i Tank Site to City and meeting the requirements of Title Insurer in order to issue the Title Policy 4 to the City with respect to the Poseidon Tank Site, free and clear of all encumbrances other than the Permitted Exceptions. 4.1.2 FIRPTA/Cal-FIRPTA Affidavit. An originally executed affidavit stating in favor of City that Poseidon is not a "foreign person" as defined in the federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act and California Revenue and Taxation Code Sections 18805 and 26131 and otherwise meeting the requirements of such statutes. 4.1.3 Lease Agreement for Water Storage Purposes. The Lease Agreement for Water Storage Purposes, executed by Poseidon and the City which shall take effect immediately after the Closing. 4.1.4 Grant Deed: Posidon shall deliver evidence to the City that an executed grant deed conveying fee interest in the Poseidon Tank Site from AES. 4.4.5 Poseidon's Charges. In cash or by wire transfer,the charges which are payable by Poseidon under Article 9 below. 4.2 Breach The failure of Poseidon to make any delivery described above by the date, or within the time, set forth above shall be a material breach of this Agreement by Poseidon. ARTICLE 5. CITY'S DELIVERIES TO ESCROW HOLDER 5.1 Deliveries Before Closing Date City shall (i) convey to Poseidon the fee estate to the City Tank Site, together with all other right, title and interest, tangible and intangible, in and to the real property comprising the City Tank Site, free and clear of all encumbrances and matters subject only to the Permitted Exceptions, and (ii) no later than 3:00 p.m. of the last Business Day before the Closing Date deliver to Escrow Holder: 5.1.1 City's Grant Deed. City's Grant Deed, conveying the City Tank Site to Poseidon and meeting the requirements of Title Insurer in order to issue the Title Policy to Poseidon with respect to the City Tank Site, free and clear of all encumbrances other than the Permitted Exceptions. 5.1.2 FIRPTA/Cal-FIRPTA Affidavit. An originally executed affidavit stating in favor of Poseidon (or its designee) that City is not a "foreign person" as defined in the federal Foreign Investment in Real Property Tax Act of 1980 and the 1984 Tax Reform Act and California Revenue and Taxation Code Sections 18805 and 26131 and otherwise meeting the requireni`ents of such statutes. 5.1.3 Lease Agreement for Water Storage Purposes. The Lease Agreement for Water Storage Purposes, executed by the City, which shall take effect immediately after the losing. 5 5.1.4 City's Charges. In cash or by wire transfer, the charges which are payable by City under Article 9 below. 5.2 Breach The failure of City to make any delivery described above by the date, or within the time, set forth above shall be a material breach of this Agreement by City. ARTICLE 6. SPECIAL CONDITIONS; TERMINATION; CONSEQUENCES OF FAILURE 6.1 Special Conditions The Close of Escrow is subject to the following special conditions: 6.1.1 Poseidon Approval of Title. Poseidon's approval of the covenants, conditions, reservations, restrictions, easements and other matters described in the Preliminary Report for the City Tank Site. Unless Poseidon delivers written notice of approval of the state of title to Escrow Holder on or before 4:30 p.m. Pacific Time on the Contingency Date, this special condition shall be conclusively deemed to have failed. If Poseidon does approve this condition, all covenants, conditions, reservations, restrictions, easements and other matters listed as exceptions to coverage in the Preliminary Report and approved by Poseidon in writing shall be Permitted Exceptions. Notwithstanding anything in the foregoing to the contrary, in no event will any deeds of trust, mechanic's liens, or lis pendens notices be deemed to be Permitted Exceptions. Nothing in this Paragraph 6.1.1 shall limit or otherwise affect Poseidon's right in its sole and absolute discretion to disapprove the suitability of the City Tank Site pursuant to Paragraph 6.1.2. 6.1.2 Suitability of City Tank Site for Poseidon Uses. Poseidon's approval of the Property Documents, the physical condition, soils and all other aspects of the City Tank Site which Poseidon, in its sole discretion, deems material to Poseidon's decision to acquire the City Tank Site. Unless Poseidon delivers written notice of approval to Escrow Holder on or before 4:30 p.m. Pacific Time on the Contingency Date, this condition shall be conclusively deemed to have failed. 6.1.3 City Approval of Title. City's approval of the covenants, conditions, reservations, restrictions, easements and other matters described in the Preliminary Report for the Poseidon Tank Site. Unless City delivers written notice of approval of the state of title to Escrow Holder on or before 4:30 p.m. Pacific Time on the Contingency Date, this special condition shall be conclusively deemed to have failed. If City does approve this condition, all covenants, conditions, reservations, restrictions, easements and other matters listed as exceptions to coverage in the Preliminary Report and approved by the City in writing shall be Permitted Exceptions. Notwithstanding anything in the foregoing to the contrary, in no event will any deeds of trust, mechanic's liens, or lis pendens notices be deemed to be Permitted Exceptions. Nothing in this Paragraph 6.1.3 shall limit or otherwise affect City's right in its sole and absolute discretion to disapprove the suitability of the Poseidon Tank Site pursuant to Paragraph 6.1.4. 6.1.4. Suitability of Poseidon Tank Site for City Uses. City's approval of the Property Documents, the physical condition, soils and all other aspects of the Poseidon Tank Site which City, in its sole discretion, deems material to City's decision to acquire the Poseidon Tank 6 / Site. Unless City delivers written notice of approval to Escrow Holder on or before 4/30 p.m. Pacific Time on the Contingency Date, this condition shall be conclusively deemed to have failed. 6.1.5 Delivery of the CUP/CDP Financing Approval Notice/Unless Poseidon delivers the CUP/CDP Financing Approval Notice to Escrow Holder on or before December 31, 2020, this special condition shall be conclusively deemed to have failed.,( ity acknowledges, in this regard, that notwithstanding City's approval of the CUP/CDP, Posdon may determine that the CUP/CDP conditions of approval are unacceptable, and that in such event, Poseidon may not send the CUP/CDP Financing Approval Notice and this condition will accordingly fail. 6.1.6 Exercise of Option Under Exiting Opt'cin Agreement. Unless Poseidon exercises its option to purchase Poseidon Tank Site from S (in accordance with the Existing Option Agreement between Poseidon and AES)prior to t Closing Date (as it may be extended pursuant to Paragraph 6.2),this special condition shall bonclusively deemed to have failed and this Agreement shall be void. / 6.2 Extension of Closing Datelf the requirements under Paragraphs 6.1.5 and 6.1.6 above have not been met by the fifth(5th) Bus' ss Day before the then-scheduled Closing Date, Poseidon shall have the right to extend the osing Date for an additional thirty (30) days to satisfy such condition to the Closing, witli an unlimited number of such extensions being permitted; provided, however, in no even shall the Closing Date be extended beyond December 31, 2020. Poseidon shall exercise its a tension option hereunder by written notice to City and Escrow Holder delivered not later tl n three (3) Business Days prior to the then-scheduled Closing Date. 6.3 WaiverThe special'conditions described in Paragraphs 6.1.1 and 6.1.2 are for the benefit of Poseidon, and if not timely satisfied may thereafter be waived unilaterally by Poseidon unless and until such time ais either party elects to terminate this Escrow pursuant to the following Paragraph. The special conditions described in Paragraphs 6.1.3 and 6.1.4 are for the benefit of City, and if noVtimely satisfied may thereafter be waived unilaterally by City unless and until such time as either party elects to terminate this Escrow pursuant to the following Paragraph. Any such-waiver will be effective only if the same is in writing, signed by the waiving party, and delivered to Escrow Holder prior to delivery by either party of a written notice of termination pursuant to the following Paragraph. The special conditions described in Paragraphs 6.1.5 and 6.1.6 cannot be waived. 6.4 Terminationlf any of the special conditions described in Paragraph 6.1 has been neither satisfied nor waived in the manner and by the time specified in Paragraph 6.1, the party who is the beneficiary of such special condition, provided such party is not then in default hereunder, shall have the right to terminate this Agreement (and the Escrow) by delivering a written notice of termination to Escrow Holder. The right to so terminate this Agreement (and the Escrow) shall be optional, not mandatory. If the notice is delivered, the provisions of Paragraph 8.4 shall apply. In all instances of a permitted termination of this Agreement, Poseidon shall pay all escrow termination fees and costs. 7 ARTICLE 7. PRE-CLOSING RIGHTS AND OBLIGATIONS 7.1 Limit on Escrow Holder's Responsibilities Escrow Holder sJ ii1 have no concern with,nor liability nor responsibility for, this Article. 7.2 Delivery of Documents by CityCity shall deliver to Poseidon the Property Documents with respect to the City Tank Site(to the extent not previously:rirovided to Poseidon as of the Escrow Opening Date) within ten (10) Business Days following the Escrow Opening Date. City shall cause a Natural Hazard Disclosure with respect to the City Tank Site to be delivered to Poseidon, if practicable within thirty (30) days of the/Opening of Escrow, with respect to which Poseidon shall have not less than ten (10) Busiu ss Days after receipt of each to review and approve same and the Contingency Date shall be extended as necessary to provide for such 10-day period. City shall provide to Poseidon with reasonable promptness any documents relating to the City Tank Site that are in City's Iles or reasonably accessible to City which City discovers were not included in the original delivery of Property Documents to Poseidon. 7.3 Delivery of Documents by Poseido4Poseidon shall deliver to City the Property Documents with respect to the Poseidon Tank S (to the extent not previously provided to City as of the Escrow Opening Date) within ten (105 Business Days following the Escrow Opening Date. Poseidon shall cause a Natural Hazard Disclosure with respect to the Poseidon Tank Site to be delivered to City, if practicable wi hin thirty (30) days of the Opening of Escrow, with respect to which City shall have not les6 than ten (10) Business Days after receipt of each to review and approve same and the Contingency Date shall be extended as necessary to provide for such 10-day period. Poseidon/shall provide to City with reasonable promptness any documents relating to the Poseidon Tank Site that are in Poseidon's files or reasonably accessible to Poseidon which Poseidon discovers were not included in the original delivery of Property Documents to City. ARTICLE 8. THE CLOSING 8.1 Conditions to ClosingEscrow Holder shall close this Escrow on the Closing Date (as the same may have been extended pursuant to Paragraph 6.2) by (i) filing in the Official Records City's and Poseidon's respective Grant Deeds and such other documents as may be necessary to procure the Title Policies for the Exchange Properties, and (ii) delivering funds and documents to the parties (as set forth in the Article of this Agreement entitled "Distribution of Funds and Documents") WHEN AND ONLY WHEN each of the following conditions has been satisfied: 8.1.1 Deliveries. All funds and documents described in Articles 4 and 5 have been delivered to Escrow Holder. 8.1.2 The Title Policies. Title Insurer is irrevocably committed to issue the Title Policy for the City Tank Site and the Title Policy for the Poseidon Tank Site. 8.1.3 Special Conditions. The special conditions of Paragraph 6.1 have been either satisfied or waived. 8 8.2 ALTA Extended Coverage Title Policy Either City or Poseidon, or both of them may, at their option, direct Escrow Holder to procure an ALTA Extended C,o'verage Title Policy from Title Insurer, for their respective Exchange Property with liability in the amount of $3,867,009.00. If either City or Poseidon, or both elect to procurer an ALTA Extended Coverage Title Policy, then all references in this Agreement to the "Title Policy" for said policy shall refer to the ALTA Extended Coverage Title Policy; provided, however, the electing party or parties shall be solely responsible to timely supply to Title Insurer, at their sole cost, any ALTA survey required by Title Insurer as a condition to the issuance of an ALTA Extended Coverage Title Policy. 8.3 Early ClosingIf all of the conditions set forth in Paragraph 8.1 become satisfied at a date earlier than the Closing Date, Escrow Holder shall, at Poseidon's request and subject to City's approval, close this Escrow at the earlier date. 8.4 Delayed Closing; TerminationIf Escrow Folder cannot close this Escrow on or before the Closing Date, it shall, nevertheless, close the/Escrow when all conditions have been satisfied or waived, unless after the Closing Date apd prior to the Close of Escrow, Escrow Holder receives a written notice to terminate this Agfeement and the Escrow from a party who, at the time the notice is delivered, is not in default/tinder this Agreement. The right to terminate this Agreement and this Escrow will be optional/not mandatory. 8.4.1 Termination of Escrow. Escrow Holder shall have no liability or responsibility for determining that a part ,t°giving a written notice to terminate is not in default under this Agreement. Within five (5);Business Days after receipt of a notice from one party, Escrow Holder shall deliver one copy cif such notice to the other party. Unless written objection to termination of this Escrow is received by Escrow Holder within five (5) Business Days after Escrow Holder delivers such not* to the other party, Escrow Holder shall promptly terminate this Escrow and, unless Paragraph 6.4 specifies otherwise, return all funds and documents held by it to the party depositing same. If written objection to the termination of this Escrow is delivered to Escrow Holder within such five (5) Business Day period, Escrow Holder is authorized to hold all funds and documents delivered to it in connection with this Escrow and Escrow Holder may, in Escrow Holder's sole discretion, take no further action until otherwise directed, either by the parties' mutual written instructions or by a final order or judgment of a court of competent jurisdiction. 8.42 Legal Remedies of Parties Not Affected. Except as otherwise provided under Paragraph 13.2 below, neither(i) the exercise of such right of termination, (ii) delay in the exercise of such right, nor (iii) the return of funds and documents, shall affect the right of the party giving the notice of termination to recover damages or pursue other available legal remedies for the other party's breach of this Agreement. Nor shall (a) the receipt of the notice, (b) any failure to object to termination of this Escrow, or (c) the return of funds and documents affects the right of the other party to recover damages or pursue other available legal remedies for the breach of the party who gives the notice of termination. 9 ARTICLE 9. PRORATIONS,FEES AND COSTS 9.1 Proration of Property TaxesEscrow Holder shall prorate (i.e., apportion) between the parties, in cash, to the Close of Escrow, General and Special Real Estate Taxes, based on the latest information available to Escrow Holder from the appropriate city or county office. All prorations shall be done based strictly upon the date on which the Close of Escrow occurs, without regard to the payment due date. All General and Special Real Estate Taxes levied on the City Tank Site, if any, with respect to periods up to and including the Close of Escrow shall be the responsibility of City and all such amounts levied on the Poseidon Tank Site with respect to periods up to and including the Close of Escrow shall be the responsibility of Poseidon. 9.2 Post-Closing AdjustmentsPoseidon and City agree to reprorate any of the above- referenced prorations if, after the Close of Escrow, more accurate or definitive information becomes available with respect thereto. The party receiving such information shall deliver written notice thereof to the other party within five (5) Business Days of such receipt and, within five(5) Business Days thereafter, the parties shall reprorate the affected matter and a party which is thereby shown to have received an excess credit shall to the extent of such excess immediately reimburse the other party. 9.3 Poseidon's ChargesPoseidon shall pay (i) all documentary transfer tax with respect to Poseidon's Grant Deed and City's Grant Deed, (ii) the Title Policy premium for the City Tank Site and Poseidon Tank Site, (iii)all of the Escrow Holder's fee or termination charge, (iv) applicable fees for beneficiaries' statements, and (v) usual document-drafting and recording charges applicable to Poseidon and the City. 9.4 SurvivalThe provisions of this Article 9 shall survive the Closing. ARTICLE 10. DISTRIBUTION OF FUNDS AND DOCUMENTS 10.1 Interest Any sums delivered by Poseidon to Escrow Holder pursuant to this Agreement, shall be deposited by Escrow Holder into a liquid money market account with a bank approved by Poseidon: Interest earned on funds delivered by Poseidon to Escrow Holder shall belong to Poseidon,and shall be credited upon receipt to Poseidon's funds held by Escrow Holder. Escrow Holder's processing fee for establishing the Poseidon account shall be paid by Poseidon. Any §alms delivered by City to Escrow Holder pursuant to this Agreement shall be deposited by Ecrow Holder into a liquid money market account with a bank approved by City. Interest earne 1 on funds delivered by City to Escrow Holder shall belong to City and shall be credited up receipt to City's funds held by Escrow Holder. Escrow Holder's processing fee for establiing the City account shall be paid by City. 0.2 Disbursements All disbursements by Escrow Holder shall be made by chec s of Escrow Holder or, at the request of the party to whom disbursement is made, by wire tra sfer. 10 10.3 Payment of EncumbrancesEscrow Holder shall, at the Close of Escrow, pay, to the appropriate obligees, all liens, claims and encumbrances other than those approved as Permitted Exceptions. 10.4 Return After Recording Escrow Holder shall cause the County Recorder of Orange County to mail the Grant Deeds after recordation to the applicable grantee. Escrow Holder shall also provide Poseidon and City with conformed copies of the Grant Deeds upon such recordation. 10.5 Delivery of Instruments Escrow Holder shall, at the Close of Escrow, deliver by United States mail (or shall hold for personal pickup, if requested) each non-recorded instrument received by Escrow Holder to the payee or person (i) acquiring rights under the instrument, or (ii) for whose benefit the instrument was acquired. Escrow Holder shall also deliver to City or Poseidon as appropriate full copies of all instruments deposited by such party into this Escrow within ten(10) days of Closing. 10.6 Delivery of Funds Escrow Holder'shall, at the Close of Escrow, deliver by electronic funds transfer or by Federal Express or/United States mail (or shall hold for personal pickup, if requested), as elected by each party, any excess funds delivered to Escrow Holder by such party. 10.7 Reporting to Internal Revenue Service Any returns, statements or reports required to be filed under Section 6045(e) of the Internal Revenue Code of 1986 (or any similar reports required by state or local law)"or relating to the Exchange Properties shall be filed by Escrow Holder. In no event shall this Agreement be construed so as to require that such returns, reports or statements be filed by,/Poseidon, Poseidon's counsel, City or the City Attorney. Within five (5) days of the date Escrow Holder shall receive a written request from City and/or Poseidon to do so, Escrow Holder shall provide evidence to City and/or Poseidon of its compliance with the provisions of this Paragraph. 10.8 Settlement'Statement On the Closing Date, City and Poseidon shall have approved an estimated settlement statement setting forth all prorations, disbursements and allocations of funds deposited into Escrow as a condition to Closing. ARTICLE 11. POSSESSION; ENTRY BY POSEIDON 11.1 Limit on Escrow Holder's ResponsibilitiesEscrow Holder shall have no concern with,nor liabixity nor responsibility for, this Article. /, 11.2 Entry to the Poseidon Tank Site by City During the term of this Escrow, Poseidon'shall arrange to allow City and its agents, consultants and advisors access, during normal/business hours and on reasonable advance notice, to the Poseidon Tank Site for purposes of (it)' inspecting the Poseidon Tank Site, (ii) surveying, testing, improvement designing, performing environmental studies and the like, and (iii) determining the suitability of the Pseidon Tank Site for City's use. City shall hold Poseidon, AES and the Poseidon Tank Site armless from any claim, cost, lien, action or judgment (including, without limitation, Poseidon's or AES's attorneys' fees and defense costs) ("Claims") (a) incurred for surveyors, engineers, architects, environmental and utility consultants, and others employed or retained by 11 City for the purposes contemplated under this Paragraph 11.2, and (b) for personal injury and property damage caused by City or any of its employees, agents or independent contractors. Before undertaking any entry upon the Poseidon Tank Site or commencing any activities contemplated by this Paragraph, City shall secure and maintain, at City's sole cost, pursuant to City's self insured policy, a commercial general liability and property damage insurance policy covering City's activities on the Poseidon Tank Site, with combined limits of $1,000,000 for personal injury or death, $1,000,000 for property damage, and $1,000;000 policy limit for aggregate operations on an occurrence basis, which policy shall name Poseidon, AES, and any person or entity controlled by, under common control with, or controlling, Poseidon and AES, as an additional insured, and a comprehensive automobile liability insurance policy covering all owned, non-owned, employee and hired vehicles utilized by City or for City's behalf in connection with its activities on the Poseidon Tank Site hereunder with a combined bodily injury and property single limit of not less than $1,000,000. City's`insurance policies shall contain a provision that each such policy may not be terminated until-thirty(30) days' written notice of the proposed termination has been delivered to Poseidon and''AES. If this Agreement is terminated for any reason, City shall, as soon as practicable after such termination, at City's sole cost, repair any physical damage resulting from its activities thereon and restore the Poseidon Tank Site to substantially the same condition it was in prior to City's entry thereon. City's right to enter onto the Poseidon Tank Site does not include any right to use, store or release any Hazardous Materials in, on or under the Poseidon Tank Site, and City's indemnity hereunder shall include any Claims arising out of the presence, release or introduction of any Hazardous Materials in, on or under the Poseidon Tank Site, in each case, to the extent arising out of or due to the negligence or intentional acts or omissions of City, its agents or employees, in exercising its entry and investigation rights under this Paragraph 11.2, excepting only Claims to the extent arising out of pre-existing conditions'On the Poseidon Tank Site (and not exacerbated by City) or Claims to the extent arising out of/or due to, the negligent or intentional acts of Poseidon, AES or its agents or employees. In,:`no event shall City be entitled to engage in any invasive or destructive tests or studies witr"respect to the Poseidon Tank Site without Poseidon's and AES's prior written consent in each'such instance. City's obligations under this Paragraph 11.2 shall survive any termination of this Agreement. 11.3 Entry tothe City Tank Site by Poseidon During the term of this Escrow, City shall allow Poseidon and its agents, consultants and advisors, as well as Optionee and its agents, consultants and advisors, access, during normal business hours and on reasonable advance notice, to the City Tank Site for purposes of (i) inspecting the City Tank Site, (ii) surveying, testing, improvement designing, performing environmental studies and the like, and (iii) determining the suitability of the City Tank Site for Poseidon's use. Poseidon shall hold City and the City Tank Site harmless from any claim, cost, lien, action or judgment (including, without limitation, City's attorneys' fees and defense costs) ("Claims") (a) incurred for surveyors,engineers, architects, environmental and utility consultants, and others employed or retained by Poseidon or Optionee for the purposes contemplated under this Paragraph 11.3, and (b) for personal injury and property damage caused by Poseidon or Optionee or any of their respective employees, agents or independent contractors. Before undertaking any entry upon the City Tank Site or commencing any activities contemplated by this Paragraph, Poseidon or Optionee shall secure and maintain, at Poseidon's (or Optionee's, as applicable) sole cost, a commercial general liability and property damage insurance policy covering Poseidon's (or Optionee's, as applicable) activities on the City Tank Site, with combined limits of$1,000,000 12 for personal injury or death, $1,000,000 for property damage, and $1,000,000 policy limit for aggregate operations on an occurrence basis, which policy shall name City and any person or entity controlled by, under common control with, or controlling, City, as an additional insured, and a comprehensive automobile liability insurance policy covering all owned, non-owned, employee and hired vehicles utilized by Poseidon (or Optionee, as applicable) br for Poseidon's (or Optionee's, as applicable) behalf in connection with its activities on the City Tank Site hereunder with a combined bodily injury and property single limit of ngt'less than $1,000,000. Poseidon's (or Optionee's, as applicable) insurance policies shall contain a provision that each such policy may not be terminated until thirty (30) days' writteli notice of the proposed termination has been delivered to City. If this Agreement is termin‘ted for any reason, Poseidon shall (or shall cause Optionee to), as soon as practicable after supS termination, at Poseidon's (or Optionee's, as applicable) sole cost, repair any physical dancage resulting from its activities thereon and restore the City Tank Site to substantially th/same condition it was in prior to Poseidon's (or Optionee's, as applicable) entry thereon. Poseidon's (or Optionee's, as applicable) right to enter onto the City Tank Site doe /not include any right to use, store or release any Hazardous Materials in, on or under e City Tank Site, and Poseidon's (or Optionee's, as applicable) indemnity hereunder s all include any Claims arising out of the presence, release or introduction of any Hazard() Materials in, on or under the City Tank Site, in each case, to the extent arising out of or due the negligence or intentional acts or omissions of Poseidon or Optionee (as applicable) andheir respective agents or employees, in exercising its or their entry and investigation rights under this Paragraph 11.3, excepting only Claims to the extent arising out of pre-existi4 condi ' ns on the City Tank Site (and not exacerbated by Poseidon or Optionee) or Claims toy a extent arising out of, or due to, the negligent or intentional acts of City or its agents yid employees. In no event shall Poseidon or Optionee be entitled to engage in any invasive o destructive tests or studies with respect to the City Tank Site without City's prior written consent in each such instance. Poseidon's obligations under this Paragraph 11.3 shall survive an termination of this Agreement. 11.4 PossessipnP session of the Poseidon Tank Site shall pass to City at the Close of Escrow and possession of e City Tank Site shall pass to Poseidon at the Close of Escrow. ATICLE 12. ACKNOWLEDGMENTS,WARRANTIES, REPRESENTATIONS AND COVENANTS 12.1 Li• it on Escrow Holder's Res I onsibilities Escrow Holder shall have no concern wi ,no liability nor responsibility for,this Article. .2 City's Representations and Warranties City represents that each of the City' a nties set forth in this Paragraph is true and correct as of the date the Agreement was sig d a 4 will be true, subject to the possible application of Paragraph 12.3, as of the Close of E row 12.2.1 Duly Organized. City is duly organized, validly existing and in good st. ding under the laws of the State of its formation, and is qualified to do business and in good anding in the State of California, with full power and authority to consummate the transaction contemplated hereby. 13 12.2.2 Due Authorization. This Agreement has been duly authorized by all requisite action, and City has full power and authority to execute this Agreement, to undertake and consummate the transactions contemplated hereby, and to pay, perform and observe all of' the conditions, covenants, agreements and obligations contained herein. 12.2.3 No Default. The consummation of the transaction contemplated by this Agreement, and the payment and performance of all of the obligations of City hereunder, will not result in any breach of, or constitute a default under, any contract, loan or credit agreement, corporate charter, bylaws, trust indenture or, to City's current actual knowledge, any f other instrument,to which City is a party or by which City may be bound or affected. 12.2.4 Agreement Enforceable. No consent, approval pr other authorization of, or registration, declaration or filing with, any court, governmental agi cy or commission, or lender is required for the due execution and delivery of this Agreement or for the validity or enforceability thereof against City. 12.2.5 No Insolvency. City is not insolvent or the subject of any bankruptcy or creditor's rights action or proceeding. 12.2.6 No Pending Litigation, Condemnation or Regulatory Actions. To City's knowledge, there are no actions, proceedings, investigations or condemnation or eminent domain proceedings pending or threatened against City with respect to the City Tank Site, before or by any court, arbitrator, administrative agency (*other governmental authority which would affect the ability of City to convey the City Tank Site to Poseidon. 12.2.7 No Known Violati ns. To City's knowledge, City has received no notices from governmental authorities or, private parties pertaining to violations of law or governmental regulations with respect tc(the City Tank Site, with which City has not fully complied or corrected. 12.2.8 No Known Claims. City has no current actual knowledge of any pending or threatened claims by third parties with respect to the City Tank Site. 12.2.9 Hazardous Materials. To City's knowledge, except as otherwise disclosed in the Property Documents: (i) no Hazardous Materials are or have been stored on or under the surface of the City Tank Site in violation of applicable law; and(ii) there have been no past or present claims, complaints, litigation or governmental or administrative proceedings or other restrictions of any nature brought or threatened to be brought against the City Tank Site, nor any settlement reached with any party or parties alleging the presence, release or threatened release of any Hazardous Materials from or under the City Tank Site. 12.2.10 City Not a Foreign Person. City warrants that no individual or entity which, under the terms of this Agreement, will transfer United States Real Property Interests, as defined in Section 897(c) of the Internal Revenue Code, is a "foreign person"within the meaning of Section 1445(f) of the Internal Revenue Code. City also warrants that Poseidon as transferee will not be required to withhold tax pursuant to Section 26131 of the California Revenue And Taxation Code. 14 12.3 Other Provisions Relating to City's Warranties City makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by City to Poseidon pursuant to Paragraph 7.2. City's Warranties and representations made in this Agreement or any other document executed in connection with the transaction shall survive the Closing for a period of twelve (12) months. Any reference to the "knowledge" or "current actual knowledge" of City shall refer only to the knowledge of current employees of City most knowledgeable about the City Tank Site and the matters set forth in City's Warranties, with reasonable inquiry and investigation but without imputation to any such individual of the knowledge of others, whether or not any such others would be deemed agents of such individuals. Poseidon acknowledges and agrees that the use of the named individuals is solely for the purpose of establishing a standard for measurement of City's knowledge, and nothing herein shall impose any personal liability on any such individual for any representation, warranty or covenant of City hereunder. 12.4 City's Representations Re Due Diligence and Reliance City acknowledges, represents and warrants that prior to the Contingency Date, City will have conducted (or will have waived its right to conduct) all such inspections, investigations, tests, analyses, appraisals and evaluations of the Poseidon Tank Site (includin those for Hazardous Materials or such past land uses) as City considers necessary or appropriate (all of such inspections, investigations, tests, analyses, appraisals and evaluations being herein collectively called the "Investigations"). As of the Closing Date, City shall have reviewed, examined, evaluated and verified the Property Documents and the results of the Investigations to the extent it deems necessary or appropriate with the assistance of such experts as City deemed appropriate. City represents, acknowledges and agrees that as of the Close of Escrow`(i) City shall be familiar with the physical condition of the Poseidon Tank Site, (ii) City shall have completed its due diligence with respect to the Poseidon Tank Site and the Property Documents to its satisfaction, and (iii) except for Poseidon's Warranties, City is acquiring the Poseidon Tank Site based exclusively upon its own investigations and inspections of the Poseidon Tank Site and the Property Documents. Without limiting the generality of the foregoing, City agrees that CITY HAS NOT RELIED AND WILL NOT RELY ON, AND POSEIDON SHALL NOT BE LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE POSEIDON TANK SITE OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, THE PROPERTY DOCUMENTS) MADE OR FURNISHED BY POSEIDON, OR ANY REAL PROPERTY BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT POSEIDON, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH AS A POSEIDON WARRANTY IN THIS AGREEMENT. CITY REPRESENTS TO POSEIDON THAT CITY HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE POSEIDON TANK SITE, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS POSEIDON DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE POSEIDON TANK SITE AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS MATERIALS ON OR DISCHARGED FROM THE POSEIDON TANK SITE, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF POSEIDON OR ITS AGENTS OR 15 EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH POSEIDON WARRANTIES AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. 12.5 Basis of Exchange Acquisition City acknowledges that it is acquiring the Poseidon Tank Site in reliance solely on (i) City's own inspection of the Poseidon Tank Site, (ii) City's independent verification of the truth of any documents delivered by Poseidon to City, (iii) the opinions and advice concerning the Poseidon Tank Site provided by consultants engaged by City, and (iv) the Poseidon Warranties and covenants of Poseidon expressly set forth in this Agreement. Subject to the Poseidon Warranties and covenants of Poseidon expressly set forth in this Agreement, City shall accept the Poseidon Tank Site, and the matters relating to the Poseidon Tank Site listed below, in their"as is, where is, with all faults" condition or status as of the Closing Date. The matters are: soils and geological condition, topography, area and configuration of the Poseidon Tank Site; availability of utilities,public access and fire and police protection; any easement, license or encroachment which is not a matter of public record, whether or not visible upon inspection of the Poseidon Tank Site; any existing or future planning, zoning and subdivision statutes, ordinances, regulations and permits; the character and amount of park fees,public facilities fees, school fees, inspection fees, traffic impact fees, bridge and thoroughfare fees, drainage fees, growth management fees and any other fee or charge which must be paid to develop the Poseidon Tank Site; and any all other matters relating to the Poseidon Tank Site including, but not limited to, value, feasibility, cost, marketing and investment return. City acknowledges that Poseidon has no obligation to undertake any preparation of, or improvement to, the Poseidon Tank Site as a condition to the Closing. 12.6 Poseidon Representations and WarrantiesPoseidon represents that each of the Poseidon's Warranties set forth in this Paragraph is true and correct as of the date the Agreement was signed and will be true, subject to the possible application of Paragraph 12.7, as of the Close of Escrow. 12.6.1 Duly Organized. Poseidon is duly organized, validly existing and in good standing under the laws of the State of its formation, and is qualified to do business and in good standing in the State of California, with full power and authority to consummate the transaction contemplated hereby. 12.6.2 Due Authorization. This Agreement has been duly authorized by all requisite action, and Poseidon has full power and authority to execute this Agreement, to undertake and consummate the transactions contemplated hereby, and to pay, perform and observe all of the conditions, covenants, agreements and obligations contained herein. 12.6.3 No Default. The consummation of the transaction contemplated by this Agreement, and the payment and performance of all of the obligations of Poseidon hereunder, will not result in any breach of, or constitute a default under, any contract, loan or credit agreement, corporate charter, bylaws, trust indenture or, to Poseidon's current actual knowledge, any other instrument, to which Poseidon is a party or by which Poseidon may be bound or affected. 12.6.4 Agreement Enforceable. No consent, approval or other authorization of, or registration, declaration or filing with, any court, governmental agency or commission, or 16 lender is required for the due execution and delivery of this Agreement or for the validity or enforceability thereof against Poseidon. 12.6.5 No Insolvency. Poseidon is not insolvent or the subject of any bankruptcy or creditor's rights action or proceeding. 12.6.6 No Pending Litigation, Condemnation or Regulatory Actions. To Poseidon's knowledge, there are no actions, proceedings, investigations or condemnation or eminent domain proceedings pending or threatened against Poseidon with respect to the Poseidon Tank Site, before or by any court, arbitrator, administrative agency or other governmental authority which would affect the ability of Poseidon to convey the Poseidon Tank Site to City. 12.6.7 No Known Violations. To Poseidon's knowledge, Poseidon has received no notices from governmental authorities or private parties pertaining to violations of law or governmental regulations with respect to the Poseidon Tank Site, with which Poseidon has not fully complied or corrected. 12.6.8 No Known Claims. Poseidon has no current actual knowledge of any pending or threatened claims by third parties with respect to the Poseidon Tank Site. 12.6.9 Hazardous Materials. To Poseidon's knowledge, except as otherwise disclosed in the Property Documents: (i) no Hazardous Materials are or have been stored on or under the surface of the Poseidon Tank Site in violation of applicable law; and (ii) there have been no past or present claims, complaints, litigation or governmental or administrative proceedings or other restrictions of any nature brought or threatened to be brought against the Poseidon Tank Site, nor any settlement reached with any party or parties alleging the presence, release or threatened release of any Hazardous Materials from or under the Poseidon Tank Site. 12.6.10 Poseidon Not a Foreign Person. Poseidon warrants that no individual or entity which, under the terms of this Agreement, will transfer United States Real Property Interests, as defined in Section 897(c) of the Internal Revenue Code, is a "foreign person" within the meaning of Section 1445(f) of the Internal Revenue Code. Poseidon also warrants that City as transferee will not be required to withhold tax pursuant to Section 26131 of the California Revenue And Taxation Code. 12.7 Other Provisions Relating to Poseidon's Warranties Poseidon makes no representation or warranty as to the truth, accuracy or completeness of any materials, data or information delivered by Poseidon to City pursuant to Paragraph 7.3. Poseidon's Warranties and representations made in this Agreement or any other document executed in connection with the transaction shall survive the Closing for a period of twelve (12) months. Any reference to the "knowledge" or "current actual knowledge" of Poseidon shall refer only to the knowledge of current employees of Poseidon (or an affiliate of Poseidon) most knowledgeable about the Poseidon Tank Site and the matters set forth in Poseidon's Warranties), with reasonable inquiry and investigation but without imputation to any such individual of the knowledge of others, whether or not any such others would be deemed agents of such individuals. City acknowledges and agrees that the use of the named individuals is solely for the purpose of establishing a 17 standard for measurement of Poseidon's knowledge, and nothing herein shall impose any personal liability on any such individual for any representation, warranty or covenant of Poseidon hereunder. 12.8 Poseidon's Representations Re Due Diligence and Reliance Poseidon acknowledges, represents and warrants that prior to the Contingency Date, Poseidon will have conducted (or will have waived its right to conduct) all such inspections, investigations, tests, analyses, appraisals and evaluations of the City Tank Site (including those for Hazardous Materials or such past land uses) as Poseidon considers necessary or appropriate (all of such inspections, investigations, tests, analyses, appraisals and evaluations being herein collectively called the "Investigations"). As of the Closing Date, Poseidon shall have reviewed, examined, evaluated and verified the Property Documents and the results of the Investigations to the extent it deems necessary or appropriate with the assistance of such experts as Poseidon deemed appropriate. Poseidon represents, acknowledges and agrees that as of the Close of Escrow (i) Poseidon shall be familiar with the physical condition of the City Tank Site, (ii) Poseidon shall have completed its due diligence with respect to the City Tank Site and the Property Documents to its satisfaction, and(iii) except for City's Warranties, Poseidon is acquiring the City Tank Site based exclusively upon its own investigations and inspections of the City Tank Site and the Property Documents. Without limiting the generality of the foregoing, Poseidon agrees that Poseidon HAS NOT RELIED AND WILL NOT RELY ON, AND CITY SHALL NOT BE LIABLE FOR OR BOUND BY, ANY EXPRESSED OR IMPLIED WARRANTIES, GUARANTIES, STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE CITY TANK SITE OR RELATING THERETO (INCLUDING SPECIFICALLY, WITHOUT LIMITATION, THE PROPERTY DOCUMENTS) MADE OR FURNISHED BY CITY, OR ANY REAL PROPERTY BROKER OR AGENT REPRESENTING OR PURPORTING TO REPRESENT CITY, TO WHOMEVER MADE OR GIVEN, DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING, UNLESS SPECIFICALLY SET FORTH AS A CITY'S WARRANTY IN THIS AGREEMENT. POSEIDON REPRESENTS TO CITY THAT POSEIDON HAS CONDUCTED, OR WILL CONDUCT PRIOR TO CLOSING, SUCH INVESTIGATIONS OF THE CITY TANK SITE, INCLUDING BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF, AS POSEIDON DEEMS NECESSARY TO SATISFY ITSELF AS TO THE CONDITION OF THE CITY TANK SITE AND THE EXISTENCE OR NONEXISTENCE OR CURATIVE ACTION TO BE TAKEN WITH RESPECT TO ANY HAZARDOUS MATERIALS ON OR DISCHARGED FROM THE CITY TANK SITE, AND WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON BEHALF OF CITY OR ITS AGENTS OR EMPLOYEES WITH RESPECT THERETO, OTHER THAN SUCH CITY'S WARRANTIES AS ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. 12.9 Basis of Exchange Acquisition Poseidon acknowledges that it is acquiring the City Tank Site in reliance solely on (i) Poseidon's own inspection of the City Tank Site, (ii) Poseidon's independent verification of the truth of any documents delivered by City to Poseidon, (iii) the opinions and advice concerning the City Tank Site provided by consultants engaged by Poseidon, and (iv) the City Warranties and covenants of City expressly set forth in this Agreement. Subject to the City Warranties and covenants of City expressly set forth in this 18 Agreement, Poseidon shall accept the City Tank Site, and the matters relating to the City Tank Site listed below, in their "as is, where is, with all faults" condition or status as of the Closing Date. The matters are: soils and geological condition, topography, area and configuration of the Land; availability of utilities, public access and fire and police protection; any easement, license or encroachment which is not a matter of public record, whether or not visible upon inspection of the City Tank Site; any existing or future planning, zoning and subdivision statutes, ordinances, regulations and permits; the character and amount of park fees, public facilities fees, school fees, inspection fees, traffic impact fees, bridge and thoroughfare fees, drainage fees, growth management fees and any other fee or charge which must be paid to develop the City Tank Site; and any all other matters relating to the City Tank Site including, but not limited to, value, feasibility, cost, marketing and investment return. Poseidon acknowledges that City has no obligation to undertake any preparation of, or improvement to, the City Tank Site as a condition to the Closing. 12.10 No Brokerage Commissions Each party warrants to the other that the warranting party has incurred no obligation by reason of this Agreement or the transaction contemplated by this Agreement, for any other real estate brokerage commission or finder's fee for which the other party would be liable. Each party will hold the other party free and harmless from and against any damage or expense the other party may incur by reason of the untruth as to the warranting party of the foregoing warranty, including expenses for attorneys' fees and court costs. ARTICLE 13. REMEDIES 13.1 Limit on Escrow Holder's Responsibilities Escrow Holder shall have no concern with,nor liability nor responsibility for,this Article. 13.2 Additional Remedies If the Exchange is not consummated because of a default under this Agreement on the part of one party and the other party is ready, willing and able to close, the non-defaulting party, as its sole and exclusive remedy, may either (i) terminate this Agreement in its entirety by delivery of notice of termination to the defaulting party and be reimbursed by the defaulting Party, as its sole damages, for all out-of-pocket expenses incurred by it in negotiating this Agreement and performing its due diligence with respect to the applicable Exchange Property, or (ii) commence within sixty (60) days after the scheduled Closing Date an action for specific performance hereunder, provided that (A) the non-defaulting party shall timely commence such proceedings and thereafter prosecute the same with diligence and continuity, and (B) in no event shall the non-defaulting party be entitled to relief in any such proceeding which shall require the defaulting party to make any monetary payments to perform its obligations hereunder or cure any breach hereunder(other than such payments as are required by this Agreement). ARTICLE 14. EMINENT DOMAIN 14.1 Condemnation of the City Tank Site In the event that prior to the Close of Escrow all or any material portion of the City Tank Site should be taken or appropriated by any public authority under the power of eminent domain, then Poseidon may at its option terminate this Agreement and Escrow without further liability by delivering written notice of termination 19 within fifteen(15) days after receiving notice of the taking or appropriation. City shall promptly notify Poseidon of any such taking or appropriation. If Poseidon does not exercise its option to terminate (or less than all or a material portion of the City Tank Site is taken) and the Closing actually occurs, then all proceeds of the award for the taking that are applicable to the City Tank Site shall belong to Poseidon. City assumes all risk of loss to the City Tank Site as a result of casualty thereto up to and through the Closing. 14.2 Condemnation of the Poseidon Tank Site In the event that prior to the Close of Escrow all or any material portion of the Poseidon Tank Site should be taken or appropriated by any public authority (other than the City) under the power of eminent domain, then City may at its option terminate this Agreement and Escrow without further liability by delivering written notice of termination within fifteen (15) days after receiving notice of the taking or appropriation. Poseidon shall promptly notify City of any such taking or appropriation. If City does not exercise its option to terminate (or less than all or a material portion of the Poseidon Tank Site is taken) and the Closing actually occurs, then all proceeds of the award for the taking that are applicable to the Poseidon Tank Site shall belong to City. Poseidon assumes all risk of loss to the Poseidon Tank Site as a result of casualty thereto up to and through the Closing. ARTICLE 15. NOTICES 15.1 Time of Delivery; Addresses Unless otherwise specifically provided herein, all notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly delivered upon confirmed personal delivery, or by Federal Express (or similar reputable express delivery service), or by confirmed telecopier or electronic transmission with back-up copy mailed the same day, or as of the second business day after mailing by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to City, to: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Atten: Director of Public Works Telephone: 714-536-5348 With a Copy to: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Atten: City Clerk Telephone: (714) 536-5404 Telecopier: (714) 374-1557 If to Poseidon,to: Poseidon Resources(Surfside) LLC 501 West Broadway, Suite 2020 San Diego, CA 92101 Atten: President Telephone: (619) 595-7802 20 Telecopier: (619) 595-7892 or to such other address or to such other person as any party shall designate to the others for such purpose in the manner hereinabove set forth. ARTICLE 16. EXCULPATORY PROVISIONS 16.1 Neglect,Misconduct Escrow Holder shall not be liable for any of its acts or omissions unless the same constitutes negligence or willful misconduct. 16.2 Form,Validity and Authority Escrow Holder shall not be responsible for (i) the sufficiency or correctness as to form or the validity of any document deposited with Escrow Holder, (ii) the manner of execution of any such deposited document, unless such execution occurs in Escrow Holder's premises and under its supervision, or (iii) the identity, authority or rights of any person executing any document deposited with Escrow Holder unless under Escrow Holder's supervision or control. 16.3 Conflicting Instructions Upon receipt of any conflicting instructions, Escrow Holder shall have the right to take no further action until otherwise directed, either by the parties' mutual written instructions or a final order or:judgment of a court of competent jurisdiction. 16.4 Interpleader Escrow Holder shall have the absolute right, at its election, to file an action in interpleader requiring the parties to answer and litigate their several claims and rights among themselves, and Escrow Holder is authorized to deposit with the clerk of the court all documents and funds held in this Escrow. If such action is filed, the parties shall jointly and severally pay Escrow Holder's termination charges and costs and reasonable attorney's fees which Escrow Holder is required to expend or incur in the interpleader action, the amount thereof to be fixed and judgment therefor to be rendered by the court; provided, however, that as between themselves, the losing party shall be solely responsible for any such charges, costs and attorneys' fees. Upon the filing of such action, Escrow Holder shall be and become fully released and discharged from all obligations to further perform any obligations imposed by this Agreement. 16.5 Miscellaneouslf any party is seeking to obtain a loan secured by the Property, then, during the pendency of this escrow, Escrow Holder is authorized to furnish the lender, or anyone acting on its behalf, any information concerning this Escrow, including, but not limited to, a certified/copy of this Agreement and any amendments thereto. If any party uses facsimile- transmitted signed documents, Escrow Holder is authorized to rely upon such documents as if they bore original signatures unless written notice to the contrary is received from any signatory to any such documents; provided, however, that facsimile-transmitted signed documents will not be accepted for recordation in the Official Records. 16.6 Additional Instructions Escrow Holder may request that Poseidon and City sign additional instructions related to the Escrow created by this Agreement. Poseidon and City Agree to be reasonable in reviewing, commenting on, proposing changes to, approving and entering into any such additional instructions; provided, however, City, Poseidon and Escrow Holder agree that in the event of any conflict or inconsistency between this Agreement and such 21 additional instructions, the terms, conditions and provisions of this Agreement shall govern and control. ARTICLE 17. GENERAL PROVISIONS 17.1 Gender,Number Whenever the context requires, the use herein of (i) the neuter gender includes the masculine and the feminine, and (ii) the singular number includes the plural. 17.2 Time of the Essence Time is of the essence of each covenant of this Agreement for which a date of performance is specified. 17.3 Business Days If the (i) stated Closing Date (as extended, if applicable), or (ii) last day for performance of an act falls upon a day during which Escrow Holder is not open for business, the Closing Date (as extended, if applicable) or such last day, as the case may be, shall be the next following Business Day. 17.4 Survival of Provisions The representations, warranties, agreements and indemnities set forth in this Agreement shall remain operative, shall be deemed made at the Close of Escrow, and shall survive the closing and the execution and delivery of the Grant Deeds and shall not be merged in the Grant Deeds. 17.5 Authority of Signatories Each individual signing this Agreement on behalf of a corporation warrants that he or she is duly authorized to sign and deliver this Agreement on behalf of the corporation, in accordance with a duly adopted resolution of the governing board of the corporation or in accordance with the bylaws of the corporation, and that this Agreement is binding upon the corporation in accordance with its terms. Each individual signing this Agreement on behalf of any other entity warrants that he or she is duly authorized to sign and deliver this Agreement on behalf of the entity, either with authority under the entity's organizational documents so to sign, or as the entity's duly authorized agent with authority to bind the entity. 17.6 Captions Captions in this Agreement are inserted for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement. 17.7 Applicable Law This Agreement shall be construed and enforced in accordance with the laws of the State of California. 17.9 Entire Agreement This Agreement contains the entire agreement between the parties relating to the transaction contemplated hereby and all prior or contemporaneous agreements,understandings, representations and statements, oral or written, are merged herein. 17.10 ModificationsNo modification, waiver or discharge of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification,waiver or discharge is or may be sought. 22 17.11 Assignment Neither City nor Poseidon may assign this Agreement or aiiy right or obligation hereunder without the prior written consent of the other party, which cpfisent shall not be unreasonably withheld; provided however that Poseidon may assign this Agreement to any affiliate or subsidiary of Poseidon or to Poseidon's parent company or to lenders of Poseidon provided such assignee agrees to meet all the requirements of this Agreement and provides to the City commercially reasonable evidence of its ability to meet all of the requirements of this agreement. All terms of this Agreement shall be binding upon and inure to the benefit of the parties and their respective administrators or executors, successors and permitted assigns. 17.12 Invalidity of Material Provision If any material covenant, condition or provision herein contained is held to be invalid, void or unenforceable by a final judgment of any court of competent jurisdiction, this Agreement shall become rescinded unless the party benefitted by such covenant, condition or provision delivers to the other party and Escrow Holder, within five (5) days after the judgment becomes final, a written waiver of the covenant, condition or provision, in which case the remainder of this Agreement shall be enforceable. 17.13 Further Assurances Each party to this Agreement, for itself and its successors and assigns, agrees to take such additional actions and execute such additional instruments as may be reasonably requested by Escrow Holder or the other party in order to give effect to the transaction contemplated hereby. 17.14 Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one instrument. 17.15 Exhibits/Schedules The following exhibits and schedules are attached and are part of this Agreement: A-1 Legal Description of the City Tank Site A-2 Tentative Parcel Map B Form of Grant Deeds C Form of Lease Agreement for Water Storage Purposes 17.17 Submission of Agreement Not an Option Submission by Poseidon of this Agreement for examination or signature by City shall not constitute an option. Accordingly, this Agreement shall not become effective, and Poseidon shall have no rights hereunder unless and until this Agreement is executed by City. 17.18 Automatic Stay—Waiver,Non-Executory Contract a. In consideration of the City's execution and performance of this Agreement, the City's and Redevelopment Agency's (Agency) inherent police power relating to the public health and safety of the citizens of the City as recognized by 11 U.S.C. Section 362, and in consideration of the recitals and mutual covenants contained herein and in the Amended and Restated Owner Participation Agreement, and for other good and valuable consideration, including the agreement of the City to afford Poseidon a period in excess of 10 (ten) years to perform under the terms of this Exchange Agreement as provided herein, the receipt and sufficiency which are hereby acknowledged, Poseidon hereby agrees that in the event that 23 Poseidon (by its own action or by the action of its members, shareholders or creditors, if applicable), shall at any time during the term of this Agreement (a) file with any bankruptcy court of competent jurisdiction or be the subject of any petition for relief under the Bankruptcy Code of 1978 as amended, or any amended or successor statutory provisions (the "Bankruptcy Code"), (b)be the subject of any order for relief issued under the Bankruptcy Code, (c) file or be the subject of a petition seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act of law relating to bankruptcy, insolvency, or other relief for debtors, (d) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator, or liquidator, (e) be the subject of any order, judgment or decree entered by any court of competent jurisdiction approving a petition filed against such party for the reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, then, in any such event, the Agency and the City shall thereupon be entitled to relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or any similar stay to the extent necessary for the exercise of the rights and remedies otherwise available to the Agency or the City as provided in this Agreement and as otherwise provided by law. Poseidon hereby waives the benefit of such stay to the extent provided herein and does hereby consent to the entry of an order of any court of competent jurisdiction granting immediate relief from, modification or termination of such stay, and Poseidon does hereby further agree to raise no objection to any motion or proceeding seek relief from,modification or termination of such stay. b. Poseidon further acknowledges that upon execution of this Agreement, the Agency and the City shall have performed the material obligations as provided herein, leaving the majority of performance remaining solely with Participant. In the event of a bankruptcy proceeding as described in the preceding paragraph, Participant acknowledges and agrees that this Agreement is not executory as that term is defined in the Bankruptcy Code and in particular Section 365 thereof. This Exchange Agreement and Escrow Instructions has been executed at Huntington Beach, California, as of the date set forth at the beginning hereof. City: Poseidon: CITY OF HUNTINGTON BEACH, a POSEISON RESOURCES (SURFSIDE) LLC, Municipal Corporation of the State of a Delaware li ited liability company California By By ' �........_ Its C:x Its By Its Its ,] n L. F1 nn Cit Jerk APPROVED A TO FORM ,City Attorney 014141IFE 24 Deputy City A CONSENT OF ESCROW HOLDER The undersigned Escrow Holder hereby agrees to (i) accept the foregoing Agreement, (ii) be Escrow Holder under the Agreement, and (iii) be bound by the Agreement in the performance of its duties as Escrow Holder; provided, however, the undersigned shall have no obligations, liability or responsibility under(a) this Consent or otherwise, unless and until the Agreement, fully signed by the,parties, has been delivered to the undersigned, or (b) any amendment to said Agreement unless and until the same is accepted by the undersigned in writing. Date: STEWART TITLE COMPANY By Escrow Officer 25 EXHIBIT A-1 Legal Description of the City Tank Site / 26 Legal Description Exhibit"A" THAT PORTION OF PARCEL 4 OF LOT LINE ADJUSTMENT NO. LL 97-3 'IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, RECORDED DECEMBER 8, 1997 AS INSTRUMENT NO. 19970628491 OF OFFICIAL RECORDS OF SAID/COUNTY OF ORANGE, MORE PARTICULARLY DESCRIBED AS FOLLOWS: / BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 4; ENCE ALONG THE EASTERLY LINE THEREOF, BEING ALSO THE WESTERLY RIGHT-OF-WAY LINE/ F THE ORANGE COUNTY FLOOD CONTROL DISTRICT HUNTINGTON BEACH CHANNEL, DESCRI$';~D AS PARCEL NO. D1-104 IN THE AMENDED FINAL ORDER OF CONDEMNATION RECORDED NOV,EMBER 1, 1963 IN BOOK 6788, PAGES 915 THROUGH 922 OF OFFICIAL RECORDS; THENCE ALONG SAID COMMON LINE, SOUTH 00' 17' 00" WEST 96.13 FEET TO A POINT ON A NON-TANGENT CURVE CONCAVE WESTERLY, WITH A RADIUS OF 312.69 FEET, A RADIAL LINE THROUGH/SAID POINT BEARS NORTH 87' 30' 32" EAST; THENCE SOUTHERLY ALONG SAID CURVE THOUGH A CENTRAL ANGLE OF 02° 47' Si", AN ARC DISTANCE OF 15.27 FEET TO A POINT ON REVERSE CURVE CONCAVE EASTERLY, WITH A RADIUS OF 2462.50 FEET, A RADIAL LINE TOUGH SAID POINT BEARS NORTH 89° 41' 37" WEST; THENCE SOUTHERLY ALONG SAID CURVi THROUGH A CENTRAL ANGLE OF 08° 06' 06", AN ARC DISTANCE OF 348.20 FEET TO A POINT THROUGH WHICH A RADIAL LINE BEARS SOUTH 82° 12' 17" WEST; THENCE LEAVING SAID H TERLY LINE OF PARCEL 4 AND SAID WESTERLY RIGHT-OF-WAY LINE OF THE ORANGE CO/UNTY FLOOD CONTROL DISTRICT HUNTINGTON BEACH CHANNEL, WEST 454.99 FEET; NORTH 119.28 FEET; AND NORTH 05' 26. 07" EAST 344.64 FEET TO A POINT ON THE NORTHERLY LINVOF SAID PARCEL 4; THENCE SOUTH 89° 27' 18" EAST 399.83 FEET ALONG SAID NORTHERLY L::NE TO THE POINT OF BEGINNING. /r /r /I / /r f EXHIBIT A-2 Tentative Parcel Map 27 A. 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In accordance with Section 11932 of the California Revenue and Taxation Code, Grantor has declared the amount of the transfer tax which is due by a separate statement which is not being recorded with this Grant Deed. FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, ("Grantor"), hereby GRANTS to ("Grantee"), the real property in the City of Huntington Beach, County of Orange, State of California, more particularly described on Exhibit 1 attached hereto (the"Land"). THIS GRANT DEED is made and accepted upon 1. Current real property taxes and all.current but unpaid general and special bonds or assessments. 2. All other covenants, conditiop, restrictions, reservations, rights, rights-of- way and easements of record or known;to Grantee or that can be ascertained by an inspection of said Land. This Grant Deed is made without any warranty expressed or implied as to the suitability of the Land for any purpose. GRANTOR By Its By Its [Add acknowledgments] EXHIBIT 1 TO GRANT DEED Legal Description /' TENTATIVE PARCEL MAP No. 2010 130 IN THE CITY OF HUNTINGTON BEACH.COUNTY OF ORANGE.STATE OF CALIFORNIA ANTHONYC.CUOMO,PL$(OHN50»:RAlv;t a ASSOCIATES.INC. 1FGAI DFSlRIPTION 5ISO EAST HUNTERAVE ANAHEIM.?2M] (714)7778877 V OLrasn W.A.loLOTWO♦VV.Mfv LOT 1.1A4 06,07 �OI V CV DC mMTL I 01660 0 MOM.OE SC ROO.Xt. 1 y ) Y.[ ;- 1 ASSFSSORS PARl:FI No ��g1g�q��q x ®„ \ 1it .696 6162 ►yyI S .( ,per___ �. _- __ . ,.�,;,.� _)„ .Ia..E E$ Sf1RINYID£R w p , t�� `�C* ,�i � / �,'� _ �.. } Lua1 LOea'ac LLe wawa.Ioawm 1166.SIC 11a. re, . "trtr, ' ` ` i- T ' & j 41 1!,' 111/Oa` s 4106'/1 0001 RYEYOR 7 ‘i 1 1 w QPP I/ t "q r ,�'Ev C4. 1 `� 1 I!! !t 1 . 4 i 1 "" ten... R. w, 4+.i —, o 1 1 r 1 AT T )ATION �: _ - .14 �-- . ,. Amn- el' "Jiiiiii m MOW/MOM 0'NAM� WIRE Twanorr Z _1' /�'-1 { � �+:! t, ^• I * 1 p; ', L11 L ' s+,t 1,,—/ a� zw''''' y .�l +! 13� _ A . k 1 s !,1 i .1, _. 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II / r/ a/!/ir/h p':\y v A I.1.01 SO`cmoa'0 i°1'i`1.100 XTLL:a'.n r y\ MOS �// / \i�� rr/�� • r 6 NOR A 0616 OR 00.001,Mt LL i GfIWI IRO / Malw K K�Lwar .A¢SAVVI'C1 / PROPOSED EASEMENTS AND a""""'- Q£DICATIONS "'" 16, W®•^�apes 4M a3 ® waam Aoza ama.r-r MC K 0awnc La..LLwr n 166 LLu4 O 000/06 AMoumn-a-.oc a"I�e'`m®"'VO°sra Lw'''a.m..17,...a Lw„.'aL"moo' r- O ravam AMm as.O.r-a— a5 Im.w na.a/a own Aa.Ls 0AaL L oa w ..R 0 1.nam M moire nAar a.e Y ��..� ..0 LAMS MI•10.1 0K I./M~iY—O 10071 XL O .Bloom 016063111000-666 RYa 116/10 6.6aJl MI CV IRI66 0 wgwm AC WOO?-'dPi. I1 AS"'""'IA. ERC IL55 16000 Sla 4 ii C C e. 0 laaom M.s.006.-ammo soar-It— OSOOOL.L..MTS N.010600 Imp n K aovRasa 0 wham Ran s rr Lorna.-R^'" AS 110160010.m®,7 1/006''n SC 4ji O wLl,.m wow s..r oom.-mLL VOCEI0066 na..«a.a ow:0111 p1r 601,17 Nn.'R.x.am u.aIaROI.,L. O nw®Lasser AM.(AOr SLma.A.aa.RR.>1.r1oa ILavas 0 noa®1e.=L.Aan t7 o0D 70NE DESIGNATION a a Mw ,swam mass 4La.1-.5$wedar W. K 10a naw 00.N.x RAM KM R.Lo..aaax Rr.60 16000(3 sass K S.. W • w0®AnV'an-ww[8FCORDFD EAEMFNTS' *ILLwoSa..LeosC'IIOw AB.w GA00 RE.D R ICE 1Pa0[10/001INa 6 ram mvm� � .0 oca tams ma r 4A w ow ow Owl Room"aar SGC w.war.ALI®.L4 Lu SURVEYORS STATEMENT ANE ew 4.a atom® Aa wOn VA aa+fwawwM LZLmIr w row a,K nNwc orlon wame a:aw// 060011f^ 1460.20 w NOW "'a'Aw"'aR REV: 2010-08-10 EXHIBIT C Form of Lease Agreement for Water Storage Purposes LEASE AGREEMENT BETWEEN THE CITY OF HUNTINGTON BEACH AND POSEIDON RESOURCES (SURFSIDE) LLC FOR WATER STORAGE PURPOSES AT THE NEWLAND TANK SITE THE CITY OF HUNTINGTON BEACH, hereinafter referred to as "City," hereby leases to POSEIDON RESOURCES (SURFSIDE) LLC hereinafter referred to as "Lessee," (sometimes hereafter referred to collectively as the "Parties") those certain premises known as the Newland Tank Site, located at the southeast corner of Newland Street and Edison Way in the City of Huntington Beach, State of California, herein called "Premises" or "Property." The Property contemplated by this Lease shall cover approximately 3.5 acres, and shall include a proposed new 10 million gallon water storage facility and other ancillary facilities including a product water pump station (the "Water Tank") to be constructed by Lessee on the Property. The Property and the Water Tank are more particularly shown as Parcel 1 on the Tentative Parcel Map attached hereto as Exhibit "A," and incorporated herein by this reference. This Lease is made upon the following terms and conditions: ARTICLE 1. TERM OF LEASE Section 1.01. Original Term. This term of this Lease (the "Original Term") shall commence (the "Commencement Date") immediately after the close of escrow and as soon as title to the Property vests in the City pursuant to that certain Exchange Agreement and Escrow Instructions between City and Poseidon (this Lease is an exhibit to the Exchange Agreement) and end thirty-five (35) years after the Commencement Date, unless sooner terminated as herein provided. Section 1.02. Extension of Original Term; Hold Over; Termination Rights of Cit,) and Lessee. At the end of the Original Term, or any extension thereof, Lessee shall ,1_ 1 have the right to hold over and continue in possession of the Premises. Lessee's continued occupancy of the Premises shall be considered a month-to-month tenancy subject to all the terms and conditions of this Lease. City shall have the right to terminate this Lease at any time after the expiration of the Original Term by giving Lessee thirty (30) days advance written notice of termination of this Lease. Both parties must agree in writing to extension. Section 1.03. Lessee's Option to Purchase Property. A. Grant of Option to Lessee. In consideration of the construction of the Water Tank, and the other obligations of Lessee herein, City hereby grants to Lessee the exclusive option to purchase the Property from City (the "Option") upon the terms and conditions set forth in this Section 1.03. The Option is held by Lessee and the determination to exercise the Option shall be made by Lessee in Lessee's sole and absolute discretion. B. Term of Option and Exercise. The term of the Option shall commence upon the date that is two (2) years after the Commencement Date and shall expire at midnight pacific standard time upon the date that is five (5) years after the Commencement Date (the "Expiration Date"). If not exercised during the term of the Option, the Option shall automatically and without further notice, act or documentation by any party expire at midnight on the Expiration Date. Lessee may exercise the Option at any time during the term of the Option by giving City written notice of its intention to exercise the Option. C. Purchase Price. The Purchase Price ("Purchase Price") that Lessee agrees to pay for the Property and that City agrees to accept for purchase of the Property upon the exercise of the Option by Lessee shall be Three Million, Eight Hundred 2 Sixty Seven Thousand and Nine Dollars ($3,867,009.00). The City at its sole discretion may increase the amount Purchase Price if economic factors as evidenced by an appraisal of the property make the price of the Property more valuable than stated above, but only if the Option to purchase is not executed by Lessee within seven years from the date of City Council approval Of this Lease. D. City's Option to Purchase Back or Maintain Easement. In the event Lessee exercises its Option to purchase the Property as set forth above, the City shall be provided an irrevocable easement and right-of-way and/or the option to repurchase the property in an amount not to exceed Two Dollars ($2.00) as valuable consideration. This option and/or easement will be in the form of (i) a Grant of Easement and Right-of-Way in the form attached hereto as Exhibit "B" and (ii) a Right of First Refusal and Option to Repurchase in the form attached hereto as Exhibit "C" and shall be included as future escrow documents, recorded and run with the land In the event Lessee exercises its Option to purchase the Property, as a condition precedent to purchase, Lessee agrees to include in the Right of First Refusal and Option to Repurchase, which document shall be recorded, a covenant that will run with the land that if the Lessee uses the Property, Water Tank or any attachments permanent or otherwise to the Property as collateral to secure financing that the collateral is subordinate to the City's property rights as described herein. E. Escrow: Within ten (10) business days after City receives written notice from Lessee that Lessee will exercise the Option, City and Lessee shall open an Escrow with Stewart Title Company. The parties shall jointly submit additional signed escrow instructions to the Escrow Holder which shall include the terms and 3 conditions stated above as a condition precedent to maintaining escrow. The obligations of the parties shall be subject to conditions typically associated with the purchase and sale of similar properties of this size and quality, including but not limited to satisfactory representations and warranties, receipt of a title insurance policy evidencing marketable title and payment of each party's respective and customary charges for document drafting, recording and miscellaneous expenses. F. Real Estate Brokerage Commission. Each party represents and warrants to the others that no broker or finder is entitled to any Commission or finder's fee in connection with this transaction, and each agrees to defend and hold harmless the others from any claim to any such commission,or fee resulting from any action on its part. ARTICLE 2. RENT Section 2.01 Rental. Lessee agrees to pay rent to City for the use of the Property during all terms or term of this Lease. The rent shall be Twenty Four Thousand One Hundred Sixty Eight Dollars ($24,168.00) per MONTH and shall be paid by Lessee to City on or before the first day of each month. The base rent shall be adjusted annually by the percentage change per the Consumer Price Index, All Urban Consumers (CPI-U) for the Los Angeles-Riverside-Orange County area (1982-84=100) as published by the United States Bureau of Labor statistics, for a minimum of three percent (3%) and a maximum of five percent (5%). The rent specified in this section shall be paid by Lessee to City at P.O. Box 711, 2000 Main Street, Huntington Beach, CA 92648, or at such other place or places as City may from time to time designate by written notice delivered to Lessee. A ten percent 4 (10%) late charge shall be added on the 10th day after any payment hereunder is due, but unpaid. Interest of 1 % percent per month will accrue on any unpaid balance. ARTICLE 3. USE OF PREMISES Section 3.01. Permitted Use. The Premises are let for the construction and operation of the Water Tank, the other ancillary facilities described more particularly in Exhibit "A," and for such other uses as may from time to time be approved at the sole and absolute discretion of the City in writing. Section 3.02. Subleasing or Assigning as Breach. Lessee shall not encumber, assign, or otherwise transfer this Lease, any right or interest in this Lease, or any right or interest in the Premises or any of the improvements that may now or hereafter be constructed or installed on the Premises without the express written consent of the City, in writing which may be withheld by the City at its sole and absolute discretion. Nothwithstanding the foregoing, Lessee may assign this Lease, any right or interest in this Lease, or any right or interest in the Premises or any of the improvements that may now or hereafter be constructed or installed on the Premises to any affiliate or subsidiary of Lessee or to Lessee's parent company or to lenders of Lessee provided such assignee agrees to meet all the requirements of this Lease and provides to the City commercially reasonable evidence of its ability to meet all the requirements in this Lease. Lessee shall not sublet the Premises or any part thereof or allow any other person, other than Lessee's agents, servants, or employees, to occupy the Premises or any part thereof without the prior written consent of the City which may be withheld at the sole and absolute discretion of the City. A consent by the City to one assignment, one subletting, or one occupation of the Premises by another person shall not be deemed to be a consent to any subsequent assignment, subletting, or occupation of the Premises by another person. Any 5 f encumbrance, assignment, transfer, or subletting without the prior written consent of the City whether it be voluntary or involuntary, by operation of law or otherwise, is void and shall, at the option of the City, terminate this Lease. ARTICLE 4. TAXES AND UTILITIES Section 4.01. Payment of Utility Charges. Lessee shall pay, and hold Lessor and the property free and harmless from all charges for the furnishing of gas, water, electricity, telephone, and for the removal of garbage and rubbish from the Premises during the term of this Lease, or any extensions thereof. If electric and/or any other services requiring meters are required by Lessee, Lessee at its sole cost and expense shall install separate metered service. ARTICLE 5. MAINTENANCE, ALTERATIONS AND REPAIRS Section 5.01. Lessee shall, at its own cost and expense, keep and maintain all portions of the Premises as well as all improvements on the Premises and all facilities appurtenant to the Premises in good order and repair and in as safe and clean a condition as they were when received by Lessee from City, reasonable wear and tear excepted. The Parties understand and agree existing structures on the Premises will be removed by Lessee in connection with the construction of the Water Tank and the other ancillary facilities described more particularly in Exhibit "A." Lessee shall consult with and obtain approval of the City prior to removal of any structures on the premises. Section 5.02. Alterations and Liens. As part of this Lease, the Parties acknowledge that the Water Tank (a permanent structure) may be built on the Property in addition to the other ancillary facilities described in Exhibit "A," all at the sole cost of Lessee. Lessee shall obtain all required Federal, State and City permits and/or approvals 6 i prior to undertaking the construction of said structure and shall comply with all Federal, State and City laws ordinance or regulation regarding construction and operation of the Water Tank. Except as in accordance with such permits and laws, Lessee shall not make or permit any other person to make any alterations to the Premises or to any improvement thereon or facility appurtenant thereto without the written consent of City first had and obtained. Lessee shall keep the Premises free and clear from any and all liens, claims, and demands for work performed, materials furnished, or operations conducted on the Premises at the instance or request of Lessee. Section 5.03. Inspection by City. Lessee shall permit City or City's agents, representatives, or employees to enter the Premises at all reasonable times, with notice, for the purpose of inspecting the Premises to determine whether Lessee is complying with the terms of this Lease and for the purpose of doing other lawful acts that may be necessary to protect City's interest in the Premises under this Lease or to perform City's duties under this Lease. Section 5.04. Surrender of Premises. On expiration or sooner termination of this Lease, or any extensions or renewals of this Lease, Lessee shall promptly surrender and deliver the Premises to City in as good condition as they are now at the date of this Lease, reasonable wear and tear and repairs herein required to be made by City excepted. ARTICLE 6. INDEMNITY AND EXCULPATION INSURANCE Section 6.01. Indemnification, Defense, Hold Harmless During the term of this Lease, Lessee hereby agrees to protect, defend, indemnify and hold harmless City, its officers, elected or appointed officials, employees, agents, and volunteers from and against any and all, claims, damages, losses, expenses, judgments, demands defense costs, and consequential damage or liability of any kind or nature, however caused, 7 including those resulting from death or injury to Lessee's employees and damage to Lessee's property, arising directly or indirectly out of the obligations or operations herein undertaken by Lessee, caused in whole or in part by any negligent act or omission of the Lessee, any subcontractors, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, including but not limited to concurrent active or passive negligence, except where caused by the active negligence, sole negligence, or willful misconduct of the City. Lessee will conduct all defense at its sole cost and expense and City shall approve selection of Lessee's counsel. This indemnity shall apply to all claims and liability regardless of whether any insurance policies are applicable. The policy limits do not act as a limitation upon the amount of indemnification to be provided by Lessee. Section 6.02. Insurance. During the term of this Lease, Lessee will provide coverage for Workers Compensation Insurance, General Liability Insurance and Property Insurance as follows: Workers' Compensation and Employer's Liability Insurance Pursuant to California Labor Code Section 1861, Lessee acknowledges awareness of Section 3700 et seq. of this Code, which requires every employer to be insured against liability for workers' compensation; Lessee covenants that it will comply with such provisions prior to construction of the Water Tank. Lessee shall obtain and furnish to City workers' compensation and employer's liability insurance in an amount of not less than the State statutory limits. Lessee shall require all subcontractors to provide such workers' compensation and employer's liability insurance for all of the subcontractors' employees. Lessee shall furnish to City a certificate of waiver of subrogation under the terms of the 8 workers' compensation and employer's liability insurance and Lessee shall similarly require all subcontractors to waive subrogation. General Liability Insurance In addition to the workers' compensation and employer's liability insurance referenced above and Lessee's covenant to defend, hold harmless and indemnify City as set forth in Section 6.01, Lessee shall obtain and furnish to City, a policy of general public liability insurance, including motor vehicle coverage covering the any and all aspect of Lessees use of the leased premises . This policy shall indemnify Lessee, its officers, employees and agents while acting within the scope of their duties, against any and all claims arising out or in connection with the any and all aspect of Lessees use of the leased premises, and shall provide coverage in not less than the following amount: combined single limit bodily injury and property damage, including products/completed operations liability and blanket contractual liability, of One Million Dollars ($1,000,000) per occurrence. If coverage is provided under a form which includes a designated general aggregate limit, the aggregate limit must be no less than One Million Dollars ($1,000,000). This policy shall name City, its officers, elected or appointed officials, employees, agents, and volunteers as Additional Insureds, and shall specifically provide that any other insurance coverage which may be applicable to the construction and operation of the Water Tank shall be deemed excess coverage and that Lessee's insurance shall be primary. Certificates of Insurance, Additional Insured Endorsements Prior to commencing construction of the Water Tank, Lessee shall furnish to City certificates of insurance subject to approval of the City Attorney evidencing the foregoing insurance coverages as required by this Lease; the certificates shall: 1. provide the name and policy number of each carrier and policy; 9 2. state that the policy is currently in force; and 3. promise to provide that such policies will not be canceled or modified without thirty (30) days' prior written notice of City. Lessee shall maintain the foregoing insurance coverages in force during the term of this Lease. The requirement for carrying the foregoing insurance coverages shall not derogate from the Lessee's defense, hold harmless and indemnification obligations as set forth in Section 6.01. City or its representative shall at all times have the right to demand the original or a copy of all the policies of insurance. Lessee shall pay, in a prompt and timely manner, the premiums on all insurance hereinabove required. Lessee shall provide a separate copy of the additional insured endorsement to each of Lessee's insurance policies, naming City, its officers, elected and appointed officials, employees, agents and volunteers as Additional Insureds, to the City Attorney for approval prior to any payment hereunder. Property Insurance Lessee shall provide before commencement of this Lease and shall obtain and furnish to City, at Lessee's sole cost and expense, property and fire insurance with extended coverage endorsements thereon, by a company acceptable to City authorized to conduct insurance business in California, in an amount insuring for the full insurable value of the Premises and all Improvements, Trade Fixtures, personal property whether or not owned or leased by Lessee, and all trade inventory in or on the Premises against damage or destruction by fire, theft or the elements. This policy shall contain a full replacement cost endorsement naming Lessee as the insured and shall not contain a coinsurance penalty provision. The policy shall also contain an endorsement naming City as an Additional Insured. The policy shall contain a special endorsement that such proceeds shall be used 10 to repair, rebuild or replace any such Improvements, Trade Fixtures, personal property whether or not owned or leased by Lessee, and all trade inventory so damaged or destroyed; and if not so used, such proceeds (excluding any insurance proceeds for Trade Fixtures, personal property whether or not owned or leased by Lessee, and trade inventory, but only to the extent the insurance proceeds specifically cover those items) shall be paid to City. This policy shall also contain the following endorsements: 1. The insurer shall not cancel or reduce the insured's coverage without (30) days prior written notice to City; 2. City shall not be responsible for premiums or assessments on the policy. A complete and signed certificate of insurance with all endorsements required by this Section shall be filed with City prior to the execution of this Lease. At least thirty (30) days prior to the expiration or termination of any such policy, a signed and complete certificate of insurance showing that coverage has been renewed shall be filed with City. Increase in Amount of General Public Liability and Property Insurance Not more frequently than once every three (3) years, if, in the sole opinion of City, the amount and/or scope of general public liability insurance and/or property insurance coverage above at that time is not adequate, Lessee shall increase the insurance coverage as reasonably required by City. Section 6.03. Insurance Hazards. Lessee shall, at its sole cost and expense, comply with all requirements of any insurance carrier providing any insurance policy for the Premises or required by this Lease necessary for the continued maintenance of these policies at reasonable rates. 11 Section 6.04. Determination of Replacement Value. The "full replacement value" of the buildings and other improvements to be insured shall be determined by the company issuing the insurance policy at the time the policy is initially obtained. Not more frequently than once every five (5) years, either Party shall have the right to notify the other Party that it elects to have the replacement value redetermined by an insurance company. The redetermination shall be made promptly and in accordance with the rules and practices of the Board of Fire Underwriters, or a like board recognized and generally accepted by the insurance company, and each Party shall be promptly notified of the results by the company. The insurance policy shall be adjusted according to the redetermination. Section 6.05. Waiver of Subrogation. The Parties release each other, and their respective authorized representatives, from any claims for damage to any person or to the Premises and to the fixtures, personal property, and alterations of either in or on the Premises that are caused by or result from risks insured against under any insurance policies carried by the Parties and in force at the time of any such damage. Each Party shall cause each insurance policy obtained by it to provide that the insurance company waives all rights of recovery by way of subrogation against either Party in connection with any damage covered by any policy. Neither Party shall be liable to the other for any damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. If any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by the payment of an additional premium charge above that charged by insurance companies issuing policies without waiver of subrogation, the Party undertaking to obtain the insurance shall notify the other Party of this fact. The other Party shall have a period of 20 days after receiving the notice either to 12 place the insurance with a company that is reasonable satisfactory to the other Party and that will carry the insurance with a waiver of subrogation, or to agree to pay the additional premium if such a policy is obtainable at additional cost. If the insurance cannot be obtained or the Party in whose favor a waiver or subrogation is desired refused to pay the additional premium charged, the other Party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance involved. ARTICLE 7. SIGNS AND TRADE FIXTURES Section 7.01. Installation and Removal of Trade Fixtures. Lessee shall have the right, at any time and from time to time during the term of this Lease and any renewal or extension of such term, at Lessee's sole cost and expense, to install and affix in, to, or on the Premises, such items, herein called 'trade fixture,' for use in Lessee's trade or business as Lessee may, in its sole discretion, deem advisable subject to City ordinances and permits and Section 7.03 below. Trade fixtures shall not include the Water Tank contemplated herein. After the expiration of this Lease, City at its sole discretion may take and retain ownership of the Water Tank and/or trade fixtures or City may at its sole discretion require Lessee to remove the Water Tank and/or trade fixtures at Lessee's complete cost and expense. Section 7.02. Unremoved Trade Fixtures. Any trade fixtures described in this Article that are not removed from the Premises by Lessee within thirty (30) days after the expiration or sooner termination, regardless of cause, of the Lease shall be deemed abandoned by Lessee and shall automatically become the property of City as owner of the real property to which they are affixed and not simply because of the lien described in Sectiph 7.02 of this Lease. 13 Section 7.03. Signs. Lessee shall not place and maintain, nor permit any other person to place or maintain, in any exterior door, wall, or window of the Premises any sign, awning, canopy, marquee, or other advertising without the express written consent and approval of City. Furthermore, Lessee shall not place any decoration, lettering, or advertising matter on the glass of any interior or exterior shop window of the Premises without approval and consent of City. Should City consent to any such sign, awning, canopy, marquee, decoration, or advertising matter, Lessee shall maintain it at all times during this Lease in good appearance and repair. On expiration or sooner termination of this Lease, any of the items mentioned in this section not removed from the Premises by Lessee on such expiration or termination of this Lease may, without damage or liability, be destroyed by City. ARTICLE 8. DESTRUCTION OF PREMISES. Section 8.01. Partial Destruction. Should Premises be partially destroyed by any cause not the fault of Lessee or any person in or about the Premises with the consent, express or implied, of Lessee, this Lease shall continue in full force and effect and City, at City's own cost and expense, shall promptly commence and diligently continue to complete the work of repairing and restoring the Premises to their prior condition providing such work can be accomplished under all applicable governmental laws and regulations within one hundred eighty (180)working days. This does not include any improvements made by Lessee. Section 8.02. Abatement of Rent. Should City be required under Section 8.01 of this Lease to repair and restore the Premises to their former condition following partial or full dOstruction of the Premises: 14 A. City shall have full right to enter the Premises and take possession of so much of the Premises, including the whole of the Premises, as may be reasonably necessary to enable City promptly and efficiently to carry out the work of repair and restoration; and B. The percentage rent described in Section 2.01 of this Lease shall not be abated for the time Lessee is prevented from using the whole of the Premises. Section 8.03. Total Condemnation. Should, during the term of this Lease or any renewal or extension thereof, title and possession of all of the Premises be taken under the power of eminent domain by any public or quasi-public agency or entity, this Lease shall terminate as of 12:01a.m., of the date actual physical possession of the Premises is taken by the agency or entity exercising the power of eminent domain and both City and Lessee shall thereafter be released from all obligations, except those specified in Section 8.08 of this Lease, under this Lease. Section 8.04. Termination Option for Partial Condemnation. Should, during the term of this Lease or any renewal or extension thereof, title and possession of only a portion of the Premises be taken under the power of eminent domain by any public or quasi-public agency or entity, Lessee may, at Lessee's option, terminate this Lease if more than five percent (5%) of the ground area (or floor space) or more than ten percent (10%) in value of the Premises is taken under the power of eminent domain. Lessee shall exercise its option by giving written notice to City within thirty (30) days after actual physical possession of the portion subject to the eminent domain is taken by the agency or entity exercising the power. This Lease shall terminate as of 12:01a.m. of the date the notice is deemed given to City. 15 Section 8.05. Partial Condemnation Without Termination. Should Lessee fail to exercise the option described in Section 8.04 of this Lease or should the portion of the Premises taken under the power of eminent domain be insufficient to give rise to the option described in Section 8.04 of this Lease, then, in the event: This Lease shall terminate as to the portion of the Premises taken by eminent domain as of 12:01a.m. of the day, herein called the "date of taking," actual physical possession of that portion of the Premises is taken by the agency or entity exercising the power of eminent domain. Section 8.06. Condemnation Award. Should, during the term of this Lease or any renewal or extension thereof, title and possession of all or any portion of the Premises be taken under the power of eminent domain by any public or quasi-public agency or entity, the portion of the compensation or damages for the taking awarded to each of the Parties to this Lease, City and Lessee, shall belong to and be the sole property of the Party City or Lessee, to whom it is awarded. Lessee shall be entitled to that portion of the compensation or damages awarded for the eminent domain taking that represents (1) the reasonable value of Lessee's rights under this Lease for the unexpired term of this Lease; (2) the cost or loss sustained by Lessee because of the removal of Lessee's merchandise, trade fixtures, equipment, and furnishings from the portion of the Premises taken by eminent domain; and (3) whatever other compensation and/or damages which may be usual and customary to LESSEES under the circumstances. Section 8.07. Relocation and Assistance. In the event this Lease is terminated for any reason by City, Lessee shall not be entitled to any relocation rights or benefits and expressly waives such benefits and rights under City, State or Federal Relocation Assistance Plans. 16 ARTICLE 9. DEFAULT, ASSIGNMENT, AND TERMINATION OF MASTER LEASE Section 9.01. Abandonment by Lessee. Should Lessee breach this Lease and abandon the Premises prior to the natural expiration of the term of this Lease, City may: A. Continue this Lease in effect by not terminating Lessee's right to possession of the Premises, in which event City shall be entitled to enforce all its rights and remedies under this Lease, including the right to recover the rent as it becomes due under this Lease; or B. Terminate this Lease and recover from Lessee any and all damages provided by law. Section 9.02. Default by Lessee. Should Lessee default in the performance of any of the covenants, conditions, or agreements contained in this Lease, Lessee shall have breached the Lease and City may, after providing Lessee with written notice of the alleged breach and a minimum of thirty (30) days from the date of such written notice to cure the alleged breach, in addition to the remedy specified in the subparagraph (b) of Section 9.01 of this Lease, re-enter and regain possession of the Premises in the manner provided by the laws of unlawful detainer of the State of California then in effect. Section 9.03. Insolvency of Lessee. The insolvency of Lessee as evidenced by a receiver being appointed to take possession of all or substantially all of the property of Lessee, or the making of a general assignment for the benefit of creditors by Lessee, or filing a petition in bankruptcy shall terminate this Lease and entitle City to re-enter and regain possession of the Premises. Section 9.04. Cumulative Remedies. The remedies given to City in this Article shall not be exclusive but shall be cumulative and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this Lease. 17 Section 9.05. Waiver of Breach. The waiver by City of any breach by Lessee of any of the provisions of this Lease shall not constitute a continuing waiver or a waiver of any subsequent breach by Lessee either of the same or another provision of this Lease. ARTICLE 10. MISCELLANEOUS Section 10.01. Care of Premises. Lessee shall not obstruct, cause or permit any obstruction surrounding the Premises or any part thereof in any manner whatsoever. Lessee shall comply with all written notice served by City with regard to the care and maintenance of the interior of the Premises. Any written notice hereunder shall specify the work to be done, the estimated cost thereof, and the period of time deemed to be reasonable necessary for completion of such work. Should Lessee fail to comply with City's written notice within fifteen (15) days, or within a time deemed reasonably necessary of the time specified therein, Lessee shall pay over to City the estimated cost of such work as set forth in the notice. Upon receipt of such sum, City shall than proceed to cause the required work to be performed. This section shall not apply to City maintenance obligations described herein. Section 10.02. Notices. Any written notice, given under the terms of this Lease, shall be either delivered personally or mailed, certified mail, postage prepaid, addressed to the Party concerned, as follows: City Lessee City of Huntington Beach Poseidon Resources (Surfside) LLC Public Works Department Attn:President Attn: Director of Public Works 501 West Broadway, Suite 2020 2000 Main Street San Diego, CA 92101 Huntington Beach, CA 92648 /� 18 Section 10.03. Waste or Nuisance. Lessee shall not commit or permit the commission by others of any waste on the Premises; Lessee shall not maintain, commit or permit the maintenance or commission of any nuisance as defined in Section 3479 of the California Civil Code on the Premises; and Lessee shall not use or permit the use of the Premises for any unlawful purpose. Section 10.04. Compliance With Law. Lessee shalt, at Lessee's own cost and expense, comply with all statutes, ordinances, regulations, and requirements of all governmental entities, federal, state, county and municipal, relating to Lessee's use and occupancy of the Premises whether such statutes, ordinances, regulations, and requirements be now in force or hereinafter enacted. The judgment of any court of competent jurisdiction, or the admission by Lessee in a proceeding brought against Lessee by any government entity, that Lessee has violated any such statute, ordinance, regulation, or requirement shall be conclusive as between City and Lessee and shall be ground for termination of this Lease by City. Section 10.05. Binding on Heirs and Successors. This Lease shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of the Parties hereto. Section 10.06. Partial invalidity. Should any provision of this Lease be held by a court of competent jurisdiction to be either invalid, void, or unenforceable, the remaining provisions of this Lease shall remain in full force and effect unimpaired by the holding, so long as the reasonable expectations of the Parties hereto are not materially impaired. Section 10.07. Automatic Stay—Waiver, Non-Executory Contract 19 a. In consideration of the City's execution and performance of this Agreement, the City's and Redevelopment Agency's ("Agency") inherent police power relating to the public health and safety of the citizens of the City as recognized by 11 U.S.C. Section 362, and in consideration of the recitals and mutual covenants contained herein and in the Amended and Restated Owner Participation Agreement, and for other good and valuable consideration, including the agreement of the City to afford Poseidon a period in excess of 10 (ten) years to perform under the terms of the Exchange Agreement as provided therein, the receipt and sufficiency which are hereby acknowledged, Poseidon hereby agrees that in the event that Poseidon (by its own action or by the action of its members, shareholders or creditors, if applicable), shall at any time during the term of this Agreement(a)file with any bankruptcy court of competent jurisdiction or be the subject of any petition for relief under the Bankruptcy Code of 1978 as amended, or any amended or successor statutory provisions (the "Bankruptcy Code"), (b) be the subject of any order for relief issued under the Bankruptcy Code, (c)file or be the subject of a petition seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act of law relating to bankruptcy, insolvency, or other relief for debtors, (d) have sought or consented to or acquiesced in the appointment of any trustee, receiver, conservator, or liquidator, (e) be the subject of any order,judgment or decree entered by any court of competent jurisdiction approving a petition filed against such party for the reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal or state act or law relating to bankruptcy, insolvency, or relief for debtors, then, in any such event, the Agency and the City shall thereupon be entitled to relief from any automatic stay imposed by Section 362 of the Bankruptcy Code, or any similar stay to the extent 20 necessary for the exercise of the rights and remedies otherwise available to the Agency or the City as provided in this Agreement and as otherwise provided by law. Poseidon hereby waives the benefit of such stay to the extent provided herein and does hereby consent to the entry of an order of any court of competent jurisdiction granting immediate relief from, modification or termination of such stay, and Poseidon does hereby further agree to raise no objection to any motion or proceeding seek relief from, modification or termination of such stay. b. Poseidon further acknowledges that upon execution of this Agreement, the Agency and the City shall have performed its material obligations as provided herein, leaving the majority of performance remaining solely with Poseidon. In the event of a bankruptcy proceeding as described in the preceding paragraph, Poseidon acknowledges and agrees that this Agreement is not executory as that term is defined in the Bankruptcy Code and in particular Section 365 thereof. Section 10.08. Sole Agreement. Except for the Exchange Agreement and Escrow Instructions (referenced in Section 1.01 of the Lease) this instrument constitutes the sole and only agreement between City and Lessee respecting the Premises, the leasing of the Premises to Lessee, or the Lease term herein specified, and correctly sets forth the obligations of City and Lessee to each other as of its date. Except for the Exchange Agreement and Escrow Instructions (referenced in Section 1.01 of the Lease), any agreements or representations respecting the Premises or their leasing by City to Lessee not expressly set forth in this instrument are null and void. (Signatures Continued) 21 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by and through their authorized officers on if 7 /0 Lessee CITY OF HUNTINGTON BEACH, a By municipal corporation of the State of Signature California ri t Namea ayor By ✓ Signature ity Clerk INITI ED AND APPROVED: Print Name Public Works ire c r REVIE D APPROVED: APPROVED AS TO FORM: Cit Administrator -' Cit Attorney _9_1 _1 U 22 Exhibit A Tentative Parcel Map showing Property and Water Tank 23 TENTATIVE PARCEL MAP No. 2010 130 IN THE CITY OF HUNTINGTON BEACH.COUNTY OF ORANGE.STATE OF CALIFORNIA ANTHONVC.CUOMO.PLS/0515150.^:ERAr aASSOC/A TES.MC. -FCAI DESCRIPTION 5 15OEA5THUNTER AVE ANAHEIM.Aa2t:1 471412726E77 VAC 0' 1.0.0.d OrIAA=a DC Orr 0,A010,10,1CAOL C0.•CO« 001 for LAC AM�ir¢Caa Y DCIAA imwlT 0601.• - M.OW.01001:. OW f i I ' j q$SESSORS PAL No } � 'gii .x m , �' r me6T a w.n®s Me 1 .<I.K OA.w MOOT .: �„ .' ! _:Mri fit:. 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Mt' "<N4/ F.A RAM MO.Ia O:a[aO 101V: OW.,Ram MS. apaT M O.P r/MII.nOw n'AI/a.a•MOM•R K RI.OSS s VICINITY MAP "'a°"`'� �.M.dr REV:2010 08-To Exhibit B Form of Grant of Easement and Right of Way 24 EASEMENT RECORDING REQUESTED BY: ) ) STEWART TITLE COMPANY ) ) WHEN RECORDED MAIL TO: ) ) ) ) ) [Space Above This Line For Recorder's Use Only] APN GRANT OF EASEMENT FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, POSEIDON RESOURCES (SURFSIDE) LLC, a Delaware limited liability company, (hereinafter, "Grantor"), hereby grants and conveys to THE CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California (hereinafter "Grantee"), a perpetual nonexclusive easement and right-of-way for the purpose of operating, repairing, replacing, maintaining and using a 10 million gallon water storage tank, together with the necessary fixtures and appurtenances, including a product water pump station (collectively hereafter, the "Water Storage Tank") in, over, under, upon, along, through and across the respective portions of that certain real property described as Parcel 1 in the Tentative Parcel Map attached hereto as Exhibit "A" (hereinafter, the "Easement Area"). The easement and right-of-way granted herein include the incidental rights to enter upon and pass and repass over and along the Easement Area for reconstruction, improvement, repair, operation and maintenance of the Water Storage Tank and for ingress and egress to the Water Storage Tank. The easement and right-of-way granted herein are in gross. The easement and right-of-way acquired herein are acquired subject to the first right of Grantor, its successors or assigns,to operate, repair, replace, maintain and use the Water Storage Tank and the Easement Area, including the surface and subsurface of the land within the Easement Area, as part of and in conjunction with the operation of that certain Seawater Desalination Facility located on that certain real property described as Parcel 3 in the Tentative Parcel Map attached hereto as Exhibit "A" (hereinafter, the "Seawater Desalination Facility"), and may only be exercised by Grantee in the event that the Condition Precedent to Exercise of Easement and Right-of-Way set forth below is met. Condition Precedent to Exercise of Easement and Right-of-Way: As a condition precedent to Grantee's exercise of the easement and right-of-way granted herein, the<`. Seawater Desalination Facility shall have ceased operations and been shut down in excess of one continuous year. Procedure for Exercise of Easement and Right-of-Way by Grantee: Prior to exercise of the easement and right-of-way granted herein, Grantee sha .'deliver to Grantor, its successors or assigns, a written notice of Grantee's intent to exercise the easement and right-of-may granted herein. Such written notice shall set forth in detail the facts that support Grantee's assertion that the Seawater Desalination./Facility has ceased operations and been shut down in excess of one continuous year. Grantor, its successors or assigns, shall then have thirty (30) days to deliver to Grantee a written rebuttal of Grantee's assertion. In the event that Grantor, its successors or assigns, do not deliver a written rebuttal to Grantee within thirty (30) days after receiving Grantee's written notice of intent to exercise the easement and right-of-way, or within any extension of time to deliver such rebuttal provided in writing by Grantee, then nothing shall inhibit the full and free exercise of the easement and right-of-way by Grantee. In the event that Grantor, its successors or assigns, deliver a written rebuttal to Grantee within thirty (30) days after receiving Grantee's written notice of intent to exercise the easement and right-of-way, or within any extension of time to deliver such rebuttal provided in writing by Grantee, then the parties shall meet in good faith,to mediate such dispute prior to seeking any legal relief to which they may be entitled. Limitations on Exercise of Easement and Right-of-Way: Should Grantee exercise the easement and right-of-way herein granted, Grantee agrees to abide by all of the limitations in this paragraph. If, during the exercise of the easement and right-of-way by Grantee, the Water Storage Tank, the Easement Area, or any material portion thereof is totally or partially destroyed of damaged from any cause whatsoever, Grantee, at its sole cost and expense, shall make or cause to be made such repairs or replacements as are necessary to restore operation of the Water Storage Tank, or the Easement Area, or both, as soon as possible. After completion of any work performed by Grantee or its agents, contractors or employees which disturbs the Water Storage Tank or the Easement Area, or both, Grantee shall restore the Water Storage Tank or the Easement Area, or both, as close as reasonable to its original character. Grantorfs Right to Resume Operations; Discontinuance of Grantee's Exercise of Easement an.'�Ri.ht-of-Wa : At any time during Grantee's exercise of the easement and right-of-w. ' herein granted, Grantor may deliver to Grantee a 30-day, written notice of Grantor' ntent to resume operation of the Seawater Desalination Facility. Grantee shall then h. ,e thirty (30) days after receipt of such written notice to discontinue Grantee's exerc. e of the easement and right-of-way granted herein, and turn over operation of the Wa -r Storage Tank to Grantor. Thereafter, Grantee shall hold the continuing right to e -rcise the easement and right-of-way granted herein in accordance with the Procedure '•r Exercise of Easement and Right-of-Way by Grantee set forth above. IN WITNESS WHEREOF, Grantor has caused its duly authorized representatives to execute this instrument as of the date hereinafter written. Dated: GRANTOR • EXHIBIT"A" TENTATIVE PARCEL MAP TENTATIVE PARCEL MAP No. 2010 130 IN THE CITY OF HUNTINGTON BEACH.COUNTY OF ORANGE.STATE OF CALIFORNIA ANTHONYC.CUO,,O.PI-5 JOHNSO7..%RANA E.O SODA TES.INC. I E{:AI DESCRIPTION 5150 EASTHIJNTER AVE ANAHEIM.A92807 01 re NC Orr 0,0010VM MM..Mc•M Cr COMM SucC rcw.r+o<..mwo1 s•..m n•er mur I MN n.n wmm aoa a A.MA R-a.m•,.o,r w w. A•a,IaNW.r MC.a•OY,.,M. M oT raf w..IM WI - MOO •:C000: I 11 r -i °tn `GIB QA• S c g l ira a•3' ,,.l--I l Y`1 1 -,,,:,> \'� l 1,..51 7L " ,gym.. �„,.•"r• wx , 1 t ASSESSORS PARCEL No ' =''`' 1I .,---,tot ...r— Ir-wO�N MVO* -RIr-M-r II 11 j>D~N•• _ --s-._., if-'-‘, \ yt �La.I �fi 11 , OEM S11RaV10ER w , �* .r}"" ti" 1t t tf ii I I WIMwwIaR rAw as ao.oR.uc r®w alum ao.aalW CO�f 1 I , „t—?�`, e 7 • '71 I F I ll H II t UMN▪ N•C•04.uAnm-mr IOR01 cv CUM w"`LC as�cn.°' iS t' 1 +1 ' I £ E r 1 't %°s.arl..n.ep.'u°' SURVE c,ra wL wn z i.i I R,,,,„r Q t/ I;J4 r i , • 9 I I 'l P1)q .u0a 4.w.. 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T UN-PLOTTED EASEMENTS / �''e�.4/_ WOO.,MOMS 100 KM r,00(0 R NM Mu.rw • Mm.M0a MM,w.wR me oar cum,romr x M M.Ma / //q v,% L,w w...af M MEMO 0100 I.L wna,ea or a Md / IX MY 00 dOCAMICI MC / / • h/IJ• j' .. OM n..roa wa<csw,r auawcs wawm \ / OW rnuw.0OrWC.ur�Irs.w rn,nmw �••' PROPOSED EASEMENTS AND :®Or NM L r IL 0/000rMOMMSrI0 r n MET r Mr OF 0301 DEDICATIONS M m..OM a»n 0.0%0 UUL.SAs wla.. ® wmRNO AaLSt44wI-NrI[ A OWL 05C mwL.:RAM.WORM,00M.NL C .r • MOOED__ R LT NM MN A.aw oa.M.sow mass pm,.saw,wa of- a.' WAYS!a 100 0 Mat NM rode IT N.Icr..m a\rWT Wet N.W.S.SA SAWN i Tc.t ama.c f.R 0 •Ivan Aaar unwary-ar A(ow ITya.f.MrAams ODORSA Ill SMOKY tlMmII naA0 W: .T. O /w1®M!M[IIWT NSORf -"Ai INC McOM 010100..v-•w aC Ma oa. N--�-� Q FMM6•A4aq NO OKIMaOL wlaanMCMY 41agn-WAIY,MIX NM M MOD MA MOM d P OTICYL ROaO[ r. O woo.IOC 4eOw-•Y Nor 1000000.1001006. MOORS 4YS MR K Mm a.400 MO S IL OW A.Iw..wlr.0OTM..MOMS 3 g g g 6 MUM wan Or wr.mr.w-mom mar-s NY cOOA 1,00007 AY mal.aa W:MIm R NC•.„.ar ® Iwlan wwr or Off am...-...r mvR oa.w.nMs.w,.slo.roau.c,NMm • `w'ws.I u.a�wAMn N.aaRrm..r MR Rrm.a R.c i i 0 .NMan wan r wAMMO.r• M.-DON S00700000 AMMO SCOA.wf am®Ar..,N.AVM w.aM n«rM . a..®M..a MM r.I.a.w.wODa • 0 macro 0000 •00,14mr MUMS A- ® rlooTo ANao MOM, FLOOD 70NE DESIGNATION 41■ III O reran AI.m. sMlr-MI we arwmnr sa.r w K raw ream wwMa AMC ry RMe.mru aWn srmn4 a 8*871*4 wIm®Aal$4OMrI-.Y..l RwawlYa amawio ws tow woof Row mC r: ICIa.A A. p� Tom- AW O CCM MwWL oRM¢Cr AMU ISM Y IS BF CORDED EASEMENT mt AS 040 aWtWa O 01,0000C Y0 0 r I�MC r al 1 roar Wp110.WY•K/,Y 163 MM I A/Mr I,rE'MO ORiriTar.al..rm>:rlWt LAW MOO Ia A•Mµ arM4 es. .'.4474. r; a amw vMM 4Nawr ALAV R S.aL KA.W a M00,L e~ e .C.WMO�.�,m Ma „a'R^M^'°°"M°TSURVEYORS suTEMENT ler a0..o aMLsowv.0a A.N vna,A.wu•a,uNm 49vMIr IM r 01 IMW..L RK M Mao R M o Me MIL e R aeex _ ww war SA.c..MIL Mt..,T:awaCOWMrw.ew-•—' .IIYWOW Iaour'°O4�`,,.a.e�'�'ai,.°e oaTM A.MMa R T..AO WOOIwaAa os�llw A.. 00. Rt ma/001007 Or PhOoL Mr �mMa4.w4aMr Ram a ,OOD...ad' 1� a MaM 4W,ra mom R aLL.m.�. NM „Maw L MOM •�'A,rW e A<[wa,rr rv.mRM.w wR T.0 M. OMMMS LM.ON e 44113.f M nwr r Mu.M.`40 0O.a' AAnma rw 0 .m VICINITY MAP IM^N"10910. COMMW M°"a'ML aA' 0- RE% 2010-08-IQ / Exhibit C Form of Right of First Refusal and Option to Repurchase [to be inserted] 25 RIGHT OF FIRST REFUSAL AND OPTION TO REPURCHASE AGREEMENT This RIGHT OF FIRST REFUSAL AND OPTION TO REPURCHASE AGREEMENT ("Agreement") is entered into as of (the"Effective Date")between the CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California ("City"), and POSEIDON RESOURCES (SURFSIDE)LLC, a Delaware limited liability company ("Poseidon")to provide the City with a right of first refusal and an option to repurchase real property that will be developed by Poseidon as provided herein. RECITALS A. Poseidon is the owner of the real property referred to herein as the "Tank Site" consisting of approximately 3.5 acres, located in Huntington Beach, California, which real property is described as Parcel 1 in the Tentative Parcel Map attached hereto as Exhibit"A" (hereinafter, the "Tank Site"). B. Poseidon intends to construct a 10 million gallon water storage tank,together with the necessary fixtures and appurtenances including a product water pump station (collectively hereafter,the "Water Storage Tank")to be used as part of and in conjunction with the operation of that certain Seawater Desalination Facility which will be constructed and operated by Poseidon on that certain real property described as Parcel 3 in the Tentative Parcel Map attached hereto as Exhibit"A"(hereinafter, the"Seawater Desalination Facility"). C. City desires to obtain a right of first refusal and option to repurchase the Tank Site together with the Water Storage Tank in the event that the conditions provided herein occur. AGREEMENT NOW,THEREFORE,for good and valuable consideration,receipt of which is acknowledged, the parties hereto agree as follows: 1. Grant of Right of First Refusal and Option to Repurchase. Poseidon grants to City a right of first refusal ("Right of First Refusal") and an option("Option")to repurchase the Tank Site and the Water Storage Tank upon the terms and conditions set forth in this Agreement. The Right of First Refusal and Option shall commence as of the Effective Date of this Agreement and this Agreement, or a memorandum of this Agreement, shall be recorded within five (5) days after the Effective Date. Any security interest held by third parties in connection with Poseidon's financing of the construction of the Seawater Desalination Facility or the Water Storage Tank shall be subordinate to the Right of First Refusal and Option. 2. Purchase Price. The Purchase Price("Purchase Price")that City agrees to deliver to the Escrow Holder(as hereinafter defined)upon the opening of Escrow(as hereinafter defined) for the purchase of the Tank Site and the Water Storage Tank shall be the sum of One Dollar($1.00). 3. Condition Precedent to Exercise of Right of First Refusal'and Option. As a condition precedent to City's exercise of the Right of First Refusal and Option, Poseidon shall have abandoned the Seawater Desalination Facility and forever ceased operations either as a result of foreclosure, bankruptcy or any other similar transfer of all of Poseidon's interest in the Seawater Desalination Facility. 4. Procedure for Exercise of Right of First Refusal and Option: Prior to exercise of the Right of First Refusal and Option, City shall deliver to Poseidon, its successors or assigns,a written notice of City's intent to exercise the Right of First Refusal and Option. Such written notice shall set forth in detail the facts that support City's assertion that Poseidon has abandoned the Seawater Desalination Facility and forever ceased operations. Poseidon, its successors or assigns, shall then have thirty (30) days to deliver to City a written rebuttal of City's assertion. In the event that Poseidon, its successors or assigns, do not deliver a written rebuttal to City within thirty(30) days after receiving City's written notice of intent to exercise the Right of First Refusal and Option, or within any extension of time to deliver such rebuttal provided in writing by City, then the parties shall open the Escrow(as hereinafter defined)and complete the sale of the Tank Site and the Water Storage Tank from Poseidon to the City in accordance with the terms of this Agreement. In the event that Poseidon, its successors or assigns,deliver a written rebuttal to City within thirty(30)days after receiving City's written notice of intent to exercise the Right of First Refusal and Option, or within any extension of time to deliver such rebuttal provided in writing by City,then the parties shall meet in good faith to mediate such dispute prior to seeking any legal relief to which they may be entitled. 5. Escrow: In accordance with the procedure set forth in Section 4 above, Poseidon and City shall open an Escrow with Stewart Title Company. The parties shall jointly submit signed escrow instructions to the Escrow Holder. The obligations of the parties shall be subject to conditions typically associated with the purchase and sale of similar properties of this size and quality, including but not limited to satisfactory representations and warranties,receipt of a title insurance policy evidencing marketable title and payment of each party's respective and customary charges for document drafting, recording and miscellaneous expenses. 6. General Provisions. 6.1 Real Estate Brokerage Commission. Each party represents and warrants to the other that no broker or finder is entitled to any commission or finder's fee in connection with this transaction, and each agrees to defend and hold harmless the others from any claim to any such commission or fee resulting from any action on its part. 6.2 Assignment. a. This Agreement shall be binding upon and shall inure to the benefit of City and Poseidon and their respective heirs, representatives, successors and assigns. b. The parties hereto may not assign any of their rights pursuant to this Agreement without first obtaining the written consent of each of the other party. In no event shall any assignment relieve the assigning party of any of its obligations under this Agreement. 6.3 Approvals and Notices. Any approval, disapproval, demand, document or other notice ("Notice")which either party may desire to give to the other party under this Agreement must be in writing and may be given by any commercially acceptable means to the party to whom the Notice is directed at the address of the party as set forth below, or at any other address as that party may later designate by Notice. Any Notice given under this paragraph, whether personally or by mail, shall be deemed received only upon actual receipt by the intended party If to City,to: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Atten: Director of Public Works Telephone: 714-5 3 6-5 34 8 Telecopier: With a Copy to: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Atten: City Clerk Telephone: (714) 536-5404 Telecopier: (714) 374-1557 i If to Poseidon,to: Poseidon Resources (Surfside)LLC 501 West Broadway, Suite 2020 San Diego, CA 92101 Atten: President Telephone: (619) 595-7802 Telecopier: (619) 595-7892 or to such other address or to such other person as any party shall designate to the others for such purpose in the manner hereinabove set forth. 6.4 Jurisdiction and Venue. This Agreement shall be construed under the laws of the State of California in effect at the time of the signing of this Agreement. The parties consent to the jurisdiction of the California courts with venue in Orange County. 6.5 Titles and Captions. Titles and captions are for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or of any of its terms. References to section numbers are to sections in this Agreement, unless expressly stated otherwise. 6.6 Interpretation. As used in this Agreement, masculine, feminine or neutral gender and the singular or plural number shall each be deemed to include the others where and when the context so dictates. The word"including"shall be construed as if followed by the words "without limitation." This Agreement shall be interpreted as though prepared jointly by all parties hereto. 6.7 No Waiver. A waiver by any party of a breach of any of the covenants,conditions or agreements under this Agreement to be performed by the other party or parties shall not be construed as a waiver of any succeeding breach of the same or other covenants, agreements, restrictions or conditions of this Agreement. 6.8 Modifications. Any amendment, change or modification of, or supplement to this Agreement,in order to become effective, shall be made in writing and in each instance signed on behalf of each party. 6.9 Severability. If any term,provision, condition or covenant of this Agreement or its application to any party or circumstances shall be held,to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision,condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law. 6.10 Cooperation. Each party agrees to cooperate with the other party in the closing of this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Agreement including, but not limited to, releases or additional agreements. This Agreement has been executed at Huntington Beach, California, as of the date set forth at the beginning hereof. City: Poseidon: CITY OF HUNTINGTON BEACH, a POSEISON RESOURCES (SURFSIDE) LLC, Municipal Corporation of the State of a Delaware limited liability company California By By Its Its By By Its Its EXHIBIT"A" TENTATIVE PARCEL MAP TENTATIVE PARCEL MAP No. 2010 - 130 IN THE CITY OF HUNTINGTON BEACH.COUNTY OF ORANGE.STATE OF CALIFORNIA AN THONYC.CUOMO.MS JOHNSONFRAW a ASSOCIATES.INC. IMAI DESCRIPTION 5150EAST1-1VNTERAVE ANAHEIM.Ao2L:7 (7107778877 or...n r.A..rm....awn o r..rt MS r LAMA.a..A f.m.Ier Cr MOM M r MST I.. . VA.w.st.o..Arose.«At n-a.a,.l.o.... C. SA o.A..r CAM. ;n '( __(%.Qh -4ts p -t _ 9= A.r } \\ ASSESSORS PARCEL No 9 ' �-., D 9 • at .m.wa r ar MONO O...e awn ..r StAttE8 E .. f .,...'�� =¢ti`l /} ° ,. t k ; war. IO..<.oamTiam-�_S ue r®a s,e MO kit d}i \ ^atl, p` I h! ` nk !# o .E Orr reMw.TOM4. =EMI a{ �I1;) > IA... It' �/ —' { #�! A NOT WM w4•44.0o'Art a a... 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TO AA zusi la 'T. I.AMR EwaM aWnro�D ' VICINITY MAP ^""""'"0.41.SIAX."a""a`°" REN 10I0-06-10 ATTACHMENT #2 SIT M-AP--- .l. '.ma,r '� �'�, "i:::;�- ..�'`� � _ �� ��• �::s:-,:, �� L ::;"fit � � �, �:• ,a/ _-�.�• �\ `'ic.�:�. ,�,�5' '?��^ ��,s``• 5%`.�e..:' � /r r`% x si;`'di`. ✓"y •-v`�� V to �� A ���;: ��s,• r} ���� �a ,���• n.'�,= fir`,:..; �` w PM im *3: •`may.-'; �,yy^ ,?�„E -"�,' �- y.:'•d;'< ALL.�\ � � '� � .., ✓i i f i.��„ � � �., .\ a„r1a• ,"ram �\ �S,;,z•.. •,',sia 'y � ,u„R4a/.f :t>,�Gi .K ���. -a�:} ma's, � •�.; es ��,+*, ,?,`\\✓.• y-L, ^�;.w�„per a• t•+ ••%�a g 1„ •ter y� '�, �3 ;ail ::���• •„%".'>-.,fez: \�'f:�:� .,,Z...\xf- ® .&� 6 qi- p li: