HomeMy WebLinkAboutCC AG PKT 2004-06-28 #U •
City of Seal Beach
Agenda Report
Date: June 28, 2004
To: Honorable Mayor a d City Council
From: John B. Bahorski
City Manager
Subject: Zoeter School History and Status Report
SUMMARY OF REQUEST:
At the request of City Council, staff was assigned the task of reviewing the Zoeter School
documents and providing a report to Council on the history of the purchase. This report
provides information to Council and the public on Zoeter School purchase based on a
review of the files available to staff. Due to the enormous volume of files related to
Zoeter School, staff worked diligently to distill down the documents so that Council and
the community could easily understand the transaction. It is important to review the
attached documents since they are the backbone of this complex transaction.
BACKGROUND:
History:
Staff has been able to recreate the history of the Zoeter School purchase through an
extensive review of the files. This report will hopefully answer many of the public's and
Council's questions. However, as staff discovered from reviewing these files, this project
spans 22 years, and has been impacted by numerous City Councils, making decisions
based upon factors relevant at the times the decisions were made; therefore, many of the
details of the acquisition have been lost. Staff believes the first discussion regarding the
purchase of Zoeter School began around 1982 when the Seal Beach School District
annexed with the Los Alamitos School District. In a July 1982 memorandum,
Councilmember Risner raised concerns about the future of Zoeter School and expressed
the basic motive for the purchase, which was " Zoeter School is critical in my opinion in
meeting the recreational needs of our citizens" (Attachment A). The need to preserve
Zoeter School for recreation purposes is a consistent theme throughout the documents
that span the 22 -year history of this site.
The Zoeter School site is actually composed of three parcels of land. Zoeter School is
comprised of 1) the commercial portion of property along Pacific Coast Highway, 2) the
1 Item U
parcel that contains the day care centers along 12` Street and 3) the parcel that is the
baseball field. During staff's review of this project, there was confusion due to the parcel
identifications changing from numbers to letters; however, regardless of the identification
the parcels are now under the control of the City and Redevelopment Agency.
Attachment B is a map that illustrates the three parcels that make up Zoeter School site.
During staff's review of the files, a memorandum was found that summarizes the types of
acquisition strategies used to secure the Zoeter site (Attachment C) .The following is a
summary of how the City and Agency secured the acquisition of the three parcels:
• The City of Seal Beach purchased parcel 3 commonly referred to as the baseball
field site. This purchase was funded by the City's General Fund and represented
about one -third of the site. There is no outstanding debt on Parcel 3.
• Parcel 2 or the portion of the site containing the day care facilities and playfield
was lease - purchased for the City by the Redevelopment Agency. Even though this
is City property, it was purchased using Redevelopment Tax increment funds. The
Agency is currently still paying off the lease purchase agreement. The lease
purchase agreement is between the City and Los Alamitos Unified School
District.
• The commercial parcel fronting PCH, or parcel 1, was purchased by the
Redevelopment Agency through a lease purchase agreement between the Agency
and Los Alamitos Unified School District.
For purposes of this report the primary focus is on the commercial portion of Zoeter
School, since this parcel is the subject of an "option to purchase" period. Staff has found
a memorandum dated October 16, 1987, that explains in a succinct fashion the original
deal points for the commercial portion of Zoeter School (Attachment D). Contained
within the memorandum, is the City Council direction on how the Zoeter School
acquisition was to be accomplished.
Council directed the City Manager to acquire the property "without use of City funds,
without additional taxes or assessments, without the sale of any existing City properties,
and with the retention of the existing Mary E. Zoeter School building." With those
parameters, the Redevelopment Agency was the only means of accomplishing the
Council direction following a failed attempt to purchase the land using general obligation
bonds. The Redevelopment Agency lease - purchased the property from the Los Alamitos
School District for $1,908,360 that was financed over a 25 -year period. The Agency then
agreed to a master lease with Gemtel Corporation for 55 years. It was assumed that the
revenues from the Gemtel lease would offset the purchase costs of the land, and at the
end of 55 years, the parcel would be "free and clear for a future City Council to
determine the best use of the asset ". It is worth noting that the initial 35 -year term has not
yet expired and the four five -year options remain in effect. In addition, the original
master lease with Gemtel contained a first right of refusal to purchase the property after
the termination of the lease. The master lease terms are still in effect and are a limiting
factor on the value of the property.
Staff has attached copies of the Purchase and Sale Agreement with the School District,
executed September 1987 (Attachment E), and the Master Lease executed between
Gemtel and the Redevelopment Agency in November 1987 (Attachment F). The Lease
Purchase Agreement between the School District and Redevelopment Agency is to be
paid off in 2011. As mentioned earlier in this report, the Master Lease is still in effect and
will not expire until 2042.
Essentially, in 1995 Gemtel became delinquent in the amount of $321,247 plus interest
and the Rodi Trust acquired the entire interest from Gemtel under the Master Lease. The
Master Lease was transferred from Gemtel the original Master Lease Holder, to Rodi
Family Trust. That was memorialized in the Third Amendment to the Master Lease
(Attachment G). Contained within that Third Amendment is a provision granting the
Rodi Family Trust an option to purchase the landlord's interest. The option period is for
six months beginning July 1, 2004 and ending December 31, 2004. Page 4 of the Third
Amendment explains in great detail how the purchase price is to be arrived at and the
process if the parties cannot agree on a purchase price. City Council should review this
section carefully because some members of the community have inquired about this.
Specifically, section (4) explains the appraisal process that is to be used to determine the
value of the landlord's interest. The City Council cannot change the option period or
establish a different purchase value using a different method other than what is allowed in
the Third Amendment to the Master Lease. At this time, the Rodi Family Trust continues
to hold the Master Lease and, if the option period is not acted upon, the terms of the
Master Lease will continue until the 55 -year lease ends in 2042.
Key Questions and Answers:
Staff has identified several key issues related to the Zoeter School transaction that need to
be clarified. In addition, members of the public have posed questions concerning the
Zoeter School transaction and staff will attempt to answer those questions. Staff has
assembled the documents necessary to provide an overview of the Zoeter School
transaction. In order to reduce the complexity of the responses to the questions, the
original documents have been attached to this report and are referenced as often as
possible.
Did the former City Manager Keith Till give special consideration to the Rodi
Family Trust by granting an option to purchase in the Third Amendment to the
Master Lease?
No! According to documents reviewed by staff, the negotiations with the Rodi Family
Trust began well before Former City Manager Till began his tenure with the City.
Discussions surrounding the option period began in August 1995 and Mr. Till did not
begin employment with the City until November 1995. The discussions on the Third
Amendment occurred during City Manager Bankston and Interim City Manager
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Shelver's tenure. Please review Attachment H that documents the fact that Former City
Manager Till did not have a role in granting an option to purchase.
Was the Redevelopment Agency Board aware of the option to purchase provision in
the Third Amendment?
Yes. It is highly unlikely the Agency Board was unaware of the option to purchase
provision and it appears the Agency Board was briefed on numerous occasions about the
negotiations taking place on the Third Amendment. On August 21, 1995, the Agency
Board was provided with a written memorandum that outlined the status of negotiations
with the Rodi Family Trust. According to the memorandum addressed to the
Redevelopment Agency Board, the option to purchase issue was discussed and
alternatives were provided to the Board. Staff strongly encourages City Council to review
this memorandum (Attachment I), because it not only explains why the Rodi Family
Trust was requesting an option to purchase period but also sheds light on why it made
sense for the City to agree to Rodi's request for an option to purchase.
Staff would like the Council to specifically review the following two excerpts from the
August 21, 1995 memorandum because it brings into focus the issues the Agency Board
was dealing with in 1995. The first excerpt relates to the option price issue:
"In order to assist in obtaining financing, the operator felt it necessary to have an option
to purchase the Agency's interest in the property at its fair market value. The Agency's
negotiators agreed to recommend the grant of an option, but only if the option could not
be exercised for approximately ten years giving the value of the property time to recover
from its present depressed level. The Agency's negotiators also sought to build in
mechanisms to guarantee that the purchase price could not be less than a specified
minimum."
Clearly, the option issue was needed due to financing concerns and it appears Agency
officials carefully thought about the future value of the property as well as abysmal land
values that existed in Southern California during the early 1990's. It does not appear that
the option to purchase provision was entered into without Agency Board knowledge or
lack of informed deliberation.
Staff in its review of the August 1995 document is struck by the following passage as it
relates to the value of Zoeter property.
"There is no legal requirement that the Agency protect against taking the book loss. On
the contrary, it is not uncommon for Redevelopment Agencies to take book losses in the
process of stimulating redevelopment. This project has already achieved the
redevelopment goals of preserving and rehabilitating the Zoeter School structure
and stimulating commerce and employment in the City." (Emphasis added)
Based on a review of the historical documents related to this transaction, this is an
accurate statement. Staff found numerous instances where Council and staff articulated
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the primary rationale for this transaction was saving these buildings and preserving open
space. Increasing the value of the site was a secondary concern to those involved in the
purchase of Zoeter School.
What are the unpaid balances on the Zoeter School Properties?
The Redevelopment Agency owes the Los Alamitos Unified School District $687,000 for
Parcel 1 (A) the commercial portion of Zoeter School. Parcel 2 (B &D) has an unpaid
balance of $765,000. Together the unpaid balance for Zoeter School property is
$1,452,000.
What is the annual payment paid to Los Alamitos Unified School District and what
was the lease payment received from the Rodi Family Trust in 2003?
The Redevelopment Agency in 2003 paid Los Alamitos School District $120,000 for
Parcel 1 (A) and $126,000 for Parcel 2 (B &D). Rodi Family Trust paid the Agency rent
of $207,000 in 2003.
Who owns the parcels that make up Zoeter School?
The baseball field and bleachers were purchased outright by the City of Seal Beach under
the Naylor Act. General Fund money was used to purchase this portion of the property.
A lease purchase agreement between the City and School District allowed the acquisition
of the child care center portion of the property and is being paid by the Redevelopment
Agency. Attachment J is the lease agreement that allowed the City to acquire the child
care portion of Zoeter School commonly identified as parcel 2 (B &D). This is a 25 -year
lease that is set to expire on December 2011. This lease agreement provides for an option
to purchase prior to 2011 (section 13.2). The City must exercise this option or the lease is
terminated. The agreement provides for a credit on the purchase price for the rent that has
already been paid to the City. The purchase price of parcel 2 (B &D) was $1,590,000.
Staff would recommend that the option be exercised immediately after the option to
purchase is exercised by the Rodi Family Trust.
The commercial portion of Zoeter School was purchased by the Redevelopment Agency
through a lease purchase agreement with the School District. Attachment E is a copy of
the purchase and sale agreement executed in September 1987. This note can be prepaid at
any time or will be paid in full by September 2011. This lease purchase agreement would
need to be satisfied concurrently with the sale of the property to the Rodi Family Trust
thus extinguishing the outstanding debt with the School District.
Why did the Redevelopment Agency enter into a 55 -year lease with Gemtel?
The community wanted to preserve the Parcel 1 (A) portion of the Zoeter School site and
staff was given the direction to acquire the property "without a tax increase, utilization of
an assessment district, or sale of existing real estate assets held by the City." In a
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memorandum dated May 5, 1987 (Attachment K), then City Manager Nelson reflected
upon the City Council direction and explained that, given that Council direction, people
were still interested in partnering with the City on the commercial portion of Zoeter
School.
As explained in the May 5, 1987 memorandum, the commercial portion of Zoeter was a
marginal project with risk given a 25 -year lease term; however, a 55 -year lease made the
project worth the risk. City Council should take note of the following statement by then
former City Manager Nelson explaining why this project made sense with a 55 -year
lease. " If the project succeeds, the City will have a valuable asset with ongoing revenues
it wouldn't otherwise have. If we fail, we have still controlled the development, saved the
Mary Zoeter Building, increased the City's tax base (property tax, sales tax and business
licenses tax), and lost only the potential and not out of pocket cash."
How will the purchase price be determined during the option to purchase period?
Within the Third Amendment to Master Lease section 5 (d) the purchase price is
explained in detail (Attachment G). The purchase price will be equal to the greater of the
fair market value of the Landlord's interest in the property, or the then unpaid principal
balance of the note and deed of trust encumbering the property in favor of the School
District. Council will recall when the Third Amendment was being negotiated with the
Agency in 1995, there was very real concern that the value of the land would be less than
what was owed when the option was exercised.
Why was the Zoeter School transaction so complex?
After reviewing the files, it becomes very apparent that the transaction was complex due
to three reasons. First, the negotiations with the School District were not simple and
required extensive discussions to determine a purchase price. Second, the financing
methods were made more difficult by the severe lack of revenues within the City. A
General Obligation Bond Election was attempted but failed to achieve the 2/3 vote
necessary for approval. In spite of that defeat, the City still moved forward to acquire the
site and was then forced to rely on lease purchase agreements and having the
Redevelopment Agency involved in the transaction. Third, after the transaction was
completed Gemtel defaulted on its lease obligations during the worst real estate
depression to hit Southern California. These three factors created the complex Zoeter
School history.
Why was the Redevelopment Agency involved in purchase of the commercial
portion of Zoeter School?
The City did not have the power to acquire Parcel 1 (A) for the sole purpose of private
development. The Redevelopment Agency on the other hand did have the authority to
acquire Parcel A for private redevelopment. As the files indicate, the City Council at the
time strongly wanted to preserve the site and retain the footprint of the school building.
6
What is the method for determining the value of the Landlord's interest?
Section 5 (d) (2 -6) of the Third Amendment (Attachment G) explains how the method of
determining value will occur. The short version is that if the parties are unable to agree
on a value, each party will then obtain an appraiser and the two appraisers will attempt to
set a value. If the two appraisers cannot agree, then a third appraiser will be hired and a
majority of the appraisers will then determine the value. If the majority of the appraisers
cannot agree, the three appraisals will be added together and their total divided by three
to determine the value. After the purchase price has been set, the parties will be notified
of the purchase price.
Can the City direct an appraiser to set a very high price to get the best deal for the
community?
No! Section 5 (d) (4) of the Third Amendment (Attachment G) contains a provision that
states " If, however, the low appraisal or high appraisal is more than 10% lower or higher
than the middle appraisal, any appraisal which differs from the middle appraisal by more
than 10% shall be disregarded." During the review of the files related to the Third
Amendment, it was apparent both parties in this transaction had a healthy respect for the
other's negotiating skills and that is why this type of process was developed to rely on
qualified, independent appraisers to determine value. In addition, the appraisers must be
MAI qualified with experience in commercial property in order to reduce the chance to
skew the value.
Can the City stop the option from being exercised?
No! According to the Third Amendment Section 5 (a) the option is solely at the tenant's
discretion so long as at the time when the purchase option is exercised there is no existing
default under the terms of the master lease and the tenant's interest in the master lease has
not been voluntarily or involuntarily assigned or transferred subsequent to the date of this
Third Agreement.
How long is the option period?
The option period is for the six -month period from July 1, 2004 to December 31, 2004.
How will the value of the property be determined?
The commercial portion of the Zoeter School property is constrained by a long -term
ground lease, which the master lessee will soon have an option to acquire. The value of
the property is based on the leased fee interest in the commercial portion of Zoeter
School. In order to measure the present worth of future net benefits of properties, the
industry has established three appraisal methods for processing market data into
indicators of value. Attachment L includes brief descriptions of the three appraisal
approaches. In 1999, the City had an appraisal conducted on the commercial portion of
the Zoeter property. Based on the lease conditions on the property, the appraiser used the
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income capitalization approach in setting the appraised value. In addition, the appraiser
also included a discounted cash flow analysis that included valuation of the fee simple
interest of the underlying land by the Sales Comparison Approach for comparison. Since
lease conditions have not changed since the last appraisal, it is more than likely that a
new appraisal will use this approach when developing the purchase price for Parcel 1 (A).
Conclusion:
Staff has reviewed the files related to Zoeter School and has provided to the City Council
the information discovered during that process. The Zoeter School transaction was time
consuming and complex. Looking back on the acquisition, the Council and staff did
everything possible to accomplish what the community desired. In the end, Zoeter School
and open space were preserved, the City controlled development of Zoeter, and it was
done as requested by Council without a tax increase, sale of other City assets or an
assessment district. Although much of the complexity of the transaction is lost to time,
our research indicates that the Council and staff did the best job they could under the
circumstances, constraints and limitations present at the time decisions were made.
FISCAL IMPACT:
No fiscal impact.
RECOMMENDATION:
Receive and file report.
ATTACHMENTS:
A. July 28, 1982 Memorandum
B. Map of the parcels
C. October 14, 1987 Memorandum
D. October 16,1987 Memorandum
E. Purchase and Sale Agreement with Los Alamitos School District Parcel A
F. Gemtel Master Lease
G. Third Amendment to Master Lease
H. Correspondence dated November 3, 1995
I. August 21, 1995 Redevelopment Agency report on Zoeter Place
J. Agreement between Los Alamitos School District and Seal Beach (Parcel B &D)
K. May 5, 1987 Memorandum on Zoeter School Acquisition Partners
L. Methodologies to Access Valuation of the Zoeter Property Parcel A
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ATTACHMENT "A"
July 28, 1982
MEMORANDUM
TO: Honorable Mayor and City Council _
FROM: Joyce Risner, Councilmember
REGARDING: City's Options Relative to Zoeter School
As you know, the Seal Beach School District is currently conducting reviews
relative to the future use of Zoeter School properties. As you are also
aware, Zoeter School is the site of a considerable amount of recreational
programs and activities.
It is my understanding that the Naylor Bill, AB 859, applies to the sale or
lease of surplus school district real property when the property has been
used for at least eight years for playground, playing field or other outdoor
recreational and open space purposes, and when there is no other available
publically -owned land in the vicinity of the site adequate to meet existing
and foreseeable needs of the community for playgrounds and field or other
outdoor recreational and open space purposes as determined by the public
agency which purposes to purchase or lease the site from the school district.
Under such conditions, it is my general understanding that the District
must usually first offer that portion of the site to the City or other
recreation /open space /park authority. Price is to be the school district's
price of acquisition adjusted by CPI plus the cost of improvements made
by the district, but in any event, not less than 25% of the fair market value
of the land. Leasing is at an amount not less than 1 /20th of the maximum sales
price adjusted annually by CPI. The District may of course not sell any portion
of a site and make it available for open space /recreation or may substitute
equivilent areas.
In addition it is my understanding that under Article 12, the District may sell
to the City the entire (or part) of Zoeter School apart from the Naylor Bill
provisions.
Zoeter School is critical in my opinion in meeting the recreational needs of
our citizens. Any possible or potential loss of the recreational uses of the
site should be critically examined by the community and this City Council as
to potential and practical alternatives.
In view of the present school district studies, the vote and possible consolidation
of the Seal Beach and Los Alamitos School Districts, and the recreational needs
of the City and its citizens, I am requesting that the City Attorney and City
Manager jointly prepare complete written reports relative to the Naylor Bill
and other laws effecting the future use of Zoeter School, particularly the
Agenda Item #U.
1
I
MEMORANDUM
July 28, 1982
Page Two
options open to the City upon declaration of the property by the District
as surplus, and feasible means to take advantage of such options for the benefit
of our citizens.
•
Joy R suer
Cou ilmember
JR /ci
cc: Allen J. Parker, City Manager
Greg Stepanicich, City Attorney
•
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ATTACHMENT "C"
October 14, 1987
M E M O R A N D U M
TO: Honorable Chair and Agency Members
FROM: Bob Nelson, Executive Director
SUBJECT: Status of Acquisition of Zoeter School Site
RECOMMENDATION: It is recommended that the Community
Redevelopment Agency Board receive this report for information.
BACKGROUND: The purchase or lease purchase of major portions of
the Zoeter School Site have been substantially completed. The
transactions have been divided into 3 elements:
1. The City of Seal Beach purchased one -third of the site,
consisting of most of the play field and bleachers, under
the'provisions of the Naylor Act. This purchase was funded
by General Fund monies set aside by City Council for this
purpose.
2. The City used the Community Redevelopment Agency as its
agent to lease - purchase the remainder of the play field and
the portion of the site on which the child care centers are
located. This lease purchase is being funded by
Redevelopment Tax Increment funds.
3. The City, again using the Community Redevelopment Agency, is
about to enter escrow to purchase the parcel fronting on
Pacific Coast Highway, containing the principle school
building. This purchase will be funded by revenues derived
from a public - private venture to develop the parcel for
commercial uses consistent with the C2 zoning on the site,
and providing for the retention and integration of the Mary
Zoeter School building into the development (See Item this
agenda).
A copy of the tentative parcel map is attached for information
and identification of the parcels. The escrow instructions to
carry out the purchase of the P.C.H. parcel are still in draft
fore.
:ea ELSON
Executive Director
Attachment
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€NDA lTEi ., . .� .�
ATTACHMENT "D"
262
C c' dpi /q ;/92
AfEE r/
October 16, 1987
M E M O R A N D U M
TO: Honorable Chair and Members of the Board
FROM: Bob Nelson, Executive Director
SUBJECT: Proposed Master Lease For Zoeter School Site
RECOMMENDATION: It is recommended that the Agency Board approve
proposed draft Master Lease, dated September 22, 1987, subject to
non - substantive revisions as may be determined by the Agency
Counsel and Executive Director. The proposed lease is between
the Redevelopment Agency of the City of Seal Beach ( "Landlord ")
and Gemtel Corporation, a California Corporation, and Dana
MacKay, an individual (jointly "Tenant ") for the development of a
retail commercial shopping center on the Zoeter School Site
parcel fronting on Pacific Coast Highway.
BACKGROUND: The City Council, City of Seal Beach, has decided to
acquire the Zoeter School Site parcel fronting on Pacific Coast
Highway at 12th Street as a long -term future asset. The City
Council directed that the acquisition be accomplished without use
of City funds, without additional taxes or assessments, without
sale of any existing City properties, and with the retention of
the existing Mary E. Zoeter School building. The method selected
to achieve this goal with the constraints imposed is to use the
Redevelopment Agency to enter into a joint public - private
venture, utilizing private capital to fund acquisition by
development of the property. An additional direction was given
to staff that clear title to the property was to pass to the City
at a future date.
By working with a private partnership, the Redevelopment Agency
will be able to acquire the $1,908,360 parcel from the Los
Alamitos Unified School District, lease the property for
development, and thus generate revenues from the development
lease to fund the purchase costs. The lessee /tenant will fund all
improvement costs. By separate agreement with the School
District, the purchase will be financed over a 25 -year period.
The development lease will provide increasing revenues to the
Agency during the purchase period, sufficient to'cover the
purchase costs. Once the purchase is complete, the lease
revenues will be available for Agency or City purposes as
determined by the City Council. In 55 years, the parcel will be
free and clear for a future City Council to determine the best
use of the asset.
Attached to this memorandum is an outline of the proposed master
lease between the Agency and the Gemtel Corporation and Dana
MacKay. Copies of the 60 -page draft Master Lease, dated
September 22, 1987, have been provided to each Agency Board
member. A copy is available for the public to review in the City
Manager's office. All of the "deal points" of the proposed lease
AGENDA :lT
have been negotiated and are included in the draft. There are
some minor points still being discussed which relate to
legalities of how present unknowns which may occur in the future
are to be handled.
The lease generally provides for:
(1) The development of a retail commercial center meeting
all requirements of the C -2 zoning presently on the
property and meeting all other applicable City codes.
Improvements to be constructed will have a minimum
value of $1,000,000. The commercial center will be
approximately 25,000 square foot in gross area with
parking as required by City codes. The Agency will
provide an easement for additional parking on the
adjacent parcel if required to meet code.
(2) The Mary Zoeter School building will be retained and
integrated into the development. Every effort has been
made to insure the preservation of the building,
including attempts to predict future occurrences. The
building is now 53 years of age and does not meet
current building codes. All new construction and
rehabilitation will meet code.
(3) The proposed lease has an initial term of 35 years with
four additional successive 5 -year option periods, for a
potential full term of 55 years. There is a "first
right of refusal" provision should the City Council
decide to continue a retail commercial use of the
property after termination of this lease. The 35 -year
term with option is appropriate to fully amortize the
purchase and construction costs and to provide a
reasonable return on investment.
(4) Lease revenues to the Agency will be $11,175,000 over
the initial 35 -year term. It is estimated that the
total lease revenues during the four 5 -year option
periods will exceed $18 million. The lease revenues
should exceed $1.2 for each year of the last 5 -year
option period.
(5) The proposed lease contains provisions for handling
factors unknown at present which might arise in the
future such as default by either party and natural
disaster.
Gemtel Corporation and Dana MacKay were selected after
demonstrating the qualifications and financial abilities needed
for a successful project. The staff had extensive contacts with
a number of developers, but only 2 developers would commit to
preserving the Mary E. Zoeter School building. Gemtel /MacKay
presented the stronger qualifications of the two in restoring
historic buildings and developing and managing small commercial
centers. Gemtel is currently restoring the Huntington Hotel in
Pasadena and has commercial developments in the cities of Pinole
and Fairfield, California. MacKay has small commercial
renovations in Redondo Beach, San Dimas, Torrance, San Bernardino
and other locations in Southern California, Utah and Idaho.
Statements of qualifications and financial references are on file
the City Manager's office.
v
BOB NEL ON
Executive Director
RN /gkb
Attachments
•
ZOETER GEMTEL /DJM LEASE OUTLINE
(Draft dated 9/22/87)
This is is a master lease between the Redevelopment Agency of the
City of Seal Beach ( "Landlord ") and Gemtel Corporation and Dana
MacKay, an individual, (jointly, "Tenant ") for Zoeter School Site
parcel fronting on Pacific Coast Highway at 12th Street,
including the main building and right to construct a parking lot
on the adjacent parcel on 12th Street.
Section 1. Definitions
Section 2. Lease of Premises and Parking Lot.
Section 3. Term. The initial term is 35- years, commencing after
certain conditions precedent are satisfied or waived:
a. Removal of asbestos.
b. Tenant's receipt of building permit to construct a
retail shopping center on the premises.
c. In the event City acquires a lease -hold interest in
Premises, receipt from Landlord of a nondisturbance
agreement.
d. Option to extend: Four additional successive periods
of 5 -year each.
Section 4. Annual Rent. Payable in equal monthly installments
on first day of month.
Years 1 -5 $180,000
Years 5 -10 $220,000
Years 11 -15 $260,000
Years 16 -20 $300,000
Years 21 -25 $350,000
Years 26 -30 $425,000
Years 31 -35 $500,000
Extended Term Rent: The annual rent payable during each
extended term shall be determined by multiplying the annual rent
payable during the immediately preceding five -year period by a
fraction, the numerator of which is the CPI Adjustment Index and
the denominator of which is the CPI Base Index, however the
annual rent shall not be less than the preceding annual rent nor
exceed 125% of the preceding annual rent.
Section 5. Taxes. Tenant to pay taxes.
Section 6. Use of Premises. The premises shall be used for a
retail commercial shopping center and related uses. Tenant shall
not use or permit the use of premises in any manner which creates
a nuisance or violates any law.
Section 7. Improvements; Construction. Cost of all improvements
to be paid b' t.srsnt. Value of improvements to be not less than
$1,000,000. Improvement plans subject to City approval, both as
landlord and through code enforcement. Tenant to complete
construction with reasonable diligence.
Section 8. Maintenance and Repairs. City to not have any
responsibility to maintain premises.
Section 9. Utilities and Services. Tenant's responsibility.
City warrants that services are available.
Section 10. Alterations and Signs. City codes.
Section 11. Indemnity and Exculpation; Insurance. Industry
accepted standard terms and conditions. This section outlines
manner in which proceeds are handled in event of destruction of
improvements.
Section 12. Destruction. Provisions of this lease govern.
a. If destruction of School Building occurs during first
25- years, and extent of damage is 30% or less if its
then replacement value, tenant shall repair and restore
the School Building. If extent of damage exceed 30 %,
tenant shall restore School Building to substantially
the same condition, or construct new improvements as
approved by City. Any destruction shall not terminate
this lease.
b. If destruction of School Building occurs after first
25- years, tenant may elect to terminate lease within 6-
months of date of destruction.
c. This section also covers how casualty insurance
proceeds will be handled.
Section 13. Condemnation. Provisions of this lease govern. The -
rights of both parties are set forth in so far as can be foreseen
and provisions are made for the unknown.
Section 14. Assignment, Subletting and Encumbering. Specific
provisions are established for assignment with City approval.
This lease is considered a "Master Lease" and provision is made
for subleases. Tenant shall have the right to encumber or assign
its interest by a first or second leasehold encumbrance in favor
of a lender.
Section 15. Financing Provisions. Rights of lenders set forth.
Section 16. Defaults and Remedies. Defaults and remedies are
set forth. The parties agree that it would be extremely
difficult or impracticable to determine the damages Landlord
would suffer as a result of any default by tenant. Tenant shall
deposit an amount that represents a reasonable estimate of such
damages. In case of default by tenant, City's remedies shall be
limited to realizing upon tenant's interest in this lease and the
deposit with accumulated interest. Tenant shall be liable for
any act which would constitute "waste" of the premises.
Section 17. Surrender and Landlord's Entry. Standard terms.
Section 18. Notices. Standard terms.
Section 19. Quiet Possession. Standard terms.
Section 20. Rights of First Refusal. If City decides to
continue retail commercial use or to sell property after
termination of lease, tenant has right of first refusal for two
years.
Section 21. Subordination. If Agency acquires a leasehold
interest through a lease - purchase with LAUSD, rather than
purchase the property, than parties acknowledge that this lease
is subordinate to the Premises Head Lease with LAUSD.
Section 22. General Provisions. Standard terms.
Exhibits:
A Legal Description of Premises
B Site of Plan of Premises
C Legal Description of Parking Lot
D Parking Easement Agreement
ATTACHMENT "E"
•
T
RICHARDS, WATSON & GERSHON
ATTORNEYS AT LAW
A PROFESSIONAL CORPORATION
RICHARD RICHARDS MICHAEL JENKINS THIRTY - EIGHTH FLOOR
GLENN R. WATSON WILLIAM B. RUDELL
ROBERT G. BEVERLY DAVID L. COHEN 333 SOUTH HOPE STREET
HARRY L. GERSHON TERESA R. TRACY LOS ANGELES, CALIFORNIA 90071-1469
DOUGLAS W. ARGUE OUINN M. BARROW
MARK L. LAMKEN COLEMAN J. WALSH, JR. December 4, 1987 (213) 626-8484
ARNOLD SIMON CAROL W. LYNCH
LEE T. PATERSON JOHN A. BELCHER
RICHARD H. DINEL JEFFREY A. RABIN CABLE ADDRESS
ERWIN E. ADLER MARSHA JONES MOUTRIE RICHWAT
DAROLD D. PIEPER CHARLES F. TIMMS, JR.
FRED A. FENSTER GREGORY M. KUNERT
ALLEN E. RENNETT SCOTT WEIBLE TEL (2 PIERS
STEVEN L. DORSEY DANIEL P. TORRES 38TH FLOOR (213) 626-0078
WILLIAM L. STRAUSZ MICHELE BEAL BAGNERIS 40TH FLOOR (213) 617 -1141
ROBERT M. GOLDFRIED MICHAEL 8. TANNATT
ANTHONY B. DREWRY ROBERT 0. SOPER
S7296-002
MITCHELL E. ABBOTT ROBERT C. CECCON
TIMOTHY L. NEUFELD BETH A. SHENFELD
STEVEN A. BROILES GINA M. DE GENNARO
ROBERT F. DE METER JONATHAN R. DAVIS •
GREGORY W. STEPANICICH KEVIN G. ENNIS
ROCHELLE BROWNE JANET H. BREYER
DONALD STERN ROBIN D. HARRIS
City of Seal Beach
211 8th Street
Seal Beach, CA 90740
Attention: Joanne Yeo
City Clerk
Re: Zoeter School Purchase
Dear Joanne:
Enclosed for your files is one fully executed copy
of the Purc .e and Sale A•reemen and Escrow Instruc-
tj_ons. between the School n i st r ct ,and the ewA..l nnm a
Ate-. If you need an extra copy, please let me know _
since we have some extras. -
Very truly yours,
A
ALLEN E. RENNETT
AER:jp
Encl.
(
L_
I
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
Commerce Escrow Company
1545 Wilshire Blvd., Suite 600
Los Angeles, California 90017
Attn: Mark Minsky
September 1, 1987
THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
( "Agreement ") entered into between the Los Alamitos Unified
School District ( "Seller "), and the Seal Beach Redevelopment
Agency ( "Buyer "), constitutes both an agreement to purchase and
sell real property and escrow instructions directed to Commerce
Escrow Company ( "Escrow Holder ") in its capacity as escrow holder
and hereby establishes an escrow ( "Escrow ") to accommodate the
transaction contemplated hereby.
TERMS. AND CONDITIONS
1. Purchase and Sale.
Seller hereby agrees to sell to Buyer, and Buyer
agrees to buy from Seller, on the terms and conditions herein-
after set forth, the real property (the "Property ") described in
Exhibit A attached hereto and incorporated herein by this
reference.
2. Purchase Price.
The purchase price for the Property to be paid by
Buyer is the sum of One Million Nine Hundred Eight Thousand Three
Hundred Sixty and 00 /100 Dollars ($1,908,360.00) (the "Purchase
Price "), which sum shall be payable as follows:
(a) Down Payment. Seventy Six Thousand Three
Hundred Thirty Four and 40/100 Dollars ($76,334.40) shall be
payable in cash through the Escrow at the Close of Escrow.
(b) Balance. Buyer shall deliver to Seller
through Escrow at the Close of Escrow Buyer's promissory note
(the "Note ") in the principal amount of One Million Eight Hundred
Thirty Two Thousand Twenty Five and 60/100 Dollars
($1,832,025.60), in the form attached hereto as Exhibit "B ",
representing the balance of the Purchase Price. The Note shall
be secured by a Deed of Trust (the "Deed of Trust ") encumbering
the Property, in form reasonably acceptable to Buyer and Seller.
The Deed of Trust shall include provisions that:
(i) the beneficiary may at its election declare all
sums under the Note immediately due and payable if the
zoning of the Property is changed to a classification other
than C -2 without the written consent of the beneficiary,
which consent shall not be unreasonably withheld;
(ii) if Buyer leases all or any portion of the Property
and the lessee or any leasehold lender requests notice of
default and notice of sale pursuant to California Civil Code
§2924b (or any successor statute), then upon a default under
the Deed of Trust the beneficiary shall give notice to such
lessee or leasehold lender as required by §2924b (or any
successor statute) and will permit such lessee or leasehold
lender to cure the default under the Deed of Trust within
the time period specified in subdivision (e) of §2924b (or
any successor statute); and
(iii) If either (A) the annual payments under a bona
fide arm's- length lease of the Property equal or exceed the
annual payment due under the Note for each comparable
period, or (B) the trustor provides the beneficiary with
acceptable guarantees or other assurances that the
beneficiary will receive annual payments not less than the
annual payment due under the Note for each comparable
period, then the beneficiary will upon request execute a
nondisturbance agreement, providing that if the beneficiary
acquires the trustor's fee interest in the Property, whether
by foreclosure, deed in lieu of foreclosure or otherwise,
the beneficiary will recognize the tenant and will not
disturb the tenant's possession of the Property under such
lease so long as the tenant is not in default of its
obligations under the lease.
3. Title and Title Insurance.
Upon the opening of escrow, Escrow Holder shall
order from Ticor Title Insurance Company ( "Ticor ") a preliminary
title report for the Property (the "Preliminary Title Report ").'
Escrow Holder shall also order copies of all instruments iden-
tified as exceptions on said Preliminary Title Report. Upon
receipt of the foregoing, Escrow Holder shall deliver these
instruments and the Preliminary Title Report to Buyer, and a copy
of the Preliminary Title Report to Seller. Title to the Property
shall be insured at the Close of Escrow by a CLTA Joint Protec-
tion Policy of Title Insurance in the amount of the Purchase
Price (the "Policy "). The Policy provided for pursuant to this
Section shall insure Buyer's fee interest in the Property and
Seller's Deed of Trust free and clear of all liens, encumbrances,
restrictions, and rights -of -way of record, subject only to the
following permitted conditions of title ( "Permitted Title Excep-
tions "):
-2-
871008 aer A205.JAR 2
(a) The applicable zoning, building and develop -
ment regulations of any municipality, county, state or federal
jurisdiction affecting the Property;
(b) Those exceptions approved by Buyer (which
approval will not be unreasonably withheld) within ten (10)
business days after the date Buyer receives the Preliminary Title
Report and the copies of all instruments noted as exceptions
therein. If Buyer unconditionally disapproves any exceptions,
the escrow shall automatically terminate, and this Agreement
shall be of no further force or effect. If Buyer conditionally
disapproves any exceptions, then Seller shall use Seller's best
efforts to cause such exceptions to be removed by the Close of
Escrow. If such conditionally disapproved exceptions are not
removed by the Closing Date, Buyer may, at Buyer's option, either
(i) accept the Property subject to such encumbrances, and the
cost of releasing the Property from any monetary encumbrances
shall be paid from the Down Payment, or (ii) terminate the Escrow
and receive a refund of all funds deposited into Escrow, and this
Agreement shall thereupon be of no further force or effect; and
(c) The Deed of Trust.
4. Deposit of Documents in Escrow.
(a) Seller hereby covenants and agrees to deliver
to Escrow Holder prior to the Closing Date, for disbursement as
hereinafter provided, the following instruments and documents,
the delivery of each of which shall be a condition of the Close
of Escrow:
(i) A Grant Deed in customary form duly
executed and acknowledged by Seller, granting and conveying to
Buyer good and marketable title to the Property; and
(ii) Such proof of Seller's authority and
authorization to enter into this transaction as First American
Title Insurance Company may reasonably require in order to issue
the Policy.
(b) Prior to the Close of Escrow, in addition to
delivering Buyer's certificate of acceptance to be attached to
the Grant Deed, Buyer shall deliver to Escrow for disbursement as
hereinafter provided, the following documents and instruments,
the delivery of which shall be a condition of the Close of
Escrow:
(i) The Note duly executed.
(ii) The Deed of Trust duly executed and
acknowledged.
-3-
871008 aer A205.JAR 2
5. Authorization to Record Documents and Disburse
Funds.
Escrow Holder is hereby authorized to record the
Grant Deed and the Deed of Trust documents and disburse the funds
and documents called for hereunder upon the Close of Escrow, pro -
vided each of the following conditions has then been fulfilled:
(a) Ticor can issue the Policy in favor of Buyer
with liability equal to the Purchase Price, showing the Property
vested in Buyer subject only to the Permitted Title Exceptions.
(b) Escrow Holder shall have received Buyer's
notice of approval or waiver of all of the contingencies to
Buyer's obligations hereunder, as provided for in Section 11,
within; and
(c) Buyer and Seller shall have deposited in
Escrow the documents required pursuant to Section 4 and Buyer
shall have deposited in Escrow the Down Payment as provided in
Section 2 (a) .
Unless otherwise instructed in writing, Escrow Holder is author-
ized to record at the Close of Escrow any instrument delivered
through this Escrow if necessary or proper for issuance of the
Policy referred to in Section 3, above.
6. Opening and Closing of Escrow.
For purposes of this Agreement, Opening of Escrow
shall mean the date on which Escrow Holder shall have received
executed counterparts of this Agreement from Buyer and Seller.
Close of Escrow shall be the date upon which the Grant Deed to
the Property to Buyer is delivered and recorded in the Official
Records of the County of Orange. The Closing Date and the Close
of Escrow shall occur not later than five (5) business days after
the later of (a) the date Seller certifies to Buyer in writing
that all asbestos has been removed from the Property, as required
by Section 8 hereof, and (b) Buyer has inspected the Property to
confirm that the asbestos has, in fact, been removed. The
Closing Date may be modified only upon the mutual agreement of
the parties communicated in writing to the Escrow Holder by each
of the parties.
7. Escrow Charges and Prorations.
(a) Buyer and Seller shall each pay one -half
(1/2) of the escrow fees and Escrow Holder's customary out -of-
pocket expenses for messenger services, long distance telephone,
etc. Seller shall pay for the cost of the Policy and the
Preliminary Title Report. If the Escrow shall fail to close
-4-
871008 aer A205.JAR 2
through no fault of either party, each party shall pay one -half
of any Escrow cancellation charges.
(b) Because both Buyer and Seller are public
agencies, this transaction will not involve recording charges,
documentary transfer taxes or prorations.
8. Condition of Property; Removal of Asbestos.
Seller agrees to cause all asbestos located within
the improvements on the Property to be removed at Seller's cost
and expense no later than December 1, 1987. Seller shall deliver
to Buyer a written certification that all such asbestos has been
removed promptly following the completion of the removal of such
asbestos. Except for the foregoing covenant of Seller to remove
all asbestos from the Property, Buyer is purchasing the Property
in its "as is" condition as of the Close of Escrow, subject to
the provisions of Section 10 hereof.
9. Inspections.
Upon prior notice to Seller, Buyer and its
attorneys, accountants and other agents shall have the right to
enter upon the Property prior to the Close of Escrow to make
inspections and other examinations of the Property and the
improvements thereon, including the right to perform soil and
geological tests of the Property. Buyer shall indemnify and hold
Seller and the Property free and harmless from and against any
liability or loss arising as a result of any such entry.
10. Destruction.
If, prior to the Close of Escrow, any part of the
improvements on the Property are damaged or destroyed by fire or
other casualty, Seller shall assign and turn over, and Buyer
shall be entitled to receive and keep, all insurance proceeds
payable with respect to such destruction, and the parties shall
proceed to the closing pursuant to the terms hereof, without
modification of the terms of this Agreement and without any
reduction in the Purchase Price.
11. Buyer's Contingencies.
The Close of Escrow and Buyer's obligation to
consummate the purchase of the Property shall be contingent upon
and subject to written notice to Escrow Holder by Buyer of the
occurrence of all of the following (or Buyer's written waiver
thereof, it being agreed that Buyer can waive any or all such
contingencies) on or before the dates specified below or, if no
date is specified, prior to the Closing Date:
-5-
871008 aer A205.JAR 2
(a) Removal of all asbestos from the Property to
the satisfaction of buyer; and
(b) Issuance in favor of Buyer of the Policy with
liability equal to the Purchase Price showing Buyer's fee
interest in the Property subject only to the Permitted Title
Exceptions.
12. Default.
In the event of a breach or default under this
agreement by either Buyer or Seller which is not cured within 5
days after written notice thereof, the non - defaulting party shall
have the right to terminate the Escrow by delivering written
notice thereof to the defaulting party and to Escrow Holder.
Such termination of the Escrow by a non - defaulting party shall be
without prejudice to the non - defaulting party's rights and
remedies at law or equity.
13. Notices.
All notices and demands shall be given in writing
by certified mail, postage prepaid, and return receipt requested,
or by personal delivery. Notices shall be considered given upon
the earlier of (a) personal delivery or (b) two (2) business days
following deposit in the United States mail, postage prepaid,
certified or registered, return receipt requested. A copy of all
notices shall be sent to Escrow Holder. Notices shall be
addressed as provided below for the respective party; provided
that if any party gives notice in writing of a change of name or
address, notices to such party shall thereafter be given as
demanded in that notice:
BUYER: Seal Beach Redevelopment Agency
211 Eighth Street
Seal Beach, California 90740
Attn: Agency Administrator
COPY TO: Richards, Watson & Gershon
333 So. Hope St., 38th F1.
Los Angeles, California 90071
Attn: Gregory W. Stepanicich
SELLER: Los Alamitos Unified School District
10293 Bloomfield Street
Los Alamitos, California 90720
COPY TO: Clayton H. Parker, Esq.
Parker and Covert
1901 East Fourth Street, Suite 312
Santa Ana, California 92705
-6-
871008 eer A205.JAR 2
ESCROW HOLDER: Commerce Escrow Company
1545 Wilshire Boulevard, Suite 600
Los Angeles, California 90017
Attn: Mark Minsky, Vice President
14. Broker's Commissions.
Seller represents and warrants to Buyer that
Seller has used no broker, agent, finder or other person in
connection with the transaction contemplated hereby to whom a
brokerage or other commission or fee may be payable. Buyer
represents and warrants to Seller that Buyer has used no broker,
agent, finder or other person in connection with the transaction
contemplated hereby to whom a brokerage or other commission or
fee may be payable. Each party indemnifies and agrees to defend
and hold the other harmless from any claims resulting from any
breach by the indemnifying party of the warranties, representa-
tions and covenants in this Section.
15. Time of Essence.
Seller and Buyer hereby acknowledge and agree that
TIME IS STRICTLY OF THE ESSENCE with respect to each and every,
term, condition, obligation and provision herein and the failure
to TIMELY and FULLY perform any of the terms, conditions, obliga-
tions or provisions hereof by Buyer or Seller shall constitute a
material breach of and a default under this Agreement.
16. Amendments.
Any amendments to this Agreement shall be effec-
tive only when duly executed by Buyer and Seller and deposited
with Escrow Holder.
17. Miscellaneous
(a) Counterparts. This Agreement may be executed
simultaneously or in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and
the same Agreement.
(b) Applicable Law. This Agreement shall be con-
strued and interpreted under, and governed and enforced according
to the laws of the State of California.
(c) Entire Agreement. This Agreement supersedes
any prior agreement, oral or written, and together with the
Exhibits hereto and any agreements delivered pursuant hereto,
contains the entire agreement between Buyer and Seller on the
subject matter hereof. No subsequent agreement, representation
or promise made by either party hereto, or by or to any employee,
officer, agent or representative of either party, shall be of any
-7-
871008 aer A205.JAR 2
effect unless it is in writing and executed by the party to be
bound thereby. No person is authorized to make, and by execution
hereof Seller and Buyer acknowledge that no person has made,. any
representation, warranty, guaranty or promise except as set forth
herein; and no agreement, statement, representation or promise
made by any such person which is not contained herein shall be
valid or binding on Seller or Buyer.
(d) Further Documents. Each party will, wher-
ever and as often as it shall be requested by the other party,
execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such further instruments and docu-
ments, including escrow instructions, as may reasonably be neces-
sary in order to complete the sale, conveyance and transfer
herein provided and to do any and all other acts and to execute,
acknowledge and deliver any and all documents as may be requested
in order to carry out the intent and purpose of this Agreement.
(e) Remedies Not Exclusive and Waivers. No
remedy conferred by any of the specific provisions of this Agree-
ment is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise. The election of
any one or more remedies shall not constitute a waiver of the
right to pursue other available remedies.
(f) Attorneys' Fees. If either party hereto
incurs attorneys' fees in order to enforce, defend or interpret
any of the terms, provisions or conditions of this Agreement or
because of a breach of this Agreement by the other party, the
prevailing party, whether by suit, negotiation, arbitration or
settlement shall be entitled to recover reasonable attorneys'
fees from the other party.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.
LOS ALAMITOS UNIFIED SCHOOL DISTRICT
( "Se11g " )
f
By 1
J f LA <( It -11-07
Ronald W. Murrey
Director of Busines a Support Services
By
-8-
871008 aer A205.JAR 2
SEAL BEACH REDEVELOPMENT AGENCY
( "Buyer ")
By ji
r 77.zse.Arir
, Chairperson
Attest:
7 I
a � it Clerk / I W OO� C L 4
/ ryes
X 14 ai esaeed°
•
r'
-9-
871008 aer A205.JAR 2
•
LIST OF EXHIBITS
EXHIBIT A Legal Description
EXHIBIT B Promissory Note
871008 aer A205.JAR 2
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES'
A subdivision of a portion of Blocks 210 and 211, Bay View Tract
in the City of Seal Beach, County of Orange, State of California,
a map of which was recorded in Book 8, Page 91, Miscellaneous
Maps, Records of Orange County, California, described as follows:
Commencing at the centerline intersection of Pacific Coast Highway
and 12th Street as shown on Parcel Map No. 84 -1004, Parcel Book
203, Pages 49 & 50, Records of Orange County; thence along the
centerline of said 12th Street, south 31'17'10" west 50.00 feet;
thence north 58'42'45" west 30.00 feet to the most easterly corner
of Lot 66 in Block 211 as shown in said Bay View Tract, said
corner being in the westerly line of 12th Street and the true
point of beginninq; thence south 31'17'10" west 180.00 feet;
thence north 58'42'45" west 427.51 feet to the easterly line of
10th Street alley in Block 210; thence north 31'16'19" east 180.00
feet to the most northerly corner of Lot 57 in Block 210, said
corner also being in the southerly line of Pacific Coast
oHig Highway
(North Avenue as shown in said Bay View Tract); thence
58'42'45" east along said southerly line of Pacific Coast Highway
427.55 feet to the point of beginning.
sealbch.lgl
PROMISSORY NOTE
SECURED BY DEED OF TRUST
$1,832,025.60 Seal Beach, California September 1, , 1987
FOR VALUE RECEIVED, the undersigned (hereinafter referred
to as "Maker "), hereby promises to pay to the order of the Los
Alamitos Unified School District ( "Holder "), without deduction or
offset, the sum of One Million Eight Hundred Thirty Two Thousand
Twenty Five and 60/100 ($1,832,025.60), together with interest on the
unpaid principal balance determined as follows: (a) through
December 31, 1987, at the rate of 7.84% per annum; (b) thereafter,
during each calendar year, at a rate equal to the average daily
commingled interest rate earned by funds in the general fund of the
Orange County, California, Treasury during the preceding calendar
year, as such Index Rate is determined by the Treasurer of the County
of Orange; provided the interest rate hereof shall at no time be less
than 5.84% per annum. Maker shall pay all accrued interest annually,
on the anniversary date of this Note. In addition, Maker shall make
annual principal payments in the sum of Seventy -Six Thousand Three
Hundred Thirty Four and 40/100 Dollars ($76,334.40) each, commencing
on the first annual anniversary date of this Note, to the end that
all sums of principal and accrued interest shall be paid in full on
or before the twenty- fourth (24th) annual anniversary date of this
Note.
Maker may prepay, without penalty or premium, any amount
payable under this Note prior to the due date thereof. Any amounts
so paid shall first be credited against accrued interest and the
balance shall be credited against principal.
Should default be made in the payment of any installment of
interest, principal, or any other sums due hereunder, and if the
default is not cured within ten (10) days after receipt of written
notice of such delinquency, then, at Holder's option, all sums owing
hereunder shall become immediately due and payable.
If any sum due under this Note is not paid when due, the
undersigned hereby covenants and agrees to pay all costs and expenses
of collection, including without limitation reasonable attorney's
fees.
This Note is secured by a Deed of Trust of even date here-
with executed by Maker in favor of Ticor Title Insurance Company of
California, as Trustee.
SEAL BEACH REDEVELOPMENT AGENCY
By
, Chairperson
Attest:
City Clerk
EXHIBIT "B"
870922 sas A206.JAR 1
ATTACHMENT "F"
RICHARDS, WATSON & GERSHON
ATTORNEYS AT LAW
A PROFESSIONAL CORPORATION
RICHARD RICHARDS MICHAEL JENKINS THIRTY- EIGHTH FLOOR
GLENN R. WATSON WILLIAM B. RUDELL
ROBERT G. BEVERLY DAVID L. COHEN 333 SOUTH HOPE STREET
•
HARRY L. GERSHON TERESA R. TRACY LOS ANGELES, CALIFORNIA 90071 -1469
DOUGLAS W. ARGUE OUINN M. BARROW
MARK L. LAMKEN COLEMAN J. WALSH, JR. (213) 626 -8484
ARNOLD SIMON CAROL W. LYNCH
LEE T. PATERSON JOHN A. BELCHER CABLE ADDRESS
RICHARD H. DINEL JEFFREY A. RABIN February 9, 1988
ERWIN E. ADLER MARSHA JONES MOUTRIE RICHWAT
DAROLD D. PIEPER CHARLES F. TIMMS, JR.
FRED A. FENSTER GREGORY M. KUNERT
TELECOPIERS
ALLEN E. RENNETT SCOTT WEIBLE
STEVEN L. DORSEY DANIEL P. TORRES 38T1-1 FLOOR (213) 626-0078
WILLIAM L. STRAUSZ MICHELE BEAL BAGNERIS 40TH FLOOR (213) 617 -1141
ROBERT M. GOLDFRIED MICHAEL B. TANNATT
ANTHONY B. DREWRY ROBERT G. SOPER
S7296-002
MITCHELL E. ABBOTT ROBERT C. CECCON
TIMOTHY L. NEUFELD BETH A. SHENFELD
STEVEN A. BROILES GINA M. DE GENNARO
ROBERT F. DE METER JONATHAN R. DAVIS
GREGORY W. STEPANICICH KEVIN G. ENNIS
ROCHELLE BROWNE JANET H. BREYER
DONALD STERN ROBIN D. HARRIS CERTIFIED - RETURN RECEIPT
)
City of Seal Beach
211 8th Street
Seal Beach, California 90740
Attention: Joanne Yeo,
City Clerk
Re: Gemtel Lease
Dear Ms. Yeo:
In accordance with our conversation some weeks ago, we
• enciose an executed copy of the Gemtel Lease dated November 30,
1987. In reviewing it, I noticed that the Parking,
.Agreement, which is attached as Exhibit D to the Lease, was
also executed by the parties. It was my understanding that
the Easement Agreement would not be executed or recorded until
the contingencies under the Lease were either waived or satis-
fied. Because the signatures have not been acknowledged, the
Easement Agreement should not be recordable anyway. Conse-
quently, this copy should simply be retained in the City's
files, and we can decide at the appropriate time whether to
have a new Easement Agreement signed.
Very truly yours,
1,
ALLEN E. RENNETT
AER:jp
Enclosure
•
TABLE OF CONTENTS
1. DEFINITIONS 1
1.1 General Definitions 1
1.2 Other Definitions 4
2. LEASE OF PREMISES AND PARKING LOT 6
3. TERM - 6
3.1 Initial Term 6
3.2 Primary Condition Precedent for Tenant . . 6
3.3 Commencement Date 7
3.4 Options to Extend 9
4. ANNUAL RENT; SECURITY DEPOSIT 9
4.1 Payment of Rent 9
4.2 Rent During Initial Term 10
4.3 Rent During Extended Terms 10
4.4 Security Deposit 12
5. TAXES 13
5.1 Tenant to Pay Taxes 13
5.2 Exception 13
5.3 Time for Payment 13
5.4 Tax Bills 13
5.5 Tenant's Right to Contest Real Property Taxes 14
6. USE OF PREMISES 15
7. IMPROVEMENTS; CONSTRUCTION 15
7.1 Construction of Improvements 15
7.2 Conditions of Construction 16
7.3 Completion Of Construction 17
7.4 Mechanics' Liens 18
7.5 Ownership and Removal of Additional Improvements 18
8. MAINTENANCE AND REPAIRS 20
9. UTILITIES AND SERVICES 20
10. ALTERATIONS; SIGNS 20
10.1 Alterations 20
10.2 Conditions to Alterations 21
10.3 Signs 23
11. INDEMNITY AND EXCULPATION; INSURANCE 23
11.1 Exculpation of Landlord 23
11.2 Indemnity 23
11.3 Public Liability and Property Damage Insurance 24
11.4 Casualty Insurance 25
11.5 Loss of Rent Insurance 25
11.6 Waiver of Subrogation 25
11.7 Other Insurance Matters 26
11.8 Landlord's Right to Procure Insurance . . . 27
12. DESTRUCTION 27
12.1 Lease to Govern Tenant's Rights 27
12.2 Destruction During First Twenty -Five Years 27
12.3 Destruction After First Twenty -Five Years . 29
i.
/%
13. CONDEMNATION 32
13.1 Definitions 32
13.2 Rights and Obligations Governed by Lease . 33
13.3 Total Taking 33
•
13.4 Partial Taking 34
13.5 Condemnation Proceedings, Both Parties . . 35
14. ASSIGNMENT, SUBLETTING AND ENCUMBERING 35
14.1 Prohibition Against Voluntary Assignment,
Subletting and Encumbering 35
14.2 Permitted Assignments 36
14.3 Permitted Subleases 38
14.4 Encumbrance or Assignment as Security . . . 40
15. FINANCING PROVISIONS 40
15.1 Cancellation of Lease 40
15.2 Notice of Default 40
15.3 Right to Cure 41
15.4 Additional Time 42
15.5 Assignment of Lease 43
15.6 New Lease With First Permitted Lender . . 43
15.7 Annual Rent Forgiven or Deferred 44
15.8 Further Assurances 45
16. DEFAULTS AND REMEDIES 45
16.1 Defaults 45
16.2 Remedies 46
16.3 Cumulative Nature of Remedies 49
16.4 Landlord's Right to Cure Tenant's Breach . 49
16.5 Interest on Unpaid Rent 50
16.6 Non Recourse 50
16.7 Landlord's Default 50
17. SURRENDER AND LANDLORD'S ENTRY 51
17.1 Surrender 51
17.2 Landlord's Entry on Premises 51
18. NOTICES 52
19. QUIET POSSESSION 53
20. RIGHTS OF FIRST REFUSAL 53
20.1 Right of First Refusal to Purchase 53
20.2 Right of First Refusal to Lease 54
20.3 Transfer of Landlord's Interest 55
21. SUBORDINATION 56
21.1 With Respect to Landlord's Leasehold . .. . 56
21.2 With Respect to Landlord's Fee Interest . . . 56
21.3 Further Assurances 57
22. GENERAL PROVISIONS 57
22.1 Waiver 57
22.2 Attorneys' Fees 57
22.3 Estoppel Certificates 58
22.4 Entire Agreement; Modification 58
22.5 Recording 59
22.6 Governing Law 59
22.7 Successors 59
22.8 Severability 59
ii.
22.9 Singular and Plural; Gender 59
22.10 Time 59
22.11 Captions 5
22.12 Consent of Landlord 60
22.13 Brokers 60
22.14 Joint and Several Obligations 60
22.15 Force Majeure 60
iii. '
MASTER LEASE
THIS MASTER LEASE ( "Lease ") is made and entered into
this 30th day of November, 1987 (the "Execution Date ") by and
between THE REDEVELOPMENT AGENCY OF THE CITY OF SEAL BEACH., .a
public body, corporate and politic ( "Landlord "), and GEMTEL
CORPORATION, a California corporation, and DANA MacKAY, an
individual (jointly "Tenant ").
RECITALS
A. Landlord is or is about to become the owner or
lessee of certain real property (including all easements, rights
and appurtenances relating thereto) (the "Premises ") located in
the City of Seal Beach, County of Orange, State of California, as
more fully described on Exhibit A hereto. The Premises include
without limitation the main building (the "School Building ") of
the Mary E. Zoeter Elementary School, as shown on the site plan
attached as Exhibit B hereto. The City of Seal Beach ( "City ") has
leased certain additional land adjacent to the Premises, as more
fully described on Exhibit C hereto (the "Parking Lot ").
B. Tenant desires to lease (i) the Premises for the
purpose of developing the Premises as a retail commercial shopping
center and (ii) a nonexclusive right to use the Parking Lot.
C. Landlord desires to lease the Premises and a non-
exclusive right to use the Parking Lot to Tenant in accordance
with the terms and conditions set forth hereinbelow.
NOW THEREFORE, the Parties agree as follows:
1. DEFINITIONS.
1.1 General Definitions. As used in this Lease,
the following words and phrases shall have the following meanings:
(a) Additional Improvements - any buildings
or structures on, additions to or modifications of the Premises,
excluding Alterations to the School Building, made by Tenant
before, at or within two (2) years after the commencement of the
Term, or after a total Destruction of the School Building; and any
replacements for such Additional Improvements.
(b) Alteration - any change to, or modifi-
cation of, the Premises or the Improvements made by Tenant includ-
ing, without limitation, fixtures.
(c). Authorized Representative - any offi-
cer, agent, employee, or independent contractor retained or em-
ployed by either Party, acting within authority given him by that
Party.
(d) Damage - injury, deterioration, or loss
to a Person or property caused by an Act of God or another Per-
son's acts or omissions. Damage includes death; Damage does not
include normal wear and tear.
(e) Damages - a monetary compensation or
indemnity that can be recovered in the courts by any Person who
has suffered damage to his person, property, or rights through
another's act or omission.
(f) Destruction - any Damage to the Prem-
.
ises or the Improvements.
(g) Encumbrance - any deed of trust, mort-
gage, or other written security device or agreement encumbering
either the leasehold or the fee interest in the Premises, and the
note or other obligation secured by it, that constitutes security
for the payment of a debt or performance of an obligation.
(h) Expiration - the coming to an end of
the time specified in this Lease as its duration, including any
extension of the Term resulting from the exercise of an option to
extend.
(i) Good condition - the good physical con-
dition of the Premises and the Improvements and each portion of
the Premises and the Improvements, including, without limitation,
signs, windows, and appurtenances, taking into account the age of
the Improvements. "In good condition" means neat and broom -
clean.
2.
A
(j) Hold harmless - to defend and indemnify
from all liability, losses, penalties, Damages, costs, expenses
(including, without limitation, attorneys' fees), causes of ac-
tion, claims, or judgments arising out of or related to any Damage
to any Person or property.
(k) Improvements - the Additional Improve-
ments and the Alterations to the School Building made by Tenant
before, at or within two years after the commencement of the Term.
(1) Landlord - the Redevelopment Agency of
the City of Seal Beach, California, and any Successor to Landlord
in the Premises.
(m) Law - any judicial decision, statute,
constitution, ordinance, resolution, regulation, rule, administra-
tive order, or other requirement of any municipal, county, state,
federal, or other government agency or authority having jurisdic-
tion over the Parties or the Premises, or both, in effect either
at the time of execution of this Lease or at any time during the
Term, including, without limitation, any regulation or order of a
quasi- official entity or body (e.g., board of fire examiners or
public utilities).
(n) Lender - the beneficiary, mortgagee,
secured party, or other holder of an Encumbrance.
(o) Lien - a charge imposed on the Prem-
ises by someone other than Landlord, by which the Premises are
made security for the performance of an act. Most of the Liens
referred to in this Lease are mechanics' liens.
(p) Maintenance - repairs, replacement,
repainting, and cleaning.
(q) Person - one or more human beings, or
legal entities or other artificial persons, including, without
limitation, partnerships, corporations, trusts, estates, associa-
tions, and any combination of human beings and legal entities.
(r) Provision - any term, agreement, cove-
nant, condition, clause, qualification, restriction, reservation,
or other stipulation in this Lease that defines or otherwise
3.
controls, establishes, or limits the performance required or per-
mitted by either Party.
(s) Rent - Annual Rent and any other
charges payable by Tenant to Landlord under the Provisions of this
Lease.
(t) Restoration - the reconstruction,
rebuilding, rehabilitation, and repairs that are necessary to
return destroyed portions of the Premises and the Improvements to
substantially the same physical condition as they were in immedi-
ately before the Destruction or such other condition as shall be
specified hereunder.
(u) Successor - assignee, transferee, per-
sonal representative, heir, or other Person succeeding lawfully,
and pursuant to the provisions of this Lease, to the rights or
obligations of either Party.
(v) Tenant - the Persons listed in the
introductory paragraph above as Tenant, and any Successor here-
under.
(w) Term - the period of time during which
Tenant has a right to occupy the Premises.
(x) Termination - the ending of the Term
for any reason before Expiration.
1.2 Other Definitions. The following additional
Terms are defined in the following sections of this Lease:
(a) Adjustment Date $4.3
(b) Adjustment Index $4.3
(c) Adjustment Notice §4.3
(d) Annual Rent $4.1
(e) Asbestos Notice $3.3(a)
(f) Award 613.1(c)
(g) Base Characteristics $10.1(b)
(h) Base Index $4.2
(i) Commencement Date $3.3
(j) Complete $7.3
4.
(k) Condemnation §13.1(a)
(1) Condemnor §13.1(d)
(m) Date of Taking §13.1(b)
(n) Default §16.1
(o) Default Notice Date §15.7
(p) Deposit §4.4
• (q) Easements §2
(r) Execution Date Introductory
Paragraph
(s) Extended Term §3.3
(t) Fair Market Value §12.3(e)
(u) Improvement Completion Date §7.3
(v) Index §4.3
(w) Initial Term §3.1
(x) Interest §20.1
(y) Landlord Portion §12.3(e)
(z) Lease Introductory
Paragraph
(aa) Leased Portion §20.2
(bb) Master Lease §14.3
(cc) Net Income §15.7
(dd) Nondisturbance Notice §3,2
(ee) Nondisturbance Notice Date §3.2
(ff) Parking Easement Agreement §2
(gg) Parking Lot Recitals
(hh) Party §22.14
(ii) Permitted Encumbrance §14.4
(jj) Permitted Lender $14.4
(kk) Premises Head Lease §3.2(a)
(11) Premises Head Lessor §3.2(a)
(mm) Rent Loss Insurance Period §11.5
(nn) RFR Date §20.1(b)
(oo) Taxes §5.1
(pp) Tenant Asbestos Notice §3.3(a)
(qq) Trustee *11.4
5.
2. LEASE OF PREMISES AND PARKING LOT.
For and in consideration of the payment of rent and
the performance of all the terms, covenants and conditions of this
Lease by Tenant, Landlord hereby leases the Premises to Tenant and
Tenant hereby takes and hires the Premises from Landlord. For the
Term of this Lease and any extensions or renewals thereof, Land-
lord further agrees to cause City to grant to Tenant a non - exclu-
sive easement for parking on, and a non - exclusive easement of in-
gress and egress (collectively, the "Easements ") over the Parking
Lot pursuant to a Parking Easement Agreement in the form attached
hereto as Exhibit D and made a part hereof. If, for any reason
whatsoever other than Termination of this Lease or as a result of
the default of Tenant under the Parking Easement Agreement, the
Parking Easement Agreement is terminated and the parking spaces
therein granted are unavailable to Tenant, -Landlord shall make
other parking spaces available to Tenant on terms substantially
the same as contained in the Parking Easement Agreement so that
Tenant is able at all times to comply with Laws pertaining to
parking.
3. TERM.
3.1 Initial Term. The Term ( "Initial Term ") of
this Lease shall be thirty -five (35) years, commencing on the
Commencement Date (as defined in §3.3), unless extended or sooner
Terminated as provided for herein.
3.2 Primary Condition Precedent for Tenant.
Landlord has attempted to obtain a Nondisturbance Agreement exe-
cuted by the fee interest Lender providing that, in the event such
Lender acquires the Landlord's fee interest in the Premises,
whether by foreclosure, deed in lieu of foreclosure or otherwise,
so long as Tenant is not in Default under this Lease, Lender will
recognize Tenant pursuant to this Lease and will not disturb
Tenant's possession of the Premises pursuant to this Lease. The
fee interest Lender has refused to give such a nondisturbance
agreement to date, but has stated the terms under which such
6 .
Lender would provide such a nondisturbance agreement. Landlord
shall obtain said Lender's agreement to give Tenant notice of and
the opportunity and right to cure any default under the fee
interest Encumbrance. Tenant shall have six months from the date
( "the Nondisturbance Notice Date ") of this Lease within which to
obtain a nondisturbance agreement, to negotiate alternative
mechanisms to protect Tenant and Tenant's Lender, or to terminate
this Lease. During the six -month period Landlord and Tenant agree
to negotiate in good faith and with due diligence to obtain a
nondisturbance agreement or to establish alternate mechanisms
reasonably acceptable to Tenant and Tenant's Lender.
3.3 Commencement Date. The "Commencement Date"
shall be the first business day after all of the following condi-
tions shall have been satisfied or waived:
(a) Delivery to Tenant of the certification
of Landlord or the Orange County Health Department or other appro-
priate governmental agency that all asbestos and asbestos bearing
materials have been removed from the Premises. Notwithstanding
the foregoing, Landlord may elect by written notice (the "Asbestos
Notice ") to Tenant given on or before three (3) months from the
Nondisturbance Notice Date not to remove all asbestos and asbestos
bearing materials from the Premises, in which event this Lease
shall be deemed Terminated and of no further force and effect un-
less Tenant elects by written notice (the "Tenant Asbestos No-
tice") to Landlord given on or before six (6) months from the
Nondisturbance Notice Date to remove all such asbestos and asbes-
tos bearing materials at its own expense. Failure to serve the
Asbestos Notice on or before three (3) months from the Nondistur-
bance Notice Date shall be deemed a waiver of Landlord's right to
elect not to remove the asbestos as set forth in the preceding
sentence. Failure to serve the Tenant Asbestos Notice on Landlord
on or before six (6) months from the Nondisturbance Notice Date
shall be deemed to constitute Tenant's election to Terminate this
lease.
7 .
(b) Tenant's approval of the Title Report
(defined below) and Survey (defined below) and the elimination or
cure of any Disapproved Matters (defined below) which Landlord
agrees to eliminate or cure. As promptly as reasonably possible
after the Execution Date, Tenant shall obtain, at its sole cost
and expense, a survey of the Premises and the Parking Lot (the
"Survey ") and a current title report and commitment for issuance
of an ALTA Leasehold policy insuring Tenant's interest in the
Premises and the Parking Lot pursuant to this Lease and the Park-
ing Easement Agreement (the "Title Report "). Within sixty (60)
days after the last to occur of (i) Tenant's receipt of the Title
Report and Survey or (ii) Landlord's recordation of a final Parcel
Map for the Premises and the Parking Lot, but in no event later
than six (6) months after the Nondisturbance Notice Date, Tenant
shall notify Landlord of any matters (the !Disapproved Matters ")
disclosed by the Survey or the Title Report which Tenant reason-
ably disapproves (the "Title Notice "). Failure to serve the Title
Notice within the time period set forth in the preceding sentence
shall be deemed Tenant's approval of the Title Report and Survey.
Within ten (10) days after receipt of the Title Notice, Landlord .
shall by written notice ( "Landlord Title Notice ") to Tenant indi-
cate which, if any, of the Disapproved Matters Landlord agrees to
eliminate or cure. Failure to serve the Landlord Title Notice
within said period shall be deemed to be Landlord's agreement to
eliminate or cure all of the Disapproved Matters. Within ten (10)
days after receipt of the Landlord Title Notice, Tenant shall by
written notice (the "Tenant Election ") to Landlord elect: (a) to
waive those Disapproved Matters which Landlord has refused to
eliminate or cure pursuant to the Landlord Title Notice; or (b) to
terminate the Lease. Failure to serve the Tenant Election within
said period shall be deemed a waiver of all of the Disapproved
Matters which Landlord has refused to eliminate or cure.
(c) Tenant's receipt of a building permit
to construct a retail shopping center on the Premises containing
approximately 25,000 net leasable square feet of space, the
8 .
conditions of which shall be reasonably satisfactory to Tenant.
Tenant shall exercise due diligence in seeking to obtain said
building permit (including without limitation seeking to obtain in
a timely manner all other permits, licenses and authorizations
which are prerequisites to obtaining a building permit).
Upon satisfaction of this condition, Tenant
shall promptly send notice thereof to Landlord. If such condition
has not been satisfied one (1) year after the Nondisturbance
Notice Date, Tenant, by notice served on or prior to that date
which is one (1) year from the Nondisturbance Notice Date, may
either waive the condition or Terminate this Lease, upon which
termination this Lease shall be of no further force and effect.
Failure to serve such notice to Terminate this Lease on or before
said one (1) year deadline shall be deemed a waiver of the fore-
going condition.
3.4 Options to Extend. (a) Tenant shall have
the right, subject to the provisions of this Lease and provided
that Tenant is not then in default hereunder, to extend the Term
of this Lease for four additional successive periods of five years
each (individually, an "Extended Term "), upon the same terms and
conditions as the terms and conditions of the Initial Term, except
Annual Rent as hereinafter set forth. In order to extend the Term
of this Lease, Tenant shall give Landlord not less than six
months' written notice prior to the Expiration of the Initial Term
or the preceding Extended Term, as the case may be. Each Extended
i Term shall commence on the day immediately succeeding the expira-
tion date of the preceding Term.
(b) Tenant shall have no other right to
extend the Term beyond the fourth Extended Term.
4. ANNUAL RENT; SECURITY DEPOSIT.
4.1 Payment of Rent. Tenant shall throughout
the Term of this Lease pay to Landlord, without deduction, set
off, prior notice or demand, at such place as Landlord may from
time to time designate, the annual rent specified below (the
9.
"Annual Rent ") in equal monthly installments, on the Commencement
Date and continuing on the same day of each succeeding calendar
month. If the Lease Terminates on a day other than the last day
of a lease month, then the rent for such partial month shall be
prorated on the basis of a thirty -day month.
4.2 Rent During Initial Term. The Annual Rent
payable by Tenant, to Landlord during the Initial Term shall be as
follows:
(a) For the five -year period commencing on
the Commencement Date: $180,000 per year;
(b) For the five -year period commencing on
the fifth anniversary of the Commencement Date: $220,000 per
year;
(c) For the five -year period commencing on
the tenth anniversary of the Commencement Date: $260,000 per
year;
(d) For the five -year period commencing on
the fifteenth anniversary of the Commencement Date: $300,000 per
year;
(e) For the five -year period commencing on
the twentieth anniversary of the Commencement Date: $350,000 per
year;
(f) For the five -year period commencing on
the twenty -fifth anniversary of the Commencement Date: $425,000
per year;
(g) For the five -year period commencing on
the thirtieth anniversary of the Commencement Date: $500,000 per
year.
4.3 Rent During Extended Terms. On the first
day of each Extended Term (the "Adjustment Date "), the Annual Rent
shall be adjusted in the following manner: The Consumer Price
Index (all items) for All Urban Consumers for the Los Angeles-
Anaheim-Riverside area, published by the United States Department
of Labor, Bureau of Labor Statistics ( "Index "), which is published
for the second calendar month immediately preceding each
10.
Adjustment Date (the "Adjustment Index ") shall be compared with
the Index (the "Base Index ") published for the second calendar
month preceding the Thirtieth anniversary of the Commencement Date
(in the case of the first Extended Term) or the Index published
for the second calendar month preceding the last Adjustment Date
(in the case of the second, third and fourth Extended Terms). The
Annual Rent payable during each Extended Term shall be determined
by multiplying the Annual Rent payable during the immediately
preceding five year period by a fraction, the numerator of which
is the Adjustment Index and the denominator of which is the Base
Index; provided, however, that: (1) the Annual Rent shall not be
less than the Annual Rent in effect during the immediately preced-
ing five year period; and (2) the amount of any increase shall not
exceed twenty -five per cent of the Annual Rent payable in the
immediately preceding five year period.
For each Extended Term, Landlord shall
determine the Annual Rent effective as of the Adjustment Date as
soon as practicable and shall give Tenant written notice (the
"Adjustment Notice ") of the adjusted Annual Rent, indicating how
such adjusted Annual Rent was computed. If it cannot be deter-
mined before the Adjustment Date, the new Annual Rent once deter-
mined by Landlord shall have retroactive application to the first
day of such Extended Term, and any Annual Rent relating to said
retroactive period shall be paid by Tenant with the first install-
ment of Annual Rent due after service of the Adjustment Notice.
If the Index is changed so that the base year for the Adjustment
Index differs from the base year used for the Base Index, the
Index shall be corrected in accordance with the conversion factor
published by the United States Department of Labor, Bureau of
Labor Statistics. If, on any Adjustment Date, the Index shall not
exist, any successor index designated by the United States Depart-
ment of Labor, Bureau of Labor Statistics, or successor or similar
governmental agency, as most nearly equivalent to the Index, shall
be substituted. In the absence of a successor designated Index,
if the parties are not otherwise able to agree, the parties shall
11.
refer the choice of a successor Index to arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association.
4.4 Security Deposit.
(a) Tenant shall deposit with Landlord upon
execution hereof the sum of Ten Thousand Dollars ($10,000.00) (the
"Deposit ") as security for Tenant's faithful performance of Ten -.
ant's obligations hereunder. Landlord shall invest the Deposit in
an interest bearing account pursuant to subsection (b) below, and
any interest earned thereon shall constitute additional Deposit
available to Landlord for the purposes described herein. Upon any
Default pursuant to this Lease, Lessor may use, apply or retain
all or such portion of said Deposit as may be reasonably required
to compensate Landlord for any loss or damage which Landlord may
suffer thereby. Application of all or a part of the Deposit
pursuant to the preceding sentence shall neither excuse nor cure
any such Default. Subject to the limitation set forth in Section
16.6 below (non recourse), within ten (10) days after any such
application and Landlord's notice thereof to Tenant, Tenant shall
pay to Landlord such sums as may be required to restore the
Deposit to the amount which was available immediately prior to
such application.
(b) Landlord shall deposit the Deposit into
a separate, interest bearing account reasonably acceptable to Ten-
ant. Tenant hereby approves the deposit of said sums with the
Orange County Treasurer as a dedicated reserve. On a periodic
basis, no less frequently than one (1) time per year, Landlord
shall send notice to Tenant stating the amount of the Deposit,
including the amount of interest accrued to date. If the interest
rate earned on the Deposit is not competitive with the interest
rates which would be earned if the Deposit were held in a money
market account or similar interest bearing account at a financial
institution Tenant may, by written notice to Landlord, require
that the Deposit be deposited with a financial institution mutu-
ally acceptable to Landlord and Tenant. Any interest earned on
12.
said Deposit shall accrue and be compounded from time to time and
shall become part of the Deposit, and shall not be disbursed to
Landlord< except for the purposes set forth in subsection (a)
above, or to Tenant as provided in subsection (c) below.
(c) The Deposit, or so much thereof as has
not been theretofore applied by Landlord, shall be returned, with
all accrued but unspent interest, to Tenant (or, at Landlord's
option to the last assignee, if any, of Tenant's interest
hereunder) at the Expiration or Termination of the term hereof,
after completion by Tenant of all of its obligations hereunder.
5. TAXES.
5.1 Tenant to Pay Taxes. Throughout the Term of
this Lease, in addition to Annual Rent, Tenant shall pay, except
as otherwise provided in this Lease, all taxes, assessments, impo-
sitions, levies and charges which may be levied upon or assessed
against or become a lien in any manner upon the Premises, or any
part thereof, by or according to any law or governmental, legal,
political or other authority whatsoever (collectively "Taxes ").
All Taxes for the fiscal year in which the Lease commences or in
which it expires or Terminates shall be prorated between Landlord
and Tenant on the basis of a 365 -day year. Where any Taxes are
permitted by law to be paid in installments, Tenant may pay such
installments as and when each such installment becomes due.
5.2 Exception. Tenant shall not be required to
pay any income, franchise, estate, inheritance, succession, capi-
tal levy or transfer tax assessed against Landlord or any Succes-
sor of Landlord, or any income, excess profits or revenue tax or
any other similar tax, assessment, charge or levy upon the rent or
other income derived by Landlord or any Successor Landlord under
this Lease.
5.3 Time for Payment. Tenant shall pay all
Taxes prior to the date of their delinquency.
5.4 Tax Bills. Landlord shall forward to Tenant
any notice of Taxes and any bills or demands for payment of such
13. •
Taxes and any changes in the assessed value of the Premises which
Landlord shall receive within fifteen (15) days of Landlord's
receipt of such notices, bills and demands.
5.5 Tenant's Right to Contest Real Property
Taxes. Tenant at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the Premises or the
Improvements or to contest any Taxes that are to be.paid by
ant. If Tenant seeks a reduction or contests the Taxes, the
failure on Tenant's part to pay the Taxes shall not constitute a
default as long as Tenant complies with the provisions of this
section.
Landlord shall not be required to join in
any proceeding or contest brought by Tenant unless the provisions
of any Law require that the proceeding or contest be brought by or
in the name of Landlord or any owner of the Premises. In that
case Landlord shall join in the proceeding or contest or permit it
to be brought in Landlord's name as long as Landlord is not re-
quired to bear any cost. Tenant, on final determination of the
proceeding or contest, shall immediately pay or discharge any
decision or judgment rendered, together with all costs, charges, .
interest, and penalties incidental to the decision or judgment.
Landlord appoints Tenant as its agent for
the sole purpose of making payment to the tax collector, obtaining
information and other data from the county assessor, and institut-
ing and maintaining any proceeding or contest allowed under this
section, with respect to all Taxes in connection with the
Premises.
If Tenant does not pay the Taxes when due
and Tenant seeks a reduction or contests them as provided in this
section, before the commencement of the proceeding or contest
Tenant shall furnish to Landlord a surety bond issued by an insur-
ance company qualified to do business in California. The amount
of the bond shall equal one hundred and twenty -five percent (125 %)
of the total amount of Taxes in dispute plus the late payment
penalty relating thereto. The bond shall hold Landlord and the
14.
Premises harmless from any damage arising out of the proceeding or
contest and shall insure the payment of any judgment that may be
rendered.
All refunds of any Taxes so contested or
reviewed shall be paid to Tenant. Landlord shall not, without the
prior written approval of Tenant, make or enter into or finally
agree to any settlement, compromise or any disposition of any
contest or review, or discontinue or withdraw from any contest or
review, or accept any refund, other adjustment or credit of or
from any such Taxes as a result of any contest or review.
6. USE OF PREMISES.
Throughout the Term of this Lease, the Premises
shall be used by Tenant for a retail commercial shopping center
and related uses. Tenant shall not use the Premises for any other
purpose without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Without limiting the
foregoing, Landlord shall not unreasonably withhold its consent to
a non - retail use of the Premises which may require Tenant to ob-
tain a variance from applicable Law, provided that Tenant actually
obtains such variance. Tenant shall not use or permit the use of
the Premises in any manner which (i) creates a nuisance or (ii)
violates any Law. Without limiting the foregoing, Tenant shall
not use or permit any portion of the Premises to be used as an
adult book store, night club, discotheque or bar serving alcoholic
beverages.
7. IMPROVEMENTS; CONSTRUCTION.
7.1 Construction of Improvements. Tenant shall
construct or cause to be constructed on the Premises at Tenant's
expense Improvements having a cost of not less than $1,000,000.
For purposes of this section, costs shall include so called "hard
costs ", such as labor and material costs, and so called "soft
costs" relating to the Improvements, including, without limita-
tion, contractor's, architect's, engineer's and attorney's fees,
15.
interest and loan points on construction loans and similar indi-
rect costs and expenses. Construction of the Improvements shall
comply with all of the Provisions of this Section 7 and of Sec-
tion 10.1.
7.2 Conditions of Construction.
Before construction of any Improvements or
Alterations is commenced, and before any building materials have
been delivered to the Premises by Tenant or under Tenant's autho-
rity, Tenant shall comply with all the following conditions or
procure Landlord's written waiver of the condition or conditions:
(a) Concurrently with submission of
preliminary construction plans and specifications to appropriate
governmental agencies for review, Tenant shall submit one set of
such documents to Landlord. Landlord may comment on the proposed
plans and specifications, but shall have no right of approval or
disapproval so long as the plans and specifications do not violate
any of the Provisions of this Lease.
(b) Tenant shall submit final working plans
and specifications to the appropriate governmental agencies for
approval and shall deliver to Landlord one complete set as
approved by the governmental agencies.
(c) Tenant shall notify Landlord of Ten-
ant's intention to commence a work of construction at least twenty
(20) days before commencement of any such work or delivery of any
materials in connection therewith. Landlord shall have the right
to post and maintain on the Premises any notices of nonresponsi-
bility provided for under applicable law, and to inspect the Prem-
ises in relation to the construction at all reasonable times.
(d) If and only if a Lender financing Ten-
ant's construction requires a completion, payment and /or perfor-
mance bond, or Tenant elects, in its discretion, to obtain all or
any such bonds, Tenant shall provide to Landlord a bond or bonds
in the same form and upon the same terms and conditions as re-
quired by such Lender or otherwise obtained by Tenant, or shall
cause the bond or bonds delivered to such Lender or obtained by
16.
Tenant to name Landlord as an additional beneficiary. If the
Lender or Tenant elects not to require or obtain such bond, Tenant
shall deliver to Landlord, at Tenant's option, either (i) reason-
able evidence that the contractor selected by Tenant could, upon
payment of required fees, obtain completion, payment and perform-
ance bonds on request, (ii) reasonable evidence that Lender has
established construction loan disbursement procedures reasonably
designed to ensure the payment of and performance by all contrac-
tors, or (iii) reasonable evidence that Tenant has established a
payment disbursement system, either on its own account or by use
of an outside party, reasonably designed to ensure the payment of
and performance by all contractors. If Tenant is unable to meet
conditions (i), (ii) or (iii) above, then Landlord shall have the
right to require Tenant, prior to the commencement of any con-
struction, to provide Landlord with a completion, payment and /or
performance bond in form and substance reasonably acceptable to
Landlord; and
(e) Tenant shall deliver to Landlord insur-
ance certificates for any insurance pertaining to the construction
which is required pursuant to Section 11 hereof.
7.3 Completion Of Construction. Once the con-
struction of Improvements or Alterations is begun, Tenant shall
with reasonable diligence prosecute such construction to comple-
tion.
For purposes of this Lease, the construction
contemplated by Section 7.1 with respect to the Improvements shall
be deemed "Complete" notwithstanding the presence of standard
"punch list items" if a certificate of occupancy shall have been
issued with respect to the shell Improvements. For purposes of
this Lease, Tenant shall not be required to complete the con-
struction of interior improvements to individual tenant spaces to
comply with this covenant to complete construction. Tenant agrees
that the construction of all of the shell Improvements shall be
Complete no later than two years after the Commencement Date. The
17.
date on which the Improvements are Complete shall be referred to
herein as the "Improvement Completion Date ".
All construction of Improvements or Altera-
tions shall be performed in a good and workmanlike manner and
shall comply with all applicable Laws. The Parties acknowledge
that it is common practice in the construction industry to make
certain changes during the course of construction, which Landlord
shall have no right to review and /or approve, provided such
changes do not violate any of the Provisions of this Lease. On
completion of the work, Tenant shall supply Landlord with "as
built" drawings accurately reflecting all such changes.
7.4 Mechanics' Liens. Tenant shall pay all
costs for construction done by it or caused to be done by it on
the Premises as permitted or required by this Lease. Tenant shall
keep the Premises free and clear of all mechanics' liens resulting
from construction done by or for Tenant.
Tenant shall have the right to contest the
correctness or the validity of any such lien if, within thirty
(30) days of demand by Landlord, Tenant procures and records a
lien release bond issued by a corporation authorized to issue
surety bonds in California in an amount equal to one and one -half
times the amount of the claim of lien. The bond shall meet the
requirements of Civil Code §3143 and shall provide for the payment
of any sum that the claimant may recover on the claim (together
with costs of suit, if it recovers in the action).
Tenant shall defend and indemnify Landlord
against all liability and loss of any type arising out of work
performed on the Premises by Tenant, together with reasonable
attorneys' fees and all costs and expenses reasonably incurred by
Landlord in negotiating, settling, defending or otherwise protect-
ing against such claims.
7.5 Ownership and Removal of Additional Improve-
ments. Tenant shall not remove any Improvements or Alterations
from the Premises nor waste, destroy or modify any Improvements or
Alterations on the Premises, except as permitted by this Lease.
18.
Upon Expiration or Termination of the Term
of this Lease, all Improvements and Alterations on the Premises
shall, without compensation to Tenant, thereupon become Landlord's
property. Notwithstanding the foregoing, either Landlord or Ten-
ant may elect that all Additional Improvements shall be removed by
Tenant at Tenant's expense upon Expiration of this Lease as pro-
vided below. Additionally, Landlord shall have the right to elect •
that all Additional Improvements shall be removed by Tenant at
Tenant's expense upon any Termination of this Lease. In order for
Landlord to exercise either of the foregoing options, Landlord
must serve written notice thereof on Tenant not later than six (6)
months prior to the Expiration of this Lease, or thirty (30) days
after the Termination of this Lease. For Tenant to exercise the
option to remove the Additional Improvements upon Expiration of
the Term, Tenant must serve written notice' on Landlord not
later than five (5) months prior to the Expiration of this Lease.
However, in the event of any Termination of this Lease, Landlord
shall not have the right to require Tenant to remove all or any
part of the Additional Improvements if Landlord has previously
granted to any subtenant at the Property a nondisturbance agree-
ment pursuant to section 14.3 (b) below unless all such subten-
ants' leases are terminated on or before the date of Landlord's
notice to Tenant.
If Landlord elects that all of the Addition-
al Improvements be removed, Tenant shall complete such removal
within ninety (90) days after the Expiration or Termination of the
Term. If Tenant elects that all of the Additional Improvements be
removed, Tenant shall complete such removal prior to the Expira-
tion of the Term. Notwithstanding the foregoing, if Tenant is
unable to remove the Additional Improvements before the Expiration
or Termination of the Lease or within ninety (90) days thereafter,
as applicable, due to Force Majeure delays, as described in Sec-
tion 22.15, Tenant shall have such additional time as is required
with the exercise of reasonable diligence to complete said remov-
al. Tenant's duty under this section includes without limitation
19.
the duty to demolish and remove all basements and foundations,
fill all excavations, return the surface to grade, and leave the
Premises safe and free from debris and hazards.
8. MAINTENANCE AND REPAIRS.
Tenant shall, at its own cost and expense, cause
the Premises (including the Improvements) to be kept and main-
tained in good order, condition and repair throughout the Term of
this Lease. Landlord shall not have any responsibility to main-
tain the Premises. Tenant hereby waives the benefit of California
Code Section 1941 and 1942 and any other Law which would otherwise
afford Tenant the right to make repairs at Landlord's expense.
9. UTILITIES AND SERVICES.
Tenant shall pay for all water, sewage, gas, elec-
tricity, telephone, maintenance, janitorial, trash collection and
any and all other utilities and services supplied to the Premises.
Landlord represents and warrants that water, sewage, gas, electri-
city and telephone services are or will be available at the peri-
meter of the Premises as of the Commencement Date.
10. ALTERATIONS; SIGNS.
10.1 Alterations. Tenant shall have the right,
throughout the Term of this Lease at any time and from time to
time, to:
(a) Demolish any of the presently- existing
structures included in the Premises other than the School Build-
ing;
(b) Alter, modify, improve and restore the
School Building, except that Tenant may not alter the footprint or
the structural components of the exterior load bearing walls of
the north or east sides of the School Building, nor the line of
the roof of the School Building (the "Base Characteristics ").
Additionally, Tenant shall use reasonable efforts to preserve as
many of the other distinctive architectural characteristics of the
20.
School Building as possible, consistent with Tenant's intended
conversion of the School Building to retail uses. In no event
shall Tenant be required to spend more money to preserve said
architectural characteristics (except for the Base Character-
istics) than Tenant will spend for comparable features or
components of the Additional Improvements; or
(c) Alter, modify, improve, restore and
replace the Additional Improvements.
10.2 Conditions to Alterations. Notwithstanding
the provisions of Section 10.1, with respect to any such altera-
tions, Tenant shall comply with the provisions of Sections 7.2(c)
and 7.4 hereof and with the following requirements:
(a) If the work relating to the Premises
requires a building permit, concurrent with submission of prelim-
inary construction plans and specifications to appropriate govern-
mental agencies for review, Tenant shall submit one set of such
documents to Landlord. Landlord may comment on the proposed plans
and specifications, but shall have no right of approval or
disapproval so long as the plans and specifications do not violate
any of the Provisions of this Lease;
(b) If the work relating to the Premises
requires a building permit, Tenant shall submit final working
plans and specifications to the appropriate governmental agencies
for approval and shall deliver to Landlord one complete set as
approved by the governmental agencies;
(c) If Tenant or any subtenant is con-
structing (i) any alterations, improvements or renovations to
individual tenant spaces, or (ii) alterations, improvements or
renovations to the Additional Improvements or the School Building
(other than alterations, improvements or renovations to individual
tenant suites), which cost 20% or less of the then replacement
value of the Additional Improvements and School Building together,
then Landlord shall not have the right to require Tenant to comply
with this subsection (c). If Tenant proposes to construct altera-
tions, improvements or renovations ( other than alterations,
21.
improvements or renovations to individual tenant spaces) costing
more than 20% of the then replacement value of the Additional
Improvements and the School Building together, and if a Lender
financing Tenant's alterations (if any) requires a completion,
payment and /or performance bond, or Tenant elects, in its discre-
tion, to obtain all or any such bonds, Tenant shall provide to
Landlord a bond or bonds in the same form and upon the same terms
and conditions as required by such Lender or otherwise obtained by
Tenant, or shall cause the bond or bonds delivered to such Lender
or obtained by Tenant to name Landlord as an additional benefi-
ciary. If the Lender or Tenant elects not to require or obtain
such bond, then, upon Landlord's request, Tenant shall deliver to
Landlord, at Tenant's option, either (i) reasonable evidence that
the contractor selected by Tenant could, upon payment of required
fees, obtain completion, payment and performance bonds on request,
(ii) reasonable evidence that Lender has established standard
construction loan disbursement procedures reasonably designed to
ensure the payment of and performance by all contractors, or
(iii) reasonable evidence that Tenant has established a payment
disbursement system, either on its own account or by the use of an
outside party, reasonably designed to ensure the payment of and
performance by all contractors. If Tenant is unable to meet
conditions (i), (ii) or (iii) above, then Landlord shall have the
right to require Tenant, prior to the commencement of any con-
struction described in this subsection (c), to provide Landlord
with a completion, payment and /or performance bond in form and
substance reasonably acceptable to Landlord.
(d) If the cost of the alterations exceeds
$50,000, Tenant shall deliver to Landlord insurance certificates
for any insurance pertaining to the construction which is required
pursuant to Section 11 hereof; and
(e) Once construction of the Alterations is
begun, Tenant shall with reasonable diligence prosecute such con-
struction to completion.
22.
All construction of Improvements or Altera-
tions shall be performed in a good and workmanlike manner and
shall comply with all applicable Laws. The Parties acknowledge
that it is common practice in the construction industry to make
certain changes during the course of construction, which Landlord
shall have no right to review and /or approve, provided such
changes do not violate any of the Provisions of this Lease. On
completion of the work, Tenant shall supply Landlord with "as
built" drawings accurately reflecting all such changes.
10.3 Signs. Subject to the approval of local
and /or other governmental regulatory authorities, Tenant shall
have the right to place, affix and maintain signs, illuminated or
otherwise, upon the Premises and the Improvements. All such signs
shall be installed and maintained in good condition and repair at
Tenant's cost and expense. All such signs -shall be the personal
property of Tenant regardless of how affixed or installed.
11. INDEMNITY AND EXCULPATION; INSURANCE.
11.1 Exculpation of Landlord. Landlord shall not
be liable to Tenant for any damage to Tenant or Tenant's property
from any cause except the negligence of Landlord or its Authorized
Representatives. Tenant waives all claims against Landlord for
damage to Person or property arising for any reason other than the
intentional torts or negligence of Landlord or its Authorized
Representatives.
11.2 Indemnity.
(a) Subject to Section 16.6, Tenant will
indemnify, hold harmless and defend Landlord against and from any
loss, cost or expense of any sort or nature, and from any liabil-
ity to any person, on account of any damage to Person or property
arising out of any failure of Tenant to perform and comply in any
respect with any of the requirements and provisions of this Lease
or arising from Tenant's use and occupancy of the Premises or the
Parking Lot.
23.
(b) The liability of Tenant to indemnify
Landlord, as set forth in this Section 11.2, shall not extend to
any matter against which Landlord shall be protected by insurance
provided by Tenant pursuant to the Terms of this Lease; provided,
however, that if any such liability shall exceed the amount of the
effective and collectable insurance in question, subject to Sec -
tion 16.6, the said liability of Tenant shall apply to such
excess.
(c) Notwithstanding anything to the con-
trary contained in this Section, Tenant shall not be liable for
any injury, loss or Damage of whatever kind if such injury, loss
or damage is the result of the negligence or willful act or omis-
sion of Landlord or its Authorized Representatives.
11.3 Public Liability and Property Damage Insur-
ance. Tenant shall, at its sole cost and expense, maintain or
cause to be maintained with respect to the Premises and the
Parking Lot throughout the Term of this Lease comprehensive
general liability insurance against any and all liability of the
insured for personal injury, death or property damage with respect
to or arising out of the ownership, maintenance, use or occupancy
of the Premises and the Parking Lot, and all incidental operations
thereto, having limits of not less than $1,000,000 per occurrence
for bodily injury, death and property damage and the consequential
damages arising therefrom. All liability insurance shall insure
performance by Tenant of the indemnity provisions of Section 11.2.
Both parties shall be named as additional insureds, and the policy
shall contain cross - liability endorsements.
Not more frequently than once each three
years, Landlord may increase the amount of liability insurance
coverage required hereunder, and Tenant shall increase the insur-
ance coverage as required by Landlord, provided that such coverage
is then reasonably available and is then commonly maintained by
shopping centers of a comparable size, type and location to the
Premises.
24.
11.4 Casualty Insurance. Tenant shall, at its
sole cost and expense, maintain or cause to be maintained through-
out the Term of this Lease casualty insurance on the Premises and
all insurable improvements which may be constructed on the Prem-
ises against all loss or damage by fire and other risks included
under "extended coverage ", or, when appropriate, "builder's all -
risk" policies or their equivalent, in an amount equal to the cur-
rent actual replacement cost of the insured property. Such casu-
alty insurance shall be written in such a manner that, in the
event of loss, the amount of coverage afforded to the insured
shall not be reduced or diminished by reason of the application of
any co- insurance or average clause. Subject to the rights of any
Permitted Lender, the proceeds from any claim made under such
casualty insurance shall be made payable to an independent third
party mutually agreeable to Landlord and Tenant (the "Trustee "),
as the trustee for Landlord and Tenant, as their interests may
appear, and the Trustee shall release all such proceeds for the
cost of repair, restoration or reconstruction of the damaged
improvements.
11.5 Loss of Rent Insurance. Tenant may, in
Tenant's sole discretion and at Tenant's cost, elect to procure
and maintain in force loss of rent insurance insuring that all
Rent will be paid to Landlord if the Premises or the Improvements
are destroyed or rendered inaccessible by a risk insured against
by the policy of casualty insurance required by Section 11.4. The
period of coverage for such rent loss insurance (the "Rent Loss
Insurance Period ") shall be determined by Tenant, in Tenant's
discretion.
11.6 Waiver of Subrogation. The Parties release
each other, and their respective Authorized Representatives, from
any claims for Damage to any Person or to the Premises and to the
fixtures, personal property, Improvements, and Alterations of
either in or on the Premises that are caused by or result from
risks insured against under any insurance policies required by
this Lease and in force at the time of any such Damage.
25.
Tenant shall cause each insurance policy
obtained by it to provide that the insurance company waives all
rights of recovery by way of subrogation against either Party in
connection with any Damage covered by any policy.
11.7 Other Insurance Matters.
(a) All insurance required under this Lease
shall:
(1) have Landlord and Tenant named as
insured, as their interest may appear;
(2) state that the insurance afforded
to each of the above -named insured shall be primary insurance and
any other valid and collectable insurance available to either
party shall be excess insurance and under no circumstances shall
be considered contributory;
(3) provide that coverage shall not be
revised, cancelled or reduced until after at least thirty days'
written notice of such revision, cancellation or reduction has
been given to all insureds; and
(4) be issued by reputable insurance
companies qualified to do business in the State of California.
(b) Any insurance required under this Lease
may be part of a blanket policy or policies of insurance main-
tained by Tenant covering the risks to be insured against under
this Lease, so long as the coverage required under this Lease is
not diminished.
(c) Any and all unexpired insurance, in-
cluding any right to unearned premiums, shall, upon Expiration or
Termination of this Lease, inure to the benefit of and pass to
Tenant or any assignee of Tenant.
(d) Tenant shall deliver to Landlord copies
of the policies or certificates of insurance for all of the insur-
ance required under this Lease on or before the Commencement Date,
and renewal certificates therefor not less than fifteen days
before the renewal date of any such insurance policies during the
Term of this Lease. Notwithstanding the foregoing, Landlord may
26.
request a status report with respect to insurance renewal not less
than thirty days before the renewal date.
(e) Either Party may effect for its own
account any insurance not required under the Lease.
11.8 Landlord's Right to Procure Insurance.
Notwithstanding the provisions of Section 16.1 and Section 16.4 of
this Lease to the contrary, if (i) Landlord shall receive notice
that the insurance procured by Tenant pursuant to Section 11.3 or
Section 11.4 hereof is to be cancelled, and (ii) Tenant does not
deliver to Landlord evidence of renewal, reinstatement or replace-
ment of said insurance on or before five days prior to the cancel-
lation date specified in the insurer's notice of cancellation,
then Landlord may obtain its own insurance for such purposes and
any sums reasonably expended by Landlord therefor shall be due to
Landlord from Tenant as additional Rent within ten (10) days after
Landlord's demand. Any portion thereof not paid by Tenant within
said ten (10) day period shall thereafter bear interest as pro-
vided in Section 16.5 and payment of such interest shall neither
excuse nor cure Tenant's breach. No payment or act by Landlord
pursuant to this Section 11.8 shall constitute a cure or waiver of
the breach or a waiver of any remedy for default or render
Landlord liable for any loss or damage resulting from any such
act.
12. DESTRUCTION.
12.1 Lease to Govern Tenant's Rights. Tenant
waives the provisions of California Civil Code Sections 1932(2)
and 1933(4) with respect to any Destruction, and agrees that Ten-
ant's rights in case. of Destruction shall be governed solely by
the Provisions of this Lease.
12.2 Destruction During First Twenty - Five Years.
(a) If, prior to the twenty -fifth anniver-
sary of the Commencement Date, the Additional Improvements are
totally or partially destroyed by any casualty, Tenant shall elect
either: (i) to repair and restore the Additional Improvements to
27.
substantially the same condition as they were in immediately
before the Destruction, or (ii) to construct alternate Additional
Improvements at least equal in value to the value of the Addition-
al Improvements immediately prior to the Destruction. In restor-
ing the Additional Improvements or in constructing alternate Addi-
tional Improvements pursuant to this Section 12.2(a), Tenant shall
comply with the Provisions of Sections 7.2, 7.3, 7'..4 and 10.1 of
this Lease.
(b) If, prior to the twenty -fifth anniver-
sary of the Commencement Date, the School Building is destroyed or
damaged to the extent of 30% or less of its then replacement
value, Tenant shall repair and restore the School Building to sub-
stantially the same condition as it was in immediately before the
Destruction, complying with the Provisions of Sections 7.2, 7.3,
7.4 and 10.1 of this Lease in such restoration.
(c) If, prior to the twenty -fifth anniver-
sary of the Commencement Date, the School Building is destroyed or
damaged to the extent of more than 30% of its then replacement
value, Tenant shall elect either: (i) to repair and restore the
School Building to substantially the same condition as it was in
immediately before the Destruction, complying with the provisions
of Sections 7.2, 7.3, 7.4 and 10.1 of this Lease in such restora-
tion; or (ii) to demolish any remaining portion of the School
Building and to construct new improvements to replace the School
Building, complying with the Provisions of Sections 7.2, 7.3 and
7.4 of this Lease, and, at Tenant's option, to seek a variance or
re- zoning with respect to the Premises to permit a development
which would otherwise be prohibited. If and only if Tenant elects
to demolish any portion of the School Building pursuant to option
(ii) of the preceding sentence, then during the remainder of the
Term the Annual Rent payable under Section 4.2 or Section 4.3
shall be adjusted as follows: If the rentable area of the
Improvements after the construction (the "New Area ") is less than
the rentable area of the Improvements immediately preceding the
destruction (the "Old Area ") as a result of any Law that restricts
28.
Tenant's right to construct new Improvements containing as much
square footage as the Improvements immediately prior to such
destruction, then the rent shall be reduced in accordance with the
rent adjustment formula set forth hereinbelow. If the New Area is
greater than the Old Area then the Annual Rent shall be increased
in accordance with the rent adjustment formula set forth
hereinbelow. In•either case, commencing as of the date which is
six (6) months after the new Improvements are Complete, the
otherwise applicable Annual Rent shall be multiplied by a
fraction, the numerator of which shall be the New Area and the
denominator of which shall be the Old Area.
(d) Any Destruction described in this Sec-
tion 12.2 shall not Terminate this Lease. Tenant shall be re-
quired to pay Rent hereunder while the Destruction is repaired.
Notwithstanding the foregoing, if Tenant elects to obtain Rent
Loss Insurance pursuant to section 11.5, then Rent shall abate
during the Rent Loss Insurance Period. All proceeds of the casu-
alty insurance described in Section 11.4 relating to the Destruc-
tion shall be applied to the restoration or construction under
this Section 12.2.
12.3 Destruction After First Twenty -Five Years.
(a) If, on or after the twenty -fifth anni-
versary of the Commencement Date, the Additional Improvements are
totally or partially destroyed, Tenant shall elect: (i) to repair
and restore the Additional Improvements to substantially the same
condition as they were in immediately before the Destruction; (ii)
to construct alternate Additional Improvements at least equal in
value to the value of the Additional Improvements immediately
before the Destruction; or (iii) to Terminate this Lease pursuant
to this Section 12.3. In restoring the Additional Improvements or
in constructing alternate Additional Improvements pursuant to this
Section 12.3(a), Tenant shall comply with the Provisions of Sec-
tions 7.2, 7.3, 7.4 and 10.1 of this Lease.
(b) If, on or after the twenty -fifth anni-
versary of the Commencement Date, the School Building is destroyed
29.
' or damaged to the extent of 30% or less of its then replacement value,
Tenant shall elect either: (i) to repair and restore the School Build-
ing to substantially the same condition as it was in immediately before
the Destruction, complying with the Provisions of Sections 7.2, 7.3,
7.4 and 10.1 of this Lease in such restoration; or (ii) to Terminate
this Lease pursuant to this Section 12.3.
(c) If, on or after the twenty -fifth anniversary
of the Commencement Date, the School Building is destroyed or damaged
to the extent of more than 30% of its then replacement value, Tenant
shall elect: (i) to repair and restore the School Building to
substantially the same condition as it was in immediately before the
Destruction, complying with the provisions of Sections 7.2, 7.3, 7.4
and 10.1 of this Lease in such restoration; (ii) to demolish any
remaining portion of the School Building and to construct new improve-
ments on the Premises containing at least as much leasable square
footage as the leaseable square footage of the School Building
immediately before the Destruction, complying with the Provisions of
Sections 7.2, 7.3 and 7.4 of this Lease and, at Tenant's option, to
seek a variance or rezoning with respect to the Premises to permit a
development which would otherwise be prohibited; or (iii) to Terminate
this Lease pursuant to this Section 12.3. If and only if Tenant elects
to demolish any portion of the School Building pursuant to option (ii)
of the preceding sentence, then during the remainder of the Term the
Annual Rent payable under Section 4.2 or Section 4.3 shall be adjusted
as follows: If the rentable area of the Improvements after the
construction (the "New Area ") is less than the rentable area of the
Improvements immediately preceding the destruction (the "Old Area ") as
a result of any Law that restricts Tenant's right to construct new
Improvements containing as much square footage as the Improvements
immediately prior to such destruction, then the rent shall be reduced
in accordance with the rent adjustment formula set forth hereinbelow.
If the New Area is greater than the Old Area then the Annual Rent
shall be increased in accordance with the rent adjustment formula set
forth hereinbelow. In either case, commencing as of the date which is
six (6) months after the new Improvements are Complete, the
30.
' otherwise applicable Annual Rent shall be multiplied by a
fraction, the numerator of which shall be the New Area and the
denominator of which shall be the Old Area.
(d) If Tenant does not elect to Terminate
this Lease pursuant to this Section 12.3, any Destruction de-
scribed in this Section 12.3 shall not Terminate this Lease. Ten-
ant shall be required to pay Rent hereunder while the Destruction
is repaired. Notwithstanding the foregoing, if Tenant elects to
obtain Rent Loss Insurance pursuant to Section 11.5, the rent
shall abate during the Rent Loss Insurance Period. All proceeds
of the casualty insurance described in Section 11.4 relating to
the Destruction shall be applied to the restoration or construc-
tion under this Section 12.3.
(e) Tenant must exercise its right, to ter-
minate its obligations pursuant to this Section 12.3 no later than
six (6) months after the date of any Destruction giving rise to
such right. In the event Tenant elects to Terminate this Lease
pursuant to this Section 12.3, the proceeds (if any) from the
casualty insurance policy maintained pursuant to Section 11.4
shall be divided between the Tenant and Landlord as follows:
(i) an amount equal to the Fair Market Value of Tenant's interest
in the Lease (including the value of Tenant's interest in all sub-
leases to occupants of the Premises) at the time of the Destruc-
tion shall be paid to Tenant; and (ii) the balance (the "Landlord
Portion ") shall be paid to Landlord. The "Fair Market Value"
shall be determined by agreement between the parties or, in the
event the parties are unable to reach such an agreement, by an
M.A.I. appraiser agreed upon by Landlord and Tenant. If a single
such appraiser cannot be agreed upon, Landlord and Tenant shall
each select an M. A. I. appraiser and the two selected appraisers
shall select a third such appraiser; each shall render a written
appraisal of the fair market value of this Lease as defined above,
and the average of the two closest appraised values shall be bind-
ing upon Landlord and Tenant. Notwithstanding the foregoing, the
Landlord Portion shall in no event be less than an amount equal to
31.
Annual Rent which would otherwise have been payable for the one
year period after Termination unless the insurance proceeds are
less than that amount, in which event Landlord shall be entitled
to all of the proceeds. If a single appraiser is used, the
Parties shall equally split such appraiser's costs and fees. If
three appraisers are used, each Party shall pay the costs and fees
of the appraiser it selects, and the Parties shall equally split
the costs and fees of the third appraiser. Upon payment of any
sums due to Tenant pursuant hereto, this Lease shall Terminate.
Landlord shall have the right to require Tenant to remove debris
resulting from the Destruction of the School Building, provided
that Landlord gives written notice thereof to Tenant within thirty
(30) days after Tenant's election to Terminate this Lease pursuant
to this section 12.3. Landlord shall also have the right to
require Tenant to remove the Additional Improvements pursuant to
Section 7.5 hereof. Additionally, Tenant shall be required to
deliver possession of the Premises to Landlord. Finally, upon
request by Landlord, Tenant shall deliver a quitclaim deed evi-
dencing such Termination. Tenant shall pay in full any outstand-
ing indebtedness incurred by Tenant and secured by an Encumbrance
on the leasehold, or alternatively, deliver to Landlord the
written consent of the holders of all such Encumbrances to the
early Termination of this Lease and extinguishment of their Encum-
brances.
13. CONDEMNATION.
13.1 Definitions.
(a) "Award" means all compensation, sums,
or anything of value awarded, paid, or received on a total or
partial Condemnation.
(b) "Condemnation" means (1) the exercise
of any governmental power, whether by legal proceedings or other-
wise, by a Condemnor and (2) a voluntary sale or transfer by Land-
lord to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending.
32.
(c) "Condemnor" means any public or quasi
public authority, or private corporation or individual, having the
power of Condemnation.
(d) "Date of Taking" means the date the
Condemnor has the right to possession of the property being con-
demned.
(e) "Minor Taking" means a Condemnation
which does not cause a loss of building square footage or parking
spaces at the Premises and which does not permanently and adverse-
ly impact or affect circulation, ingress, egress or visibility of
or at the Premises.
13.2 Rights and Obligations Governed by Lease.
If during the Term there is any taking of all or any part of the
Premises or any interest in this Lease by Condemnation, the rights
and obligations of the Parties shall be determined pursuant to
this Section 13. Each Party waives the provisions of Code of
Civil Procedure §1265.130 allowing either Party to petition the
superior court to Terminate this Lease in the event of a partial
taking of the Premises.
13.3 Total Taking.
(a) If all or substantially all of the
Premises shall be taken by condemnation then this Lease shall
Terminate as of the Date of Taking and Annual Rent shall be paid
up to the Date of Taking. All Annual Rent paid in advance and
pertaining to a period beyond the Date of Taking shall be propor-
tionately refunded to Tenant by Landlord. For purposes of this
Section, "substantially all" of the Premises shall be deemed to
have been taken if the Condemnation is more than a Minor Taking
and if, in Tenant's reasonable discretion, the remaining property
cannot be practicably used by Tenant for the purposes contemplated
by this Lease.
(b) In the event of a taking of all or sub-
stantially all of the Premises, Tenant shall be entitled to that
portion of the Award equal to the Fair Market Value of Tenant's
interest in the Leasehold (including the value of Tenant's inter-
,
33.
est in all subleases to occupants of the Premises), such value to
be determined as it existed immediately preceding the earliest
taking or threat of taking of the Premises, and Landlord shall be
entitled to receive the balance of any Award. Notwithstanding the
foregoing, Landlord shall be entitled to a portion of the Award
equal to the Annual Rent which would otherwise have been payable
for the one year period after the Date of Taking, unless the Award
is less than that amount, in which event Landlord shall be enti-
tled to the whole Award.
13.4 Partial Taking.
(a) In the event of a taking of less than
all or substantially all of the Premises, the Term of this Lease
shall not be reduced or affected in any way; provided, however,
that on the Date of Taking the Annual Rent shall be reduced in the
same proportion that the area of the portion of the Premises so
taken bears to the area of the Premises immediately before the
Date of Taking. Notwithstanding the foregoing, there shall be no
adjustment to Annual Rent in the event of a Minor Taking.
(b) In the event of a taking of less than
all or substantially all of the Premises:
(1) Subject to the rights of any Per-
mitted Lender, that portion of the Award as may be required to
reasonably repair and restore any improvements on the Premises
shall be made payable to the Trustee, as trustee for Landlord and
Tenant, as their interests may appear, and the Trustee shall
release all such proceeds for the cost of repair, restoration or
reconstruction of the damaged or destroyed improvements. If and
to the extent that the Improvements cannot, in Tenant's reasonable
judgment, be so repaired and restored, Tenant shall be entitled to
a portion of the Award as required to reasonably compensate Tenant
for the value of the Improvements which cannot be so repaired or
restored. Any such reconstruction or restoration by Tenant shall
comply with the Provisions of Sections 7.2, 7.3, 7.4 and 10.1 of
this Lease; and
34.
(2) Landlord shall be entitled to
receive the balance of the Award.
(c) If the temporary use or occupancy of
all or any part of the Improvements shall be taken for any public
or quasi- public use for a period exceeding thirty days during the
Term of this Lease, Tenant shall have the option to Terminate this
Lease upon notice to Landlord. If Tenant does not exercise this
option to Terminate the Lease, Tenant shall continue to pay in
full the Annual Rent and other sums due from Tenant to Landlord
under this Lease, and Tenant shall have the right to receive so
much of any Award or other consideration for such taking as repre-
sents compensation for the use and occupancy of the Premises up to
and including the date of expiration of the Term of this Lease or
the date of Termination of the temporary taking, whichever is
earlier, and Landlord shall be entitled to receive the balance,if
any, of the Award.
13.5 Condemnation Proceedings Both Parties.
Tenant shall have the right to participate in any and all condem-
nation proceedings concerning or affecting the Premises, and no
settlement shall be made except with the agreement of Tenant. In
case of a taking of all or any part of the Premises or any inter-
est in the Lease, or the commencement of any proceedings or nego-
tiations which might result in such taking, any Party receiving
information as to the same shall promptly give written notice
thereof to the other.
14. ASSIGNMENT, SUBLETTING AND ENCUMBERING.
14.1 Prohibition Against Voluntary Assignment,
Subletting and Encumbering.
(a) Except as provided in this Section 14,
Tenant shall not voluntarily assign or encumber its interest in
this Lease or in the Premises, or sublease substantially all or
any part of the Premises, or allow any other person or entity
(except Tenant's Authorized Representatives) to occupy or use all
or any part of the Premises. Any such assignment, Encumbrance, or
35.
sublease shall be voidable and, at Landlord's election, shall con-
stitute a default. No consent to any assignment, Encumbrance, or
sublease shall constitute a further waiver of the provisions of
this section.
(b) For purposes of this Lease assignments
shall include: (i) with respect to a partnership tenant, a with-
drawal or change, voluntary, involuntary or by operation of law,
of any general partner, or a dissolution of the partnership, and
(ii) with respect to a corporate tenant, any dissolution, merger,
consolidation, or other reorganization of Tenant, or the sale or
other transfer of a controlling percentage of the capital stock of
Tenant. The phrase "controlling percentage" means the ownership
of, or the right to vote, stock possessing at least 50% of the
total combined voting power of all classes of Tenant's capital
stock issued, outstanding, and entitled to -vote for the election
of directors. This paragraph shall not apply if the stock of
Tenant is publicly traded through an exchange or over the counter.
14.2 Permitted Assignments. Notwithstanding the
Provisions of Section 14.1, Tenant may assign this Lease or the
leasehold estate of Tenant created and established by this Lease
as follows:
(a) To a limited or general partnership of
which Dana MacKay, Lary Mielke or Tom Tellefsen are general part-
ners;
(b) to a corporation (including a Sub -
Chapter S Corporation) of which all or any of the foregoing
individuals own or have the right to vote stock possessing at
least fifty percent of the total combined voting power of the
corporation's issued stock and are officers and /or directors of
said corporation;
(c) To a Person: (i) having management
experience in running commercial retail centers similar to the
Premises; and (ii) having a net worth at the date of the assign-
ment at least equal to the Annual Rent for the two years immedi-
ately preceding the date of the assignment and (iii) who has not
36.
(or whose principals have not) been convicted of a felony or a
crime involving moral turpitude; or
(d) To any other person or entity with
Landlord's prior written consent, which consent shall not be un-
reasonably withheld. Landlord may withhold its consent to a pro-
posed assignment under this subparagraph (d) if the prospective
assignee or a principal or principals of the prospective assignee
has or have ever been convicted of a felony or a crime involving
moral turpitude.
With respect to any assignment described in
Section 14.1(b), Tenant shall not be required to notify Landlord
or to obtain Landlord's approval prior to the assignment provided
that: (i) the assignee would continue to qualify as a tenant
under subsections (a), (b), (c) or (d); and (2) Tenant shall
notify Landlord of the assignment within ninety (90) days after
the completion of the assignment. With respect to any other pro-
posed assignment pursuant to subparagraph (c) or (d) above, at
least thirty (30) days prior to the date on which such proposed
assignment shall be effective, Tenant shall provide Landlord with
the identity of the prospective assignee, the prospective assign-
ee's current balance sheet, a summary of the prospective assign-
ee's relevant management experience and (if applicable) the
identity of the proposed management company. In the event the
prospective assignee does not have experience in operating com-
mercial retail centers similar to the Premises, Landlord's consent
to the assignment of the Lease may be conditioned upon said
assignee entering into a contract with a real property management
company acceptable to Landlord, in form and substance reasonably
acceptable to Landlord. Landlord shall have twenty (20) days
within which to reasonably object to any of the foregoing items.
Failure to object within said twenty (20) day period shall be
deemed approval.
In the case of an assignment or transfer,
the assignee or transferee shall execute and deliver to Landlord
an agreement in form reasonably acceptable to Landlord assuming
37.
the obligations of Tenant under this Lease throughout the remain-
ing Term of this Lease. Upon delivery of such assumption agree-
ment to Landlord, any assignment permitted pursuant to Sec-
tion 14.2 made after the Improvement Completion Date shall
automatically release the assignors from all further liabilities
pursuant to this Lease as of the effective date of the assignment.
14.3 Permitted Subleases. Notwithstanding the
Provisions of Section 14.1 Tenant may sublease any part or parts
of the Premises without need for Landlord's consent, provided
that:
(a) each such sublease shall contain provisions
in substantially the following form:
(1) "This Lease is subject and subordinate
to the Master Lease (the "Master Lease ") dated November _ , 1987
by and between Redevelopment Agency of the City of Seal Beach, as
Landlord, and Lessor, as Tenant, and any amendments, modifications
or extensions thereof."
(2) "If the Master Lease shall be Termi-
nated prior to the end of the then effective Term of said Master
Lease (other than upon a Termination following a condemnation or
destruction), Lessee shall attorn to the Master Landlord, as the
landlord under this Lease, said attornment to be effective and
self operative without the execution of any further instruments
upon the Termination of Lessor's interest under the Master Lease."
(3) Lessee acknowledges and agrees that if
Lessee is required to attorn as provided above or is otherwise
permitted to attorn to the Master Landlord, the Master Landlord
shall not be required to credit Lessee with more than three months
rent (including security deposits) actually prepaid by Lessee to
Lessor on or before the time of such attornment;" and
(b) Promptly after the execution of any sublease
or amendment thereto, Tenant shall notify Landlord of such execu-
tion and of the name and mailing address of the subtenant and
shall provide Landlord with a copy of the sublease or amendment.
38.
At the request of Tenant, Landlord shall at
any time and from time to time execute in favor of a subtenant of
Tenant a nondisturbance agreement in form and substance reasonably
acceptable to Tenant within twenty (20) days of such request, pro-
vided that:
(1) the sublease is permitted by this
Section 14.3;
(2) the request is made after the
Improvement Completion Date;
(3) if the sublease is entered into
before the fifth (5th) anniversary of the
Commencement Date, the net rent payable to
Tenant shall not be less than ten dollars
($10.00) per square foot of the rentable
space leased pursuant thereto per month;
(4) if the sublease is entered into
after the fifth (5th) anniversary of the
Commencement Date, then at the time of exe-
cution, the aggregate amounts payable for
rent, property taxes and common area
maintenance under the sublease and all of
the other subleases then affecting the Prem-
ises for the calendar year in which the sub-
lease is executed shall exceed the Annual
Rent, property taxes and insurance premiums
relating to the Premises payable by Tenant
in the immediately preceding calendar year
by Twenty -Five percent (25 %).
The nondisturbance agreement shall provide, among
other things, that, in the event of early Termination of this
Lease by Landlord (other than upon a Termination following a Con-
demnation or Destruction), Landlord will not disturb the subten-
ant's possession of the Premises, or portion thereof, provided
said subtenant is not then in default, and does not subsequently
default, under its sublease.
39.
14.4 Encumbrance or Assignment as Security.
Notwithstanding the Provisions of Section 14.1, Tenant shall have
the right to encumber or assign its interest in this Lease by a
first or second leasehold Encumbrance ( "Permitted Encumbrance ") in
favor of (i) any institutional lender, including banks, savings
and loans, and insurance companies, (ii) any former Tenant here-
under, in the event this Lease is assigned in accordance with
Section 14, and /or (iii) any other person or entity who is not
affiliated directly or indirectly with the then current Tenant
hereunder (collectively, a "Permitted Lender "). As promptly as
possible after execution of such Encumbrance (or any amendment,
supplement or modification thereto), a true copy of such instru-
ment and the obligation secured thereby shall be delivered to
Landlord together with a written notice of the name and mailing
address of the Permitted Lender, the date and place of recording
or filing of record thereof and recorder's instrument number, book
and page reference or other recorder's index reference. Except as
expressly provided herein, nothing contained in any Permitted
Encumbrance shall be deemed or construed to relieve Tenant from
the full and faithful observance and performance of its covenants
herein contained, or from any liability for the nonobservance or
nonperformance thereof, or to constitute a waiver of any rights of
Landlord hereunder, or to require or provide for the subordination
to the Lien of the Permitted Encumbrance of any estate, right,
title or interest of Landlord in or to the Premises or this Lease.
15. FINANCING PROVISIONS.
15.1 Cancellation of Lease. No cancellation,
surrender or modification of this Lease shall be effective as to
Permitted Lender unless consented to in writing by such Permitted
Lender.
15.2 Notice of Default. Concurrently with giving
Tenant any notice of default under this Lease, Landlord shall
provide a copy of such notice in the manner provided for in Sec-
tion 18 hereof to any Permitted Lender at its address as furnished
40.
' in writing pursuant to Section 14.4. Permitted Lender shall have
the right, but not the obligation to cure Tenant's default. Land-
lord shall accept performance by or at the instigation of Permit-
ted Lender as if the same had been done by Tenant. Tenant autho-
rizes Permitted Lender's option to cure pursuant hereto and does
hereby authorize entry upon the Premises by the Permitted Lender
for such purpose.
15.3 Right to Cure. If any .default shall occur
which entitles Landlord to Terminate this Lease, except for the
giving of notices required pursuant to this Lease Landlord will
take no action to effect a Termination of the Term of this Lease
if, by the later of thirty (30) days after the expiration of Ten-
ant's grace period or sixty (60) days after such Permitted Len-
der's receipt of the Notice of Default pursuant to Section 15.2,
such Permitted Lender:
(a) Pays or causes to be paid all
Annual Rent and other payments then due to Landlord under this
Lease and in arrears, including without limitation rent which may
become due during the period following the notice of default, but
excluding all amounts which were delinquent by more than sixty
(60) days on the date of the first notice of default to said
Permitted Lender; and
(b) Complies, or in good faith com-
mences to comply, with all nonmonetary requirements of this Lease
then in default and reasonably susceptible of being complied with
by such Permitted Lender; provided, however, that in the event
such Permitted Lender shall commence foreclosure proceedings, such
Permitted Lender shall not be required during such period to cure
or commence to cure any default consisting of Tenant's failure to
satisfy and discharge any Lien, charge or Encumbrance against the
Tenant's interest in this Lease or the Premises which is junior in
priority to the Permitted Encumbrance held by such Permitted
Lender, and provided further that if such Permitted Lender is
restrained by Law from proceeding with foreclosure proceedings,
the time period set forth above shall be tolled (notwithstanding
41.
' which, Permitted Lender shall continue to pay all Rent and other
sums due and becoming due under the Lease during the period of
such toll) and if default is cured, Permitted Lender may discon-
tinue such proceedings. Notwithstanding the foregoing, if Tenant
is in Default under this Lease more than once during any twelve
(12) month period, then with respect to the second such Default,
the Permitted Lender shall have no right to discontinue foreclo-
sure proceedings and reinstate the original Tenant; instead, the
Permitted Lender shall be required to complete foreclosure pro-
ceedings (whether by foreclosure, deed in lieu of foreclosure or
by any other lawful means), whereupon such Permitted Lender shall
have the right to sell or assign its rights to a new Tenant as
permitted pursuant to this Lease.
15.4 Additional Time. If Landlord shall elect to
Terminate this Lease by reason of any default of Tenant and
Permitted Lender shall have proceeded in the manner provided for
by Section 15.3, Landlord will take no action to effect a Termina-
tion of this Lease, provided that such Permitted Lender shall:
(a) Pay, or cause to be paid, all Annual
Rent and any other monetary obligations of Tenant to Landlord
under this Lease as the same become due, and continue its good
faith efforts to perform Tenant's other obligations under this
Lease; and
(b) If not enjoined or stayed, take steps
to acquire or sell Tenant's interest in this Lease by foreclosure
of the Leasehold Trust Deed or other appropriate means and prose-
cute the same to completion.
If such Permitted Lender is diligently com-
plying with this Section 15.4, this Lease shall not then Termin-
ate, and the time for completion by such Permitted Lender of its
proceedings shall continue so long as such Permitted Lender is
enjoined or stayed and thereafter for so long as such Permitted
Lender proceeds to complete steps to acquire or sell Tenant's in-
terest in this Lease by foreclosure of the Permitted Encumbrances
or by other appropriate means. Except as hereinafter provided,
42.
nothing in this Section 15.4 shall be construed to require any
Permitted Lender to continue such foreclosure proceedings after
Tenant's default with respect to such Permitted Lender has been
cured. If said default shall be cured and the Permitted Lender
shall discontinue such foreclosure proceedings, this Lease shall
continue in full force and effect as if Tenant had not defaulted
under this Lease. Notwithstanding the foregoing, if Tenant is in
Default under this Lease more than once during any twelve (12)
month period, then with respect to the second such Default, the
Permitted Lender shall have no right to discontinue foreclosure
proceedings and reinstate the original Tenant; instead, the Per-
mitted Lender shall be required to complete foreclosure proceed-
ings (whether by foreclosure, deed in lieu of foreclosure or by
any other lawful means), whereupon such Permitted Lender shall
have the right to sell or assign its rights to a new Tenant as
permitted pursuant to this Lease.
15.5 Assignment of Lease. If the Permitted
Lender is complying with Section 15.4, then, notwithstanding the
provisions of Section 14.1. restricting assignment of this Lease,
this Lease may be assigned to the Permitted Lender in lieu of
foreclosure or to the Permitted Lender or its designee or any
other purchaser at a foreclosure sale. Any such assignee shall be
liable for the payment of all Rent and the performance of all
other obligations of Tenant becoming due with respect to the
period during which such assignee is the holder of the Leasehold
interest hereunder but shall not be liable for the Rent or the
performance of other obligations of Tenant accruing after its or
their subsequent sale or transfer of such leasehold estate.
15.6 New Lease With First Permitted Lender. Not-
withstanding any other provision of this Lease to the contrary,
should this Lease Terminate because of the insolvency or bankrupt-
cy of Tenant or because of any other incurable default under or
breach of this Lease by Tenant, Landlord will execute a new lease
for the Premises to the holder of the Permitted Encumbrance which
is first in priority as lessee, provided:
43.
(a) A written request for the new lease is
served on Landlord by such Permitted Lender within fifteen (15)
days after the date of Termination of the Lease.
(b) The new lease is for a Term commencing
upon Termination of the Lease and ending on the same date the Term
of this Lease would have ended had this Lease not been Terminated,
provides for the ,payment of rent at the same rate that would have
been payable under this Lease during the remaining Term of this
Lease had this Lease not been Terminated, and contains all the
same Provisions as are contained in this Lease.
(c) Such Permitted Lender, on execution of
the new lease by Landlord, shall pay any and all sums that would
at the time of the execution of the new lease be due under this
Lease but for its Termination and shall otherwise fully remedy, or
agree in writing to remedy, any other defaults under or breaches
of this Lease committed by Tenant that can reasonably be remedied
by Permitted Lender.
(d) The new lease shall be subject to all
existing subleases under which the sublessees are not in default.
15.7 Annual Rent Forgiven or Deferred. Notwith-
standing anything contained in this Section 15 or elsewhere in
this Lease to the contrary, Annual Rent and other charges accruing
under this Lease in the one (1) year period commencing on the date
on which a notice of default is delivered to a Permitted Lender by
Landlord (the "Default Notice Date") shall be payable only to the
extent that Net Income is sufficient to pay said Annual Rent and
charges. "Net Income" shall mean the cash income generated by the
Premises after payment of all regular operating and maintenance
expenses of the Premises. Any deficiency between Net Income for
the first six (6) months after the Default Notice Date and Annual
Rent and charges due hereunder accruing in said six (6) month
period shall be absolutely and forever forgiven by Landlord. Any
deficiency between Net Income and Annual Rent and charges due
hereunder for the second six (6) months after the Default Notice
44.
•
Date shall be due and payable, without interest thereon, on that
date which is one (1) year after the Default Notice Date.
15.8 Further Assurances. Within twenty (20) days
after Tenant's request therefor, Landlord shall execute such
further documents, whether amendments to this Lease or separate
agreements, as may be reasonably required by a Permitted Lender in
order to carry out the purpose and intent of this Section 15, so
long as the documents do not extend any periods provided in Sec-
tion 15 or otherwise impair the rights of Landlord under this
Lease.
16. DEFAULTS AND REMEDIES.
16.1 Defaults. Each of the following shall be
deemed a Default under this Lease:
(a) if Tenant shall fail to pay any in-
stallment of rent or other sum due under this Lease when due and
payable, and such failure continues after written notice thereof
from Landlord, for a period of more than thirty days;
(b) if Tenant shall fail to perform any
other term, covenant or condition of this Lease, and such failure
continues for more than thirty days after written notice from
Landlord (or if the default is of such character as reasonably to
require more than thirty days to cure, then if Tenant shall fail
within thirty days after written notice from Landlord to commence
and pursue with reasonable diligence the curing of such default);
(c) if a petition to have Tenant adjudicat-
ed a bankrupt or any other similar or related proceeding under any
federal or state law relating to bankruptcy, arrangement, reorgan-
ization, insolvency or relief of debtors be filed or instituted by
or against Tenant and not be dismissed within ninety days from the
date of such filing or instituting;
(d) if Tenant makes a general assignment
for the benefit of creditors, or if a receiver, guardian, conser-
vator, trustee or assignee, or any other or similar officer or
person shall be appointed to take charge of the Premises or all or
45.
•
substantially all of Tenant's other property, and such assignment
or appointment is not vacated within ninety days thereafter; or
(e) if Tenant abandons the Premises and
Landlord establishes such abandonment in accordance with California
Civil Code §1951.3, provided that the rent for the Premises shall
have been due and unpaid for at least thirty (30) consecutive days
prior to the date of Landlord's notice to Tenant thereof.
16.2 Remedies. Upon occurrence of any Default,
Landlord may, at its option and without any further demand or
notice, do any of the following:
(a) Give Tenant written notice of Termina-
tion of this Lease and on the date specified in such notice Ten-
ant's right to possession of the Premises shall cease and this
Lease shall Terminate. Upon such Termination, Landlord may reenter
the Premises, and, subject to the rights of subtenants, pursuant
to Section 14.3 of this Lease, Landlord may eject all parties in
possession of the Premises and repossess and enjoy the Premises, in
which event Landlord shall be entitled to recover from Tenant, in
accordance with California Civil Code Section 1951.2 or successor
statute, or otherwise, the following:
(1) the worth at the time of award of
the amount of any obligations of Tenant which has accrued or been
earned at the time of Termination;
(2) the worth at the time of award of
the amount by which the unpaid Rent and all additional and further
charges under this Lease which would have been earned after Termi-
nation until the time of award exceeds the amount of loss of such
rental or other charges that Tenant proves could have been reason-
ably avoided;
(3) the worth at the time of award of
the amount by which the unpaid Rent and other charges for the
balance of the Term of this Lease after the time of award exceeds
the amount of loss of such rental and other charges that Tenant
proves could be reasonably avoided; and
46.
0
(4) any and all other amounts necessary
to compensate Landlord for all detriment, costs and expenses in-
curred by Landlord proximately caused by Tenant's default hereunder
or which in the ordinary course of things would be likely to result
therefrom.
As used in clauses (1) and (2) above, the
"worth at the time of award" is computed by allowing interest at a
rate equal to the maximum rate at the time of the award that a non-
exempt lender is permitted to charge on loans for any use other
than for personal, family or household purposes, under California
Constitution Article XV, Section 1, as now in effect or hereafter
from time to time amended. As used in clause (3) above, the "worth
at the time of award" is computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent. No effort -by Landlord to mitigate
the damages caused by Tenant's default hereunder shall waive or
result in the waiver of any right of Landlord to recover damages
under this Section 16.2(a). The amount recoverable by Landlord
pursuant to clause (4) above shall include, but is not limited to,
any costs or expenses incurred by Landlord in maintaining or
preserving the Premises after such default, preparing the Premises
for reletting to a new tenant, accomplishing any repairs or Altera-
tions to the Premises for the purpose of such reletting, rectifying
any damage thereto occasioned by the act or omission of Tenant or
any other costs necessary or appropriate to relet the Premises.
(b) Without Terminating this Lease or Ten-
ant's right to possession of the Premises or otherwise relieving
Tenant of any obligation hereunder, Landlord may re -enter the Prem-
ises, do all things necessary to preserve, maintain and repair the
same, make efforts it may deem desirable to relet the Premises,
obtain at its option the appointment of a receiver to protect its
interests under this Lease and continue to enforce all of its
rights and remedies under this Lease.
Landlord may at any time and from time to
time relet the Premises or any part or parts of them for the
47.
account and in the name of Tenant or otherwise. Subject to the
rights of subtenants pursuant to Section 14.3, Landlord may at
Landlord's election eject all Persons or eject some and not others
or eject none. Landlord shall apply all rents from reletting as in
Section 16.2(d) relating to assignment of subrents. Any reletting
may be for the remainder of the Term or for a longer or shorter
period. Landlord may execute any leases made under this provision
either in Landlord's name or in Tenant's name and shall be entitled
to all rents from the use, operation, or occupancy of the Premises.
Tenant shall nevertheless pay to Landlord on the dates specified in
this Lease the equivalent of all sums required of Tenant under this
Lease, plus Landlord's expenses, less the proceeds of any reletting
or attornment. No act by or on behalf of Landlord under this Pro-
vision shall constitute a Termination of this Lease unless Landlord
gives Tenant specific notice of Termination.
(c) Landlord may at Landlord's election use
Tenant's personal property and trade fixtures located on, about or
appurtenant to the Premises without compensation and without lia-
bility for use or damage, or store them for the account and at the
cost of Tenant. The election of one remedy for any one item shall
not foreclose an election of any other remedy for another item or
for the same item at a later time.
(d) Tenant assigns to Landlord all subrents
and other sums falling due from subtenants, licensees, and conces-
sionaires during any period in which Landlord has the right under
this Lease, whether exercised or not, to reenter the Premises for
Tenant's default, and Tenant shall not have any right to such sums
during that period. This assignment is subject and subordinate to
any and all assignments of the same subrents to the Permitted Len-
ders under any Permitted Encumbrances. Landlord may at Landlord's
election reenter the Premises with or without process of law,
without Terminating this Lease, and either or both collect these
sums or bring action for the recovery of the sums directly from
such obligors. Landlord shall receive and collect all subrents and
proceeds from reletting, applying them: first, to the payment of
48.
• reasonable expenses (including attorneys' fees or brokers' com-
missions or both) paid or incurred by or on behalf of Landlord in
recovering possession, placing the Premises in good condition, and
preparing or altering the Premises for reletting; second, to the
reasonable expense of securing new subtenants; third, to the ful-
fillment of Tenant's obligations to the end of the Term; and
fourth, to the persons legally entitled thereto. Tenant shall
nevertheless pay to Landlord on the due dates specified in this
Lease the equivalent of all sums required of Tenant under this
Lease, plus Landlord's expenses, less the proceeds of the sums
assigned and actually collected under this Provision.
16.3 Cumulative Nature of Remedies. The foregoing
rights of Landlord pursuant to Section 16.2 shall be cumulative to
all other rights or remedies now or hereafter given to Landlord by
law or in equity or by Terms of this Lease; provided, however, that
the election of Landlord to exercise the remedy hereinabove pro-
vided in Section 16.2(a) shall be binding upon Landlord and exclude
recourse thereafter to any other remedy for rent or charges equi-
valent to rent or damages for breach of the covenant to pay such
rent or charges accruing subsequent to the time of such Termina-
tion.
16.4 Landlord's Right to Cure Tenant's Breach.
Except (i) as set forth in Section 11.8, and (ii) in the event of
an emergency which threatens life or material damage to property,
Landlord may, but is not obligated to, cure any of Tenant's
failures to perform any covenant or provision of this Lease at Ten-
ant's cost only if such failure has continued after delivery by
Landlord of notice thereof to Tenant and lapse of the applicable
grace period, as provided in Section 16.1. If Landlord, by reason
of such failure by Tenant, pays any sum or does any act in accord-
ance with this Section 16.4, the sum paid by Landlord plus the rea-
sonable cost of performing such act shall be due as additional Rent
within ten (10) days after written demand therefor by Landlord to
Tenant. No such payment or act shall constitute a cure or waiver
49.
of the breach or a waiver of any remedy for default or render
Landlord liable for any loss or damage resulting from any such act.
16.5 Interest on Unpaid Rent. Rent not paid when
due shall bear interest from ten (10) days after the date due until
paid at a rate equal to the maximum rate (as such rate may vary
from time to time) that a non - exempt lender is permitted to charge
on loans for any use other than for personal, family or household
purposes, under California Constitution Article XV, Section 1, as
now in effect or hereafter from time to time amended. Payment of
such interest shall not excuse or cure any default by Tenant under
this Lease.
16.6 Non Recourse. Notwithstanding Sections 16.2,
16.3, 16.4, 16.5 or any other provision of this Lease to the con-
trary, from and after the Improvement Completion Date, Landlord
shall not seek or obtain a money judgment against Tenant, its
successors and assigns nor their officers, directors, partners,
principals, employees and agents, for any breach of this Lease
(whether or not this Lease is terminated as a result of such
breach). It is expressly understood by Landlord that after the
Improvement Completion Date, Landlord's remedies against Tenant
with respect to this Lease and the Premises shall be limited to
realizing upon Tenant's interest in this Lease and the Deposit and
in no event shall Tenant, any successor or any stockholder, indi-
vidual, partner, joint venturer, joint tenant, trustee, beneficiary
or any other person or entity directly or indirectly interested in
Tenant or any successor or assign of Tenant, whether disclosed or
undisclosed, be liable for any cause of action, claim or liability
arising under or related to this Lease except to the extent of such
Person's interest in this Lease and /or the Deposit, and then only
out of and limited to such interest in this Lease and /or the
Deposit. Notwithstanding the foregoing, Tenant shall be liable to
Landlord for any act by Tenant which would constitute "waste" of
the Premises at any time during the Term hereof.
16.7 Landlord's Default. Landlord shall not be
deemed to be in default in the performance of any obligation
50.
' required to be performed by it hereunder unless and until it has
failed to perform such obligation within thirty (30) days after
written notice by Tenant to Landlord specifying wherein Landlord
has failed to erform such obligation; P g provided, however, that if
the nature of Landlord's obligation is such that more than thirty
(30) days are required for its performance then Landlord shall not
be deemed to be in default if it shall commence such performance
within such thirty (30) day period and thereafter diligently and in
good faith prosecute the cure to completion.
17. SURRENDER AND LANDLORD'S ENTRY.
17.1 Surrender. Upon the Expiration or sooner
Termination of this Lease, Tenant shall surrender the Premises to
Landlord in good order, condition and repair, ordinary wear and
tear, unavoidable depreciation and obsolescence excepted, subject
to the provisions of Section 7.5 of this Lease. Tenant's tenants,
subtenants, licensees and concessionaires for space in the Premises
shall have the right to remove their trade fixtures, furniture,
furnishings and equipment from the Premises prior to the Expiration
date or within thirty (30) days after the date of Termination
provided they repair any damage to the Premises caused by said
removal.
17.2 Landlord's Entry on Premises. Landlord and
its Authorized Representatives shall have the right to enter the
Premises during normal business hours upon reasonable prior notice
to Tenant for any of the following purposes:
(a) To determine whether the Premises are in good
condition and whether Tenant is complying with its obligations
under this Lease;
(b) To do any necessary maintenance and to make
any restoration to the Premises that Landlord has the right to
perform;
(c) To serve, post, or keep posted any notices
required or allowed under the Provisions of this Lease;
51.
(d) To show the Premises to prospective brokers,
agents, buyers, lenders, or Persons interested in an exchange, at
any time during the Term.
Landlord shall not be liable in any manner
for any inconvenience, disturbance, loss of business, nuisance, or
other damage arising out of Landlord's entry on the Premises as
provided in this section, except damage resulting from the acts or
omissions of Landlord or its Authorized Representatives.
Tenant shall not be entitled to an abatement
or reduction of Rent if Landlord exercises any rights reserved in
this section.
Landlord shall conduct its activities on the
Premises as allowed in this section in a reasonable manner that
will minimize any inconvenience, annoyance, or disturbance to
Tenant and Tenant's subtenants.
18. NOTICES.
All notices, statements, demands, requests, con-
sents, approvals, authorizations, offers, agreements, appointments
or designations under this Lease made or given by either party to
the other shall be personally delivered or sent by United States
certified mail, return receipt requested, postage prepaid, and
shall be deemed received upon delivery if personally served or
three days after deposit in the United States mails, if sent certi-
fied mail, return receipt requested, postage prepaid. Such notices
shall be addressed as follows:
If to Landlord: Seal Beach Redevelopment Agency
211 8th Street
Seal Beach, California 90740
Attention: Agency Administrator
With a copy to: Richards, Watson & Gershon
333 South Hope Street, 38th Floor
Los Angeles, California 90017
Attn: Gregory W. Stepanicich, Esq.
If to Tenant: Gemtel Corporation
523 West Sixth Street, Suite 707
Los Angeles, California 90014
Attention: Lary J. Mielke
52.
With a 'copy to: Riordan & McKinzie
300 S. Grand Avenue, Suite 2900
Los Angeles, CA 90071
Attention: Michael F. Keeley, Esq.
or to such other place or places as Landlord and Tenant may desig-
nate by written notice similarly delivered.
19. OUIET POSSESSION.
Tenant, upon paying the Rent herein provided and
performing all of the other obligations of this Lease on its part
to be performed, shall and may peaceably and quietly have, hold and
enjoy the Premises during the Term hereof, as the same may be ex-
tended, without hindrance or molestation by Landlord, subject to
all of the Provisions of this Lease.
20. RIGHTS OF FIRST REFUSAL.
20.1 Right of First Refusal to Purchase.
(a) Provided Tenant is not then in default
under this Lease, in the event Landlord proposes to sell all or any
part of its interest in the Premises (the "Interest ") during the
Term of this Lease or within one (1) year after Expiration of the
Term, Landlord shall give written notice to Tenant of the price and
terms of such proposed sale. If Tenant, within thirty days after
receipt of Landlord's notice, agrees in writing to purchase the
Interest on the terms stated in Landlord's notice, Landlord shall
promptly sell and convey the Interest to Tenant on the terms stated
therein.
(b) If Tenant does not elect to purchase the
Interest within said thirty -day period, Landlord thereafter shall
have the right to sell and convey it to a third party on terms
which shall not in the aggregate be more favorable to the purchaser
than those stated in Landlord's notice to Tenant. If Landlord
changes the terms in a manner which is in the aggregate more favor-
able to the purchaser, Landlord must again offer such changed or
more favorable terms to Tenant pursuant to the terms hereof. If
Landlord notified Tenant pursuant to section (a) prior to the
execution of a definitive formal agreement between Landlord and the
53.
.purchaser, then promptly after execution of such formal agreement
Landlord shall deliver an executed copy thereof to Tenant. Tenant
shall have no right to approve such formal agreement or object to
the sale described therein if the terms set forth in the formal
agreement are not in the aggregate more favorable to the purchaser
than the terms set forth in the Landlord's prior notice to Tenant.
The date on which such definitive agreement is delivered to Tenant
shall constitute the "RFR Date."
(c) If Landlord does not complete the sale
and convey the Interest within six months after the RFR Date, then
Landlord shall offer the Interest to Tenant on the terms stated in
the formal agreement (unless Landlord has decided not to sell the
Interest to any party and has removed it from the market, in which
event Landlord shall not be obligated to again offer the Interest
to Tenant). If Tenant within 30 days after receipt of Landlord's
notice agrees in writing to purchase the Interest on the terms
stated in the formal agreement, Landlord shall promptly sell and
convey the Interest to Tenant on those terms.
(d) Notwithstanding the foregoing,
Landlord's obligations to offer the Interest to Tenant under this
Section 20.1 shall expire on that date which is one year after the
Expiration of the Term.
20.2 Right of First Refusal to Lease.
(a) If, within one (1) year of Expiration of
the Term of this Lease, Landlord proposes to lease all or any part
of the Premises (the "Leased Portion "), Landlord shall give written
notice to Tenant of the terms of such proposed lease. If Tenant,
within thirty days after receipt of Landlord's notice, agrees in
writing to lease the Leased Portion on the terms stated in
Landlord's notice, Landlord shall promptly enter into a lease with
Tenant on the terms stated therein.
(b) If Tenant does not elect to lease the
Leased Portion within said thirty -day period, Landlord thereafter
shall have the right to lease the Leased Portion to a third party
on terms which shall not in the aggregate be more favorable to the
54. ,
' lessee than those stated in Landlord's notice to Tenant. If Land-
lord changes the terms in a manner which is in the aggregate more
favorable to the lessee, Landlord must again offer such changed or
more favorable terms to Tenant pursuant to the terms hereof. If
Landlord notified Tenant pursuant to section (a) prior to the
execution of a definitive formal agreement between Landlord and the
proposed lessee, then promptly after execution of such formal
agreement Landlord shall deliver an executed copy thereof to
Tenant. Tenant shall have no right to approve such formal
agreement or object to the lease described therein if the terms set
forth in the formal agreement are not in the aggregate more
favorable to the lessee than the terms set forth in the Landlord's
prior notice to Tenant. The date on which such definitive
agreement is delivered to Tenant shall again constitute the RFR
Date.
(c) If Landlord does not complete the lease
of the Leased Portion within six months after the RFR Date, then
Landlord shall offer to lease the Leased Portion to Tenant on the
terms stated in the formal agreement (unless Landlord has decided
not to lease the Leased Portion to any party, in which event
Landlord shall not be obligated to again offer to lease the Leased
Portion to Tenant). If Tenant within 30 days after receipt of
Landlord's notice agrees in writing to lease the Leased Portion on
the terms stated in the formal agreement, Landlord shall promptly
lease the Leased Portion to Tenant on those terms.
(d) Notwithstanding the foregoing,
Landlord's obligations to lease the Leased Portion under this
Section 20.2 shall expire on that date which is one year after the
Expiration of the Term.
20.3 Transfer of Landlord's Interest. If Landlord
sells the Interest to a third party, Landlord, on the date title
vests in such third party, shall be released from any liability
thereafter created under. this Lease if and only if Landlord's suc-
cessor has assumed in writing for the benefit of Tenant all of
Landlord's obligations under this Lease. Notwithstanding the
55.
foregoing, Landlord shall not be released from the obligation set
forth in the last sentence of Section 2 hereof upon a sale of its
Interest to a third party.
21. SUBORDINATION.
21.1 With Respect to Landlord's Leasehold. If
Landlord acquires a Leasehold interest in the Premises, the parties
acknowledge that this Lease is subject and subordinate to the Prem-
ises Head Lease, and any amendments, modifications or extensions
thereof, which lease includes an option to purchase the fee inter -
est, and agree that neither the Termination of the Premises Head
Lease nor the acquisition of the fee interest by Landlord shall
Terminate this Lease. Provided Landlord delivers to Tenant the
nondisturbance agreement provided for in Section 3.2, Tenant shall
execute such documents, whether amendments .. to this Lease or separ-
ate documents, reasonably required by the Premises Head Lessor, so
long as such documents do not impair the rights of Tenant under
this Lease.
21.2 With Respect to Landlord's Fee Interest. If
Landlord acquires a fee interest in the Premises (whether at or
prior to the Commencement Date or at any time during the Term
hereof, by exercise of an option to purchase or otherwise pursuant
to the Premises Head Lease), Landlord may encumber the fee or enter
into a sale - leaseback or other financing transaction with respect
to the fee interest. This Lease shall be prior to any such Encum-
brance or lease. If, however, a Lender, leaseback lessor or other
party to a financing transaction requires that this Lease be subor-
dinate to its Encumbrance, lease or other instruments, Tenant shall
subordinate its interest in and to this Lease to such Encumbrance,
lease or other instruments if Landlord obtains from the Lender,
leaseback lessor or other party to the financing transaction a duly
executed nondisturbance agreement in form reasonably acceptable to
Tenant. The nondisturbance agreement shall provide that if the
Lender, leaseback lessor, other party to the financing transaction
or purchaser at a foreclosure sale acquires Landlord's interest in
56.
the Premises, whether by foreclosure or otherwise, the acquiring
party will not disturb Tenant's possession of the Premises so long
as Tenant is not in Default.
21.3 Further Assurances. If the Premises Head
Lessor or any subsequent Lender, leaseback lessor, other party to a
financing transaction or purchaser at a foreclosure sale acquires
Landlord's interest in the Premises, whether by foreclosure or
otherwise, Tenant shall attorn to that party. Provided that Tenant
obtains said nondisturbance agreement, Tenant shall execute any
other documents, whether amendments to this Lease or separate docu-
ments, reasonably required to implement the types of transactions
described in this Section 21 or to otherwise carry out the intent
of this Section 21, so long as such documents do not impair the
rights of Tenant under this Lease.
22. GENERAL PROVISIONS.
22.1 Waiver. The waiver by Landlord or Tenant of
any breach by the other Party of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any
other term, covenant, or condition herein contained. The subse-
quent acceptance of Rent hereunder by the Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of any
term, covenant, or condition of this Lease, other than the failure
to pay the particular rents so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of
such Rent.
22.2 Attorneys' Fees. If either Party becomes a
party to any litigation concerning this Lease or the Premises, by
reason of any act or omission of the other Party or its Authorized
Representatives, and not by any act or omission of the Party that
becomes a party to that litigation or any act or omission of its
Authorized Representatives, the Party that causes the other Party
to become involved in the litigation shall be liable to that Party
57.
for actual attorney's fees and court costs incurred by it in the
litigation.
If either Party commences an action against the
other Party arising out of or in connection with this Lease, the
prevailing Party shall be entitled to have and recover from the
losing Party reasonable attorneys' fees and costs of suit.
22.3 Estoppel Certificates. At any time and from
time to time, within twenty (20) days after notice of request by
either Party, the other Party shall execute, acknowledge, and de-
liver to the requesting Party, or to such other recipient as the
notice shall direct, a statement certifying that this Lease is
unmodified and in full force and effect, or, if there have been
modifications, that it is in full force and effect as modified in
the manner specified in the statement and acknowledging that there
are no uncured defaults or failures to perform any covenant or
Provision of this Lease on the part of the requesting Party or spe-
cifying any such defaults or failures which are claimed to exist.
The statement shall also state the dates to which the Rent and any
other charges have been paid in advance. The statement shall be
such that it can be relied on by any auditor, creditor, commercial
banker, and investment banker of either Party and by any prospec-
tive purchaser or mortgagee of the Premises or all or any part or
parts of Tenant's or Landlord's interests under this Lease.
22.4 Entire Agreement; Modification. This Lease
contains the entire agreement between the Parties. No verbal
agreement or implied covenant shall be held to vary the provisions
hereof, any statements, law or custom to the contrary notwithstan-
ding. No promise, representation, warranty, or covenant not inclu-
ded in this Lease has been or is relied on by either party. Each
party has relied on its own inspection of the Premises and examina-
tion of this Lease, the counsel of its own advisors, and the war-
ranties, representations, and covenants in this Lease itself. The
failure or refusal of either party to inspect the Premises, to read
this Lease or other documents, or to obtain legal or other advice
relevant to this transaction constitutes a waiver of any objection,
58.
• contention, or claim that might have been based on such reading,
inspection, or advice.
No provision of this Lease may be amended or varied
except by an agreement in writing signed by the Parties.
22.5 Recording. Landlord and Tenant shall enter
into a short form memorandum of this Lease, in suitable form for
recording, which shall, along with the Parking Easement Agreement,
be recorded at Tenant's request and expense upon commencement of
the Term.
22.6 Governing Law. The Lease shall be governed by
and interpreted under the laws of the State of California.
22.7 Successors. Subject to the restrictions on
assignment and subleasing in Article 14 hereof, the covenants,
conditions and agreements of this Lease shall be binding upon and
shall inure to the benefit of the heirs, representatives, succes-
sors and assigns of the parties hereto.
22.8 Severability. If the Provisions of this Lease
shall for any reason be held to be invalid, illegal or unenforce-
able by any court of competent jurisdiction, the validity of the
other provisions of this Lease shall in no way be affected thereby,
and this Lease shall be construed as though such invalid, illegal
or unenforceable provisions had never been contained herein, pro-
vided that such construction does not materially alter the rights
or obligations of either Party hereunder.
22.9 Singular and Plural; Gender. Whenever the
singular number is used in this Lease and the context requires, the
same shall include the plural. Further, when used in this Lease
and the context requires, the neuter gender shall include the
feminine and masculine, the masculine shall include the feminine
and neuter, the feminine shall include the masculine and neuter,
and each shall include any reference to a corporation, partnership,
trust, or other legal entity.
22.10 Time. Time is of the essence of this Lease.
22.11 Captions. The captions of the sections of
this Lease are for convenience only and shall not be considered or
59.
referred to in resolving questions of interpretation or construc-
tion.
22.12 Consent of Landlord. Neither Landlord's
execution of this Lease nor any consent or approval given by Land-
lord hereunder in its capacity as Landlord shall waive, abridge,
impair or otherwise affect Landlord's powers and duties as a gov-
ernmental body. Any requirements under this Lease that Tenant
obtain consents or approvals of Landlord are in addition to and
not in lieu of any requirements of Law that Tenant obtain approv-
als or permits. Wherever in this Lease it is provided that any
matter, thing or act requires the prior approval of Landlord,
should Landlord fail for any reason whatever to provide such ap-
proval in writing or notify Tenant in writing of its disapproval
and the reasons therefor within the time periods set forth herein,
such failure shall be conclusively deemed to be the equivalent of
an express approval.
22.13 Brokers. Each Party warrants to and for the
benefit of the other that it has had no dealings with any real
estate broker or other agent (attorneys excepted) in connection
with the negotiation or making of this Lease except Daum - Johnstown
American ( "Daum "). Tenant agrees to pay the commissions owed to
Daum in accordance with its agreement with Daum.
22.14 Joint and Several Obligations. "Party"
shall mean Landlord or Tenant; and if more than one Person is
Landlord or Tenant, the obligations imposed on that Party shall be
joint and several.
22.15 Force Majeure. Except as provided below, ,
any prevention, delay or stoppage due to strikes, lockouts, labor
disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes therefor, extraordinary governmental
restrictions, regulations or controls, enemy or hostile govern-
mental action, civil commotion, fire or other casualty, and other
causes beyond the control of the Party obligated to perform any
term, covenant or condition of this Lease, shall excuse the per-
formance by such Party for a period equal to any such prevention,
•
60.
delay or stoppage, except the obligations imposed with regard to
Rent or Landlord's financial obligations pursuant to this Lease,
unless abatement is provided for in those instances under this
Lease.
Either Party encountering such Force Majeure
delays shall send written notice thereof to the other Party no
later than thirty (30) days after the commencement of such Force
Majeure delay. If the Party encountering such Force Majeure delay
fails to send notice thereof to the other party within thirty (30)
days after the commencement of such delay, then any alleged delay
occurring more than thirty (30) days prior to the date of such
notice shall not be deemed to extend any time for performance set
forth herein.
IN WITNESS WHEREOF, the parties hereto have executed
this Master Lease as of the date first above written.
LANDLORD: THE REDEVELOPMENT AGENCY OF
THE CITY OF SEAL BEACH,
a public body, corporate and politic
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TENANT: GEMTEL CO:•
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61.
EXHIBITS
A Legal Description of Premises
B Site Plan of Premises
C Legal Description of Parking Lot
D Parking Easement Agreement
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
A subdivision of a portion of Blocks 210 and 211, Bay View Tract
in the City of Seal Beach, County of Orange, State of California,
a map of which was recorded in Book 8, Page 91, Miscellaneous
Maps, Records of Orange County, California, described as follows:
Commencing at the centerline intersection of Pacific Coast Highway
and 12th Street as shown on Parcel Map No. 84 -1004, Parcel Book
203, Pages 49 & 50, Records of Orange County; thence along the
centerline of said 12th Street, south 31 °17'10" west 50.00 feet;
thence north 58 °42'45" west 30.00 feet to the most easterly corner
of Lot 66 in Block 211 as shown in said Bay View Tract, said
corner being in the westerly line of 12th Street and the true
point of beginning; thence south 31 °17'10" west 180.00 feet;
thence north 58 °42'45" west 427.51 feet to the easterly line of
10th Street alley in Block 210; thence north 31 °16'19" east 180.00
feet to the most northerly corner of Lot 57 in Block 210, said
corner also being in the southerly line of Pacific Coast Highway
(North Avenue as shown in said Bay View Tract); thence south
58 °42'45" east along said southerly line of Pacific Coast Highway
427.55 feet to the point of beginning.
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EXHIBIT B
, SITE PLAN OF PREMISES
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EXHIBIT C
LEGAL DESCRIPTION OF PARKING LOT
That portion of Block 211, Bay View Tract, in the City of Seal
Beach, County of Orange, State of California, a map of which was
recorded in Book 8, Page 91, Miscellaneous Maps, Records of Orange
County, California, described as follows:
Apiece of land 45.00 feet wide, the northerly line of which is
described as follows:
Commencing at the centerline intersection of Pacific Coast Highway
and 12th Street; thence along the centerline of 12th Street south
31 °17'10" west 230.00 feet; thence north 58 °42'45" west 30.00 feet
to the most southerly corner of Parcel 1, said corner also being
in the westerly line of 12th Street and the true point of
beginning; thence continuing northwesterly along the southerly
line of Parcel 1 182.50 feet.
sealbch.lgl
•
•
EXHIBIT D
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
PARKING EASEMENT AGREEMENT
This Parking Easement Agreement ( "Agreement ") is
entered into as of the day of , 1987, by and
between The CITY OF SEAL BEACH, a municipal corporation ( "City "),
and GEMTEL CORPORATION, a California corporation, and DANA
MacKAY, an individual (hereinafter jointly referred to as
"Grantee ").
R E C I T A L S
A. City is the lessee under a Lease (the "District
Lease ") dated January 1, 1987, by and between the Los Alamitos
Unified School District, as Landlord, and City, as Tenant, with
respect to the real property ( "the District Parcel ") described in
Exhibit "A" attached hereto and incorporated herein by this
reference.
B. Grantee is the lessee under a Lease (the "Agency
Lease ") dated concurrently herewith, by and between the
Redevelopment Agency of the City of Seal Beach, as Landlord, and
Grantee, as Tenant, with respect to the real property ( "the
Agency Parcel ") described in Exhibit "B" attached hereto and
incorporated herein by this reference.
C. The District Parcel and the Agency Parcel are
adjacent, with their respective locations as shown on the plot
plan attached hereto as Exhibit "C ".
D. Grantee intends to develop improvements on the
Agency Parcel which may, under applicable Law, require that
Grantee provide more parking spaces than Grantee is able to
provide on the Agency Parcel.
E. City is willing to grant to Grantee an easement to
construct and operate a parking lot on the portion ( "the Burdened
Parcel ") of the District Parcel described in Exhibit D attached
hereto and incorporated herein by this reference, for the benefit
of the Agency Parcel and the District Parcel, on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions.
1.1 General Definitions. As used in this Agree-
ment, the following words and phrases shall have the following
meanings:
(a) Authorized Representative - any officer,
agent, employee, or independent contractor retained or employed
by either Party, acting within authority given him by that Party.
(b) City - The City of Seal Beach, a municipal
corporation, and any Successor in interest in the District
Parcel.
(c) Damage - injury, deterioration, or loss to a
Person or property caused by a Act of God or another Person's
acts or omissions. Damage includes death; Damage does not
include normal wear and tear.
(d) Damages - a monetary compensation or indem-
nity that can be recovered in the courts by any Person who has
suffered damage to his person, property, or rights through
another's act or omission.
(e) Grantee - the Person listed in the introduc-
tory paragraph of this Agreement as Grantee, and any Successor.
(f) Hold harmless - to defend and indemnify from
all liability, losses, penalties, Damages, costs, expenses
(including, without limitation, attorneys' fees), causes of
action, claims, or judgments arising out of or related to any
Damage to any Person or property.
(g) yaw - any judicial decision, statute, consti-
tution, ordinance, resolution, regulation, rule, administrative
order, or other requirement of any municipal, county, state,
federal, or other government agency or authority having jurisdic-
tion over either of the Parties or the District Parcel or the
Agency Parcel, or both, in effect either at the time of execution
of this Agreement or at any time during the term of the Agree-
ment, including, without limitation, any regulation or order of a
quasi- official entity or body (e.g., board of fire examiners or
public utilities).
(h) Party - City or Grantee, or their respective
Successors.
(i) Permittees - subtenants, guests, employees,
agents, licensees, and invitees of Grantee and Grantee's sub-
tenants of the Agency Parcel.
(j) Person - one or more human beings, or legal
entities or other artificial persons, including, without limita-
tion, partnerships, corporations, trusts, estates, associations,
and any combination of human beings and legal entities.
(k) Provision - any term, agreement, covenant,
condition, clause, qualification, restriction, reservation, or
other stipulation in this Agreement that defines or otherwise
controls, establishes, or limits the performance required or
permitted by either Party.
(1) Successor - assignee, transferee, personal
representative, heir, or other Person succeeding lawfully to the
rights or obligations of either Party, including without limita-
tion the tenant under a Replacement Agency Lease.
1.2 Other Definitions. The following additional
terms are defined in the following sections of this Agreement:
(a) Agency Lease Recital B
(b) Agency Parcel Recital B
(c) Agreement Introductory
Paragraph
(d) Burdened Parcel Recital E
(e) District Lease Recital A
(f) District Parcel Recital A
(g) Parking Lot §2.1
(h) Permitted Lender §7,1
(i) Replacement Agency Lease §2.4
(j) Reserved Spaces §2.2
(k) Taxes §4.2.1
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871028 kw A102.AER 2
2. Grant of Easements.
2.1 Parking Lot Easement. City hereby grants to
Grantee an easement for Grantee to construct and operate a
parking lot ( "the Parking Lot "), for the exclusive use (except as
otherwise provided in §2.2) of Grantee and Grantee's Permittees,
on the.Burdened Parcel on the terms and conditions set forth in
this Agreement.
2.2 Reserved Spaces. Notwithstanding anything in
§2.1 to the contrary, City reserves the right to the exclusive
use by City and City's Permittees of eight parking spaces ( "the
Reserved Spaces "): six for parking and two for short -term
passenger loading and unloading; along with the right of
vehicular and pedestrian ingress and egress across such portions
of the Burdened Parcel as may be reasonably necessary to provide
City and City's Permittees with access to the Reserved Spaces
from the other portions of the District Parcel and from the
adjoining public streets. The location of the Reserved Spaces
and the walkways and driveways used for pedestrian and vehicular
ingress and egress shall be designated by Grantee, subject to the
approval of City, which approval shall not be unreasonably
withheld. City may at its option place signs or other
identifying markings on the Reserved Spaces; the design of such
signs or other markings shall be subject to the approval of
Grantee, which approval shall not be unreasonably withheld.
2.3 Changes of Burdened Parcel. Subject to the
approval of Grantee, which approval shall not be unreasonably
withheld, City may from time to time change the location of the
Parking Lot or designate another portion of the District Parcel
to serve as all or a portion of the Parking Lot and the Burdened
Parcel; provided, however, that (i) City shall bear all costs of
constructing the substituted or changed portions of the Parking
Lot; (ii) City shall provide reasonably convenient pedestrian
ingress and egress between the Agency Parcel and the Parking Lot
and shall provide reasonably convenient vehicular ingress and
egress from the adjoining public streets to the Parking Lot; and
(iii) the Parking Lot as reconfigured shall contain substantially
the same number or a greater number of parking spaces than the
Parking Lot prior to the reconfiguration.
2.4 Term. The term of the easement granted under
this Agreement shall commence on the date that the term of the
Agency Lease commences, and shall, unless sooner terminated
pursuant to this Agreement, expire on the termination or
expiration of the term of the Agency Lease, including options to
extend, or the termination or expiration of any replacement lease
( "Replacement Agency Lease ") given to a lender pursuant to the
provisions of the Agency Lease.
3. Construction of Parking Lot.
3.1 Initial Construction. Grantee shall at
Grantee's expense construct the Parking Lot on the Burdened
Parcel in a design and quality consistent with the improvements
which Grantee constructs on the Agency Parcel. The design shall
include a fence or wall not less than six feet high separating
the Burdened Parcel from the balance of the District Parcel,
which wall or fence will include an opening for pedestrian
ingress and egress between the Parking Lot and the balance of the
District Parcel at a location designated by Grantee, subject to
the approval of City. City shall at the expense of City or its
Permittees install and maintain in the opening a self - closing,
self - latching door or gate.
3.2 Completion of Construction. Once the
construction of the Parking Lot is begun, Grantee shall with
reasonable diligence prosecute such construction to completion.
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871028 kw A102.AER 2
All construction shall be performed in a good and workmanlike
manner and shall comply with all applicable Laws.
3.3 Mechanics' Liens. Grantee shall pay all
costs for construction done by it or caused to be done by it on
Burdened Parcel as permitted or required by this Agreement.
Grantee shall keep the Burdened Parcel free and clear of all
mechanics' liens resulting from construction done by or for
Grantee.
Grantee shall have the right to contest the
correctness or the validity of any such lien if, within thirty
(30) days of demand by City, Grantee procures and records a lien
release bond issued by a corporation authorized to issue surety
bonds in California in an amount equal to one and one -half times
the amount of the claim of lien. The bond shall meet the
requirements of Civil Code $3143 and shall provide for the
payment of any sum that the claimant may recover on the claim
(together with costs of suit, if it recovers in the action).
Grantee shall defend and indemnify City
against all liability and loss of any type arising out of work
performed on the Burdened Parcel by Grantee, together with
reasonable attorneys' fees and all costs and expenses reasonably
incurred by City in negotiating, settling, defending or otherwise
protecting against such claims.
4. Maintenance and Operation of Parking Lot.
4.1 Grantee's Obligations. Grantee shall at
Grantee's expense maintain the Parking Lot in good condition and
repair.
4.2 Utilities and Services. Grantee shall pay
for all water, sewage, gas, electricity, telephone, maintenance,
janitorial, trash collection and any and all other utilities and
services supplied to the Burdened Parcel.
4.3 Taxes.
4.3.1 Grantee's Obligation. Grantee shall
pay all taxes, assessments, impositions, levies and charges which
may be levied upon or assessed against or become a lien in any
manner upon the easement granted hereunder or upon Grantee's
interest in the Burdened Parcel, or any part thereof, by or
according to any Law or governmental, legal, political or other
authority whatsoever (collectively "Taxes "). Where any Taxes are
permitted by Law to be paid in installments, Grantee may pay such
installments as and when such installment becomes due prior to
the date of their delinquency.
4.3.2 Grantee's Right to Contest Taxes.
Grantee at its cost shall have the right, at any time, to seek a
reduction in the assessed valuation of the easement or to contest
any Taxes that are to be paid by Grantee. If Grantee seeks a
reduction or contests the Taxes, the failure on Grantee's part to
pay the Taxes shall not constitute a default as long as Grantee
complies with the provisions of this section.
Grantee, on final determination of the
proceeding or contest, shall immediately pay or discharge any
decision or judgment rendered, together with all costs, charges,
interest, and penalties incidental to the decision or judgment.
If Grantee does not pay the Taxes when
due and Grantee seeks a reduction or contests them as provided in
this section, before the commencement of the proceeding or
contest Grantee shall furnish to City a surety bond issued by an
insurance company qualified to do business in California. The
amount of the bond shall equal one hundred and twenty -five
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871028 kw A102.AER 2
percent (125 %) of the total amount of Taxes in dispute plus the
late payment penalty relating thereto. The bond shall hold City
and the Burdened Parcel harmless from any damage arising out of
the proceeding or contest and shall insure the payment of any
judgment that may be rendered. All refunds of any Taxes so
contested or reviewed shall be paid to Grantee.
4.4 Rules and Regulations. Grantee shall have
the right to: (i) establish and enforce reasonable rules and
regulations applicable to all users of the Parking Lot concerning
the maintenance, management, use and operation of the Parking
Lot, which rules and regulations City shall observe and shall use
reasonable efforts to cause City's Permittees to observe;
(ii) close temporarily any portion of the Parking Lot as reason-
ably necessary for health, safety or maintenance purposes; (iii)
charge for parking in the Parking Lot, other than for the use of
the Reserved Spaces by City or City's Permittees; (iv) contract
with a Person to maintain and operate the Parking Lot on such
terms and conditions and for such period of time as Grantee deems
reasonable both as to service and as to cost; (v) subject to the
provisions of §2.2, make changes to the Parking Lot, including
without limitation changes in the location of driveways,
entrances, exits, parking spaces, or the direction of the flow of
traffic.
5. Indemnity and Exculpation; Insurance.
5.1 Exculpation of City. City shall not be lia-
ble to Grantee for any damage to Grantee or Grantee's Permittees
or Grantee's Permittee's property from any cause except the
negligence of City or its Authorized Representatives. Grantee
waives all claims against City for damage to Person or property
arising for any reason other than the negligence or willful act
or omission of City or its Authorized Representatives.
5.2 Indemnity.
(a) Subject to the provisions of this Agree-
ment limiting Grantee's personal liability, Grantee will indem-
nify, hold harmless and defend City against and from any loss,
cost or expense of any sort or nature, and from any liability to
any Person, on account of any Damage to person or property aris-
ing out of any failure of Grantee to perform and comply in any
respect with any of the requirements and provisions of this
Agreement or arising from Grantee's or Grantee's Permittees' use
and occupancy of the Burdened Parcel.
(b) The liability of Grantee to indemnify
City, as set forth in this § 5.2, shall not extend to any matter
against which City shall be protected by insurance provided by
Grantee pursuant to the terms of this Agreement; provided,
however, that if any such liability shall exceed the amount of
the effective and collectable insurance in question, subject to
the provisions of this Agreement limiting Grantee's personal
liability, the said liability of Grantee shall apply to such
excess.
(c) Notwithstanding anything to the contrary
contained in this Section, Grantee shall not be liable for any
injury, loss or Damage of whatever kind if such injury, loss or
Damage is the result of the negligence or willful act or omission
of City or its Authorized Representatives.
5.3 Public Liability and Property Damage
Insurance. Grantee shall cause City to be named as an additional
insured on the public liability and property damage insurance
policy required under the Agency Lease.
5.4 Waiver of Subrogation. The Parties release
each other, and their respective Authorized Representatives, from
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871028 kw A102.AER 2
any claims for Damage to any Person that are caused by or result
from risks insured against under any insurance policies required
by this Agreement and in force at the time of any such Damage.
Grantee shall cause each insurance policy obtained
by it to provide that the insurance company waives all rights of
recovery by way of subrogation against either Party in connection
with any Damage covered by any policy.
6. Prohibition Against Voluntary Assignment and
Encumbering. Grantee shall not voluntarily assign or encumber
its interest in this Agreement or in the Burdened Parcel except
as part of an assignment or encumbrance of Grantee's interest in
the Agency Parcel pursuant to the Agency Lease. Any such assign-
ment or encumbrance shall be void and without effect, and, at
City's election, shall constitute a default.
7. Financing Provisions.
7.1 Cancellation of Agreement. No cancellation,
surrender or modification of this Agreement shall be effective as
to a lender ( "Permitted Lender ") which (i) is a "Permitted
Lender" under the Agency Lease, and (ii) has given City written
notice of its name and address, unless consented to in writing by
such Permitted Lender.
7.2 Notice of Default. Concurrently with 'giving
Grantee any notice of default under this Agreement, City shall
provide a copy of such notice in the manner provided for in
Section 10 hereof to any Permitted Lender at its address as fur-
nished in writing pursuant to Section 7.1. Permitted lender
shall have the right, but not the obligation to cure Grantee's
default. City shall accept performance by or at the instigation
of Permitted Lender as if the same had been done by Grantee.
Grantee authorizes Permitted Lender's option to cure pursuant
hereto and does hereby authorize entry upon the Burdened Parcel
by the Permitted Lender for such purpose.
7.3 Might to Cure. If any default shall occur
which entitles City to Terminate this Agreement, except for the
giving of notices required pursuant to this Agreement City will
take no action to effect a Termination of the Term of this
Agreement if, by the later of thirty (30) days after the expir-
ation of Grantee's grace period or sixty (60) days after such
Permitted Lender's receipt of the notice of default pursuant to
Section 7.2, such Permitted Lender:
(a) Pays or causes to be paid all payments
then due to City under this Agreement and in arrears, including
without limitation any payments which may become due during the
period .following the notice of default, but excluding all amounts
which were delinquent by more than sixty (60) days on the date of
the first notice of default to said Permitted Lender; and
(b) Complies, or in good faith commences to
comply, with all nonmonetary requirements of this Agreement then
in default and reasonably susceptible of being complied with by
such Permitted Lender; provided, however, that in the event such
Permitted Lender shall commence foreclosure proceedings, such
Permitted Lender shall not be required during such period to cure
or commence to cure any default consisting of Grantee's failure
to satisfy and discharge any Lien, charge or Encumbrance against
the Grantee's interest in the Burdened Parcel which is junior in
priority to the encumbrance held by such Permitted Lender, and
provided further that if such Permitted Lender is restrained by
Law from proceeding with foreclosure proceedings, the time period
set forth above shall be tolled (notwithstanding which, Permitted
Lender shall continue to pay all sums due and becoming due under
this Agreement during the period of such toll) and if default is
cured, Permitted Lender may discontinue such proceedings.
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871028 kw A102.AER 2
Notwithstanding the foregoing, if Grantee is in default under
this Agreement more than once during any twelve (12) month
period, then with respect to the second such Default, the
Permitted Lender shall have no right to discontinue foreclosure
proceedings and reinstate the original Grantee; instead, the
Permitted Lender shall be required to complete foreclosure
proceedings (whether by foreclosure, deed in lieu of foreclosure
or by any other lawful means), whereupon such Permitted Lender
shall have the right to sell or assign its rights to a new
Grantee as permitted pursuant to this Agreement.
7.4 Additional Time. If City shall elect to
terminate this Agreement by reason of any default. of Grantee and
Permitted Lender shall have proceeded in the manner provided for
by Section 7.3, City will take no action to effect a termination
of this Agreement, provided that such Permitted Lender shall:
(a) Pay, or cause to be paid, all monetary
obligations of Grantee to City under this Agreement as the same
become due, and continue its good faith efforts to perform
Grantee's other obligations under this Agreement; and
(b) If not enjoined or stayed, take steps to
acquire or sell Grantee's interest in this Agreement by
foreclosure or other appropriate means and prosecute the same to
completion.
If such Permitted Lender is diligently
complying with this Section 7.4, this Agreement shall not then
terminate, and the time for completion by such Permitted Lender
of its proceedings shall continue so long as such Permitted
Lender is enjoined or stayed and thereafter for so long as such
Permitted Lender proceeds to complete steps to acquire or sell
Grantee's interest in;this Agreement by foreclosure of the
Permitted Encumbrances or by other appropriate means. Except as
hereinafter provided,jnothing, in this Section 15.4 shall be
construed to require any Permitted Lender to continue such
foreclosure proceedings after Grantee's default with respect to
such Permitted Lender has been cured. If said default shall be
cured and the Permitted Lender shall discontinue such foreclosure
proceedings, this Lease shall continue in full force and effect
as if Grantee had not defaulted under this Agreement. Notwith-
standing the foregoing, if Grantee is in Default under this
Agreement more than once during any twelve (12) month period,
then with respect to the second such Default,. the Permitted
Lender shall have no right to discontinue foreclosure proceedings
and reinstate the original Grantee; instead, the Permitted Lender
shall be required to complete foreclosure proceedings (whether by
foreclosure, deed in lieu of foreclosure or by any other lawful
means), whereupon such Permitted Lender shall have the right to
sell or assign its rights to a new Grantee as permitted pursuant
to this Agreement.
8. Defaul and Remedies.
8.1 Defaults. Each of the following shall be
deemed a Default under this Agreement:
(a) if Grantee shall fail to pay any sum due
under this Agreement when due and payable, and such failure con-
tinues after written notice thereof from City, for a period of
more than thirty days;
(b) if Grantee shall fail to perform any
other term, covenant or condition of this Agreement, and such
failure continues for more than thirty days after written notice
from City (or if the default is of such character as reasonably
to require more than thirty days to cure, then if Grantee shall
fail within thirty days after written notice from City to com-
e
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871028 kw A102.AER 2
mence and pursue with reasonable diligence the curing of such
default).
• 8.2 Termination. Upon occurrence of any Default,
City may, at its option and without any further demand or notice,
terminate this Agreement.
8.3 Citv's Right to Cure Grantee's Breach.
Except in the event of an emergency which threatens life or
material damage to the Burdened Parcel, City may, but is not
obligated to, cure any of Grantee's failures to perform any
covenant or provision of this Agreement at Grantee's cost only if
such failure has continued after delivery by City of notice
thereof to Grantee and lapse of the applicable grace period, as
provided in § 8.1. If City, by reason of such failure by
Grantee, pays any sum or does any act in accordance with this
§ 8.3, the sum paid by City plus the reasonable cost of
performing such act shall be due within ten (10) days after
written demand therefor by City to Grantee. No such payment or
act shall constitute a cure or waiver of the breach or a waiver
of any remedy for default or render City liable for any loss or
damage resulting from any such act.
8.4 Interest on Unpaid Sums. Any amounts not
paid when due shall bear interest from ten (10) days after the
date due until paid at a rate equal to the maximum rate (as such
rate may vary from time to time) that a non- exempt lender is per-
mitted to charge on loans for any use other than for personal,
family or household purposes, under California Constitution
Article XV, Section 1, as now in effect or hereafter from time to
time amended. Payment of such interest shall not excuse or cure
any default by Grantee under this Agreement.
8.5 Non Recourse. Notwithstanding any Provision
of this Agreement to the contrary, City shall not seek or obtain
a money judgment against Grantee, its successors and assigns nor
their officers, directors, partners, principals, employees and
agents, for any breach of this Agreement (whether or not this
Agreement is terminated as a result of such breach). It is
expressly understood by City that City's remedies against Grantee
with respect to this Agreement and the Burdened Parcel shall be
limited to terminating this Agreement. Notwithstanding the fore-
going, Grantee shall be liable to City for any act by Grantee
which would constitute "waste" of the Burdened Parcel at any time
during the term hereof.
8.6 City's Default. City shall not be deemed to
be in default in the performance of any obligation required to be
performed by it hereunder unless and until it has failed to per-
form such obligation within thirty (30) days after written notice
by Grantee to City specifying wherein City has failed to perform
such obligation; provided, however, that if the nature of City's
obligation is such that more than thirty (30) days are required
for its performance then City shall not be deemed to be in
default if it shall commence such performance within such thirty
(30) day period and thereafter diligently and in good faith
prosecute the cure to completion.
9. notices.
9.1 All notices, statements, demands, requests,
consents, approvals, authorizations, offers, agreements, appoint-
ments or designations under this Agreement made or given by
either Party to the other shall be personally delivered or sent
by United States certified mail, return receipt requested, post-
age prepaid, and shall be deemed received upon delivery if per-
sonally served or three days after deposit in the United States
mails, if sent certified mail, return receipt requested, postage
prepaid. Such notices shall be addressed as follows:
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871028 kw A102.AER 2
•
If to Landlord: City of Seal Beach
211 8th Street
Seal Beach, California 90740
Attention: City Manager
With a copy to: Richards, Watson & Gershon
333 South Hope Street, 38th Floor
Los Angeles, California 90017
Attn: Gregory W. Stepanicich, Esq.
If to Tenant: Gemtel Corporation
523 West Sixth Street, Suite 707
Los Angeles, California 90014
Attention: Lary J. Mielke
With a copy to: Riordan & McKinzie
300 S. Grand Avenue, Suite 2900
Los Angeles, California 90071
Attention: Michael F. Keeley, Esq.
or to such other place or places as Landlord and Tenant may
designate by written notice similarly delivered.
10. General Provisions.
10.1 Waiver. The waiver by City or Grantee of any
breach by the other Party of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or
any other term, covenant, or condition herein contained. The
subsequent acceptance of payments hereunder by City shall not be
deemed to be a waiver of any preceding breach by Grantee of any
term, covenant, or condition of this Agreement, other than the
failure to pay the particular rents so accepted, regardless of
City's knowledge of such preceding breach at the time of accept-
ance of such payment.
10.2 Attorneys' Fees. If either Party becomes a
party to any litigation concerning this Agreement or the Burdened
Parcel, by reason of any act or omission of the other Party or
its Authorized Representatives, and not by any act or omission of
the Party that becomes a party to that litigation or any act or
omission of its Authorized Representatives, the Party that causes
the other Party to become involved in the litigation shall be
liable to that Party for actual attorney's fees and court costs
incurred by it in the litigation.
If either Party commences an action against the
other Party arising out of or in connection with this Agreement,
the prevailing Party shall be entitled to have and recover from
the losing Party reasonable attorneys' fees and costs of suit.
10.3 Zstoppel Certificates. At any time and from
time to time, within twenty (20) days after notice of request by
either Party, the other Party shall execute, acknowledge, and
deliver to the requesting Party, or to such other recipient as
the notice shall direct, a statement certifying that this Agree-
ment is unmodified and in full force and effect, or, if there
have been modifications, that it is in full force and effect as
modified in the manner specified in the statement and acknowledg-
ing that there are no uncured defaults or failures to perform any
covenant or Provision of this Agreement on the part of the re-
questing Party or specifying any such defaults or failures which
are claimed to exist. The statement shall also state the dates
to which payments have been paid in advance. The statement shall
be such that it can be relied on by any auditor, creditor, com-
mercial banker, and investment banker of either Party and by any
prospective purchaser or mortgagee of the Agency Parcel or the
District Parcel. Subject to the Provisions of §6, each Party
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+.
871028 kw A102.AER 2
t.
10.12 Force Maieure. Except as provided below, any
prevention, delay or stoppage due to strikes, lockouts, labor
disputes, acts of God, inability to obtain labor or materials or
reasonable substitutes therefor, extraordinary governmental
restrictions, regulations or controls, enemy or hostile govern-
mental action, civil commotion, fire or other casualty, and other
causes beyond the control of the Party obligated to perform any
term, covenant or condition of this Agreement, shall excuse the
performance by such Party for a period equal to any such
prevention, delay or stoppage, except the obligations imposed
with regard to Grantee's financial obligations pursuant to this
Agreement.
Either Party encountering such Force Majeure
delays shall send written notice thereof to the other Party no
later than thirty (3) days after the commencement of such Force
Majeure delay. If the Party encountering such Force Majeure
delay fails to send notice thereof to the other party within (3)
days after the commencement of such delay, then any alleged delay
occurring more than thirty (30) days prior to the date of such
notice shall not be deemed to extend any time for performance set
forth herein.
10.13 gunning With Leasehold Estates. The
covenants and agreements contained herein and the rights,
privileges and easement herein granted shall run with and shall
be appurtenant to the respective leasehold estates described
herein (or the leasehold estates created by any Replacement
Agency Lease or, if City acquires fee title to the Burdened
Parcel the easement granted under this Agreement shall
automatically and without further action of the Parties become an
easement on the fee simple estate), and shall be binding upon and
shall inure to the benefit of the Parties hereto and their
respective Successors.
11. Temporary Easements. The Parties acknowledge that
a temporary structure is currently located on the southern
portion of the Agency Parcel, encroaching onto the District
Parcel, which structure Grantee intends to demolish in connection
with Grantee's development of the Agency Parcel. City hereby
grants temporary easements to Grantee over the northerly 25 feet
of the District Parcel for the purposes of: (i) encroachment of
such structure; and (ii) access in order to demolish such struc-
ture and remove all debris. The temporary easements shall auto-
matically terminate without further action of the Parties upon
the earlier of (i) completion of the demolition of the structure
and removal of the debris; and (ii) one year after the commence-
ment of the term of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the date first above written.
THE CITY OF SEAL BEACH,
a Municipal Corporation ( "City ")
By: C �/ it/
ATTES Its: Mayor
�G lug ,! /
/44,
C ® . � �ee 0 „ 19
City Clerk � ® ®� 6 11
IL )I J
[S ignatures continue] � '�j { � (�► � ° ° 21. Ng ofre
4t% °®
c �b�
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871028 kw A102.AER 2
("Grantee"): GEMTEL CORPORATION,
a California)Porporation
• By: ( -
Its: /"
(th By:
Its: ANPI, 11 ...WILMOV
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871028 kw A102.AER 2
' r
• r
further agrees to execute, acknowledge and deliver such other
documents clarifying (but not expanding or contracting) the
rights or burdens of the Parties, as may be reasonably requested
by the other Party in connection with any sale, financing or
other disposition of its interest in the Burdened Parcel or this
Agreement.
10.4 Entire Agreement: Modification. This Agree-
ment contains the entire agreement between the Parties. No
verbal agreement or implied covenant shall be held to vary the
provisions hereof, any statements, law or custom to the contrary
notwithstanding. No promise, representation, warranty, or
covenant not included in this Agreement has been or is relied on
by either party. Each party has relied on its own inspection of
the Burdened Parcel and examination of this Agreement, the coun-
sel of its own advisors, and the warranties, representations, and
covenants in this Agreement itself. The failure or refusal of
either party to inspect the Burdened Parcel, to read this Agree-
ment or other documents, or to obtain legal or other advice
relevant to this transaction constitutes a waiver of any objec-
tion, contention, or claim that might have been based on such
reading, inspection, or advice.
No provision of this Agreement may be amended or
varied except by an agreement in writing signed by the Parties.
10.5 Recording. This Agreement shall, along with
a memorandum of the Agency Lease, be recorded at Grantee's re-
quest and expense upon commencement of the term of this Agree-
ment.
10.6 Governing Law. The Agreement shall be
governed by and interpreted under the laws of the State of
California.
10.7 Severability. If the Provisions of this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable by any court of competent jurisdiction, the valid-
ity of the other provisions of this Agreement shall in no way be
affected thereby, and this Agreement shall be construed as though
such invalid, illegal or unenforceable provisions had never been
contained herein, provided that such construction does not
materially alter the rights or obligations of either Party here-
under.
10.8 Singular and Plural; Gender. Whenever the
singular number is used in this Agreement and the context re-
quires, the same shall include the plural. Further, when used in
this Agreement and the context requires, the neuter gender shall
include the feminine and masculine, the masculine shall include
the feminine and neuter, the feminine shall include the masculine
and neuter, and each shall include any reference to a corpora-
tion, partnership, trust, or other legal entity.
10.9 Time. Time is of the essence of this Agree-
ment.
10.10 Captions. The captions of the sections of
this Agreement are for convenience only and shall not be con-
sidered or referred to in resolving questions of interpretation
or construction.
10.11 Consent of City. Neither City's execution of
this Agreement nor any consent or approval given by City here-
under in its capacity as a Party to this Agreement shall waive,
abridge, impair or otherwise affect City's powers and duties as a
governmental body. Any requirements under this Agreement that
Grantee obtain consents or approvals of City are in addition to
and not in lieu of any requirements of Law that Grantee obtain
approvals or permits.
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871028 kw A102.AER 2
ATTACHMENT "G"
THIRD AMENDMENT TO MASTER LEASE
This Third Amendment to Master ase ( "Th d
Amendment ") is entered into as of the day of
1996, by and between The Redevelopment Agency of the City of Seal
Beach ( "Landlord "), and Trust "A" of the Karl and Tina Rodi
Family Trust ( "Tenant ").
R E C I T A L S :
A. Landlord leased certain real property ( "the
Property ") to Gemtel Corporation, a California corporation, and
Dana John MacKay ( "Original Tenants ") pursuant to that Master
Lease, dated as of November 30, 1987 ( "the Master Lease "), a
memorandum of which was recorded June 20, 1989, in Official
Records of the County Recorder of the County of Orange, State of
California, for a term which commenced March 6, 1989;
B. Landlord and Original Tenants' successors in
interest entered. into a First Amendment to Master Lease dated as
of August 31, 1989 ( "the First Amendment ");
C. Landlord and Original Tenants' successors in
interest entered into a Second Amendment to Master Lease dated as
of January 29, 1992 ( "the Second Amendment ");
D. As of March 6, 1995, the rent payable under the
Master Lease was delinquent in the amount of $321,247, plus
$46,727 accrued interest on the amount of the delinquences;
E. Tenant has acquired by foreclosure the entire
interest of the tenant under the Master Lease, as amended;
F. Landlord and Tenant desire to enter into a further
amendment of the Master Lease.
NOW, THEREFORE, in consideration of the mutual
covenants contained herein, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Delinquent Rent. Tenant shall pay the
delinquent rent and accrued interest thereon as follows:
a. $271,934 upon execution of this Third
Amendment;
b. $96,040, plus interest from March 6, 1995, at
the maximum rate that anon - exempt lender is permitted to charge
on loans for any use other than for personal, family or household
purposes, under California Constitution Article XV, Section 1, as
now in effect or hereafter from time to time amended, payable at
the option of Landlord upon either (i) any default by Tenant
under the Master Lease, if not cured within any cure period
permitted under the Master Lease; or (ii) any voluntary or
involuntary assignment or transfer of Tenant's interest in the
Master Lease, other than a Permitted Transfer; provided, however,
that if the amounts due under this Paragraph 1.c have not become
payable on or before June 30, 2004, such amounts shall be deemed
waived and released by Landlord.
Tenant acknowledges that each payment under this Section 1
constitutes rent payable under the Lease (in addition to the rent
otherwise payable under the terms of the Lease).
2. Initial Annual Rent. Paragraph 4.2 of the
Master Lease is hereby amended to provide in its entirety as
follows:
"4.2 Initial Annual Rent. The Annual Rent payable
_ by Tenant to Landlord during the period from the
Commencement Date (March 6, 1989) until the fifth
anniversary of the Commencement Date shall be $180,000 per
year. The Annual Rent payable by Tenant to Landlord during
the period from the fifth anniversary of the Commencement
Date until the tenth anniversary of the Commencement Date
shall be $220,000 per year."
3. Rent Adjustment. Paragraph 4.3 of the Master
Lease is hereby amended to provide in its entirety as follows:
"4.3 Rent Adjustment. The Annual Rent shall be
adjusted on the tenth anniversary of the Commencement Date
and every five years thereafter (each, an "Adjustment
Date "), during the Initial Term and any Extended Terms, as
follows:
"The base for computing the adjustment on
each Adjustment Date is the Consumer Price Index for All
Urban Consumers for the Los Angeles - Anaheim - Riverside
Metropolitan Area published by the United States Department
of Labor, Bureau of Labor Statistics ( "Index "), which is
published for the sixty -third calendar month prior to that
Adjustment Date ( "the Base Index "). If the Index published
for the third calendar month prior to that Adjustment Date
( "the Adjustment Index ") is more than 115% of the Base Index
but less than 130% of the Base Index, the Annual Rent shall
be adjusted to an amount determined by multiplying the
Annual Rent in effect immediately prior to the Adjustment
Date by a fraction, the numerator of which is the Adjustment
Index and the denominator of which is the Base Index. If
the Adjustment Index is equal to or more than 130% of the
Base Index, the Annual Rent shall be adjusted to an amount
equal to 130% of the Annual Rent in effect immediately prior
to the Adjustment Date. If the Adjustment Index is less
than or equal to 115% of the Base Index, the Annual Rent
960131 B750.aer (7) -2-
shall be adjusted to an amount equal to 115% of the Annual
Rent in effect immediately prior to the Adjustment Date.
"If the Index is changed so that the base
year differs from that used for the Beginning Index, the
Index shall be converted in accordance with the conversion
factor published by the United States Department of Labor,
Bureau of Labor Statistics. If the Index is discontinued or
revised during the Term, such other government index or
computation with which it is replaced shall be used in order
to obtain substantially the same result as would be obtained
if the Index had not been discontinued or revised."
4. Conditional .Partial .Rent Waiver. Notwithstanding
anything in Paragraph 4.2 of the Master Lease (as amended by
Section 2 of this Third Amendment) to the contrary, for the
period from March 6, 1995, until the tenth anniversary of the
Commencement Date Landlord shall waive the portion of Annual Rent
in excess of $15,000 per month so long as: (i) Tenant timely pays
(or pays within the applicable cure period) monthly installments
of Annual Rent at the rate of $15,000 per month; and (ii) no
,other default by Tenant occurs under the Master Lease which is
not cured within any cure period permitted under the Master
Lease; and (iii) Tenant's interest in the Master Lease is not
voluntarily or involuntarily assigned or transferred, other than
by a Permitted Transfer. If the conditions for the partial rent
waiver under this Section 4 are satisfied throughout the period
from the date of this Third Amendment until the tenth anniversary
of the Commencement Date, for purposes of computing the adjusted
Annual Rent on the tenth anniversary of the Commencement Date
pursuant to Paragraph 4.3 of the Master Lease (as amended by
Section 3 of this Third Amendment) the "Annual Rent in effect
immediately prior to the Adjustment Date" shall be deemed to be
$180,000.
5. Option to Purchase Landlord's Interest.
a. Grant. of Option. Landlord grants to Tenant
the option ( "Purchase Option ") to purchase Landlord's interest in
the Property in accordance with the provisions of this Section 5,
as long as at the time Tenant exercises the Purchase Option:
(i) there is no existing default by Tenant under the Master
Lease; and (ii) Tenant's interest in the Master Lease has not
been voluntarily or involuntarily assigned or transferred
subsequent to the date of this Third Amendment, other than by a
Permitted Transfer.
b. Option Period. Tenant shall have the right to
exercise the Purchase Option during the six -month period ( "Option
Period ") beginning July 1, 2004, and ending December 31, 2004.
c. Method of Exercising Option. Tenant shall
960131 B750.aer (7) -3-
exercise the Purchase Option by giving notice ( "Option Notice ")
to Landlord within the Option Period.
d. Purchase Price.
(1) The purchase price shall be equal to the
greater of: (a) fair market value of Landlord's interest in the
Property, or (b) the then - unpaid principal balance of the note
and deed of trust encumbering the Property in favor of the
Los Alamitos Unified School District.
(2) For a period of ninety days (the
"Negotiation Period ") after Landlord receives the Option Notice
the Parties shall attempt to agree on the purchase price. If the
Parties are unable to agree on the purchase price during the
Negotiation Period, then within twenty days after the end of the
Negotiation Period each Party, at its respective cost and by
giving notice to the other Party, shall appoint an M.A.I. or
similarly - qualified real estate appraiser with at least five
years' full -time commercial appraisal experience in the area in
which the Property is located to appraise the fair market value
of Landlord's interest in the Property. If a Party does not
appoint an appraiser within the twenty -day period after the end
of the Negotiation Period, the single appraiser appointed shall
be the sole appraiser of the fair market value of Landlord's
interest in the Property. If the two appraisers are appointed by
the Parties as stated in this paragraph, they shall meet promptly
and attempt to establish the fair market value of Landlord's
interest in the Property.
(3) If the two appraisers are unable to
agree on the fair market value within sixty days after the second
appraiser has been appointed, they shall attempt to elect a third
appraiser meeting the qualifications stated in this paragraph
within ten days after the last day the two appraisers are given
to determine the fair market value. If they are unable to agree
on the third appraiser, either of the Parties to this Lease by
giving ten days' notice to the other Party can apply to the then
president of the county real estate board of Orange County, or to
the presiding judge of the superior court of that county, for the
selection of a third appraiser who meets the qualifications
stated in this paragraph. Each of the Parties shall bear one
half of the cost of appointing the third appraiser and of paying
the third appraiser's fee.
(4) Within sixty days after the selection of
the third appraiser, a majority of the appraisers shall determine
the fair market value. If a majority of the appraisers are
unable to agree upon the fair market value within the stipulated
period of time, the three appraisals shall be added together and
their total divided by three; the resulting quotient shall be the
purchase price. If, however, the low appraisal or the high
960131 B750.aer (7) -4-
appraisal is more than 10% lower or higher than the middle
appraisal, any appraisal which differs from the middle appraisal
by more than 10% shall be disregarded. If only one appraisal is
disregarded, the remaining two appraisals shall be added together
and their total divided by two; the resulting quotient shall be
the purchase price. If both the low appraisal and the high
appraisal are disregarded as stated in this paragraph, the middle
appraisal shall be the purchase price.
(5) In addition to all other factors to be
considered by the Appraisers appraising the fair market value of
Landlord's interest in the Property in accordance with generally -
accepted professional appraisal standards, the appraisers:
(i) shall use as the valuation date the date that the first
appraiser is appointed; and (ii) shall include in the fair market
value of Landlord's interest in the Property the value of the
Easements, as modified pursuant to Section 5.f(2) of this Third
Amendment.
(6) After the purchase price has been set,
the appraisers shall immediately notify the Parties. If Tenant
objects to the purchase price that has been set, Tenant may
rescind the exercise of the Purchase Option if Tenant both:
(i) notifies Landlord of the rescission within thirty days after
receipt of notice from the appraisers of the purchase price, and
(ii) pays all costs incurred by Landlord in connection with the
appraisal procedure that set the purchase price.
e. Payment of Purchase Price. The purchase
price shall be payable in cash in lawful money of the United
States to Landlord by Tenant at close of the escrow described in
Section 5.g of this Third Amendment.
f. Title.
(1) Landlord shall deliver to Tenant an
executed grant deed in recordable form conveying the Property,
free and clear of all liens and Encumbrances (other than those
encumbering the leasehold interest, and taxes and assessments),
subject to all covenants, conditions, restrictions, easements,
and rights of way of record, leases or other tenancy agreements
(other than the Master Lease, which shall terminate upon the
close of the escrow), other matters of record, and anything of
record or not of record that in any way affects title to the
Property resulting from the acts or omissions of Tenant.
(2) At the close of escrow Tenant shall
enter into and Landlord shall cause the City to enter into an
amendment of the Parking Easement Agreement substantially in the
form attached hereto as Exhibit A.
g. Escrow. The sale shall be consummated
960131 B750.aer (7) -5-
through a mutually - acceptable escrow. Escrow shall close within
sixty (60) days after the purchase price has been set under
Section 5.d of this Third Amendment; provided, however, that
Tenant may extend the sixty -day period by not more than two,
additional fifteen (15) day periods if, despite Tenant's
commercially reasonable efforts, Tenant's lender is not prepared
to fund the portion of the purchase price which the lender has
committed to lend to Tenant. Escrow shall be deemed to be closed
on the date the grant deed is recorded.
h. Prorations. Rent shall be prorated as of
close of escrow.
i. Closing Costs. Transfer taxes, recording fees
the cost of any title policy, escrow charges and all other
closing costs shall be paid by Tenant.
j. Termination Upon Close of Escrow. On close
of escrow the Master Lease shall terminate.
6. Security Deposit. Notwithstanding anything to
the contrary in Paragraph 4.4 of the Master Lease, the parties
acknowledge that the Deposit was never delivered to Landlord.
However, the parties believe that Landlord's security has been
increased by Tenant's construction of improvements on the -
Property, and therefore agree that Paragraph 4.4 of the Master
Lease is hereby deleted in its entirety.
7. Permitted Transfer. For purposes of this Third
Amendment, the term "Permitted Transfer" shall mean: (i) a
transfer to other Rodi family trusts or beneficiaries of such
trusts, or to an entity owned solely by such trusts or
beneficiaries; (ii) an involuntary transfer to an institutional
creditor (other than a government agency or corporation [such as,
without limitation, RTC or FDIC]) holding a security interest in
the Master Lease; and (iii) a transfer with the prior written
consent of Landlord, which consent may be withheld in the sole
and complete discretion of Landlord.
8. Address for Notices. Paragraph 18 of the
Master Lease is amended to provide that Tenant's address for
notices is as follows:
Trust "A" of the Karl and Tina Rodi Family
Trust
c/o James M. Galbraith
2600 Mission Street, Suite 200
San Marino, California 91108
960131 B750.aer (7) -6-
With a copy to: •
John D. Pettker, Esq.
Rodi, Pollock, Pettker, Galbraith &'Phillips
801 South Grand Avenue, Suite 400
Los Angeles, California 90017
9. Continuing Effect. Landlord and Tenant
acknowledge that the Master Lease, as amended by the First
Amendment and the Second Amendment, is in full force and effect,
except as modified by this Third Amendment. In the event of any
inconsistency between the terms and conditions stated in the
Master Lease, as previously amended, and the terms and conditions
set forth in this Third Amendment, the terms and conditions in
this Third Amendment shall control.
. _ IN WITNESS WHEREOF, the parties hereto have entered
into this Third Amendment as of the date and year first written
above.
THE REDEVELOPMENT AGENCY OF THE CITY OF
SEAL BEACH, a public body, corporate and
politic ( "Landlord ")
// 7� •
By:
Executive Director
Attest:
Secretary
TRUST "A" OF THE KARL AND TINA RODI
FAMILY_ TRUST ( "Tenant ")
By:
The undersigned, Permitted Lender under the Master
Lease, acknowledges and consents to the foregoing Third Amendment
to Master Lease.
CHINO VALLEY BANK
By:
960131 B750.aer (7) —
With a copy to:
John D. Pettker, Esq.
Rodi, Pollock, Pettker, Galbraith & Phillips
801 South Grand Avenue, Suite 400
Los Angeles, California 90017
9. Continuing Effect. Landlord and Tenant
acknowledge that the Master Lease, as amended by the First
Amendment and the Second Amendment, is in full force and effect,
except as modified by this Third Amendment. In the event of any
inconsistency between the terms and conditions stated in the
Master Lease, as previously amended, and the terms and conditions
set forth in this Third Amendment, the terms and conditions in
this Third Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have entered
into this Third Amendment as of the date and year first written
above.
THE REDEVELOPMENT AGENCY OF THE CITY OF
SEAL BEACH, a public body, corporate and
politic ( "Landlord ")
By:
Executive Director
Attest:
Secretary
TRUST "A" OF THE KARL AND TINA RODI
FAMILY TRUST ( "Tenant ")
By: . ° -
The undersigned, Permitted Lender under the Master
Lease, acknowledges and consents to the foregoing Third Amendment
to Master Lease.
CHINO VA BANK
By: 6414A _
960131 B750.aer (7) -7-
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
AMENDMENT TO
PARKING EASEMENT AGREEMENT
This Amendment to Parking Easement Agreement
( "Amendment ") is entered into as of the day of
200_, by and between the CITY OF SEAL BEACH, a municipal
corporation ( "City "), and TRUST "A" OF THE KARL AND TINA RODI
FAMILY TRUST ( "Grantee ").
R E C I T A L S
A. City . is the lessee under a Lease (the "District
Lease "), dated January 1, 1987, by and between the Los Alamitos
Unified School District, as Landlord, and City, as Tenant, with
respect to the real property ( "the District Parcel ") described in
Exhibit "A" of the Parking Easement Agreement described in
Recital C.
EXHIBIT A
B. Grantee is the successor lessee under a Lease (the
"Agency Lease "), dated as of November 30, 1987, a memorandum of
which was recorded June 20, 1989, in Official Records of the
County Recorder of the County of Orange, State of California,
with respect to the real property ( "the Agency Parcel ") described
in Exhibit "B" of the Parking Easement Agreement described in
Recital C.
- C. Pursuant to that Parking Easement Agreement ( "the
Parking Easement Agreement "), dated March 6, 1989, recorded
June 20, 1989, in Official Records of the County Recorder of the
County of Orange, State of California, City granted to Grantee's
predecessor -in- interest an easement to construct and operate a
parking lot on the portion ( "the Burdened Parcel ") of the
District Parcel described in Exhibit D of the Parking Easement
Agreement, for the benefit of the Agency Parcel and the District
Parcel.
D. Grantee is concurrently acquiring title to the
Agency Parcel, as a result of which the Agency Lease is being
terminated. The parties now desire to amend the Parking Easement
Agreement to avoid the provisions of Section 2.4 of the Parking
Easement Agreement which provide that the Parking Easement
Agreement expires upon termination of the Agency Lease, and to
960215 kw B750A.aer (2) EXHIBIT A
make other changes consistent with Grantee's ownership of the
Agency Parcel.
NOW, THEREFORE, the Parties agree as follows:
1. Section 2.3 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
2.3 Changes of Burdened Parcel. Subject to
the approval of Grantee, which approval shall not be
- unreasonably withheld, City may from time to time
change the location of the Parking Lot or designate
another portion of the District Parcel or another
property to serve as all or a portion of the Parking
Lot and the Burdened Parcel; provided, however, that
(i) City shall bear all costs of constructing the
substituted or changed portions of the Parking Lot;
(ii) City shall provide reasonably convenient
pedestrian ingress and egress between the Agency Parcel
and the Parking Lot and shall provide reasonably
convenient vehicular ingress and egress from the
adjoining public streets to the Parking Lot; and
(iii) the Parking Lot as substituted or reconfigured
shall contain substantially the same number or a
greater number of parking spaces than the Parking Lot
prior to the substitution or reconfiguration.
2. Section 2.4 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
2.4 Term. The term of the easement granted
under this Agreement shall, unless sooner terminated
pursuant to this Agreement, be perpetual so long as the
structures on the Agency Parcel remain in substantially
the same configuration as on January 1, 1995.
3. Section 5.2 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
960215 kw B750A.aer (2) EXHIBIT A
5.2 Indemnity.
(a) Grantee will indemnify, hold
harmless and defend City against and from any loss,
cost or expense of any sort or nature, and from any
liability to any Person, on account of any Damage to
person or property arising out of any failure of
Grantee to perform and comply in any respect with any
of the requirements and provisions of this Agreement or
arising from Grantee's or Grantee's Permittees' use and
occupancy of the Burdened Parcel.
(b) The liability of Grantee to
indemnify City, as set forth in this § 5.2, shall be
limited to the amount not covered by insurance provided
by Grantee pursuant to the terms of this Agreement.
(c) Notwithstanding anything to the
contrary contained in this Section, Grantee shall not
be liable for any injury, loss or Damage of whatever
kind if . such injury, loss or Damage is the result of
the negligence or willful act or omission of City or
its Authorized Representatives.
4. Section 5.3 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
5.3 Public Liability and Property Damage
Insurance.
(a) Grantee shall at Grantee's sole
cost and expense maintain with respect to the Burdened
Parcel at all times comprehensive general liability
insurance against any and all liability of the insured
for personal injury, death or property damage with
respect to or arising out of the ownership,
maintenance, use or occupancy of the Burdened Parcel,
having limits of not less than (the amount then
required under the Agency Lease] per occurrence for
bodily injury, death and property damage and the
consequential damages arising therefrom. All liability
insurance shall insure performance by Grantee of the
indemnity provisions of Section _ 5.2. Both Parties
shall be named as additional insureds, and the policy
shall contain cross - liability endorsements.'
960215 kw B7SOA.aer (2) EXHIBIT A
(b) Not more frequently than once each
three (3) years, City may increase the amount of
liability insurance coverage required hereunder, and
Grantee shall increase the insurance coverage as
required by City, provided that such coverage is then
reasonably available and is then commonly maintained by
shopping centers of a comparable size, type and
location as the shopping center being operated on the
Agency Parcel.
(c) All the insurance required under
this Agreement shall:
(1) Be issued as a primary policy
(i.e., any other insurance policies maintained by the
Parties shall be treated as excess insurance and shall
not be considered contributory);
(2) Contain an endorsement
requiring not less than thirty (30) days' written
notice..from the insurance company to both Parties
before cancellation or change in the coverage, scope,
or amount of any policy; and
(3) Be issued by insurance
companies authorized to do business in the State of
California, with a financial rating of at least an
A VIII status as rated in the most recent edition of
Best's Insurance Reports.
(d) Any insurance required under this
Agreement may be part of a blanket policy or policies
of insurance maintained by Grantee so long as the
coverage of the risks to be insured against under this
Agreement is not diminished.
(e) Each policy, or a certificate of
the policy, together with evidence of payment of
premiums, shall be deposited with the City on renewal
of the policy not less than twenty (20) days before
expiration of the term of the policy.
5. Section 6 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
6. Prohibition Against Sale, Conveyance,
Assignment and Encumbering. Grantee shall not
960215 kw B750A.aer (2) EXHIBIT A
voluntarily sell, convey, assign or encumber its
interest in this Agreement or in the Burdened Parcel
except as part of a sale, conveyance, assignment or
encumbrance of the Agency Parcel. Any purported
separate sale, conveyance, assignment or encumbrance
shall be void and without effect, and, at City's
election, shall constitute a default.
6. Section 7 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
7. Financing Provisions.
7.1 Cancellation of Agreement. No
- - cancellation, surrender or modification of this
Agreement shall be effective as to a lender ( "Lender ")
which (i) holds an encumbrance on the Burdened Parcel,
and (ii) has given City written notice of its name and
address, unless consented to in writing by such Lender.
7.2 Notice of Default. Concurrently
with giving Grantee any notice of default under this
Agreement, City shall provide a copy of such notice in
the manner provided for in Section 10 hereof to any
Lender at its address as furnished in writing pursuant
to Section 7.1. Lender shall have the right, but not
the obligation to cure Grantee's default. City shall
accept performance by or at the instigation of Lender
as if the same had been done by Grantee. Grantee
authorizes Lender's option to cure pursuant hereto and
does hereby authorize entry upon the Burdened Parcel by
the Lender for such purpose.
7.3 Right to Cure. If any default
shall occur which entitles City to Terminate this
Agreement, except for the giving of notices required
pursuant to this Agreement City will take no action to
effect a Termination of the Term of this Agreement if,
by the later of thirty (30) days after the expiration
of Grantee's grace period or sixty (60) days after such
Lender's receipt of the notice of default pursuant to
Section 7.2, such Lender:
(a) Pays or causes to be paid all
payments then due to City under this Agreement and in
arrears, including without limitation any payments
960215 kw B750A.aer (2) EXHIBIT A
which may become due during the period following the
notice of default; and
(b) Complies, or in good faith
commences to comply, with all nonmonetary requirements
of this Agreement then in default and reasonably
susceptible of being complied with by such Lender;
provided, however, that in the event such Lender shall
commence foreclosure proceedings, such Lender shall not
be required during such period to cure or commence to
cure any default consisting of Grantee's failure to
satisfy and discharge any Lien, charge or Encumbrance
against the Grantee's interest in the Burdened Parcel
which is junior in priority to the encumbrance held by
such Lender, and provided further that if such Lender
is restrained by Law from proceeding with foreclosure
proceedings, the time period set forth above shall be
tolled (notwithstanding which, Lender shall continue to
pay all sums due and becoming due under this Agreement
during the period of such toll) and if the default is
cured,..Lender may discontinue such proceedings.
Notwithstanding the foregoing, if Grantee is in default
under this Agreement more than once during any twelve
(12) month period, then with respect to the second such
Default, the Lender shall have no right to discontinue
foreclosure proceedings and reinstate the original
Grantee except as required by law; instead, the Lender
shall be required to complete foreclosure proceedings
(whether by foreclosure, deed in lieu of foreclosure or
by any other . lawful means), whereupon such Lender shall
have the right to sell or assign its rights to a new
Grantee as permitted pursuant to this Agreement.
7.4 Additional Time. If City shall
elect to terminate this Agreement by reason of any
default of Grantee and Lender shall have proceeded in
the manner provided for by Section 7.3, City will take
no action to effect a termination of this Agreement,
provided that such Lender shall:
(a) Pay, or cause to be paid, all
monetary obligations of Grantee to City under this
Agreement as the same become due, and continue its good
faith efforts to perform Grantee's other obligations
under this Agreement; and
(b) If not enjoined or stayed,
take steps to acquire or sell Grantee's interest in
960215 kw B7SOA.aer (2) EXHIBIT A
•
this Agreement by foreclosure or other appropriate
means and prosecute the same to completion.
If such Lender is diligently
complying with this Section 7.4, this Agreement'shall
not then terminate, and the time for completion by such
Lender of its proceedings shall continue so long as
such Lender is enjoined or stayed and thereafter for so
long as such Lender proceeds to complete steps to
acquire or sell Grantee's interest in this Agreement by
foreclosure of the Permitted Encumbrances or by other
appropriate means. Except as hereinafter provided,
nothing, in this Section 7.4 shall be construed to
require any Lender to continue such foreclosure
proceedings after Grantee's default with respect to
such Lender has been cured. If said default shall be
_ _ cured and the Lender shall discontinue such foreclosure
proceedings, this Agreement shall continue in full
force and effect as if Grantee had not defaulted under
this Agreement. Notwithstanding the foregoing, if
Grantee is in Default under this Agreement more than
once during any twelve (12) month *period, then with
respect to the second such Default, the Lender shall
have no right to discontinue foreclosure proceedings
and reinstate the original Grantee except as required
by law; instead, the Lender shall be required to
complete foreclosure proceedings (whether by
foreclosure, deed in lieu of foreclosure or by any
other lawful means), whereupon such Lender shall have
the right to sell or assign its rights to anew owner
of the Agency Parcel as permitted pursuant to this
Agreement.
7. Section 8.5 of the Parking Easement Agreement is
hereby deleted.
8. Section 10.12 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
10.12 Force Majeure. Except as provided
below, any prevention, delay or stoppage due to
strikes, lockouts, labor disputes, acts of God,
inability to obtain labor or materials or reasonable
substitutes therefor, extraordinary governmental
restrictions, regulations or controls, enemy or hostile
governmental action, civil commotion, fire or other
960215 kw B7SOA.aer (2) EXHIBIT A
casualty, and other causes beyond the control of the
Party obligated to perform any term, covenant or
condition of this Agreement, shall excuse the per -
formance by such Party for a period equal to any such
prevention, delay or stoppage, except the obligations
imposed with regard to Grantee's financial obligations
pursuant to this Agreement'.
Either Party encountering such
Force Majeure delays shall send written notice thereof
to the other Party no later than fifteen (15) days
after the commencement of such Force Majeure delay. If
the Party encountering such Force Majeure delay fails
to send notice thereof to the other Party within
fifteen (15) days after the commencement of such delay,
then any alleged delay occurring more than fifteen (15).
- - days prior to the date of such notice shall not be
deemed to extend any time for performance set forth
herein.
9. Section 10.13 of the Parking Easement Agreement is
hereby amended to provide in its entirety as follows:
10.13 Running With Land and Leasehold
Estate. The covenants and agreements contained herein
and the rights, privileges and easement herein granted
shall run with and shall be appurtenant to the Agency
Parcel and the City's leasehold estate in the District
Parcel or, if City acquires fee title to the Burdened
Parcel the easement granted under this Agreement shall
automatically and without further action of the Parties
become an easement on the fee simple estate, and shall
be binding upon and shall inure to the benefit of the
Parties hereto and their respective Successors.
960215 kw B7SOA.aer (2) EXHIBIT A
IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the date first above written.
CITY OF SEAL BEACH,
a municipal corporation ( "City ")
By:
Its: Mayor
ATTEST:
City -Clerk
TRUST "A" OF THE KARL AND TINA RODI
FAMILY TRUST ( "Grantee ")
By:
By:
EXHIBIT A
960215 kw B750A.aer (2)
ATTACHMENT "H"
THE KARL & TINA RODI FAMILY TRUST "A"
2600 Mission Street, Suite 200
San Marino, California 91108 -1676
818/799 -0395 FAX: 818/799 -3921
November 3, 1995
Mr. Keith Till
City Manager
City of Seal Beach
City Hall
211 Eight Street
Seal Beach, CA 90750
Dear Keith:
Congratulations on your appointment as City Manager of Seal Beach. We hope that the
City's commercial resurgence will match that of Mission Street in San Marino in recent
years.
We now own the Zoeter Place shopping center in Seal Beach on Pacific Coast Highway.
Through your predecessor Jerry Bankston and the City Attorney, Allen Rennett and
Quinn Barrow of Richards, Watson & Gershon, we have restructured the
Redevelopment Agency's ground lease and will be paying off almost $315,000 in
delinquent rent (the ground lease had been in default under prior management since
September 1993). We have also negotiated an agreement to repurchase the first mortgage
on the property, now held by the FDIC. We hope to finalize both transactions before year-
end.
Throughout this lengthy process, we have been making timely lease payments to the
Redevelopment Agency and have established an excellent relationship with the City. I
look forward to discussing this project with you at your convenience, hopefully before
you depart from San Marino, since a long -time health problem prevents me from
traveling to Seal Beach.
With best regards.
i,
Y urs very truly,
s M. Galbraith
JMG /pkj
ATTACHMENT "I"
I
M E M O R A N D U M
TO: The Redevelopment Agency of the City of Seal Beach
FROM: Allen E. Rennett
DATE: August 21, 1995
SUBJECT: Zoeter Place
The purposes of this memorandum are (i) to provide a
brief update on recent developments regarding the status of
Zoeter Place, and (ii) to discuss the remaining open issues.
1. Status.
As previously reported, the other partners of the
entity operating the shopping center negotiated the removal of
Dana MacKay from management; our primary contact has been Jim
Galbraith, who has been much more cooperative to work with. It
is our understanding that since Mr. Galbraith took over
management the operator has paid rent to the Agency on a current
basis as though the restructuring were in place (i.e., at the
rate of $15,000 per month).
Since this matter was last discussed with the Agency
Board, on August 2 the center's anchor tenant (Wherehouse
Entertainment, Inc.) filed for protection under Chapter 11 of the
Bankruptcy Code. After the filing was reported, Mr. Galbraith
learned that the last rent check bounced, and the no future rent
will be paid until the company is ordered to pay rent by the
Bankruptcy Court. Under bankruptcy law, the Debtor is given a
relatively short period (which can be extended) to decide whether
to keep or reject its leases. If the lease is rejected, the
Debtor must abandon the premises; the landlord is treated as an
unsecured creditor but at least can seek a new tenant for the
space. If the lease is accepted, the Debtor is required to pay
rent.
The Debtor has indicated to Mr. Galbraith that the
lease will be rejected unless a substantially lower rent is
negotiated.
Notwithstanding this further deterioration of the
project, the operator is sticking with its proposal to
financially rehabilitate the center. The FDIC, which holds the
mortgage on the center, appears to be cooperating, but is moving
extremely slowly in responding to the operator's proposals.
2. Open Issues.
As previously reported to the Agency, under the pending'
proposal the FDIC would substantially write down the loan on the
project and the Agency would agree to restructure the rent
schedule. Although the FDIC has lagged, all of the issues and
documentation regarding the Agency have been completed except for
one relatively minor issue. The operator has recently made a
proposal which would re -open a second issue.
A. Option Price Issue.
In order to assist in obtaining financing, the
operator felt it necessary to have an option to purchase the
Agency's interest in the property at its fair market value. The
Agency's negotiators agreed to recommend the grant of an option,
but only if the option could not be exercised for approximately
ten years (giving the value of the property time to recover from
its present depressed level). The Agency's negotiators also
sought to build in mechanisms to guarantee that the purchase
price could not be less than a specified minimum. The operator
does not want to lock in a minimum, since the minimum could
result in a price that is higher than the fair market value.
The options are as follows:
1. No minimum.
Even if no minimum option price is specified,
the fair market value option guarantees that the property will
not be "given away "; the property would be sold for its fair
value at the time. Even though it might not be sold at an
optimal time, its full value at the time would be realized.
2. Minimum equal to then - unpaid debt.
It is possible that the fair value in 2005
may be less than the then - remaining unpaid balance of the
purchase price to the School District (scheduled to be
approximately $800,000). In that event, the Agency would have to
use its other funds to pay off the balance owed to the School
District.
With a minimum equal to the then - balance of
the debt to the School District, the Agency would be assured that
even in the worst case it would not have to contribute cash to
complete the sale. The operator would probably agree to that
minimum: reasoning that if real estate values are so low in 2005
that the value is less than $800,000, the operator will probably
have defaulted prior to that date, so the option won't matter.
B801(4r
3. Minimum equal to Agency's purchase price.
It is possible that the fair value in 2005
may be greater than the remaining debt but less than what the
Agency paid to buy the property in 1988 (approximately
$1,900,000).
With a minimum equal to the Agency's original `.
purchase price, the Agency would be protected from being forced
to take a "book" loss on the sale. The operator is less likely
to agree to that minimum, precisely because it has a greater
chance of being applicable and forcing the purchase price above
the fair market value.
There is no legal requirement that the Agency
protect against taking the book loss. On the contrary, it is not
uncommon for Redevelopment Agencies to take book losses in the
process of stimulating redevelopment. This project has already
achieved the redevelopment goals of preserving and rehabilitating
the Zoeter School structure and stimulating commerce and
employment in the City.
4. Minimum based on Agency's cash flow.
This option is similar to the preceding one,
but would take into account the Agency's cash flow from the
project in determining the minimum. In prior years, the rent
received has been less than the payments to the School District,
forcing the Agency in make additional investments; in future
years, the rent may exceed the School District payments, thereby
reducing the Agency's investments.
This option has the same advantages and
disadvantages as the preceding one, but is more cumbersome to
calculate.
5. Other minimums.
Other, more arbitrary, minimums could be
negotiated. However, the higher the minimum, the more difficult
the negotiation is likely to be.
B. Past Due Rent Issue.
The second issue involves payment of previously -
accrued delinquent rent.
As previously negotiated, approximately $314,000
of delinquent rent was to be paid as follows: $100,000 upon
execution of the lease amendment; approximately $214,000 in
installments of $4,000 per month (without interest) for
B801(& *r
approximately 54 months. The operator is offering an alternative
lump -sum payment of $175,000 in lieu of the entire $314,000.
Since $100,000 is payable upon execution anyway,
the new proposal really means a payment of $75,000 now in lieu of
$214,000 of payments over 42 years. This represents a very
substantial discount. (When Mr. Galbraith first suggested the
lump sum payment, he had forgotten that the terms already
included a $100,000 down payment; he thought his proposal
represented a less drastic discount than it actually does.)
Mr. Galbraith is still willing to honor the
previous payment schedule (or to entertain other counterproposals
for lump -sum payment). Thus, it is entirely up to the Agency
whether to simply stay with the prior proposal, accept the new
proposal, or pursue further negotiations for a lump -sum payment.
[If the Agency agrees to any change increasing the
lump -sum payment, as a technical matter we suggest that the
amount of any "discount" should not be written off, but instead
should be deferred and written off in the future if the operator
continues to perform. Structuring the transaction that way gives
the operator the benefit of the bargain if it performs while
retaining maximum leverage against the FDIC if the operator
subsequently defaults.]
B801(ao;er
ATTACHMENT "J"
AGREEMENT
THIS AGREEMENT is made this 1st day of January,
1987, by and between the Los Alamitos Unified School District
(hereinafter referred to as the "District ") and the City
of Seal Beach (hereinafter referred to as the "City ").
The parties agree as follows:
Section 1. The District shall lease to the City
that certain real property, described in Exhibit A attached
hereto, and hereinafter referred to as Parcels B and D, for
a term of twenty -five years in accordance with the provisions
of the Lease, a copy of which is attached hereto as Exhibit
,B. As part of the Lease, the District shall grant the City
an option to purchase Parcels B and D as described in Article
XIII of the Lease.
Section 2. The District hereby grants to the City
the right to purchase that certain real property, described
in Exhibit C attached hereto, and hereinafter referred to
as Parcel A, for the price of $1,908,360 on or before July 1,
1987. The District agrees to not enter into any agreements
for the sale or lease of Parcel A with any other parties
on or before July 1, 1987. In order to exercise the right
to purchase Parcel A granted hereunder, the City shall provide
written notice to District on or before July 1, 1987 stating
that the City has elected to purchase Parcel A. If such
election is made, the payment of the purchase price to the
District and the transfer of title to the City shall occur
on or before August 1, 1987. In the event that the City
does not timely exercise such right to purchase Parcel A,
the City shall have no rights or interest in Parcel A under
this Agreement and the District may sell, lease or otherwise
dispose of Parcel A in any manner that the District deems
appropriate or desirable.
Section 3. Upon the filing of an application by
the District, the City shall initiate proceedings to rezone
Parcel A to C -2 (General Commercial) in accordance with the
applicable provisions of the Code of the City of Seal Beach,
California. The City shall use its best efforts to complete
such rezoning on or before July 1, 1987.
Section 4. The District and the City shall enter
into a separate agreement regarding the use and operation
of the swimming pool and gymnasium (the "facilities ") located
at the McGaugh School site in the City of Seal Beach. Such
agreement shall provide that the City will assume responsibility
for the operation and maintenance of the facilities. Such
agreement shall further provide the terms and conditions
under which the facilities may be used by the District.
Executed in duplicate the day and year first above
written. tMITOS LOS UN FIED SCHOOL DISTRICT
By:
I.
CITY OF SEAL BEACH
By:
Mayor
ATTEST:
,ice cp
LEASE
THIS LEASE is made in duplicate as of the 1st day of
January, 1987, by and between THE LOS ALAMITOS UNIFIED SCHOOL
DISTRICT (hereinafter called "Landlord "), and The CITY OF SEAL
BEACH, a municipal corporation (hereinafter called "Tenant ").
ARTICLE I
PREMISES
Section 1.1 Leased Premises Defined. Landlord hereby
leases to Tenant the real property described in Exhibit A,
attached hereto, and all improvements and personal property now
or hereafter located thereon (hereinafter called the "Premises ")
for the term and upon all of the conditions and agreements set
forth herein.
Section 1.2 Condition of Premises. The Premises are
accepted "as is" in their present condition. Landlord makes no
representation as to the condition of the Premises or their
fitness for any purpose.
ARTICLE II
USE OF THE PREMISES
Section 2.1 Permitted Use. The Premises may be used
and occupied for any lawful purpose.
Section 2.2 Compliance with Law and Regulations.
Tenant shall comply promptly, and at Tenant's expense, with all
applicable statutes, ordinances, rules, regulations, orders and
requirements regulating the use of the Premises.
ARTICLE III
TERM
Section 3.1 Term. Subject to the terms, covenants,
agreements and conditions herein contained, Tenant shall have and
hold the Premises for a term commencing on the 1st day of
January, 1987 and ending on the 31st day of December, 2011.
Section 3.2 Termination. The term of this Lease shall
terminate upon the occurrence of any of the following events:
(a) A default by Tenant and Lessor's election to
terminate this Lease under Section )1.2(b) hereof.
4 lo, z .:
1/, b/ 8' 7 Ssf (0 Y ?
EXHIBIT "B"
(b) The exercise by Tenant of its option to purchase
the Premises in accordance with Article XIII hereof.
(c) The exercise by Tenant of its right to terminate
this Lease under Section 8.2 hereof if the Premises are destroyed
or substantially damaged.
ARTICLE IV
RENT
Section 4.1 Annual Rent. On or before the 31st day of
December of each year during the term of this Lease, Tenant shall
pay to Landlord as annual rent ( "Annual Rent ") an amount equal to
the sum of:
(a) The amount ( "Base Rent ") indicated for that year
in Schedule 1 attached hereto and incorporated herein by this
reference, plus
(b) The product of (i) the amount indicated for that
year in Schedule 2 attached hereto and incorporated herein by
this reference, multiplied by (ii) the Inflation Factor for that
year. For 1987, the Inflation Factor shall be 7.84 %; for each
other year, the Inflation Factor shall be a percentage equal to
the average daily commingled interest rate earned by funds in the
general fund of the Orange County Treasury during the preceding
calendar year (the "Index Rate") as such Index Rate is determined
by the Treasurer of the County of Orange. In no event shall the
Inflation Factor be less than 5.84% or greater than 12.84 %.
Section 4.2 Alternate Annual Rent. In the event that
the City of Seal Beach fails to either (1) adopt an ordinance
rezoning that certain parcel of real property, described in
Exhibit B attached hereto, to C -2 (General Commercial) on or
before July 1, 1987, or (2) acquire such property pursuant to
Section 2 of that certain Agreement dated January 1, 1987,
between the parties hereto, the Alternate Annual Rent provided by
this Section 4.2 shall apply during the term of the Lease rather
than the Annual Rent provided by Section 4.1 hereof. Such
Alternate Annual Rent shall be equal to the sum of:
(a) The amount ( "Base Rent ") indicated for that year
in Schedule 3 attached hereto and incorporated herein by this
reference, plus
(b) The product of (i) the amount indicated for that
year in Schedule 4 attached hereto and incorporated herein by
this reference, multiplied by (ii) the Inflation Factor (as
defined in Section 4.1) for that year.
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870119 lj A010.GWS (2)
Section 4.3 Fair Rental Value. The Annual Rent, or
the Alternate Annual Rent if applicable, for each calendar year
shall constitute the total rental for such year and shall be paid
by Tenant for and in consideration of the right to the use and
possession of and the continued quiet use and enjoyment of the
Premises during each such year for which such rent is paid. The
parties hereto have agreed and determined that the Annual Rent,
and the Alternate Annual Rent if applicable, represent the fair
rental value of the Premises.
ARTICLE V
TAXES AND UTILITIES
Section 5.1 Taxes. Tenant shall be responsible for
and shall pay or cause to be paid before delinquency all
municipal, county or state taxes, levies and fees of every kind
and nature, including but not limited to general or special
assessments, assessed during the term of this Lease against any •
leasehold interest, leasehold improvements or personal property
of any kind owned by or placed in, upon or about the Premises by
Tenant.
Section 5.2 Utilities. Tenant shall pay all charges
for gas, water, sewer, electricity, and other utility services
used in the Premises during the Lease term (including hookup
charges), whether or not such charges are billed directly to
Tenant. Landlord shall not be liable in damages or otherwise for
any failure or interruption of any utility service being
furnished the Premises and no such failure or interruption shall
entitle Tenant to an abatement of rent or to terminate this
Lease.
ARTICLE VI
MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.1 Landlord's Duties. Landlord shall have no
obligation of any kind or nature whatsoever with respect to the
maintenance, repair, or restoration of the Premises or any
improvements located thereon.
Section 6.2 Tenant's Duties.
(a) Maintenance and Repairs. Subject to the provi-
sions of Article VIII pertaining to casualties, Tenant shall
during the term of this Lease at Tenant's sole expense keep in a
safe, clean, orderly, and sanitary condition, and in a state fit
for the intended use the Premises and every part thereof.
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870119 lj A010.GWS (2)
(b) Performance by Landlord. If Tenant fails to
perform its obligations under this Section 6.2, Landlord may at
its option, after thirty (30) days' written notice to Tenant,
enter upon the Premises and put the same in good order, condition
and repair and the cost thereof shall become due and payable by
Tenant to Landlord upon demand.
Section 6.3 Tenant's Improvements.
Alterations. Tenant shall be entitled to make any
alterations or improvements to the Premises necessary or
desirable to utilize the Premises. Any alterations made shall
remain on and be surrendered with the Premises on expiration or
termination of the term of this Lease, except that (unless Tenant
exercises its option under Article XIII to purchase the Premises)
Landlord can elect within thirty (30) days before the expiration
of the term, or within ten (10) days after termination of the
term, to require Tenant to remove any alterations that Tenant has
made to the Premises. If Landlord so elects, Tenant at its cost
shall restore the Premises to the condition existing on the date
of this Lease, normal wear and tear excepted.
If Tenant is not then in default of any provisions of
this Lease Tenant shall have the right to remove from the
Premises immediately before the expiration of the term of this
Lease, or within ten (10) days after termination of the term, any
alterations Tenant has made to the Premises, as long as the
removal will not cause any structural damage to the Premises, and
Tenant at its cost promptly restores any damage caused by the
removal.
ARTICLE VII
INSURANCE AND INDEMNITY
Section 7.1 Property Insurance. Tenant shall at all
times during the term of this Lease, at its sole cost and
expense, maintain in effect policies of insurance covering all
improvements now or at any time during the term of this Lease
located within or upon the Premises with a reputable insurance
company or insurance pool for the full replacement cost of such
improvements providing protection against any peril included
within the classification "Fire and Extended Coverage," vandalism
and malicious mischief. Full replacement cost does not include
the costs of excavation, foundations, and subsurface footings.
Proceeds of such insurance shall be payable to Landlord and
Tenant as their interests may appear.
Section 7.2 Evidence. Copies of policies of such
insurance or certificates evidencing such insurance shall be
delivered to Landlord by Tenant on or before February 15, 1987.
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870119 tj A010.GWS (2)
•
No such policy shall be cancellable or the coverage reduced
thereunder except after ten (10) days' written notice to
Landlord. All insurance required to be maintained by Tenant
shall be primary and non - contributing to other insurance
available to Landlord.
Section 7.3 Non - Liability of Landlord and Indemnity.
Landlord shall not be liable for any loss of or damage to any
improvements, fixtures, equipment, or property of any kind on, or
about the Premises, or for injury or death to any person or
persons from any cause arising at any time; nor shall Landlord be
in any way liable in case of any accident or injury to or death
of Tenant's servants, employees, agents, invitees or licensees,
or to any person or persons on or about the Premises. Tenant
agrees to defend and hold Landlord free and harmless from any and
all claims, damage, liability, loss, cost or expense of any and
every nature on account of the death of or injury to any person
or as a result of loss of or damage to any goods, wares,
merchandise or property of any kind, arising out of, resulting
from, or occasioned by the use, maintenance, operation, or
occupancy or control of the Premises by Tenant or other persons
claiming under Tenant or using the Premises with Tenant's express
or implied consent. Notwithstanding the foregoing, the
provisions of this Section 7.3 shall not apply to any loss,
damage, injury or death arising from or related to the acts or
omissions of Landlord, its employees or agents.
ARTICLE VIII
DESTRUCTION; REPAIRS AND RESTORATION
Section 8.1 Minor Damage. If at any time during the
term of this Lease the Premises are damaged, and such damage is
not "substantial" as that term is defined in Section 8.3, then
Tenant shall promptly repair such damage, at Tenant's expense to
extent such damage is uninsured, and this Lease shall continue in
full force and effect.
Section 8.2. Substantial Damage. If at any time
during the term hereof the Premises are destroyed or damaged and
such damage is "substantial" as that term is hereinafter defined,
then Tenant, at its option, may cancel and terminate this Lease
as of the date of the occurrence of such damage, by giving the
Landlord written notice of its election to do so within thirty
(30) days after the date of occurrence of such damage. In the
event of such termination, Tenant shall pay to Landlord prorated
rent for the calendar year computed from January 1 of such year
to the date of termination. If Tenant does not elect to
terminate this Lease, Tenant shall promptly repair such damage,
at Tenant's expense to the extent such damage is uninsured, and
this Lease shall continue in full force and effect. No lease
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870119 tj A010.GWS (2)
termination shall relieve Tenant of liability for uninsured
damages to the premises arising from Tenant's wilful misconduct
or negligence or that of its agents or employees.
Section 8.3. Definitions. For the purposes of this
Article VIII, damage to the Premises shall be deemed to be sub-
stantial if the reasonable estimated cost of repair or restor-
ation exceeds Two Hundred Fifty Thousand Dollars ($250,000.00).
Section 8.4. Waiver. Tenant waives the provisions of
California Civil Code Sections 1932(2) and 1933(4) which relate
to termination of leases when the thing leased is destroyed and
agrees that such event shall be governed by the terms of this
Lease.
Section 8.5. Non - Responsibility of Landlord. Landlord
shall have no obligation whatsoever to repair or restore the
Premises.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
Section 9.1 Assignment. The interests of Tenant in
this Lease Agreement may not be assigned by Tenant without
Landlord's prior written consent which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the whole
or any part of the Premises may be subleased by Tenant.
ARTICLE X
DEFAULTS AND REMEDIES
Section 10.1 Default Defined. The occurrence of any
one or more of the following events shall constitute a default
hereunder by Tenant:
(a) The failure by Tenant to make any payment of
rent or other payment required to be made by Tenant
hereunder, as and when due where such failure shall
continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant.
(b) The failure by Tenant to observe or perform
any of the covenants or provisions of this Lease to be
observed or performed by Tenant, where such failure, if
curable, shall continue for a period of thirty (30)
days after written notice thereof from Landlord to
Tenant; provided, however, that if the nature of
Tenant's default is such that more than thirty (30)
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870119 tj A010.GWS (2)
days are reasonably required for its cure, then Tenant
shall not be deemed to be in default if Tenant shall
commence such cure within said thirty (30) day period
and thereafter diligently prosecutes such cure to
completion.
(c) (1) The making by Tenant of any general
assignment for the benefit of creditors;
(2) The filing by or against Tenant of a
petition to have Tenant adjudged bankrupt or a petition
for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a peti-
tion filed against Tenant, the same is dismissed within
sixty (60) days);
(3) The appointment of a trustee or receiver
to take possession of substantially all of Tenant's
assets located at the Premises or of Tenant's interest
in this Lease, where possession is not restored to
Tenant within sixty (60) days; or
(4) The attachment, execution or other judi-
cial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this
Lease, where such seizure is not discharged within
sixty (60) days.
Section 10.2 Landlord's Remedies. Landlord shall have
the following remedies if Tenant commits a default:
(a) Landlord can continue this Lease in full
force and effect, and the Lease will continue in effect
as long as Landlord does not terminate Tenant's right
to possession, and Landlord shall have the right to
collect rent when due; or
(b) Landlord can terminate Tenant's right to posses-
sion of the Premises. No act by Landlord other than giving
notice to Tenant shall terminate this Lease. Acts of main-
tenance, efforts to relet the Premises, or the appointment
of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination
of Tenant's right to possession.
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870119 lj A010.GWS (2)
Section 10.3 Dependent Covenants. Landlord shall be
under no obligation to observe or perform any covenant of this
Lease on its part to be observed or performed during the continu-
ance of any default by Tenant hereunder and such nonperformance
by Landlord shall not be deemed or construed to be an eviction or
ejection of Tenant..
Section 10.4 Remedies Cumulative. Landlord may exer-
cise any other remedy or right now or hereafter available to a
landlord against a defaulting tenant under the laws of the State
of California and not otherwise specifically reserved herein.
The various rights and remedies reserved to Landlord herein,
including those not specifically 'described herein, shall be
cumulative, and, except as otherwise provided by California
statutory law in force and effect at the time of the execution
hereof, Landlord may pursue any or all of such rights and
remedies, whether at the same time or otherwise.
Section 10.5 No Waiver. No delay or omission of
Landlord to exercise any right or remedy shall be construed as a.
waiver of any such right or remedy or of any default by Tenant or
of any interest due hereunder. The acceptance by Landlord of
rent or additional rent hereunder shall not be a waiver of any
preceding breach or default by Tenant of any provision hereof,
other than the failure of Tenant to pay the particular rent or
any additional rent accepted, regardless of Landlord's knowledge
of such preceding breach or default at the time of acceptance of
such rent or any additional rent, or a waiver of Landlord's right
to exercise any remedy available to Landlord by virtue of such
breach or default. The acceptance of any payment from a debtor
in possession, a trustee or a receiver, or any other person
acting on behalf of Tenant or Tenant's estate shall not waive or
cure a default under Section 10.1(c) above.
Section 10.6 Default by Landlord. Landlord shall not
be deemed to be in default in the performance of any obligation
required to be performed by it hereunder unless and until it has
failed to perform such obligation within thirty (30) days after
written notice by Tenant to Landlord specifying wherein Landlord
has failed to perform such obligation; provided, however, that if
the nature of Landlord's obligation is such that more than thirty
(30) days are required for its performance then Landlord shall
not be deemed to be in default if it shall commence such perform-
ance within such thirty (30) day period and thereafter diligently
prosecute the same to completion.
Section 10.7 Expense of Litigation. If either party
incurs any expense, including reasonable attorneys' fees, in
connection with any action or proceeding instituted by either
party by reason of any default or alleged default of the other
party hereunder, or to construe this Lease, the party prevailing
in such action or proceeding shall be entitled to recover from
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870119 lj A010.GWS (2)
the other party reasonable expenses and attorneys' fees in the
amount determined by the Court, whether or not such action or
proceeding goes to final judgment. In the event of settlement or
final judgment in which neither party is awarded all of the
relief prayed for, the prevailing party as determined by the
Court shall be entitled to recover from the other party reason-
able expenses and attorneys' fees in the amount determined by the
Court.
ARTICLE XI
REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 11.1 Representations, Covenants and Warranties
of Tenant. Tenant represents, covenants and warrants to Landlord
as follows:
(a) Tenant is a charter city duly organized and
validly existing under the laws of the State of California.
(b) Neither the execution and delivery of this Lease,
nor the fulfillment of or compliance with the terms and
conditions hereof, nor the consummation of the transactions
contemplated hereby, conflicts with or results in a breach of the
terms, conditions or provisions of any restriction or any agree -
ment or instrument to which Tenant is now a party or by which the
Tenant is bound, or constitutes a default under any of the
foregoing.
Section 11.2 Representations, Covenants and Warranties
of Landlord. Landlord represents, covenants and warrants to the
City as follows:
(a) Landlord is the owner in fee of the Premises and
is possessed of the full power to own and hold real property and
to lease and sell the same.
(b) Landlord will not encumber the Premises with any
condition, restriction, easement or other similar interest.
(c) Landlord shall not voluntarily encumber the
Premises with any mortgage, deed of trust or other lien unless
both: (i) the original amount of such lien does not exceed 75%
of the Net Purchase Price of the Premises under Section 13.3 at
the time the lien first encumbers the Premises; and (ii) the
amount of such lien does not at any time exceed 90% of the then
effective Net Purchase Price of the Premises under Section 13.3.
The "Net Purchase Price" of the Premises under Section 13.3 at
any given time shall be equal to the difference of (i) the
applicable purchase price, less (ii) the then applicable credit
described in Section 13.3 against the purchase price. Any such
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870119 lj A010.GWS (2)
mortgage, deed of trust or lien shall be junior and subordinate
to Tenant's rights under this Lease.
(d) Neither the execution and delivery of this Lease,
nor the fulfillment of or compliance with the terms and condi-
tions hereof, nor the consummation of the transactions contem-
plated hereby, conflicts with or results in a breach of the
terms, conditions or provisions of any restriction or any agree-
ment or instrument to which Landlord is now a party or by which
Landlord is bound, or constitutes a default under any of the
foregoing.
(e) Except as provided herein, Landlord will not
assign this Lease, its right to receive rent from Tenant, or its
duties and obligations hereunder to any other person, firm or
entity so as to impair or violate the representations, covenants
and warranties contained in this Section 11.2. Provided, how-
ever, Landlord reserves the right to sell its interest in the
Premises subject to the Lease.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Recording. This Lease shall be recorded
with the Orange County Recorder and shall run with the land until
it expires or is earlier terminated.
Section 12.2 Notices. Any notice required or per-
mitted to be given hereunder shall be in writing and may be
served upon Landlord personally or by mail addressed to Landlord
at Landlord's offices at 10652 Reagan Street, Los Alamitos,
California 90720 and upon Tenant personally or by mail addressed
to Tenant at 211 Eighth Street, Seal Beach, California 90740,
Attention: City Manager. Such notice shall be effective upon
personal delivery to addressee or if given by mail, shall be
effective two (2) days after deposit in the United States mail
first class, postage prepaid and addressed as specified above.
Either party may by written notice to the other specify a
different address for notice purposes.
Section 12.3 Severability. Any provision of this
Lease which shall prove to be invalid, void or illegal shall in
no way affect, impair or invalidate any other provision hereof,
and such remaining provisions shall remain in full force and
effect.
Section 12.4 Time of Essence. Time is of the essence
with respect to the performance of every provision of this Lease
in which time of performance is a factor.
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870119 lj A010.GWS (2)
Section 12.5 Headings. The article and paragraph
captions contained in this Lease are for convenience only and
shall not be considered in the construction or interpretation of
any provision hereof.
Section 12.6 Entire Agreement and Binding Effect.
This Lease contains all of the agreements of the parties hereto
with respect to any matter covered or mentioned in this Lease, or
relating to the negotiation and execution thereof and no other
agreement, representation, statement or understanding pertaining
to any such matter, or any provision contained in a preliminary
draft of this Lease, shall be effective for any purpose. All of ,
the covenants, conditions, and obligations herein contained shall
be binding upon and inure to the benefit of the respective
successors and permitted assigns of the parties hereto to the
same extent as if such successors and assigns were in each case
named as a party to this Lease. No provision of this Lease may
be amended or added to except by an agreement in writing signed
by the parties hereto or their respective successors in interest.
Section 12.7 Possession and Enjoyment. During the
term of this Lease, Landlord shall provide Tenant with quiet use
and enjoyment of the Premises, and Tenant shall during such term
peaceably and quietly have and hold and enjoy the Premises, with-
out suit, trouble or hindrance from Landlord, except as expressly
set forth in this Lease. Landlord will, at the request of Tenant
and at Tenant's cost, join in any legal action in which Tenant
asserts its right to such possession and enjoyment to the extent
Landlord may lawfully do so.
ARTICLE XIII
OPTION TO PURCHASE
Section 13.1 Option Granted. Landlord does hereby
grant to Tenant an option to purchase the Premises and Landlord's
interest under this Lease, upon the terms and conditions herein
set forth.
Section 13.2 Exercise of Option. Tenant may exercise
the option to purchase at any time during the Lease term, herein-
after referred to as the "Option Period." In order to exercise
the option to purchase herein granted, Tenant must give written
notice of the exercise of the option to Landlord during the
Option Period, and if not so given, this option shall
automatically expire. If Tenant shall exercise the option to
purchase during the Option Period, the transfer of title to
Tenant and the payment of the purchase price to. Landlord shall
occur thirty days after the option to purchase is exercised, and
until that time the terms of this Lease shall remain in full
force and effect. Concurrently with the closing of the sale
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870119 lj A010.GWS (2)
r
transaction, Tenant shall pay prorated Annual Rent (or Alternate
Annual Rent, if applicable) for the portion of the calendar year
ending on the closing date.
Section 13.3 Purchase Price. The purchase price to be
paid by Tenant to Landlord for the Premises, if Tenant exercises
its option to purchase, shall be the sum of $1,590,000.00
provided that the City of Seal Beach either (1) rezones that
certain parcel of real property, described in Exhibit B, attached
hereto, to C -2 (General Commercial) on or before July 1, 1987, or
(2) acquires such property pursuant to Section 2 of that certain
Agreement, dated January 1, 1987, between the parties hereto. If
such condition is not timely satisfied, the purchase price shall
be $1,777,705. Tenant shall receive a credit against the
purchase price in an amount equal to the aggregate amounts of
Base Rent paid under this Lease through the closing date
(including without limitation the Base Rent portion of the
prorated Annual Rent or Alternate Annual Rent paid concurrently
with the closing).
Section 13.4 Title to Premises. At the closing,
Landlord shall deliver to Tenant an executed grant deed in
recordable form conveying the Premises. Title to the Premises
shall be conveyed by Landlord to Tenant free and clear of all
liens, encumbrances, covenants, conditions, restrictions, ease-
ments, rights of way of record, leases or other tenancy agree-
ments, and other matters of record, except matters of record as
of the date of the Lease and anything of record or not of record
that in any way affects title to the Premises resulting from the
acts or omissions of Tenant. Landlord, at Landlord's expense,
shall cause to be delivered to Tenant a CLTA Standard Coverage
Policy of Title Insurance in the amount of the purchase
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870119 lj A010.GWS (2)
price insuring title to the premises vested in Tenant subject
only to the matters described in this Section.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be duly executed in duplicate the day and year
first above written.
LANDLO'':
/
LOS / ITOS UNIFIED SCHOOL DISTRICT
1
1
By
TENANT:
CITY OF SEAL BEACH
By ----<;4C)),-;:-.-c./)
Mayor
AT ST:
.0.01 ' I / _2_0
. City Clerk
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870119 l j A010.GWS (2)
( ;
SCHEDULE 1
BASE RENT
1987 $23,000 1999 $56,000
1988 24,000 2000 60,000
1989 26,000 2001 64,000
1990 28,000 2002 69,000
1991 30,000 2003 74,000
1992 33,000 2004 80,000
1993 35,000 2005 86,000
1994 38,000 2006 93,000
1995 41,000 2007 100,000
1996 44,000 2008 108,000
1997 48,000 2009 117,000
1998 52,000 2010 126,000
2011 135,000
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870119 lj A010.GWS (2)
(
(
SCHEDULE 2
1987 $1,590,000 1999 $1,168,000
1988 1,567,000 2000 1,112.000
1989 1,543,000 2001 1,052,000
1990 1,517,000 2002 988,000
1991 1,489,000 2003 919,000
1992 1,459,000 2004 845,000
1993 1,426,000 2005 765,000
1994 1,391,000 2006 679,000
1995 1,353,000 2007 586,000
1996 1,312,000 2008 486,000
1997 1,268,000 2009 378,000
1998 1,220,000 2010 261,000
2011 135,000
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870119 tj A010.GWS (2)
• ! ( 1
SCHEDULE 3
BASE RENT
1987 $24,705 1999 $62,000
'1988 27,000 2000 67,000
1989 29,000 2001 72,000
1990 32,000 2002 77,000
1991 34,000 2003 83,000
1992 37,000 2004 90,000
1993 40,000 2005 97,000
1994 43,000 2006 104,000
1995 46,000 2007 112,000
1996 49,000 2008 121,000
1997 53,000 2009 130,000
1998 57,000 2010 140,000
2011 151,000
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870119 lj A010.GWS (2)
1
. r
SCHEDULE 4
1987 $1,777,705 1999
$1,306,000
1988 1,753,000 2000 1,244,000
1989 1,726,000 2001 1,177,000
1990 1,697,000 2002 1,105,000
1991 1,665,000 2003 1,028,000
1992 1,631,000 2004 945,000
1993 1,594,000 2005 865,000
1994 1,554,000 2006 758,000
1995 1,511,000 2007 654,000
1996 1,465,000 2008 542,000
1997 1,416,000 2009 421,000
1998 1,363,000 2010 291,000
2011 151,000
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870119 lj A010.GWS (2)
_ .
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•
•
•
EXHIBIT "A"
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•
SCALE: 1 60'
•
•
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PACIFIC COAST - + -
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ZOETER SITE LEGAL DESCRIPTION
That portion of Bay View Tract in the City of Seal Beach, County
of Orange, State of California, as shown on a map recorded in
Book 8, Page 91, inclusive of Miscellaneous Maps, Records of
Orange County, California, described as follows:
* ** Exhibit "A" attached hereto and made a part thereof * **
Parcel 1: -
Lots 45, 47, 49, 51, 53, 55, 57 and the north 5.00 feet of Lot 43
in Block 210, that portion of llth Street vacated by that certain
Resolution No. 388 of the City Council of the City of Seal Beach,
recorded October 12, 1964 in Book 7256, Page 352 of official
records of said Orange County, Lots 53 through 66 and the north
5.00 feet of Lots 51 and 52 in Block 211, including that portion
of that certain alley, 15.00 feet wide as vacated by that certain
resolution of the Board of Trustees of Seal Beach recorded May 2,
1923 in Book 20, Page 375 of Deeds of said Orange County.
Parcel 2:
Lots 39, 41 and 43 in Block 210, that portion of said vacated
llth Street, Lots 27 through 52, in Block 211 including the
vacated portion of said alley.
Excepting therefrom, the north 5.00 feet of said Lot 43 and the
south 8.00 feet of said Lot 39 in Block 210, the north 5.00 feet
of said Lots 51 and 52, the south 10.00 feet of said Lots 27 and
28, and the westerly 67.5 feet of said Lots 28, 30, 32, 34, 36,
38, 40, 42, 44, 46 and 48 all in Block 211, intersecting the
easterly projection of said line 8.00 feet north of. Lot 39 in
Block 210.
Parcel 3:
Lots 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37 and the south
8.00 feet of Lot 39 in Block 210, that portion of the vacated
llth Street, the westerly 67.5 feet of Lots 30, 32, 34, 36, 38,
40, 42, 44, 46 and the south 8.00 feet of Lot 48 and the north
15.00 feet of Lot 28.
Parcel A:
Lots 39, 41 and 43 in Block 210, that portion of said vacated
llth Street, the westerly 67.5 feet of Lots 48, 50 and 52 in
Block 211.
Excepting therefrom, the north 5.00 feet of said Lot 43 and the
south 8.00 feet said Lot 39 in Block 210, the north 5.00 feet
of said Lot 52 and the south 8.00 feet of said Lot 48, in Block
211.
Parcel B:
(Lots 50 and 52, that portion of said vacated alley, 15.00 feet
wide, all in Block 211.
Excepting therefrom the north 5.00 feet of Lots 51 and 52.
Parcel C:
Lots 27, 29, 31, 33, 35, 37, 39, 41, 43, 45, 47 and the easterly
50.00 feet of Lots 28, 30, 32, 34, 36, 38, 40, 42, 44, 46, 48 and
that portion of vacated alley, 15.00 feet in width, all in Block
211.
Excepting therefrom the south 10.00 feet of said Lots 27 and 28.
2XHISIT "A'
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.• J
ATTACHMENT "K"
t -�4
May 5, 1987
M E M O R A N D U M
TO: Mayor and City Council
FROM: City Manager
SUBJECT: An Introduction to Potential Zoeter Parcel "A"
Acquisition Partners - The Gemtel Corporation and DJM
Company
You have been asked to meet with the principals involved with the
Gemtel Corporation and DJM Company, potential partners with the
City in the acquisition and development of the Zoeter Parcel "A ".
The following information is attached by way of introduction:
* Introductory letter.
* General Development Concept
* Summary information on developer's experience (detailed
information is available).
* List of references.
* Financial ability.
* Management philosophy.
* Management qualifications and resumes.
In addition to the above information, I have been asked to
comment on the viability of the acquisition.
Given the direction by City Council to acquire the Zoeter Parcel
"A" while retaining the Mary Zoeter Building and without a tax
increase, utilization of an assessment district, or sale of
existing real estate assets held by the City, I am surprised that
we continue to have people interested.
Based on financial pro formas run by Ed Knight and the staff of
Los Angeles County Development Commission, on our behalf, the
acquisition /development project is marginal at the agreed
property acquisition price of $1,908,000. A $300,000 reduction
in property cost would help tremendously.
Because of the continued interest of not only Gemtel /DJM, but
another local Orange County commercial developer, I feel that we
have the potential to put together a viable acquisition package.
In the short term, 25- years, it appears to be a marginal project
with risk. In the long term, 55- years, it appears to be worth
the risk. If the City acquires the parcel through a 25 -year
lease - purchase program with LAUSD "carrying the paper ", we stand
to lose the parcel during any year if we fail to generate
revenues to meet the annual payments to LAUSD. However, the City
has no up front investment, so would in effect lose nothing other
than the potential to own the property at the end of the lease -
purchase period, and the rents from our sublease to our
"partners ". We would continue to receive sales tax, business
license tax, and a share of proprietary interest tax in lieu of
property tax.
Our partners are banking on the projections that Seal Beach will
continue to be an attractive place to locate a business. The
projections are that the City's and surrounding area's
populations will have increasing per capita incomes greater than
Southern California as a whole, thus the City will be an ideal
place to do business. This will in turn enable rents to be
increased 4% per year, a rate greater than the cost of financing
the acquisition and development. The rental revenues will thus
be greater than the costs, and both the City and the developer
will profit.
I am concerned that we will run out of time to put the package
together. July 1, 1987 is just around the corner. I've asked
Mike Miller, LAUSD Superintendent, to approach the Board about an
extension. I am not optimistic that the Board will grant an
extension.
We have located asbestos in the main building and are attempting
to determine the cost implications. LAUSD staff is investigating
and we have received an oral commitment from the Orange County
Health Department staff to consult with us, at no cost, on the
abatement program.
I am also concerned that even though the development proposal
will retain the Mary Zoeter Building, it, in my opinion, will not
look at all like the present building. The footprint, and
general outline of the building will remain. When commercial
signage, parking and landscaping are added, any resemblance to
the present building and grounds will be minimal.
Conclusion:
It is worth pursuing the project. If is succeeds, the City will
have a very valuable asset with ongoing revenues it wouldn't
otherwise have. If we fail, we have still controlled the
development, saved the Mary Zoeter building, increased the City's
tax base (property tax, sales tax and business licenses tax), and
lost only the potential and not out -of- pocket cash.
0
• LSON
City Manager
1
ATTACHMENT "L"
1
4 �r
t
s = Valuation Approaches
nom .:.?
Cost Approach
A set of procedures through which a value indication is derived for the fee simple interest in a property by
`` . estimating the current cost to construct a reproduction of, or replacement for, the existing structure;
ci:
_ - deducting accrued depreciation from the reproduction or replacement cost; and adding the estimated land
value plus an entrepreneurial profit. Adjustments may then be made to the indicated fee simple value of
`? the subject property to reflect the value of the property interest being appraised.
`- Income Capitalization Approach
A set of procedures through which an appraiser derives a value indication for an income- producing
`•` property by converting its anticipated benefits (cash flows and reversion) into property value. This
- - !k= . conversion can be accomplished in two ways. One year's income expectance can be capitalized at a
-_ market - derived capitalization rate or at a change in the value of the investment. Alternative, the annual
cash flows for the holding period and the reversion can be discounted at a specific yield rate.
"` Sales Comparison Approach
A set of procedures in which a value indication is derived by comparing the property being appraised to
ay, similar properties that have been sold recently, applying appropriate units of comparison, and making
11
adjustment to the sale prices of the comparables based on the elements of comparison. The sales
? comparison approach may be used to value improved properties, vacant land, or land being considered as
., though vacant; it is the most common and preferred method of land valuation when comparable sales data
s are available. -
>f Various analytical techniques may be used to identify and measure adjustments. Comparative analysis
`" includes the consideration of both quantitative and qualitative factors. Quantitative adjustments are
developed as either dollar or percentage amounts. Factors that cannot be quantified are dealt with in
qualitative analysis.
ki
SA
1 - „-”
5 The Dictionary of Real Estate Appraisal, (Third Edition) Chicago: Appraisal Institute, 1993, p.81.
6 Ibid., p.178
7 _- Ibid., p.318
E: 8 The Appraisal of Real Estate, ( Eleventh Edition) Chicago: Appraisal Institute 1996, 414.
a; , P•
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