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Stanley M. Bloom - 1990-01-01 (3)
REQ"'SST FOR CITY COVMCIL/ REDEVk3PMENT AGENCY h&ION RH90-36 t November S, 199( , Date Honorable Mayor/Chairman & City Council/Redevelopment Agency Members - rn Submitted to: -- W�r r.7 r- Michael T. Uberuaga, City Administrator/Chief Executive Officer Warn Submitted by: { � Barbara A. Kaiser, Deputy City Administrator/Economic DevelopmentDJ42 - r Prepared by: C= 71 Q TRANSFER OF CITY PROPERTY (PIERSIDE RESTAURANTS LEASE srm TO Subject: THE REDEVELOPMENT AGENCY MAIN—PIER REDEVELOPMENT PROJECT .2 Consistent with Council Policy? Yes [ ]'New Policy or Exception %R co .`(Lo Statement of Issue, Recommendation,Analysis, Funding Source, AI(emativg Actions,Attachments: STATEMENT OF ISSUE: At the direction of the Redevelopment Agency, staff has been negotiating an amended Pierside Lease for the proposed Pierside Restaurant project. The proposed lease outlines the terms of a ground lease by the Redevelopment Agency to the developer, allowing for the development of restaurants, plazas, promenades, and parking facilities. Transfer of the site from the City to the Agency is required to complete the transaction. The Planning Comission is scheduled to consider the conformance of the conveyance with the General Plan at their November 6, 1990 meeting. Therefore staff recommends continuance of this item until after Planning Commission action. RECQMMENDATION: Staff recommends continuance of this item until Planning Commission acts on the conformance of the site conveyance with the General Plan. ANALYSIS: Development of the 3.5 acre site located at Main Street and Pacific Coast Highway south of the pier, requires the transfer of the site from the City to the Agency. Lease negotiations have been concluded with the developer, Stanley M. Bloom and the Pierside Lease has been executed by the developer and filed with the City Clerk in anticipation of-the public hearing. The Agency must acquire the subject parcel from the City of Huntington Beach at a price equal to the current fair market value at the highest and best use allowed by the zoning codes and General Plan of the City, as well as the Downtown Specific Plan District 10. The value of this property is $5,860,000. The Agency will acquire the property, subject to a 3S year note from the City, bearing interest at 10% per annum and make payments in accordance with the attached schedule. Staff recommends continuance of this item until after the Planning Commission has considered conformance of the conveyance with the General Plan. FUNDIING SOURCE: No funds are required for the proposed.action. PIO 4/84 RCA/RAA RH 90-36 November 5, 1990 Page two ALTERNATIVE ACTIONS: 1) Consider transfer of the property at this time. ATTACH'uIENTS: 1) Resolutions No. and No. 2) 33433 Report. 3) Site Plan and Legal Description. 4) Sale Agreement. 5) Schedule of Payments 7972r MTU/BAK/KBB:lp } r•A r Vb w' w' w w � 2� y fn G� Y PACIFIC AST HIGHWAY . Ia.rlt.•rf lul/raa.• aar ff a.»r !..1 TiTTfTE: Mill ��TTi �...,.R..e...r MKr FM ., _L fu1.M •a.l• I• •1• i �. . `•euaar+c C N f r eu Ld c A � —f 1 PICA -y I fl•.1». I f�• SYMBOL LEGEND PARKING TABULATION' PL.'l Z.f LEVEL ('{� w•wp 4►.Cd ff Yaf HfRllr aw 'HalA lfYy �..�»� � . YA.lf� '�. '1IOaf r•r• V wq rr.vl •Mft<lw.lerlW 14 l _ �r M f.w w r .1 ISM rnoa++�u1 .......... PIER SIDE REST11URf1NT DEVELOPMENT m C=.CAAf+T r1 M � � W, Lai wl N PAC1FlC COAST HIGHWAY _ arn.e.•wa aw•e•Iw, u.,\au..• • e.r rw.•a\•• a ti :: - tz ba BUILDING A �•-7 .,.�. "i ��'�' f , —� "BUILDING C • 8VrL61NG B _ r PIER I SYMBOL LEGEND PARKING TAevLATION PL I Z 1f LEVEL MrA../.al 'K .••,'w•�1F0-,a.a.a• PIERSIDE REST.IfUR ,4NT DEVELOPMENT m C�.CArxY • Pi • .w J If31T A LBGAL D ON Bcginrting at the centerline on of Paci.f%C r Oast Hicft y and Ia)m Street, shown as Ocean Avenue and First Strom respectively, on said mentioned rep; thence along the oenterline of Pacific Coast Highmny mrth 4802IP42" east-37.50 feet to the intersection with the southwesterly extension of the southeast right-of-way lim of Wm Street; thence saxth 41038'l8" west 50.00 feet to the true point of beginning; thence north 48021142" west 1,020.00 feet; thence south 41038/1811 WWt 200.00 feet; thence south 48021142" mst. 1020.00 feet; the-noe north 4103 8'18" east 200.00 feet to the true point of be ginnirx3. �- RLAAYM MT OF CITY LARD VALUE EXHIBIT B PIERSIDE RES"MURANT COMPLEX NUNTINOTON 9SACH, CALIFORNIA AtENCY PAYMENTS TO THE CITY .... .......... 1 1991 498,260 2 1992 421,019 3 1993 327,120 ' 4 1994 246,748 3 1995 294,138 6 1996 315,973 7 1997 344,754 8 1998 371,564 9 19" 4221423 10 2000 452,340 11 2001 483,454 12 2002 515,812 13 2003 549,464 14 2004 766.164 , 15 2005 $09,831 16 2006 855.244 17 2007 902,474 18 2008 951,592 19 2009 1,002,676 20 2010 1,055,303 21 2011 1,111,055 22 2012 1,168.318 23 2013 1,228,278 24 2014 1,290,429 25 2015 1,634,787 26 2016 1,713,199 27 2017 1,794,746 28 2018 1,877,556 29 2019 1.967,759 30 2020 2,059,439 31 2021 2,154,888 32 2022 2,S79,604 33 2023 2,iW,7Ir8 34 2024 2,790,099 35 2025 196,692 36 2026 0 37 2027 0 38 2028 0 39 2029 0 40 2030 0 - 41 2031 0 42 2032 0 43 2033 0 44 2034 0 45 2035 0 46 2036 0 47 2037 0 48 2038 0 49 2039 0 so 2040 0 51 2041 0 52 2042 0 53 2043 0 S4 2044 0 55 2045 0 PRESENT VALUE OF PAYKINT 5,859,000 TOTAL P.04 SUMMARY REPORT PURSUANT TO SECTION 33433 of the CALIFORNIA COMMUNITY REDEVELOPMENT LAW on a LEASE AGREEMENT by and .between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and STANLEY M. BLOOM, AN INDIVIDUAL I. INTRODUCTION The California Health and Safety Code, Section 33433, provides that if a redevelopment agency wishes to sell or lease property to which it holds title and if that property was acquired in whole or in part with tax increment funds, the agency must first secure ap- proval of the proposed sale or lease agreement from its local legislative body (City Council) after a public hearing. A copy of the proposed sale or lease agreement and a summary report that describes and contains specific financing elements of the proposed transaction shall be available for public inspection prior to the public hearing. ''As contained in the Code, the following informa- tion shall be included in the summary report: 1 . The cost of the agreement to the agency, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the agency, plus the expected interest on any loans or bonds to finance the -agreements; 2 . The estimated value of the interest to be conveyed or leased, determined at the highest uses permitted under the plan; and 1 3 . The purchase price or sum of the lease payments which the lessee will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use consis- tent with the redevelopment plan, then the agency shall provide as part of the summary an explanation of the reasons for the difference. r -• This report outlines the salient parts of the Pierside Lease Agree- ment (the "Agreement" ) which provides for the leasing of property owned by the Redevelopment Agency of the City of Huntington Beach ( "Agency" ) to Stanley M. Bloom ( "Developer" ) for the purpose of constructing a restaurant development. This report is based upon information contained in a proposed Lease Agreement and is organized into the following four sections : 1 . Description of the Proposed Agreement - This section in- cludes a description of the site and interests to be leased, the proposed development and the major respon- sibilities of the Agency and the Developer. 2 . Cost of the Agreement to th4e Agency - This section out- lines the cost of the Agreement to the Agency. In addi- tion, it discusses the ground lease payments to be paid by the Developer to the Agency, provides a projection of tax increment revenues resulting from the new development and sets forth the net cost of the Agreement to the Agency. The net cost to the Agency equals Agency expen- ditures minus the present value of the lease payments and the value of the tax increment generated by the new development, plus any other resources pledged to the pay- ment of related expenses. 2 3 . Estimated value of the Interests to be Leased - This section summarizes the Agency appraisal of the value of the parcel to be leased to the Developer. 4. Purchase Price and Reasons Therefore - This section describes the purchase price, which is equal to the present value of the anticipated lease payments, to be paid by the Developer to the Agency. It also contains a comparison of the purchase price ( lease value) and the fair market value at the highest and best use consistent with the Downtown Specific Plan 10 for the interests con- veyed. II. DESCRIPTION OF THE PROPOSED AGREEMENT A. Site and Interest to be Leased The site consists of 3 .5 acres of land immediately south of the Huntington Beach Pier, on the ocean side of the Pacific Coast High- way. Currently, the site is improved with a 17, 800 square foot commercial structure with miscellaneous retail on the first level, "Maxwell's" Restaurant on the second level, a freestanding struc- ture containing "Dwight's" hamburger stand, and a public parking lot. B. The Proposed Development The proposed development for the site is a - 48, 500 square foot res- taurant complex. The restaurants will be built on an elevated deck with 611 structured parking spaces provided. Public access to the beach will be provided by two central staircases leading to the beach level . 3 C. Agency Responsibilities The Agency responsibilities can be summarized as follows: 1. Purchase the subject site from the City of Huntington Beach. 2 . Provide the site in a reasonable time period free and clear of all recorded encumbrances , assessments , leases/subleases, possesory rights, franchises, license and taxes, except as set forth in the Agreement. 3 . Reimburse to the developer the total construction cost of 250 parking spaces being built to replace the existing public parking plus an additional 11 spaces . 4 . Finance the difference in construction costs between the structured parking and surface parking for the remaining 361 parking spaces . The Agency will amortize the cost differential in 30 annual payments. - D. Developer's Responsibilities The developer's responsibilities are as follows : 1 . • Ground lease the site from the Agency for an original term of 55 years. 2. Finance all off-site costs, except as specifically set forth in the agreement. 4 3 . Construct a 48,500 square foot restaurant complex on a raised deck at the quality level implied in the eleva- tions and developer pro forma. 4. Develop 611 on-site structured parking spaces. 5. Provide public beach access from the project. III. COST OF THE AGREEMENT TO THE AGENCY The total cost of the Lease Agreement to the Agency, and the net costs of the project after consideration of project revenues are presented herein. Both the total and net costs of the Lease Agree- ment are presented in terms of absolute dollar amounts generated over the 55-year lease and in terms of the present value (PV) of expenditures and receipts resulting from implementation of the Lease Agreement. The PV of expenditures and receipts has been com- puted using an assumed discount rate of 10% . The difference be- tween the PV of expenditures and the PV of receipts constitutes the net present value cost of the Lease Agreement to the Agency. This net cost can be either an actual cost (where expenditures exceed receipts) or a net gain (where revenues created by implementation of the Lease Agreement exceed expenditures) . A. Total Costs he Agency Table 1 contains a listing of the Agency's estimated expenditures, by major category, relating to its obligations under the Lease Agreement. Per Table 1, total implementation expenditures by the Agency over the 55 year original term of the lease are estimated at approximately $53 . 61 million, which equates to $14 . 82 million in present value terms . The basis of this estimate is presented below. 5 1 . Site Acquisition Costs The Agency must acquire the subject parcel from the City of Huntington Beach at a price equal to the current fair market value at the highest and best use allowed by the zoning codes and general plan of the City, as well as the Downtown Specific Plan District 10 . The value of this property is estimated at '$5. 86 million. The Agency will acquire the property subject to a note from the City, bearing interest at 10% per annum. 2 . Site Preparation/Relocation Expense In order to prepare the site for the proposed develop- ment, the existing tenants must be relocated at the ex- pense of the Agency, there could be legal expenses as- sociated with any potential condemnation actions taken, the Agency is responsible for $50, 000 of toxic clean-up costs and the Agency must ensure adequate utilities are available to the site. These costs have been capped in the Lease Agreement at $1 .0 million. 3. Parking Costs The Agency parking costs consist of two components: a. An upfront payment of $4 .0 million to cover the to- tal construction cost for the 250 replacement public parking spaces. b. An upfront payment of $1 .0 million, plus thirty an- nual payments of $325,500 to amortize the difference in construction costs between structured parking and surface parking for the 361 spaces serving the 6 private development. The rationale for this payment is that in a typical ground lease where the lessor is receiving 2 .00$ to 3.25% of gross sales as rent, the lessor has provided enough land to allow for the building improvements and surface parking. In the proposed Lease Agreement the Agency has not provided enough land to develop a sufficient amount of sur- face parking and, thus, must make up the difference in parking costs to justify the lease terms. These parking payments total nearly $10.76 million, with a present value of $3 .96 million. B. Agency Revenues Table 2 shows the nominal and present values of the Agency revenues created as a result of implementation of the lease. I . Ground Lease Payments The Pierside Lease Agreement is structured so that the amount of ground rent paid is directly related to the project's performance. The ground rent schedule is as follows: Percent of Total Sales Gross Restaurant Sales A2plied to Ground Lease $0 - 35 million 2 .00% $35 - $55 million 2 .50% $55 - 100 million 3.00% $100 million + 3.25% 7 In no event can the percentage of gross sales applied to the ground lease payment decrease from year to year. Ad- ditionally, in Years 30, 40 and 50, a base rent equal to 75% of the average of the preceding 3 years of lease pay- ments will be applied. After Year 30, through the ter- mination of the lease, in no event can the annual lease payment decrease from year to year. Over the original term, Keyser Marston Associates, Inc. has estimated that the lease will generate nearly $124 million in revenues, with a present value of $8.07 million when discounted at 10% annually. In addition, the property will revert to the Agency at the termination of the lease. The revers- ionary value is projected at nearly $145 million. This equates to $764,000 in present value terms. 2. Guaranteed Parking Payment Currently, the City is receiving net revenues after ex- penses of $110,000 from the site annually. The developer must guarantee this parking income, with upward adjust- ments commensurate with increases in other City parking revenues, over the life of the lease. This provides to- tal revenues of $21 . 03 million, which have a present value of $1 .75 million. 3 . Tax Increment Revenue It is currently estimated that the proposed project will have an assessed value of $14 . 19 million upon completion. When this is reduced by the current assessed value of $1 .06 million, the incremental value is approximately $13. 13 million. Assuming a first year tax rate of 1.077% and set-asides equal to 20%, this results in property tax increment of +$113, 000 in the first full year of B operation. Assuming the assessed value increases at 2% annually, and the project area ends in 20181 the project should produce tax increments of approximately $4.04 mil- lion over the remaining life of the project area. The present value of the tax increments generated by the project is $1.20 million. A summary of anticipated revenues is shown in Table 2. C. CQm2arison of ExpenditUresRevenues A comparison of the present value of the expenditures and revenues discussed above results in the following tabulation: Total Dollars Present Value Over a 55-year Over a 55-year Lease Lease Total Agency Revenues $293,241, 000 $11,783, 000 Less: Agency Costs (53, 605,000) (14, 818,000) Net Gain (loss) $239, 636, 000 ($3,035,000) The analysis above indicates that as a result of implementation of the Lease, the Agency can expect to realize a gain over the lease period of almost $240 million in actual dollars. On a present value basis, project costs exceed project revenues by approximately $3.04 million. 9 IV. ESTIMATED VALUE OF INTEREST TO BE LEASED The value of the interest to be leased has been computed at its highest and best use allowable under the zoning codes and general plan of the City, as well as the Downtown Specific Plan District 10. Under these constraints, Keyser Marston Associates, Inc. has estimated that the proposed use is the highest and best use. Thus, the present value of the ground lease and parking revenues to the Agency, less the present value 'of the amortized parking costs, is the estimated value of the site. The amortized parking payments are subtracted to reflect the extraordinary site costs that must be borne by the lessor in order to make the site developable at the proposed intensity. The present value of the ground lease and parking revenues has been estimated to be $9 . 82 million and the present value of the amortized parking costs is $3 . 96 million, therefore, the estimated value of the site is $5 .86 million. V. LEASE PAYMENTS AND REASONS THEREFOR Based upon an analysis of the ground lease payments to the Agency conducted by Keyser Marston Associates, the present value of the developer's ground lease payments is $5. 86 million. This amount is estimated to be the market value of the property and, thus, the Agency is receiving the fair market value for the site. 10 TABLE 1 ESTIMATED AGENCY COSTS PIERSIDE RESTAURANT COMPLEX LEASE AGREEMENT HUNTINGTON BEACH, CALIFORNIA TOTAL PRESENT DOLLARS VALUE SITE PREPARATION $1,000,000 S1,000,000 PARKING COSTS UPFRONT COSTS (REPLACEMENT SPACES) $4,000,000 S4,000,000 AMORTIZED COSTS $10,765,000 S3,959,000 LAND PAYMENT TO CITY $37.840,000 $5,859.000 TOTAL AGENCY COSTS S53,605,000 $14,818,000 TABLE 2 ESTIMATED AGENCY REVENUES PIERSIDE RESTAURANT CCHPLEX LEASE AGREEMENT HUNTINGTON BEACH, CALIFORNIA TOTAL PRESENT DOLLARS VALUE GROUND LEASE PAYMENTS $123,748,000 58,069,000 REVERSIONARY VALUE OF LAND %144,426,000 $764,000 GUARANTEED PARKING PAYMENT 521,028,000 $1,749,000 TAX INCREMENT $4,039,000 $1,201,000 TOTAL AGENCY REVENUE 5293,241,000 $11,783,000 CITY AND�AGENQX AGREEMENT FOR THE PURCHASE AND SALE -OF PROPERTY THIS AGREEMENT, dated as of , 19_, by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a redevelopment agency and public body, corporate and politic, organized and existing under and by virtue of the laws of the State of California, (the "Agency") , as purchaser, and the CITY OF HUNTINGTON BEACH,•..-a municipal corporation of the State of California (the "City") , as seller; WHEREAS, the Agency is agreeable to paying to the City the appraised value of the Property the legal description of which is in Exhibit A attached hereto and incorporated herein by this reference; and WHEREAS, the acquisition of the Property by the Agency will facilitate the assembly of developable sites within the Main-Pier Project Area; and WHEREAS, the Agency agrees to accept conveyance of the Property; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants hereinafter contained the parties hereby agree as follows: Section_. . Sale , of_Rrgperty. The City agrees to sell and the Agency agrees to purchase the Property for the appraised amount based on the highest and best use of Five Million, Eight Hundred Sixty Thousand Dollars ($5,860, 000) , payable pursuant to the payment schedule set forth in Exhibit "B" attached hereto and incorporated herein by reference. Section2. Interest -on-Agency Payment Obli ation. The obligation of the Agency shall bear interest until paid in full at the rate of ten percent (10%) per annum. This Agreement constitutes an indebtedness of the Agency incurred in carrying out the Project and a pledging of the tax allocations from the Project to repay such indebtedness under the provisions ' of Section 19 of Article XIII of the California Constitution and Sections 33670-33677 of the Health and Safety Code; provided, however, that such pledge of tax allocations shall always be subordinate and subject to the right of the Agency to pledge or commit tax allocations from the Project to repay bonds or other indebtedness incurred by the Agency in carrying out the Project . Section. Conveyance shall be effected by grant deed in the form attached hereto as Exhibit "C" and incorporated herein by reference. The Agency assumes the obligation to pay all costs associated with the conveyance of title. Sectionn 9 . Qbligation to Refrain frQM Disc,riMination. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, or ancestry, in the sale, lease, sublease, transfer, use, occupancy, tenure, or enjoyment of the City, nor shall the Agency itself or any person claiming under or through it establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use of occupancy of tenants, lessees, subtenants, sublessees, or vendees of the City or any portion thereof . IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first above written. CITY OF HUNTINGTON BEACH By: - Mayor SEAL ATTEST: City Clerk APPROVED AS TO FORM: a�c-i4a zzz':�--- City Attorney �o•3i'y� REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH By: Chairman SEAL ATTEST: Secretary (signatures continued on next page) 10/29/90 1654u/2460/000 -2- (signatures continued from prior page) APPROVED AS TO FORM: A envy Counsel �(G' mil- Agency special. counsel c, 9 10/29/90 1654u12460l000 -3- EXHIBIT "A" LEGAL DESCEIR11ON Beginning at the centerline intersection of Pacific Coast Highway and Lake Street, shown as Ocean Avenue and First Street respectively, on said mentioned map; thence along the centerline of Pacific Coast Highway south 48021142" east 37. 50 feet to the intersection with the southwesterly extension of the southeast right-of-way line of Lake Street; thence south 41038 ' 18" west 50 . 00 feet to the true point of beginning; thence north 48021142" west 1, 020 . 00 feet; thence south 41038118" west 200. 00 feet; thence south 48021'42" east 1020.00 feet; thence south 48038 ' 18" east 200 . 00 feet to the true point of beginning . 10/29/90 1654u/2460/000 Exhibit A EXHIBIT "B" REPAYMENT SCHEDULE (To Be Inserted) 10/29/90 1654u/2460/000 Exhibit B EXHIBIT "C" RECORDING REQUESTED BY ) AND WHEN RECORDED MAIL TO: ) (Space above for Recorder's Use) This document is exempt from both the payment of a recording fee pursuant to Government Code Section 6103 , and from the documentary transfer tax. THE CITY OF HUNTINGTON BEACH By: Its : Dated: GRANT DEED FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, THE CITY OF HUNTINGTON BEACH, a municipal corporation of the State of California, GRANTOR hereby GRANTS to THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic, GRANTEE real property in the City of Huntington Beach, County of Orange, State of California, more particularly described in Exhibit "A" attached hereto and incorporated herein by reference. The interest transferred shall include all right, title, and interest now owned or hereafter acquired by the City of Huntington Beach and shall be subject to all limitations and obligations which affect the City' s use and possession of the subject property. ATTEST: THE CITY OF HUNTINGTON BEACH City Clerk Mayor 10/29/90 1654u/2460/000 C-1 APPROVED AS TO FORM: City Attorney /a-3/--9d fee 6cl ' DEED AUTHQRIZATION This is to certify that the interest in real property conveyed by the Grant Deed dated 1990 from the CITY OF HUNTINGTON BEACH to the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body corporate and politic, (the "Agency" ) , is hereby accepted by the undersigned officer or agent on behalf of the Agency pursuant to authority conferred by Resolution No. , 198_ and the Agency as Grantee consents to recordation thereof by its duly authorized officer. Dated: 1990 THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH By Chairman ATTEST: Agency Secretary 10/26/90 1654u/2460/000 C-2 I l j STATE OF CALIFORNIA ) ss . COUNTY OF ORANGE ) On this day of 19 , before me the undersigned, a Notary Public in and for said State, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be -the person who executed this instrument as the Mayor of the City of Huntington Beach and acknowledged to me that the City of Huntington Beach executed it. Signature of Notary Public Name typed or printed STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE } On this day of , 19 , before me the undersigned, a Notary Public in and for said State, personally appeared J. personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument as the Chairman of the Redevelopment Agency of the City of Huntington Beach and acknowledged to me that the Redevelopment Agency of the City of Huntington Beach executed it. Signature of 11otary Public Name typed or printed 10/29/90 1654u/2460/000 C-3 RESOLUTION 110. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTO14 BEACH AUTHORIZING EXECUTION OF AGREEMENT FOR THE PURCHASE AND SALE OF PROPERTY BETWEEN THE CITY OF HUNTINGTON BEACH AND THE REDEVELOPMENT •AGEt1CY OF THE CITY OF HUNTINGTON BEACH WHEREAS, California Health and Safety Code Section 33220 provides authority for the City to aid and cooperate in the planning, undertaking, construction or operation of redevelopment projects by selling any of its property to a redevelopment agency; and WHEREAS, the acquisition of the City' s property by the Agency will facilitate redevelopment within the Main Pier Project Area; and WHEREAS, the Agency has agreed to pay to the City and the City agrees to accept as payment the appraisal value of the -- property; NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH DOES RESOLVE AS FOLLOWS: Section 1 . The Mayor is authorized to execute the Agreement for the purchase and sale of property between the City of Huntington Beach and the Redevelopment Agency of the City of Huntington Beach dated , 1990 . Section Z. The City Administrator is authorized to take whatever actions are necessary- tc fulfill the terms of the Agreement . Section 3 . The transfer approved herein is an action to facilitate the redevelopment pursuant to the Main Pier Redevelopment Plan and the environmental impact report EIR 82-2 approved in conjunction with that plan remains adequate to address environmental impacts associated with the transfer between the City and the Agency. PASSED AND ADOPTED by the City Council of the City of 4, Huntington Beach at a regular meeting thereof held on the day of 1990 . r• !r ti Mayor ATTEST: City Clerk REVIEWED AND APPROVED: City Administrator APPROVED AS TO FORM: r '. City ttorney/2e� /a-31-50 10/29/90 1 R2Pii/2.460/000 -2- RESOLUTION 110. is 43=� A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AUTHORIZING EXECUTION OF AGREEMENT FOR THE PURCHASE AND SALE OF PROPERTY BETWEEN THE CITY OF HUNTINGTON BEACH AND THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINOTTON BEACH WHEREAS, California Health and Safety Code Section 33391 provides authority for the Agency to purchase any real or personal property or any interest in property and improvements on it ; and WHEREAS, California Health and Safety Code Section 33220 provides the authority for the City to convey to the Agency any of its property; and WHEREAS, the acquisition of a certain property owned by the City proposed to be conveyed to the Agency in the Agreement for the Purchase and Sale of Property between the City of Huntington Beach and the Redevelopment Agency of the City of Huntington Beach dated November 1990 is necessary to facilitate the redevelopment within the Main Pier Project Area; and WHEREAS, the Agency pursuant to that Agreement agrees to pay to the City and the City agrees to accept as payment the appraisal value of the property. NOW, THEREFORE, THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH DOES RESOLVE AS FOLLOWS: The Chairman of the Redevelopment Agency of the City of Huntington Beach is hereby authorized to execute the Agreement for the Purchase and Sale of Property between the City of Huntington Beach and the Redevelopment Agency of the City of Huntington Beach dated 'as of November _, 1990 (the "Agreement") . Section-Z . The Executive Director of the Redevelopment Agency of the City of Huntington Beach is hereby authorized to take whatever actions are necessary to comply with the terms of r„ the Agreement . �Y-• SectionJ . The transfer approved herein is an action to facilitate the redevelopment pursuant to the Main Pier Redevelopment Plan and the environmental impact report EIR 82-2 approved in conjunction with that plan remains adequate to address environmental impacts associated with the transfer between the City and the Agency. PASSED AND ADOPTED by the Agency Board of the Redevelopment Agency of the City of Huntington. Beach at a regular meeting thereof held on the day of 1990 . THE CITY OF HUNTINGTOU BEACH Chairman ATTEST: Secretary r; •"- I-•Y APPROVED AS TO FORM: ABenc y Counsel r Special Agency C �ns 10/29/90 1826u/2450/000 -2- REQ119EST FOR CITY COUNCIL/ _ REDEVELOPMENT AGENCY 1t6TIONED 90-37 �- Date November 5, 1990 Honorable Mayor/Chairman & City Council/Redevelopment Agep cy Members Submitted to: Michael T. Uberuaga, City Administrator/Chief Executive Officer Submitted by: Barbara A. Kaiser, Deputy City Administrator/Economic Development` Y Prepared by: FIRST AMENDED PIERSIDE LEASE BETWEEN REDEVELOPMENT AGENCY AND Subject: STANLEY M. BLOOM FOR PIERSIDE RESTAURANTS PROJECT - MAIN-PIER REDEVELOPMENT PROJECT AREA I , W_ 4 ,7, 2. V Consistent with Council Policy? k4 Yes New Policy or Exception _tG d Statement of Issue, Recommendation,Analysis, Funding Source,Alternative AEtions,Attachments: STATEMENT OF On or about August 19, 1985, a Disposition and Development Agreement was entered into for the development of the site located at Pacific Coast Highway and Main Street. On November 20, 1986, the Pierside Lease was executed. On February 20, 1990, the Agency approved a conceptual plan for development of the "Pierside Restaurants" (see attached). A First Amended Pierside Lease for the development of 48,522 square feet of restaurant and beach related retail uses with 611 parking spaces is proposed. The Planning Commission continued its actions cn Environmental Impact Report 90-2. Conditional Use Permit 90-17, and Coastal Development Permit 90-18 until November 6, 1990. .Therefore staff recommends continuing consideration of the lease until Planning Commission action has been completed. Planning Commission action may affect the terms and conditions of the proposed lease. RECOMMENDATION: Continue consideration of the proposed First Amended Pierside Lease between the, Redevelopment Agency of the City of Huntington Beach and Stanley M. Bloom fo the development of the Pierside Restaurants Project. ANALYSIS: �n cI rn Projesl Description Planning Commission action .may impact the terms and conditions of the ]ase However the proposed Pierside Lease provides for the development of a multi-4L��ieF restaurant project located within the footprint of the asphalt parking lot, consisting of 3.5 acres of land.Immediately south of the Huntington Beach Pier, on the ocean side of the Pacific Coast Highway. Currently, the site is improved with a 17,800 square foot commercial structure with miscellaneous retail on the first level, "Maxwell's" restaurant on the second level, a freestanding structure containing "Dwight's" concession stand, and a public parking lot with 239 spaces. The proposed development for the site is a 48,522 square foot restaurant complex contained within three restaurant pads. The restaurants will be built with 611 i P[O 4/84 RCA/RAA ED 90-37 November 5, I990 Page two structured parking spaces including. 250 subterranean public parking spaces. Public access to the beach will be provided by two central staircases, two smaller stairways and three handicapped accessible elevators for a total of seven accessways leading to the beach. The proposed project will also provide two major public plazas on the upper level and a series of plazas and promenades on the lower level (78,258 square feet or 48% of net site area). Relocation of Maxwell's Restaurant to the south will allow for the development of Pier Plaza, a project proposed by the City to complete the new pier development. envy Obligations •- The Agency responsibilities can be summarized as follows: 1. The Agency is obligated to purchase the subject site from the City of Huntington Beach. The Agency must acquire the subject parcel from the City at a price equal to the current fair market value at the higrest and best use allowed by zoning codes and the general plan. The value of this property is $5.86 million. The Agency will acquire the property subject to a note from the City, bearing interest at 10% per annum and make regular payments to the City. Payments to the City on this loan will replace current general fund receipts from Maxwell's rent payment (approximately $330,000 annually). 2. The Agency Is obligated to provide the site in a reasonable time period free and clear of all recorded encumbrances to the developer. In order to prepare the site for the proposed development, the Agency has agreed to allocate a maximum of $1.0 million upfront for various costs including relocation of existing tenants, potential legal expenses (maximum $50,000), potential toxic clean-up costs (maximum $50,000) and adequate utilities available to the site. 3. The Agency is obligated to reimburse the developer the total construction cost of 250 parking spaces being built to replace the existing 239 public beach parking spaces plus an additional I new spaces. In addition, the Agency would finance the difference in construction costs between the structured parking and surface parking for the remaining 361 parking spaces. The Agency parking costs consist of two components: a. An upfront payment of $4.0 million to cove. the total construction cost for the 250 replacement public parking spaces ($16,000 per space). b. An upfront payment of $I.0 million, plus thirty annual payments of $325,500 (total amortized costs of $3.96 million present value) to amortize the difference in construction costs between structured parking and surface parking for the 361 spaces serving the private development. The rationale for this payment is that in a typical ground lease where the lessor is receiving 2.00% to 3.25% of gross sales as rent, the lessor has provided enough land to allow for the building improvements and surface parking. In the proposed Lease Agreement, the Agency has not provided enough land to develop a sufficient amount of surface parking and, thus, must make up the difference in RCA/RAA ED 90-37 November 5, 1990 Page three parking costs to justify the lease terms. In addition, a Keyser Marston Associates, Inc. (KMA) report concludes that Agency development of the project and a subsequent ground lease at 8% is comparable to the proposed lease. Develop�bligatIons The developer's responsibilities are as follows: 1. The developer will ground lease the site from the Agency for an original term of 55 years with an option to extend to a maximum of 80 years, subject to major renovation. The Pierside Lease Agreement is structured so that the amount of ground rent paid is directly related to the project's performance. The ground rent schedule is as follows: Percent of Total Sales Gross Restaurant Sales Applied_to Ground Lease $0 — 35 million 2.00% $35 — $55 million 2.50% $55 — 100 million 3.00% $100 million+ 3.25% In no event can the percentage of gross sales applied to the ground lease payment decrease from year to year. In addition, over the term of the lease, provisions are made to reevaluate the base rent to a higher percentage. Over the original term, KMA has estimated that the lease will generate nearly $124 million in revenues (present value of $8.07 million). The property will revert to the Agency at the termination of the lease. The reversionary value is projected at nearly$145 million (present value of $764,000). Currently, the City is receiving net parking revenues after expenses of $110,000 from the site annually. The developer must guarantee this parking income, with upward adjustments commensurate with increases in other City parking revenues, over the life of the lease. This provides total revenues of $21.03 million (present value of $1.75 million). The developer is obligated to pay all costs for operating and maintaining the parking structure. 2. The developer is obligated to finance all off—site improvement costs except as indicated above. 3. The developer is obligated to construct a 48,522 square foot restaurant complex contained within three restaurant pads consisting of accommodations for the relocation of the existing Maxwell's Restaurant ( 15,000 sq. ft.); the development of two new restaurant pads (25,000 total sq. ft.); development of casual restaurant space including Dwight's (8,250 sq. ft.); and development of RCA/RAA ED 90-37 November 5, 1990 Page four 250 public beach parking spaces and 361 private restaurant spaces (611 total). 4. The developer is obligated to provide increased public beach access from the project through the development of public plaza and promenade space, new stairways and three elevators. Project Financing Exhibit I as attached outlines the Agency costs and revenues for the Pierside Restaurants project. Immediate Agency costs are $6 million for public parking spaces, construction differential for subterranean parking and other site related costs. It is currently estimated that the proposed project will have an assessed value of $14.19 million upon completion. When this is reduced by the current assessed value of $1.06 million, the incremental value is approximately $13.13 million. Assuming a first year tax rate of 1.077% and set—asides equal to 20%, this results in property tax increment of f$113,000 in the first full year of operation. Assuming the assessed value increases at 2% annually, and the project area ends in 2019, the project should produce tax increments of approximately $4.04 million over the remaining life of the project area. (present value Is $1.20 million). Benefits to Cit_v The Pierside Lease was negotiated on the premise that the City's general fund must continue to receive its current revenue (increasing with inflation) from the public beach parking spaces and Maxwell's ground lease. This amounts to approximately $440,000 annually. The developer is obligated to pay a minimum of $110,000 in lease payments for the parking spaces. The Agency is obligated to repay the land purchase price of $5.86 million using tax increment resources and ground lease payments. If the project does well, an accelerated payment plan to the City will be implemented. Typically, repayment of the Agency Ioan would not occur until later in the redevelopment process. A KNiA analysis was also completed comparing the City's current revenue stream to the projected revenue stream for the proposed Pierside Restaurant project. It concluded that the City would receive $2.3 million to $3.2 million more in present value terms than is expected from the existing conditions scenario. Da ckgroun�: The history of the original Pierside development plan, commonly known as Pierside Village dates as far back as 1984 and consisted of construction of an 87,500 square foot specialty/retail center, with a gross leaseable area of a minimum of 75,000 square feet (excluding Maxwell's). In addition, a multiple—tiered parking structure with not less than 600 spaces was to be developed. The following is a chronological outline of the actions taken with regard to the entitlements and lease for the original Pierside Village Project. RCA/RAA ED 90-37 November 5, 1990 Page five Seplember - The Planning Commission approved Pierside Village entitlements Conditional Use Permit 86-43 and Conditional Development Permit 86-27 with conditions. Octoter_IQ. 1986 - The City Council/Redevelopment Agency approved the First Amended Disposition and Development Agreement and Pierside Lease between Huntington Pacifica I/Pierside Development and the Huntington Beach Redevelopment Agency. r - The City Council approved the Pierside Village entitlements on appeal. April 21-24.199 - The California Coastal Commission reviewed the Pierside Village entitlements on appeal and approved the project with modified conditions. Through 1987, planning efforts continued and a change of direction began to emerge with respect to downtown redevelopment efforts. The 3131 Plan previously approved in concept began to evolve into what has become the "Village Concept." This changing direction was finalized in March of 1998, with conceptual approval by the Agency of the Pierside Pavilion entertainment complex in lieu of the previously proposed hotel, and Agency approval of the "Village Concept" in April of 1988. With this shift in direction, the Agency and staff began to re-think the need for a specialty/retail center as previously envisioned. Throughout this period of time, the economics of this project were continually evaluated. Ultimately, a point was reached where the viability not only from a land use but an economic standpoint concluded that the Pierside Village concept should be modified to achieve a more desirable land use with regard to public amenities (eg. increased opportunities, Increased beach accessability. open plaza and promenades). Thus, the Agency decided to proceed with a "cluster of restaurants" rather then to attempt a specialty/retail center that would be in direct competition with the revitalized Main Street retail core. Following this new direction the Council/Agency took the following actions: January 17. 1989 - The City Council/Redevelopment Agency directed staff to prepare an amended Pierside Village plan utilizing the "cluster of restaurants" concept eliminating all other specialty uses. September 18. 1989 - The City Council adopted a "Pier Plaza" concept that called for the development of a 2.1 acre""Pier Plaza" to be located between the base of the Pier and Pacific Coast Highway. This concept required Maxwell's to be relocated in order to provide the proposed 2.1 acre "Pier Plaza" foot print. February_20, 1990 - The Redevelopment Agency approved the conceptual plan for the development of the "Pierside Restaurants" which includes: RCA/RAA ED 90-37 November 5, 1990 Page six o The development of two new restaurant pads - (25,000 S.F.) o Accommodations for the relocation of the existing Maxwell's Restaurant - (15,000 sq. ft.); o The development of a parking structure, including surface and subsurface parking for both beachgoers and restaurant patrons; o The development of beach-related concessions, including approximately 6,000 sq. ft. of casual dining space; and o Authorize staff and the developer of Pierside to negotiate for the relocation and integration of-Maxwell's into the Pierside plan. o Authorize staff to negotiate an amended Pierside Lease with Stanley Ai. Bloom The developer submitted his plans for entitlements in April of this year. Subsequently it was determined that Environmental Impact Report (EIR 90-2) would need to be conducted as a supplemental (EIR to EIR 82-2). At their meeting on October 2, 1990 the Planning Commission continued action on the Pierside Restaurants entitlements including Environmental Impact Report 90-2, Conditional Use Permit 90-17, and Coastal Development Permit 90-I8 to a special meeting scheduled for Tuesday, October 23, I990. At this meeting, the Planning Commission continued consideration on the entitlements to November 6, 1990. FUNDING SOURCE: No funding is required for the proposed action. ALTERNATIVES: 1. Conduct a public hearing. ATTACHMENTS: Site Map (PIaza Level & Beach Access Level) Exhibit I - Agency Costs and Revenues Section 33433 Report Resolutions February 20, 1990 Approval of Conceptual PIan. AiTU/BAK:jar 7956r a W. N fY ~ xl N N �I N PACiFIG COAST HIGHWAY a.•f.i.nrf a.N.ia...f {aMaaa.,rf •Y , —L .. — 11 . L� .iR + •r.u•.ws..r..ice BLNLCING A �'•�!� a��� BUiL64G 8 i 'I L1_ t SYM9a LMEN7 PARKING TASULATIQN PL.f Z.f LEVEL ►aHa.eR c ...sd.am.wu..ern�ar w ® ..aa.r MUM lf#.1 I.Oa.1wM/aYO wyl r. af•M./1.f� � `• � ■+a�W►..aw f�.a Y 1 • r w r mom InMUM: ......... . PIERSIDE REST,IURIINT DEVEL0PAIENT r�r • GR.CAAWT •.aa.e...a..a P1 i IIII Illlllfh�ll If � Ifl.� ......-,► ..«.. � � I � � . � � � + i ' If` ' I :., Liji -: I i I i I 1 11111-1 + i ! .�1 Y11 1 fFW.I Mlr.i.�rw 1 {+FI{ /w.M m►.C+r Kri. G4Si 1 0. , i 11� �.1.J ..r-J ..►'•J r' eJJ r �..J r.'1 r.1.J 4 BEJCII JCCESS LEVEL M IVrM .[t01{LIA PIERSIDE RES T.II URWNT DEVELOPMENT m C.A. Pz EXHIBIT I PIERSIDE RESTAURANT COMPLEX LEASE AGREEMENT HJNTINGTON BEACH, CALIFORNIA TOTAL PRESENT DOLLARS VALUE AGENCY COSTS SITE PREPARATION $1,000,000 $1,000,000 PARKING COSTS UPFRONT COSTS (REPLACEMENT SPACES) $4,000,000 $4,000,000 AMORTIZED COSTS $10,765,000 $3,959,000 LAND PAYMENT TO CITY $37,840,000 $5,859,000 TOTAL AGENCY COSTS S53,605,000 $14,818,000 AGENCY REVENUES .............................. GROUND LEASE PAYMENTS $123,748,000 $3,069,000 REVERSIONARY VALUE OF LAND S144,426,000 S764,000 GUARANTEED PARKING PAYMENT S21,028,000 $1,749,000 TAX INCREMENT S4,039,000 $1,201,000 TOTAL AGENCY REVENUE S293,241,000 S11,783,000 ssaaaazzs:zss zaaaaazzsssa NET AGENCY REVENUES / (COSTS) 1239,b3b,000 (53,035,000y i Oe scri PARCEL A; Beginning at the centerline intersection of Pacific Coast Highway and Lake Street, shoran as Ocean Avenue and First Street respectively, on said mentioned map; thence along the centerline of Pacific Coast Highway south 48021 ' 42" east 37 . 50 feet to the intersection with the southwesterly extension of the southeast right-of-way line of Lake Street; thence south 41038 ' 18" west 50 .00 feet to the true point of beginning; thence north t 48021 ' 42" west 1 , 020 . 00 feet; thence south t4 41038 ' 18" west 200 . 00 Feet; thence south 48021 ' 42" east 1020 . 00 feet; thence north 41038 ' 18" east 200-. 00 feet to the true point of beginning . SUMMARY REPORT PURSUANT TO SECTION 33433 of the CALIFORNIA COMMUNITY REDEVELOPMENT LAW on a LEASE AGREEMENT by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and STANLEY M. BLOOM, AN INDIVIDUAL I. INTRODUCTION The California Health and Safety Code, Section 33433, provides that if a redevelopment agency wishes to sell or lease property to which it holds title and if that property was acquired in whole or in part with tax increment funds, the agency must first secure ap- proval of the proposed sale or lease agreement from its local legislative body (City Council) after a public hearing. A copy of the proposed sale or lease agreement and a summary report that describes and contains specific financing elements of the proposed transaction shall be available for public inspection prior to the public hearing. As contained in the Code, the following informa- tion shall be included in the summary report: 1 . The cost of the agreement to the agency, including land acquisition costs, clearance costs, relocation costs, the costs of any improvements to be provided by the agency, plus the expected interest on any loans or bonds to finance the agreements; 2 . The estimated value of the interest to be conveyed or leased, determined at the highest uses permitted under the plan; and 1 �1 3. The purchase price or sum of the lease payments which the lessee will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to -be conveyed or leased, determined at the highest and best use consis- tent with the redevelopment plan, then the agency shall provide as part of the summary an explanation of the reasons for the difference. This report outlines the salient parts of the Pierside Lease Agree- ment (the "Agreement" ) which provides for the leasing of property owned by the Redevelopment Agency of the City of Huntington Beach ( "Agency" ) to Stanley M. Bloom ( "Developer" ) for the purpose of constructing a restaurant development. This report is based upon information contained in a proposed Lease Agreement and is organized into the following four sections: 1 . Description .of the Proposed Agreement - This section in- cludes a description of the site and interests to be leased, the proposed development and the major respon- sibilities of the Agency and the Developer. 2. Cost of the Agreement to the Agency - This section out- lines the cost of the Agreement to the Agency. In addi- tion, it discusses the ground lease payments to be paid by the Developer to the Agency, provides a projection of tax increment revenues resulting from the new development and sets forth the net cost of the Agreement to the Agency. The net cost to the Agency equals Agency expen- ditures minus the present value of the lease payments and the value of the tax increment generated by the new development, plus any other resources pledged to the pay- ment of related expenses . 2 �l 3. Estimated Value_of t e Interests to be Leased - This section summarizes the Agency appraisal of the value of the parcel to be leased to the Developer. 4. Purchase Price and Reasons Therefore - This section describes the purchase price, which is equal to the present value of the anticipated lease payments, to be paid by the Developer.-to the Agency. It also contains a comparison of the purchase price (lease value) and the fair market value at the highest and best use consistent with the Downtown Specific Plan 10 for the interests con- veyed. II. DESCRIPTION OF THE PROPOSED AGREEMENT A. Site—and Interest to be Leased The site consists of 3 . 5 acres of land immediately south of the Huntington Beach Pier, on the ocean side of the Pacific Coast High- way. Currently, the site is improved with a 17, 800 square foot commercial structure with miscellaneous retail on the first level, "Maxwell 's" Restaurant on the second level, a freestanding struc- ture containing "Dwight's" hamburger stand, and a public parking lot. B. The Proposed Development The proposed development for the site is a 48,500 square foot res- taurant complex. The restaurants will be built on an elevated deck with 611 structured parking spaces provided. Public access to the beach will be provided by two central staircases leading to the beach level. 3 �I C. Agency Responsibilities The Agency responsibilities can be summarized as follows: 1. Purchase the subject site from the City of Huntington Beach. 2 . Provide the site in a reasonable time period free and clear of all recorded encumbrances , assessments , leases/subleases, possesory rights, franchises, license and taxes, except as set forth in the Agreement. 3. Reimburse to the developer the total construction cost of 250 parking spaces being built to replace the existing public parking plus an additional 11 spaces . 4. Finance the difference in construction costs between the structured parking and surface parking for the remaining 361 parking spaces . The Agency will amortize the cost differential in 30 annual payments. D. Developer's Responsibilities The developer's responsibilities are as follows: 1 . Ground lease the site from the Agency for an original term of 55 years. 2 . Finance all off-site costs, except as specifically set forth in the agreement. 4 �l 3. Construct a 48,500 square foot restaurant complex on a raised deck at the quality level implied in the eleva- tions and developer pro forma. 4. Develop 611 on-site structured parking spaces. 5. Provide public beach access from the project. III. COST OF THE AGREEMENT TO THE AGENCY The total cost of the Lease Agreement to the Agency, and the net costs of the project after consideration of project revenues are presented herein. Both the total and net costs of the Lease Agree- ment are presented in terms of absolute dollar amounts generated over the 55-year lease and in terms of the present value (PV) of expenditures and receipts resulting from implementation of the Lease Agreement. The PV of expenditures and receipts has been com- puted using an assumed discount rate of 10% . The difference be- tween the PV of expenditures and the Pv of receipts constitutes the net present value cost of the Lease Agreement to the Agency. This net cost can be either an actual cost (where expenditures exceed receipts) or a net gain (where revenues created by implementation of the Lease Agreement exceed expenditures) . A. Tgtal Costs to the Agency Table 1 contains a listing of the Agency's estimated expenditures, by major category, relating to its obligations under the Lease Agreement. Per Table 1, total implementation expenditures by the Agency over the 55 year original term of the lease are estimated at approximately $53. 61 million, which equates to $14 . 82 million in present value terms . The basis of this estimate is presented below. 5 1 . Site Acquisition Costs The Agency must acquire the subject parcel from the City of Huntington Beach at a price equal to the current fair market value at the highest and best use allowed by the zoning codes and general plan of the City, as well as the Downtown Specific Plan District 10 . The value of this property is estimated at $5.86 million. The Agency will acquire the property --subject to a note from the City, bearing interest at 10% per annum. 2 . Site Preparation/Relocation Expense In order to prepare the site for the proposed develop- ment, the existing tenants must be relocated at the ex- pense of the Agency, there could be legal expenses as- sociated with any potential condemnation actions taken, the Agency is responsible for $50, 000 of toxic clean-up costs and the Agency must ensure adequate utilities are available to the site. These costs have been capped in the Lease Agreement at $1 .0 million. 3. Parking Costs The Agency parking costs consist of two components: a. An upfront payment of $4 .0 million to cover the to- tal construction cost for the 250 replacement public parking spaces . b. An upfront payment of $1 . 0 million, plus thirty an- nual payments of $325,500 to amortize the difference in construction costs between structured parking and surface parking for the 361 spaces serving the 6 private development. The rationale for this payment is that in a typical ground lease where the lessor is receiving 2.00% to 3.25% of gross sales as rent, the lessor has provided enough land to allow for the building improvements and surface parking. In the proposed Lease Agreement the Agency has not provided enough land to develop a sufficient amount of sur- face parking and, thus, must make up the difference in parking costs--to justify the lease terms . These parking payments total nearly $10. 76 million, with a present value of $3.96 million. B. Agency- Revenues Table 2 shows the nominal and present values of the Agency revenues created as a result of implementation of the lease. 1 . Ground Lease Payments The Pierside Lease Agreement is structured so that the amount of ground rent paid is directly related to the project' s performance. The ground rent schedule is as follows: Percent of Total Sales Gross Restaurant Sales Applied to Ground Lease $0 - 35 million 2 .00% $35 - $55 million 2 .50% $55 - 100 million 3.00% $100 million + 3.25% 7 i 1/ In no event can the percentage of gross sales applied to the ground lease payment decrease from year to year. Ad- ditionally, in Years 30, 40 and 50, a base rent equal to 75% of the average of the preceding 3 years of lease pay- ments will be applied. After Year 30, through the ter- mination of the lease, in no event can the annual lease payment decrease from year to year. Over the original term, Keyser Marston Associates, Inc. has estimated that the lease will generate..nearly $124 million in revenues, with a present value of $8 .07 million when discounted at 10% annually. In addition, the property will revert to the Agency at the termination of the lease. The revers- ionary value is projected at nearly $145 million. This equates to $764,000 in present value terms. 2 . Guaranteed Parking Payment Currently, the City is receiving net revenues after ex- penses of $110,000 from the site annually. The developer must guarantee this parking income, with upward adjust- ments commensurate with increases in other City parking revenues, over the life of the lease. This provides to- tal revenues of $21.03 million, which have a present value of $1 .75 million. 3 . Tax Increment Revenue It is currently estimated that the proposed project will have an assessed value of $14. 19 million upon completion. When this is reduced by the current assessed value of $1 . 06 million, the incremental value is approximately $13. 13 million. Assuming a first year tax rate of 1 .077% and set-asides equal to 20%, this results in property tax increment of +$113 , 000 in the first full year of 8 operation. Assuming the assessed value increases at 2% annually, and the project area ends in 2018, the project should produce tax increments of approximately $4.04 mil- lion over the remaining life of the project area. The present value of the tax increments generated by the project is $1 .20 million. A summary of anticipated revenues is shown in Table 2. C. Comparison of Ex e i u s and Revenues A comparison of the present value of the expenditures and revenues discussed above results in the following tabulation: Total Dollars Present Value Over a 55-year Over a 55-year Lease Lease Total Agency Revenues $293, 241,000 $11,783, 000 Less: Agency Costs (53, 605, 000) (14, 818,000) Net Gain (loss) $239, 636, 000 ($31035,000) The analysis above indicates that as a result of implementation of the Lease, the Agency can expect to realize a gain over the lease period of almost $240 million in actual dollars . On a present value basis, project costs exceed project revenues by approximately $3.04 million. 9 IV. ESTIMATED VALUE OF INTEREST TO BE LEASED The value of the interest to be leased has been computed at its highest and best use allowable under the zoning codes .and general plan of the City, as well as the Downtown Specific Plan District 10 . Under these constraints, Keyser Marston Associates, Inc. has estimated that the proposed use is the highest and best use. Thus, the present value of the ground lease and parking revenues to the Agency, less the present value..of. the amortized parking costs, is the estimated value of the site. The amortized parking payments are subtracted to reflect the extraordinary site costs that must be borne by the lessor in order to make the site developable at the proposed intensity. The present value of the ground lease and parking revenues has been estimated to be $9 . 82 million and the present value of the amortized parking costs is $3 . 96 million, therefore, the estimated value of the site is $5.86 million. V. LEASE PAYMENTS AND REASONS THEREFOR Based upon an analysis of the ground lease payments to the Agency conducted by Keyser Marston Associates, the present value of the developer's ground lease payments is $5.86 million. This amount is estimated to be the market value of the property and, thus, the Agency is receiving the fair market value for the site. 10 • 1 TABLE 1 ESWANTE0 AGENCY COSTS PIERSIDE RESTAURANT COMPLEX LEASE AGREEMENT' HUNTINGTON BEACH, CALIFORNIA TOTAL PRESENT DOLLARS VALUE SITE PREPARATION $1,000,000 S1,000,000 PARKING COSTS UPFRONT COSTS (REPLACEMENT SPACES) $4.000.000 $4,000,000 AMORTIZED COSTS S10,765,000 S3,959,000 LAND PATMENT TO CITY S37,840,000 $5,859,000 TOTAL AGENCY COSTS $53.605,000 $14,818,000 1ABLE 2 ESTIMATED AGENCY REVENUES PIERSIDE RESTAURANT COMPLEX LEASE AGREEMENT HUNTINGTON BEACH, CALIFORNIA TOTAL PRESENT DOLLARS VALUE GROUND LEASE PAYMENTS $123.748,000 $8.069,000 FEVERSIONARY VALUE OF LAND S144,426,000 $764,000 CUARANTEED PARKING PAYMENT 521,028,000 S1,749,000 TAX INCREMENT $4,039,000 S1,201,000 TOTAL AGENCY REVENUE S293,241,000 S11,783,000 t REQUEST FC&.� REDEVELO,PMENT4.'.GENCY ACTION RH 90-11 February 20, 1990 Date ;irrllmrttncl to: Kcnioltilole 0mirttan and 1<oWvelopr-ent Agency M(-nb x's Submitted hy: Paul E. Cook, Executive Director • � Prepared by: Keith B. Bohr, Redevelop xmt Specialist QW, S o bj e c t: APPROVAL OF OCNCEPLD1L E FVEMFMNP PTA Fit Per= FQ TA1Cki712TT5 Consistent with Council Policy? ( 1 Yes ( New Policy or Exception Statement of Issue, Recommendation,nAnplysis, Funding Source, Alternative Actions, Attachments ELMMM OF L9UE On January 17, 1989, the Agency directed staff to prepare an azaended Pierside Village plan to eliminate the specialty/retail uses while retaining the restaurant uses (staff report attached) . Additionally, staff was authorized rr to negotiate with its operators for the rehabilitation of Maxwell's Restaurant. RBCCFF ?TDAMON Approve the conceptual plan for develcVncnt of the "Pierside Restaurants" which includes: The development of two new restaurant pads - (25,000 sq.ft.) ; Acccmrcdations for the relocation of the existing Maxwell's Restaurant - (15,000 sq.ft.) ; The developmnt of a parking structure, including surface and subsurface parking for both beachgoers and restaurant patrons; The development of beach-related eonaessions, including approximately 6,000 sq.ft. of casual dining space; and Authorize staff and the developer of Pierside to negotiate for the relocation and integration of Fax ell's into the Pierside plan. ANIILYSZ5- 9' 7-LA-�,u 747 0�' On September la, 1988, the City Council adopted a a "Pier Plaza" concept that ' calls for the development of a 2.1 acme "Pier Plaza" to be located between the base of the Pier- and Pacific Coast Highway. Approxilrately one-half of Maxwell's Restaurant as it exists today lies within the adopted 2.1 acre �• footprint of this plan. As a result, the negotiations for the rehabilitation 1_9I i i;;• RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING AND AUTHORIZING THE EXECUTION OF THE FIRST AMENDED PIER SIDE LEASE WITH STANLEY M. BLOOM AND MAKING CERTAIN FINDINGS IN CONNECTION THEREWITH . WHEREAS, the Redevelopment Agency of the City of Huntington Beach ( the "Agency") is carrying out the Redevelopment Plan (the "Redevelopment .Plan") for the Main-Pier Redevelopment Project , ( the "Project") ; and WHEREAS, the Agency entered into a Lease Agreement dated November 20, 1986, and is now considering a First Amended Pier Side Lease (collectively, the "Lease") with Stanley M. Bloom (Lessee) providing for the improvement of multiple restaurants on certain real property (the "Site" ) located within the boundaries of the Project;- and WHEREAS, pursuant to the Lease, the Agency will be responsible for a portion of the costs of certain public improvements to be constructed and installed in connection with the development of the Site; and WHEREAS, pursuant to Section 33445 of the Community Redevelopment Law, the Agency is authorized with the consent of the City Council to be responsible for all or any part of the value of and the cost of installation and construction of any building, facility, structure or other improvement which is publicly owned either within or without the Project Area upon a determination by the City Council that such building, facility, structure or other improvement is of benefit to the Project Area or the immediate area in which the Project is located and that no other reasonable means of financing such building, facility, structure or other improvement is available to the community; and WHEREAS, in connection with the approval by the City Council of the City of Huntington Beach (the "City Council") of the Redevelopment Plan, the City caused to be prepared certain environmental impact report No. 82-2 ( "EIR" ) which was approved and certified by the City Council on July 18, 1983 ; NOW, THEREFORE, BE IT RESOLVED by the Huntington Beach City Council as follows : •,Sion -1 . The City Council hereby finds and determines that the provision of public improvements by the Agency in connection with the development of the Site in the manner set forth in the Lease is of benefit to the Project Area and that no other reasonable means of financing such public improvements is available to the community, and the Agency is authorized to participate in the costs for all .or part of the land the costs of installation and construction of such public improvements in accordance with the Lease. Semi. on 2 . The City Council hereby finds and determines that EIR No. 82-2 which was certified on July 18, 1983 by the City Council, remains adequate to describe potential environmental impacts of the proposed development and that a supplemental EIR for the development will be prepared for review in conjunction with the required conditional use permit for the project . Section . The City Council hereby approves and authorizes execution of the First Amended Pier Side Lease and the Chairman and Secretary of the Agency are hereby authorized and directed to execute said First Amended Pier Side Lease on behalf of -the Agency after the same has been formally approved and executed by the Lessee. ADOPTED this day of 1990 . Maycr of the City of Huntington Beach ATTEST: City Clerk Approved as to Form: t Ci y ttorney G w: J 10/26/90 2109u/2460/04 - 2 - r7- I hereby certify that the foregoing Resolution was duly and regularly adopted by the City Council of the City of Huntington Beach at a regular meeting thereof held on the day of _ 1990, by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: ABSTAIN: COUNCIL MEMBERS: City Clerk of the City of Huntington Beach [I�4 4 10/26/90 2109u/2460/04 - 3 - RESOLUTION NO. RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH APPROVING AND AUTHORIZING THE EXECUTION OF THE FIRST AMENDED PIER SIDE LEASE WITH STANLEY M. BLOOM AND MAKING CERTAIN FINDINGS IN CONNECTION THEREWITH. WHEREAS, the Redevelopment Agency of the City of Huntington Beach (the "Agency") is carrying out the Redevelopment Plan (the "Redevelopmenk_Plan") for the Main-Pier Redevelopment Project, (the "Project" ) ; and W11EREAS, the Agency entered into a Lease Agreement dated November 20, 1986, and is now considering a First Amended Pier Side Lease (collectively, the "Lease" ) with Stanley M. Bloom (Lessee) providing for the improvement of multiple restaurants on certain real property (the "Site") located within the boundaries of the Project; and WHEREAS, pursuant to the Lease, the Agency will be responsible for a portion of the costs of certain public improvements to be constructed and installed in connection with r.:,. the development of the Site; and WHEREAS, pursuant to Section 33445 of the Community Redevelopment Law, the Agency is authorized with the consent of the City Council to be responsible for all or any part of the value of and the cost of installation and construction of any building, facility, structure or other improvement which is publicly owned either within or without the Project Area upon a determination by the City Council that such building , facility, structure or other improvement is of benefit to the Project Area or the immediate area in which the Project is located and that no other reasonable means of financing such building , facility, structure or other improvement is available to the community; and WHEREAS, in connection with the approval by the City Council of the City of Huntington Beach (the "City Council") of the Redevelopment Plan, the City caused to be prepared an environmental impact report No . 82-2 ("EIR" ) which was approved and certified by the City Council on July 18 , 1983 ; NOW, THEREFORE, BE IT RESOLVED by the Redevelopment Agency of the City of Huntington Beach as follows : r �l' , ,- 5ection_1. The Agency hereby finds and determines that the provision of public improvements by the Agency in connection with the development of the Site in the manner set forth in the Lease is of benefit to the Project Area and that no other reasonable means of financing such public improvements is available to the community, and the Agency is authorized, based upon consent of the City Council , to participate in the costs for all or part of the land the costs of installation and construction of such public improvements in accordance with the Lease. _Section 2 . The Agency hereby finds and determines that EIR No . 82-2 , which was certified on July 18, 1983 by the City Council , remains adequate to describe potential environmental impacts of the proposed development and that a supplemental EIR for the development will be prepared for review in conjunction with the required conditional use permit for the project . 5estion 3 . The Agency hereby approves and authorizes execution of the First Amended Pier Side Lease and the Chairman and Secretary are hereby authorized and directed to execute said First Amended Pier Side Lease on behalf of the Agency after the same has been formally approved and executed by the Lessee. ADOPTED this day of , 1990 . THE HUNTINGTON BEACH REDEVELOPMENT ` AGENCY Chairman ATTEST: Agency Clerk Approved as to Form: Agency Counsel / Agency�Special Chu s 1 .4ru:z -� fGrcct +_�.�, f 10/26/90 2107u/2460/04 - 2 - r-,- � `. I hereby certify that the foregoing Resolution was duly and w regularly adopted by the Huntington Beach Redevelopment Agency �:: • at .a regular meeting thereof held on the day of 1990, by the following vote : AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS : ABSTAIN : COUNCIL MEMBERS: Agency Clerk .E 10/26/90 2107u/2460/04 - 3 - W� Awhorized to Publish Advertisements of all kinds including public notices by Decree of the Superior Court of orange Comty, Cardomia, Number A-6214, September 29, 1961. and A-24831 June 11, 1963 STATE OF CALIFORNIA County of Orange am a Citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a party to or interested in the below entitled matter. I am a principal clerk of the ORANGE COAST DAILY PILOT, a newspaper of general circulation, primed and publishes in the City of Costa Mesa, County of Orange, State of California, and that attached Notice is a true and complete copy as was printed and published in the Costa Mesa, f'1OK NOTICE Newport Beach, Huntington Beach, Fountainpm1c a Valey, Irvine, the South Coast communities and ft£ OPNMW Laguna Beach issues of said newspaper to wit PROACT AREA On Monday.November 5. the issue(s) of: 19w,at 7:00 PM,or as soon thereaiier as the matter may be heard.in the City Council Chambers, Huntington Beach City Hatt, located at 2000 Main Street, Hunt- Ington Beach,California,the City Council of the City ol, October 35, 22, 3990 Huntington Beach and the Huntington beach Fie- do vetopment AgOACy ("Agency").will hold is!Dint public hearing lo,,consider I the proposed disposnlon of ' 4 certaln real poopsrty locate•? � on the wasd side of Pacific l Coast ,H19"oy between First and Man Streels, Gy tha Agency to Stanley At. ; Bloom pursuant to a . proposed tease Agreement ,by and between the Re- development Agency and Stanley M.Bloom.A findirg concerning adegjacy of the Supplemeniol ErMronmen- ta1 Intpaot pApprl No. W2 Imptamentuq the Calltwnle Envtrortmental Ouallty Con- trol Act will aro be eo1- aidered at the same hearing. The proposed Agreement I declare, under penally{,/.�('�' perjury, that the and financial reportrequired foregoing is true and corrriiiCC.►. by California Health and 9 y� Salefy Coda Section 33433 / are available for puW In- apaGtion at the othce of the. Executed On 9Ctober 22, 4 City Clerk,at the above ad-i 199 dress, during office hours PM.Mond 3Y at Costa Mesa!Califomia. through Friday). Fu her in- fo rmation concerning this matiermay ng Keith th Boed by contaGing Keith Bo'+r.!' Pr.]CW Manager. at (Tt41 969-2185. Signature / Doted this 91h day of / lobar,1990 cowrie sradt.ra CHI 3 Clerk, city d ,ttlntMglan Published Orange Coast / Daily pilot October 15. 22. 19P� „ PROOF OF PUBLICATION M-225' 11 CITY OF HUNTINGTON BEACH -COUNCIL_ - ADMINISTRATOR COMMUNICATION WJNTENGTEN BEACH Honorable Mayor and Michael T. Uberuag To City Council Members From City Administrator t CONVEYANCE OF PIERSIDE SITE& October 31, 1990 Subject PIERSIDE RESTAURANT LEASE Date A public hearing was advertised for November 5, 1990 for the City Council/Redevelopment Agency to consider two actions: 1) Transfer of City Property (Pierside Restaurants Lease Site) to the Redevelopment Agency and 2) Approval of the First Amended Pierside Lease Agreement between the Redevelopment Agency and Stanley.M. Bloom for the Pierside Restaurants Project. Staff will recommend at the meeting that action on both items be continued. The conveyance of city property is to be continued to allow the Planning Commission to consider the conformance of the conveyance with the General Plan at their meeting on November 6, I990. Under state law for administration of the General Plan, is it required that "If a general plan or part thereof has been adopted, no real property shall be acquired by dedication or otherwise for street, square, park or other public purposes, and no real property shall be disposed of, no street shall be vacated or abandoned, and no public building or structure shall be constructed or authorized, if the adopted general plan or part thereof applies thereto, until the location, purpose and extent of such acquisition or disposition, such street vacation or abandonment, or such public building or structure have been submitted to and reported upon by the planning agency as to conformity with said adopted general plan or part thereof" (Section 65402(a)). Consideration of the Pierside Lease for the restaurant project is to be continued until after Planning Commission action on the Environmental Impact Report 90-2, Conditional Use Permit 90-17 and Coastal Development Permit 90-18. The Planning Commission is currently scheduled to consider these items at their meeting on November 6, 1990. Once the Planning Commission has considered and acted on both the conveyance of the site and the Environmental Impact Report and permits, the City Council public hearings will be rescheduled (with appropriate noticing). The City Council may then consider both the site conveyance and the first amended Pierside Lease. BAK:jar 7999r xc. Department Heads ,• lCITY OF HUNTINGTON BEACH •r COUNCIL - ADMINISTRATOR COMMUNICATION tAATt C.10N stAk" Honorable Mayor and Michael T. Uberuag To City Council Members From City Administrator CONVEYANCE OF PIERSIDE SITE & October 31, 1990 Subject Date PIERSIDE RESTAURANT LEASE A public hearing was advertised for November 5, 1990 for the sty: Council/Redevelopment Agency to consider two actions: Q 1) Transfer of City Property (Pierside Restaurants Lease Site) to the Redevelopment Agency and 2) Approval of the First Amended Pierside Lease Agreement between the Redevelopment Agency and Stanley M. Bloom for the Pierside Restaurants Project. Staff will recommend at the meeting that action on both items be continued. The conveyance of city property is to be continued to allow the Planning Commission to consider the conformance of the conveyance with the General Plan at their meeting on November 6, 1990. Under state law for administration of the General Plan, is it required that "If a general plan or part thereof has been adopted, no real property shall be acquired by dedication or otherwise for street, square, park or other public purposes, and no real property shall be disposed of, no street shall be vacated or abandoned, and no public building or structure shall be constructed or authorized, if the adopted general plan or part thereof applies thereto, until the location, purpose and extent of such acquisition or disposition, such street vacation or abandonment, or such public building or structure have been submitted to and reported upon by the planning agency as to conformity with said adopted general plan or part thereof' (Section 65402(a)). Consideration of the Pierside Lease for the restaurant project is to be continued until after Planning Commission action on the Environmental Impact Report 90-2, Conditional Use Permit 90-17 and Coastal Development Permit 90-18. The Planning Commission is currently scheduled to consider these items at their meeting on November 6, 1990. Once the Planning Commission has considered and acted on both the conveyance of the site and the Environmental Impact Report and permits, the City Council public hearings will be rescheduled (with appropriate noticing ). The City Council may then consider both the site conveyance and the first amended Pierside Lease. BAK:jar 7999r xc: Department Heads ,3 OCT 22 '90 16'40 REYSER i iTOPi, P.2 SUMMARY REPORT PURSUANT TO SECTION 33433 of the CALIFORNIA COMMUNITY REDEVELOPMENT LAW on a LEASE AGREEMENT by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and STANLEY M. BLOOM, AN INDIVIDUAL I. INTRODUCTION The California Health and Safety Code, Section 33433, provides that if a redevelopment agency wishes to sell or lease property to which it holds title and if that property was acquired in whole or in pa-c with tax increment funds, the agency must first secure ap- pro% al _ the proposed sale or lease agreement from its local 1eg151G; '_ve body (City Council) after a public hearing. A copy of the prc..osed sale or lease agreement and a summary report t,iat desc:ii s and contains specific financing elements of the proposed '- n . 3 --lor. shall be available for public inspection prior to the As contained in the Code, the following informa- - �n snail he included in the summary report: I . The cost of the agreement to the agency, including lard acquisition costs, clearance costs, relocation ccc- s, the costs of any improvements to be provided by the agency, Plus the expected interest on any loans or bonds to finance the agreements; 2 . The estimated value of the interest to be conveyed or leased, ddternined at the highest uses permitted under the plan; and 1 OCT 22 '90 16:41 REYCEER ��TON. P.3 3 . The purchase price or sum of the lease payments which the lessee will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use consis- tent with the redevelopment plan, then the agency shall provide as part of the sum.-nary an explanation of the reasons for the difference. This report outlines the salient parts of the Pierside Lease Agree- ment (the "Agreement" ) which provides for the leasing of property owned by the Redevelopment Agency of the City of Huntington Beach ( "Agency" ) to Stanley M. Bloom ( "Developer" ) for the purpose of constructing a restaurant development. This report is based upon information contained in a proposed Lease Agreement and is organized into the following four sections: I . Descrizion of tht ProRosed Lareement - This section in- cludes a description of the site and interests to be leased, the proposed development and the major respon- sibilities of the Agency and the Developer. 2 . Cost of the A re . ent to the .Agency - This section out- lines the cost of the Agreement to the Agency. in addi- tion, it discusses the ground lease payments to be paid by the Developer to the Agency, provides a projection of tax increment revenues resulting from the new development and sets forth the net cost of the Agreement to the Agency. The net cost to the Agency equals Agency expen- ditures minus the present value of the tease payments and the value of the tax increment generated by the new development, plus any other resources pledged to the pay- ment of related expenses. 2 l� 1_; �t-1121 1-.11 OCT 22 '90 16:42 REYEER �" �TON. P.4 3. Value pf &he intrregts to bg Lpased - This section surimarizes the Agency appraisal of the value of the parcel to be leased to the Developer. 4 . Purchase_ Price and Reasons_ Therefore - This section describes the purchase price, which is equal to the present value of the anticipated lease payments, to be paid by the Developer to the Agency. It also contains a comparison of the purchase price (lease value) and the fair market value at the highest and best use consistent with the Downtown Specific Plan 10 for the interests con- veyed. 1i. VEbURIL-KiUm Or Tnt rmVrwbry xvxz4MENT A. �1CP and Interest__tQ�it Leased The site consists of 3 .5 acres of land iirmediately south of the Huntington Beach Pier, on the ocean side of the Pacific Coast High- way. Currently, the site is improved with a 17, 600 square foot commercial structure with miscellaneous retail on the first level, "Maxwell 's" Restaurant on the seccnd level, a freestanding struc- ture containing "Dwight' s" hamburger stand, and a public parking lot. B. The.. Propos ed_e-volQP_m=t The proposed development for the site is a 46,500 square foot res- taurant complex. The restaurants will be built on an elevated deck with 611 structured parking spaces provided. Public access to the beach will be provided by two central staircases leading to the beach level. 3 t ' OCT 22 '90 16c43 PEYSER �"STON. P.5 C. The Agency responsibilities can be summarized as follows: 1 . Purchase the subject site from the City of Huntington Beach. 2 . Provide the site in a reasonable time period free and clear of all recorded encumbrances , assessments , leases/subleases, possesory rights, franchises, license and taxes, except as set forth in the Agreement. 3 . Reimburse to the developer the total construction cost of 250 parking spaces being built to replace the existing public parking plus an additional 11 spaces . 4 . Finance the difference in construction costs between the structured parking and surface parking for the remaining 361 parking spaces . The Agency will amortize the cost differential in 30 annual payments. D. Developer's Responsibilities The developer's responsibilities are as follows: 1. Ground lease the site from the Agency for an original term of 55 years. 2 . Finance all off-site costs, except as specifically sett forth in the agreement. 4 ' - t OCT 22 '90 16:43 REYSER J,",,STON, P.6 3. Construct a 48, 500 square foot restaurant complex on a raised deck at the quality level implied in the eleva- tions and developer pro forma. 4 . Develop 611 on-site structured parking spaces. S. Provide public beach access from the project. III. COST OF THE AGREEMENT TO THE AGENCY The total cost of the Lease Agreement to the Agency, and the net costs of the project after consideration of project revenues are presented herein. Both the total and net costs of the Lease Agree- ment are presented in terms of absolute dollar amounts generated over the 55-year lease and in terms of the present value (PV) of expenditures and receipts resulting from implementation of the Lease Agreement. The PV of expenditures and receipts has been com- puted using an assumed discount rate of 10% . The difference be- tween the PV of expenditures and the PV of receipts constitutes the net present value cost of the Lease Agreement to the Agency. This net cost can be either an actual cost (where expenditures exceed receipts) or a net gain (where revenues created by implementation of the Lease Agreement exceed expenditures) . A. TQtalCosts tg the__Agencv Table 1 contains a listing of the Agency's estimated expenditures, by major category, relating to its obligations under the Lease Agreement. Per Table 1, total implementation expenditures by the Agency over the 55 year original terra of the lease are estimated at approximately $53 . 61 million, which equates to $14 .82 million in present value terms. The basis of this estimate is presented below. 5 i OCT 22 '90 16:44 REYSER4no STON, p,7 1 . Site Acquisition Costs The Agency must acquire the subject parcel from the City of Huntington .Beach at a price equal to the current fair market value at the highest and best use allowed by the zoning codes and general plan of the City, as well as the Downtown Specific Plan District 10. The value of this property is estimated at $5.86 million. The Agency will acquire the property subject to a note from the City, bearing interest at 10% per annum. 2 . Site Preparation/Relocation Expense In order to prepare the site for the proposed develop- ment, the existing tenants must be relocated at the ex- pense of the Agency, there could be legal expenses as- sociated with any potential condemnation actions taken, the Agency is responsible for $50,000 of toxic clean-up costs and the Agency must ensure adequate utilities are available to the site. These costs have been capped in the Lease Agreement at $1 .0 million. 3. Parking Costs The Agency parking costs consist of two components : a. An upfront payment of $4.0 million to cover the to- tal construction cost for the 250 replacement public parking spaces. b. An upfront payment of $1 .0 million, plus thirty an- nual payments of $325,500 to amortize the difference in construction costs between structured parking and surface parking for the 361 spaces serving the 6 I"' - • t OCT 22 '90 15"-45 REYSER �.,,STON, p.a private development. The rationale for this payment is that in a typical ground lease where the lessor is receiving 2 .00% to 3.25% of gross sales as rent, the lessor has provided enough land to allow for the building improvements and surface parking. In the proposed Lease Agreement the Agency has not provided enough land to develop a sufficient amount of sur- face parking and, thus, must make up the difference in parking costs to justify the lease terms. These parking payments total nearly $10.76 million, with a present value of $3 .96 million. B. gency Revenues Table 2 shows the nominal and present values of the Agency revenues created as a result of implementation of the lease. 1 . Ground Lease Payments The Pierside Lease Agreement is structured so that the amount of ground rent paid is directly related to the projects performance. The ground rent schedule is as follows: Percent of Total Sales Gross Restaurant SaleQ Amlied to Ground_ Lease $0 - 35 million 2.00% $35 - $55 million 2.50% $55 - 100 million 3.00% $100 million •+ 3.25% 7 OCT 22 '90 15:45 REYSER�.)STON, R,9 In no event can the percentage of gross sales applied to the ground lease payment decrease from year to year. Ad- ditionally, in Years 30, 40 and 50, a base rent equal to 75% of the average of the preceding 3 years of lease pay- ments will be applied. After Year 30, through the ter- mination of the lease, in no event can the annual lease payment decrease from year to year. over the original term, Keyser Marston Associates, Inc. has estimated that the lease will generate nearly $124 million in revenues, with a present value of $8.07 million when discounted at 10% annually. In addition, the property will revert to the Agency at the termination of the lease. The revers- ionary value is projected at nearly $145 million. This equates to $764,000 in present value terms. 2 . Guaranteed Parking Payment Currently, the City is receiving net revenues after ex- penses of $110,000 from the site annually. The developer must guarantee this parking income, with upward adjust- ments commensurate with increases in other City parking revenues, over the life of the lease. This provides to- tal revenues of $21.03 million, which have a present value of $1.75 million. 3. Tax Increment Revenue It is currently estimated that the proposed project will have an assessed value of $14 .19 million upon completion. When this is reduced by the current assessed value of $1 . 06 million, the incremental value is approximately $13. 13 million. Assuming a first year tax rate of 1.077% and set-asides equal to 20%, this results in property tax increment of +$ll3, 000 in the first full year of 8 ` • ` OCT 22 '90 16:46 REYSER k'STaJ' � P.10 operation. Assuming the assessed value increases at 2% annually, and the project area ends in 2018, the project should produce tax increments of approximately $4 .04 mil- lion over the -remaining life of the project area. The present value of the tax increments generated by the project is $1.20 million. A summary of anticipated revenues is shown in Table 2. C. CQmn sQn—Qf Fx eP-nditures and Revenues A comparison of the present value of the expenditures and revenues discussed above results in the following tabulation: Total Dollars Present Value Over a 55-year over a 55-year Lease Lease Total Agency Revenues $293,241,000 $11,783,000 Less: Agency Costs (53, 605,000) (14,8181000) Net Cain (loss) $239, 636,000 ($3,035,000) The analysis above indicates that as a result of implementation of the Lease, the Agency can expect to realize a gain over the lease period of almost $240 million in actual dollars . On a present value basis, project costs exceed project revenues by approximately $3.04 million. 9 OCT 22 '90 16.47 REYSER STON, P.11 IV. ESTIMATED VALUE OF INTEREST TO BE LEASED The value of the interest to be leased has been cor.puted at its highest and best use allowable under the ,zoning codes and general plan of the City, as well as the Downtown Specific Plan District 10. Under these constraints, Keyser Marston Associates, Inc. has estimated that the proposed use is the highest and best use. Thus, the present value of the ground lease and parking revenues to the Agency, less the present value of the amortized parking costs, is the estimated value of the site. The amortized parking payments are subtracted to reflect the extraordinary site costs that must be borne by the lessor in order to make the site developable at the proposed intensity. The present value of the ground lease and parking revenues has been estimated to be $9 .82 million and the present value of the amortized parking costs is $3.96 million, therefore, the estimated value of the site is $5.86 million. V. LEASE PAYMENTS AND REASONS THEREFOR Based upon an analysis of the ground lease payments to the Agency conducted by Keyser Marston Associates, the present value of the developer's ground lease payments is $5 .86 million. This amount is estimated to be the market value of the property and, thus, the Agency is receiving the fair market value for the site. 10 ' OCT 22 '90 1S:47 REYSER�MtSTON, P.12 TABLE 1 ESTIMATED AGENCY COSTS PIERSICE RESTAURANT CCK1'LEX LEASE AGRLEKLUT WITINGION FEACH, CALIFORNIA TOTAL PRESENT DOLLARS VALUE S11E PREPARATION E1,C07,000 S1,C00,000 PARKING COSTS UPFRCKT COS15 (REPLACEFERT SPACES) 14,000,000 S4,000,000 A`M IZED LuS15 SI0,755,000 $3,959,000 LAND PAYHFNT TO CITY $37.840,000 $5,859,000 ............. ............ TOTAI AGENCY COSTS 353,605,C00 %14,818,OC.o ' { ' OCT 22 'SC 16:43 REYSER 'STOh1. P.13 e , TAiLE 2 ESTIMATED AZENCT REVEMUES PIERSIDE RIESTAURANT CCMFLEX LEASE AGPEEMERT NON11NU1014 REACH, CA1IfOPRIA TOTAL M SENT DCLtARS VALUE GROUND LEASE PWIENTS $123,748,000 $8,069,003 REVrRSIONARY VALUE Of LAND S144,426,000 1764,000 GUARANTEED PARKING PAYMENT $21.028,003 S1,749,000 TAX INCRE4ENT 94,039.000 $1,201,000 TOTAL AGENCY REVENUE S293,241,000 $11,783,000 M21IC E OF RJSLSC IMMMr. MAIN FIM {J� DPI` PFDJB/T AM F;r,+µA 1 �� I �Grsl�t FY4SG/ I�rr.Cf^Ch l on Noonday, Noverber 5, at 7:00 PM, or as soon thereafter as the matter may be heard, in the City Council Owbers, Huntington Beach City Hall located at 2000 Main Street, Huntington Beach, California, the City Coil of the City of Huntington Beach and the Redevelopnent Agency ("Agency") of the City of Huntington Beach, will hold a joint public hearing to consider the disposition {of certain real _ located within the Main-Pier Rede relcpnent PJ ect Area on the west side of Pacific Coast Highway between First and Main Streets, (legal Description on File in the City Clerk's office) fran the City to the` Age , and Lease of said real property to Stanley M. Bloom, pursuant to a .y proposed First Ar,*-xdedALease Agreenent by and between the Redevelopr=t Agency 1: and Stanley M. Bloari. The proposed Agreerr-nt and financial report required by +R California Health and Safety Code Section 33433 are available for public inspection. at the office of the City Clerk at 2000 Main Street, Huntington Beach, California. Further information concerning this ratter may also be obtained by contacting Keith Bahr, Project Manager, at (714) 969-2185. By Connie Brockway City Clerk City of Huntington Beach Publish: October �, & 3�, 1990 kw� ,`l M=CE Or PUIUZC 1MRTM NUN RUR Frreii IIIonoi' PnaTDCT 70M �i��14rcMc� �+crsiC�•c ��sc ��r�t�.rw�' On Monday, November 5, at 7:00 PM, or as soon thereafter as the matter ray be heard, in the City Council Chambers, Huntington Beach City Hall located at 2000 Main Street, Huntington Beach, California, the City Council of the City of Huntington Beach and the Redevelopment Agency ("Agency") of the City of Huntington Beach, will hold a joint public hearing to consider the disposition of certain real property located within the Main-Pier Redeveloptnent Project Area on the west side of Pacific Coast Highway between First and Main Streets, (Legal Description on File in the City Clerk's office) from the City to the Agency, and Tease of said real property to Stanley M. Blom, pursuant to a proposed First. Amendedkease Agreement by and between the Redevelopmt Agency and Stanley M. Bloom. She proposed Agreemment and financial report required by California Health and Safety Code Section 33433 are available for public inspection at the office of the City Clerk at 2000 Main Street, Huntington Beach, California. Further information oxx*rning this matter may also be obtained by contacting Keith Bohr, Project Manager, at (714) 969-2185. By Connie Brockway City Clerk City of Huntington Beach Publish: October �, & �, 1990 FKOM '} RED.SAT.Va. TO CITYCLERK P.e2. •dot . Pam'' _ s, 1��3� s� �Nval`ourrR ,,pgcf- v+^ Move�bQ� On Monday, , at 7:00.FM, or as soon thermfter as the ratter my be heard, in the City 0M=il Chambers, Huntington Beach City W1 located at 2000 Wain Suet, Huntington Beach, California, the City Council of the City of Huntington Beach and the Huntbyjton Beach Redevelop-ent Agexxy ("Agency„) , will, hold a joint public hearing to =Isider the ptWosed di,-pwition of certain real property located on the lout side of Pacific Ckat Hig!r y between Fixes and Main Stets, by the Agency to.Stanley M. Blocs pznsuant to a praposW Lease Agrom-ent by and between the Rodevelop-p-nt Agency and Stanley N. Bloom. A finding ooarroerntng adequacy of the SupplerRntal ,NDTri: on-ental lrpact Report No, 90-2 imple renting the California nwironnntal Quality Control Act will also be considered at the saw. hearing. The proposed Agre�-nt ard firsancial report regaixed by California health and Safety Code Section 33433 are available for public inspection at the office of the City Clerk., at the above addrev-s, during office hours 8:00 AM - 5:00 IMI Monday thru Friday) . Further information conce nirq this matter ray also be obtainod by Coaltacting Yeith Bohr, Project YzMger, at (714) 969-2165. 1;atea this. � Y da of Ct 7 1. �_ - , 1.990. C,e/n/6 brae'&L'1C � City Clerk Published �CCT-09-19SO 08:39 FROM RED.SAT.HB. TO CITYCLSRK P.02 MMCE QF CSC Hmram ,41b1eo,bQ(,s, r 90 on Noonday, O=baker-1-5, at 7:00 PM, or as soon thereafter as the matter ruy be heaxd, in the City C=-cil ass, Mr.tirgton Death City Hall loca-ted at 2000 Main Street, Mriti.ngtvri Beach, California, the City 0==il of the City of Rmt',ix g Ecac h and the Huntington Beach Rcdevelga;ti nt Agm y ("Agency"). will hold a joint public hearing to oomider the xwosed disposition of coxtain real pxoperty located on the wC'r"t Side of Pacific Coat Hl'crr.�3y between First and Main Streets, by the Agesccy to Stanley M. Bloom parent to a prcposod Leap Agroamnt by and between the Rodevelopmnt Agency arri Stanley M. nlocn.. A finding Corr'-Ling adequacy of the Supplezental Environn,m- tal fact Report No. 90--2 irplim-ne.-t-A g the Wifornia Ewitormn`al Quality Control Act will also be c=idm d at the same hearing. The proposed Afire . nt and financial report rEgia by California health and Safety Code Section 33433 are available for public it pcctaon at the office of the City Clerk, at the above addre-.mac, during office hairs 8:00 AM - 5:00 rM, Monday thru Friday) . F rthc r information oanoerning this matter ray also be obtainod by contacting Keith Bohr, Project Manager, at (714) 969-2185. Ih Dated this day of ' �c_ _ 1- , 1990. C7 c onn/e raC'Kic1a v City Clerk I I Published. jof/1--`/ C CIF ETC -TW. IREEEVEM fRor'6sco PIZASIOJJ LAASOL S, I I a S���o I�t, �N ut you rrst pa /l/ovg�ham ' On Monday, ;$ar--q 5, at 7:00 ,r-M, or as soon after as the Mtter 'MY be heard, in the City Council Chambexs, Huntiix_ n Beach City Hall located at 2000 Main StXeet, Huntington Beach, Califon--'a, the City Co&=11 of the City of Huntington Beach and the Huntington Beach Redevelopment A90=,Y ("Agency") will hold a. joint public hearing to oDmide:: the proposed disposition of certain real property located on the west side of Pacific Coast Highway between First and Main Streets, by the Agency to Stanley M. Bloom pursuant to a proposed Lease Agreement by and between t-1,e Redevelopment Agemy and Stanley M. Bloom. A finding cxzcrrung adequacy of the S-opplemental. Envi.rorm-�--ntal Impact Report No. 90-2 ixoplc tenting the California Environmental Quality Control. Act will also be considered at the same hearing. The proposed A��azt and financial resort rWixxvd by CaliforXai,a health and Safety Code Section 33433 are available for public in_s:.peotion at the off_im of the City Clerk, at the above address, during office ',' z 8:00 AM -- 5:00 FM, Monday thru Friday) . Further information c ncerni.ng this matter may also be obtained by contacting Keith Bobr, Project Mmger, at (71.4) 969-2185. 15 4'- ,r� Dated this day of C/c�� , 1990, C � 641-17/e- i r 0 cz)a y City Clerk Published p'-T-09-1990 08:39 FROM � RED.SAT.4M TO CITYCLERK P.02. f Ra�as�D_ p14P.S_io� `L�hS�. r 1g90 S�J .twAAT-A �N�s�ou, +� pacflxA�pa`T On Y".'Aay, Cobsimw 15, at 7:00.BM, or as soon thereafter as the muter nay be heard, in the City Q;uncil Chw bers, Hun�n Beach City Hall located at 2000 rain S#Xtet, HUntington Beach, California, the City Council of the city of hILInt ngton Beach and the Huntirx3tan Bead Rodevelcpant Agency ("Agency"), will held a joint public hearing to aamider the prPosed dispositicm of =fain real prqxrty located on the west side of Pacific Co, Higtx y between First and Main Streets, by the Agency to Stanley M. Blom purs=t to a Proposed Lease Agrecurent by and between the Redevelopment Agency and Stanley M. Blow. A finding concerning adequacy of the Sale *&n Envixnm,rental Dgmct Report No. 90-2 iMlemzrting the California Eivi.rowental Quality C=Ytral Act will also be eonsidc,,W at the spa hearing. The proposed and financial report rcguirvd by Califomia health and Safety Code Section 33433 arc Milable for public inspection at the office of the City Clerk, at the above address, during office hours 8:00 AM - 5:00 PM, Monday thru Friday). Farther information cono=n.ing this natter ray also be Chained by ovntactirlg Keith Bohr, Project Man>—,, at (73.4) 969-2185. , S44- Dated thin- day of D�7"�` L , 1990. �0n17/6 ,�ra(fIkQ)a City Clerk rL c E f L j 1� Published - - GtT-09-1990 03:39 F-CM --RED.SAT.HB. +��.� TO _ CITYCLERK -�P.62 . in-MCM or rim TcH HATu-fit T .yf'rc L rr4X7F= AID On 11-inday, , at 7:00 Flit, or a, soon thereafter as the matter may be heard, in the City Council Chwbexs, Hw:tington Beach City Hall locatod at 2000 Main Street, Fluntington Deach, California, the City Coi=il of the City of MmUlIgtM B03Ch and the Huntington Beach RCdevelo:r,=t Agency ("1',gency") . will hold a joint public hearing to consider the pxcposed di-position of o=train real property locatod on the wN�—t side of Pacific Coast Hi%lvimy between First and Main Streets, by the Agery--y to Stanley M. Bloon pur.;ua - to a propc�,cx3 Lease Agreer nt by and between the Rodevelopment Agency and SMnl0y M. B10cm.. A fincWV conoerni g adogjacy of the Supplemental Dtimmmntal 7raet Report too. 90-2 the California nwirorry--ntal Quality Control Act will also be considerCd at the sam hearinj. The'pzo�.ed Agree:; nt and financial report required by California health and Safety C4e Section 33433 •am available for public inspection at the offim of the City Clerk, at the abme- addres-., during office haws, 8:00 AM _ 5:00 M, N,onday thru Friday) . Fur&mr inform-ition concerning this matter rey also be obtainod by contacting Neith Bohr, Project Manager, at (714) 969-2185. Wted this --- 2 ciay of Oc- / i990 rr//l l — t� fir, r��G � t�GGKLt1c7 � Cit1 Clerk Public ie REWI ST FOR CITY COUP'AL/ _ REDEVELOPMENT AGENCY ANION Mi 90-34 �p is Date October 15, 1990 a Submitted to: Honorable Mayor/Chairman and City Council/Redevelopnent Agency M=bers Submitted by: Michel T. Uberuaga, City Adahiistrator/Exec utive Director Prepared by: Barbara A. Fad,, y City Adnini txator/F.00amdc Development '"� Subject: FIRST AMMDID P=IDE IFASWMAIN-PIM RFMEV=PM Nr Pf IB= AREA Consistent with Council Policy? [ ] Yes [ ] New Policy or Exception Statement of Issue,Recommendation,Analysis, Funding Source,Alternative Actions,Attachments: SPAWM Nr OF ISS[JE: Transmitted for the City Council/Redeveloprent. Agency's consideration is the First Amended Pierside Lease Agreement and all appropriate resolutions for the transfer of City-awned land to the Redevelgvient Agency • ' o o Continue this item to the Agency's next scheduled meeting of Monday, November 5, 1990. co N ^ m co r �O ANAWSS' a r At their meeting of Tuesday, October 2, 1990, the Planning Commission � continued the public hearing cn this project to a special meeting to be held on Tuesday, October 23, 1990. Therefore, staff is requesting that the Agency continue this item until the-Planning Ccnrtission has taken action on the Pierside entitlements. On February 20, 1990, the Redevelopient Agexry conceptually approved the Pierside Restaurants development consisting of: . The development of two new restaurant pads - (25,000 sq.ft.) Acea cdations for the relocation of the existing Maxwell's Restaurant - (15,000 sq.ft.) . The development of a parking structure, including surface and subsurface parking for beat3xloers and restaurant patrons . The development of beach-related cmxmssiens, including apprc imately 6,000 sq.ft. of casual dining space . Authorize staff and the developer of Pierside to negotiate for the relocation and integration of Maxu-ell's into the Pierside plan Authorize staff to negotiate an amended lease with Stanley Bloom P10 4184 Since that time, the dorelope..r has refined the project as directed by the Agency, and staff has been, negotiating the terms of an amended Pierside lease. MOM, SOURCE: 1) None as a result of this action. 1I I TIVE AMC M: 1) Cm--time this item to a special meeting designated by the Agency, subsequent to the Planning Commission's public hearing (October 23) on Pierside entitlements. ATrMPUNM: 1) Staff Report dated Febnmry 20, 1990. FffU BARB:lp I REQUEST FOF�EDEVELOPMENT hou' ENCY ACTION RH 90-11 Date February 20, 1990 Submitted to: -• Honorable Chairman and.Radevelopmennt Agency Members !� Submitted by: Fain E. Cock, Executive Director � 1, Prepared by: Keith B. Bohr, RedcvelgXient Specialist9 Subject: APPWM OF CCIRCEPTUAL E VEEDP f W PIAN FM FIERSUE RESTAURANTS Consistent with Council Policy? Yes [ j New Policy or Exception Statement of Issue, Recommendation, Anplysis, Funding Source, Alternative Actions, Attachments: 2I&TUM OF ISSUE: On January 27, 1989, the Agency directed staff to prepare an amended Pierside village plan to eliminate the specialty/retail uses while retaining the restaurant uses (staff report attached) . Additionally, staff was authorized to negotiate with its operators for the rehabilitation of Maxwell"s Restaurant. Cts: Approve the conceptual plan for development of the "Pierside Restaurants" which includes: . The development of two new restaurant pads - (251000 sq.ft.) ; • Accommodations for the relocation of the existing Maxwell's Restaurant - (15,000 sq.ft.) ; . The development of a parking structure, including surface and subsurface parking for both bead-hgoers and restaurant patrons; . The development of beach-related concessions, including approximately 6,000 sq.ft. of casual dining space; and . Authorize staff and the developer of Pierside to negotiate for the relocation and integration of Maxwell's into the Pierside plan. AWJ STS: �-- On September 18, 1988, the City Council adopted a a "Pier Plaza" concept that calls for the develcp:n_nt of a 2.1 acre "Pier Plaza" to be located between the base of the Pier and Pacific Coast Highway. Apprcximately one-half of Maxwell"s Restaurant as it exists today lies within the adopted 2.1 acre footprint of this plan. As a result, the negotiw om for the rehabilitation f:� of Naxwell's has shifted to negotiations for the demolition and relocation of _ a wa Yoxdell's within the proposed Pierside Restaurant development. the history of the Pierside project dates back to 1984 and is more specifically outlined in the analysis of the attached staff report dated January 17, 1989. Briefly, the originally approved "Pierside Village" plan called for an 87,500 sq.ft. specialty/retail oaplex to be located on the ocean side of Pacific Coast Highway between the existing Maxwell's Restaurant and the Lifeguard Headquarters. Ultimately, the plan received all necessary approvals, including the California coastal Mission. however, as the Main-Pier Redevelopment Plan further evolved and approved development heights and densities were scaled dam, staff re-analyzed the need for a specialty/retail ocinplex of the scope and magnitude originally envisioned for Pierside Village. As planning efforts continued, potential conflicts between the Pierside Village concept and the retail activity along Main Street began to be a source of concern. Ultimately, it was concluded that the Pierside Village concept, should be I downscaled and directed away from a focus on retail activity and more towards food services. the currently proposed plans are the result of that shift in focus and reflect a refinement of that concept. FUNDING SOURCE: None as a result of this action. r A19ERNA= A CNS: t 1) Deny approval of the Pierside Restaurants conceptual development plan, and direct staff accordingly. I 1) Staff report of January 17, 1989. 2) Conceptual Plan. PDC/M:1p 0139h i i 1 i � avA;t BY CITY cotr :=sT .F R .CITY CO.L�JCIL/ . RED .. tLO`PMENT AGENCY ACTION • �s.rl. ;" : . RH 89-09 Date JanuaEX 17, 1989 " ITY. LE Submittod to: Honorab a ayor/Chairman and City Council/Agency Members Submitted by: Paul E. Cook, City Administrator/Executive Director ?__ Proparod by: Douglas N. La Belie, Deputy City Administrator/Economic Devel me 6/ Michael C. Adams, Acting Director of ComrTLunity Developmen Subject: PIERSIDE VILLAGE STATUS REPORT AND'RECOMMENDED ACTIONS Consistent with Council Policy? ( j Yes New Policy or Exception Statement of Issue, Recommendation, Analysis, Funding Source, Alternative Actions, Attachments: STATEMENT-OF ISS11 Pursuant to your direction, staff has placed on the agenda for discussion purposes and direction-a Status Report on the Pierside Village portion of the Main--Pier Phase I Project. In 1984, the Agency began its first implementation efforts in the Main-Pier Project Area, and as a part of those efforts an initial development entity was selected for the-project that has become known-as Main-Pier Phase I. The site was bounded by Lake Street, Walnut, Main Street, a portion of the Pier, and the Pacific Coast Highway frontage from the Lifeguard Headquarters to the Pier, bounded by the beach frontage road on the ocean side. RECONIENDAIJONS: 1} Direct staff to prepare an amended Pierside Village plan utilizing the "cluster of restaurants" concept, eliminating all other specialty retail uses; and 2) Receive and file this report. ANALYSI The initial development entity selected to work exclusively with the Agency, Huntington Pacifica Development Group, included four principals. Negotiations took place from late-1984 through mid--1985. The negotiations concluded in August of 1985, with the adoption by "the Redevelopment Agency of the Main-Pier Phase I DDA. This Disposition and Development Agreement provided for an initial scope of development that included in part a 300-room, first-class hotel and related retail uses, and a 75,000 sq.ft. specialty commercial complex. With the Disposition and Development Agreement being approved, the developer spent an extensive period of time seeking to obtain financing and develop a final Land Use Plan for implementation. In October of 1986, these efforts resulted in a revised development concept that was approved along with the First Amended Disposition and Development Agreement, and-the initial Pie-side Lease in October, 1986. Final entitlement project approvals were obtained in December, 1996, through the Coastal Commission and efforts continued to develop a viable Phase I plan for implementation. y f Through 087,.the planning efforts continued and a change of direction began -o erne--- `:. . with respect io O' U'r Main Street redevelopment efforts. The 3DI Plan previously npr- in concept began to evolve into which has become the "Village Concept." This `� �— direction was finalized with conceptual approval by the Agency of the entertaanicnr complex in lieu of the hotel in March of 1988, and Agency approval of the NHL;,ge Concept" in April of 1988. It is important to note that in the first several years of our implementation of-.-Forts a:- visitor-serving corridor essentially from Main to Beach, Walnut to Pacific Coat Higi= h was envisioned. Under the visitor-serving concept Pierside Village was a key (�evelo� I� component and served to provide a needed specialty/retail use as an importan_ eleme the visitor-serving concept. With a shift:in direction and removal of that visi,-fc-sei core, we began to re-think the need for a specialty/retail village of the scope u-ld magnitude originally envisioned for Pierside Village. As the Village planning e:--orts continued, land use conflicts began to occur in terms of Pierside Village drawi-g the -- life for Main Street to that area rather than becoming the specialty/retail as o=ce envisioned. Throughout this period of time, the economics of this project were being continually evaluated by Agency staff, our consultants, and developer represeLativef. Ultimately, a point was reached where the viability not only from a land use b-7- an economic standpoint brought us to the conclusion that the Pierside Village con_-ept s= be modified to achieve a more desirable land use, as well as an economically ��_ble project. Thus, the decision to proceed with a cluster of restaurants rather tha= to attempt a specialty/retail center that would be in direct competition with the -evitai=_ Main Street retail core that we were attempting to create. Staff has reviewed this matter with various Agency consultants and our recom-7enda_ is as outlined above to proceed with the preparation of an Amended Pierside V -_ In our analysis, this action is appropriate based upon project economics and the a, modified development concept as now being implemented for the Main Street Core. FUNDING SOURCE: Available Agency Contractual Services funds. ALTERNATIVE ACTIONS: Continue with original Pierside Village concept. PEC/DLB:lp 4230r a STATEMENT QF THE ACTION OF IIIE CITY MUNCIL Council Chamber, City Hall Huntington Beach, California Tuesday, January 17, 1989 Mayor Bannister called the regular City Council meeting of the City of Huntington Beach to order at 7 p.m. ROLL-CALL Present: MacAllister, Green, Hinchell , Bannister, Mays, Silva, Erskine Absent: None Agency)(City Council/BedeyglQpMent REPORT — RECEIVE D N T ELIMINATE_SPECIALTY—RETAIL _USES MER_7HAN RESTAURANTS — STAFF TO NEGOTIATE HITH MELUS_RESTAURANT REALHABILITATION The City Clerk/Clerk presented a communication from the Deputy City Adminis— trator/Economic Development, transmitting pursuant to Council/Agency direction a Status Report on the Pierside Village portion of the Main—Pier Phase I Project. The site is bounded by Lake/walnut/Main/a portion of the Pier and the Pacific Coast Highway frontage from the Lifeguard Headquarters to the Pier, bounded by the beach frontage road on the ocean side. The City Administrator/Executive Officer presented a staff report. A motion was made by MacAllister, seconded by Mays, to direct staff to prepare an amended Pierside Village plan which eliminates all specialty retail uses other than restaurants, to receive and file the Pierside Village Status Report and to authorize City staff to . discuss and negotiate with the owner of Maxwell ' s for a rehabilitation of that restaurant. The motion carried by the following roll call vote: AYES: MacAllister, Green, Winchell , Bannister, Mays, Silva, Erskine HOES: None ABSENT: None Councilman Mays requested staff to talk to potential restaurant users of the pads and get specific required square footage before developing a plan. • 1 � J Page 2 - Statement o, Acti on, =. 1117189 Mayor Bannister adjourned .the regular meeting of the City Council and the regular meeting of the Redevelopment Agency of the City of Huntington Beach to 8:30 a.m. , Friday, January 20, 1989, to Ben Brown' s Restaurant, Laguna Beach. ATTEST: Connie Brockway City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California Connie Brockway City Clerk STATE OF CALIFORNIA ) Wes Bannister County of Orange ) Mayor City of Huntington Beach) I, CONNIE BROCKWAY, the duly elected and qualified City Clerk of the City of Huntington Beach, California, do hereby certify that the above and foregoing is a true and correct Statement of Action of the City Council of said City at their regular meeting held on the 17th day of January 1989. WITNESS my hand and seal of the said City of Huntington Beach this the 7th day of February 1990. Connie Brockway City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California Deputy i ( t � � B0 t,)TICE j NOTICE OF PUBLIC HEARING " MAIN-PIER REDEVELOPMENT •, PROJECT AREA " On Monday,November 5, 1990,at 7 00 PM,or as soon!' thereafter as the matter may'., be heard,in the City Council Chambers, Huntington Beach City Hall, located at 2000 Main 'Street,,.Hunt- ington Beach,California,the ;City-Council of the City of Hun:,ngton Beach and thel Huntington ' Beach'•Re development Agency ("Agency"), will hold a joint public hearing to consider) the proposed'disposition of certain real property located on ie west-side of Pacific Coast, Highway ;between First and Main Streets, by the Agency to Stanley M- )Bloom' pursuant to a proposed LeaseAgreement by and between the Re- development Agency ',and Stanley M Bloom A'finding concerning adequacy of,the Supplemental Environmen-' tal Impact Report No 90=2' implementing the California Environmental Quality Con- trot Act will also be con- r FUBJI;-N�=` _ sidered at the same hearing The proposed Agreement and financial report required by Cahforrna Health^and Safety Code Section 334331 are available for public in I spection at the office of the City Clerk,at the;above`ad i dress, during office hours (8 00 AM-5 00 PM,Monday through Friday) Further in" formation 'concerning this matter may also be obtained by contacting Keith'i'Bohr) Project Manager,,at{(714) 969-2185' Dated this 9th'aay of OJ tober, 1990- Connie Brockway,))Cit Clerk„City of Huntington Beach•" 9+ Published Orange Coas Daily Pilot`October;,15, 22 1990 ` I d � Orange Coast Daily Pilot •Oronge Coost Doily Poi •Hun ingron Beoch Independent •F.C.;T n Volley Independei 330 West Bay Street • Costa Mesa, Cali(orr.ia 92627 • 714 642-4321 • FAX 714 631.5902 Dear Advertiser: Enclosed please find clipping of your ad from the first publication. If you need to make any changes or corrections, please call me at your earliest convenience. The cost of this publication will be $ ''`I�1• �� Thanks for your cooperation and patronage. Sincerely, qudy etting Manager Legal Advertising Manager ?tom IC'ETICE NOTK;E OF PUBLIC'HEARING MAltl_PIER i REDEVE?LOPMENT PROJF,CT AREA FIRST AMENDED PIERS')DE LEASE AGREEMENT' On 1Mond ay;November 5, 1990 at 7:00 PM,or as soon thereafter a,s the matter may be heard,i!i the City Council Chamber;; Huntington Beach Cite'Hall located at 2000 Ma!,n Street, Hunt- ington Beq:ich,California,the City Courjcil of the City of Huntington Beach and the, Redevel(-)pment Agency ("Agency's) of the City of Huntington Beach, will hold a Joint public hearing to con- sider the 9disposition of cer- tain real' property located within tt7e .Main-Pier Re- developn,ent 'Project Area on the 'A est side of Pacific Coast h lighway between First anal Main Streets, (Legal Description on File in the City C,lerk's office)from the City to the Agency, and Lease of..said real property to St ar,•,ley M. Bloom; pursuant to a proposed First Amendec�i pierside Lease Agreemetnt by and between the Redevelopment Agency and Stan'iey M. Bloom. The proposer.; Agreement. and financial'o-eport required by California Health and Safety Code Sec-,tjon 33433 are available f'or public inspec- tion at the'office of the City Clerk at 21')00 Main Street, Huntington Beach, .Cali- fornia. Further information concerning;this matter may also be obt ained by contact- ing Keith B.ohr,_f'roject Man- ager,at(7',4) -2185. By: Co,nnle Brockway, City Clerik, City of Hunt- ington Be�9ch Published Orange Coast Daily.Pilot`,October. 22, 29, L M239 Orange Coast ' DailyPUDIA •Orange Coast Do-ly Pibt •Hun+mglon Beoch Independent •Founroin Vohey Inderenderl 330 West Say Street • Costa Mesa, California 92621'0 714 642-4321 + FAX 714 631-5902 Dear Advertiser: Enclosed please find clipping of your ad from the first publication. If you need to make any changes or corrections, please call me at your earliest convenience. The cost of this publication will be $ LILIr33 Thanks for your cooperation and patronage. Sincerely, 94 udy etting Manager Legal Advertising Manager �.— , wOCT-09=15G0 08.39' FRCM RED.SAT.HB. TO jTYCLERK P.02 tM-Jr1Ut_F1["IFMn I?1WF1t'T AT*-A D LSD. enr � On An:a: s, at 7:00 PM, or as soon th--roafter as thn nwitter rmy bn hceW, ir, thn City Cot=il auub rs, R-mtington mach City IWI loratod at 2000 Main Straet, h'tultingtvn Beach, California, the City Cowzeil of the City of H n4j- srgtcn Beach w-ia the FlUntington Bich Rec'._"rel*t—mz. Agm y ("Agency") . will hold a joint public hearing to consider the pzrxl disposition of certain real pxoperty locatcod on the Unst side of Pacific Coast Hic, rway between First and Main Stets, by the Agency to Stanley M. Bloaa purssuant. to a propot-e d Lease Agrrcv=nt by arx i k citween the: Rcx f•ve1cp gent Aqnxic y and Stanley 11- `nlow- A finding concerning adoc=cy of the Supplerental i7rrirc. cntal Mrpaet Report 11o. 90-2 irppler,enting the California Ewi -u QLrdity Control Act will also be c onsidcrnd at the rzann hearing. The prc- Xjree-= t and finmvrial irport regairrd by California health and Safety C• <ection 33433 are available for public ir-,-pccUon at the office of the Cii.y Clerk, at the above addres.c., dkU'1r,rJ offioA hcxtrs 8:00 AM - 5:00 r.41 Mo:xl,Y' u Friday). tether informtioun concerning this matter ray also be abtz :. c=tacting Feith Rtxr, Project Miwjer, at (714) 969-2185. 1S +4- Dated this w day of 7` - 1990. o,7416 Ora c-,&way City Clerk - �. PLtA i he•t t G ..... r 13MCE or luffiLl. ]MAP-IM MAIN- F(`�,/�1�c D mwr F31C] wr ARIA /' Fit,+A�^o� Pk -L Ictcc �recl-eft- ' On Monday, November 5, at 7:00 PM, or as soon thereafter as the matter may be heard, in the City Cm-r-il ems, Huntington Beach City Hall located at 2000 Main Street, Huntington Beach, California, the City Council of the City of Huntington Beach and the Redevelopnent Agency ("Agency") of the City of Huntington Beach, will hold a joint public hearing to consider the disposition of certain real property located within the Main-Pier Redevelopment Project Area on the west side of Pacific Coast Highway between First and Main Streets, (Legal Description on File in the City Clerk's office) from the City to the Agency, and Lease of said real property to Stanley M. Blom, pursuant to a proposed First A endedkPase Agreement by and betwee-n the Redevelopment Agency and Stanley M. Bloom. The proposed Agreement and financial report required by California Health and Safety Code Section 33433 are available for public inspection at the office of the City Clerk at 2000 Main Street, Huntington Beach, California. Further information concerning this matter may also be obtained by contacting Keith Wx, Project Manager, at (714) 969-2185. By Connie Brockway City Clerk City of Huntington Beach Publish: October IS, & :W, 1990 i . OCT-09-199e 08:39 FROM .{ RED.SAT.HB. TO CITYCLERK R.02. NCy1 M—M EOV— .g_1 ?A '0 LAAS r r�9 svJr.t,,,4A-r.A eN OIJIOA)nst�+�a 7r►pa d�I P `T . on Mr clay, , at 7:00-R% or as soon thereafter as the mtte- ray be heard, in the City Council umbers, Huntiry ,.on Beach City Hall located at 2000 Plain Street, Huntington Beach, California, the City Council of the City of Hanti.rxgton Beach and the Huntington Beach Pedevelopr.�ent Agency ("Agency") , will hold a joint public hearing to =-Lsider the proposed di ition of c=tain real property located on the t,%--.t side of Pacific Oast Hiomy between First and Main Streets, by the Agency to Stanley M. Floor pursuant to a pared Lease Agroement by and between the Rodevelopmnt Agemy arxi Stanley M. Bloom. A finding concerning adegmcy of the Supple:: ntal £nvirox.n_ntal ltrpact Report No. 90-2 1apleTer M the California Enrl=m, ntal Quality control Act will also be at the sa-w hearing. The pi .wed Agree-zent and f isnanoial report required by California health and Safety Code section 33433 am available for public inspection at the office- of the city Clerk, at the aW,,e ads, during offioe hours 8:00 AM 5:00 rM, Monday thru Friday) . Further information concerning this matter ray also be obtain,©d by ccrtacting xeith Bohr, Project Famger, at (714) 969-2185. 1 S 4.4- � Dated this day of [mac.` k , 1990. 1716 raC')tI11cy y city clerk 1 Published RECEIVED CY CITY OF HUNTINGTON BEACH CTY or CLERK INTER-DEPARTMENT COMMUNICATION ..•.LIF. �uvnr+GWN atACH Ou 3 1 54 l4,*j 'go To Barbara Kaiser From Gail Hutton - Economic Development City Attorney Subject Amended Pierside Lease Date October 3, 1990 Pursuant to your request, we have reviewed the draft Pierside lease dated October 1, 1990. It would be easier in the future if we were involved in the process, so that we could offer more comprehensive and on-going thoughts. We note that there were drafts as early as August 20, but no draft was furnished to us for comment until September 28, leaving very little time before your October 3 deadline to make a comprehensive analysis or to suggest additional language. 1. As a first matter, you may find that consideration of the lease is premature until there is some consensus on the nature of the project, if any, to be approved on the site. The lease is rather project specific, and as yet we have little agreement on the precise shape this project is to take. 2. The name of the agency is misstated as Huntington Beach Redevelopment Agency; we believe the proper name is Redevelopment Agency of the City of Huntington Beach (pages 1 and 10) . 3. A number of the parties to the initial lease are not parties to this amendment. We have not seen any quitclaims or releases of the interests of Pier Side, Inc. , a California Corporation, Huntington Pacifica I, dba Huntington Pacifica Development Group, comprised of Aviv Group Limited, which is a group composed of Aviv Development Corporation and also Pacific Heritage Corporation. 9 . Apparently Stan Bloom is the successor to all these prior entities, and now the sole lessee. I note that the requirement for a personal guarantee has been deleted. Is there any need to require his or anyone's personal guarantee of the obligations of lessee? - 5. The lease provides that the lessor shall acquire the premises from the city on or before the commencement date. This means that the city shall convey the property to the Redevelopment Agency. This is probably not necessary, and also it is probably inadvisable in view of the fact that the city holds this property subject to a public trust. A + ry � w Barbara Kaiser October 3, 1990 Page 2 6. The ingress and- egress provisions (paragraph 3) provide that the promenade and plaza portions are to be made available for public access, but the lease does not otherwise speak about public access obligations the city possesses under the public trust theory. It seems to us that the language needs to be broadened to specify the kinds of access that need to be provided and instead of providing limited access, limit the areas under control by the developer with access otherwise available to the public. 7. On page 4 there is a reference to "partial" certificates of completion. We don't think there is such a thing. 8 . On page 5, we note there is no minimum rent and there is no procedure for determining rent during the first year of the lease. While we refrain from advising on the business aspects of transactions, we suggest that the lack of minimum rent and a requirement of $35 million annual gross receipts before any obligation arises to pay any percentage rent might need some rethinking. 9. On the same page the parking requirement is discussed, with an annual adjustment for the consumer price index. This is too vague a reference, and it cannot be enforced in the absence of specific identification of the particular index to be consulted and the base year from which it is measured. This same comment pertains to page 11 of Exhibit B, the insurance clause. That clause uses an old index not currently published and has been replaced, we recall, by the All Urban Consumers Index. 10. We note that the provision in the former lease concerning contingent rent in lieu of property tax has been deleted. 11. With regard to public parking construction, there should be more extensive language concerning the obligation to enter into public works contracts on the form approved by the City Attorney. (page 6) 12. On the rent credit clause, there are no limits set forth on the amounts of debt or the interest rate. (page 6) 13 . The security deposit should probably be payable to the City Treasurer. (page 7) With regard to title, there is an odd reference to the cost of ALTA and CLTA policies, assuming that CLTA policies cost less than ALTA policies. It may be that the reverse is true, (page 8) f Barbara Kaiser October 3, 1990 Page 3 14. Notices should probably be served by certified mail in order to prove receipt, and the name of the lessor should be Redevelopment Agency of the City of Huntington Beach. (page 8) 15. Perhaps the city should be a party to the lease. 16. The legal description is incorrect; it includes a pier extension which is not part of the current project. Further, the exception should use the word "excluding" instead of the phrase "exclusive of. " . 17. In the general conditions, you should take a look at the insurance clause. We are not familiar with the term "cross-liability endorsements." As earlier noted, the CPI reference is too vague (page 11 of Exhibit B) . 18. The indemnity clause in Exhibit B (page 13) is inadequate and not consistent with current City Council requirements. 19. Perhaps the city should have the right to require a bond or a guarantee upon assignments of the leasehold. (page 14) 20. Also with regard to assignments, consider whether you want to permit unrestrained transfers resulting from the incapacity of the lessee, or transfer to unspecified "other family members," or unrestrained granting of easements and permits. (page 15 of Exhibit B) 21. Resolution of disputes provides for use of a retired judge. Why only a retired Superior Court judge? This generally would ensure using JAMS, which is an expensive arbitration process. (page 30) We realize that this is the provision used in the proposed Holly Seacliff agreement, but a lease is different from a development agreement. And why should there be no appeal? It seems to us that we should use some other established arbitration process. 22. There are substantial problems with Exhibit C, the section dealing with what the city and agency are obliged to furnish in the way of approved condition of title. For instance, exceptions 1 to 33 of the Litigation Guarantee are required to be cleared by the agency. All of these exceptions are not necessarily inconsistent, and some are not removable. This is ill-advised. (page 2 of Exhibit C) 23. On page 3, Dwight's lease is not mentioned as excepted from our obligation to acquire title, and again, the draft requires the agency to acquire title from the city, which can be a significant problem considering the public trust obligations the city probably has on the property. (page 3) Barbara Kaiser October 3, 1990 Page 4 24 . There are loose references also on page 3 to the State of California's contentions, The enumeration should include public easements as well as the more general reference to implied dedication, and public trust exceptions, without regard to tidelands trust. The state has already conceded that the property is tidelands. Generally, the concept of the lessee assuming all risks regarding these claims is an excellent solution. (page 3) 25. On page 4 of Exhibit C, in the first full paragraph it would seem that the consent of the lessor ought to be required before the lessee can compromise a claim. In the neat paragraph on discussing cost of litigation, it would be clearer if the phrase was transposed to read, 'relating in any manner to this lease or to the development of the premises We would be pleased to work with you in addressing and resolving these issues. Gail Hutton City Attorney By V�K Deputy City Attorne cc: Michael T. Uberuaga, City Administrator Mike Adams, Director of Community Development Bob Franz, Deputy City Administrator/Administrative Services Lou Sandoval, Director of Public Works Jim Engle, Acting Director of Community Services Ron Lowenberg, Chief of Police Ray Picard, Fire Chief Ron Hayden, Director of Library Services Connie Brockway, City Clerk James W. Palin, Deputy City Administrator Rich Barnard, Deputy City Administrator Don Watson, City Treasurer Bill Reed, Director of Public Information A 4 . (AI7 CCF.iiX J. a CITY OF HUNTINGTON BEACH ', ,{71 << �':Tr ' INTER-DEPARTMENT COMMUNICAVON LIF• To Barbara Kaiser From Gail Hutton • Economic Development City Attorney Subject Amended Pierside Lease Date October 3 , 1990 Pursuant to your request, we have reviewed the draft Pierside lease dated October 1, 1990 . It would be easier in the future if we were involved in the process, so that we could offer more comprehensive and on-going thoughts . We note that there were drafts as early as August 20, but no draft was furnished to us for comment until September 28, leaving very little time before your October 3 deadline to make a comprehensive analysis or to suggest additional language. 1 . As a first matter, you may find that consideration of the lease is premature until there is some consensus on the nature of the project, if any, to be approved on the site. The lease is rather project specific, and as yet we have little agreement on the precise shape this project is to take. 2. The name of the agency is misstated as Huntington Beach Redevelopment Agency; we believe the proper name is Redevelopment Agency of the City of Huntington Beach (pages 1 and 10) . 3 . A number of the parties to the initial lease are not parties to this amendment . We have not seen any quitclaims or releases of the interests of Pier Side, Inc. , a California Corporation, Huntington Pacifica I , dba Huntington Pacifica Development Group, comprised of Aviv Group Limited, which is a group composed of Aviv Development Corporation and also Pacific Heritage Corporation. 4 . Apparently Stan Bloom is the successor to all these prior entities, and now the sole lessee. I note that the requirement for a personal guarantee has been deleted. ' Is there any need to require his or anyone' s personal guarantee of the obligations of lessee? 5 . The lease provides that the lessor shall acquire the premises from the city on or before the commencement date. This means that the city shall convey the property to the Redevelopment Agency. This is probably not necessary, and also it is ' probably inadvisable in view of the fact that the city holds this property subject to a public trust. A Barbara Kaiser October 3 , 1990 Page 2 6 . The ingress and- egress provisions (paragraph 3) provide that the promenade and plaza portions are to be made available for public access, but the lease does not otherwise speak about public access obligations the city possesses under the public trust theory. It seems to us that the language needs to be broadened to specify the kinds of access that need to be provided and instead of providing limited access, limit the areas under control by the developer with access otherwise available to the public. 7 . On page 4 there is a reference to "partial" certificates of completion. We don' t think there is such a thing. 8 . On page 5, we note there is no minimum rent and there is no procedure for determining rent during the first year of the lease. While we refrain from advising on the business aspects of transactions, we suggest that the lack of minimum rent and a requirement of $35 million annual gross receipts before Any obligation arises to pay any percentage rent might need some rethinking . 9 . on the same page the parking requirement is discussed, with an annual adjustment for the consumer price index. This is too vague a reference, and it cannot be enforced in the absence of specific identification of the particular index to be consulted and the base year from which it is measured. This same comment pertains to page 11 of Exhibit B, the insurance clause. That clause uses an old index not currently published and has been . replaced, we recall, by the All Urban Consumers Index. 10 . We note that the provision in the former lease concerning contingent rent in lieu of property tax has been deleted. 11. With regard to public parking construction, there should be more extensive language concerning the obligation to enter into public works contracts on the form approved by the City Attorney. (page 6) 12. On the rent credit clause, there are no limits set forth on the amounts of debt or the interest rate. (page 6) 13 . The security deposit should probably be payable to the City Treasurer. (page 7) With regard to title, there ,is an odd reference to the cost of ALTA and CLTA policies, assuming that CLTA policies cost less than ALTA policies. It may be that the reverse is true. (page 8) A Barbara Kaiser October 3, 1990 Page 3 14 . Notices should probably be served by certified mail in order to prove receipt, and the name of the lessor should be Redevelopment Agency of the City of Huntington Beach. (page S) 15 . Perhaps the city should be a party to the lease. 16 . The legal description is incorrect; it includes a pier extension which is not part of the current project . Further, the exception should use the word "excluding" instead of the phrase "exclusive of . " 17 . In the general conditions, you should take a look at the insurance clause. We are not familiar with the term "cross-liability endorsements. " As earlier noted, the CPI reference is too vague (page 11 of Exhibit B) . 1B . The indemnity clause in Exhibit B (page 13) is inadequate and not consistent with current City Council requirements . 19 . Perhaps the city should have the right to require a bond or a guarantee upon assignments of the leasehold . (page 14) 20. Also with regard to assignments, consider whether you want to permit unrestrained transfers resulting from the incapacity of the lessee, or transfer to unspecified "other family members, " or unrestrained granting of easements and permits . (page 15 of Exhibit B) 21. Resolution of disputes provides for use of a retired judge. Why only a retired Superior Court judge? This generally would ensure using JAMS, which is an expensive arbitration process. (page 30) We realize that this is the provision used in the proposed Holly Seacliff agreement, but a lease is different from a development agreement. And why should there be no appeal? It seems to us that we should use some other established arbitration process . 22 . There are substantial problems with Exhibit C, the section dealing with what the city and agency are obliged to furnish in the way of approved condition of title. For instance, exceptions 1 to 33 of the Litigation Guarantee are required to be cleared by the agency. All of these exceptions are not necessarily inconsistent, and some are not removable. This is ill--advised. (page 2 of Exhibit C) 23 . On page 3, Dwight' s lease is not mentioned as excepted from our obligation to acquire title, and again, the draft requires the agency to acquire title from the city, which can. be a significant problem considering the public trust obligations the city probably has on the property. (page 3) Barbara Kaiser October 3, 1990 Page 4 24 . There are loose references also on page 3 to the State of California ' s contentions . The enumeration should include public easements as well as the more general reference to implied dedication, and public trust exceptions, without regard to tidelands trust . The state has already conceded that the property is tidelands . Generally, the concept of the lessee assuming all risks regarding these claims is an excellent solution. (page 3) 25 . On page 4 of Exhibit C, in the first full paragraph it would seem that the consent of the lessor ought to be required before the lessee can compromise a claim. in the next paragraph on discussing cost of litigation, it would be clearer if the phrase was transposed to read, "relating in any manner to this lease or to the development of the premises . . . . " We would be pleased to work with you in addressing and resolving these issues . Gail Hutton City Attorney By ; Deputy City Attorne cc: Michael T. Uberuaga, City Administrator mike Adams, Director of Community Development Bob Franz, Deputy City Administrator/Administrative Services Lou Sandoval, Director of Public Works Jim Engle, Acting Director of Community Services Ron Lowenberg, Chief of Police Ray Picard, Fire Chief Ron Hayden, Director of Library Services Connie Brockway, City Clerk James W. Palin, Deputy City Administrator Rich Barnard, Deputy City Administrator Don Watson, City Treasurer Bill Reed, Director of Public Information A + '-OCTe3 `9© 11:28 REYSER MARSTOH. P.2 _ 1 y SUMMARY REPORT PURSUANT TO SECTION 33433 of the CALIFORNIA COMMUNITY REDEVELOPMENT LAMP on a LEASE AGREEMENT by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and STANLEY M. BLOOMr AN INDIVIDUAL I. INTRODUCTION The California Health and safety Code, Section 33433, provides that if a redevelopment agency wishes to sell or lease property to which it holds title and if that property was acquired in whole or in part with tax increment. funds, the agency must first secure ap- proval of the . proposed sale or lease agreement from its local legislative body (City Council) after a public hearing. A copy of tho proposed sale or lease agreement and a summary report th,&L describes and contains specific financing elements of the proposed transaction shall be available for public inspection prior to the public hearing. As contained in the Code, the following informa- tion shall be included in the summary report: 1. The cost of the agreement to the agency, including land acquisition costs, - clearance costs, relocation costs, the costs of any improvements to be provided by the agency, plus the expected interest on any loans or bonds to finance the agreements; 2. The estimated value of the interest to be conveyed or leased, determined at the highest uses permitted under the plan; and 1 'ocT 03 190 11:29 REYSER MARSTON, r.o i r 3. The purchase price or sum of the lease payments which the lessor will be required to make during the term of the lease. If the sale price or total rental amount is less than the fair market value of the interest to be conveyed or leased, determined at the highest and best use consis- tent with the redevelopment plan, then the agency shall provide as part of the summary an explanation of the reasons for the difference. This report outlines the salient parts of the Pierside Lease Agree- ment (the "Agreement") which provides for the leasing of property owned by the City of Huntington Beach ("Agency") to Stanley M. Bloom ("Developer") for the purpose of constructing a restaurant development. Stanley M. Bloom is both the Participant under the Agreement and the Developer and, as noted, above, for purposes of this report shall be referred to as the Developer. This report is based upon information contained in a proposed Lease Agreement and is organized into the following four sections: 1. Desgription of the proposed Agreement - This section in- cludes a description of the site and interests to be leased, the proposed development and the major respon- sibilities of the Agency and the Developer. 2. Comt of th��grgement :to thgL Aaengy - This section out- lines the cost of the Agreement to the Agency. In addi- tion, it discusses the ground lease payments to be paid by the Developer to the Agency and provides a projection of tax increment revenues resulting from the new develop- went and sets forth the net cost of the Agreement to the Agency. The net cost to the Agency equals Agency expen- ditures minus the present value of the lease payments and the value of the tax increment generated by the new 2 • OCT 93 150 11:30 RJR MARSTON. P.a development and any other resources pledged to the pay- ment of related expenses. i 3. Egtigated Value of the ,Interests to be Leased - This section summarizes the Agency appraisal of the value to be leased to the Developer. 4. Egrchase d Reasons- ThgXgf ore - This section describes the purchase price, which is equal to the present value of the anticipated lease payments, to be paid by a the Developer to the Agency. it also contains a comparison of the purchase price (.ease value) and the fair market value at the highest and best use consistent with the Downtown specific Plan 10 for the interests con- veyed. II. DESCRIPTION OF THE PROPOSED AGREEMENT A. Site and Interest,tQ-bQ,__Lgased The site consists of 158,146 square feet of area immediately south of the Huntington Beach Pier, on the ocean side of the Pacific Coast Highway. Currently, the site is improved With a 17,800 square foot commercial structure with miscellaneous retail on the bottom and "Maxwell 's" Restaurant on the second level, a stand alone structure containing "Dwight's" hamburger stand, and a public parking lot. B. The Pro�posed pevejoyment The proposed development for the site is a 56,800 square foot res- taurantcomplex. The restaurants will be built on an elevated deck with 575 structured parking spaces provided. Public access to the 3 • , • ocT c3 '90 11%30 REYSER MARSTON, P.5 S . beach will be provided by two central staircases leading down to the beach level. C. haency Responsibilities, The Agency responsibilities can be summarized as follows: 1. Providing the site in a reasonable time period free and clear of all recorded encumbrances, assessments, leases sublease, possesory rights, franchise, license and taxes, except as set forth in the Agreement. ' 2. Reimburse to the developer the total construction cost of 1t�3�h 50 parking spaces being built as replacements for the zj ost public parking. 3. Pay the difference in construction costs between the structured parking and surface parking for the remaining 325 parking spaces. The Agency will pay the differences in 30 annual payments. D. ve o er's Responsibilities The developer's responsibilities under the lease are as follows: 1. The developer shall ground lease the site from the Agency for a term of 55 years. 2. The developer is responsible for all off-site costs. 3. The developer must construct a 56,800 square foot res- taurant complex on a raised deck at the quality level im- plied in the elevations and developer pro forma. 4 OCT 03_ 190 11.31 REYSER MARSTON, P.6 4. Provide 575 on-site structured parking spaces. i 5. The developer must provide public beach access from the project. III. COST OF THE AGREEMENT TO THE AGENCY The total 'cost of the Lease Agreement to the Agency is presented as well as the net costs of the project after consideration of project revenues. Both the total and net cost of the Lease Agreement are presented in terms of absolute dollar amounts generated over the 55-year lease and Also in terms of the present value (PV) of expen- ditures and receipts resulting from implementation of the Lease Agreement. The PV of expenditures and receipts has been computed using an assumed discount rate which varies depending upon the risk associated with each of the revenue streams. The difference between the PV of expenditures and the PV of receipts constitutes the net present value cost of the Lease Agreement to the Agency. This net cost can be either an. actual cost (where expenditures exceed receipts) or a net gain (where revenues created by implemen- tation of the Lease Agreement exceed expenditures) . A. 3:9o-al 9gats -t;4 the Acrency Table 1 contains a listing of the Agency's estimated expenditures, by major category, relating to its obligations under the Lease Agreement. Per Table 1, total implementation expenditures by the Agency over the life of the lease (55 years) are estimated at ap- proximately $17.0 million. In present value terms the total costs of the project, including the required off-site parking is $9.2 million. The basis of this estimate is presented below. 5 OCT 03 '90 11:32 REYSER MARSTON, P.7 1. Site Preparation/Relocation Expense In order to prepare the site for the proposed develop- ment, the existing tenants must be relocated at the ex- pense of the Agency, there are legal expenses associated with condemnation, the Agency is responsible for $50,000 of toxic clean-up costs and the Agency must ensure ade- quate utilities are available to the site. These costs have been estimated by Agency staff to equal $1.0 mil- lion. s `Yy e�• 2. Parking costs The Agency parking costs consist of two components: a. An upfront payment of $4,846,000 to • cover the total construction cost for the 50- replacement public parking spaces. b. Thirty annual payments of $371,250 to amortize the difference in construction costs between structured parking and surface parking for 325 spaces. The ra- tionale for this payment is that in a typical ground lease where the lessor is receiving 2.00% to 3.25% of gross sales as rent, the lessor has provided en_ ough land for building _.and__parking. In the proposed Lease Agreement the Agency has not provided enough land for surface parking and, thus, must make up the difference in parking costs to justify the lease. These parking payments total $11.1 million, with a present value of $3,375,000. 6 OCT 03 '90 11:33 REYSER MARSTON, N•� 1 ,i B. Agena_Revenugs Table 2 shows the nominal and present value amounts of Agency revenues created as a result of implementation of the lease. 1. Ground Lease Payments in the Pierside Lease Agreement the lease is structured so that the amount of qKS2.ndrent paid is directly re- lated to the performance__of the project. The rent schedule is as follows: gross Eestaur&nt__gAleg of Sales for Ground Lease $0--35 million 2.00% $35-$55 million 2.50% $55-$1oo million 3.00% $100 million + 3.25% In no event can the percent of gross sales paid as a ground lease payment decrease from year to year. Over the life of the lease Keyser Marston Associates, Inc. has estimated that the lease will generate $129.3 million in revenues, with a ,present value of ±$8.5 million when dis= counted at lot. 2. Guaranteed Parking Payment currently, the Agency is receiving approximately $100,000 in parking revenues from the site annually. The developer has agreed to guarantee this p,rk ng income, plus inflation over the life of the lease. This provides total revenues of $19.1 million, which has a present value of $1.6 million. 7 OCT 03 '9Q 11:32 REYSER MARSTON, P.e 3. Tax Increment Revenue It is currently estimated that the proposed project will have an assesse �lue_of_$15.9�nIlion upon completion. When this is reduced by the current assessed value of $1.1 million, the incremental value is approximately $14.8 millian. Assuming a first year tax rate of 1.077% and set-asides equal to 20%, this results in property tax increment of ±$128,000 in the first full year of operation. Assuming the Assessed value increases at 2% annually, and the project area ends in 2018, the project should produce tax increments of approximately $4.5 mil- lion over the r_emaining_i.fe stf tb.e project area. The present value of the tax increments generated by the project is $1.3 million. A summary of anticipated revenues is shown in Table 2. C. Comparison of_Lxpendituree _an evenues A comparison of the present value of the expenditures and resources discussed above results in the following tabulation: Total Dollars Present Value Over a 55-year Over a 55-year Lease Lease ----- ----- -------------- Total Agency Revenues $152,886,000 $11,412,000 Less: Agency Costs $(1619841000) $(9,221,000) ----------- ---------- { Net Gain (loss) $135,9021000 $ 2,191, 000 i 8 , OCT 03 '90 11s34 REYSER MARSTON, P.10 The analysis above indicates that as a result of implementation of the Lease, the Agency can expect to realize a gain over the lease period of almost $136 million in actual dollars. on a present value basis, project revenues exceed project costs by $2.2 million. These gains do not include the present value of the reversionary .interest at the termination of the lease, which is estimated at $250,000. IV. ESTIMATED VALUE OF INTEREST TO BE LEASED The value of the interest to be leased has been computed at its highest and best use under the zoning codes and general plan of the City and the Downtown Specific Plan District 10. Under these con- straints, Keyser Marston Associates, Inc. has estimated that the proposed use is the highest and best use and, thus, the present value of the ground lease payments to the Agency, less the present value of the amortized parking payments, is the estimated value of the site. The amortized parking payments are subtracted because they are an extraordinary site cost which must be borne by the les- sor in order to make the site developable. The present value of the lease payments has been estimated to be $8.5 million and the present value of the amortized parking costs is $3.4 million,. therefore, the estimated value of the site is $5.1 million. V. LEASE PAYMENTS AND REASONS THEREFOR i Based upon an analysis of the ground lease payments to the Agency conducted by Keyser Marston Associates, the developer is paying $5.1 million in net ground lease payments over the term of the lease. This amount is estimated to be the market value of the property and, thus, the developer is paying fair market value for the site. 9 OCT 03. 190 11.35 REYSER MARSTON, P.11 TABLE 1 ESTIMATED AGENCY COSTS PIERSIDE RESTAURANT COMPLEX LEASE AGREEMENT RUNTINGTON BEACH. CALIFORNIA TOTAL PRESENT DOLLARS VALUE ............. ............ SITE PREPARATION 11,000.ODO S110001000 PARKING COSTS UPFRONT COSTS (REPLACEMENT SPACES) 54,846,000 56,846,000 APMTIZEO COSTS S1?,138,000 $3.375,000 TOTAL AGENCY COSTS $16,984,000 $7,221,000 _ _r,. I 1 OCT 03 190 11:35 RE1 SER MAFZSTON, P.12 TABLE 2 ESTIMATED AGENCY REVENUE PIERSIDE RESTAURANT COMPLEX LEASE AGREEMENT NUNTINGTON BEACH, CALIFORNIA i TOTAL PRESENT DOLLARS VALUE ............. ............ GROUND LEASE PAYMENTS S129,255,000 $8,489,000 GUARANTEED PARKING PAYMENT S19,116,000 $1,590,000 TAX INCREMENT $4,485,000 S11333,000 ............. ............ TOTAL AGENCY REVENUE t152,686,000 i1T,412,000 3, 5►'7, OOD T n 13 b u..a CoS�S v 5•y'.Lu•"'}"'L TABLE 1 ESTIMATED PUBLIC REVENUES GROUND LEASE RANGES FROM 2.00% TO 3.25% OF GROSS REVENUES PIERSIOE RESTAURANT COMPLEX HUNTINGTON BEACH, CALIFORNIA DEVELOPER NO ACTION , PROPOSAL SCENARIO ��o a�(„}ti,,c� •— ---------CITY tOSTS........... 7-='d sc>'A " CITY UPFRONT PARKING COSTS U,B46,000 ti5.c+c� �..�--Q 1`�• 0 �07. 7� C17Y AMORTIZED PARKING COSTS S3,375,000 CrT � SITE PREPARATION COSTS S1,000,0DO (1) TOTAL CITY COSTS $7,221,000 11w} ---•-- .CITY REVENUE------- d i�o- yoa f car GAURANTEED PARKING PAYMENT S1,590,000 11,590,0004 CITY GROUND LEASE REVENUE t8,489,000 (2) $4,480,000 1 s�L-41 � ? - - .2 S i ) 9� CITY SALES TAX REVENUE 23,511.000 $620,000 s y o AW TAX INCREMENT REVENUE $1,333.000 N.A. { .b Za,q, . * I -.-.._ dyyt.si GROSS CITY REVENUE 114,929.000 36,690,000 S' rjg�, '3o3 (LESS) CITY COSTS 9,221,000 1,000,000 (3) NET CITY REVENUES 15,108,000 S5,690,000 DEVELOPER COST S14,285,000 DEVELOPER RETURN (NPV) $7,030,000 REV IRR TOTAL INVESTMENT 11.7% (1) INCLUDES RELOCATION, LEGAVRENEOIATION, TOXICS i UTILITIES. (2) ASSUMES GROUND LEASE RANGES FROM 2.00% TO 3.25% OF GROSS REVENUES. (3) COST OF "AXNELL RERABILITAT;ON FOR CURRENT SITUATION. SOURCE: KEYSER IIARSTON ASSOCIATES, INC. SEPTEKSER, 1990: FILE IPIERRES �.cS. PHIN•� {bpi aoca ,,-Authorized to Publish Advertisements of all kinds including pub)c notices by Decree of the Superior Court of Orange County, California, Number. A-6214, September 29, 1961, and A-24831 June 11, 1963 STATE OF CALIFORNIA County of Orange I am a Citizen of the United States and a resident of the County aforesaid; I am over the age of eighteen years, and not a parry to or interested in the below entitled matter. I am a principal clerk of the ORANGE COAST DAILY PILOT, a newspaper of general circulation, printed and published in the City of Costa Mesa, County of Orange, State of California, and that - -- attached'Notice is a true and complete copy as PUBLIC NOTICE` NOTICE OF ( was printed and published in the Costa Mesa, PUBLIC HEARING On Monday, October 15, Newport Beach, Huntington Beach, Fountain at 7:00 PM,or as soon there- after as the matter may be Valley, Irvine, the South Coast communities and heard, 'in the City Council Chambers, Huntington Laguna Beach issues of said newspaper to wit Beach City Hall; located at,` 2000 Main Street, Hunt the issue(s) of: ington Beach,California,the. City Council of the City of! Huntington.Beach and the Huntington Beach Re- development gptOctober 3, 1990 ("Agency"),wllhoda Io public hearing to consider the proposed disposition of certain real property located on the viest side of Pacific Coast Highway between First and Main Streets, by the Agency.ta.Stanley,M.1 ,Bloom, pursuant to a proposed Lease Agreement by and!between the Re- i development Agency`.and Stanley M.Bloom.A finding concerning adequacy:of the Supplemental Env iron men d tal Impact Report No. 90-2 implementing the California` Environmental Quality Con' trot Act will also be con) sidered at the same hearing) The proposed Agreements and financial report required by California Health and. Safety Code,Section 33433,1 are available for public in I sp I declare, under penalty of per'ury, that the City at the office of the Clerk,at the above ad j I dress, during office hours foregoing Is true and correct. 8:00 Frida' O urt Monday) thru Friday. Further Infer- I i mation concerning this mat- ter may also be obtained by Executed on October 3, 99 0 contacting Keith Bohr, Pro- t ject Manager,at(714)2185. at Costa Mesa, California. Dated October 1,1990 Connie Brockway, City Clerk Published Orange Coast Daily Pilot October 3, 1990 W-174 Sign Pure PROOF OF PUBLICATION i C�CT-Q1-159E3 08:56 FROM P.ED.SAT.HB. - ..TO CITYCLEFSK -P.02- - i•+�!1'.F�� t�F' irJr.T�`�}1:�nn� . C n NOW October 15, at 7:00 EM, or as soon thoreafter as the maw*- r y be hem, in the City Vur cil Chambers, Huntington Beach City Hall located at 2000 Main Street, Antington Beach, California, the City Council of the City of BAnti gton Beach and the Huntington Beadh Agency (" Y") , will hold a join public hearing to consider the proposed disposition of certain real property located on the west side of Pacific Coast Hich%my between First and Main Streets, by the Agency to Stanley M. Bloom pursuant to a proposed Wage Agreerrert by and betxi the RedevelgYtt Iy and Stanley M. Bloccn. A fizxiisig concerning adequacy cf the Supplemental Fx:vinta2 Impact Rreport No. 90-2 implementing the California Environmental Quality Control Act will also be considered at the same bearing. The proposed Agroement and financial repent required #1 California health and Safety Code Section 3:433 are available for public inspection at the offxoe of the City Clerk, at the above addr nn, during office hours 8:00 AM - 5:00 PM, Mornay thxu Friday). Furttxer inn rmation concerning this matter roy also be dbtained P• contacting Flith Bohr, Pivjec-t Wnager, at (714) 969-21US. Dratted this i,,�.i' day of , 1990. city Clerk / Ali*l*,d� _ TOTAL P.02. � r NO UM_or ITWAIc I ING M1N PIM TOIE VEIDTIUM MaTDCI ARM Pc rs rJe- ecckch.T' on Monday, November 5, at 7:00 RI, or as soon thereafter as the matter may be heard, in the City Oa =il Chambers, Huntington Beach City Nall located at 2000 Main Street, Huntington Beach, California, the City Council of the City of Huntington Beach and. the Redevelopment Agency ("Agency") of the City of Huntington Beach, will hold a joint public hearing to consider the disposition of certain real property located within the Fain-Pier Redevelopment Project Area on the west side of Pacific Coast Hic�my between First and Main Streets, (Legal Description on File in the City Clerk's office) fry the City to the Agency, and Lease of said real property to Stanley M. Bloom, pursuant to a proposed First Ar andedkease Agreement by and between the Rodeveloprent Agency and Stanley M. Bloom. The proposed Agreerent and financial report required by California Health and Safety Code Section 33433 are available for public inspection at the office of the City Clerk at 2000 Main Street, Huntington Beach, California. Further information concerning this matter may also be obtained by contacting Keith Bohr, Project Mark'iger, at (714) 969-2185. By Connie Brockway City Clerk City of Huntington Beach Publish: October 36, & ift, 1990 10*1 1:117 LFRK J. # CITY of HUNTINGTON BEACH CITY rr .� INTER-DEPARTMENT COMMUNICATION , l:11 To Barbara Kaiser From Gail Hutton Economic Development City Attorney Subject Amended Pierside Lease Date October 3 , 1990 Pursuant to your request , we have reviewed the draft Pierside lease dated October 1 , 1990 . It would be easier in the future if we were involved in the process, so that we could offer more comprehensive and on-going thoughts . We note that there were drafts as early as August 20, but no draft was furnished to us for comment until September 28 , leaving very little time before your October 3 deadline to make a comprehensive analysis or to suggest additional language . 1. . As a first matter , you may find that consideration of the lease is premature until there is some consensus on the nature of the project , if any, to be approved on the site . The lease is rather project specific, and as yet we have little agreement on the precise shape this project is to take . 2 . The name of the agency is misstated as Huntington Beach Redevelopment Agency; we believe the proper name is Redevelopment Agency of the City of Huntington Beach (pages 1 and 10) . 3 . A number of the parties to the initial lease are not parties to this amendment . We have not seen any quitclaims or releases of the interests of Pier Side, Inc. , a California Corporation, Huntington Pacifica I , dba Huntington Pacifica Development Group, comprised of Aviv Group Limited, which is a group composed of 'Aviv Development Corporation and also Pacific Heritage Corporation. 4 . Apparently Stan Bloom is the successor to all these prior entities, and now the sole lessee . I note that the requirement for a personal guarantee has been deleted. Is there any need to require his or anyone ' s personal guarantee of the obligations of lessee? - 5 . The lease provides that the lessor shall acquire the premises from the city on or before the convnencement date. This means that the city shall convey the property to the Redevelopment Agency. This is probably not necessary, and also it is probably inadvisable in view of the fact that the city holds this--property subject to a public trust . A Barbara Kaiser October 3 , 1990 Page 2 6 . The ingress and egress provisions (paragraph 3) ' provide that the promenade and plaza portions are to be made available for public access, but the lease does not otherwise speak about public access obligations the city possesses under the public trust theory. It seems to us that the language needs to be broadened to specify the kinds of access that need to be provided and instead of providing limited access , limit the areas tinder control by the• -developer with access otherwise available to the public . 7 . On page 4 there is a reference to "partial" certificates of completion . We don ' t think there is such a thing . B . On page 5 , we note there is no minimum rent and there is no procedure for determining rent during the first year of the lease . while we refrain from advising on the business aspects of transactions , we suggest that the lack of minimum rent and a requirement of $35 million annual gross receipts before any obligation arises to pay any percentage rent might need some rethinking . 9 . On the same page the parking requirement is discussed, with an annual adjustment for the consumer price index . This is too vague a reference, and it cannot be enforced in the absence of specific identification of the particular index to be consulted and the base year from which it is measured . This same comment pertains to page 11 of Exhibit 0, the insurance clause . That clause uses an old index not currently published and has been replaced , we recall , .by the All Urban Consumers Index . 10 . We note that the provision in the former lease concerning contingent rent in lieu of property tax has been deleted . 11 . With regard to public parking construction, there should be more extensive language concerning the obligation to enter into public works contracts on the form approved by the City Attorney. (page 6) 12 . On the rent credit clause , there are no li,rnits set forth on the amounts of debt or the interest rate . (page 6) 13 . The security deposit should probably be payable to the City Treasurer . (page 7) With regard to title, there is an odd reference to the cost of ALTA and CLTA policies , assuming that CLTA policies cost less than ALTA policies . It may be that the reverse is true. (page 8) Barbara Kaiser October 3 , 1990 Page 3 14 . Notices should probably be served by certified mail in order to prove receipt , and the name of the _lessor should be Redevelopment Agency of the City of Huntington Beach . (page 8) 15 . Perhaps the city should be a party to the lease . 16 . The legal description is incorrect ; it includes a pier extension which is not part of the current project . Further , the exception should use the word "excluding" instead of the phrase "exclusive of . " 17 . In the general conditions , you should take a look at the insurance clause . We are not familiar with the term ..crass-liability endorsements . " As earlier noted, the CPI reference is too vague (page 11 of Exhibit B) . 18 . The indemnity clause in Exhibit B (page 13) is inadequate and " not consistent with current City Council requirements . 19 . Perhaps the city should have the right to require a bond or a guarantee upon assignments of the leasehold . (page 14 ) 20 . Also with regard to assignments , consider whether you want to permit unrestrained transfers resulting from the incapacity of the lessee, or transfer to unspecified "other family members, " or unrestrained granting of easements and permits . (page 15 of Exhibit 9) 21 . Resolution of disputes provides for use of a retired judge . Why only a retired Superior Court judge? This generally would ensure using JAMS , which is an expensive arbitration process . (page 30) We realize that this is the provision used in the propo$ed Holly 5eacliff agreement , but a lease is different from a development agreement . mid why should there be no appeal? It seems to us that we should use some other established arbitration process . 22 . There are substantial problems with Exhibit C, the section dealing with what the city and agency are obliged to furnish in the way of approved condition of title . For instance , exceptions 1 to 33 of the Litigation Guarantee are required to be cleared by the agency. All of these exceptions are not necessarily inconsistent , and some are not removable . This is ill-advised . (page 2 of Exhibit C) 23 . On page 3 , Dwight ' s lease is not mentioned as excepted from our obligation to acquire title, and again, the draft requires the agency to acquire title from the city, which can be a significant problem considering the public trust obligations the city probably has on the property. (page 3) j Barbara Kaiser October 3 , 1990 Page 4 24 . There are loose references also on page 3 to the State of California ' s contentions. The enumeration should include public easements as well as the more general reference to implied dedication, and public trust exceptions , without regard to tidelands trust . The state has already conceded that the property is tidelands . Generally, the concept of the lessee assuming all risks regarding these claims is an excellent solution . (page 3 ) 25 . On page 4 of Exhibit: C, in the first full paragraph it would seem that the consent of the lessor ought. to be required before the lessee can compromise a claim. In the next paragraph on discussing cost of litigation, it would be clearer if the phrase was transposed to read, " relating in any manner. to this lease or to the development of the premises . " yle would be pleased ' to work with you in 'addressing and resolving these issues . Gail Hutton City Attorney By Deputy City Attorne, cc : Michael T. Uberuaga , City Administrator Mike Adams , Director of Community Development Bob Franz, Deputy City Administrator/Administrative Services Lou Sandoval , Director of Public works Jim Engle, Acting Director of Community Services 4 Ron Lowenberg , Chief of Police Ray Picard, Fire Chief Ron Hayden, Director of Library Services Connie Brockway, City Clerk James V1. Palin, Deputy City Administrator Rich Barnard, Deputy City Administrator Don Watson, City Treasurer Bill. Reed, Director of Public Information 0.'.T-01-1533 08:�b FRUI RED.SH f.HB. TO CiTYCL.tKK V. On 1'forday, October 15, at 7:00 EM, or as soon thereafter as the matter- may bo heard, in the City C xmcil 0 bers, Hurit� Beach City Hall located at 2000 Main Street, Rmtlngton Beach, California, the City Cxx=il of the City of HLmtixx3ton Beach and the Beach Rodevelcp errt Agency ("Age r-y") , will hold a Joint pxblic hearing to consider the ptrposed disposition of certain real pxap=ty located an the west side of Pacif is Coast Highway between First and Main Streets, by the ATE cy to Stanley M. Blom puruvant to a prcposad Ina-m Agreement by and bctwom the Redevelapemt Agmcy ar d Stanley M. Bloca. A finding conoemirg adequacy of the Supplerental Dwitwaental D�paCt Repox No. 90-2 inplanentiryg the California Dnrir=nental Q=Iity Cm-trol Act will also be considered at the sam-, hearing. The proposed Agmment and financial report rnTdrei b; California hoalth and Safety Code Soction 33433 are available for public inspec`aon at the office of the City Clerk, at the above addrems, during office hairs 8:00 AM - 5:00 P14, Momby thru Friday). Further infoxriation cox-m ning this matter may also be obtained by omtacting tKeith Bohr, Project 2•Lanager, at (714) 969-2185. Dated this S day of am, 1990. Oh�,iP� , �y rs cJ� r✓_�-Y City Clerk / p r f Foblished_ffi F t i CITY OF HUNTINGTON BEACH .� INTER-DEPARTMENT COMMUNICATION •1 HUHTNGTCTN VACH � y� 1v Barbara A. Kaiser To Department Heads From Deputy City Admin strator! • Economic Development Subject FIRST AMENDED Date October 1, 1990 PIERSIDE LEASE AGREEMENT Attached is the most current draft Amended Pierside Lease between the Huntington Beach Redevelopment Agency and Stanley M. Bloom. The project will be considered for entitlements by the Planning Commission on October 2, 1990. The Lease will be considered by the City Council on October 15, 1990. I would appreciate your review and written comment on this draft Lease by Monday, October 8, 1990. Thank you for your cooperation. BAK:sar Attachment Michael T. Uberuaga, City Administrator Mike Adams, Director of Community Development Bob Franz, Deputy City Administrator/Administrative Services Lou Sandoval, Director of Public Works Jim Engle, Acting Director of Community Services Ron Lowenberg, Chief of Police Ray Picard, Chief of Fire Ron Hayden, Director of Library Gail Hutton, City Attorney Connie Brockway, City Clerk J2mes W. Palin, Deputy City Administrator x Rich Barnard, Deputy City Administrator o Don Watson, City Treasurer Bill Reed, Director of Public Information 7S27r 1 � r w ,FT FIRST AMENDED PIER SIDE LEASE By and Between HUNTINGTON BEACH REDEVELOPMENT AGENCY and STANLEY M. BLOOM } L � r � W S Y TABLE OF CONTENTS Pane 1. RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. INGRESS AND EGRESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 S. REQUIRED SERVICES AND USES - LIMITATION ONUSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 6. DEVELOPMENT OF THE PREMISES AND ADJACENT AREAS 3 a. Scope of Development and Cost of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 b. Construction Schedule. : - - - - - - , 3 C. Certificate of Completion. . . . . . . . . . . . . . . . . 4 7. RENT. . . . . . . . . . 5 a. Percentage Rental. . . . . . . . . . . . . . . . . . . . . . . . . 5 b. Parking Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 C. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 d. Public Parking . . . . . . . . . . . . . . . . . . . . . . . . . . 6 A.L. Rent Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 S. SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 A 4_a. OPERATION AND MAINTENANCE OF PARKING FACILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ,�10• NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 THIRD PARTY BENEFICIARY. . . . . . . . . . . . . . . . . . . . . . . 9 EXHIBITS - INCORPORATION INTO LEASE. . . . . . . . . . . 9 -i- S Y• EXHIBITS A Legal Description of Premises B General Conditions C Conditions to Commencement D Scope of Development E Schedule of Performance r -ii- t r FIRST AMENDED PIERR SIDE LEASE This FIRST AMENDED PIER SIDE LEASE (the "Lease") is entered into this day of , 1990 (the "Effective Date" ) , by and between the HUNTINGTON BEACH REDEVELOPMENT AGENCY, a public body, corporate and politic ("LESSOR" ) , and STANLEY M. BLOOM, an unmarried man ( "LESSEE") , who agree as -follows: 1. RECITALS: This Lease is nade with reference to the following facts, objectives and covenants: a. On or about August 19, 1985, LESSOR, HUNTINGTON PACIFICA DEVELOPMENT GROUP, and the City of Huntington Beach, a municipal corporation (the "City" ) , entered into a Disposition and Development Agreement, which agreement was modified on or about February 18, 1986 (the "DDA") . The DDA provided for the disposition and development of two parcels located in the City of Huntington Beach, California, one of which parcels encompassed the Premises described herein (and other adjacent property that has been deleted from the Premises) . LESSEE hereunder is a shareholder in Randall Foods, Inc. , which was the parent of Pacific Heritage Land and Holding Company, which in turn was the parent of Pacific Heritage Corporation, one of the general partners in HUNTINGTON PACIFICA DEVELOPMENT GROUP, and LESSEE thereby had a substantial interest in the DDA. b. On or about November 20, 1986, LESSOR and PIER SIDE DEVELOPMENT, the successor-in-interest to HUNTINGTON PACIFICA DEVELOPMENT GROUP, entered into a lease (the "Pier Side Lease" ) . The Pier Side Lease provided for the disposition and development of the parcel described in the DDA that encompassed the Premises described herein. Huntington Pacifica Development Group was a general partner in PIER SIDE DEVELOPMENT, and LESSEE thereby had a substantial interest in the . Pier Side Lease. C. LESSOR and LESSEE, as the successor-in-interest to PIER SIDE DEVELOPMENT, desire to amend and restate the Pier Side Lease on the terms and conditions set forth herein. LESSOR and LESSEE agree that the DDA, including without limitation the Guarantees set forth as Attachments 7-10 thereto, is of no further force and effect, and that the Pier Side Lease, including without limitation the Guarantees set forth as Exhibits F, G, and H, thereto is superseded and amended by this Lease and shall be of no further force or effect on the Effective Date. d. The City is currently the owner of that parcel of real property located in the City of Huntington Beach, State of California, described in Exhibit "A" hereto and incorporated herein by this reference (the "Premises" ) . Subject to the satisfaction or waiver of all of the "Conditions to Commencement" (Exhibit "C" hereto) , LESSOR shall acquire the Premises from the City on or before the "Commencement Date" of the Lease term, as that date is defined in paragraph 4 below. - e. On , 1990, by Resolution No. LESSOR approved and authorized its Chairman to execute this Lease. f. This Lease is entered into for the redevelopment of property consistent with the public purposes of the Main-Pier Redevelopment Plan, as previously adopted by the City Council of the City, and not for the purpose of speculation in unimproved land. 2. PREMISES: LESSOR agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR the Premises upon the terms and conditions expressed herein. 3. INGRESS AND EGRESS: LESSEE shall have the full and unimpaired access to all portions of the Premises at all times during the entire Lease term, including without limitation, access from the nearest public streets (Pacific Coast Highway and Lake Street) to the Premises, pedestrian access from all adjacent public spaces and ways (which include but are not limited to the municipal pier and beach) to the Premises, and limited access from the access road/bike trail in accordance with Paragraph 7 of the Scope of Development (Exhibit "D" ) . Access points stall be limited as provided on the plans and permits to be approved by the City, as referenced in Paragraph 1 of the Conditions to Commencement (Exhibit "C" ) , as the same nay be revised from time to time. LESSEE shall provide fullApublic access to all of the promenade and plaza portions of the Premises consistent with security and safety reSn4lations proir.ulgated b-any governmentai, authority with jurisdiction. 4. TERM: The term of this Lease shall be- fifty-five (55) years, commencing on the date (herein the "Commencement Date" ) . that all of the conditions to the commencement of the Lease term described in Exhibit "C" hereto ( "CONDITIONS TO 10/01/90 1712u/2460/04 -2- z rt- COrTMENCEMENT" ) are satisfied or their performance is waived by the appropriate party. Upon the Commencement Date, LESSOR and LESSEE each agree, upon the request of the other party, to execute an appropriate memorandum in recordable form certifying the actual Commencement Date. 5. REQUIRED SERVICES AND USES LIMITATION ON USE: LESSOR' s primary purposes for entering into this Lease are to provide for the development of facilities and services needed by the public as well as to promote the implementation of the Redevelopment Plan for the Main-Pier Redevelopment Project (the f'Redevelopment Plan" ) . In furtherance of that purpose, LESSEE shall during the Lease term use the Premises for the purpose of constructing and operating thereon restaurant and food and beverage facilities, beach-related concessions, retail shops, and a parking structure designed to accommodate such uses and public beach parkina, all in accordance with the Scope of Development (Exhibit "D" ) and the Conditional Use Permit, Coastal Development Permit, and final building plans and specifications to be approved for the project referenced therein, as such matters may be amended or changed as provided herein. Provided that LESSEE obtains all permits and approvals which may be required by the City and any other governmental agency with jurisdiction, LESSOR agrees that the permitted uses on the Premises shall also include outdoor dining, the serving of alcoholic beverages in conjunction with the restaurant and food and beverage facilities, entertainment, and the staging of special outdoor events on the Premises including, but not limited to, art exhibitions, musical performances and retail merchandising activities. LESSEE shall not use or suffer the Premises to be used for any other purpose without the prior' written consent of LESSOR. . 6. DEVELOPMENT OF THE PREMISES AND ADJACENT AREAS: a. Scope of Development and Cost of Construction: LESSEE shall construct or cause to be constructed at no expense to LESSOR the "Improvements" on the Premises as set forth in Section I of the Scope of Development (Exhibit "D" ) . The additional debt cost to LESSEE of multi-level parking as compared to at grade parking shall be credited against the rental payments otherwise due from LESSEE to LESSOR pursuant to Paragraph 7(c) of this Lease. . b. Construction Schedule: Subject to the other terms and conditions set forth herein, including without limitation Paragraph 30 of the General Conditions (Exhibit "B" ) , LESSEE. shall begin and complete all construction required of it within the times specified in the Schedule of Performance (Exhibit "E" ) . 10/01/90 1712u/2460/04 -3- t r' C. Certificate of Completion: Promptly after LESSEE s completion of construction of all the Improvements, but excluding normal and customary tenant improvement items, LESSOR shall furnish LESSEE with a Certificate of Completion upon written request therefor by LESSEE. LESSOR shall also furnish partial Certificates of Completion for individual buildings or portions of buildings on the Premises. LESSOR shall not unreasonably withhold any such Certificate of Completion. Such Certificate of Completion shall be a conclusive determination of satisfactory completion of the construction required by this Lease as to which the Certificate relates and the Certificate of Completion shall so state. After recordation of such Certificate of Completion, any party then owning or thereafter purchasing the improvements, leasing the Premises, or otherwise acquiring any interest in the Premises or improvements covered by the Certificate of Completion shall not (because of such ownership, purchase, lease or acquisition) , incur any obligation or liability under this Lease with respect to LESSEE' s initial construction obligations hereunder. Each Certificate of Completion of construction shall be in such form as to permit it to be recorded in the Recorder' s Office of Orange County. If LESSOR refuses or fails to furnish a Certificate of Completion after written request from LESSEE, LESSOR shall, within thirty (30) days of written request therefor, provide LESSEE with a written statement of the reasons LESSOR refused or failed to furnish a Certificate of Completion. The statement shall also contain LESSOR' s opinion of the actions LESSEE must take to obtain a Certificate of Completion. If the reason for such refusal is confined to the immediate availability of specific items of materials for landscaping, LESSOR will issue its Certificate of Completion upon the posting of a bond, letter of credit, or cash deposit by LESSEE with LESSOR in an amount representing the fair value of the work not yet completed as determined by the Agency. Such Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of LESSEE to any holder of any mortgage, or any insurer of a 10/01/90 1712u/2460/04 -4- t r' mortgage securing money loaned to finance the improvements, or any part thereof. Such Certificate of Completion is not a notice of completion as referred to in the California Civil Code, Section 3093. 7. RENT: Subject to subparagraph (f) below and all of the other terms and conditions set forth in this Lease, including without limitation Paragraphs 7-9 of Exhibit "B", LESSEE shall pay to LESSOR rent in the form of "Percentage Rent" . a. Percentage Rental: Beginning with the date which is the first anniversary of the Commencement Date, and continuing thereafter LESSEE shall pay to LESSOR a Percentage Rent of the Gross Sales Receipts generated from the Premises during each calendar quarter or partial calendar quarter during such period according to the following schedule: during the first year and for any quarter in which the immediately preceding four quarters produce a combined Gross Sales Receipts of less than Thirty-five Million Dollars ($35,000,000) , the LESSOR shall receive two percent (2%) of Gross Sales Receipts; in the event that Gross Sales Receipts for a four quarter period equal Thirty-five Million Dollars ($35,000,000) or more then that and subsequent quarterly payments shall equal two and one-half percent (2-1/2 .) of Gross Sales Receipts; in the event that Gross Sales Receipts for a four quarter period equal Fifty-five Million Dollars ($55,000,000) or more then that and subsequent quarterly payments shall equal three percent (3%) of Gross Sales Receipts; and in the event that Gross Sales Receipts for a four quarter period equal One Hundred Million Dollars ($100,000,000) or more then that and subsequent quarterly payments shall equal three and one-quarter percent (3-1/4%) of Gross Sales Receipts. b. ParkingPayment: LESSEE shall pay to LESSOR a quarterly payment of Twenty-five Thousand Dollars ($25,000) (the "Parking Payment" ) to be annually adjusted by the Consumer Price Index the Index in consideration of the right to charge parking fees for use by the public of the parking structure. Fees charged by LESSEE for use of a parking space inav be the greater of the amount of Five Dollars ( 5.00) per day, to be annually adjusted b the Index Aor an amount equal-to 10/01/90 1712u/2460/04 -5- one hundred and twenty percent (120%) of the maximum per day rate charged by the City or LESSOR in a City or LESSOR-owned parking structure. In the event that the City determines to allow a City parking permit to be used in lieu of paying a per day fee, the LESSEE shall be credited as an offset to the Parking Payment the then applicable daily rate for each recorded permit use. C. Subordination: LESSOR agrees to execute appropriate documents required to subordinate its right to receive rent pursuant to this Lease for an amount not to exceed Fourteen Million Five Hundred Thousand Dollars ($14 j50Q,000) to financing approve by LESSOR in accordance with Paragraph 16.A of Exhibit "B. " d. Public Parking Construction- Payment. Lessee shall construct a parking structure sufficient to park both the spaces required by the uses to be conducted on the Premises and the public parking spaces in an amount equal to Lessor shall pay an amount equal to ($ ) per public parking space at the time provided in the Schedule of Performance (Exhibit E) . Lessee shall pay prevailing wages according to state law for at least that portion of the parking structure which shall provide the public parking spaces. e. Rent Credit: Notwithstanding any other provision of this Lease to the contrary, LESSEE shall be entitled to a credit against the first rental payments otherwise due in an amount equal to the difference between LESSEE'S amortized debt on the approved cost of construction of the multi-level parking structure to be constructed on the Premises (assuming a 30-year loan at 10% interest) and what the amortized debt for the cost of the construction of a single level at grade parking facility would have been (assuming a 30 year loan at 10% interest) . The parties agree for purposes of this paragraph that the difference in cost -of the amortized debt for a single evel at grade parking facility and the structured parkin structure as ro o a e of Deve o ment (Exhibit D is equal to Dollars (the "Differential Cost" ) . 10/01/90 1712u/2460/04 -6- Y The unapplied principal balance of such credit shall bear interest at the rate of ten percent (10%) per annum compounded annually, commencing as Lessee incurs costs for such portion of the Improvements and continuing thereafter until the rent credit has been fully applied. Notwithstanding the above, Lessor shall have the right to prePa� the amountof the�si eren is Cost wig _penalty and with only suc interest as as already accrued. B. SECURITY DEPOSIT: Within ten (10) days after the Commencement Date, LESSEE shall deposit with LESSOR the sum of Fifty Thousand Dollars ($50,000) (in the form of a certificate of deposit in the name of LESSOR, or an irrevocable and unconditional letter of credit, which shall be sight draft, of a term, in a form, and by a bank all acceptable to LESSORAin its reasonable discretion) as a security deposit for the performance by LESSEE of the provisions of this Lease required to be performed by LESSEE prior to LESSOR' s issuance of its final Certificate of Completion for the Improvements. If the security deposit is a certificate of deposit, interest shall be credited to LESSEE and withdrawn and paid to LESSEE quarterly. During the period that LESSOR is entitled to hold the Security Deposit, if LESSEE is in default, and such default is not cured and is not being cured in accordance with paragraph 18 of Exhibit "B, " LESSOR can use the security deposit, or any portion of it, to cure the default or compensate LESSOR for all damages sustained by LESSOR resulting from LESSEE' s default and LESSEE shall immediately on demand pay to LESSOR a sum equal to the portion of the security deposit expended or applied by LESSOR as provided in this paragraph so as to maintain the security deposit in the sum initially deposited with LESSOR. The security deposit (or such remaining portion thereof that has not been used by LESSOR to cure LESSEE' s default or to compensate LESSOR for damages sustained by LESSOR resulting from LESSEE' s default) shall be refunded promptly after the earlier of the following: (i) the date upon which LESSEE has completed the Improvements (excluding tenant improvements) and LESSOR is obligated to issue its final Certificate of Completion, or (ii) the expiration or termination of this Lease. LESSOR' s obligations with respect to the security deposit are those of a debtor and not a trustee. LESSOR shall be permitted to maintain the security deposit separate and apart from LESSOR' s other funds or can co-mingle the security deposit with LESSOR' s funds'A , 9. CONDITION__ ;OF TITLE; OF UIET ENJOYMENT: Subject to LESSEE satisfaction or LESSOR' s waiver of all of the Conditions to Commencement (Exhibit "C" hereto) to be 10/01/90 1712u/2460/04 -7- r satisfied by LESSEE, and subject to the exceptions in Exhibit "C" hereto, LESSOR covenants to convey to LESSEE the leasehold estate to the Premises in the "Approved Title Condition" referenced therein. LESSOR further covenants that, at the. Commencement Date, LESSOR shall cause First American Title Insurance Company, or such other title company as may be mutually approved by LESSOR and LESSEE, (the "Title Company" ) , to deliver to LESSEE an ALTA Survey and ALTA Extended Coverage (Form B) policy or policies of title insurance issued by the Title Company insuring that the leasehold estate is vested in LESSEE in such condition. The Title Company shall provide LESSOR with a copy of the title policy. The total amount of title insurance coverage for the Premises shall be the sum of Four Million Dollars ($4,000,000) . LESSOR shall pay that portion of the cost and expenses of the premium for the title policy which is equal to what the premium would have been if the title policy were a CLTA policy, and LESSEE shall pay the balance of such premium. LESSEE shall pay the cost of any new survey required in order to obtain the title policy. LESSEE shall pay the cost for any additional Coverage or endorsements that it may request. Subject to the exceptions in Exhibit "C" hereto, LESSOR covenants that LESSEE, after cement Date and upon performing the covenants in the Lease required to be performed by LESSEE, may quietly have, hold, and enjoy the Premises during the term of this Lease without hindrance or interruption by LESSOR or any party claiming by, through, or under LESSOR. Not by way of limitation of the foregoing, and except as specifically set forth in Exhibit "C", in the event any adverse claim is made or threatened impairing LESSEE' s leasehold title, other than a claim by any part claiming by, through, or under LESSEE, LESSOR, at its sole expense, shall take all required actions, including filing and diligent prosecution of quiet title and/or ejectment suits if necessary, to remove such adverse claim or cloud on LESSEE' s title. 410. NOTICES: Any notice, demand, request, consent, approval or communication that either party desires or is required to give to the other party or any other person shall be in writing and either served personally or sent by prepaid first class mail to the other party at the address set forth below: TO LESSOR: Huntington Beach Redevelopment Agency Attn: Executive Director/City Administrator 2000 Main Street ' Huntington Beach, California 92648 10/01/90 1722u/2460/04 -8- r TO LESSEE: Stanley M. Bloom c/o Randall Foods, Inc. 2905 E. 50th Street Vernon, CA 90058 WITH COPIES TO: Jonathan Chodos 1559 So. Sepulveda Blvd. Los Angeles, CA 90025 and any leasehold or subleasehold mortgagee approved by Lessor pursuant to Paragraph 16A of Exhibit "B" that requests in writing that Lessor provide such notice. Either party may change either its designee or its address by notifying the other party of such change. Notice shall be deemed communicated within three (3) business days from the time of the mailing, if mailed as provided in this paragraph. 11. THIRD PARTY BENEFICIARY: The City (but no other person or entity) shall be deemed a third party beneficiary of this Lease. 22. EXHIBITS - INCORPORATION INTO LEASE: The following exhibits referred to in this Lease are attached hereto and by this reference incorporated herein: Exhibit "A" Legal Description of Premises ' Exhibit "B" General Conditions Exhibit "C" Conditions to Commencement Exhibit "D" Scope of Development Exhibit "E" Schedule of Performance 10/01/90 1712u/2460/04 -9- r � / Z Y HUNTINGTON BEACH REDEVELOPMENT AGENCY, a public body, corporate and politic 1990 By Chairman ATTEST: Agency Secretary APPROVED AS TO FORM: INITIATED AND APPROVED AS TO CONTENT: Agency Special Counsel Deputy City Administrator/ Redevelopment REVIEWED AND APPROVED APPROVED: AS TO FORM: Agency Attorney Executive Director STANLEY M. BLOOM, an unmarried man ( "Lessee") 1990 10/01/90 1712u/2450/04 -10- t r EXHIBIT "A" LEGAL DESCRIPTION That portion of Huntington Beach, County of Orange, State of California as shown on a map recorded in Book 3, Page 36 of Miscellaneous Maps in the office of the County recorder of said county described as follows: Beginning at the centerline intersection of Pacific Coast Highway and Lake Street shown as Ocean Avenue and First Street respectively on said mentioned map; thence along the centerline of Pacific Coast Highway south 48° 21' 42" east 37.50 feet to the intersection with the southwesterly extension of the southeast right of way line of Lake Street; thence south 41° 38' 18" west 50.00 feet to the true point of beginning; thence north 48° 21' 42" west 1050.00 feet; thence south 41° 38' 28" west 450.00 feet; thence south 48' 21' 42" east 230.00 feet; thence north 41° 38' 18" east 250.00 feet; thence north 48° 21 ' 42" east 820.00 feet; thence north 41° 38' 16" east 200.00 feet to the true point of beginning. Exclusive of the parcel of land the boundary being described as follows: Beginning at the centerline of intersection of Pacific Coast Highway and Plain Street thence southwesterly along the centerline of Pacific Coast Highway south 480 21' 42" east 37.50 feet; thence south 410 38' 18" west 141.00 feet to the true point of beginning; thence south 48° 21' 42" east 136.00 feet; thence south 410 38' 18" west 100.00 feet; thence north 480 21' 42" west 136.00 feet; thence north 41° 38' 18" east 100.00 feet to the true point of beginning. 10/01/90 EXHIBIT "A" 1712u/2460/04 S r EXHIBIT "B" GENERAL CONDITIONS TABLE OF CONTENTS Paragraph # Caption 1. Charge for Late Payment 2. Utilities 3. Construction of Improvements by Lessee 4. Signs 5. Destruction 6. Maintenance 7. Gross Rental Receipts 8. Rent Payment Procedure and Accounting 9. Records, Books of Account, Accounting Statements and Audits 10. Insurance 11. Indemnity 12. Taxes and Assessments 13. Unlawful Use 14. Abandoned Personal Property 15. Holding Over 16. Assigning, Subletting and Encumbering 17. Successors in interest 18. Lessee' s Default 19. Lessor' s Remedies 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 1 of 35 r• 20. Lessor' s Default 21 . Quitclaim of Lessee' s Interests Upon Termination 22 . Total Taking 23 . Partial Taking 24. Eminent Domain Award 25 . Amendments 26. Captions 27. California Law 28. Waiver 29. Nondiscrimination 30. Force Majeure 31. Resolution of Disputes 32. Time 33 . Non Disturbance and Recognition 34. Estoppel Certificate 35. Hazardous Waste 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 2 of 35 r' EXHIBIT "B" GENERAL CONDITIONS 1 . CHARGE FOR LATE PAYMENT: Rent not paid when due shall accrue interest at the rate of twelve percent (12%) per annum commencing five days from the date due until paid. 2. UTILITIES: LESSOR agrees to provide, at no expense to LESSEE, all utilities (water, sewer, gas, electrical, and telephone) required for the development, use and maintenance of the Improvements, with sufficient capacities to adequately service the Premises, with such utilities to be located on .the Premises or in the public street adjacent thereto. LESSEE agrees to extend all utilities from said locations and to be responsible for tie-ins and metering. LESSEE shall make all arrangements for and pay for all utility services furnished to or used by it, including without limitation gas, electricity, water, sanitary sewer, cable television, telephone service, ^ trash collection, an uti sties use or consumed at public rest rooms to be constructed by Lessee on the Premises. 3 . CONSTRUCTION OF IMPROVEMENTS BY LESSEE: a. Statement of Construction Costs and "As Built" Plans: In conjunction with LESSEE s application for LESSOR' s issuance of its final Certificate of Completion for the Improvements described in the Scope of Development (Exhibit "D" ) , LESSEE shall furnish LESSOR a complete set of "As-Built" plans and an itemized statement of the actual construction cost of such improvements. The statement of cost shall be signed by LESSEE or its responsible agent and sworn to under penalty of perjury. b. Alterations: Subject to obtaining all requisite governmental permits and authorizations, LESSEE shall have the right to make non-structural alterations to the interior of any buildings located upon the Premises, provided that the same when complete are of a character which LESSEE reasonably determines do not adversely affect the value of the improvements and the rental value thereof immediately before such alteration. LESSEE shall not make or permit -any significant structural or exterior alterations, additions or improvements to be made to or upon the Premises inconsistent with the approved plans referenced 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 3 of 35 t Y in the Scope of Development (Exhibit "D" ) as the same may be revised from time to time without first obtaining the written approval of LESSOR, which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, changes required by governmental construction inspectors in order to comply with applicable governmental requirements shall be exempt from this approval requirement. C. Improvements to Become Property of LESSOR; Subject to subparagraph (d) below, all buildings, improvements and facilities, exclusive of Trade Equipment and personal property constructed or placed upon the Premises by LESSEE must, upon completion, be free and clear of all liens, claims, or liability for labor and materials (excepting rights of lenders, approved pursuant to paragraphs 16.A and C and Equipment Lessors referenced in paragraph 16.E herein) , and all such improvements and facilities, exclusive of Trade Equipment and personal property, and all such property and improvements shall become the property of LESSOR at the expiration of this Lease or upon earlier termination hereof. d. Mechanic' s Liens: LESSEE shall at all times indemnify and save LESSOR harmless from all claims for labor and materials in connection with construction, repair, alteration, and installation of all structures, improvements, - equipment, and facilities upon the Premises, and from the cost of defending against such claims, including reasonable attorney' s fees. In the event of a lien imposed upon the Premises as a result of such construction, repair, alteration, or installation, LESSEE shall either: ( 1) Record a valid Release of Lien; or (2) Deposit with LESSOR cash or an irrevocable letter of credit in form and content reasonably acceptable to Agency' s counsel in an amount equal to 125% of the amount of the lien and authorize payment to the extent of said deposit to any subsequent final judgment holder that may arise as a matter of public record from litigation with regard to the lienholder' s claim; or 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 4 of 35 r" (3) Procure and record a bond, in accordance with Section 3143 of the California Civil Code, which frees the Premises from the claim of the lien and from any action brought to foreclose the lien. Should LESSEE fail to accomplish one of the above within ninety (90) days after the filing of such a lien, but in no event after final judgment is entered, . such failure shall be a material default under this Lease. If LESSEE deposits cash or a letter of credit or records a bond, as provided herein, LESSOR shall promptly return the same (or unused portion thereof) after the release of lien or satisfaction of judgment is recorded, or LESSEE delivers other evidence reasonably satisfactory to LESSOR- that the dispute has been finally resolved. 4. SIGNS: LESSEE, at its cost, shall have the right to place, construct, and maintain exterior signs on the Premises and the Improvements to be constructed by LESSEE thereon in accordance with the plans approved by LESSOR and the City as the same may be revised from time to time. LESSEE shall not have the right to place, construct, or maintain on the Premises any other exterior sign, advertisement, awning, banner or decoration, except as permitted under the Huntington Beach Ordinance Code. 5. DESTRUCTION: a. Destruction Due to Risk Covered by Insurance: If, during the Lease term, the Improvements are totally or partially destroyed from a risk covered by the insurance described in paragraph 10(c) of these GENERAL CONDITIONS, this Lease shall not terminate and LESSEE shall promptly and diligently restore or cause to be restored the Improvements to substantially the same condition as they were in immediately before such destruction, whether or not the insurance proceeds are sufficient to cover the actual cost of restoration; provided, however, that: (i) if such destruction occurs during the last ten (10) years of the term of this Lease, LESSEE may elect not to restore the Premises and to terminate this Lease, and (ii) if then-existing laws do not permit restoration of the Improvements to within 95% of the size and layout existing immediately before such destruction, then LESSEE may either elect to restore pursuant to the then-controlling laws and and regulations or LESSEE may elect to terminate this Lease. If existing laws do not 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 5 of 35 Y• permit the restoration, LESSEE may elect to terminate this Lease by giving noticento Lessor. In the event this Lease is terminated as to all or any portionof the Premises LESSOR and LESSEE shall share any excess insurance proceeds on the basis of their respective interests in the Improvements after payment of any outstanding balance due any leasehold and subleasehold mortgagees. b. Destruction Due to Risk Not Covered by Insurance: If, during the Lease term, the Improvements are totally or partially destroyed from a risk not' covered by the insurance described in paragraph 10(c) of these GENERAL CONDITIONS, this Lease shall not terminate except as expressly provided herein, and LESSEE shall restore the Improvements to substantially the same condition they were in immediately before destruction; provided, however, if such destruction occurs during the last 10 years of the term or the cost of restoration exceeds twenty percent (20%) of the then replacement value of the Improvements destroyed or if then existing laws do not permit restoration; provided, however, that: (i ) if such destruction occurs during the last ten (10) years of the term of this Lease, LESSEE may elect not to restore the Premises and to terminate this Lease, and (ii) if then-existing laws do not permit restoration of the Improvements to within 95% of the size and layout existing immediately before such destruction, then LESSEE may either elect to restore pursuant to the then-controlling laws and and regulations or LESSEE may elect to terminate this Lease, then LESSEE may elect to terminate this Lease by giving notice to LESSOR no later than one hundred twenty days after the date of e casua ty loss. C. No Abatement of Rent: Provided that business interruption insurance is reasonably available to LESSEE in the insurance market (as referenced in paragraph 10(d) and (e) below, there shall be no abatement or reduction of rent in the event of a total or partial destruction of the Improvements. If, however, LESSEE suffers such a casualty loss during a period for which business interruption insurance is not so available, the Percentage Rent, shall be reduced by a fraction, the numerator of which is the total gross leaseable area on the Premises from which business cannot be conducted during the period of 20/01/90 EXHIBIT "B" 1712u/2460/04 Page 6 of 35 the casualty loss and the denominator of which is the total gross leaseable area of the Improvements immediately prior to the casualty loss. The period of the reduction shall run from the date of the casualty loss to the earlier of (i) the date on which LESSEE completes restoration of the Premises or (ii) the date on which LESSEE, exercising reasonable diligence, should complete restoration of the Premises. 6. MAINTENANCE: a. LESSEE' s Obligation: LESSEE, at its cost, shah keep and maintain the Premises and all improvements of any kind which may be constructed, installed, or made thereon (including the public rest rooms on the Premises) in good condition and in substantial repair. LESSEE expressly agrees to maintain the Premises (including the public rest rooms on the Premises) in a safe, clean, wholesome and sanitary condition and in compliance with all applicable laws. LESSEE further agrees to provide approved containers for trash and garbage and keep the Premises free and clear from accumulations of rubbish and litter. LESSOR shall have the right to enter upon and inspect the Premises at any time for cleanliness and safety. Such entry and inspection of exterior areas may occur at any time without notice to LESSEE; entry and inspection of interior areas may occur during normal business hours, with a minimum of seventy-two (72) hours prior notice (except in the event of emergency) , and shall be conducted in a manner so as to minimize interference with the businesses on the Premises to the maximum extent feasible consistent with the legitimate purpose of the inspection. LESSEE shall designate in writing to LESSOR an onsite representative who shall be responsible for day-to-day operation. b. LESSOR' s Right to Repair: If LESSEE fails to maintain the Premises or make repairs or replacements as required herein, LESSOR may notify LESSEE in writing of said failure. Should LESSEE fail to correct the situation or commence to correct the situation within a reasonable time thereafter, but in no event less than thirty (30) days (except in those instances where a shorter time is necessary to protect the public health, safety, and welfare) , and thereafter diligently proceed to complete such correction, LESSOR may, 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 7 of 35 r• but shall not be required to, enter onto the Premises make the necessary correction, and in such event the reasonable cost thereof, including but not limited to the cost of labor, materials, equipment, and administration, shall be deemed additional rent to be paid by LESSEE within thirty (30) days of receipt of a statement of said cost from LESSOR. LESSOR may, at its option, choose other remedies available herein, or by law. 7. GROSS SALES RECEIPTS: (a) Except as specifically provided in subparagraph (b) below, the term "Gross Sales Receipts" as _ used herein shall mean the total of all sales produced on the Premises (or any portion thereof) and received by any operator and/or sublessee in the course of their business including without limitation sales of food, beverage or concession items and the charges for the use or rental of portions of the Premises or equipment or supplies, vending machines sales and the sales price of any furnishings, fixtures and equipment or capital asset sold which are not replaced. (b) The following shall be excluded from the definition of "Gross Sales Receipts" : meals furnished to employees without charge; tips retained by employees or service charges in lieu of tips passed on to employees; bad debts but to the extent are subsequently co ec e t e may be added; receipts from cus omers a -are- later ~ rebated and/or refunded; income from arkinq servirzes operation; interest or service or other carrying c arges or sales on credit; the sales price of any furnishings, fixtures, and equipment or capital assets sold by LESSEE; and investment income not associated with the normal course of operation of LESSEE' s business on the Premises. s. RENT PAYMENT PROCEDURE AND ACCOUNTING: a. Accounting Year: The phrase "accounting year" as used herein shall be a period of twelve (12) consecutive full calendar months commencing on January 1. Any payment period or period which is less than twelve full calendar months is a partial accounting year. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 8 of 35 r b. Payment of Rentals: (1) Percentage Rent and Parking Pa ent: Beginning with the date which is the first _ anniversary of the Commencement Date, and within thirty (30) days after the end of each calendar quarter during the remainder of the Lease Term, LESSEE shall pay to LESSOR an amount determined in accordance with Section 7(a) and 7(b) of the Lease for such period. At the end of each accounting year during the Lease term, promptly after LESSEE has submitted to LESSOR LESSEE' s sales tax receipt reports, as provided in paragraph 9 below, any necessary adjustment to the Percentage Rent for such year shall be made in the manner specified in subparagraph (3 ) of this Paragraph 8(b) . (2) Application of Rent Credit: During the period of time that LESSEE' S rent credit is being applied, in accordance with Section 7(d) of the Lease, LESSEE shall provide to LESSOR, at the times that rental payments would otherwise be due hereunder, a written statement or statements itemizing (i) the amount of Percentage Rent, otherwise due at such time, (ii) the amount of the Rent Credit being applied against such rental obligation, and (iii ) either the amount of the Rent Payment required to be made at that time or the remaining balance of the unapplied Rent Credit (including accrued interest through that date) . (3) Place of Pa!+ment and Filing: Rent payments, Parking Payments and rent credit statements shall be delivered to and accounting statements shall be filed with the Executive Director of LESSOR, 2000 Main Street, Huntington Beach, California 92646. The designated place of payment and filing may be changed at any time by LESSOR upon written notice to LESSEE. Rentals may be paid by check made payable to the Huntington Beach Redevelopment Agency. A duplicate copy of all statements and reports herein required shall also be filed with the Finance Director of the City of Huntington Beach. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 9 of 35 r 9. RECORDS, BOOKS OF ACCOUNT, ACCOUNTING STATEMENTS, AND AUDITS: LESSEE shall keep or cause to be kept at the Premises, or at LESSEE' s principal place of business in Southern California, in accordance with generally accepted accounting principles, full and accurate books of account, records, cash receipts and other pertinent data showing the Gross Sales Receipts produced by businesses operating on the Premises. Such books of account, records, cash receipts and other pertinent data shall be kept for a period of four (4) years after the end of each accounting year and partial accounting year. The receipt by LESSOR of any statement, or any payment of percentage rent for any period, shall not bind LESSOR as to the correctness of the statement or the payment. LESSOR shall be entitled at any time within four (4) years after the end of an accounting year or partial accounting year, upon reasonable notice to LESSEE but in no event less than 72 hours,nto inspect and examine all LESSEE' s books of account, records, cash receipts and other pertinent data relating to such accounting year or partial accounting year, during normal business hours so LESSOR can ascertain the amoun o ercen age ent due LESSOR. In no event shall LESSOR' s ins ection exceed ninety days. LESSEE shall cooperate fully with LESSOR in making e inspection. Within ninety (90) days after the end of each accounting year or partial accounting year, LESSEE shall at its own expense submit to LESSOR financial statements including a balance sheet and income statement prepared by an independent certified public accountant, which shall specifically include with respect to the preceding accounting year or partial accounting year: (i) the amount of Gross Sales Receipts for each business operating on the Premises; and (ii) the total Percentage Rent, if any, paid by LESSEE in and for such year. LESSOR shall also be entitled, no more than once for each accounting year, to audit LESSEE' s and the Sublessee' s, who operate businesses on the Premises, books of account, records, cash receipts and other pertinent data to determine the Gross Sales Receipts for the entire Premises. The audit shall be limited to the determination of Gross Sales Receipts and shall be conducted during usual business hours at the Premises or at the office at which LESSEE (or its Subleasee) maintain(s) its records. If the audit shows that there is a deficiency in the payment of Percentage Rent, the deficiency shall come immediately due and payable as additional rent or as an offset to an rent credit as defined in Section 7(d) of t e Lease en ou standing. The cost of t e audit shall be paid by LESSOR unless the audit shows that LESSEE understated Gross Sales Receipts by more than five percent (5%) , in which case LESSEE shall pay all LESSOR' s cost of the audit. If within six (6) months after receiving the results of any audited financial statements by LESSEE' s certified public accountant with respect to any accounting year or 'partial accounting year, LESSOR does not deliver a written notice to LESSEE disputing LESSEE' s 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 10 of 35 • • r � fir/ s r calculation or payment of Percentage Rent for said year, LESSOR shall be conclusively deemed to have accepted LESSEE' s calculation or payment, and thereafter LESSOR shall neither reinspect or reaudit LESSEE' s records nor demand payment of additional Percentage Rent for said year. If within thirty (30) days after receiving the results of its own audit with respect to any accounting year or partial accounting year, LESSOR does not deliver a written notice to LESSEE disputing LESSEE' S calculation or payment of Percentage Rent for said year, LESSOR shall be conclusively deemed to have accepted LESSEE' s calculation or payment, and thereafter LESSOR shall neither reinspect or reaudit LESSEE'S records nor demand payment of additional Percentage Rent for said year. 10. INSURANCE: LESSEE, at its cost, shall maintain or cause to be maintained during the entire Lease term the following policies of insurance: a. Public liability and property damage insurance with combined single limits of at least $5,000,000, part of which may be provided in the form of umbrella coverage. LESSOR and City shall be named as an additional insured and the policy or policies shall contain cross-liability endorsements. Coverage shall be primary and not contributing with any coverage maintained by LESSOR. The policy shall contain a waiver of subrogation in favor of LESSOR and City. Not more frequently than each two (2) years, if, in the reasonable opinion of LESSOR or of an insurance broker retained by LESSOR, the amount of public liability and property damage insurance coverage at that tine is not adequate, LESSEE shall increase the insurance coverage as required by either LESSOR or LESSOR' s insurance broker; provided, that the percentage increase in coverage shall not be required to exceed the percentage increase in the Consumer Price Index for the Los Angeles-Long Beach-Anaheim area (All items) (the "Index") since the last requested adjustment (or, in the case of the first requested adjustment, the percentage increase in the Index since the commencement of the Lease term) . The insurance to be provided by LESSEE may provide forAdeductibles or self-insured retention up to Twent -Fi ousand Dollars ($25,000) , adjusted in accordance wit he Index rom a e omnencemen Date, or for ounts excess of Twenty-Five housanDollars _($25,000)_ as shall be accepts e, o e Executive Director. In the event such insurance does provide for deductibles or self-insured retention ALESSEE agrees that it will fully 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 11 of 35 protect LESSOR, its boards, officers, and employees in the same manner as these interests would have been protected had the policy or policies not contained the deductible or retention provisions. b. LESSEE' s indemnification obligations under paragraph 11 shall extend to damage resulting from risks insurable by garagekeepers' legal liability insurance. The public liability insurance required in paragraph 10. a. above shall include garagekeepers ' legal liability coverage. C. A policy of standard fire and extended coverage insurance to the extent of at least 90% of the replacement value of the Improvements, Trade Equipment, and LESSEE' s personal property,non or about the Premises. Sub3ect to paragraph 5 of these GENERAL CONDITIONS, the proceeds from any such policy shall be used by LESSEE for the restoration or replacement of the Improvements, Trade Equipment, and personal property. d. Business interruption insurance insuring that the Percentage ° Rent due and payable to LESSOR (based on the previous twelve month figures) will be paid to LESSOR for a period of up to twelve ( 12 ) months if thehPremises, or portion thereof, are destroyed or rendered inaccessible by a casualty loss or other occurrence normally covered by a business interruption insurance policy. e. Notwithstanding any other provision of this paragraph 10 to the contrary, LESSEE' s obligations pursuant to parts a, b, c and d of this paragraph 10 shall be conditioned upon the reasonable availability of such coverages, terms, and conditions in the insurance market. The foregoing insurance policies shall contain endorsements requiring thirty (30) days written notice from the insurance company to both parties before cancellation or change in coverage, scope, or amount of any policy. Each policy or a certificate of the policy together with evidence of payment of premium shall be deposited with LESSOR at the commencement of the Lease term and on renewal of each policy not less than twenty (20) days before the expiration of the term of the " policy. 10/01/90 EXHIBIT 1712u/2460/04 Page 12 of 35 r The procuring of such required policy or policies of insurance shall not be construed to limit LESSEE' s liability hereunder nor to fulfill the indemnification provisions and requirements of paragraph 11. Notwithstanding said policy or policies of insurance, LESSEE after exhausting all available " insurance proceeds shall be obligated for the full and total amount of any damage, injury or loss caused by LESSEE' s negligence or that of its agents, sublessees, concessionaires, licensees, and their agents and employees in connection with this Lease or with the use and occupancy of the Premises. 11. INDEMNITY: LESSEE shall indemnify, defend, and hold LESSOR harmless from all damages arising out of any damage to any person or property occurring in, on, about, or from the Premises proximately caused by any acts by or omissions of LESSEE or its agents, sublessees, concessionaires, licensees, and their agents and employees. 12. TAXES AND ASSESSMENTS: LESSEE recognizes and understands that this Lease may create a possessory interest subject to property taxation and that LESSEE may be subject to the payment of property taxes levied on such interest. LESSEE shall pay or cause to be paid all taxes and assessments levied upon the Premises based on the assessed value of the entire property and not merely the assessed value of LESSEE' s leasehold interest. LESSEE shall also pay or cause to be paid any taxes and assessments which may be levied upon any fixtures, equipment, or other property installed, constructed or located on the Premises. LESSEE may, at . any time, in good faith and upon reasonable grounds, dispute or contest the validity of the whole or any part of any such taxes or assessments, and during the period of any such dispute shall not be deemed in default hereof so long as LESSEE does not subject the Premises to foreclosure or sale and promptly pays the amount finally determined to be due. Notwithstanding the above, both parties recognize that LESSEE should not be assessed a possessory interest tax for that portion of the Premises which is the public parking which isAin excess of the code rpcm1rament for the operation of the bUsiness= on the Premises and Agency agrees--To—cooperate with LESSEE in the event of a challenge to such an assessment. 13 . UNLAWFUL USE: LESSEE agrees that no improvements shall be erected, placed upon, operated, nor maintained upon the Premises, nor any business conducted or carried on therein or therefrom, •in violation of the terms of this Lease, or of any 'regulation, order, law, statute, or ordinance of a governmental agency having jurisdiction. 0 14. ABANDONED PERSONAL PROPERTY: If LESSEE abandons the Premises or is dispossessed thereof by process of law or otherwise, title to any personal property belonging to LESSEE and left on the Premises forty-five (45) days after such 10/01/90 EXHIBIT "B" 1712u/2450/04 Page 13 of 35 Y• abandonment or dispossession shall be deemed to have been transferred to LESSOR. LESSOR shall have the right to remove and to dispose of such property without liability therefor to LESSEE or to any person claiming under LESSEE, and shall have no need to account therefor. LESSEE hereby designates LESSOR' s Executive Director as its attorney-in-fact to execute and deliver such documents as may be reasonably required to dispose of such abandoned property and transfer title thereto. 15. HOLDING OVER: In the event LESSEE shall continue in possession of the Premises after the expiration of the Lease term, such possession shall not be considered a renewal of this Lease but a tenancy from month to month and shall be governed by the conditions and covenants contained in this Lease. 26. ASSIGNING, SUBLETTING, AND ENCUMBERING: A. Assignments The qualifications and identity of LESSEE are of particular concern to LESSOR. It is because of those qualifications and identity that LESSOR has entered into this Lease with LESSEE. Accordingly, LESSEE shall not, except as permitted in this paragraph 16, assign all or any part of this Lease or any of Lessee' s rights hereunder without the prior written approval of LESSOR. LESSOR agrees that it will not unreasonably withhold or condition such approval. In this regard, LESSOR agrees that in the event of a request by LESSEE to assign LESSEE' s interest in the Lease or the Premises, LESSOR shall grant such approval after issuance of certificate of completion provided (i ) such assignment is made to a responsible third party who will undertake LESSEE' s responsibilities under this Lease to use the Premises, or portion thereof, in accordance with this Lease; (ii) such third party shall demonstrate sufficient qualifications and experience to assure the development and operation of the Improvements thereof, in accordance with this Lease; (iii) such third party shall demonstrate sufficient financial resources or commitments equal to or greater than those of Stanley M. Bloom to assure operation of the project, or portion thereof, in accordance with this Lease; LESSOR further agrees not to unreasonably disapprove an assignment to a financially responsible lender which assignment consists of a mortgage, deed of trust, sale and lease back, or other form of conveyance for financing, provided that prior to LESSOR' s issuance of its final Certificate of Completion, LESSOR shall have no obligation to approve such an assignment unless LESSOR determines in its reasonable discretion that such assignment is for the purpose of securing loans of funds to be used solely for financing the direct and indirect costs, including without limitation financing costs, interest, and commissions, of planning, designing,, constructing, developing, leasing, 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 14 of 35 marketing and operating the improvements to be constructed by LESSEE and/or a Sublessee with respect to the Premises. Prior to issuance of Certificate of Completion, approvals of assignments of the Lease shall be at the sole discretion of the LESSOR with the exception of approval for transfers to secure financing whit s a e reasona y approved by Lessor. Notwithstanding any other provision of this Lease to the contrary, LESSOR approval of an assignment of this Lease or any interest herein shall not be required in connection with any of the following: (i) Any transfer to any entity or entities in which LESSEE retains a minimum of fifty-one percent (51%) of the ownership or beneficial interest and retain management control. (ii ) Transfers resulting from the death or mental or physical incapacity of an individual. (iii) Transfers or assignments in trust for the benefit of a spouse, children, grandchildren, or other family members. (iv) A transfer of LESSEE' s interest in the Premises at foreclosure or a transfer of any Sublessee' s interest in thepor ao the Premises leased-Co suc sub essee at foreclosure or a conveyance thereof in lieu of a foreclosure pursuant to a oreclosure thereof by a lenEler approvedAby LESSOR in accordance with this Paragraph 16.A Exhibit "B. " (v) A sale or transfer of some or all of LESSEE'S interest in the Premises or a transfer of any Sublessee' s inter es the- _portiozi of the Premises leased to suc suble at forecloi-urg to a lender approved^by LESSOR in accordance with this Paragraph 16.A of Exhibit "B. " (vi) The conveyance or dedication of any portion of the Premises to the City or other appropriate governmental agency, or the granting of easements or permits to facilitate the developme-nt of the Premises. (vii) A transfer of stock resulting from or in connection with a reorganizhtion as contemplated by the provisions of the Internal Revenue Code of 1954, as amended or otherwise, in which the ownership interests 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 15 of 35 r of a corporation are assigned directly or by operation of law to a person or persons, firm or corporation which acquires the control of the voting capital stock of such corporation or all or substantially all of the assets of such corporation. (viii) A transfer of stock in a publicly held corporation or the transfer of the beneficial interest in any publicly held partnership or real estate investment trust. (ix) Equipment financing pursuant to Paragraph 15.E of these General Conditions. LESSEE shall deliver written notice to LESSOR requesting approval of any assignment requiring LESSOR approval hereunder. Such notice shall be accompanied by sufficient evidence regarding the proposed assignee' s qualifications and experience and its financial commitments and resources to enable LESSOR to evaluate the proposed assignee pursuant to the criteria set forth under the first paragraph of this Paragraph 16A. Within fifteen (15) days after the receipt of LESSEE' S written notice requesting LESSOR approval of an assignment, LESSOR shall respond in writing by stating what further information, if any, LESSOR reasonably requires in order to determine whether or not to approve the requested assignment. Upon receipt of such a timely response, LESSEE shall promptly furnish to LESSOR such further information as may be reasonably requested. Once LESSEE' S request for approval of an assignment has been accepted as complete, LESSOR shall not be entitled to demand additional information or to disapprove the assignment on the basis that LESSEE has not furnished adequate or complete information. LESSOR shall approve or disapprove any requested assignment for financing purposes within thirty (30) days after LESSEE' S request therefor is accepted as complete. Any disapproval shall be in writing and shall specify the reasons for the disapproval and, if applicable, the conditions required to be satisfied by LESSEE in order to obtain approval. LESSEE shall compensate LESSOR for its actual reasonable expenses (not including personnel or overhead expenses) incurred in investigating a proposed assignee' s qualifications as a permitted assignee hereunder. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 16 of 35 r" No assignment of LESSEE'S obligations with respect to the Premises, whether or not LESSOR approval is required therefor (but specifically excluding assignments for financing purposes, and those types of assignments identified in subparagraphs (iv) , (v) , and (vi) , (vii) , and ix) ) , shall be effective unless and until the proposed assignee executes and delivers to LESSOR an agreement in form reasonably satisfactory to LESSOR'S attorney assuming the obligations of LESSEE which have been assigned. Thereafter, the assignor shall remain responsible to LESSOR for performance of the obligations assumed by the assignee unless LESSOR releases the assignor in writing or unless LESSOR has approved the assignee on the basis of the criteria set forth under (i) , (ii) , and (iii ) of the first paragraph of this Paragraph 16.A, in either of which events the assignor shall be released from, but .only from, those obligations arising subsequent to the effective date of the assignment. No consent or approval by LESSOR of any assignment requiring LESSOR' s approval shall constitute a consent or approval of any subsequent assignment requiring LESSOR' s approval pursuant to the provisions of this paragraph. B. Subletting LESSOR shall have the right to approve all subleases on the Premises with respect,.particularl3k to the proposed use and operator and to ensure the following: AM that, subject to temporary interruptions of business due to circumstances beyond the tenant' s reasonable control, and occurrences such as casualty losses and periods of reconstruction and alteration of improvements, and the nature of beach related concession business suc tenants shall continuously use or cause to be used the Premises and portions thereof for the uses specified in Paragraph 5 of the Lease and continuously merchandise the Premises or portions thereof during all usual business hours and on all such days as comparable businesses of like nature in the area are open for business and shall make available verifiable records of gross sales; (ii) if the Improvements on the Premises are .partially destroyed or condemned and such tenant' s sublease remains in force, the tenant shall continue or cause to be continued operation of its business at the Premises to the extent reasonably practical from the standpoint of good business judgment during any period of reconstruction; (iii) the tenant shall exercise reasonable diligence to operate or cause to be operated its business conducted on the Prem}ses or portion thereof in a manner that will produce the highest volume of gross receipts reported to LESSEE consistent with competitive pricing and prudent business practices; (iv) with respect to each tenant who sells alcoholic beverages for on Premises consumption, such tenant shall maintain public liability and property damage insurance with dram shop coverage; (v) the 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 17 of 35 r- non-discrimination provisions set forth in paragraph 29 below; and (vi) the tenant shall attorn to LESSOR in the event of any termination of this Lease, and attorn to any successor or assignee of LESSEE in accordance with Paragraph 33.B below. LESSEE covenants to LESSOR to use reasonable diligence to enforce the aforementioned provisions of subleases and other agreements.n LES E further covenants to use reasonable diligence to sublease the Premises to tenants promptly and in such a manner as to maximize Gross Sales Receipts, consistent with market conditions, the mutual desire of LESSOR and LESSEE to encourage a proper tenant mix, and prudent business practices. C. Assignments for Financing; Lender Protection Subject to obtaining LESSOR' s approval, and the limitation on the maximum amount of subordination as specified in paragraph 7(c) of this Lease, LESSEE may transfer and assign this Lease and the leasehold interest created thereby ("Leasehold Estate") to a lender as security for the repayment of a loan, in accordance with Paragraph 16.A above. The term "lender" as used herein shall mean the beneficially, mortgagor, secured party, or other holder of a promissory note or other written obligation which is secured by any deed of trust, mortgage, or other written security agreement affecting the Leasehold Estate ( "Leasehold Mortgage" ) . After approval by LESSOR, LESSEE may perform any and all acts and execute any and all instruments necessary or proper to consummate any such loan transaction and perfect the security therefore to be given the lender on the security of the Leasehold Estate With respect to any lender who shall have delivered to L� ESSOR a written notice which shall state the name, address and a general description of the type of lien it holds on the Leasehold Estate, the following provisions shall apply: a. LESSOR shall not agree to any mutual termination nor accept any surrender of this Lease, nor shall. LESSOR consent to any amendment or modification of this Lease which could be reasonably construed to have an impact on the lender' s Leasehold Mortgage without the prior written consent of the lender. b. Notwithstanding any default by LESSEE in the performance or observance of any agreement, covenant or condition of this Lease on the part of LESSEE to be performed or observed, LESSOR shall have no right to terminate this Lease unless a default of this Lease shall have occurred and be continuing, LESSOR 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 16 of 35 r shall have given the lender written notice of such default, and the lender shall have failed to remedy such default or acquire LESSEE' s estate created hereby or commence foreclosure or other appropriate proceedings in the nature thereof, all as set forth in, and within the times specified by the provisions of this Lease and its attachments, as the same may be amended from time to time. C. Lender shall have the right, but not the obligation, at any time prior to termination of this Lease and without payment of any penalty, to pay all of the rents due hereunder, to effect any insurance, to pay any taxes and assessments, to make any repairs and improvements, to do any other act or thing required of LESSEE hereunder, and to do any act or thing which may be necessary and proper to be done in the performance and observance of the agreements, covenants and conditions hereof to prevent termination of this Lease. All payments so made and all things so done and performed by the Lender shall be as effective to prevent a termination of this Lease as the same would have been if made, done and performed by LESSEE instead of the Lender. d. Should any default under this Lease occur, the lender shall have sixty (60) days after receipt of notice from LESSOR setting forth the nature of such default, and, if the default is such that possession to the Premises may be reasonably necessary to remedy the default, a reasonable time after the expiration of such sixty (60) day period within which to remedy such default, provided that (A) the lender shall have fully cured any default in the payment of any monetary obligations of LESSEE under this Lease within such sixty (60) day period and shall continue to pay currently such monetary obligations as and when the same are due and (B) the lender shall have acquired LESSEE' s estate in the Premises created hereby or commenced foreclosure or other appropriate proceedings in the nature thereof within such period, or prior thereto, and is diligently prosecuting any such proceedings. All rights of LESSOR to 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 19 of 35 rt" terminate this Lease as the result of the occurrence of any such default shall be subject to, and conditioned upon, LESSOR having first given the lender written notice of such default and the lender having failed to remedy such default or acquire LESSEE' s estate in the Premises created hereby or commence foreclosure or other appropriate proceedings in the nature thereof as set forth in and within the times specified by this subparagraph (d) . e. Any default under this Lease which in the nature thereof cannot be remedied by the lender shall be deemed to be remedied if (A) within sixty (60) days after receiving written notice from LESSOR setting forth the nature of such default,or prior thereto, the lender shall have acquired LESSEE' s estate in the Premises created hereby or shall have commenced foreclosure or other appropriate proceedings in the nature thereof to acquire said estate, (B) the lender shall diligently prosecute any such proceedings to completion, (C) the lender shall have fully cured any default in the payment of any monetary obligations of LESSEE hereunder which do not require possession of the Premises within such sixty (60) day period and shall thereafter continue to faithfully perform all such monetary obligations which do not require possession of the Premises, and (D) after gaining possession of the Premises the lender performs all other obligations of LESSEE hereunder as and when the same are due. In addition to the rights set forth in this subparagraph (e) , the lender shall have the option to be exercised by written notice to LESSOR given within the aforesaid sixty (60) day period, to obtain a new lease of the Premises upon the following terms and conditions: (i) Such new Lease shall be effective as of the date of the termination of this Lease and shall IDe for the remainder of the term of this Lease at the same rental and with the same terms, covenants and conditions as are set forth herein. 10/01/90 EXHIBIT "B" 2712u/2460/04 Page 20 of 35 r (ii) In addition to paying all current rent under the new Lease, the lender shall pay all unpaid rental ( fter deducting any income LESSOR may have received from the Premises during such period) due pursuant to Paragraph 8 of these GENERAL CONDITIONS which accrued cn or after the date which is thirty (30) days prior to the date on which the lender firEt received written notification of the default by LESSOR and the lender cures all defaults under this Lease that reasonably can be cured by the lender. In lieu of executing a new lease in its own name, the lender shall have the right to designate a nominee which shall become a lessee under the new lease so long as such assignee or nominee is qualified consistent with the requirements of this Lease, its attachments and amendments. f. If the lender is prohibited by any process or injunction issued by any court or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving LESSEE from commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereof, the times specified in subparagraphs (d) and (e) above for commencing or prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition plus an additional period of sixty (60) days thereafter; provided that the lender shall have fully cured any default in the payment of any monetary obligations of LESSEE under this Lease prior to the end of such sixty (60) day period and thereafter shall continue to pay currently such monetary obligations as and when the same fall due. g. LESSOR shall mail or deliver to the lender duplicate copies of any and all notices which LESSOR may from time to time give to or serve upon LESSEE pursuant to the provisions of this Lease; and such copy shall be mailed or delivered to the lender simultaneously with the mailing or delivery of the same to LESSEE. No notice by LESSOR to LESSEE hereunder shall be deemed to have been given insofar as the lender' s rights 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 21 of 35 Y under this Paragraph are concerned unless and until a copy thereof shall have been mailed or delivered to the lender as herein set forth. h. Foreclosure of a Leasehold Mortgage, or any sale thereunder,whether by judicial proceedings or by virtue of any power contained in the Leasehold Mortgage, or any conveyance of the estate in the Premises created hereby from LESSEE to the lender through, or in lieu of, foreclosure or other appropriate proceedings in the nature thereof, shall not require the consent of LESSOR or constitute a breach of any provision of or a default under this Lease, and upon such foreclosure, sale or conveyance LESSOR shall recognize the lender, or any other foreclosure sale purchaser, as lessee hereunder. In the event lender becomes lessee under this Lease, lender shall assume the obligations of LESSEE under this Lease or such new lease only for the period of time that lender remains lessee thereunder, and LESSEE shall be released from any liability therefor, provided prior defaults by LESSEE have either been cured or waived. The lender shall be subject only to those restrictions applicable to LESSEE as set forth in this Paragraph. In the event that, consistent with this Paragraph, the lender subsequently assigns or transfers its interest under this Lease after acquiring the same by foreclosure or deed in lieu of foreclosure, and in connection with any such assignment or transfer the lender takes back a mortgage or deed of trust encumbering such leasehold interest to secure a portion of the purchase price given to the lender for such assignment or transfer, then such mortgage or deed of trust shall be considered a Leasehold Mortgage as contemplated under this Paragraph and the lender shall be entitled to receive the benefit of and enforce the provisions of this Paragraph and any other provisions of ,this Lease intended for the benefit of the holder of a Leasehold Mortgage. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 22 of 35 r In the event the Lender requires any modifications to the provisions of this Paragraph in order to secure its loan, LESSOR agrees not to unreasonably withhold consent to such modifications so long as such modifications do not reduce the amount of rent or other sums payable to LESSOR hereunder, or do not otherwise have a materially adverse impact on any of LESSOR' s interests, rights and remedies hereunder. D. Sublessees' Right to Encumber the Sublease LESSOR recognizes each sublessee' s right to mortgage or encumber the sublease and/or the subleasehold estate held by such sublessee in accordance with and subject to the same terms and conditions as are set forth in this/Paragraph 16 subparagraph C above with respect to the sub-leasehold estate only, and in this regard LESSOR will recognize any and all of the rights of any subleasehold mortgagee as and to the extent set forth therein for the leasehold estate. E. Equipment Leasing Some of the equipment, fixtures and furniture (collectively designated herein as "Trade Equipment") installed and used by LESSEE and sublessees on the Premises may or will be directly financed by a third-party lender or otherwise be subjected to a security interest or owned by an equipment rental company or vendor ( "Equipment Lessor" ) and leased to LESSEE or such sublessee either directly from the Equipment Lessor or by way of equipment sublease or assignment of equipment lease from an equipment sublessor ("Equipment Sublessor") , and LESSOR hereby agrees to recognize the rights therein of any such third-party lender or Equipment Lessor or Sublessor (or their respective assignees) . LESSOR agrees that all such items of financed or leased Trade Equipment installed on the Premises shall be and remain personal property and not real property, notwithstanding the fact that the same may be nailed or screwed or otherwise attached or affixed to the Premises or any of LESSEE' s or any sublessee' s buildings or improvements, and further agrees to recognize the rights therein of any such Equipment Lessor or Sublessor (or their respective assignees) . LESSEE and any sublessee shall have the right at any time, whether or not LESSEE is in default hereunder or such sublessee is in default under its sublease, to remove or replace any or all Trade Equipment, whether or not financed or leased, regardless of whether attached or affixed to the Premises, and to the extent of their respective interests therein such third-party lender or Equipment Lessor or Sublessor (or their respective assignees) shall also have such a right. Any damage to the Premises caused by such a removal shall be repaired by and at the expense of LESSEE or other party causing such removal. LESSOR waives the right of distraint and agrees that it does not have and shall not assert 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 23 of 35 r any right, lien, or claim in or to the financed or leased Trade Equipment and agrees that any third-party lender or Equipment Lessor or Sublessor (or their respective assignees) may remove and dispose of the same without reference to, and free and clear of, any demand of LESSOR, and that such disposal or sale may be made on the Premises. 17. SUCCESSORS IN INTEREST: Unless otherwise provided in this Lease, the terms, covenants and conditions contained herein shall apply to and bind the heirs, successors, executors, administrators, and assigns of all the parties hereto. 18. LESSEE'S DEFAULT: The occurrence of any of the following shall constitute a default by LESSEE: a. Failure to pay rent when due, if the failure continues for fifteen (15) days after written notice has been delivered to LESSEE. LESSEE shall not be excused from its obligation to pay rent by reason of the inability for any reason to obtain the full and prompt payment to LESSEE of all payments due LESSEE by any sublessees or concessionaires. b. Failure to perform any of the provisions of this Lease required to be performed by LESSEE, if the failure to perform is not cured within thirty (30) days after written notice has been given to LESSEE. If the default cannot reasonably be cured within said thirty (30) days, LESSEE shall not be deemed to be in default of this Lease if LESSEE commences to cure the default within the thirty (30) day period and diligently, and in good faith, continues to cure the default. Notices given under this paragraph shall specify the alleged default and the applicable Lease provision, and shall demand that LESSEE perform the provisions of the Lease or pay the rent that is in arrears, as the case may be, within the applicable period of time, or quit the Premises. No such notice shall be deemed a forfeiture or a termination of this . Lease unless LESSOR so elects in the notice. 19. LESSOR' S REMEDIES: LESSOR shall have the following remedies if LESSEE commits a default. These remedies are not exclusive; they are cumulative in addition -to any remedies now or later allowed by law. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 24 of 35 • , e � fir` LESSOR can continue this Lease in full force and effect, and the Lease will continue in effect as long as LESSOR does not terminate LESSEE' S right to possession, and LESSOR shall have the right to collect rent when due. During the period LESSEE is in default, LESSOR can enter the Premises subject to the rights of any subtenants under Paragraph 33 of this Exhibit "B, " relet them, or any part of them, to third parties for LESSEE' s account; provided, that in such event LESSOR shall not be excused from any legal obligation it would otherwise have to act reasonably to mitigate its damages and to exercise reasonable diligence-to relet the Premises of part thereof for fair market rent. In such event, LESSEE shall be liable immediately to LESSOR for all reasonable costs LESSOR incurs in reletting the Premises, if applicable, including, without limitation, broker' s commissions, reasonable expenses of remodeling the Premises required by the reletting and supplied by other landlords under similar circumstances, and like costs. Reletting can be for a period shorter or longer than the remaining term of this Lease. LESSEE shall pay to LESSOR the rent due under this Lease on the dates the rent is due, (provided LESSOR notifies LESSEE in writing a minimum of thirty (30) days in advance the amount of Gross Sales Receipts from which the calculation of rent can be made) less the rent LESSOR receives from any reletting. No act by LESSOR allowed by this paragraph shall terminate this Lease unless LESSOR notifies LESSEE that LESSOR elects to terminate this Lease. After LESSEE' s default and for as long as LESSOR does not terminate LESSEE' s right to possession of the Premises, if LESSEE obtains LESSOR' s consent, LESSEE shall have the right to assign or sublet its interests in this Lease, but LESSEE shall not be released from liability for said default absent a waiver or . release from LESSOR. No act by LESSOR other than giving notice of such termination to LESSEE shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on LESSOR' s initiative to protect LESSOR' s interests under this Lease shall not constitute a termination of LESSEE' s right to possession. On termination, LESSOR has the right to recover from LESSEE: a. The worth, at the time of the award, of the unpaid rent that had been earned at the time of the termination of this Lease; b. The worth, at the time of the award, of the amount by which the unpaid rent that would have been earned after the date of termination of this Lease until the time of award exceeds the amount of' the loss of rent that LESSEE proves could have been reasonably avoided; 20/01/90 EXHIBIT "B" 1712u/2460/04 Page 25 of 35 r C. The worth, at the time of the award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of the loss of rent that LESSEE proves could have been reasonably avoided; and d. Any other amount and court costs, necessary to compensate LESSOR for all detriments proximately caused by LESSEE' s default. "The worth, at the time of the award, " as used in subparagraphs (a) and (b above is to be computed by allowing interest at the rate of 10% per annum. "The worth, at the time of the award, " as referred to in-subparagraph (c) above is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus 1%. If LESSEE is in default of this Lease and subject to the rights of any sub-tenants under Paragraph 33 of this Exhibit "B" , LESSOR shall have the right to have a receiver appointed to collect and conduct LESSEE' s business. Neither the filing of a petition for the appointment of a receiver nor the appointment itself shall constitute an election by LESSOR to terminate this Lease. LESSOR, at any time after LESSEE commits a default, can cure the default at LESSEE' s cost. If LESSOR at any time, by reason of LESSEE' s default pays any sum or does any act that requires the payment of any sum, the sum paid by LESSOR shall be immediately due from LESSEE to LESSOR at the time the sum is paid, and if paid at a later date shall bear interest at the rate of 10% per annum from the date the sum is paid by LESSOR until LESSOR is reimbursed by LESSEE. The sum, together with the interest on it, shall be deemed additional rent. 20. LESSOR' S DEFAULT: LESSOR shall be in default of this Lease if it tails or refuses to perform any provision of this Lease that it is obligated to perform if the failure to perform is not cured within thirty (30) days after written notice of the default has been given by LESSEE to LESSOR. If the default cannot be reasonably cured within thirty (30) days, LESSOR shall not be in default of this Lease if LESSOR commences to cure the default within the thirty (30) day period and diligently and in good faith continues to cure the default. 21. QUITCLAIM OF LESSEE'S INTERESTS UPON TERMINATION: Upon termination of this Lease for any reason, including but not limited to termination because of default •by LESSEE, and subject to the rights of any sub-tenants under Paragraph 33 of 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 26 of 35 r this Exhibit "B", LESSEE shall execute, acknowledge and deliver to LESSOR within thirty (30) days after receipt of written demand therefor a good and sufficient deed whereby all right, title and interests of LESSEE in the Premises is quitclaimed to LESSOR. 22. TOTAL TAKING: If the whole of the Premises, or other improvements to be made by LESSEE shall be taken by right of eminent domain or otherwise for any public or quasi-public use, then, when possession shall be taken thereunder by the condemnor, or the LESSEE is deprived of its practical use of the Premises, and other improvements, whichever date is earlier, this Lease and all rights and obli ations of LESSOR . and LESSEE hereunder, shall terminate as of the date of the taking and any rent and all other payments required of LESSEE shall beyprorated between the parties as of the date of the taking; A 23. PARTIAL TAKING: In the event of a partial taking, as a result of which the remaining portion of the Premises, or other improvements on the Premises cannot be restored to an economically operable facility of a comparable kind and quality to the facility existing prior to the taking with condemnation awards received by LESSEE, then this Lease at LESSEE' s option shall terminate as of the time when possession of the Premises shall be taken by the condemnor or LESSEE is deprived of its practical use thereof, whichever date is earlier. If a portion of the Premises or any other improvements shall be taken by right of eminent domain or otherwise for any public or quasi-public use and the remaining portion of the Premises and improvements can be restored by LESSEE to an economically operable facility of comparable kind and quality to the facility existing prior to the taking, then this Lease shall not be affected and LESSEE shall retain the remaining portion of the Premises. 24. EMINENT DOMAIN AWARD: If there is a taking by right of eminent domain, the rights and obligations of the parties with reference to the award and the distribution thereof shall be determined in accordance with the provisions of this Paragraph. The award shall belong to and be paid to LESSOR, except that LESSEE shall first receive from the award the following: a. A sum attributable to the value of LESSEE' s leasehold estate including improvements, trade fixtures and personal ro ert th -pre aken which sum shall be first applied - - toward any outstanding balance due LESSEE' s lender; 10/01/90 EXHIBIT "B" 1712u/2450/04 Page 27 of 35 b. A sum attributable to severance damages to be used solely for the restoration of the other improvements upon the Premises; and C. An award (if any) specifically made with respect to loss of goodwill. 25. AMENDMENTS: This Lease, including the Exhibits thereto, set forth all of the agreements and understandings of the parties and any modification must be in writing executed by both parties. 26. CAPTIONS: The captions and the table of contents of this Lease shall have no effect on its interpretation. 27. CALIFORNIA LAW: This Lease shall be construed and interpreted in accordance with the laws of the State of California. 28. WAIVER: No delay or omission by either party in the exercise of any right or remedy on any default_hy the other party shall impair such a right or remedy or be construe as a waiver. The receipt and acceptance by LESSOR of delinquent rent shall not constitute a waiver of any other defaults by LESSEE; it shall constitute only a waiver of timely payment for the rent payment involved. LESSOR's consent to or approval of any act by LESSEE requiring LESSOR' s consent or approval shall not be deemed to waive or render unnecessary LESSOR' s consent to or approval of any subsequent act by LESSEE. Any waiver by either party of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Lease. 29. NONDISCRIMINATION: LESSEE covenants for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through it, that this Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, martial status, age, national origin or ancestry in the subleasing of the Premises herein leased, nor shall the LESSEE establish or permit any such practige or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of lessees of the Premises. .LESSEE shall make its accommodations and services available to the public on fair and reasonable terms. In the event LESSEE 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 28 of 35 r enters into contracts, subleases, or assignments with respect .to any of its interest herein, LESSEE shall include in such arrangements a nondiscrimination clause substantially conforming to the following: a. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, ad.-ninistrators, and assigns and all persons claiming under or through him or her, that this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, age, national origin or ancestry in the subleasing, transferring, use, occupancy, tenure or enjoyment of the premises herein leased, nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of lessees of the premises. " b. In contracts: "There shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, age, national origin or ancestry in the sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the transferee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of the land. " 30. FORCE MAJEURE. In any case where either party hereto is required to do any act, delays caused by or resulting from acts of Cod, war, civil commotion, fire, flood, earthquake or other casualty, strikes or other extraordix4ary labor difficulties, shortages of labor or materials or equipment in the ordinary course of trade, government regulations, litigation (other than litigation arising from- the failure to perform hereunder by the party claiming an extension of time to perform or from a wrongful act or failure to act by such party) 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 29 of 35 T• or other causes not reasonably within such party' s control and not due to the fault or neglect of such party shall not be counted in determining the time during which such act shall be completed, whether such time be designated by a fixed date, a fixed time or "a reasonable time", and such time shall be deemed to be extended by the period of such delay. Financial inability of either party shall not be considered to be a circumstance or cause beyond the reasonable control of that party. Litigation concerning paragraph 3 of Exhibit " " commencing on pa all be in u ed as an event which triggers this force ma •eur provision. In no event shall the ] opera ion of this Paragraph 30 extend beyond ten years rr—o—m-The Effective Date and in the event such ten years has elapsed it shall constitute grounds for termination by either party. 31. RESOLUTION OF DISPUTES. Any and all disputes between the parties hereto regarding the construction, operation or enforcement of this Lease, and any of the rights or obligations granted or imposed by this Lease, shall be submitted only to a retired Judge of the Superior Court in and for the State of California (hereinafter "Superior' Court") in the following manner: (a) The parties must agree on the Judge' s identity within five (5) days after the dispute arises or, at the end of the fifth day, the parties' respective counsel shall be authorized to agree upon the Judge's identity and bind their clients. Failure to cooperate in this selection process waives the uncooperative party' s right to participate in the selection process, or object to the Judge selected. (b) Disputed matters shall be promptly submitted to the Judge in a manner determined by him/her following his/her selection. Once a matter is submitted to the Judge, s/he is empowered with the full authority of a judge sitting on the bench of the Superior Court, and may make any ruling consistent with that power. In order to implement this provision, the parties, by executing this Lease, agree to execute and file with the Superior Court, such papers as are appropriate to procure the appointment of said . Judge as a Judge Pro-Tempore of the Superior Court. (c) The Judge may make any order .s/he feels is appropriate regarding which party should bear or be awarded attorneys' fees and/or costs, and which party or parties should pay for the fees and costs of the Judge. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 30 of 35 r" (d). The rights of judicial review granted under this Paragraph are the only rights of judicial review that are available to the parties hereto. They are exclusive of all other rights of relief which might otherwise be held by them. It is their intention that all of the disputes arising out of, or related to, their execution of this Lease, or the rights or responsibilities granted or imposed by this Lease, be resolved exclusively in the manner provided for in this Paragraph and its subparts. Consistent with this intention, the parties, by executing this Lease, specifically acknowledge that the decisions and orders of the Judge are nonappealable and nonreviewable, and, therefore, they .are waiving their rights to seek relief in the State or Federal Courts, except for the purpose of securing and confirming the authority of the Judge provided for herein, and to enforce his/her decisions and orders by confirmation pursuant to the California Code of Civil Procedure Section 1280 et. Reg. , or through appropriate injunctive relief. In the event that a party files any action inconsistent with the terms of this Paragraph, then the party filing the action will be liable for all fees and costs actually incurred by the other party in responding to said action, regardless of its outcome. (e) The limitations on actions set forth in this Paragraph apply only to actions between the parties hereto. They are not intended to and do not limit the parties' right to bring an action against third parties. Furthermore, no third party shall be entitled to rely on any provision of this Paragraph in their response or defense to an action brought against them by a party(s) to this Lease. Notwithstanding the foregoing in the event that this method of dispute resolution is prohibited by law then both parties shall either agree to submit to binding arbitration or to the jurisdiction of the appropriate court of law. 32. TIME: Time is of the essence of this Lease, and of each and every covenant, term, condition, and provision hereof. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 31 of 35 r 1 r r 33 . NON-DISTURBANCE AND RECOGNITION: A. Non-Disturbance So long as any subtenant of any portion of the Premises is not in default (beyond the period given such subtenant to cure such default in its sublease) in the payment of rent or in the performance of any of the terms, covenants, or conditions of such sublease, or if the subtenant is in default but is diligently proceeding to cure such default as provided in its sublease, and notwithstanding LESSEE' s termination of this Lease as to all or a portion of the Premises pursuant to Paragraphs 5 or 22 of these GENERAL CONDITIONS which termination is not consented to by such subtenant: (a) LESSOR will not bring, join, or cooperate in any action or proceeding to terminate such subtenant' s Interest, estate, or rights under such sublease, (b) the subtenant' s possession and rights and privileges under the sublease shall not be diminished or interfered with by LESSOR, and (c) LESSOR will continue to recognize the estate of the subtenant created under the sublease and the subtenant's occupancy shall not be disturbed by LESSOR during the term of the sublease or any extensions or renewals which subtenant may exercise under the provisions of the sublease. B. Attornment If the interest of LESSEE in all or any part of the Premises shall be terminated for any reason, and LESSOR succeeds to the interest of and assumes all the obligations of LESSEE under any sublease, each sublessee shall be bound to LESSOR under all of the terms, covenants, and conditions of the sublease for the balance of the sublease term and any extensions of renewals of the sublease which the subtenant May exercise under the provisions of the sublease. The subtenant shall attorn to LESSOR, such attornment to be effective and self-operative without the execution of any further instruments immediately upon LESSOR succeeding to the interest of LESSEE under the sublease. The respective rights and obligations of the subtenant and LESSOR under this attornment shall be the same as between LESSEE and the subtenant under the sublease; provided, however, that (i) the subtenant shall be under no obligation to pay rental to LESSOR until the subtenant receives written notice from LESSOR that LESSOR has succeeded to the Interest of LESSEE and assumed all the obligations of LESSEE under the sublease, and (ii) LESSOR shall not hold the subtenant responsible for any costs or acts related to any default or alleged default by LESSEE under this Lease. 10/01/90 EXHIBIT "B" 1712u/2450/04 Page 32 of 35 r' C. New Lease In the event of the termination of this Lease as to all or a portion of the Premises prior to its stated expiration date for any reason whatsoever any sublessee or any subleasehold mortgagee may notify LESSOR within sixty (60) days after receipt of notice of such event of its election to enter into a new lease with LESSOR. During such sixty (60) day period, the provisions of subparagraph A herein shall apply. LESSOR, upon receipt of such sublessee' s or subleasehold mortgagee' s notice, shall immediately enter into a written agreement with such sublessee or subleasehold mortgagee containing the same provisions as those in the sublease, except for any changes that are necessary because of the substitution of LESSOR in the place of LESSEE. Sublessee or any subleasehold mortgagee shall have no rights under this subparagraph (C) if it fails to give notice within the sixty (60) day period. 34. ESTOPPEL CERTIFICATE: LESSOR and LESSEE will, at any time and from time to time, within fifteen (25) days of the request of the other party or a leasehold or subleasehold mortgagee or prospective mortgagee, execute, acknowledge, and deliver to the other party and such mortgagee, if any, a certificate certifying: a. That the Lease or sublease is unmodified and in full force and effect (or, if there have been modifications, that the same are in full force and effect as modified and stating such modifications) ; b. The dates, if any, to which the Percentage Rent and any additional rent and charges have been paid and the amount of any accumulated rent credit available to LESSEE; C. Whether there are any existing defaults by the other party to the knowledge of the party making such certification specifying the nature of such defaults, if any; d. Whether the Lease Commencement Date has occurred and, if so, the date; e. Whether the leasehold or subleasehold mortgagee (or prospective mortgagee) ik entitled to the protection afforded under the terms of the sublease or this Lease; and f. Such other matters as may be reasonably requested. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 33 of 35 r Any such certificate may be relied upon by any party to whom the certificate is directed. 35. Hazardous Waste Indemnit . To the best of the Lessor' s knowledge, the Lessor has not received any notice or communication from any government agency having jurisdiction over the Site notifying the Lessor of the presence of subsurface zone hazardous materials, waste, or contamination in, on, or under the Site, or any portion thereof. 'Lessor agrees to notify Lessee if in the future it becomes aware of contamination on the Premises.Lessee, including any and all of uccessors in in erest, and assigns, acknowledges and agrees it shall be responsible for any release, excavation, or movement of any hazardous materials, waste, or contamination of the subsurface zone as may be found to have contaminated the Premises after the Commencement Date of this Lease. Lessee and Lessor shall comply with CERCLA (Comprehensive Environmental Response, Compensation and Liability Act of 1980) 42 U.S.C. §9601, et sere . , and California Health and Safety Code §§ 25100, et seq. , 25300, et seq. , 25280 et spec . Lessee, including any and all of its successors in interest, agrees to and shall indemnify, defend, and hold the Lessor and the City and their officers, employees, representatives and agents harmless from and against all expenses (including, without limitation, reasonable attorneys' fees and disbursements) , losses, or liabilities suffered by Lessor or City by reason of governmental action or third party - claims arising out of such hazardous materials, waste, or contamination, exacerbation, movement, release, or additional contamination of the Premises as may be found to hav contaminated Premises a ter t e om cement Date of this ease. The Lessee assumes all responsibility fors sur ace zone conditions and soils conditions in, on or under the Premises, and for any rehabilitation necessary for the provision of the Improvements; and the Lessor makes no other representations or warranties concerning thelPremises, its suitability for the use intended by the Lessee, or the surface or subsurface conditions of the and and if the soil conditions of thetPremises are not in all respects entirely suitable for the use or uses to which the Premises will be put, then it is the sole responsibility and obligation of Lessee to take such action as may be necessary to place thegPremiges in a condition entirely suitable for the development of the A Premier es. This is expressly agreed between the Parties to be a material term of this Agreement. Prior to the Commencement 10/02/90 EXHIBIT "B" 1712u/2460/04 Page 34 of 35 r Date Lessee shall exercise due diligence and conduct( cause,. to be conducted an environmental assessment or audit acceptable tcLthe Lessor of thep remises to ascertain whether it iin- all respects suitable for the construction and completion of the Improvements. 10/01/90 EXHIBIT "B" 1712u/2460/04 Page 35 of 35 r EXHIBIT "C" CONDITIONS TO COMMENCEMENT 1. Plan Approvals. LESSEE shall obtain approvals from all applicable government entities for conditional use permit, coastal development permit, supplemental environmental impact report and final plans and specifications with respect to the Improvements to be located on the Premises. 2. Evidence of Financing Commitments. LESSEE shall obtain and shall submit to LESSOR' s Executive Director, evidence reasonably satisfactory to LESSOR' s Executive Director that LESSEE has obtained the financing necessary for the development of the Improvements on the Premises in accordance with this Lease. Such evidence of financing shall include the following: (a) A copy of the commitment or commitments obtained by LESSEE for the mortgage loan or loansAto assist in financing the construction of the Improvements, certified by LESSEE to be a true and correct copy or copies thereof. The commitments for financing shall be in such form and content acceptable to LESSOR' s Executive Director as reasonably evidences a firm and enforceable commitment, with only those conditions which are standard or typical for the lender(s) involved for similar projects; (b) Sufficient information (e.g. , an annual report) regarding the construction menders to enable LESSOR' s Executive Director to determine whether or not such lender(s) has (have) sufficient financial resources to fund the loan(s) ; and (c) A copy of the contract between LESSEE and the contractor(s) for the construction of the Improvements, certified by LESSEE to be a true and correct copy thereof; and (d) A financial statement and/or other documentation satisfactory to LESSOR' S Executive Director as evidence of other sources of capital sufficient to demonstrate LESSEE has adequate funds committed to cover the difference, if any, between construction and development cost minus financing authorized by mortgage loans. j Within fifteen (15) days after receipt of request for i approval of its evidence of financing, LESSOR' S Executive Director shall respond in writing by stating what further 10/01/90 EXHIBIT "C" 1712u/2460/04 Page 1 of 6 information, if any, he or she reasonably requires in order to determine whether or not to approve such evidence of financing. Upon receipt of such a timely response, LESSEE shall promptly furnish to the Executive Director such further information as may be reasonably requested. LESSEE' s request for approval of its evidence of financing shall be deemed complete fifteen (15) days after Executive Director' s receipt thereof, if no timely response requesting further information is delivered to LESSEE, or, if such a timely response requesting further information is received, on the date that LESSEE delivers such additional information to Executive Director. Once LESSEE' s request for approval of its evidence of financing has been accepted as or is deemed complete, Executive Director shall not be entitled to demand additional information or to disapprove the request on the basis that LESSEE has not furnished adequate or complete information. The Executive Director LESSOR shall approve or disapprove LESSEE' s evidence of financing within thirty (30) days after LESSEE' s request for such approval is accepted complete. Avproval shall not be unreasonably withheld or conditioned. If-the Executive Director sh—a-Irdisapprove any such evidence of financing, it shall do so by written notice to LESSEE stating the reasons for such disapproval. 3. Approved Condition of Title; Acquisition of Property Interests in the Premises To Place Title In Such Condition. Except as expressly set forth herein, LESSOR covenants to convey to LESSEE the leasehold estate in the Premises free and clear of all monetary liens and all recorded and unrecorded nonmonetary liens, encumbrances, easements, licenses, leases, and other defects of title inconsistent with LESSEE' s approved development plans, including without limitation Exceptions 1-33 set forth in the litigation guarantee issued by First American Title Insurance Co. (Order No. ) dated January 15, 1986 (the "Approved Title Condition ' ) . Except as expressly set forth herein, LESSOR hereby represents that the City currently holds the fee title to the Premises in a condition that would enable the City to convey leasehold title in the Approved Title Condition, excepting only the "Maxwell' s Lease", the "Dwi ht' s Lea " and_any currently e isting subtenants (t at certain lease dated between e i y as landlord and as tenant) . Within the time set forth in the Schedule of Performance (Exhibit "E" ) , LESSOR, LESSEE, and the City shall exercise best efforts to negotiate and enter into a binding written agreement with the holder of the 10/01/90 EXHIBIT "C" 1712u/2460/04 Page 2 of 6 r Maxwell' s Lease Dwight's and all subtenant to terminate or amend said leases on terms acceptable to LESSOR, the City, LESSEE, and the holder of the Maxwell' s Lease, Dwii ht' s Lease and all subtenaats,Ano later than the Commencement Date of this ease. Subject to LESSEE' s and Maxwell' s performance of their obligations under such agreement, LESSOR covenants that on or before the Commencement Date it shall acquire title to the Premises from the City in the Approved Title Condition. Notwithstanding the foregoing, LESSEE acknowledges that the State of California, through the Office of the California Attorney General and the State Lands Commission, has made contentions that the Premises or some portions thereof have been or may have been impliedly dedicated to the public or are or may be subject to a public tidelands trust and that development and operation of the Improvements on the Premises would or may be inconsistent with the rights of the public to public open space and/or recreational use and/or access to the coastline. LESSEE assumes all risks regarding any such claims, whether made by the State of California or any third party. Either LESSOR or LESSEE shall have the right to file and prosecute a quiet title action to determine the validity of any such adverse claims against LESSOR' s and LESSEE' s title to the Premises. In addition, in the event of any legal challenge instituted by the State of California or any third party making any such adverse claim against the title of LESSOR or LESSEE to the Premises, the parties hereby agree to cooperate in defending said action as set forth herein. In the event that either LESSOR or LESSEE determines to file a quiet title action, the same shall be diligently prosecuted and the party maintaining the same shall exercise best efforts to obtain a final and favorable judgment as soon as practicable after the action is filed. No such action shall be filed without prior consultation with the other party, which other party shall have the right to appear independently in the action to represent its interests. In the event of litigation instituted by the State of California or other third party, LESSOR shall have the right, but not the obligation, to defend such action; provided, that without LESSEE' s prior written consent, LESSOR shall not allow any default or judgment to be taken against it and shall not enter into any settlement or compromise of any claim which has the effect, directly or indirectly, of prohibiting, preventing, delaying, or further conditioning or impairing LESSEE' s development, use, or maintenance of any portion of the Premises or impairing any of LESSEE' s rights hereunder. In addition, LESSOR shall provide reasonable assistance to LESSEE in defending any such action, such assistance to include: (i ) making available upon reasonable notice, and at no cost to LESSEE, LESSOR officials and employees who are or may be 10/01/90 EXHIBIT "C" 1712u/2460/04 Page 3 of 6 r" witnesses in such action, and (ii) provision of other information within the custody or control of LESSOR and the City that is relevant to the subject matter of the action. LESSEE shall have the obligation to defend any such action filed by the State of California or any third party; provided, however, that this obligation to defend shall not be effective if and to the extent that LESSEE determines in his reasonable discretion that such action is meritorious or that the interests of the parties justify a compromise or settlement of such action. In this regard, LESSEE' s obligation and right to defend shall include the right to hire attorneys and experts necessary to defend, subject to reasonable approval by LESSOR. LESSOR shall be solely responsible for all of its costs and expenses incurred in prosecuting or defending any such action. LESSEE shall be solely responsible for all of its costs and expenses incurred in prosecuting or defending any such action and, in addition_to any costs and expenses arising out of or re- t ng in any manner to the,rdeveloAment of the Premises or this Lease if the action results in an unfavorable Judgn t or settlement that prohibits or prevents LESSEE' s development of the Improvements on the Premises pursuant to this Lease. LESSEE shall be entitled to full reimbursement up to a maximum amount of from LESSOR from all legal- costs and expenses incurred by LESSEE in prosecuting or defending any such action if the action results in a favorable judgment or settlement permitting LESSEE to develop the Improvements as contemplated in this Lease. Such reimbursement shall take the form of an additional credit against the first rental payments otherwise due hereunder (after application of the applicable rent credit for the period in question as set forth in Section 7(d) of this Lease) . In addition, such reimbursement shall include interest accruing on the principal amount of LESSEE' s expenditures at the rate of ten percent (10%) per annum from the date expenditures are made until fully reimbursed. Rent credits shall be allocated first to accrued interest, then to unpaid principal. LESSEE shall provide to LESSOR an itemized statement of LESSEE' s costs and expenses in such detail as LESSOR may reasonably require in order to verify the amount of LESSEE' s actual and reasonable expenses and the time such expenses were incurred. LESSEE agrees to act reasonably to conserve funds subject to this rent credit, consistent with the parties' mutual objective of having the action handled by qualified experts and quickly and successfully concluded. 4. Environmental Testing. Lessee shall obtain soils test analysis to be approved by Lessor to determine the suitability of the Site for the proposed development. 10/01/90 EXHIBIT "C" 1712u/2460/04 Page 4 of 6 r" 5. Miscellaneous Governmental Approval. In addition to the approvals to be obtained from City and LESSOR as provided herein, LESSOR and LESSEE shall cooperate andAdiligen 1 ursue, within the times set forth in the Schedule of Performance (Exhibit "E" ) , the obtainment of all other governmental approvals required for developmen�t and operation of the Improvements. A 6. Failure of Conditions; Termination. In the event that, prior to the Commencement Date: (a) LESSEE fails to submit or is unable, after and despite its exercise of reasonable diligence, to timely obtain approval of the final building plans and specifications for the Improvements,&in accordance with paragraph 1 of this Exhibit "C"; or (b) LESSEE is unable, after and despite its exercise of reasonable diligence, to timely obtain financing commitments for the development of the Premises or the Executive Director' s approval thereof, in accordance with paragraph 2 of this Exhibit "C"; or (c) LESSOR, LESSEE, and the City fail to timely enter into a binding written agreement with the holder of the Maxwell' s Lease or any other leasehold interest capable of asserting relocation rights, in accordance with Paragraph 3 of this Exhibit "C"; or (d) Replacement Parking requirements of any governmental entity fail to be satisfied by the onsite parking and no more than ten (10) offsite parking spaces. (e) LESSOR fails to timely tender possession of the Premises, with the condition of title meeting the requirements set forth in Paragraph 3 of this Exhibit "C"; or (f) LESSEE either fails to obtain an approved environmental study or cost to clean up contamination exceeds $25, 000; or h (g) As of the scheduled Commencement Date, LESSOR is in default of any of its other obligations under this Lease, and such failure or default is npt cured and is not being cured in accordance with paragraph 20 of Exhibit "B" to the Lease; 10/01/90 EXHIBIT "C" 1712u/2460/04 Page 5 of 6 r" (h) As of the Scheduled Commencement Date, Lessee is in default of any obligation under this Lease, and such failure or default is not cured and is not being cured in accordance with paragraph 20 of Exhibit "B" to the Lease; then this Lease shall, at the option of either party, under paragraph(s) a, b, c, d or f above, be terminated by written notice thereof to remaining party; or, Lessee may terminate under paragraph(s) a or g above; Lessor may terminate under (h) above, and thereupon neither LESSOR nor LESSEE shall have any further rights or obligations with respect to the Premises or this Lease. 20/01/90 EXHIBIT "C" 1712u/2460/04 Page 6 of 6 r EXHIBIT "D" SCOPE OF DEVELOPMENT I . LESSEE'S RESPONSIBILITIES: 1. The Improvements. As used in this Lease, the term "Improvements" shall mean all improvements constructed, assembled, or placed by LESSEE on the Premises. Except as specifically set forth in Section II below, LESSEE shall be responsible for demolition and clearance from the Premises of all existing improvements inconsistent with the construction thereon of the "Improvements" in accordance with the plans and permits to be approved by .the City, LESSOR, and any other governmental agency that has jurisdiction, as the same may be amended from time to time. Additional clarifications of LESSEE' s responsibilities are set forth below: (i) Concept. The Improvements shall consist of a multi-level restaurant project located within the footprint of the asphalt parking lot located south of the Pier. The lifeguard station and beach access road/bike path will remain in their present locations. Emphasis is on small building footprints and silhouettes and large public spaces, promenades and plazas. Pier, ocean, and beach view opportunities, both in and through the project, will be maximized wherever possible. Maxwell' s will have the option of relocating to a new structure within the project. New structures on the Plaza or PCH level are limited to the new Maxwell' s (building "A" ) and buildings "B" and "C" on the plans. The buildings shall be consistent with the development guidelines for District 10 o£• The Downtown Specific Plan. New structures on the lower or beach access level will house food services, beach-related concessions, and other approved visitor-serving commercial uses. Structures on both levels shall be set back so as to create pedestrian promenades along the entire ocean side of the project. The upper promenade shall be lower than the plaza level to improve PCH views of the surf. The lower promenade or boardwalk shall be above the bike path so as to separate pedestrians from skateboarders, bicyclists, and roller skaters. (ii) Parking. The parking structure shall contain a sufficient number of parking stalls (including subterranean stalls on "lifts" ) to satisfy code requirements for the uses on the Premises, calculated as follows: (1) the relocated Maxwell' s restaurant: SO spaces (based on the number of spaces currently provided pursuant to the Maxwell' s Lease) ; (2) the two (2) major new PCH-level buildings and the 10/01/90 EXHIBIT "D" 1712u/2460/04 Page 1 of 5 r approximately 6,000 square feet of planned restaurants/cafes on the lower level: I space per 100 square feet of floor area; and (3 ) pedestrian-oriented cafe and beach concessions: no spaces. LESSEE shall not be responsible for providing any off-Premises parking to replace any existing parking spaces on or adjacent to the Premises that will or may be eliminated due to the development of the project, whether required by the City, the California Coastal Commission, or otherwise. (iii) Access. The project shall be designed so that pedestrians will be able to enter the project site through the signalized intersections at Main and Lake Streets. Elevators, as well as ramps at all level changes, shall be provided for full handicap access throughout the project and down to the beach. Grand staircases from the plaza level to the beach access level shall also be provided to act as observation and sitting areas. The project shall provide automobile entry to the plaza level south of building "A" and to the lower parking level at Lake Street. Exiting shall be provided onto PCH south of the entry and from the lower parking level out to Lake Street. Two-way ramps shall provide access between the parking levels. Payment control points shall be located on the lower level at the base of the ramp and at the Lake Street entrance/exit. (iv) Construction. Buildings "A, " "B, " and "C" shall be Type V-1 hour construction and shall conform to all applicable Huntington Beach building ordinances, applicable as of the Effective Date of this Lease. They shall be erected on top of a fully sprinklered steel reinforced concrete parking structure. Surface finishes, design, and roofing shall be consistent with the Downtown Design Guidelines and direction from the Design Review Board. Hardscape shall be a mixture of stone, concrete, and exposed aggregate surfaces. (v) Landscaping. Landscaping shall emphasize a variety of palm trees, flowering vines, shrubbery, and bedding plants, as well as a variety of coastal grasses. Landscaping shall be accented by night-time lighting. (vi ) Size of Buildings. The buildings to be , included in the project shall be of approximately the following sizes (in square feet) : 10/01/90 EXHIBIT "D" 1712u/2460/04 Page 2 of 5 r Plaza Level Square Footage Building "A" (Maxwell' s) : 1st Level 11,200 2nd Level 3, 800 15,000 15,000 Building "B" 1st Level 8,700 2nd Level 2,300 11,000 11,000 Building "C" 1st Level 8, 700 2nd Level 5,400 14, 100 14, 100 Total Plaza Level 40, 100 Beach Access Square Footage Beach Concession 3, 150 Cafe 3,500 Casual Restaurant 6,000 Beach Concession 4,050 Total Beach Access Level 16,700 PROJECT TOTAL 56,800 The size and the distribution of square footage among the particular buildings and parts of building may vary from the above, provided, however, the project total square footage shall not exceed 60,000 square feet without an amendment to this Scope of Development. (vii ) Cost of Construction. The Improvements shall be constructed at a minimum hard" cost of Seventy-Five Dollars ($75.00) per square foot of gross building floor area for the three . (3) buildings referenced in subparagraph (vi) above (not including the parking facilities) , including without limitation tenant improvements and furnishings, fixtures, and equipment, site preparation costs, parking, landscaping, driveways, and other similar items. 10/01/90 EXHIBIT "D" 1712u/2460/04 Page 3 of 5 r II . LESSOR' S RESPONSIBILITIES: 1. Permitted Development. LESSOR warrants and represents that, at such time as the City' s approval of the Conditional Use Permit and Coastal Development Permit for the Improvements to be constructed on the Premises become "final" (as that term is defined below) , neither the City nor Lessor shall prohibit, prevent, or delay development or use of the Premises, or impose arty conditions, fees, or other requirements on LESSEE' s development or use of the Premises other than as specifically permitted in this Lease, in the conditions of such development approvals, and as may be customarily imposed by the City in connection with the issuance of building permits. It is understood that the foregoing warranty and representation does not apply to any statutes, ordinances, resolutions, or regulations of any governmental agency other than those of the City and LESSOR, nor to any actions taken by persons or entities other than City or LESSOR to prohibit, prevent, or delay development or use of the Premises. The Conditional Use Permit and Coastal Development Permit shall be deemed "final" for purposes of this Paragraph 1 upon the last of the following three (3) dates (i) as to each condition on said permits, on the date on which LESSEE obtains LESSOR approval of LESSEE' s satisfaction of such items, (ii) the date on which all applicable statutes of limitations for challenging such permits have expired without litigation being filed, or (iii) the date on which all such litigation is favorably and finally terminated, whether by judgment, dismissal, settlement agreement or otherwise. 2. Reopening._and Maintenance of Municipal Pier. As of the Effective Date of this Lease, LESSOR is proceeding with a project to restore and reconstruct the municipal pier. Subject to Paragraph 30 of Exhibit "B, " LESSOR agrees to complete such restoration and reconstruction project and to reopen the pier to the public no later than the later of the following dates: (i) June 1, 1992, or (ii ) the date LESSEE completes or causes completion of construction of the first restaurant facility on the Premises and LESSOR is required to issue a Certificate of Completion therefor. Thereafter, subject to Paragraph 30 of Exhibit "B, " LESSOR agrees to maintain, or cause to be maintained (and repaired, restored, and recontructed, if necessary) , the municipal pier in good and safe condition and open to public access for the entire term of this Lease. 3. Maintenance of City Beach. During the entire term of this Lease, LESSOR agrees to maintain the public beach adjacent to the Premises and all off-premises common areas and improvements in good, clean, and safe condition. 4. Utilities. LESSOR agrees to provide, or cause to be provided, at no expense to LESSEE, within the times required 10/01/90 EXHIBIT "D" 1712u/2460/04 Page 4 of 5 V in the Schedule of Performance, all utilities (water, sewer, gas, electrical, and telephone) required for the development, use, and maintenance of the improvements on the Premises, with sufficient capacities to adequately service the Premises, with such utilities to be located on the Premises or stubbed no further away than 3 feed toward the Premises from the curb along the west side of Pacific Coast Highway adjacent to the Premises. LESSEE shall be responsible for extending utilities from said location(s) to the improvements located on the Premises in accordance with Paragraph I above. 5. Easements and Permits. LESSOR agrees to cooperate with LESSEE in connection with the filing and processing of any and all applications for permits and other approvals required by the City or any other governmental agency in connection with the development of the Premises. 6. Replacement Parking. If the City, the Coastal Commission, or any other governmental agency with jurisdiction over the Premises imposes a requirement on LESSEE or the project that on- or off-site "replacement" parking be provided (to offset the existing surface public parking lot on and about the Premises that will be eliminated) in excess of the number of parking spaces to be provided by LESSEE as referenced in Section I . l(ii ) herein, LESSOR shall take all actions necessary to provide such parking at no cost to LESSEE on a schedule which will enable LESSEE to construct the Improvements and operate and use the Premises without delay. 7. Access for Service Vehicles. During the entire term of this Lease, LESSOR agrees to provide, or cause to be provided, access for service and delivery vehicles to the businesses on the Premises along the access road/bike trial on the beach side of the Premises; provided that such access may be restricted from 10:30 a.m. - 4:00 p.m. on weekdays and from 9:00 a.m. - 4:00 p.m. on weekends. S. Relocation Assistance. The obligations of LESSOR and LESSEE with respect to the temporary shutdown of Maxwell' s and relocation of Maxwell' s into the project to be developed by LESSEE on the Premises shall be as set forth in the agreement by and among LESSOR, LESSEE, the City, and the holder of the Maxwell' s Lease, as referenced in Paragraph 3 of Exhibit "C" (the "Conditions to Commencement" ) . Otherwise, LESSOR shall be solely responsible for payment of relocation expenses and provision of relocation assistance to any persons or entities displaced as a result of LESSEE' s development of the Premises, in accordance with applicable provisions of` law. 10/01/90 EXHIBIT "D" 1712u/2460/04 Page 5 of 5 r" EXHIBIT "E" SCHEDULE OF PERFORMANCE Item of Performance Time for Performance 1. LESSEE submits to City and Completed LESSOR application for Conditional Use Permit and Coastal Development Permit (Exhibit "C, " ail) 2 . LESSOR completed review and Within one hundred and exercises reasonable eighty (180) days diligence to cause City to after Effective Date approve Conditional Use Permit, Coastal Development Permit, and supplemental environmental impact report (Exhibit "C, " TI) 3 . LESSOR, LESSEE, and the City Within one hundred and exercise best efforts to eighty (180) days of the enter into a binding written date City approves the agreement with the holder of Conditional Use Permit, the Maxwell' s Lease, Dwight' s Coastal Development Lease and any subtenants Permit, and Supplemental (Exhibit "C, " J13) EIR 4. LESSEE delivers Security On or before the Deposit (Lease, TG) Commencement Date 5. LESSEE submits to City and Within one hundred fifty LESSOR final building plans (150) days after the and specifications for later of the following: Improvements (Exhibit "C, " (i) the date on which all TVI and 3) of the permits and approvals referenced in paragraph 2 herein become "final"; or (ii) the date on which the City, LESSOR, and LESSEE enter into a binding written agreements with the holders of the Maxwell' s Lease and any subtenants, Dwight' s Lease 10/01/90 EXHIBIT "E" 1712u/2460/04 Page 1 of 3 r 6. LESSOR completes review Within thirty (30) days and exercises reasonable after submittal diligence to cause City to complete review of final building plans and speci- fications for Improvements (Exhibit "C, " �1) 7 . LESSEE submits evidence Within one hundred twenty of financing (220) days after City and (Exhibit "C, " T2) LESSOR approval of final building plans 6. LESSOR reviews and approves Within 30 days of receipt (or disapproves) evidence of complete financing of financing (Exhibit "C, " package 12) 9. LESSEE delivers evidence Within thirty (30) days of insurance; Lease term after LESSOR approval commences; LESSOR causes of evidence of financing Title Company to deliver (and satisfaction or title policy to LESSEE; waiver of all of the LESSEE obtains building other Conditions to permit(s) and construction Commencement in Exhibit loan records (Lease, is 4 "C" ) and 10; Exhibit "B, " %10; Exhibit "C, " 1I3) 10. LESSEE commences construc- Within thirty (30) days tion of Improvements (Lease, after Commencement Date %6) 11. LESSOR provides utilities Prior to LESSEE' s to the Premises (Exhibit scheduled date for "B, " V2; Exhibit "D, " 1lII .4) commencement of construction 12. LESSEE completes construction Within twenty-four (24) of Improvements; Exhibit months after commence- "D, " TI .1 and 2) ment of construction 13 . LESSEE requests Certificate of Completion and furnishes to Lessor as-built plans and itemized statement of construction costs (Exhibit "B" U.a; Exhibit "D" 'VI .1(vii) 14. LESSOR shall either approve or disapprove Certificate of Completion (Lease, T6(c) ) 10/01/90 EXHIBIT "E" 1712u/2460/04 Page 2 of 3 ` a r It is understood that the foregoing Schedule of Performance is subject to all of the terms and conditions set forth in the text of this Lease. The summary of the items of performance in this Schedule of Performance is not intended to supersede or modify the more complete description in the text; in the event of any conflict or inconsistency between this Schedule of Performance and the text of this Lease, the text shall govern. i r 10/01/90 EXHIBIT "E" 1712u/2450/04 Page 3 of 3 EXHIBIT "F" rI MAP OF EXCLUSIVE USE AREA • (To be added) 09/30/90 EXHIBIT "F" 1712u/2460/04 ATTACHMEW 3 CITY COUNCIL RESOLUTION NO. 6224 REDEVELOPMENT AGENCY RESOLUTION NO. 206 1 a RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING THE NONDISTURBANCE AND RECOGNITION AGREEMENT BETWEEN THE CITY OF HUNTINGTON BEACH AND h., STANLEY M. BLOOM WHEREAS, on or about November 20, 1986, the Redevelopment Agency of the City of Huntington Beach and Pier Side Development, a California general partnership, entered into that certain lease entitled Pier Side Lease and is now in the process of amending that lease; and As part of that transaction City is leasing its interest in the subject property to the Redevelopment Agency; and As a further part of this transaction City is entering into a Nondisturbance and Recognition Agreement with Stanley M. Bloom, Sublessee of subject property, NOW, THEREFORE, the City Council of the City of Huntington Beach resolves as follows: The Nondisturbance and Recognition Agreement between the City of Huntington Beach and Stanley M. Bloom is hereby approved, and the Mayor is authorized to execute it on behalf of the City. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the day of 1991. Mayor ATTEST: APPROVED AS TO FORM: City Clerk 7-3 5 - ity Attorney G ..r REVIEWED AND APPROVED: INITIATED AND APPROVED: City Administrator Director of Economic Development AGENCY RESOLUTION NO. a� O A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH APPROVING THE FIRST AMENDED PIER SIDE LEASE BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND STANLEY Pi. BLOOM WHEREAS, on or about November 20, 1986, the Redevelopment Agency of the City of Huntington Beach ("Agency") and Pier Side Development, a California general partnership, entered into that certain lease entitled Pier Side Lease; and Stanley M. Bloom is the sole successor in interest to Pier Side Development, a California general partnership; and Agency and Stanley M. Bloom wish to enter into a First Amended Pier Side Lease, NOW, THEREFORE, the Redevelopment Agency of the City of Huntington Beach resolves as follows: The First Amended Pier Side Lease Between the Agency and Stanley M. Bloom is hereby approved, and the Chairman and Agency Secretary are authorized to execute it on behalf of the Agency. PASSED AND ADOPTED by the Redevelopment Agency of the City of Huntington Beach at a regular meeting thereof held on the day of 1991. ATTEST: Agency Clerk Chairman APPROVED AS TO FORM: REVIEWED AND APPROVED: Agency Counsel Executive Director ATTTICHMENJ CITY COUNCIL RESOLUTION NO. 6225 REDEVELOPMENT AGENCY RESOLUTION NO. 207 RESOLUTION 110. �a A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH APPROVING THE PIER SIDE LEASE BETWEEN THE CITY OF HUNTINGTON BEACH �+ AND THE IM-DEVELOPMENT AGENCY WHEREAS, on or about November 20, 1986, the Redevelopment Agency of the City of Huntington Beach and Pier Side Development, a California general partnership, entered into that certain lease entitled Pier Side Lease and are now in the process of amending that lease; and As a part of that transaction the City is leasing its interest in the subject property to the Redevelopment Agency; and Agency and City wish to enter into a Pier Side Lease, NOW, THEREFORE, the City Council of the City of Huntington Beach resolves as follows: The Pier Side Lease Between the City of Huntington Beach and the Redevelopment Agency is hereby approved, and the flayor is authorized to execute it on behalf of the City. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the day of , 1991. Ilayor ATTEST: APPROVED AS TO FORM: City Clerk City Attorney REVIEWED AND APPROVED: INITIATED AND APPROVED: t� City Administrator Director of Economic Development kl- AGENCY RESOLUTION NO. o2Z�� A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH APPROVING THE PIER SIDE LEASE BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND THE CITY OF HUNTINGTON BEACH WHEREAS, on or about November 20, 1986, the Redevelopment Agency of the City of Huntington Beach ("Agency") and Pier Side Development, a California general partnership, entered into that certain lease entitled Pier Side Lease and is now in the process of amending that lease; and As a part of that transaction the City is leasing its interest in the subject property to the Redevelopment Agency, NOW, THEREFORE, the Redevelopment Agency of the City of Huntington Beach resolves as follows: The Pier Side Lease Between the City of Huntington Beach and L,r, the Redevelopment Agency is hereby approved, and the Chairman and Agency Secretary are authorized to execute it on behalf of the Agency. PASSED AND ADOPTED by the Redevelopment Agency of the City of Huntington Beach at a regular meeting thereof held on the day of 1991. ATTEST; Agency Clerk Chairman APPROVED AS TO FORM: j� Agency Counsel C Executive Director ATTA.SHMEN14 LEASE BETWEEN THE CITY AND AGENCY FOR CITY-OWNED PROPERTY L E A S E LESSOR: CITY OF HUNTINGTON BEACH, a municipal corporation LESSEE: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a Public body, corporate and politic DATED: 5/267/013376-0001/01 5/31/91 r INDEX Page Article I . Leased Premises. . . . . . . . . . . . . . . . . . . . . . . . 1 II . Term of Lease. . . . . . . . . . . . . . . . . . . . . . . . . . 1 III . Rent. . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . 2 IV. Indemnification and Hold Harmless . . . . . . 2 V. Use of Premises . . . . . . . . . . . . . . . . . . . . . . . . 3 VI . Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 VII . Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 VIII . Attorneys ' Fees. . . . . . . . . . . . . . . . . . . . . . . . 4 IX. Covenants of Quiet Enjoyment and Nondisturbance. . . . . . . . . . . . . . . . . . . . . 4 X. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Exhibits A Legal Description B Nondisturbance and Recognition Agreement C Short Form Memorandum of Lease i I -i- LEA E THIS LEASE is made, and entered into as of this day of by and between the CITY OF HUNTINGTON BEACH, a municipal corporation (herein referred to as "Lessor" ) , and the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a Public body, corporate and politic (herein referred to as "Lessee►►) . The parties hereto mutually covenant and agree that Lessor , in consideration of the rentals payable by Lessee and the covenants and agreements to be kept, observed and performed by Lessee hereunder , has rented and leased unto Lessee, and Lessee does hereby take and hire from Lessor, the Leased Premises, pursuant to the provisions of this Lease. ARTICLE I Leased Premises 1 . 1 "Leased Premises" or "Premises, " as hereinafter collectively referred to, shall consist of that certain real property located in the City of Huntington Beach, County of Orange, State of California and more particularly described in Exhibit "A" attached hereto and incorporated herein by this reference, together with all improvements now located thereon. 1. 2 The Leased Premises are leased and granted to Lessee for the purpose of subleasing and assigning the same to Stanley M. Bloom (hereafter "Sublessee" ) in accordance with the "First Amended Pier Side Lease" as defined in Section 2 . 1 below. 1. 3 Prior to the "Commencement Date" (as hereinafter defined) , Lessee and its designees shall have the right , upon prior notice to Lessor, to enter upon the Leased Premises to make any and all inspections and tests of the Leased Premises in connection with the development of the Leased Premises . TO HAVE AND TO HOLD the Premises unto Lessee for the term of this Lease as the same is hereinafter defined. ARTICLE II Term of Lease 2. 1 The term of this Lease shall be fifty-five (55) years commencing on the "Commencement Date" as defined in -1- that certain First Amended Pier Side Lease dated , 1991 by and between Lessee and Stanley M. Bloom ( the "First Amended Pier Side Lease" ) . The above described term of this Lease is hereinafter referred to as the "Lease Term. " ARTICLE III Rent 3. 1 Lessee agrees to pay to Lessor at or at such other place as may be designated by Lessor from time to time, the amount payable as rent by the Sublessee pursuant to the First Amended Pier Side Lease ( taking into account any deductions, reductions or offsets thereto to which the Sublessee may from time to time be entitled) up to a cumulative total amount during the Lease Term not to exceed Dollars ($ ) plus interest thereon at the rate of ten percent ( 10%) per annum accruing from the Commencement Date until said amount is paid in full . The rent payable by Lessee hereunder shall be payable within thirty ( 30) days of Lessee ' s receipt of the same from the Sublessee pursuant to the First Amended Pier Side Lease. 3 . 2 As additional rent hereunder , Lessee shall pay during the Lease Term, and prorated to the commencement and the termination of the Lease Term, any and all taxes and assessments levied against the Premises, or any portion thereof, public utility and related costs and expenses, and any other expenses or charges which during the Lease Term shall be levied, assessed or imposed by any governmental authority upon or with respect to, or incurred in connection with, the possession, occupation, operation, alteration, maintenance, repair and use of the Premises, it being intended that this Lease shall result in a rent to be paid to Lessor , without additional cost to Lessor or diminution or offset thereto, in the fixed amount specified in Section 3 . 1 above. ARTICLE IV Indemnification and Hold Harmless 4. 1 Except for claims arising out of the acts or omissions or neglect of Lessor, Lessee covenants to defend and indemnify Lessor and save it harmless from and against any and all claims, actions, damages, liability and expenses, including reasonable attorneys' fees, in connection with the loss of life, bodily injury and/or damage to property arising from or out of any occurrence in, upon or at the Premises, or -2- the occupancy or use by Lessee of the Premises or any part thereof, or arising from or out of Lessee' s failure to comply with any provision of this Lease or otherwise occasioned wholly or in part by any act or omission of Lessee, its agents, representatives , contractors , employees, servants, customers or licensees . Except for Lessor ' s willful or negligent conduct, Lessee hereby assumes all risk of damage to property or injury to persons in, upon or about the Premises from any cause whatsoever. ARTICLE V U e of Premises 5. 1 Lessee may use the Premises for any lawful purpose. 5 . 2 Lessee may from time to time, without the necessity of consent from or notice to Lessor, transfer, assign, sublet, mortgage and/or otherwise hypothecate this Lease and Lessee' s interest in and to the Premises . ARTICLE VI Improvements 6 .1 Subject to compliance with all applicable laws, rules and regulations, Lessee may from time to time during the Lease Term make or cause to be made such improvements and/or alterations to the Premises , including demolition of the improvements now or hereafter comprising the Premises, as Lessee shall in its sole discretion deem appropriate without the necessity of consent from or notice to Lessor . 6 . 2 Upon expiration of the Lease Term, Lessee may, in Lessee' s sole and absolute discretion, remove some or all of the improvements then comprising the Premises and any such improvements not so removed by Lessee shall be deemed to be abandoned and title thereto shall be deemed to have been transferred to Lessor . ARTICLE VII Default 7 .1 The following events shall constitute default(s) by Lessee: 7 .1.1 The failure by Lessee to make, as and when due, any payment of rent or other charges payable by Lessee -3- hereunder or to timely discharge any other monetary obligation hereunder , where such failure has continued for a period of ten ( 10) days after written notice thereof from Lessor to Lessee. 7 . 1 . 2 The failure by Lessee to observe or to perform any of the nonmonetary covenants, promises , agreements or provisions of this. Lease to be observed or performed by Lessee other than as specified in Section 7 .1 . 1, where such failure has continued for a period of thirty ( 30) days after written notice thereof from Lessor of such default; provided, if such default by its nature is not susceptible to cure within such thirty (30) days, Lessee shall not be deemed to be in default if within such thirty ( 30 ) day period Lessee commences to effect such cure and thereafter diligently prosecutes the same to completion. ARTICLE VIII Attorneys ' Fees 8.1 In the event that either Lessor or Lessee brings any action or proceeding against the other for possession of the Premises or for the recovery of any sum due hereunder , or because of the breach of any covenant, condition or provision hereof, or for any other relief against the other , declaratory or otherwise, including appeals therefrom, and whether being an action based upon a tort or contract, then the prevailing party in any such proceeding shall be paid by the unsuccessful party reasonable attorneys ' fees and costs of such action or proceeding which shall be enforceable whether or not such action or proceeding is prosecuted to final judgment, and including an allowance for reasonable attorneys ' fees and costs for appeals and rehearings. ARTICLE IX Covenants of Quiet Enioyrient and Nondisturbance 9 . 1 Lessor does hereby covenant, promise and agree to and with Lessee that Lessee, for so long as it is not in default hereof , shall and may at all times peaceably and quietly have, hold, use, occupy and possess the Premises throughout the Lease Term; without any litigation, suit, molestation or eviction by Lessor or any persons claiming by or through Lessor or claiming the Premises, other than third parties claiming under or through Lessee or Sublessee. 9 .2 on or before the Commencement Date of this Lease, Lessor shall execute and deliver to Sublessee the -4- Nondisturbance and Recognition Agreement attached hereto as Exhibit "B" and by this reference incorporated herein. ARTICLE X General 10. 1 The covenants and agreements herein contained shall bind and inure to the benefit of Lessor , its successors and assigns, and Lessee, its successors and assigns, subject to the provisions of this Lease. 10 . 2 Any notice, demand, request, consent, approval or communication that Lessor or Lessee desires or is required to give to any other party shall be in writing addressed to such other party at the following addresses or such other address as may have been specified by notifying the other parties of the change of address: Lessor : Lessee: Redevelopment Agency of the City of Huntington Beach Attn: Executive Director/City Administrator 2000 Main Street Huntington Beach, CA 42648 Sublessee/ Leasehold Mortgagee: where notice is required under Exhibit "B" , paragraph 5 , to the addresses referenced in Exhibit_ "B" , paragraph 5 Notice shall be deemed served on the third ( 3d) business day following the day of mailing if mailed with the United States Postal Service, by certified mail, return receipt requested or one (1) business day after the same is timely deposited with a reputable overnight courier service. 10. 3 The headings or captions of Articles in this Lease are for convenience and reference only, and they in no way define, limit or describe the scope or intent of this Lease or the provisions of such Articles. -5- 10. 4 Feminine or neuter pronouns shall be substituted for those masculine form or vice versa, and the plural shall be substituted for the singular number or vice versa, in the place or Places herein where the context may require such substitution or substitutions. 10.5 This Lease shall be governed by and construed pursuant to the laws of the State of California. 10.6 This agreement may be executed in several counterparts, each of which shall constitute an original . IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date first set forth above. LESSOR LESSEE CITY OF HUNTINGTON BEACH, REDEVELOPMENT AGENCY OF THE CITY a municipal corporation OF HUNTINGTON BEACH, a public body, corporate and politic By, y.. Its: Its: ATTEST: ATTEST: -6- EXHIBIT "A" LEGAL DESCRIPTION That portion of Huntington Beach, County of Orange, State of California as shown on a map recorded in Book 3, Page 36 of Miscellaneous Maps in the office of the County Recorder of said county described as foIIows: To Be Inserted When Recorded Mail To: Stanley M. Bloom c/o Randall Foods, Inc. 2905 E. 50th Street Vernon, CA 90058 NONDISTURBANCE AND RECOGNITION AGREEMENT THIS NONDISTURBANCE AND RECOGNITION AGREEMENT ("Agreement" ) is made this day of , 1991, between the CITY OF HUNTINGTON BEACH, a municipal corporation ("Lessor") and STANLEY M. BLOOM, an unmarried man ("Sublessee") . , RECITALS: A. The Redevelopment Agency of the City of Huntington Beach ( "Lessee") has entered into a Lease dated , 1991, (the "Lease" ) with Lessor covering the "Leased Premises" (as hereinafter defined) . B. Sublessee has entered into a First Amended Pier Side Lease dated , 1991 (the "Sublease" ) with Lessee covering certain real property more particularly described in Exhibit "A" attached hereto (the "Leased Premises" ) . C. Lessor agrees to enter into this Agreement in order to induce Sublessee to enter into the Sublease. Sublessee would not enter into the Sublease unless Lessor entered into this Agreement. Lessor acknowledges that by Sublessee entering into the Sublease it will be benefited. D. Sublessee and Lessor wish to confirm their understanding with respect to the Sublease, the Lease and any "Leasehold Mortgage" (as defined in the Sublease) placed upon the Leased Premises. In consideration of the mutual covenants set forth below and notwithstanding any provisions of the Lease or Sublease to the contrary, Lessor and Sublessee agree as follows: 1. Nondisturbancg. So long as Sublessee is not in default (beyond any period given Sublessee to cure such default in the Sublease) in the payment of any rent or in the performance of any of the terms, covenants, or conditions of 5/267/013376-0001/02 5/31/91 the Sublease: (a) Lessor will not bring, join or cooperate in any action or proceeding to terminate Sublessee's interest, estate, or rights under the Sublease (whether or not Lessor has succeeded Lessee) ; (b) Sublessee's possession of the Leased Premises and Sublessee's rights and privileges under the Sublease shall not be diminished or interfered with by Lessor; and (c) Lessor will continue to recognize the estate of Sublessee created under the Sublease and Sublessee's occupancy of the Leased Premises shall not be disturbed by Lessor during the term of the Sublease or any extensions or renewals which may be exercised under the provisions• of the Sublease. 2. Attornment. If the interest of Lessee in all or any part of the Leased Premises shall be terminated by reason of the exercise of any remedy by Lessor under the Lease or any other action brought by Lessor, or by any other manner, and Lessor succeeds to the interest and assumes all the obligations of Lessee under the Sublease, Sublessee shall be bound to Lessor under all of the terms, covenants, and conditions of the Sublease for the balance of the Sublease term and any extensions or renewals of the Sublease which may be exercised under the provisions of the Sublease. Sublessee hereby attorns to Lessor as its landlord, this attornment is to be effective and self-operative without the execution of any further instruments immediately upon Lessor succeeding to the interest of Lessee under the Sublease. The respective rights and obligations of Sublessee and Lessor under this attornment shall be the same as that between Sublessee and Lessee as set forth in the Sublease, it being the intention of the parties to incorporate the Sublease by reference in this Agreement, with the same force and effect as if the Sublease were set forth at length in this Agreement. Sublessee shall have the same remedies against Lessor for the breach of a provision of the Sublease that Sublessee would have had against Lessee. Sublessee, however, shall be under no obligation to pay rent to Lessor until Sublessee receives written notice from Lessor that Lessor has succeeded to the interest of Lessee and assumed all the obligations of Lessee under the Sublease. Lessor shall not hold Sublessee responsible for any costs or acts caused by failure of Lessee not related to any act of Sublessee which is connected with any dispute between Lessor and Lessee with respect to whether Lessor has succeeded to any or all of Lessee' s interest and assumed any or all of Lessee 's obligations under the Sublease. 3. Sublessee 's Right to Encumber the Sublgagg. Lessor recognizes Sublessee 's right to mortgage or encumber the Sublease and/or the leasehold estate thereunder pursuant to paragraph 16 of the General Conditions of the Sublease. Subject to the terms of the Sublease, Lessor will recognize -2- any and all of the rights of any lender of a "Leasehold Mortgagee" as defined in the Sublease ( "Leasehold Mortgagee" ) . Subject to the -terns of the Sublease, each Leasehold Mortgagee who has succeeded to the rights of Sublessee under the Sublease and has given notice to Lessor has the same rights as Sublessee under this Agreement and may act on behalf of Sublessee under this Agreement and Lessor will acknowledge and accept such actions. 4. Notice. Lessor will give notice to Sublessee and each Leasehold Mortgagee in the event of the termination of the Lease or of any new lease prior to its stated expiration • date for any reason whatsoever. Any notice required under the Lease to be given by Lessor to Lessee shall not be effective unless and until such notice is also given to Sublessee and each Leasehold Mortgagee. Any notice or other communication which a party shall desire or is required to give to or serve upon the other or any Leasehold Mortgagee shall be in writing and shall be served by registered or certified mail, at the Following addresses, or at such other address as shall be designated from time to time by such party by notice in writing given to the other by registered or certified mail: Lessor: The City of Huntington Beach Sublessee: Stanley M. Bloom c/o Randall Foods, Inc. 2905 E. Fiftieth Street Vernon, CA 90058 With copies to: Jonathan Chodos 1559 South Sepulveda Blvd. Los Angeles, CA 90025 Sublessee will furnish the addresses of each Leasehold Mortgagee to Lessor. S. Default Under the Sublease. Lessor shall have no cause of action against Sublessee, its successors or assigns if Sublessee is in default or otherwise fails to observe or perform any of its obligations under the Sublease unless Lessor has succeeded to the position of Lessee and has assumed all of Lessee's obligations under the Sublease. Default by Lessee under the Sublease shall not constitute a default under the Lease. 6. New Lease. In the event of the termination of the Lease prior to its stated expiration date for any reason -3- whatsoever, or the failure to exercise or the lapse of any option to extend the Lease, Sublessee or any Leasehold Mortgagee may notify Lessor, within forty (40) days after receipt of such notice of such event, of its election to enter into a new lease with Lessor. During such forty (40) day period,. the provisions of paragraph 1 herein shall apply. Lessor, upon receipt of Sublessee's or Leasehold Mortgagee's notice, shall immediately enter into a written agreement with Sublessee or Leasehold Mortgagee containing the same provisions as those in the Sublease, except for any changes that are necessary because of the substitution of Lessor in the place of Lessee. Sublessee or any Leasehold Mortgagee shall have no rights under this paragraph 6 if it fails to give notice within the forty (40) day period. 7. Estoppel-Certificate. Lessor and Sublessee will, at any time and from time to time within thirty ( 30) days of the request of the other party or a Leasehold Mortgagee or a prospective Leasehold Mortgagee, execute, acknowledge, and deliver to the other party and such Leasehold Mortgagee, if any, a certificate certifying: (a) That the Lease or Sublease is unmodified and in full force and effect (or, if there have been modifications, that the same are in full force and effect as modified and stating such modifications) ; (b) The dates, if any, to which the rent, percentage rent and any additional rent and charges have been paid; (c) Whether there are any existing defaults by the other party to the knowledge of the party making such certification specifying the nature of such defaults, if any; (d) Whether the Commencement Date of the Lease has occurred and, if so, the date; (e) Whether the Leasehold Mortgagee (or prospective Leasehold Mortgagee) is entitled to the protection afforded a Leasehold Mortgagee under the terms of the Sublease or Lease; and (f) Such other matters as may be reasonably requested. Any such certificate may be relied upon by any party to whom the certificate is directed. 8. Lessor Consent. Lessor will not unreasonably withhold, delay or condition any consent or approval required or requested of it hereunder or under the Lease or Sublease, including any requests for approval of an amendment to the -4- Sublease requested by a Leasehold Mortgagee pursuant to paragraph 16 of the General Conditions of the Sublease. In the event Lessor withholds its approval or consent, it will provide Sublessee with the specific reasons for withholding such approval or consent. No item once approved by Lessor shall be subject to subsequent disapproval by Lessor. Notwithstanding any provision to the contrary, all such approvals or consents or notice of the reasons for the withholding of such approval or consent will be provided within thirty (30) days after request. 9 . Modification of Lease. Except by reason of an uncured default by Lessee (and then subject to the rights of a Leasehold Mortgagee or Sublessee as contained herein) , Lessor will not modify, merge or amend those portions of the Lease which affect Sublessee's rights under the Sublease without the prior written consent of Sublessee and all Leasehold Mortgagees. Any such modification, merger, or amendment without the written consent of Sublessee or all Leasehold Mortgagees shall be void and of no force or effect. 10. Easements , Public Approvals. and Permits. Lessor shall grant, join �in granting, apply or aid in the application for all reasonable utility easements, government approvals, and all permits necessary for the operations on the Leased Premises at no cost to Lessor. 11. Commencement of Agreement. This Agreement will commence as of the date hereof regardless of the commencement date of the Sublease. 12. Entry on Leased Premises . Lessor hereby consents to the entry of Sublessee upon the Leased Premises prior to Sublessee taking possession of the Leased Premises pursuant to the Sublease for purposes of making the tests and investigations necessary and appropriate to satisfy the conditions set forth in the Sublease and shall hold Lessor harmless from any liability which may arise due to such entry. Any such entry is subject to reasonable advance notice. 13. Parties Bound. This Agreement shall be binding upon and inure to the benefit of Sublessee, Lessor and each Leasehold Mortgagee, their respective heirs, personal representatives, and permitted successors and assigns. The term "Lessor" , as used in this Agreement, shall be deemed to include Lessor, its successors and assigns, and anyone who shall have succeeded to Lessor 's interest by any means under the Lease. 14. Insurance Proceeds and C ndemnation Distributions. The payment or disposition of proceeds of fire or extended -5- insurance coverage, and any other property damage insurance provided for in the Sublease, and the payment and disposition of any condemnation award, shall be made and applied in the manner provided in the Sublease. 15. Reserved Police Power Authority. Nothing contained In this Agreement. is intended or shall be construed to limit or restrict . Lessor's legitimate exercise of its general, municipal or police power authority. 16. Definition of Terms. Any terms not defined herein will have the meaning ascribed to such term in the Sublease. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. "LESSOR" : ATTEST: CITY OF HUNTINGTON BEACH, a municipal corporation By: Its: "SUBLESSEE": STANLEY M. BLOOM, an unmarried man S anley M I Bloom APPROVED AS TO FORZM: city Attorney -3-q r -6- STATE OF CALI RNIA ) �) s s. COUNTY On tit �day of 1991, before me, the undersigned, a No Pdr u lic, in an for said State and County, personally app personally known to me (, ove to me on the asis of satisfactory evidence) to be the person who executed the within instrument as the on behalf of the CITY OF HUNTINGTON BEACH, the municipal corporation therein named, and acknowledged to me that such corporation executed the within instrument pursuant to its bylaws or a resolution of its board of directors. WITNESS my hand and official al. Notary ubl (SEAL) �p GAR 14 o Q� �issto;EtD�i�f�d� i �•ti i zs Lj r L . o � � ..'�,����; fit• - - dj J'f••'�-fir G%�.••• v0 ' f�P 47 i0SFAo ���5 -7- W STATE OF CALIFORNIA ) Js s. COUNTY O 1(ir? 4��-] On tbg ' day of "� .�, 1991, before me, the undersigned, a Not Public in and for said State and County, personally ap a TANLEY M. BLOOM, personally known to me (or proved o .e an the basis of satisfactory evidence) to be the person who executed this instrument and acknowledged to me that he executed same. WITNESS my hand and offi ial s al. otary u 1 (SEAL) GPA Ric, � • Gam'- �. • O`rl• �`iJl �:� c ��CPFAFCAIIFDR'�� `oa �4�0S i,r3G��ES _g_ ' ATTACHMENT 5 SITE MAP(PLAZA LEVEL AND BEACH ACCESS LEVEL) i i # S hl S N Z. r tN , h PACIF IC Cooksy HIGHWAY r ,.......�. ........�. r,......... to-�I--i _ _ M •�' F _�.��. r .•..r..n.. •�r..n.�...,• i V. JITP Y.l..C"-TT. I I r Cam•.�- }1 3 rm BLMI-DING A .•1,. ?�T� L��--�—"—J— ,BLrLL04NG G F BuiGnG e _ L— PIER I�. ;, f . . . . . �, ySeS�, . . %�L.•,v�+-L►•, i . 1 I i 1 •1 SYMBOL LEGEND PARKING TABLILATION � PL ff Z.f LEVEL © •rpf.•/Kam..•.....Ot.T.r '1Y•aFL' . K.tr aFa •lea.rr•w.•..P.►arr aa...aF< — PIE RSIDE REST11UR11 .ArT DEVELOPMENT �•m Least �own�a�ics �• P1 � � II , � , , , ! ! � ! � ! ill . � l . �_�' •--•.� -=....... ! ! i , ililll : lll � l ! Ili I ! '. =� Ik . . � , .'• I ; li ' ; ; '�_ ., ._..._w��- I i � iiil {j lill li` • M�a i as° ! � , ! � �r_ : I � � ` . ' . � � — ` , 1 I ! I ! ! I i I I i I � I � i . • l i ! III ! I I 1 11 1 i � f � � � I I � aa.N_• r.... 1 { 1 BEdCff .fCCESS LEVEL `Cy PIERSIDE RESTf1URfINT DEVELOPMENT m G,.CALM � 5) P 2 ~JQ I IIllflllill !�Ilif ! I.I._I ; il1.� ri ! IIII ; ! IIl1ll : ; I : ; ! : ! ; : ! I : : I ! ! I ! lill ! ! I ��' If , i 11 �' . � ' i ;! ifilillillill' I ' ll ' it: 1 ! 11177, Z ; R t 1 LOWER PefRKt?1'C LEVEL r � PIERSIDE RESTdUR .IINT DIF UELOPAIENT m P3 AU&CHMENT 7 FIRST AMENDED PIERSIDE RESTAURANTS LEASE FIRST AMENDED PIER SIDE LEASE By and Between THE REDEVELOPMENT AGENCY OF T=- CITY OF HUNTINGTON BEACH and STANLEY M. BLOOM TABLE OF CONTENTS P_ age 1. RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. INGRESS AND EGRESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5. REQUIRED SERVICES AND USES; LIMITATION ON USE. 3 6. DEVELOPMENT OF THE PREMISES AND ADJACENT AREAS 6 a. Scope of Development and Cost of Construction. . . . . . . . . . . . . . . . . . . . . . . . 6 b. Construction Schedule. . . . . . . . . . . . . . . . . . . . . 7 c. Certificate of Completion. . . . . . . . . . . . . . . . . 7 7. RENT; PUBLIC PARKING PAYMENTS. . . . . . . . . . . . . . . . . 8 a. Percentage Rental. . . . . . . . . . . . . . . . . . . . . . . . . 8 b. Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 c. Public Parking Construction Payment. . . . . . . 14 d. Rent Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 e. Appraisal Procedure . . . . . . . . . . . . . . . . . . . . . . 15 f. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8. SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 9. CONDITION OF TITLE; COVENANT OF QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 10. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 11. THIRD PARTY BENEFICIARY. . . . . . . . . . . . . . . . . . . . . . . 20 12. REPRESENTATIONS BY LESSEE. . . . . . . . . . . . . . . . . . . . . 20 23. EXHIBITS • INCORPORATION INTO LEASE. . . . . . . . . . . 21 EXHIBITS A Legal Description of Premises B General Conditions C Conditions to Commencement D Scope of Development E Schedule of Performance F Certificate of Commencement Date G [Reserved] H Site Map I Master Lease J Nondisturbance and Recognition Agreement -i- FIRST AMENDED PIER SIDE LEASE This FIRST AMENDED PIER SIDE LEASE (the "Lease" ) is entered into this day of , 1991 (the "Effective Date" ) , by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic ("LESSOR" ) , and STANLEY M. BLOOM, an unmarried man ("LESSEE" ) , who agree as follows: 1. RECITALS: This Lease is made with reference to the following facts, objectives and covenants: a. On or about August 19, 1985, LESSOR, HUNTINGTON PACIFICA DEVELOPMENT GROUP, and the City of Huntington Beach, a municipal corporation (the "City") , entered into a Disposition and Development Agreement, which agreement was modified on or about February 18, 1986 (the "DDA") . The DDA provided for the disposition and development of two parcels located in the City of Huntington Beach, California, one of which parcels encompassed the Premises described herein (and other adjacent property that has been deleted from the Premises) . LESSEE hereunder is a shareholder in Randall Foods, Inc. , which was the parent of Pacific Heritage Land and Holding Company, which in turn was the parent of Pacific Heritage Corporation, one of the general partners in HUNTINGTON PACIFICA DEVELOPMENT GROUP, and LESSEE thereby had a substantial interest in the DDA. b. On or about November 20, 1986, LESSOR and PIER SIDE DEVELOPMENT, the successor-in-interest to HUNTINGTON PACIFICA DEVELOPMENT GROUP, entered Into a lease (the "Pier Side Lease") . The Pier Side Lease provided for the disposition and development of the parcel described in the DDA that encompassed the Premises described herein. Huntington Pacifica Development Group was a general partner in PIER SIDE DEVELOPMENT, and LESSEE thereby had a substantial interest in the Pier Side Lease. C. LESSOR and LESSEE, as the successor-in-interest to PIER SIDE DEVELOPMENT, desire to amend and restate the Pier Side Lease on the terms and conditions set forth herein. LESSOR and LESSEE agree that the DDA, including without limitation the Guarantees set forth as Attachments 7-10 thereto, is of no further force and effect, and that the Pier Side Lease, including without limitation the Guarantees set forth as Exhibits F, G, and H, thereto is superseded and amended by this Lease and shall be of no further force or effect on the Effective Date. d. The City is currently the owner of that parcel of real property located in the City of Huntington Beach, State of California, described in Exhibit "A" hereto and incorporated herein by this reference (the "Premises") . Subject to the satisfaction or waiver of all of the "Conditions to Commencement" (Exhibit "C" hereto) , LESSOR shall acquire a leasehold interest in and to the Premises pursuant to that certain Lease (the "Master Lease" ) to be entered into between the City as landlord and the Lessor as tenant on or before the "Commencement Date" of the Lease term (as that date is defined in paragraph 4 below) . The Master Lease is attached hereto as Exhibit I and incorporated herein by this reference. LESSOR and LESSEE acknowledge that this Lease is a sublease subject to all the terms and conditions of the Master Lease, with the understanding that LESSEE is not obligated to perform any of LESSOR' s obligations thereunder. e. On , 1991, by Resolution No. LESSOR approved and authorized its Chairman to execute this Lease. f. This Lease is entered into for the redevelopment of property consistent with the public purposes of the Main-Pier Redevelopment Plan, as previously adopted by the City Council of the City, and not for the purpose of speculation in unimproved land. g. The development of the Premises pursuant to the terms of this Lease shall improve public access to the public beach and recreational access and use of the Premises by creating amenities designed for year-round use and enjoyment by the public at the Premises as well as improving and facilitating vehicular, pedestrian, cycling and handicapped access to and through the Premises. 2. PREMISES: Contingent upon City' s approval and execution of the Master Lease, LESSOR agrees to lease to LESSEE and LESSEE agrees to lease from LESSOR the Premises, as described in Exhibit "A", upon the terms and conditions expressed herein. 06/13/91 5409u/2460/39 -2- 3. INGRESS AND EGRESS: LESSEE shall have access, as approved by the City and Caltrans, pursuant to the approved building plans for the development proposed herein, to all portions of the Premises at all times during the entire Lease term, including without limitation, access from the nearest public streets (Pacific Coast Highway and Lake Street) to the Premises, pedestrian access from all adjacent public spaces and ways (which include but are not limited to the municipal pier and beach) to the Premises, and limited access from the access road/bike trail in accordance with the Scope of Development (Exhibit "D") . Access points shall be limited as provided on the plans and permits to be approved by the City, as referenced in Paragraph 1 of the Conditions to Commencement (Exhibit "C") , as the same may be revised from time to time. LESSEE shall provide full public access to all of the promenade and plaza portions of the Premises consistent with security and safety regulations promulgated by any governmental authority with jurisdiction. LESSEE shall further provide access to the public parking facilities to be located on the Premises from 6:00 A.M. to twelve midnight each day on a year-round basis or such shorter period of time permitted in accordance with applicable governmental regulation. 4. TERM: Subject to Paragraph 7(a) (ii) herein, the term of this Lease shall be fifty-five (55) years, commencing on the date (herein the "Commencement Date") that all of the conditions to the commencement of the Lease term described in Exhibit "C" hereto ("CONDITIONS TO COMMENCEMENT") are satisfied or their performance is waived by the appropriate party. Upon the Commencement Date, LESSOR and LESSEE each agree, upon the request of the other party, to execute and record in the Official Records of Orange County an appropriate memorandum certifying the actual Commencement Date in the form attached hereto as Exhibit "F". S. REQUIRED SERVICES AND USES; LIMITATION ON USE: a. In General. LESSOR' s primary purpose for entering into this Lease is to provide for improved accessibility and use of the Premises by the public through the development of facilities and services needed by the public as part of the implementation of the Redevelopment Plan for the Main-Pier Redevelopment Project (the "Redevelopment Plan") . In furtherance of that purpose, LESSEE shall during the Lease term use the Premises for the purpose of constructing and operating thereon restaurant and food and beverage facilities, beach-related concessions, retail shops, and a parking structure designed to accommodate such uses and public beach parking, all in accordance with the Scope of Development (Exhibit "D") and the Conditional Use Permit, Coastal Development Permit, and final building 06/13/91 5409u/2460/39 -3- plans and specifications to be approved for the project referenced therein, as such matters may be amended or changed as provided herein. Provided that LESSEE obtains all permits and approvals which may be required by the City and any other governmental agency with jurisdiction, LESSOR agrees that the permitted uses on the Premises shall also include outdoor dining, the serving of alcoholic beverages in conjunction with the restaurant and food and beverage facilities, entertainment, and the staging of special outdoor events on the Premises including, but not limited to, art exhibitions, musical performances and retail merchandising activities. LESSEE shall not use or suffer the Premises to be used for any other purpose without the prior written consent of LESSOR. b. Uses on Pier Plaza; Right of First Refusal. In consideration of LESSEE s provision of the Pier Plaza construction work, pursuant to Paragraph 6a. below, Lessee shall be entitled to a right of first refusal on the ownership and operation of any for profit commercial enterprises ultimately allowed in the Pier Plaza area adjacent to the Premises as denoted on the Site Map attached hereto as Exhibit H and incorporated herein by this reference (the "Pier Plaza Area" ) . Specifically, except as expressly provided hereinbelow, LESSOR agrees for the benefit of LESSEE that neither it nor the City shall sell any food or beverages and neither it nor the City shall sell or rent any other retail items in the Pier Plaza Area nor shall LESSOR or the City permit or authorize any such sale or lease of food, beverage, or retail items without first having offered a right of first refusal to LESSEE. If LESSOR or the City elect to permit or authorize any such sale or lease activities to occur within the Pier Plaza Area, LESSOR shall so notify LESSEE in writing. Such notice shall specify all of the material terms and conditions on which LESSOR or the City is willing to permit or authorize such activities, including without limitation an identification of the permitted use(s) , term, hours of operation (if applicable) , rental or other consideration, any requirements for construction, repair, and maintenance of improvements, and insurance obligations, if applicable. If LESSEE fails to exercise such first right of refusal within sixty (60) days • after being so notified by LESSOR, LESSOR and the City shall be free thereafter to enter into an 06/13/91 5409u/2460/39 -4- agreement with any third party acceptable to LESSOR or the City to undertake such activities, provided that the terms and conditions of the agreement with the third party are identical to those offered to LESSEE hereunder. If after LESSEE fails to timely exercise its right of first refusal, LESSOR or the City fail to enter into a binding written agreement meeting such requirements with a third party for an additional period of six (6) months, LESSEE' s right of first refusal shall again apply, and the parties shall proceed in the same manner and within the same times as set forth hereinabove for the the initial offer to LESSEE. In addition, if after entering into a binding written agreement with a third party, the third party (including any permitted successor or assign of the original contracting party) ceases operations for a continuous period of six (6) months, LESSEE' s right of first refusal shall again apply, and LESSOR shall offer any new, addition, or extended business opportunity to LESSEE in the same manner and within the same times as set forth hereinabove for the initial offer to LESSEE. Notwithstanding the foregoing, LESSEE' s right of first refusal shall not apply to the occasional sale of food, beverages, or retail items in the Pier Plaza Area by a non-profit corporation or association for a City- or LESSOR-sponsored community special event. C. Parking Revenue. Fees charged by LESSEE for use of a parking space may be the greater of the amount of Five Dollars ($5.00) per day, to be annually adjusted by the Index capped annually at seven percent (7%) or an amount equal to one hundred and twenty percent (120%) of the maximum per day rate charged by the City or LESSOR in a City or LESSOR-owned parking structure. The "Index", as used in this Lease shall be deemed to mean The United States Department of Labor, Bureau of Labor Statistics Consumer Price Index for All Urban Consumers, All Items Los Angeles- Anaheim-Riverside Area (1982-84=100) . If at any time the Index shall cease to exist in the format recited herein, LESSOR shall substitute any official index published by the Bureau of Labor Statistics or successor or similar governmental agency as may then be in existence that shall, in LESSOR' s reasonable opinion, be most nearly 06/13/91 5409u/2460/39 -5- equivalent thereto. In the event that the City determines to allow a City parking permit to be used in lieu of paying a per day fee in all other City or LESSOR owned beach parking facilities, the LESSEE shall allow the use of such a permit and waive a parking charge. In the event LESSEE provides evidence to LESSOR that the permit usage is preventing the LESSEE from obtaining an equitable rate of return in operating the parking facility, adjustments may be made to the Parking Fee charged as reasonably approved by LESSOR. 6. DEVELOPMENT OF THE PREMISES AND ADJACENT AREAS: a. Scope of Development and Cost of Construction: LESSEE shall construct or cause to be constructed the "Improvements" on the Premises as set forth in Section I of the Scope of Development (Exhibit "D") . Except as expressly provided herein, LESSEE shall construct or cause to be constructed the Improvements at no expense to LESSOR. Notwithstanding the foregoing, the cost of the Structure Public Parking Spaces, which are to be located in the parking structure on the Premises, pursuant to the approved parking management plan, and which are constructed or caused to be constructed by LESSEE, shall be paid for by LESSOR pursuant to Paragraph 7(c) of this Lease. The additional debt cost to LESSEE of multi-level parking as compared to at grade parking shall be credited against the rental payments otherwise due from LESSEE to LESSOR pursuant to Paragraph 7(d) of this Lease. LESSOR shall also be responsible for the costs of performing its obligations in Section II of the Scope of Development and shall share a portion of the cost of any required environmental remediation as set forth in Paragraph 4 of the Conditions to Commencement (Exhibit "C" ) . LESSEE shall, in addition, if authorized by the City and any other applicable governmental entity with jurisdiction, construct or cause to be constructed certain grading, foundation, paving surfaces, retainer walls and stairways sufficient to meet code requirements for the "Pier Plaza Area" . The value to the Agency of the Pier Plaza construction work shall be up to an amount equal to Three Hundred Thousand Dollars ($300,000) . 06/13/91 5409u/2460/39 -6- b. Construction Schedule: Subject to the other terms and conditions set forth herein, including without limitation Paragraph 30 of the General Conditions (Exhibit "S" ) , LESSEE shall begin and complete all construction required of it within the times specified in the Schedule of Performance (Exhibit "E") . The Schedule of Performance may be modified by approval of LESSEE and the LESSOR' s Executive Director. LESSOR agrees that any and all construction plan checking and field inspections related to the construction of the Improvements may be submitted to deputy or independent plan checkers or field inspectors hired by LESSEE but certified by LESSOR and/or City. LESSOR further agrees that the approval or certification of such deputy or independent inspectors will not be unreasonably withheld or conditioned. C. Certificate of Completion: Promptly after LESSEE s completion of construction of all the Improvements, but excluding normal and customary tenant improvement items, LESSOR shall furnish LESSEE with a Certificate of Completion upon written request therefor by LESSEE. LESSOR shall also furnish partial Certificates of Completion for individual buildings or portions of buildings on the Premises. LESSOR shall not unreasonably withhold any such Certificate of Completion. Such Certificate of Completion shall be a conclusive determination of satisfactory completion of the construction required by this Lease as to which the Certificate relates and the Certificate of Completion shall so state. After recordation of such Certificate of Completion, any party then owning or thereafter purchasing the improvements, leasing the Premises, or otherwise acquiring any interest in the Premises or improvements covered by the Certificate of Completion shall not (because of such ownership, purchase, lease or acquisition) , incur any obligation or liability under this Lease with respect to LESSEE' s initial construction obligations hereunder. Each Certificate of Completion of construction shall be in such form as to permit it to be recorded in the Recorder' s Office of Orange County. 06/23/91 5409u/2460/39 -7- �1 If LESSOR refuses or fails to furnish a Certificate of Conpletion after written request from LESSEE, LESSOR shall, within thirty (30) days of written request therefor, provide LESSEE with a written statement of the reasons LESSOR refused or failed to furnish a Certificate of Completion. The statement shall also contain LESSOR' s statement of the actions LESSEE must take to obtain a Certificate of Completion. If the reason for such refusal is confined to the immediate availability of specific items of materials for landscaping, LESSOR will issue its Certificate of Completion upon the posting of a bond, letter of credit, or cash deposit by LESSEE with LESSOR in an amount representing the fair value of the work not yet completed as determined by the Executive Director of the LESSOR. Such Certificate of Completion shall not constitute evidence of compliance with or satisfaction of any obligation of LESSEE to any holder of any mortgage, or any insurer of a mortgage securing money loaned to finance the improvements, or any part thereof. Such Certificate of Completion is not a notice of completion as referred to in the California Civil Code, Section 3093. 7. RENT; ,,PUBLIC PARKING PAYMENTS: Subject to subparagraph (e) below and all of the 'other terms and conditions set forth in this Lease, including without limitation Paragraphs 7-9 of Exhibit "B", LESSEE shall pay to LESSOR rent and LESSOR shall pay LESSEE to construct the beach public parking as follows: a. Percentage Rental: (i) Basic Percentage. Beginning with the date which is the first anniversary of the Commencement Date, and continuing thereafter until the date that is the earlier of (A) the fifth anniversary of the date on which the first restaurant on the Premises opens for business to the public or (B) the fifth anniversary of the deadline in the Schedule of Performance for LESSEE to complete construction of the Improvements (Exhibit E 112), LESSEE shall pay to LESSOR a Percentage Rent equal to two percent (2%) of the Gross Sales Receipts generated from the Premises during each calendar quarter or 06/13/91 5409u/2460/39 -8- partial calendar quarter during such period. Thereafter for the balance of the term of this Lease and subject to Paragraph 7(a) (ii) and (iii) herein, LESSEE -shall pay to LESSOR a Percentage Rent according to the following schedule: Gross Sales Percentage Receipts Threshhold Rent Rate (in millions of dollars per year) less than 30 2% less than 40 2-1/2% less than 50 3% less than 65 3-1/2% 65 and above 3-3/4% Quarterly rent payments shall be determined by multiplying the Gross Sales Receipts generated for such quarter by the Percentage Rent Rate used in the previous calendar year. Once a Gross Sales Receipts Threshhold is achieved in a calendar year, the percentage rent Rate shall not be reduced below such Percentage Rent Rate and as each new Gross Sales Receipts Threshhold is achieved, the new Percentage Rent Rate shall be established and not subsequently lowered notwithstanding that Gross Sales Receipts in a subsequent calendar year may fall below a previously achieved threshhold. In the event that the annual Gross Sales Receipts reconciliation pursuant to Paragraph 9 of Exhibit "B" reveals that a higher Gross Sales Receipts Threshhold had been reached in such preceeding calendar year, LESSEE shall pay to LESSOR within thirty (30) days after such determination an amount equal to the Gross Sales Receipts for such calendar year multiplied by the difference between the prior Percentage Rent Rate and the new Percentage Rent Rate for the higher Gross Sales Receipts Threshhold. 06/13/91 5409u/2460/39 -9- (ii) Major Renovation; Extension of Term; Adjustment of Rent. Beginning with the thirty-first (31st) year of the term of this Lease and during the succeeding two ten (10) year periods thereafter, LESSEE shall have the right, but not the obligation, at any time, to deliver to LESSOR written notice that LESSEE is willing to undertake a major renovation of the Premises, which, for the purpose of this provision shall be an expenditure by LESSEE and its subtenants, within a twenty-four (24) month period, as approved by LESSOR, in an amount equal to or greater in value than fifty percent (50%) of the total replacement cost of the Improvements not including the parking facilities and not including twenty-five percent (25%) of the Furniture, Fixtures and Equipment installed on the Premises at the commencement of the twenty-four (24) month renovation period. In the event LESSEE so notifies LESSOR, LESSOR may then elect, in LESSOR' s sole and absolute discretion, either to: (A) extend the term of this Lease for an additional twenty-five (25) years (the "Extended Term") and increase the rent during the Extended Term as provided hereinbelow, or (B) supplement LESSEE' s financing costs to construct the proposed major renovation by offsetting against the rent otherwise due under this Lease an amount equal to the difference in cost to the LESSEE to finance the major renovation calculated as provided herein. LESSOR' s election shall be made within ninety (90) days after receipt of LESSEE' s written notice, unless the time for LESSOR to make said election is extended by a writing approved by both parties. In the event LESSEE elects to undertake a major renovation and LESSOR elects to extend the term, as provided in option (A) above, the rent shall continue as set forth in Paragraph 7a(i) until the commencement of the Extended Term and then the Premises shall be appraised according to the method set out in Paragraph 7(e) below and the Rent shall convert at the commencement of the 06/13/91 5409u/2460/39 -10- Extended Term to the then "fair rental value" (as established by the appraisal pursuant to Paragraph 7(e) below) of the existing use (the "Extended Term Rent") . The Extended Term Rent shall increase at the beginning of each successive five (5) year period through the expiration of the Extended Term by the multiple of the Index, as defined below, however the application of such Index shall result in a minimum increase of three percent and maximum increase of seven percent (7%) on a per year basis even if the actual Index would dictate a greater or lesser multiplier. In the event LESSEE elects to undertake a major renovation of the Premises and LESSOR elects not to extend the term, as provided in option (B) above, and if the major renovation commences (i.e. , building permits are obtained and construction commences) in the 31st lease year, the rent credit shall commence at such time, shall continue in effect for fifteen (15) years (subject to carry-over of unused rent credit amounts, as provided herein below) , and shall be calculated as the difference in each of said 15 years between the hypothetical debt service of fully amortizing 100% of the cost of the major renovation (whether paid by LESSEE or its subtenants) over a 30-year term and the hypothetical debt service of fully amortizing such cost over a 15-year term, using LESSEE' s (or its subtenants' ) average cost of funds. If the major renovation commences in or after the 41st lease year, the rent credit shall be calculated in the same manner, except that the rent credit shall continue in effect for 10 years and the amount of the credit shall equal the difference between the hypothetical debt service on 30-year as compared to 10-year financing. If the major renovation commences between the 31st and 41st lease years, the term of the rent credit and the hypothetical amortization period against which the 30-year financing is compared shall be reduced by one year for every two years after the 31st lease year in which the major renovation commences. In no event shall the application of the rent 06/13/91 5409u/2460/39 -11- credit result in the rent being reduced to less then zero (i.e. , a payment by LESSOR to LESSEE) . In the event that for any reason there is any unused credit during ,any lease year, the unused credit shall be carried over to the following year or years with interest accruing at the rate of eleven percent (11%) per annum, compounded annually, until the entire unused credit is applied. If there is any unused credit at the end of the 55-year term of this Lease, the remaining balance of the credit shall be forgiven and discharged at that time. (iii) Base Percentage Rental If No Major Renovation. In the event at year thirty-one (31) of this Lease, LESSEE does not deliver to LESSOR written notice that LESSEE is willing to undertake a major renovation of the Premises, as provided in subparagraph (a) (ii) above, and continuing for as long thereafter as no major renovation is undertaken, then a base rent shall be established (the "Base Rent") by applying the Percentage Rent Rate set forth in subparagraph (a) (i) above to seventy-five percent (75%) of the average of the Gross Sales Receipts for years 28, 29 and 30. This Base Rent shall be in force until year 41 at which point it shall be reset until year 51 by applying the Percentage Rent Rate set forth in subparagraph (a) (i) above to seventy-five percent (75%) of the average Gross Sales Receipts for years 38, 39 and 40. The process shall repeat in year 51 and be based on seventy-five percent (75%) of the average Gross Sales Receipts for years 48, 49 and 50. However, in no event shall the Base Percentage Rent fall, below a prior set base. If after the establishment of the Base Rent LESSEE undertakes a major renovation of the Premises pursuant to subparagraph (a) (ii) above, the Base Rent shall be terminated. If in any year a site specific occurrence or a general economic . downturn results in the application of the above Base Rent being a grossly unfair burden on the LESSEE, the LESSEE has the right to appeal the application of the Base Rent as to a specific calendar year and LESSOR may allow an abatement of all or a. 06/13/91 5409u/2460/39 -12- portion of the Base Rent requirement for a given year. In the event that the parties hereto cannot reach an accord on an appeal of Base Rent, then LESSEE may appeal the application of Base Rent by LESSOR to the judge provided for in Paragraph 31 of Exhibit "B" hereto. In such appeal, the judge shall analyze the shortfall in Gross Sales Receipts to determine if it is the result of site specific or general market conditions and not reasonably attributable to the operational performance of LESSEE or its subtenants. If the judge finds (i) that site specific or general market conditions are the cause of the shortfall and, (ii) that such an application would be a "grossly unfair" burden on the LESSEE, then she shall have the authority to abate the Base Rent in an amount that is fair and equitable to the interests of both parties hereto. b. Subordination: LESSOR agrees to execute appropriate documents required to subordinate its right to receive rent pursuant to this Lease for an amount not to exceed Sixteen Million Two Hundred Fifty Thousand Dollars ($16,250,000) for the initial construction and take out financing approved by LESSOR in accordance with Paragraph 16.A of Exhibit "B. " The subordination shall apply only to the initial financing and shall decrease simultaneously with the declining balance of unpaid principal and accrued and unpaid interest owing from time to time on the initial financing. Such subordination shall also apply to any refinancing of the initial construction and/or take out financing to the extent that the principal balance of the loan is not increased and the amortization period of the loan (as to any take out or permanent financing) is not extended. Where the subordination results in the failure to pay the rent as calculated in subparagraph a. above, the rent obligation shall accrue to the extent not credited in subparagraph d. below at an interest rate of eleven percent (11%) . If in the event a balance remains accrued at the termination of this Lease such accrued rent payments shall be forgiven. 06/13/91 5409u/2460/39 -13- C. Public Parking Construction Payment. LESSEE shall construct a parking structure deemed sufficient pursuant to a parking management plan approved by LESSEE, Agency Executive Director and City in accordance with Conditional Use Permit 90-17 (the "Parking Management Plan") . The number of designated public parking spaces to be located within the lowest level of the parking structure shall be two hundred and fifty (250) (the "Structure Public Parking Spaces)" ) ; provided, however, that said number may be reduced by a maximum of 57 spaces based on the approved Parking Management Plan. At the time set forth in the Schedule of Performance (Exhibit "E") , LESSOR shall pay to LESSEE as compensation for the cost of constructing the Structure Public Parking Spaces, an amount equal to Four Million Dollars ($4,000,000) (250 spaces multiplied by Sixteen Thousand Dollars ($16,000) per space) , less the sum of the following: (i) One Million Two Hundred Fifty Thousand Dollars ($1,250,000) , and (ii) Fourteen Thousand Five Hundred Dollars ($14,500) multiplied by the difference, if any, between the original two hundred and eighty-one (261) designated parking spaces for the lowest level of the parking structure and, if applicable, the lesser number of designated parking spaces that LESSEE is actually required to provide on the lowest level of the parking structure (after approval of the Parking Management Plan) . LESSEE shall either pay prevailing wages according to state law for that portion of the parking structure which shall provide the Structure Public Parking Spaces or shall indemnify, defend and hold harmless LESSOR and/or City from any claim or action arising out of LESSEE' s failure to pay prevailing wages and/or LESSOR' s failure to make such payment mandatory in this Lease. The form of the bid package for the parking structure shall be submitted to the City Attorney' s office for review and approval. The submission shall be deemed approved thirty (30) days from the date of submittal unless a written statement itemizing objections is received by LESSEE prior to the expiration of such thirty (30) day period. 06/13/91 5409u/2460/39 -14- d. Rent Credit: Notwithstanding any other provision of this Lease to the contrary, LESSEE shall be entitled to a credit against the first rental payments otherwise due in an amount equal to the difference between LESSEE'S amortized debt on the approved cost of construction of the multi-level parking structure spaces required to provide parking for the commercial uses on the Premises (assuming a 30-year loan at 11% mortgage constant) and what the amortized debt for the cost of the construction of a single level at-grade parking facility would have been (assuming a 30 year loan at 11% mortgage constant) . The parties agree for purposes of this paragraph that the difference in cost of the amortized debt for a single level at grade parking facility and the structured parking as proposed in the Scope of Development (Exhibit "D" ) is equal to 120 quarterly payments of One Hundred Eight Thousand Eight Hundred Seventy-Five Dollars ($108,875) (the "Differential Cost") due simultaneous to the first 220 Rent payment dates. The unapplied principal balance of such credit shall bear interest at the rate of eleven percent (11%) per annum compounded annually, commencing upon the due date of the first rental payment date as provided in Paragraph 7(a) above and continuing thereafter until the rent credit has been fully applied. Notwithstanding the above, LESSOR shall have the right to prepay the amount of the Differential Cost without penalty and with only such interest as has already accrued. In the event that due to the subordination provision of subparagraph c. above, or other conditions, the term of this Lease is completed with insufficient funds generated under the rent provisions to offset the Agency' s obligation for Differential Cost then any remaining balance of principal and accrued interest shall be forgiven upon the termination of this Lease. e. Appraisal Procedure: In the event that this Lease is extended pursuant to Subparagraph (ii) of Paragraph 7(a) above, the Premises shall be appraised at the commencement of the Extended Term at the then current fair 06/13/91 5409u/2460/39 -15- rental value of the Premises determined in accordance with the then current and actual use being made of the Premises as permitted by this Lease and without assuming any change of use whether or not permitted by the terms of the Lease and without regard to any residual value for any future or potential use. The appraisal shall not include the value of the existing Improvements on the Premises and shall only consider the existing Improvements on the Premises for the purpose of determining the then current and actual use being made of the Premises. The appraisal procedure shall be conducted as follows: (i) Such appraisal shall be conducted and made by three (3) appraisers, each of whom shall be a member of the American Institute of Real Estate Appraisers, qualified for the purpose of appraising the Premises. The appraisal by each appraiser shall be made in accordance with the then standard practices of the American Institute of Real Estate Appraisers or any successor organization. (ii) Either LESSOR or LESSEE shall appoint in writing an appraiser and give written notice thereof to the other, and within fifteen (15) days after service by such party on the other of such notice, the other party shall, in a like manner, appoint an appraiser and give written notice thereof to the other party. In case of failure of either party to appoint an appraiser, the other party shall have the right to apply to the president of the local Chapter of the American Institute of Real Estate Appraisers in the County in which the premises are situated to appoint an appraiser to represent the defaulting party. In the event the president of such Chapter declines to appoint an appraiser, the executive committee of said Chapter may appoint an appraiser for the defaulting party. In the event that the executive committee of said Chapter declines to appoint an appraiser, the party having appointed an appraiser shall have the right to appoint a second appraiser to act on behalf of the party failing to appoint an appraiser. The two appraisers thus appointed, in either manner, 06/13/91 5409u/2460/39 -16- shall select and appoint in writing a third appraiser and give written notice thereof to LESSOR and LESSEE, of if within ten (10) days after the appointment of- the -second appraiser the two appraisers so appointed shall fail to appoint a third appraiser, then either party hereto may apply the default methodology for the selection of an appraiser outlined above. (iii) The three (3) appraisers so appointed (in either manner) shall promptly fix a time for completion of the appraisal, which time shall be no later than ninety (90) days from the date of the appointment of the last appraiser. The appraisers shall notify LESSOR and LESSEE as to the said date fixed for such completion. On that date the three (3) appraisers shall submit their appraisals in writing in the then usual form to LESSOR and LESSEE. The parties agree that for the purpose of calculating the value to be determined by appraisal the appraised value shall be deemed to be that amount which is determined by taking the average of the two (2) appraisal figures which are closest to each other. each of the parties hereto shall pay for the services of its appointee (whether or not said appraiser is selected by default) and one-half (1/2) of the costs of the services for the third appointee. f. Cooperation: LESSOR and LESSEE agree to cooperate with one another and with any approved or permitted lender in executing such documents as may be reasonably requested by such other party or lender confirming the percentage rental then in effect (paragraph 7(a) ) and the amount of the rent credit then existing (paragraphs 7(a) (ii) and 7(d) ) . S. SECURITY DEPOSIT: Within ten (10) days after the Commencement Date, LESSEE shall deposit with LESSOR the sum of Fifty Thousand Dollars ($50,000) (in the form of a certificate of deposit in the name of LESSOR, or an irrevocable and unconditional letter of credit, for two hundred seventy (270) days which shall be sight draft, of a term, in a form, and by a bank all acceptable to LESSOR in its reasonable discretion) as a security deposit for the performance by LESSEE of the provisions of this Lease required to be performed by LESSEE - prior to LESSOR' s issuance of its final Certificate of 06/13/91 5409u/2460/39 -17- Completion for the Improvements. If the security deposit is a certificate of deposit, interest shall be credited to LESSEE and withdrawn and paid to LESSEE quarterly. If it is a letter of credit, the letter of credit shall authorize the LESSOR to draw funds from the letter of credit by presenting a sight draft and certification for payment in the event of a default as defined in Exhibit "B" Paragraph 16 of this Lease by LESSEE. It shall be a condition of the letter of credit that it shall be deemed automatically extended without amendment for two hundred seventy (270) days from its current or future expiry date unless, not less than thirty (30) days prior to such expiry date, the issuer shall notify the LESSOR by registered mail that the issuer has elected not to renew the letter of credit for any additional period of time. In that event, LESSEE shall immediately extend or replace the letter of credit. If LESSEE has failed to extend or replace the letter of credit ten (10) days prior to its expiry date, the LESSOR may draw against the letter of credit by presenting LESSOR's sight draft. Provided, however, that if the LESSOR draws down on the letter of credit pursuant to this Paragraph 8, the LESSOR shall return such funds to LESSEE within ten (10) days of LESSEE' s providing a new letter of credit consistent with the provisions of this Paragraph S. During the period that LESSOR is entitled to hold the Security Deposit, if LESSEE is in default, and such default is not cured and is not being cured in accordance with paragraph 18 of Exhibit "B, " LESSOR can use the security deposit, or any portion of it, to cure the default or compensate LESSOR for all damages sustained by LESSOR resulting from LESSEE' s default and LESSEE shall immediately on demand pay to LESSOR a sum equal to the portion of the security deposit expended or applied by LESSOR as provided in this paragraph so as to maintain the security deposit in the sum initially deposited with LESSOR. The security deposit (or such remaining portion thereof that has not been used by LESSOR to cure LESSEE' s default or to compensate LESSOR for damages sustained by LESSOR resulting from LESSEE' s default) shall be refunded promptly after the earlier of the following: (i) the date upon which LESSEE has completed the Improvements (excluding tenant improvements) and LESSOR is obligated to issue its final Certificate of Completion, or (ii) the expiration or termination of this Lease. LESSOR' s obligations with respect to the security deposit are those of a debtor and not a trustee. LESSOR shall be permitted to maintain the security deposit separate and apart from LESSOR' s other funds or can co-mingle the security deposit with LESSOR' s funds. 9. CONDITION OF TITLE; COVENANT OF QUIET ENJOYMENT: Subject to LESSEE' s satisfaction or LESSOR' s waiver of all of the Conditions to Commencement (Exhibit "C" hereto) to be satisfied by LESSEE, and subject to the exceptions in 06/13/91 5409u/2460/39 -18- Exhibit "C" hereto, LESSOR covenants to convey to LESSEE the leasehold estate to the Premises in the "Approved Title Condition" referenced therein. LESSOR further covenants that, at the Commencement Date, LESSOR shall cause First American Title Insurance Company, or such other title company as may be mutually approved by LESSOR and LESSEE, (the "Title Company") , to deliver to LESSEE an ALTA Survey and ALTA Extended Coverage (Form B) policy or policies of title insurance issued by the Title Company insuring that the leasehold estate is vested in LESSEE in such condition. The Title Company shall provide LESSOR and City with a copy of the title policy. The total amount of title insurance coverage for the Premises shall be the sum of Five Million One Hundred Thousand Dollars ($5, 100,000) . LESSOR shall pay that portion of the cost and expenses of the premium for the title policy which is equal to what the premium would have been if the title policy were a CLTA policy, and LESSEE shall pay the balance of such premium. LESSEE shall pay the cost of any new survey required in order to obtain the title policy. LESSEE shall pay the cost for any additional coverage or endorsements that it may request. Subject to the exceptions in Exhibit "C" hereto, LESSOR covenants that LESSEE, after the Commencement Date and upon performing the covenants in the Lease required to be performed by LESSEE, may quietly have, hold, and enjoy the Premises during the term of this Lease without hindrance or interruption by LESSOR or any party claiming by, through, or under LESSOR. Not by way of limitation of the foregoing, and except as specifically set forth in Exhibit "C", in the event any adverse claim is made or threatened impairing LESSEE' s leasehold title, other than a claim by any part claiming by, through, or under LESSEE, LESSOR and City, at their sole expense, shall take all required actions, including filing and diligent prosecution of quiet title and/or ejectment suits if necessary, to remove such adverse claim or cloud on LESSEE's title. Subject to the overall limit of expenses by LESSOR in Exhibit "D" %11 .6, LESSOR shall pay those costs necessary to relocate all currently existing LESSEEs and subtenants on the Premises pursuant to Exhibit "D" 191I .5. LESSOR further covenants to deliver to LESSEE the fully executed Nondisturbance and Recognition Agreement in the form attached to this Lease as Exhibit "J", with such delivery to occur promptly after LESSOR receives said document from City and prior to the Commencement Date. 06/13/91 5409u/2460/39 -19- 10. NOTICES: Any notice, demand, request, consent, approval or communication that either party desires or is required to give to the other party or any other person shall be in writing and either served personally or sent by prepaid first class mail to the other party at the address set forth below: TO LESSOR: Redevelopment Agency of the City of Huntington Beach Attn: Executive Director/City Ad~ninistrator 2000 Main Street Huntington Beach, California 92648 TO LESSEE: Stanley M. Bloom c/o Randall Foods, Inc. 2905 E. 50th Street Vernon, CA 90058 WITH COPIES TO: Jonathan Chodos 1559 So. Sepulveda Blvd. Los Angeles, CA 90025 and any leasehold or subleasehold mortgagee approved by LESSOR pursuant to Paragraph 16A of Exhibit "B" that requests in writing that LESSOR provide such notice. Either party may change either its designee or its address by notifying the other party of such change. 11. THIRD PARTY BENEFICIARY: The City (but no other person or entity) shall be deemed a third party beneficiary of this Lease. 12. REPRESENTATIONS BY LESSEE: The LESSEE represents and warrants to the LESSOR as follows: 1. The LESSEE has full authority from all prior interested parties, as specified in recital of Paragraph 1 to this Lease to execute and deliver this Lease and any and all other agreements and documents required to be executed and delivered by the LESSEE in order to carry out, give effect to, and consummate the transactions contemplated by this Lease. 06/13/91 5409u/2460/39 -20- 2. The LESSEE does not have any material contingent obligations or any material contractual agreements which could materially adversely affect the ability of the LESSEE to carry out its obligations hereunder. 3. There are no material pending or, so far as is known to the LESSEE, threatened, legal proceedings to which the LESSEE is or may be made a party or to which any of its property is or may become subject, which have not been fully disclosed in the material submitted to the LESSOR which could materially adversely affect the ability of the LESSEE to carry out its obligations hereunder. 4. There is no action or proceeding pending or, to the LESSEE` s best knowledge, threatened, looking toward the dissolution or liquidation of the LESSEE and there is no action or proceeding pending or, to the LESSEE' s best knowledge, threatened by or against the LESSEE which could affect the validity and enforceability of the terms of this Lease, or materially and adversely affect the ability of the LESSEE to carry out its obligations hereunder, (excepting only the potential state lands commission claim set out in Exhibit "C" Paragraph 3) . Each of the foregoing items 1 to 4, inclusive, shall be deemed to be an ongoing representation and warranty. The LESSEE shall advise the Agency in writing if there is any change pertaining to any matters set forth or referenced in the foregoing items 1 to 4, inclusive. 13 . EXHIBITS - INCORPORATION INTO LEASE: The following exhibits referred to in this Lease are attached hereto and by this reference incorporated herein: Exhibit "A" Legal Description of Premises Exhibit "8" General Conditions Exhibit "& Conditions to Com:nrencement Exhibit "D" Scope of Development Exhibit "E" Schedule of Performance Exhibit ."E" Certificate of Commencement Date Exhibit "G" [Reserved] Exhibit "H" Site Map Exhibit "I" Piaster Lease Exhibit "J" Nondisturbance and Recognition Agreement 06/13/91 5409u/2460/39 -21- 14. SUBLEASE: LESSOR and LESSEE acknowledge that this Lease is a sublease of the Master Lease, subject and subordinate to the covenants, conditions and terms of the Master Lease and in no event may the term of this Lease extend beyond the term of the Master Lease, with the understanding that LESSEE is not obligated to perform any of LESSOR' s obligations under the Master Lease. REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body, corporate and politic 1991 By Chairman ATTEST: Agency Secretary APPROVED AS TO FORM: INITIATED AND APPROVED AS TO CONTENT: �r+�� Ci . �c..� r� 1 c Agency Special Counsel Deputy City Administrator/ Economic Development REVIEWED AND APPROVED APPROVED: _ AS TO FORM: + gency Attorney n�� Executive Director /1-341 STANLEY M. BLOOM, an unmarried man ( "LESSEE" ) 2991 06/13/91 5409u/2460/39 -22- STATE OF CALIFORNIA ) ) 5s. COUNTY OF } On this day of 19_, before me, the undersigned, a Notary Public in and for said State, personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed this instrument as the Chairman of the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH and acknowledged to me that said Agency executed it. WITNESS my hand and official seal. (SEAL) STATE OF CALIFORNIA ) ss. COUNTY OF ) On this day of 19_, before me, the undersigned, a Notary Public in and for said State, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledge' that he/she executed the same. WITNESS my hand and official seal. (SEAL) EXHIBIT "A" LEGAL DESCRIPTION That portion of Huntington Beach, County of Orange, State of California as shown on a map recorded in Book 3, Page 36 of Miscellaneous Maps in the office of the County Recorder of said county described as follows: To Be Inserted EXHIBIT "B" GENERAL CONDITIONS TABLE OF CONTENTS Paragraph # Caption 1. Charge for Late Payment 2. Utilities 3 . Construction of Improvements by LESSEE 4. Signs 5. Destruction 6. Maintenance 7. Gross Rental Receipts 8. Rent Payment Procedure and Accounting 9. Records, Books of Account, Accounting Statements and Audits 10. Insurance 11. Indemnity 12. Taxes and Assessments 13 . Unlawful Use 14. Abandoned Personal Property 15. Holding Over 16. Assigning, Subletting and Encumbering 17. Successors in Interest 18. LESSEE' s Default 19. LESSOR' s Remedies 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 1 of 35 20. LESSOR' s Default 21. Quitclaim of LESSEE's Interests Upon Termination 22 . Total Taking 23. Partial Taking 24. Eminent Domain Award 25. Amendments 26. Captions 27. California Law 26. Waiver 29. Nondiscrimination 30. Force Majeure 31. Resolution of Disputes 32. Time 33. Non Disturbance and Recognition 34. Estoppel Certificate 35. Hazardous Waste 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 2 of 35 EXHIBIT "B" GENERAL CONDITIONS 1. CHARGE FOR LATE PAYMENT: Rent not paid when due shall accrue interest at the rate of twelve percent (12%) per annum commencing five days from the date due until paid. 2. UTILITIES: LESSOR agrees to provide, at no expense to LESSEE, all Utilities (water, sewer, gas, electrical, and telephone) required for the development, use and maintenance of the Improvements, with sufficient capacities to adequately service the Premises, with such Utilities to be located on the Premises or stubbed no farther away than 3 feet from the curb within the Premises along the west side of Pacific Coast Highway. LESSEE agrees to extend all Utilities from said locations and to be responsible for tie-ins and metering. LESSEE shall make all arrangements for and pay for all Utility services furnished to or used by it, including without limitation gas, electricity, water, sanitary sewer, cable television, telephone service, trash collection, and Utilities used or consumed at public rest rooms to be constructed by LESSEE on the Premises. 3. CONSTRUCTION OF IMPROVEMENTS BY LESSEE: a. Statement of Construction Costs and "As Built" Plans: Prior to LESSOR s issuance of its final Certificate of Completion for the Improvements described in the Scope of Development (Exhibit "D" ) , LESSEE shall furnish LESSOR a complete set of "As-Built" plans and an itemized statement of the actual construction cost of such improvements. The statement of cost shall be signed by LESSEE or its responsible agent and sworn to under penalty of perjury. b. Alterations: Subject to obtaining all requisite governmental permits and authorizations, LESSEE shall have the right to make non-structural alterations to the interior of any buildings located upon the Premises, provided that the same when complete are of a character which LESSEE reasonably determines do not adversely affect the value of the improvements and the rental value thereof immediately before such alteration. LESSEE shall not make or permit any significant structural or exterior alterations, additions or improvements to be made to or upon the Premises inconsistent with the approved plans referenced in the Scope of Development (Exhibit "D") as the 06/13/92 EXHIBIT "B" 5409u/2460/39 Page 3 of 35 same may be revised from time to time, without first obtaining the written approval of LESSOR, which approval shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, changes required by authorized construction inspectors in order to comply with applicable governmental requirements shall be exempt from this approval requirement. C. Im rovements to Become Property of LESSOR: Subject to subparagraph (d) below, all buildings, improvements and facilities, exclusive of Trade Equipment and personal property constructed or placed upon the Premises by LESSEE, must, upon completion, be free and clear of all liens, claims, or liability for labor and materials (excepting rights of lenders, approved pursuant to paragraphs 16.A and C and Equipment LESSORs referenced in paragraph 36.E herein) , and all such improvements and facilities, exclusive of Trade Equipment and personal property, shall become the property of LESSOR at the expiration of this Lease, as it may be extended as provided herein, or upon the earlier termination hereof and, upon the termination of the Master Lease, shall become the property of City. d. Mechanic' s Liens: LESSEE shall at all times indemnify and save LESSOR and City harmless from all claims for labor and materials in connection with construction, repair, alteration, and installation of all structures, improvements, equipment, and facilities upon the Premises, and from the cost of defending against such claims, including reasonable attorney' s fees. In the event of a lien imposed upon the Premises as a result of such construction, repair, alteration, or installation, LESSEE shall either: (1) Record a valid Release of Lien; or (2) Deposit with LESSOR cash or an irrevocable letter of credit in form and content reasonably acceptable to LESSOR' s Executive Director in an amount equal to 125% of the amount of the lien and authorize payment to the extent of said deposit to any subsequent final judgment holder that may arise as a matter of public record from litigation with regard to the lienholder' s claim; or 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 4 of 35 (3) Procure and record a bond, in accordance with Section 3143 of the California Civil Code, which frees the Premises from the claim of the lien and from any action brought to foreclose the lien. Should LESSEE fail to accomplish one of the above within ninety (90) days after the filing of such a lien, but in no event after final judgment is entered, such failure shall be a material default under this Lease. If LESSEE deposits cash or a letter of credit or records a bond, as provided herein, LESSOR shall promptly return the same (or unused portion thereof) after the release of lien or satisfaction of judgment is recorded, or LESSEE delivers other evidence reasonably satisfactory to LESSOR that the dispute has been finally resolved. 4. SIGNS: LESSEE, at its cost, shall have the right to place, construct, and maintain exterior signs on the Premises and the Improvements to be constructed by LESSEE thereon in accordance with the plans approved by LESSOR and the City as the same may be revised from time to time. LESSEE shall not have the right to place, construct, or maintain on the Premises any other exterior sign, advertisement, awning, banner or decoration, except as permitted under the Huntington Beach Ordinance Code. S. DESTRUCTION: a. Destruction Due to Risk Covered by Insurance_ : If, during the Lease terra, the Improvements are totally or partially destroyed from a risk covered by the insurance described in paragraph 10(c) of these GENERAL CONDITIONS, this Lease shall not terminate and LESSEE shall promptly and diligently restore or cause to be restored the Improvements to substantially the same condition as they were in immediately before such destruction, whether or not the insurance proceeds are sufficient to cover the actual cost of restoration; provided, however, that: (i) if such destruction occurs during the last ten (10) years of the term of this Lease, as may be extended pursuant to Paragraph 7(a) (ii) of the Lease, LESSEE may elect not to restore the Premises and to terminate this Lease, and (ii) if then-existing laws do not permit restoration of the Improvements to within 95% of the size and layout existing immediately before such destruction, then LESSEE may either elect to restore pursuant to the then-controlling laws 'and regulations or LESSEE may elect to terminate this Lease. If existing laws do not permit the 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 5 of 35 restoration, LESSEE may elect to terminate this Lease by giving notice to LESSOR. In the event this Lease is terminated as to all or any portion of the Premises, LESSOR and LESSEE shall share any excess insurance proceeds on the basis of their respective interests in the Improvements after payment of any outstanding balance due any leasehold and subleasehold mortgagees. LESSEE' s election to terminate pursuant to this Paragraph 5(a) shall be made by giving written notice to LESSOR no later than one hundred twenty (120) days after the date of the casualty loss. b. Destruction Due to Risk Not Covered by Insurance: If, during the Lease term, the Improvements are totally or partially destroyed from a risk not covered by the insurance described in paragraph 10(c) of these GENERAL CONDITIONS, this Lease shall not terminate except as expressly provided herein, and LESSEE shall restore the Improvements to substantially the same condition they were in immediately before destruction; provided, however, if such destruction occurs during the last 10 years of the term of this Lease as may be extended or the cost of restoration exceeds twenty percent (207.) of the replacement value of the Improvements immediately before their destruction, or if then existing laws do not permit restoration; LESSEE may elect not to restore the Premises and to terminate this Lease, and (ii) if then-existing laws do not permit restoration of the Improvements to within 95% of the size and layout existing immediately before such destruction, then LESSEE nay either elect to restore pursuant to the then-controlling laws and and regulations, or LESSEE may elect to terminate this Lease. In the event that LESSEE elects to terminate this Lease he shall give notice of such election to LESSOR no later than one hundred twenty days after the date of the casualty loss. C. No Abatement of Rent: Provided that business interruption insurance is available at commercially reasonable rates to LESSEE in the insurance market (as referenced in paragraph 10(d) and (e) below) , there shall be no abatement or reduction of rent in the event of a total or partial destruction of the Improvements. If, however, LESSEE suffers such a casualty loss during a period for which business interruption insurance is not so available, and this Lease or portion thereof is not terminated pursuant to subparagraphs (a) or (b) of this Paragraph 5, the 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 6 of 35 Percentage Rent shall be abated only as to that portion of the Improvements rendered not reasonably usable by the casualty loss in an amount equal to the Percentage Rent generated by that portion of the Improvements during the same period in the previous year or, if such figures are not available, in an amount determined by dividing the square footage of gross leasable area rendered unusable by the casualty loss by the total gross leasable area on the Premises immediately prior to the casualty loss and multiplying the remainder by the Percentage Rent payable during the same time period in the previous year. The period of abatement shall run from the date of the casualty loss to the earlier of (i ) the date on which LESSEE completes restoration of the Premises (or portion thereof) or (ii) the date on which LESSEE, exercising reasonable diligence, should complete restoration of the Premises (or portion thereof) . 6. MAINTENANCE: a. LESSEE' s Obligation: LESSEE, at its cost, shall keep and maintain the Premises and all improvements of any kind which may be constructed, installed or made thereon (including the public rest rooms designated in the Scope of Development) in good condition and in substantial repair. LESSEE expressly agrees to maintain the Premises (including the designated public rest rooms) in a safe, clean, wholesome and sanitary condition and in compliance with all applicable laws. LESSEE further agrees to provide approved containers for trash and garbage and keep the Premises free and clear from accumulations of rubbish and litter. LESSOR shall have the right to enter upon and inspect the Premises at any time for cleanliness and safety. Such entry and inspection of exterior areas may occur at any time without notice to LESSEE; entry and inspection of interior areas may occur during normal business hours, with a minimum of seventy-two (72) hours prior notice (except in the event of emergency), and shall be conducted in a manner so as to minimize interference with the operation of businesses on the Premises to the maximum extent feasible consistent with the legitimate purpose of the inspection. LESSEE shall designate in writing to LESSOR a representative who shall be responsible for day-to-day operation. 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 7 of 35 b. LESSOR' s Right to Repair: If LESSEE fails to naintain the Premises or make repairs or replacements as rewired herein, LESSOR may notify LESSEE in writing of said failure. Should LESSEE fail to correct the situation or commence to correct the situation within a reasonable time thereafter, but in no event less than thirty (30) days (except in those instances where a shorter time is necessary to protect the public health, safety, and welfare) , and thereafter diligently proceed to complete such correction, LESSOR may, but shall not be required to, enter onto the Premises to make the necessary correction, and in such event the reasonable cost thereof, including but not limited to the cost of labor, materials, equipment, and administration, shall be deemed additional rent to be paid by LESSEE within thirty (30) days of receipt of a statement of said cost from LESSOR. LESSOR may, at its option, choose other remedies available herein, or by law. 7. GROSS SALES RECEIPTS: (a) Except as specifically provided in subparagraph (b) below, the term "Gross Sales Receipts" as used herein shall mean the total of all sales produced on the Premises (or any portion thereof) and received by any operator and/or sublessee in the course of their business, including without limitation, sales of food, beverage or concession items and the charges for the use or rental of portions of the Premises or equipment or supplies, vending machines sales and the sales price of any furnishings, fixtures and equipment or capital assets sold which are not replaced. (b) The following shall be excluded from the definition of "Gross Sales Receipts" : meals furnished to employees without charge; tips retained by employees or service charges in lieu of tips passed on to employees; bad debts but to the extent they are subsequently collected the net recovery shall be added to Gross Sales Receipts; receipts from customers that are later rebated and/or refunded; income from parking services operation; interest or service or other carrying charges for sales on credit; the amount of all sales and excise tax receipts which are accounted for and paid by LESSEE to any governmental agency; the sales price of any furnishings, fixtures, and equipment or capital assets sold by LESSEE; and investment income not 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 8 of 35 V associated with the normal course of operation of LESSEE' s business on the Premises. 8. RENT PAYMENT PROCEDURE ;111D ACCOUNTING: a. Accounting Year: The phrase "accounting year" as used herein shall be a period of twelve (12) consecutive full calendar months commencing on January 1. Any payment period or period which is less than twelve full calendar months is a partial accounting year. b. Payment of Rentals: (1) Percentage Rent and Parking Payment: Beginning with the date which is the first anniversary of the Commencement Date, and within thirty (30) days after the end of each calendar quarter during the remainder of the Lease Term, LESSEE shall pay to LESSOR an amount determined in accordance with Section 7 of the Lease for such period. At the end of each accounting year during the Lease term, promptly after LESSEE has submitted to LESSOR LESSEE' s sales tax receipt reports, as provided in paragraph 9 below, any necessary adjustment to the Percentage Rent for such year shall be made in the manner specified in subparagraph (3) of this Paragraph 8(b) . (2) Application of Rent Credit: During the period of time that LESSEE'S rent credit is being applied, in accordance with Paragraphs 7(a) (ii) and 7(d) of the Lease, LESSEE shall provide to LESSOR, at the times that rental payments would otherwise be due hereunder, a written statement or statements itemizing (i) the amount of Percentage Rent otherwise due at such time, (ii) the amount of the Rent Credit being applied against such rental obligation, and (iii) either the amount of the Rent Payment required to be made at that time or the remaining balance of the unapplied Rent Credit (including accrued interest through that date) . (3) Place of Payment .and Filing: Rent payments and rent credit statements shall be delivered to and accounting statements shall be filed with the Executive Director of ' LESSOR, 2000 Main Street, Huntington Beach, 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 9 of 35 W California 9264B. The designated place of payment and filing nay be changed at any time by LESSOR upon written notice to LESSEE. Rent payments may be paid by check made payable to The Redevelopment Agency of the City of Huntington Beach. A duplicate copy of all statements and reports herein required shall also be filed with the Finance Director of the City of Huntington Beach. 9. _RECORDS, ,BOOKSOF. ACCOUNT, ACCOUNTING STATEMENTS, AND AUDITS: LESSEE shall keep or cause to be kept at the Premises, or at LESSEE' s principal place of business in Southern California, in accordance with generally accepted accounting principles, full and accurate books of account, records, cash receipts and other pertinent data showing the Gross Sales Receipts produced by businesses operating on the Premises. Such books of account, records, cash receipts and other pertinent data shall be kept for a period of four (4) years after the end of each accounting year and partial accounting year. The receipt by LESSOR of any statement, or any payment of percentage rent for any period, shall not bind LESSOR as to the correctness of the statement or the payment. Subject to the limitations set forth in the next paragraph LESSOR shall be entitled at any time within four (4) years after the end of an accounting year or partial accounting year, upon reasonable notice to LESSEE but in no event less than 72 hours, to inspect and examine all LESSEE' s books of account, records, cash receipts and other pertinent data relating to such accounting year or partial accounting year, during normal business hours, so LESSOR can ascertain the amount of Percentage Rent due LESSOR. In no event shall LESSOR' s inspection exceed ninety days. LESSEE shall cooperate fully with LESSOR in making the inspection. Within ninety (90) days after the end of each accounting year or partial accounting year, LESSEE shall at its own expense submit to LESSOR financial statements including a balance sheet and income statement prepared by an independent certified public accountant, which shall specifically include with respect to the preceding accounting year or partial accounting year: (i) the amount of Gross Sales Receipts for each business operating on the Premises; and (ii) the total Percentage Rent, if any, paid by LESSEE in and for such year. LESSOR shall also be entitled, no more than once for each accounting year, to audit LESSEE' s and the Sublessee' s, who operate businesses on the Premises, books of account, records, cash receipts and other pertinent data to determine the Gross Sales Receipts for the entire Premises. The audit shall be ' limited to the determination of Gross Sales Receipts and shall be conducted during usual business hours at the Premises or at 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 10 of 35 the office at which LESSEE (or its Subleasee) maintain(s) its records within a ninety (90) day period. If the audit shows that there is a deficiency in the payment of Percentage Rent, the deficiency shall come immediately due and payable as additional rent or as an offset to any rent credit as defined in Section 7(a) (ii) or 7(d) of the Lease then outstanding. The cost of the audit shall be paid by LESSOR unless the audit shows that LESSEE understated Gross Sales Receipts by more than five percent (5%) , in which case LESSEE shall pay all LESSOR' s cost of the audit. If within six (6) months after receiving the results of any audited financial statements by LESSEE' s certified public accountant with respect to any accounting year or partial accounting year, LESSOR does not deliver a written notice to LESSEE disputing LESSEE' s calculation or payment of Percentage Rent for said year, LESSOR shall be conclusively deemed to have accepted LESSEE's calculation or payment, and thereafter LESSOR shall neither reinspect or reaudit LESSEE' s records nor demand payment of additional Percentage Rent for said year. If within thirty (30) days after receiving the results of its own audit with respect to any accounting year or partial accounting year, LESSOR does not deliver a written notice to LESSEE disputing LESSEE' S calculation or payment of Percentage Rent for said year, LESSOR shall be conclusively deemed to have accepted LESSEE' s calculation or payment, and thereafter LESSOR shall neither reinspect or reaudit LESSEE'S records nor demand payment of additional Percentage Rent for said year. 10. INSURANCE: LESSEE, at its cost, shall maintain or cause to be maintained during the entire Lease term the following policies of insurance: a. Public liability and property damage insurance with combined single limits of at least $5,000,000, part of which may be provided in the form of umbrella coverage. LESSOR and City shall be named as an additional insured and the policy or policies shall contain cross-liability endorsements. Coverage shall be primary and not contributing with any coverage maintained by LESSOR. The policy shall contain a waiver of subrogation in favor of LESSOR and City. Not more frequently than each two (2) years, if, in the reasonable opinion of LESSOR or of an insurance broker retained by LESSOR, the amount of public liability and property damage insurance coverage at that time is not adequate, LESSEE shall increase the insurance coverage as required by either LESSOR or LESSOR' s insurance broker; provided, that the percentage increase in coverage shall not be required to exceed the percentage increase in the All Urban Consumer Price Index for the Los Angeles-Long 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 11 of 35 Beach-Anaheim Area (All Items) (1982-84=100) (the "Index") since the last requested adjustment (or, in the case of the first requested adjustment, the percentage increase in the Index since the commencement of the Lease term) . The insurance to be provided by LESSEE may provide for deductibles or self-insured retention up to Twenty-Five Thousand Dollars ($25,000) , adjusted in accordance with the Index from and after the Commencement Date, or for amounts in excess of Twenty-Five Thousand Dollars ($25,000) , adjusted in accordance with the Index as shall be acceptable to the Executive Director. In the event such insurance does provide for deductibles or self-insured retention, LESSEE agrees that it will fully protect LESSOR, its boards, officers, and employees in the same manner as these interests would have been protected had the policy or policies not contained the deductible or retention provisions. b. LESSEE' s indemnification obligations under paragraph 11 shall extend to damage resulting from risks insurable by garage keepers' legal liability insurance. The public liability insurance required in paragraph 10.a. above shall include garage keepers' legal liability coverage. C. A policy of standard fire and extended coverage insurance to the extent of at least 90% of the replacement value of the Improvements, Trade Equipment, and LESSEE' s personal property, on or about the Premises. Subject to paragraph 5 of these GENERAL CONDITIONS, the proceeds from any such policy shall be used by LESSEE for the restoration or replacement of the Improvements, Trade Equipment, and personal property. d. Business interruption insurance insuring that the Percentage Rent due and payable to LESSOR (based on the previous twelve month figures) will be paid to LESSOR for a period of up to twelve (12) months if the Premises, or portion thereof, are destroyed or rendered inaccessible by a casualty loss or other occurrence normally covered by a business interruption insurance policy. e. Notwithstanding any other provision of this paragraph 10 to the contrary, LESSEE' s obligations pursuant to parts a, b, c and d of this paragraph 10 shall be conditioned upon the reasonable availability of such coverages, terms, and conditions in the insurance market. 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 12 of 35 The foregoing insurance policies shall contain endorsements requiring thirty (30) days written notice from the insurance company to both parties before cancellation or change in coverage, scope, or amount of any policy. Each policy or a certificate of the policy together with evidence of payment of premium shall be deposited with LESSOR at the commencement of the Lease term and on renewal of each policy not less than twenty (20) days before the expiration of the term of the policy. The procuring of such required policy or policies of insurance shall not be construed to limit LESSEE's liability hereunder nor to fulfill the indemnification provisions and requirements of paragraph 11. Notwithstanding said policy or policies of insurance, LESSEE after exhausting all available insurance proceeds shall be obligated for the full and total amount of any damage, injury or loss caused by LESSEE' s negligence or that of its agents, sublessees, concessionaires, licensees, and their agents and employees in connection with this Lease or with the use and occupancy of the Premises. 11. INDEMNITY DEFENSE HOLD HARMLESS: LESSEE hereby agrees to protect, defend, indemnify and hold and save harmless LESSOR and/or City, its officers, and employees against any and all liability, claims, judgments, costs and demands, however caused, 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, including those arising from the passive concurrent negligence of LESSOR and/or City, but save and except those which arise out of the active concurrent negligence, sole negligence, active concurrent willful misconduct, or active concurrent or sole willful misconduct of LESSOR and/or City. LESSEE will conduct all defense at its sole cost and expense. LESSOR and/or City shall be reimbursed by LESSEE for all costs or attorney' s fees incurred by LESSOR and/or City in enforcing this obligation. 12. TAXES AND ASSESSMENTS: LESSEE recognizes and understands that this Lease may create a possessory interest subject to property taxation and that LESSEE may be subject to the payment of property taxes levied on such interest. LESSEE shall pay or cause to be paid all taxes and assessments levied upon the Premises based on the assessed value of the entire property and not merely the assessed value of LESSEE' s leasehold interest. LESSEE shall also pay or cause to be paid any taxes and assessments which may be levied upon any fixtures, equipment, or other property installed, constructed or located on the Premises. LESSEE may, at any time, in good faith and upon reasonable grounds, dispute or contest the validity of the whole or any part of any such taxes or assessments, and during the period of any such dispute shall not be deemed in default hereof so long as LESSEE does not subject the Premises to foreclosure or sale and promptly pays 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 23 of 35 the amount finally determined to be due. Notwithstanding the above, both parties recognize that LESSEE should not be assessed a possessory interest tax for that portion of the Premises which is the public parking which is in excess of the code requirement for the operation of the businesses on the Premises and LESSOR and City agree to cooperate with LESSEE in the event of a challenge to such an assessment. 13. UNLAWFUL USE: LESSEE agrees that no improvements shall be erected, placed upon, operated, nor maintained upon the Premises, nor any business conducted or carried on therein or therefrom, in violation of the terms of this Lease, or of any regulation, order, law, statute, or ordinance of a governmental agency having jurisdiction. 14. ABANDONED PERSONAL PROPERTY: If LESSEE abandons the Premises or is dispossessed thereof by process of law or otherwise, title to any personal property belonging to LESSEE and left on the Premises forty-five (45) days after such abandonment or dispossession shall be deemed to have been transferred to LESSOR. LESSOR shall have the right to remove and to dispose of such property without liability therefor to LESSEE or to any person claiming under LESSEE, and shall have no need to account therefor. LESSEE hereby designates LESSOR' s Executive Director as its attorney-in-fact to execute and deliver such documents as may be reasonably required to dispose of such abandoned property and transfer title thereto. 15. HOLDING OVER: In the event LESSEE shall continue in possession of the Premises after the expiration of the Lease term, such possession shall not be considered a renewal of this Lease but a tenancy from month to month and shall be governed by the conditions and covenants contained in this Lease. 16. ASSIGNING, SUBLETTING .IIM.ENCUMBERING: A. Assignments The qualifications and identity of LESSEE are of particular concern to LESSOR. It is because of those qualifications and identity that LESSOR has entered into this Lease with LESSEE. Accordingly, LESSEE shall not, except as permitted in this paragraph 16, assign all or any part of this Lease or any of LESSEE' s rights hereunder without the prior written approval of LESSOR. LESSOR agrees that it will not unreasonably withhold or condition such approval. In this regard, LESSOR agrees that in the event of a request by LESSEE to assign LESSEE' s interest in the Lease or the Premises, LESSOR shall grant such approval after issuance of certificate of completion provided (i) such assignment is made to a ' responsible third party who will undertake LESSEE' s responsibilities under this Lease to use the Premises, or portion thereof, in accordance with this Lease; (ii) such third 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 14 of 35 party shall demonstrate sufficient qualifications and experience to assure the development and operation of the Improvements thereof, in accordance with this Lease; (iii) such third party shall demonstrate sufficient financial resources or commitments equal to or greater than Five Million Dollars ($5,000,000.00) adjusted by CPI adjustments at the time of the transfer to assure operation of the project, or portion thereof, in accordance with this Lease; notwithstanding the foregoing, LESSOR further agrees not to unreasonably disapprove an assignment to a financially responsible lender which assignment consists of a mortgage, deed of trust, sale and lease back, or other form of conveyance for financing, provided that prior to LESSOR' s issuance of its final Certificate of Completion, LESSOR shall have no obligation to approve such an assignment unless LESSOR determines in its reasonable discretion that such assignment is for the purpose of securing loans of funds to be used solely for financing the direct and indirect costs, including without limitation financing costs, interest, and commissions, of planning, designing, constructing, developing, leasing, marketing and operating the improvements to be constructed by LESSEE and/or a Sublessee with respect to the Premises. Prior to issuance of Certificate of Completion, approvals of assignments of the Lease shall be at the sole discretion of the LESSOR with the exception of approval for transfers to secure financing which shall be reasonably approved by LESSOR. Approvals by LESSOR under this Paragraph for assignments for financing purposes shall be made by LESSOR' s Executive Director. Notwithstanding any other provision of this Lease to the contrary, LESSOR approval of an assignment of this Lease or any interest herein shall not be required in connection with any of the following: (i) Any transfer to any entity or entities in which LESSEE retains a minimum of fifty-one percent (51%) of the ownership or beneficial interest and retain management control. (ii) Transfers resulting from the death or mental or physical incapacity of an individual. (iii) Transfers or assignments in trust for the benefit of a spouse, children, grandchildren, or other family members. (iv) A transfer of LESSEE' s interest in the Premises at foreclosure (or a transfer of any Sublessee' s interest in the portion of the Premises leased to such sublessee at foreclosure or a conveyance thereof in lieu of a foreclosure) pursuant to a foreclosure thereof by a lender approved by LESSOR in 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 15 of 35 1 accordance with this Paragraph 16.A Exhibit "B. " (v) A sale or transfer of some or all 'of LESSEE'S interest in the Premises or a transfer of any Sublessee' s interest in the portion of the Premises leased to such sublessee at foreclosure to a lender approved by LESSOR in accordance with this Paragraph 16.A of Exhibit v1 B. r} (vi) The conveyance or dedication of any portion of the Premises to the City or other appropriate governmental agency, or the granting of permits to facilitate the development of the Premises. (vii) A transfer of stock resulting from or in connection with a reorganization as contemplated by the provisions of the Internal Revenue Code of 1954, as amended or otherwise, in which the ownership interests of a corporation are assigned directly or by operation of law to a person or persons, firm or corporation which acquires the control of the voting capital stock of such corporation or all or substantially all of the assets of such corporation. (viii) A transfer of stock in a publicly held corporation or the transfer of the beneficial interest in any publicly held partnership or real estate investment trust. (ix) Equipment financing pursuant to Paragraph 15.E of these General Conditions. LESSEE shall deliver written notice to LESSOR requesting approval of any assignment requiring LESSOR approval hereunder. Such notice shall be accompanied by sufficient evidence regarding the proposed assignee' s qualifications and experience and its financial commitments and resources to enable LESSOR to evaluate the proposed assignee pursuant to the criteria set forth under the first paragraph of this Paragraph 16A. Within thirty (30) days after the receipt of LESSEE' S written notice requesting LESSOR approval of an assignment, LESSOR shall respond in writing by stating what further information, if any, LESSOR reasonably requires in order to determine whether or not to approve the requested assignment. Upon receipt of such a timely response, LESSEE shall promptly furnish to LESSOR such further information as may be reasonably requested. 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 16 of 35 Once LESSEE'S request for approval of an assignment has been accepted as complete, LESSOR shall not be entitled to demand additional information or to disapprove the assignment on the basis that LESSEE has not furnished adequate or complete information. LESSOR' s Executive Director shall approve or disapprove any requested assignment for financing purposes within fifteen (15) days after LESSEE' S request therefor is accepted as complete. Any disapproval shall be in writing and shall specify the reasons for the disapproval and, if applicable, the conditions required to be satisfied by LESSEE in order to obtain approval. LESSEE shall compensate LESSOR for its actual reasonable expenses (not including personnel or overhead expenses) incurred in investigating a proposed assignee' s qualifications as a permitted assignee hereunder. No assignment of LESSEE'S obligations with respect to the Premises, whether or not LESSOR approval is required therefor (but specifically excluding assignments for financing purposes, and those types of assignments identified in subparagraphs (iv) , (v) , and (vi) , (vii) , and (ix) ) , shall be effective unless and until the proposed assignee executes and delivers to LESSOR an agreement in form reasonably satisfactory to LESSOR'S attorney assuming the obligations of LESSEE which have been assigned. Thereafter, the assignor shall remain responsible to LESSOR for performance of the obligations assumed by the assignee unless LESSOR releases the assignor in writing (said release shall not be unreasonably conditioned or withheld) or unless LESSOR has approved the assignee on the basis of the criteria set forth under (i), (ii) , and (III ) of the first paragraph of this Paragraph 16.A, In either of which events the assignor shall be released from, but only from, those obligations arising subsequent to the effective date of the assignment. No consent or approval by LESSOR of any assignment requiring LESSOR' s approval shall constitute a consent or approval of any subsequent assignment requiring LESSOR' s approval pursuant to the provisions of this paragraph. B. Subletting LESSOR' S Executive Director shall have the right to approve all subleases on the Premises with respect solely to the proposed use and operator and to ensure the following: (i) that, subject to temporary interruptions of business due to circumstances beyond the tenant' s reasonable control, and occurrences such as casualty losses and periods of reconstruction and alteration of improvements, and the seasonal nature of beach related concession businesses, such tenants 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 17 of 35 shall continuously use or cause to be used the Premises and portions thereof for the uses specified in Paragraph 5 of the Lease and continuously merchandise the Premises or portions thereof during all usual business hours and on all such days as comparable businesses of like nature in the area are open for business and shall make available verifiable records of gross sales; (ii) if the Improvements on the Premises are partially destroyed or condemned and such tenant' s sublease remains in force, the tenant shall continue or cause to be continued operation of its business at the Premises to the extent reasonably practical from the standpoint of good business judgment during any period of reconstruction; (iii) the tenant shall exercise reasonable diligence to operate or cause to be operated its business on the Premises or portion thereof in a manner that will produce the highest volume of gross receipts reported to LESSEE consistent with competitive pricing and prudent business practices; (iv) with respect to each tenant who sells alcoholic beverages for on Premises consumption, such tenant shall maintain public liability and property damage insurance with dram shop coverage; (v) the non-discrimination provisions set forth in paragraph 29 below; and (vi) the tenant shall attorn to LESSOR in the event of any termination of this Lease, and attorn to any successor or assignee of LESSEE in accordance with Paragraph 33.B below. LESSEE covenants to LESSOR to use reasonable diligence to enforce the aforementioned provisions of subleases and other agreements. LESSEE further covenants to use reasonable diligence to sublease the Premises to tenants promptly and in such a manner as to maximize Gross Sales Receipts, consistent with market conditions, the mutual desire of LESSOR and LESSEE to encourage a proper tenant mix, and prudent business practices. C. Assignments for Financing; Lender Protection Subject to obtaining LESSOR' s approval, and the limitation on the maximum amount of subordination as specified in paragraph 7(c) of this Lease, LESSEE may transfer and assign this Lease and the leasehold interest created thereby ("Leasehold Estate" ) to a lender as security for the repayment of a loan, in accordance with Paragraph 16.A above. The term "lender" as used herein shall mean the beneficiary, mortgagor, secured party, or other holder of a promissory note or other written obligation which is secured by any deed of trust, mortgage, or other written security agreement affecting the Leasehold Estate ("Leasehold Mortgage" ) . After approval by LESSOR, LESSEE may perform any and all acts and execute any and all instruments necessary or proper to consummate any such loan transaction and perfect the security therefore to be given the lender on the security of the Leasehold Estate. With respect to any lender who shall have delivered to LESSOR a written notice which shall state the name, address and a general description of the type of lien it 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 1$ of 35 holds on the Leasehold Estate, the following provisions shall apply: a. LESSOR shall not agree to any mutual termination nor accept any surrender of this Lease, nor shall LESSOR consent to any amendment or modification of this Lease which could be reasonably construed to have an impact on the lender' s Leasehold Mortgage without the prior written consent of the lender. b. Notwithstanding any default by LESSEE in the performance or observance of any agreement, covenant or condition of this Lease on the part of LESSEE to be performed or observed, LESSOR shall have no right to terminate this Lease unless a default of this Lease shall have occurred and be continuing, LESSOR shall have given the lender written notice of such default, and the lender shall have failed to remedy such default or acquire LESSEE' s estate created hereby or commence foreclosure or other appropriate proceedings in the nature thereof, all as set forth in, and within the times specified by the provisions of this Lease and its attachments, as the same may be amended from time to time. C. Lender shall have the right, but not the obligation, at any time prior to termination of this Lease and without payment of any penalty, to pay all of the rents due hereunder, to effect any insurance, to pay any taxes and assessments, to make any repairs and improvements, to do any other act or thing required of LESSEE hereunder,' and to do any act or thing which may be necessary and proper to be done in the performance and observance of the agreements, covenants and conditions hereof to prevent termination of this Lease. All payments so made and all things so done and performed by the Lender shall be as effective to prevent a termination of this Lease as the same would have been if made, done and performed by LESSEE instead of the Lender. d. Should any default under this Lease occur, the lender shall have sixty (60) days after receipt of notice from LESSOR setting forth 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 19 of 35 V the nature of such default, and, if the default is such that possession to the Premises may be reasonably necessary to remedy the default, a reasonable time after the expiration of such sixty (60) day period within which to remedy such default, provided that (A) the lender shall have fully cured any default in the payment of any monetary obligations of LESSEE under this Lease within such sixty (60) day period and shall continue to pay currently such monetary obligations as and when the same are due and (B) the lender shall have acquired LESSEE' s estate in the Premises created hereby or commenced foreclosure or other appropriate proceedings in the nature thereof within such period, or prior thereto, and is diligently prosecuting any such proceedings. All rights of LESSOR to terminate this Lease as the result of the occurrence of any such default shall be subject to, and conditioned upon, LESSOR having first given the lender written notice of such default and the lender having failed to remedy such default or acquire LESSEE's estate in the Premises created hereby or commence foreclosure or other appropriate proceedings in the nature thereof as set forth in and within the times specified by this subparagraph (d) . e. Any default under this Lease which in the nature thereof cannot be remedied by the lender shall be deemed to be remedied if (A) within sixty (60) days after receiving written notice from LESSOR setting forth the nature of such default,or prior thereto, the lender shall have acquired LESSEE' s estate in the Premises created hereby or shall have commenced foreclosure or other appropriate proceedings in the nature thereof to acquire said estate, (B) the lender shall diligently prosecute any such proceedings to completion, (C) the lender shall have fully cured any default in the payment of any monetary obligations of LESSEE hereunder which do not require possession of the Premises within such sixty (60) day period and shall thereafter continue to faithfully perform all such monetary obligations which do not require possession of the Premises, and (D) after gaining possession of the Premises the lender performs all other 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 20 of 35 obligations of LESSEE hereunder as and when the same are due. In addition to the rights set forth in this subparagraph (e) , the lender shall have the option to be exercised by written notice to LESSOR given within the aforesaid sixty (60) day period, to obtain a new lease of the Premises upon the following terms and conditions: (i) Such new Lease shall be effective as of the date of the termination of this Lease and shall be for the remainder of the term of this Lease at the same rental and with the same terms, covenants and conditions as are set forth herein. (ii) In addition to paying all current rent under the new Lease, the lender shall pay all unpaid rental (after deducting any income LESSOR may have received from the Premises during such period) due pursuant to Paragraph 8 of these GENERAL CONDITIONS which accrued on or after the date which is thirty (30) days prior to the date on which the lender first received written notification of the default by LESSOR and the lender cures all defaults under this Lease that reasonably can be cured by the lender. In lieu of executing a new lease in its own name, the lender shall have the right to designate a ncminee which shall become a lessee under the new lease so long as such assignee or ncminee is qualified consistent with the requirements of this Lease, its attachments and amendments. f. If the lender is prohibited by any process or injunction issued by any court or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving LESSEE from commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereof, the times specified in subparagraphs (d) and (e) above for commencing or prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition plus an additional period of sixty (60) days 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 21 of 35 • r- a ll- w thereafter; provided that the lender shall have fully cured any default in the payment of any monetary obligations of LESSEE under this Lease prior to the end of such sixty (60) day period and thereafter shall continue to pay currently such monetary obligations as and when the same fall due. g. LESSOR shall mail or deliver to the lender duplicate copies of any and all notices which LESSOR may from time to time give to or serve upon LESSEE pursuant to the provisions of this Lease, and such copy shall be mailed or delivered to the lender simultaneously with the mailing or delivery of the same to LESSEE. No notice by LESSOR to LESSEE hereunder shall be deemed to have been given insofar as the lender' s rights under this Paragraph are concerned unless and until a copy thereof shall have been mailed or delivered to the lender as herein set forth. h. Foreclosure of a Leasehold Mortgage, or any sale thereunder,whether by judicial proceedings or by virtue of any power contained in the Leasehold Mortgage, or any conveyance of the estate in the Premises created hereby from LESSEE to the lender through, or in lieu of, foreclosure or other appropriate proceedings in the nature thereof, shall not require the consent of LESSOR or constitute a breach of any provision of or a default under this Lease, and upon such foreclosure, sale or conveyance, LESSOR shall recognize the lender,or any other foreclosure sale purchaser, as lessee hereunder. In the event lender becomes lessee under this Lease, lender shall assume the obligations of LESSEE under this Lease or such new lease only for the period of time that lender remains lessee thereunder, and LESSEE shall be released from any liability therefor, provided prior defaults by LESSEE have either been cured or waived. The lender shall be subject only to those restrictions applicable to LESSEE as set forth in this Paragraph. In the event that, consistent with this Paragraph, the lender subsequently assigns or transfers its interest under this Lease after acquiring the same by foreclosure or deed in lieu of foreclosure, 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 22 of 35 w J and in connection with any such assignment or transfer the lender takes back a mortgage or deed of trust encumbering such leasehold interest to secure a portion of the purchase price given to the lender for such assignment or transfer, then such mortgage or deed of trust Shall be considered a Leasehold Mortgage as contemplated under this Paragraph and the lender shall be entitled to receive the benefit of and enforce the provisions of this Paragraph and any other provisions of this Lease intended for the benefit of the holder of a Leasehold Mortgage. In the event the Lender requires any modifications to the provisions of this Paragraph in order to secure its loan, LESSOR agrees not to unreasonably withhold consent to such modifications so long as such modifications do not reduce the amount of rent or other sums payable to LESSOR hereunder, or do not otherwise have a materially adverse impact on any of LESSOR's interests, rights and remedies hereunder. D. Sublessees' Right to Encumber the Sublease LESSOR recognizes each sublessee' s right to mortgage or encumber the sublease and/or the subleasehold estate held by such sublessee in accordance with and subject to the same terms and conditions as are set forth in this Paragraph 16 subparagraph C above with respect to the sub-leasehold estate only, and in this regard LESSOR will recognize any and all of the rights of any subleasehold mortgagee as and to the extent set forth therein for the leasehold estate. E. E i ment Leasing Some of the equipment, fixtures and furniture (collectively designated herein as "Trade Equipment" ) installed and used by LESSEE and sublessees on the Premises may or will be directly financed by a third-party lender or otherwise be subjected to a security interest or owned by an equipment rental company or vendor ("Equipment LESSOR" ) and leased to LESSEE or such sublessee either directly from the Equipment LESSOR or by way of equipment sublease or assignment of equipment lease from an equipment sublessor ("Equipment Sublessor" ), and LESSOR hereby agrees to recognize the rights therein of any such third-party lender or Equipment LESSOR or Sublessor (or their respective assignees) . LESSOR and City agree that all such items of financed or leased Trade Equipment installed on the Premises shall be and remain personal property and not real property, notwithstanding the fact that the same may be nailed or screwed or otherwise attached or affixed to the Premises or any of LESSEE' s or any sublessee' s buildings or 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 23 of 35 improvements, and further agrees to recognize the rights therein of any such Equipment LESSOR or Sublessor (or their respective assignees) . LESSEE and any sublessee shall have the right at any time, whether or not LESSEE is in default hereunder or such sublessee is in default under its sublease, to remove or replace any or all Trade Equipment, whether or not financed or leased, regardless of whether attached or affixed to the Premises, and to the extent of their respective interests therein such third-party lender or Equipment LESSOR or Sublessor (or their respective assignees) shall also have such a right. Any damage to the Premises caused by such a removal shall be repaired by and at the expense of LESSEE or other party causing such removal. LESSOR waives the right of distraint and agrees that it does not have and shall not assert any right, lien, or claim in or to the financed or leased Trade Equipment and agrees that any third-party lender or Equipment LESSOR or Sublessor (or their respective assignees) may remove and dispose of the same without reference to, and free and clear of, any demand of LESSOR, and that such disposal or sale may be made on the Premises. 17. SUCCESSORS IN INTEREST: Unless otherwise provided in this Lease, the terms, covenants and conditions contained herein shall apply to and bind the heirs, successors, executors, administrators, and assigns of all the parties hereto. 18. LESSEE'S DEFAULT: The occurrence of any of the following shall constitute a default by LESSEE: a. Failure to pay rent when due, if the failure continues for fifteen (15) days after written notice has been delivered to LESSEE. LESSEE shall not be excused from its obligation to pay rent by reason of the inability for any reason to obtain the full and prompt payment to LESSEE of all payments due LESSEE by any sublessees or concessionaires. b. Failure to perform any of the provisions of this Lease required to be performed by LESSEE, if the failure to perform is not cured within thirty (30) days after written notice has been given to LESSEE. If the default cannot reasonably be cured within said thirty (30) days, LESSEE shall not be deemed to be in default of this Lease if LESSEE commences to cure the default within the thirty (30) day period and diligently, and in good faith, continues to cure the default. Notices given under this paragraph shall specify the alleged default and the applicable Lease provision, and shall demand that LESSEE perform the provisions of the Lease or pay 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 24 of 35 the rent that is in arrears, as the case may be, within the applicable period of time, or quit the Premises. No such notice shall be deemed a forfeiture or a termination of this Lease unless LESSOR so elects in the notice. 19. LESSOR' S REMEDIES: LESSOR shall have the following remedies if LESSEE commits a default. These remedies are not exclusive; they are cumulative in addition to any remedies now or later allowed by law. LESSOR can continue this Lease in full force and effect, and the Lease will continue in effect as long as LESSOR does not terminate LESSEE' s right to possession, and LESSOR shall have the right to collect rent when due. During the period LESSEE is in default, LESSOR can enter the Premises subject to the rights of any subtenants under Paragraph 33 of this Exhibit "B, " relet them, or any part of them, to third parties for LESSEE' s account; provided, that in such event LESSOR shall not be excused from any legal obligation it would otherwise have to act reasonably to mitigate its damages and to exercise reasonable diligence to relet the Premises of part thereof for fair market rent. In such event, LESSEE shall be liable immediately to LESSOR for all reasonable costs LESSOR incurs in reletting the Premises, if applicable, including, without limitation, broker' s commissions, reasonable expenses of remodeling the Premises required by the reletting and supplied by other landlords under similar circumstances, and like costs. Reletting can be for a period shorter or longer than the remaining term of this Lease. LESSEE shall pay to LESSOR the rent due under this Lease on the dates the rent is due, (provided LESSOR notifies LESSEE in writing a minimum of thirty (30) days in advance the amount of Gross Sales Receipts from which the calculation of rent can be made) less the rent LESSOR receives from any reletting. No act by LESSOR allowed by this paragraph shall terminate this Lease unless LESSOR notifies LESSEE that LESSOR elects to terminate this Lease. After LESSEE' s default and for as long as LESSOR does not terminate LESSEE' s right to possession of the Premises, if LESSEE obtains LESSOR' s consent, LESSEE shall have the right to assign or sublet its interests in this Lease, but LESSEE shall not be released from liability for said default absent a waiver or release from LESSOR. No act by LESSOR other than giving notice of such termination to LESSEE shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment of a receiver on LESSOR' s initiative to protect LESSOR' s interests under this Lease shall not constitute a termination of LESSEE' s right to possession. On termination, LESSOR has the right to recover from LESSEE: a. The worth, at the time of the award, of the unpaid rent that had been earned at the time of the termination of this Lease; 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 25 of 35 b. The worth, at the time of the award, of the amount by which the unpaid rent that would have been earned after the date of termination of this Lease until the time of award exceeds the amount of the loss of rent that LESSEE proves could have been reasonably avoided; C. The worth, at the time of the award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of the loss of rent that LESSEE proves could have been reasonably avoided; and d. Any other amount and court costs, necessary to compensate LESSOR for all detriments proximately caused by LESSEE' s default. "The worth, at the time of the award, " as used in subparagraphs (a) and (b above is to be computed by allowing interest at the rate of 101/, per annum. "The worth, at the time of the award, " as referred to in subparagraph (c) above is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco 'at the time of the award, plus 1%. If LESSEE is in default of this Lease and subject to the rights of any sub-tenants under Paragraph 33 of this Exhibit "B", LESSOR shall have the right to have a receiver appointed to collect and conduct LESSEE' s business. Neither the filing of a petition for the appointment of a receiver nor the appointment itself shall constitute an election by LESSOR to terminate this Lease. LESSOR, at any time after LESSEE commits a default, can cure the default at LESSEE' s cost. If LESSOR at any time, by reason of LESSEE' s default pays any sum or does any act that requires the payment of any sum, the sum paid by LESSOR shall be immediately due from LESSEE to LESSOR at the time the sum is paid, and if paid at a later date shall bear interest at the rate of 101 per annum from the date the sum is paid by LESSOR until LESSOR is reimbursed by LESSEE. The sum, together with the interest on it, shall be deemed additional rent. 20. LESSOR'S DEFAULT: LESSOR shall be in default of this Lease if it fails or refuses to perform any provision of this Lease that it is obligated to perform if the failure to perform is not cured within thirty (30) days after written notice of the default has been given by LESSEE to LESSOR. If the default cannot be reasonably cured within thirty (30) days, LESSOR shall not be in default of this Lease if LESSOR commences to cure the default within the thirty (30) day period and 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 26 of 35 diligently and in good faith continues to cure the default. LESSEE, at any time after LESSOR commits a default, can cure the default at LESSOR' s cost. If LESSEE, at any time, by reason of LESSOR' s default pays any sum or does any act that requires the payment of any sum, the sum paid by LESSEE shall be immediately due from LESSOR to LESSEE at the time the sum is paid, and if paid at a later date shall bear interest at the rate of 10% per annum from the date the sum is paid by LESSEE until LESSEE is reimbursed by LESSOR. At LESSEE's option, such sum may also be offset against the next installment of rent or additional rent payable by LESSEE, 21. QUITCLAIM OF LESSEE'S INTERESTS UPON TERMINATION: Upon termination of this Lease for any reason, including but not limited to termination because of default by LESSEE, and subject to the rights of any sub-tenants under Paragraph 33 of this Exhibit "B", LESSEE shall execute, acknowledge and deliver to LESSOR within thirty (30) days after receipt of written demand therefor a good and sufficient deed whereby all right, title and interests of LESSEE in the Premises is quitclaimed to LESSOR. 22. TOTAL TAKING: If the whole of the Premises, or other improvements to be made by LESSEE shall be taken by right of eminent domain or otherwise for any public or quasi-public use, then, when possession shall be taken thereunder by the condemnor, or the LESSEE is deprived of its practical use of the Premises, and other improvements, whichever date is earlier, this Lease and all rights and obligations of LESSOR and LESSEE hereunder, shall terminate as of the date of the taking and any rent and all other payments required of LESSEE shall be prorated between the parties as of the date of the taking. 23. PARTIAL TAKING: In the event of a partial taking, as a result of which LESSEE reasonably determines that (i) the remaining portion of the Premises, or other improvements on the Premises cannot be restored to an economically operable facility of a comparable kind and quality to the facility existing prior to the taking with condemnation awards received by LESSEE, or (ii) the then-existing laws do not permit restoration of the Improvements to within 95% of the size and layout existing immediately before such taking, then this Lease at LESSEE' s option shall terminate as of the time when possession of the Premises shall be taken by the condemnor or LESSEE is deprived of its practical use thereof, whichever date is earlier. LESSEE shall exercise such rights of termination by giving LESSOR written notice thereof no later than one-hundred twenty (120) days after the partial taking becomes effective. If a portion of the Premises or any other improvements shall be taken by right of eminent domain or otherwise for any public or quasi-public use and LESSEE reasonably determines that the remaining portion of the 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 27 of 35 Premises and improvements can be restored by LESSEE to an economically operable facility of comparable kind and quality to the facility existing prior to the taking, then this Lease shall not be affected and LESSEE shall retain the remaining portion of the Premises. In such event, however, and notwithstanding Paragraph 5(c) of these GENERAL CONDITIONS, rent shall be abated with respect to any improvements which are remaining on the Premises but are not used during a period of reconstruction or restoration. Rent shall also be prorated in the manner provided in Paragraph 5(c) above. 24. EMINENT DOMAIN AWARD: If there is a taking by right of eminent domain, the rights and obligations of the parties with reference to the award and the distribution thereof shall be determined in accordance with the provisions of this Paragraph. The award shall belong to and be paid to LESSOR, except that LESSEE shall first receive from the award the following: a. A sum attributable to the value of LESSEE' s leasehold estate including improvements, trade fixtures and personal property that are taken which sum shall be first applied toward any outstanding balance due LESSEE' s lender; b. A sum attributable to severance damages to be used solely for the restoration of the other improvements upon the Premises; and C. An award (if any) specifically made with respect to loss of goodwill. 25. AMENDMENTS: This Lease, including the Exhibits thereto, set forth all of the agreements and understandings of the parties and any modification must be in writing executed by both parties. 26. CAPTIONS: The captions and the table of contents of this Lease shall have no effect on its interpretation. 27. CALIFORNIA LAW: This Lease shall be construed and interpreted in accordance with the laws of the State of California. 28. WAIVER; No delay or omission by either party in the exercise of any right or remedy on any default by the other party shall impair such a right or remedy or be construed as a waiver. The receipt and acceptance by LESSOR of delinquent rent shall not constitute a waiver of any other defaults by LESSEE; it shall constitute only a waiver of timely payment for the rent payment involved. 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 28 of 35 LESSOR' s consent to or approval of any act by LESSEE requiring LESSOR' s consent or approval shall not be deemed to waive or render unnecessary LESSOR' s consent to or approval of any subsequent act by LESSEE. Any waiver by either party of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Lease. 29. NONDISCRIMINATION: LESSEE covenants for itself, its heirs, executors, administrators, and assigns, and all persons claiming under or through it, that this Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, martial status, age, national origin or ancestry in the subleasing of the Premises herein leased, nor shall the LESSEE establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of lessees of the Premises. LESSEE shall make its accommodations and services available to the public on fair and reasonable terms. In the event LESSEE enters into contracts, subleases, or assignments with respect to any of its interest herein, LESSEE shall include in such arrangements a nondiscrimination clause substantially conforming to the following: a. In leases: "The lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, and assigns and all persons claiming under or through him or her, that this lease is made and accepted upon and subject to the following conditions: "That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, age, national origin or ancestry in the subleasing, transferring, use, occupancy, tenure or enjoyment of the premises herein leased, nor shall the lessee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of lessees of the premises, " b. In contracts: "There shall be no discrimination against or segregation of any person or group of persons on account of 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 29 of 35 � J race, color, creed, religion, sex, marital status, age, national origin or ancestry in the sublease, transfer, use, occupancy, tenure or enjoyment of the premises, nor shall the transferee himself or herself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of the land. " 30. FORCE MAJEURE. In any Case where either party hereto is required to do any act, delays caused by or resulting from acts of God, war, civil commotion, fire, flood, earthquake or other casualty, strikes or other extraordinary labor difficulties, shortages of labor or materials or equipment in the ordinary course of trade, government regulations, litigation (other than litigation arising from the failure to perform hereunder by the party claiming an extension of time to perform or from a wrongful act or failure to act by such party) or other causes not reasonably within such party' s control and not due to the fault or neglect of such party shall not be counted in determining the time during which such act shall be completed, whether such time be designated by a fixed date, a fixed time or "a reasonable time" , and such -time shall be deemed to be extended by the period of such delay. Financial inability of either party shall not be considered to be a circumstance or cause beyond the reasonable control of that party. Litigation concerning paragraph 3 of Exhibit "C" commencing on page 2 shall be included as an event which triggers this force majeure provision. In no event shall the operation of this Paragraph 30 extend the obligations of the parties under the Schedule of Performance (Exhibit "E" ) beyond ten (10) years from the Effective Date and in the event such ten (10) years has elapsed it shall constitute grounds for termination by either party. 31. RESOLUTION OF DISPUTES. Any and all disputes between the parties hereto regarding the construction, operation or enforcement of this Lease, and any of the rights or obligations granted or imposed by this Lease, shall be submitted only to a retired Judge of the Superior Court in and for the State of California (hereinafter "Superior Court") in the following manner: (a) The parties must agree on the Judge' s identity within five (5) days after the dispute arises or, at the end of the fifth day, the parties' respective Counsel shall be authorized to agree upon the Judge' s identity and bind their clients. Failure to cooperate in this selection process waives the uncooperative party' s right to 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 30 of 35 participate in the selection process, or object to the Judge selected. (b) Disputed matters shall be promptly submitted to the Judge in a manner determined by him/her following his/her selection. Once a matter is submitted to the Judge, s/he is empowered with the full authority of a judge sitting on the bench of the Superior Court in and for the State of California (hereinafter "Superior Court") , and may make any ruling consistent with that power. In order to implement this provision, the parties, by executing this Lease, agree to execute and file with the Superior Court, such papers as are appropriate to procure the appointment of said Judge as a Judge Pro-Tempore of the Superior Court. (c) The Judge may make any order s/he feels is appropriate regarding which party should bear or be awarded attorneys' fees and/or costs, and which party or parties should pay for the fees and costs of the Judge. (d) The rights of judicial review granted under this Paragraph are the only rights -of judicial review that are available to the parties hereto. They are exclusive of all other rights of relief which might otherwise be held by them. It is their intention that all of the disputes arising out of, or related to, their execution of this Lease, or the rights or responsibilities granted or imposed by this Lease, be resolved exclusively in the manner provided for in this Paragraph and its subparts. Consistent with this intention, the parties, by executing this Lease, specifically acknowledge that the decisions and orders of the Judge are nonappealable and nonreviewable, and, therefore, they are waiving their rights to seek relief in the State or Federal Courts, except for the purpose of securing and confirming the authority of the Judge provided for herein, and to enforce his/her decisions and orders by confirmation pursuant to the California Code of Civil Procedure Section 1280 et. seq. , or through appropriate injunctive relief. In the event that a party files any action inconsistent with the terms of this Paragraph, then the party filing the action will be liable for all fees and costs actually incurred by the other party in responding to said action, regardless of its outcome. 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 31 of 35 (e) The limitations on actions set forth in this Paragraph apply only to actions between the parties hereto. They are not intended to and do not limit the parties' right to bring an action against third parties. Furthermore, no third party shall be entitled to rely on any provision of this Paragraph in their response or defense to an action brought against them by a party(s) to this Lease. Notwithstanding the foregoing in the event that this method of dispute resolution is prohibited by law then both parties shall either agree to submit to binding arbitration or to the jurisdiction of the appropriate court of law. 32. TIME: Time is of the essence of this Lease, and of each and every covenant, term, condition, and provision hereof. 33. NON-DISTURBANCE AND RECOGNITION: A. Non-Disturbance So long as any subtenant of any portion of the Premises is not in default (beyond the period given such subtenant to cure such default in its sublease) in the payment of rent or in the performance of any of the terms, covenants, or conditions of such sublease, or if the subtenant is in default but is diligently proceeding to cure such default as provided in its sublease, and notwithstanding LESSEE' s termination of this Lease as to all or a portion of the Premises pursuant to Paragraphs 5 or 22 of these GENERAL CONDITIONS which termination is not consented to by such subtenant: (a) LESSOR will not bring, join, or cooperate in any action or proceeding to terminate such subtenant' s interest, estate, or rights under such sublease, (b) the subtenant' s possession and rights and privileges under the sublease shall not be diminished or interfered with by LESSOR, and (c) LESSOR will continue to recognize the estate of the subtenant created under the sublease and the subtenant' s occupancy shall not be disturbed by LESSOR during the term of the sublease or any extensions or renewals which subtenant nay exercise under the provisions of the sublease. Upon request, LESSOR shall execute a non-disturbance agreement, in such form reasonably approved by LESSOR, LESSEE, subtenant and lender(s) recognizing the subtenant' s rights provided hereunder. B. Attornment If the interest of LESSEE in all or any part of the Premises shall be terminated for any reason, and LESSOR succeeds to the interest of and assumes all the obligations of LESSEE under any sublease, each sublessee shall be bound to 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 32 of 35 LESSOR under all of the terms, covenants, and conditions of the ;sublease for the balance of the sublease term and any extensions of renewals of the sublease which the subtenant may exercise under the provisions of the sublease. The subtenant shall attorn to LESSOR, such attornment to be effective and self-operative without the execution of any further instruments immediately upon LESSOR succeeding to the interest of LESSEE under the sublease. The respective rights and obligations of the subtenant and LESSOR under this attornment shall be the same as between LESSEE and the subtenant under the sublease; provided, however, - that (i) the subtenant shall be under no obligation to pay rental to LESSOR until the subtenant receives written notice from LESSOR that LESSOR has succeeded to the interest of LESSEE and assumed all the obligations of LESSEE under the sublease, and (ii ) LESSOR shall not hold the subtenant responsible for any costs or acts related to any default or alleged default by LESSEE under this Lease. C. New Lease In the event of the termination of this Lease as to all or a portion of the Premises prior to its stated expiration date for any reason whatsoever, LESSOR shall notify all sublessors and subleasehold mortgagees of such termination, and any sublessee or any subleasehold mortgagee may notify LESSOR within sixty (60) days after receipt of such termination notice of its election to enter into a new lease with LESSOR. During such sixty (60) day period, the provisions of subparagraph A herein shall apply. LESSOR, upon receipt of such sublessee' s or subleasehold mortgagee' s notice, shall immediately enter into a written agreement with such sublessee or subleasehold mortgagee containing the same provisions as those in the sublease, except for any changes that are necessary because of the substitution of LESSOR in the place of LESSEE. Sublessee or any subleasehold mortgagee shall have no rights under this subparagraph (C) if it fails to give notice within the sixty (60) day period. 34. ESTOPPEL CERTIFICATE: LESSOR and LESSEE will, at any time and from time to time, within thirty (30) days of the request of the other party or a leasehold or subleasehold mortgagee or prospective mortgagee, execute, acknowledge, and deliver to the other party and such mortgagee, if any, a certificate certifying: a. That the Lease or sublease is unmodified and in full force and effect (or, if there have been modifications, that the same are in full force and effect as modified and stating such modifications); b. The dates, if any, to which the Percentage Rent and any additional rent and charges have been 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 33 of 35 paid and the amount of any accumulated rent credit available to LESSEE; C. Whether there are any existing defaults by the other party to the knowledge of the party making such certification specifying the nature of such defaults, if any; d. Whether the Lease Commencement Date has occurred and, if so, the date; e. Whether the leasehold or subleasehold mortgagee (or prospective mortgagee) is entitled to the protection afforded under the terms of the sublease or this Lease; and f. Such` other matters as may be reasonably requested. Any such certificate may be relied upon by any party to whom the certificate is directed. 35 . HAZARDOUS WASTE INDEMNITY: LESSOR is aware of two potential sources of contamination on the Premises. One potential source is a discontinued gasoline station and the other is the possibility of asbestos in the existing structure which is the subject of the Maxwell' s Lease. Except for the aforementioned potential contaminations, LESSOR has no knowledge of hazardous materials or contamination on the Premises. Further, to the best of the LESSOR' s knowledge, the LESSOR has not received any notice or communication from any government agency having jurisdiction over the Site notifying the LESSOR of the presence of subsurface zone hazardous materials, waste, or contamination in, on, or under the Site, or any portion thereof. LESSOR agrees to notify LESSEE if in the future it becomes aware of contamination on the Premises. LESSEE, including any and all of its successors in interest, and assigns, acknowledges and agrees it shall be responsible for any release, excavation, or movement of any hazardous materials, waste, or contamination of the subsurface zone as may be found to have contaminated the Premises after the Commencement Date of this Lease, except to the extent such release, excavation, or movement of any hazardous materials, waste or contamination is caused by LESSOR or City. LESSEE and LESSOR shall comply with CERCLA (Comprehensive Environmental Response, Compensation and Liability Act of 1980) 42 U. S.C. §9601, et seq. , and California Health and Safety Code §§ 25100, et seq.,25300, et ,seq. , 25280 et sue. Any costs incurred pursuant to this compliance which are necessary to develop the Premises as contemplated in this Lease shall be shared as set out in Paragraph 3 of Exhibit "C" . 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 34 of 35 LESSEE, including any and all of its successors in interest, agrees to and shall indemnify, defend, and hold the LESSOR and the City and their officers, employees, representatives and agents harmless from and against -all expenses (including, without limitation, reasonable attorneys' fees and disbursements) , losses, or liabilities suffered by LESSOR or City by reason of governmental action or third party claims arising out of such hazardous materials, waste, or contamination, exacerbation, movement, release, or additional contamination of the Premises as may be found to have contaminated Premises after the Commencement Date of this Lease unless caused by LESSOR or City. The LESSEE assumes all responsibility for subsurface zone conditions and soils conditions in, on or under the Premises, and for any rehabilitation necessary for the provision of the Improvements; and the LESSOR makes no other representations or warranties concerning the Premises, its suitability for the use intended by the LESSEE, or the surface or subsurface conditions of the Premises; and if the soil conditions of the Premises are not in all respects entirely suitable for the use or uses to which the Premises will be put, then it is the sole responsibility and obligation of LESSEE to take such action as may be necessary to place the Premises in a condition entirely suitable for the development of the Premises. This is expressly agreed between the Parties to be a Material term of this Lease. Prior to the Commencement Date LESSEE shall. exercise due diligence and conduct or cause to be conducted an environmental assessment or audit acceptable to the LESSOR of the Premises to ascertain whether it is in all respects suitable for the construction and completion of the Improvements. LESSOR in turn agrees to grant LESSEE, its agents or experts full access to the Premises for the purpose of conducting all geotechnical, ecological or other inspection of the Premises necessary to comply with this Lease and its attachments or amendments, or to prepare for the construction of the Improvements. 06/13/91 EXHIBIT "B" 5409u/2460/39 Page 35 of 35 v � EXHIBIT "C" CONDITIONS TO COMENCEMENT 1. Plan Approvals. LESSEE shall obtain approvals from all applicable government entities for conditional use permit, coastal development permit, supplemental environmental impact report and final plans and specifications with respect to the Improvements to be located on the Premises. The Conditional Use Permit and Coastal Development Permit shall be deemed "final" for purposes of this Paragraph upon the last of the following three (3) dates (i) as to each condition on said permits, on the date on which LESSEE obtains LESSOR (and, if required, Coastal Commission) approval of such items in a manner reasonably satisfactory to LESSEE, (ii) the date on which all applicable statutes of limitations for challenging such permits have expired without litigation being filed, or (fii) the date on which all such litigation is favorably and finally terminated, whether by judgment, dismissal, settlement agreement or otherwise. The development of the final plans and specifications shall be according to the requirements set out in the Scope of Development (Exhibit "D") . 2. Evidence of Financing Commitments. LESSEE shall obtain and shall submit to LESSOR' s Executive Director, evidence reasonably satisfactory to LESSOR' s Executive Director that LESSEE has obtained the financing necessary for the development of the Improvements on the Premises in accordance with this Lease. Such evidence of financing shall include the following: (a) A copy of the commitment or commitments obtained by LESSEE for the mortgage loan or loans to assist in financing the construction of the Improvements, certified by LESSEE to be a true and correct copy or copies thereof. The commitments for financing shall be in such form and content acceptable to LESSOR' s Executive Director as reasonably evidences a firm and enforceable commitment, with only those conditions which are standard or typical for the lender(s) involved for similar projects; (b) Sufficient information (e.g. , an annual report) regarding the construction lenders to enable LESSOR' s Executive Director to determine whether or not such lender(s) has (have) sufficient financial resources to fund the loan(s) ; and 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 3 of 7 (c) A copy of the contract between LESSEE and the contractor(s) for the construction of the Improvements, certified by LESSEE to be a true and correct copy thereof; and (d) A financial statement and/or other documentation satisfactory to LESSOR' s Executive Director as evidence of other sources of capital sufficient to demonstrate LESSEE has adequate funds committed to cover the difference, if any, between construction and development cost minus financing authorized by mortgage loans. Within thirty (30) days after receipt of request for approval of its evidence of financing, LESSOR' s Executive Director shall respond in writing by stating what further information, if any, he or she reasonably requires in order to determine whether or not to approve such evidence of financing. Upon receipt of such a timely response, LESSEE shall promptly furnish to the Executive Director such further information as may be reasonably requested. LESSEE' s request for approval of its evidence of financing shall be deemed complete thirty (30) days after Executive Director' s receipt thereof, if no timely response requesting further information is delivered to LESSEE, or, if such a timely response requesting further information is received, on the date that LESSEE delivers such additional information to Executive Director. Once LESSEE' s request for approval of its evidence of financing has been accepted as or is deemed complete, Executive Director shall not be entitled to demand additional information or to disapprove the request on the basis that LESSEE has not furnished adequate or complete information. The Executive Director LESSOR shall approve or disapprove LESSEE' s evidence of financing within fifteen (15) days after LESSEE' s request for such approval is accepted as complete. Approval shall not be unreasonably withheld or conditioned. If the Executive Director shall disapprove any such evidence of financing, it shall do so by written notice to LESSEE stating the reasons for such disapproval. 3. A pp roved Condition of Title_; Acquisition of Property Interests in the Premises To Place Title In Such Condition. Except as expressly set forth herein, LESSOR covenants to convey to LESSEE the leasehold estate in the Premises free and clear of all monetary liens and all recorded and unrecorded nonmonetary liens, encumbrances, easements, licenses, leases, and other defects of title inconsistent with LESSEE' s approved development plans (the "Approved Title Condition" ) . 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 2 of 7 Except as expressly set forth herein, LESSOR hereby represents that the City and Agency currently hold the fee title to the Premises in a condition that would enable the City to convey leasehold title in the Approved Title Condition, excepting only the "Maxwell' s Lease" and any currently existing subtenants (that certain lease dated March 7, 1983 and amended September 19, 1963 between the City as landlord and W.P.L. Industries as tenant) . Within the time set forth in the Schedule of Performance (Exhibit "E" ) , LESSOR, LESSEE, and the City shall exercise best efforts to negotiate and enter into a binding written agreement with the holder of the Maxwell' s Lease and all subtenant to terminate or amend said leases on terms acceptable to LESSOR, the City, LESSEE, and the holder of the Maxwell' s Lease, and all subtenants, no later than the Commencement Date of this Lease. Subject to LESSEE' s and Maxwell' s performance of their obligations under such agreement, LESSOR covenants that on or before the Commencement Date it shall have entered into the Master Lease with City in the Approved Title Condition. Notwithstanding the foregoing, LESSEE acknowledges that the State of California, through the Office of the California Attorney General and the State Lands Commission, has made contentions that the Premises or some portions thereof have been or may have been impliedly dedicated to the public or are or may be subject to a public trust and that development and operation of the Improvements on the Premises would or may be inconsistent with the rights of the public to public open space and/or recreational use and/or access to the coastline. LESSEE assumes all risks regarding any such claims, whether made by the State of California or any third party. Either LESSOR or LESSEE shall have the right to file and prosecute a quiet title action to determine the validity of any such adverse claims against LESSOR' s and LESSEE' s title to the Premises. In addition, in the event of any legal challenge instituted by the State of California or any third party making any such adverse claim against the title of LESSOR or LESSEE to the Premises, the parties hereby agree to cooperate in defending said action as set forth herein. In the event that either LESSOR or LESSEE determines to file a quiet title action, the same shall be diligently prosecuted and the party maintaining the same shall exercise best efforts to obtain a final and favorable judgment as soon as practicable after the action is filed. No such action shall be filed without prior consultation with the other party, which other party shall have the right to appear independently in the action to represent its interests. In the event of litigation instituted by the State of California or other third party, LESSOR shall have the right, 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 3 of 7 but not the obligation, to defend such action; provided, that without LESSEE' s prior written consent, LESSOR shall not allow any default or judgment to be taken against it and shall not enter into any settlement or compromise of any claim -which has the effect, directly or indirectly, of prohibiting, preventing, delaying, or further conditioning or impairing LESSEE' s development, use, or maintenance of any portion of the Premises or impairing any of LESSEE' s rights hereunder. In addition, LESSOR shall provide reasonable assistance to LESSEE in defending any such action, such assistance to include: (i) making available upon reasonable notice, and at no cost to LESSEE, LESSOR officials and employees who are or may be witnesses in such action, and (ii) provision of other information within the custody or control of LESSOR and the City that is relevant to the subject matter of the action. LESSEE shall have the obligation to defend any such action filed by the State of California or any third party; provided, however, that this obligation to defend shall not be effective if and to the extent that LESSEE determines in his reasonable discretion that such action is meritorious or that the interests of the parties justify a compromise or settlement of such action. In this regard, LESSEE' s obligation and right to defend shall include the right to hire attorneys and experts necessary to defend, subject to reasonable approval by LESSOR. LESSOR must be notified prior to any compromise or settlement and shall have approval rights on any agreement that has the potential of adversely affecting LESSOR' s right, title or interest in the Premises. LESSOR shall be solely responsible for all of its costs and expenses incurred in prosecuting or defending any such action. LESSEE shall be solely responsible for all of its costs and expenses incurred in prosecuting or defending any such action and, in addition, to any costs and expenses arising out of or relating in any manner to the development of the Premises or this Lease if the action results in an unfavorable judgment or settlement that prohibits or prevents LESSEE' s development of the Improvements on the Premises pursuant to this Lease. LESSEE shall be entitled to full reimbursement up to a maximum amount of Fifty Thousand Dollars ($50,000) from LESSOR from all legal costs and expenses incurred by LESSEE in prosecuting or defending any such action if the action results in a favorable judgment or settlement permitting LESSEE to develop the Improvements as contemplated in this Lease. Such reimbursement shall include interest accruing on the principal amount of LESSEE' s expenditures at the rate of eleven percent (11%) per annum from the date expenditures are made until fully reimbursed. Rent credits shall be allocated first to accrued interest, then to unpaid principal. LESSEE shall provide to 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 4 of 7 LESSOR an itemized statement of LESSEE' s costs and expenses in such detail as LESSOR may reasonably require in order to verify the amount of LESSEE' s actual and reasonable expenses and the time such expenses were incurred. LESSEE agrees to act reasonably to conserve funds subject to this rent credit, consistent with the parties' mutual objective of having the action handled by qualified experts and quickly and successfully concluded. 4. Environmental Testing and Clean Up Costs. LESSEE shall obtain soils test analysis to be approved by LESSOR' s Executive Director to determine the suitability of the Site for the proposed development. In the event the test evidences a need to remediate contamination of the Premises in conjunction with development, the LESSOR shall bear the cost for the first Twenty-Five Thousand Dollars, the LESSEE shall bear the cost of the second Twenty-Five Thousand and costs above Fifty Thousand shall be shared equally. If the cost estimate to remediate contamination exceeds One Hundred Thousand Dollars ($100,000) then pursuant to Paragraph 6(f) below, either party may terminate this Lease. Notwithstanding the above, if LESSEE determines to bear all such costs above One Hundred Thousand Dollars, then LESSOR shall not have the ability to terminate this Lease. 5. Election Expenses LESSOR and LESSEE agree and acknowledge that this Lease is subject to voter approval under Initiative , which requires voter approval at an election prior to the lease of City property (the "Election") . LESSEE agrees to pay fifty percent (50%) of the costs incurred in the administration and conduction of the Election. Said costs shall include, but not be limited to, all printing, publishing and distribution of election materials, including ballot materials and necessary explanatory materials, as well as any costs related to providing polling places, polling monitors and the actual tabulation and confirmation of the Election results, A deposit of Fifty Thousand Dollars ($50,000) shall be paid by LESSEE prior to the filing of the notices by the City which are required pursuant to the California Election Code in order to conduct a special election in November of 1991. Within thirty (30) days after the Election, notice and documentation of the Election costs shall be provided to the LESSEE with either a refund or a bill for amounts due above the Fifty Thousand Dollar ($50,000) deposit. 6. Miscellaneous Governmental Approval. In addition to the approvals to be obtained from City and LESSOR as provided herein, LESSOR and LESSEE shall cooperate and diligently pursue, within the times set forth in 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 5 of 7 the Schedule of Performance (Exhibit "E") , the obtainment of all other governmental approvals required for development and operation of the Improvements. 7. Failure of Conditions; Termination. In the event that, prior to the Commencement Date: (a) LESSEE fails to submit or is unable, after and despite its exercise of reasonable diligence, to timely obtain approval of the final building plans and specifications for the Improvements, in accordance with paragraph 1 of this Exhibit "C"; or (b) LESSEE is unable, after and despite its exercise of reasonable diligence, to timely obtain financing commitments for the development of the Premises or the Executive Director' s approval thereof, in accordance with paragraph 2 of this Exhibit "C"; or (c) LESSOR, LESSEE, and the City fail to timely enter into a binding written agreement with the holder of the Maxwell' s Lease or any other leasehold interest capable of asserting relocation rights, in accordance with Paragraph 3 of this Exhibit "C"; (d) Replacement Parking requirements of any governmental entity fail to be satisfied by the onsite parking; (e) LESSOR fails to timely tender possession of the Premises, with the condition of title meeting the requirements set forth in Paragraph 3 of this Exhibit "C"; or (f) LESSEE either fails to obtain an approved environmental study or the cost to clean up contamination found on or under the Premises exceeds $100,000 unless LESSEE determines to pay all costs in excess of One Hundred Thousand Dollars pursuant to Paragraph 4 of this Exhibit "C"• or (g) As of the scheduled Commencement Date, LESSOR is in default of any of its other obligations under this Lease, and such failure or default is not cured and is not being cured in accordance with paragraph 20 of Exhibit "B" to the Lease; (h) As of the scheduled Commencement Date, LESSOR has not entered into the Master Lease with City; 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 6 of 7 (i) As of the scheduled Commencement Date, LESSOR fails to deliver to LESSEE the fully executed Nondisturbance and Recognition Agreement in the form attached to this Lease as Exhibit "J" ; (j ) As of the Scheduled Commencement Date, LESSEE is in default of any obligation under this Lease, and such failure or default is not cured and is not being cured in accordance with paragraph 20 of Exhibit "B" to the Lease; then this Lease shall, at the option of either party, under paragraph(s) a, b, c, d or f above, be terminated by written notice thereof to remaining party; or, LESSEE may terminate under paragraphs e, g, h or i; LESSOR may terminate under paragraph j above, and thereupon neither LESSOR nor LESSEE shall have any further rights or obligations with respect to the Premises or this Lease, 06/13/91 EXHIBIT "C" 5409u/2460/39 Page 7 of 7 EXHIBIT "D" SCOPE OF DEVELOPMENT I . LESSEE'S RESPONSIBILITIES: 1. The Improvements. As used in this Lease, the term "Improvements' shall mean all improvements constructed, assembled, or placed by LESSEE on the Premises. Except as specifically set forth in Section II below, LESSEE shall be responsible for demolition and clearance from the Premises of all existing improvements inconsistent with the construction thereon of the "Improvements" in accordance with the plans and permits to be approved by the City, LESSOR, and any other governmental agency that has jurisdiction, as the same ray be amended from time to time. Additional clarifications of LESSEE' s responsibilities are set forth below: (i) Concept. The Improvements shall consist of a multi-level restaurant project located within the footprint of the existing improvements and the asphalt parking lot located south of the Pier. The lifeguard station and beach access road/bike path will remain in their present locations. Emphasis is on small building footprints and silhouettes and large public spaces, promenades and plazas. Pier, ocean, and beach view opportunities, both in and through the project, will be maximized wherever possible. Maxwell' s will have the option of relocating to a new structure within the project. New structures on the Plaza or PCH level are limited to the new Maxwell' s (building "A") and buildings "B" and "C" on the plans. The buildings shall be consistent with the development guidelines for District 10 of The Downtown Specific Plan. New structures on the lower or beach access level will house food services, beach-related concessions, and other approved visitor-serving commercial uses. Structures on both levels shall be set back so as to create pedestrian promenades along the entire ocean side of the project. The upper promenade shall be lower than the plaza level to improve PCH views of the surf. The lower promenade or boardwalk shall be above the bike path so as to separate pedestrians from skateboarders, bicyclists, and roller skaters. (ii) Parking. The parking structure shall contain approximately 361 commercial spaces and no less than 193 and no more than 250 public spaces in accordance with the Conditional Use Permit (including subterranean stalls on "lifts" ) to satisfy code requirements for the uses on the 06/13/91 EXHIBIT "D" 5409u/2460/39 Page 1 of 5 Premises, calculated as follows: (1) the relocated Maxwell' s restaurant: seventy-seven (77) spaces (based on the number of spaces currently provided pursuant to the Maxwell' s Lease); (2) the two (2) major new PCH-level buildings, any square footage in the New Maxwell' s in excess of 11,400 square feet and the approximately 4,500 square feet of new restaurants/cafes on the lower level in excess of 1500 square feet: 1 space per 100 square feet of floor area; and (3) pedestrian-oriented cafe and beach concessions: no spaces. LESSEE shall not be responsible for providing any off-Premises parking to replace any existing parking spaces on or adjacent to the Premises that will or may be eliminated due to the development of the project, whether required by the City, the California Coastal Commission, or otherwise. LESSEE will, in accordance with the provisions of Paragraph 7(c) of the Lease, cause 250 public parking spaces to be built on the Premises; provided, however, that said number may be reduced by a maximum of 57 spaces based on the approved Parking Management Plan. (iii) Access. The project shall be designed so that pedestrians will be able to enter the project site through the signalized intersections at Main and Lake Streets. Elevators, and ramps at all level changes, shall be provided for full handicap access throughout the project and down to the beach. Grand staircases from the plaza level to the beach access level shall also be provided to act as observation and sitting areas. The project shall provide automobile entry to the plaza level south of building "A" and to the lower parking level at Lake Street. Exiting shall be provided onto PCH south of the entry and from the lower parking level out to Lake Street. Two-way ramps shall provide access between the parking levels. Payment control points shall be located on the lower level at the base of the ramp and at the Lake Street entrance/exit. Emergency vehicle access and dedicated fire lanes shall be provided in accordance with City requirements and the Fire Code. (iv) Construction. Buildings "A, " '}B, " and "C" shall be fully sprinklered and constructed to conform to all applicable City building ordinances. They shall be erected on top of a fully sprinklered steel reinforced concrete parking structure. Surface finishes, design, and roofing shall be consistent with the Downtown Design Guidelines and direction from the City of Huntington Beach Design Review Board. Hardscape shall be a mixture of stone, concrete, and exposed aggregate surfaces. (v) Landscaping. Landscaping shall emphasize a _ variety of palm trees, flowering vines, shrubbery, and bedding plants, as well as a variety of coastal grasses. Landscaping shall be accented by night-time lighting. Landscape plans shall be as approved by the City. 06/13/91 EXHIBIT "D" 5409u/2450/39 Page 2 of 5 (vi) Size of Buildings. The buildings to be included in the project shall be of approximately the following sizes (in square feet) : Plaza Level Square Footage Building "A" (Maxwell' s) : 1st Level 11,200 2nd Level 3,800 15,000 15,000 Building "B" 1st Level 8,700 2nd Level 2,300 11,000 11,000 Building "C" 1st Level 8,650 2nd Level 5,350 14,000 14,000 Total Plaza Level 40,000 Beach Access Square Footage Dwight' s 2,500 Cafe 5,750 Beach Concession 272 Total Beach Access Level 8,522 PROJECT TOTAL 48,522 The size and the distribution of square footage among the particular buildings and parts of building may vary from the above, provided, however, the project total square footage • shall be a minimum of 45,000 and shall not exceed 60,000 square feet without an amendment to this Scope of Development. (vii) Cost of Construction. The Improvements shall be constructed at a minimum hard" cost of Ninety Dollars ($90.00) per square foot of gross building floor area for the three (3) buildings referenced in subparagraph (vi) above (not including the parking or Beach Access level facilities), including without limitation tenant improvements and furnishings, fixtures, and equipment, site preparation costs, parking, landscaping, driveways, and other similar items. The actual cost of construction will be certified and submitted to 06/13/91 EXHIBIT "D" 5409u/2460/39 Page 3 of 5 LESSOR' s Executive Director at the time specified in the Schedule of Performance Exhibit "E. " 2. Approval of Plans,.-Drawings and Related Documents The LESSOR shall receive copies of all plans, drawings and related documents for the development of the Premises, including any proposed material changes therein. The LESSOR shall review such documents to determine consistency with this Scope of Development (Exhibit "D" ) . II . LESSOR'S RESPONSIBILITIES: 2. Reopening and Maintenance of Municipal Pier. LESSOR agrees to assist LESSEE in any requests to the City for maintenance and repair of City owned facilities including without limitation the municipal Pier and the City Beach, the maintenance and repair of which or lack thereof could negatively impact the project. 2. Utilities. Subject to the maximum expenditure cap in Paragraph 6 below, LESSOR agrees to provide, or cause to be provided, within the times required in the Schedule of Performance, all Utilities (water, sewer, gas, electrical, and telephone) required for the development, use, and maintenance of the improvements on the Premises, with sufficient capacities to adequately service the Premises, with such Utilities to be located on the Premises or stubbed no further away than 3 feet from the curb within the Premises along the west side of Pacific Coast Highway. LESSEE shall be responsible for extending Utilities from said location(s) to the improvements located on the Premises in accordance with Paragraph I above. 3 . Easements and Permits. LESSOR agrees to cooperate with LESSEE in connection with the filing and processing of any and all applications for permits and other approvals required by the City or any other governmental agency in connection with the development of the Premises. 4. Access for Service Vehicles. During the entire term of this Lease, LESSOR agrees to provide, or cause to be provided, access for service and delivery vehicles to the businesses on the Premises along the access road/bike trial on the beach side of the Premises; provided that such access may be restricted from 10:30 a.m. - 4:00 p.m. on weekdays and from 9:00 a.m. - 4:00 p.m. on weekends. 5. Relocation Assistance. The obligations of LESSOR and LESSEE with respect to the temporary shutdown of Maxwell' s and relocation of Maxwell' s and as to other subtenants into ,the project to be developed by LESSEE on the Premises shall be as set forth in the agreement by and among LESSOR, LESSEE, the 06/23/91 EXHIBIT "D" 5409u/2460/39 Page 4 of 5 City, and the holder of the Maxwell' s Lease, and any current Sublessee as referenced in Paragraph 3 of Exhibit "C" (the "Conditions to Commencement" ) . Otherwise, LESSOR shall be solely responsible for payment of relocation expenses and provision of relocation assistance to any persons or entities displaced as a result of LESSEE' s development of the Premises, in accordance with applicable provisions of law. 6. Lessor Expenditure Maximum. The total amounts of costs or expenditures to the LESSOR separate and apart from the Public Parking Construction Payment in Paragraph 7(c) and the Rent Credit in Paragraph 7(d) of the Lease, prior to the issuance of the Certificate of Completion for the Improvements, shall not exceed One Million Dollars ($1,000,000) . This cap on expenditures includes, but is not limited to, all costs incurred or to be incurred due to litigation, hazardous waste remediation, relocation of existing tenants and provision of utilities to the Premises. Any such costs incurred as a result of the construction of the Improvements pursuant to the Lease which in aggregate exceed One Million Dollars shall become the obligation of the LESSEE. Costs incurred after the issuance of the Certificates of Completion shall be allocated between the parties as provided in the Lease. 06/23/91 EXHIBIT "D" 5409u/2460/39 Page 5 of 5 v � EXHIBIT "E" SCHEDULE OF PERFORMANCE Item of Performance Time for Performance 1. LESSEE submits to City and Completed LESSOR application for Conditional Use Permit and Coastal Development Permit (Exhibit "C, " Vl) 2. LESSOR completes review and Completed exercises reasonable diligence to cause City to approve Conditional Use Permit, Coastal Development Permit, and supplemental environmental impact report (Exhibit "C, " V3.) 3. LESSOR, LESSEE, and the City Within one hundred and exercise best efforts to eighty (180) days of the enter into a binding written date City approves the agreement with the holder of Conditional Use Permit, the Maxwell' s Lease, Coastal Development and any subtenants Permit, and Supplemental (Exhibit "C, " 43) EIR and all appeals are finally determined 4. LESSEE delivers Security Within ten (10) days Deposit (Lease, TB) after the Commencement Date 5. LESSEE submits to City and Within one hundred fifty LESSOR final building plans (150) days after the and specifications for later of the following: Improvements (Exhibit "C, " (i) the date on which all TSl and 3) of the permits and approvals referenced in paragraph 2 herein become "final"; or (ii) the date on which the City, LESSOR, and LESSEE enter into a binding written agreement with the holders of the Maxwell' s Lease and any subtenants 06/13/91 EXHIBIT "E" 5409u/2460/39 Page 1 of 3 6. LESSOR completes review Within thirty (30) days and exercises reasonable after submittal diligence to cause City to complete review of final building plans and speci- fications for Improvements (Exhibit "C, " TI) 7. LESSEE submits evidence Within one hundred eighty of financing (le0) days after City and (Exhibit "C, " T2) LESSOR approval of final building plans B. LESSOR reviews and approves Within 30 days of receipt (or disapproves) evidence of complete financing of financing (Exhibit "C, " package $2) 9. LESSEE delivers evidence Within thirty (30) days of insurance; Lease term after LESSOR approval commences; LESSOR causes of evidence of financing Title Company to deliver (and satisfaction or title policy to LESSEE; waiver of all of the LESSEE obtains building other Conditions to permit(s) and construction Commencement in Exhibit loan records (Lease, Is 4 "C") and 9; Exhibit "B, " 110; Exhibit "C, " V) 10. LESSOR makes funds available As of the date private for Public Parking construction loan funds Construction Payment but in no event prior to thirty (30) days before commencement of construction 11. LESSEE commences construct- Within thirty (30) days tion of Improvements (Lease, after Commencement Date 06) 12. LESSOR provides Utilities Prior to LESSEE' s to the Premises (Exhibit scheduled date for "B, " 12; Exhibit "D, " $II .2) commencement of construction 23. LESSEE completes construction Within twenty-four (24) of Improvements (Lease, months after commence- V6; Exhibit "D, " 4I . 1) ment of construction 14. LESSEE requests Certificate Within thirty (30) days of Completion (Lease, T6.c) after completion of construction 06/13/91 EXHIBIT "E" 5409u/2460/39 Page 2 of 3 15. LESSEE furnishes to Prior to issuance of Certi- LESSOR as-built plans ficate of Completion and itemized certified statement of construction costs (Exhibit "B" 1I3.a; Exhibit "D" TI .l(vii) ) 16. LESSOR shall either approve Within 30 days of request or disapprove Certificate of Completion (Lease, %6(c) ) It is understood that the foregoing Schedule of Performance is subject to all of the terms and conditions set forth in the text of this Lease. The summary of the items of performance in this Schedule of Performance is not intended to supersede or modify the more complete description in the text; in the event of any conflict or inconsistency between this Schedule of Performance and the text of this Lease, the text shall govern. Reasonable requests by Lessee for modifications in the above Schedule of Performance may be authorized in writing at the sole discretion of the Agency' s Executive Director. 06/13/91 EXHIBIT "E" 5409u/2460/39 Page 3 of 3 EXHIBIT "F" When Recorded Mail to: Redevelopment Agency of the City of Huntington Beach Attn: Executive Director/ City Administrator 2000 Main Street Huntington Beach, CA 92648 CERTIFICATE OF COMMENCEMENT DATE This certificate is executed , 199_ by the Redevelopment Agency of the City of Huntington Beach and Stanley M. Bloom, respectively Lessor and Lessee under that certain Lease dated , 1991 (the "Lease" ) . The purpose of this certificate is to establish a recorded date certain as the "Commencement Date" as that term is used and defined in the Lease. The parties hereto agree that the Commencement Date shall be 0 and authorize this certificate to be recorded in the Official Records of Orange County. Stanley M. Bloom Executive Director (Lessor) Redevelopment Agency of the City of Huntington Beach ("Lessor" ) 06/13/91 EXHIBIT "F" 5409u/2460/39 EXHIBIT "G" [RESERVED] [To Be Inserted] 06/13/91 EXHIBIT "G" 5409u/2460/39 EXHIBIT "H" SITE MAP [To Be Inserted] 06/13/91 5409u/2460/39 M EXHIBIT "I" MASTER LEASE I [To Be Inserted] E a 7 s 06/13/91 5409u/2460/39 i EXHIBIT "J" NONDISTURBANCE AND RECOGNITION AGREEMENT [To Be Inserted] 06/13/91 $409u/2460/39 ATTACHMENT 8 SUMMARY OF AGENCY OBLIGATIONS 5/28/91 SUMMARY OF AGENCY 12BLIGATIQNS BER5IDE LEAS—E—E 1) Lease the site from the City at a fair-market value of$5.29 million for a term of 55 years. 2) Provide a free and clear developable site e.g. absent of existing tenants, toxics, and with adequate utilities at a cost not to exceed $1 million. 3) Provide assistance to the developer for construction of 250 subterranean public parking spaces through: a) An Upfront payment of$4.0 million(less $1.25 million and less $I4,500 per space depending upon the number of spaces built) and b) A rent credit equivalent to 120 quarterly payments of$108,875 to amortize the difference in construction costs between structured parking and surface parking. ATTACHMENT 9 SUMMARY OF DEVELOPER OBLIGATIONS 5/28/91 SUMMARY OF DETELOPER OBLIGATION I!IERSIDE L A 1) Ground Iease the site from the Agency for 55 years. Rent to be paid as a percentage of gross restaurant sales, based on 2%- 3.75% of gross sales. 2) Developer to retain net parking revenues In order to finance $1.25 million of parking structure costs. 3) Pay all costs for operating and maintaining the parking structure. 4) Finance all offsite improvement costs, not specifically excluded. 5) Construct a 48,522 square foot restaurant complex contained within three restaurant structures including relocation of the existing Maxwell's Restaurant (15,000 sf); development of two new restaurant buildings (25,000 sf); and development of casual restaurant space (8,522 sf). 6) Construct an onsite parking structure with up to 611 spaces providing for up to 250 public beach parking spaces and up to 361 private restaurant parking spaces. 9 7) Increase access to the beach through the project with public plaza, stairways, promenades, and elevators. 8) At the City/Agency's exclusive option, provide grading, foundations, paving surfaces, retainer walls and stairways for the "Pier Plaza Area" up to a value of$300,000 in exchange for the first right of refusal on the ownership and operation of any commercial enterprises allowed in the area. 9) Developer to pay for 50% of the costs for an election regarding the lease of the site from the City to the Agency (estimated to be approximately $50,000). 8888r ATTACHMINT 10 SUMMARY REPORT 33433 f ATTACHMENT 1 STAFF REPORT-APPROVAL OF CONCEPTUAL PLAN r f l D , 3 REQUEST PQ REDEVELOPMENT�.GENCY ACTION J- ,, fk &JI Z. APPROVED BY CITY COUNCIL T fz i 9�11 k Cd p• 1910— ate February 20, 1990 od CM CaURK Submitted to: Honorable Chai=ian and Redevelop vnt Ag i EB By CITY CO UNC:ti• Submitted by: Paul E. Cook, k�xecitive Director �• 19�.s'— Prepared by: Keith B. Bohr, Redevelopment Specialist4=- G1IY CI.��tk - Subject: AMOVAL OF CiNC EMAL I EVELOPM NP PIAN 1a=41r, lum�� Consistent with Council Policy? [ ) Yes ( ) New Policy or Exception Statement of Issue, Recommendation, Analysis, Funding Source.Alternative Actions, Attachments: � OFTSSJE- • On January 17, 1989, the Agency directed staff to prepare an amended Pierside Village plan to eliminate the specialty/retail uses while retaining the restaurant uses (staff report attached) . Additionally, staff was authorized to negotiate with its operators for the rehabilitation of Maxwell's Restaurant. Approve the conceptual plan for development of the "Pierside Restaurants" which includes: • The developrent of two new restaurant pads - (25,000 sq.ft.) ; • Accorr=dations for the relocation of the existing Maxwell's Restaurant - (15,000 sq.ft.) ; • The development of a parking structure, including surface and sub =face parking for both bears and restaurant patrons; • The development of beach-related concessions, including approximately 5,000 sq.ft. of casual dining space; and • Authorize staff and the developer of Pierside to negotiate for the relocaticn and integration of Maxwn.1l's into the Pierside plan. fDYl�l c- I,- Ct On September 18, 1988, the City Council adopted a a "Pier Plaza" concept that calls for the development of a 2.1 acre "Pier Plaza" to be located between the base of the Pier and Pacific Coast Hig�Yway. Ar r ? tely one-half of Maxwell's Restaurant as it exists today lies within the adopted 2.1 acre footprint of this plan. As a result, the negotiations for the rehabilitation P 1011 tas of Niaxwell's has shifted to negotiations for the demolition and relocation of a new Ibxwell's within the proposed Pierside Restaurant development. The history of the Pierside project dates back to 1984 and is rare specifically outlined in the analysis of the attached staff report dated January 17, 1989. Briefly, the originally approved "Pierside Village" plan called for an 87,500 sq.ft. specialty/retail corplex to be located on the ocean side of Pacific Coast Highway between the existing Maxwell's PZestau`ant and the Lifeguard Headquarters. Ultimately, the plan received all necessary approvals, including the California Coastal Ca=ission. However, as the Main-Pier Redevelopment Plan further evolved and approved develcpnmt heights and densities were scaled down, staff re-analyzed the need for a specialty/retail conplex of the scope and magnitude originally envisioned for Pierside Village. As plamirg efforts continued, potential conflicts between the Pierside Village concept and the retail activity along Main Street began to be a source of concern. Ultimately, it was concluded that the Pierside Village concept should be dcumscalerd and directed away from a focus on retail activity and core towards food services. The currently proposed plans are the result of that shift in foams and reflect a refinement of that concept. , fUPDM SWRCE: None as a result of this action. �T1VE AMOW: 1) Deny approval of the Pierside Restaurants conceptual developwnt plan, and direct staff accordingly. 1) Staff report of January 17, 1989. 2) Conceptual Plan. PF)CIIW:1p 0139h CITY OF HUNTINGTON BEACH 2000 MAIN STREET CALIFORNIA 92648 OFFICE OF THE CITY CLERK January 17, 1990 Rutan & Tucker 611 Anton Blvd. , Suite 1400 Costa Mesa, CA 92628 Attn: Jeff Oderman, Esq. Enclosed is an executed copy of Negotiating Agreement between the Redevelopment Agency of the City of Huntington Beach and California Resorts International Inc. , which was approved on October 2, 1989. Connie Brockway City Clerk CB:bt Enc. ITdephon•:714-536-52V) CITY OF H UNTINGTON BEACH f 2000 MAIN STREET CALIFORNIA 92648 OFFICE OF THE CITY CLERK January 17, 1990 California Resorts International , Inc. 222 - 5th Street Huntington Beach, CA 92648 Attn: Uri Gati , President Enclosed is an executed copy of Negotiating Agreement between the Redevelopment Agency of the City of Huntington Beach and Califor d a Resorts International Inc. , which was approved on October 2, 1989. Connie Brockway City Clerk CB:bt Enc. Mlophone:714-536-62271 �� l4 CITY OF HUNTINGTON BEACH INTER-DEPARTMENT COMMUNICATION "wn woo"BEACH To Susan Hunt From Gail Hutton Redevelopment City Attorney Subject California Resorts Date January 16, 1990 Exclusive Negotiating _ Agreement Thank you for providing two signatures from California Resorts per our request. Attached is a copy of the approved agreement. The original is being transmitted to the City Clerk by copy hereof. G GAIL HUTTON !v[ City Attorney cc: City Clerk `W CERTIFIED RESOLUTION OF CALIFORNIA RESORTS INTERNATIONAL, INC. The undersigned, being the duly elected and qualified Secretary of California Resorts International, Inc. , hereby certifies that the following is a true and correct copy of resolutions adopted at a Special Meeting of the Board of Directors thereof held on August 1, 1989, and that they are in full force and effect and that there have been no changes thereto: RESOLVED that the President of this corporation, URI GATT, be and he is hereby authorized and directed to execute any and all documents on behalf of this corporation, which the r oration is required to execute in its ca_Wtv as Managing Dint venturer of Ca ornia Resor s Haseko Associates, in connection with any filings said joint venture is red to ma a with the a i ornia epar men o -Real Estate for the pro`ec as Pier b1cle -coiLony, including wi ou limitation, any applications, reports, certificates, declarations, contracts, deposit receipts, escrow instructions or agreements. IN WITNESS WHEREOF, I have hereuntq placed ry hand and affixed the seal of said corporation this l u day of August, 1989. LUBLINER, Secretary f Z:VP50:UIRSIS Z N:65"0CR Z I f