AGREEMENT FOR LEASE, OPERATION AND MAINTENANCE OF REAL PROPERTY
(WATER SYSTEM) AND LEASE OF GROUNDWATER
BETWEEN
THE CITY OF HAWTHORNE
AND
CALIFORNIA WATER SERVICE COMPANY
February 27, 1996
TABLE OF CONTENTS
Section 1. Lease of Water System 1
Section 2. Lease of Groundwater 2
Section 3. Term 2
Section 4. Use 3
Section 5. Lump Sum Payment 3
Section 6. Base Rent 3
Section 7. Repair, Maintenance and Operation 4
Section 8. Rates and Charges 4
Section 9. Customer Billing and Collections 6
Section 10. Capital Improvements 6
Section 11. Employees 9
Section 12. Insurance 10
Section 13. Liens and Encumbrances 11
Section 14. Surrender Upon Expiration or Termination 12
Section 15. Default and Remedies 12
Section 16. Assignment 16
Section 17. Discharge of Liens 16
Section 18. Indemnity 17
Section 19. California Law 18
Section 20. Notices 18
Section 21. Waiver 18
Section 22. Representation 18
Section 23. Nondiscrimination 19
Section 24. Counterparts 19
Section 25. Amendments 19
Section 26. Dispute Resolution 19
Section 27. Taxes and Assessments; Possessory Interest 20
Section 28. Supplies, Tools and Equipment 21
Section 29. Attorneys' Fees 21
Section 30. Net Lease 21
Section 31. Compliance with Law 21
Section 32. Hazardous Substances 22
Section 33. City's Access 23
Exhibits 25
AGREEMENT FOR LEASE, OPERATION AND
MAINTENANCE OF REAL PROPERTY (WATER SYSTEM)
AND LEASE OF GROUNDWATER
THIS AGREEMENT ("Lease") is made as of February 27, 1996 by and between the
CITY OF HAWTHORNE ("City"), a municipal corporation duly organized and existing
under the laws of the State of California, and CALIFORNIA WATER SERVICE
COMPANY, a California corporation ("Lessee").
W I T N E S S E T H:
WHEREAS, City provides water service to over 6,000 customers in the service
area set forth on Exhibit A (the "Service Area"); and
WHEREAS, City is the owner of a water system consisting of real property and
facilities described on Exhibit B (the "Water System"); and
WHEREAS, City has adjudicated rights to 1882 acre feet of groundwater annually
under the amended judgment in California Water Service Company, et al, v. City
of Compton, et al, Los Angeles County Superior Court Case No. 506,806 (the
"Groundwater"); and
WHEREAS, Lessee wishes to lease the Water System from City and to operate said
system, and to pump the Groundwater for the purpose of furnishing water service
to customers;
NOW, THEREFORE, in consideration of the mutual promises and agreements herein
contained, the parties hereto agree as follows:
Section 1. Lease of Water System. City hereby leases to Lessee, and Lessee
hereby leases from City, the Water System as described on Exhibit B. The
Water System is leased in an "as is" condition. Neither City nor any of its
agents has made any representation or warranties with respect to the Water
System or the Groundwater except as specifically set forth in this Lease.
Section 2. Lease of Groundwater. City hereby leases to Lessee, and Lessee
leases from City, the Groundwater. City agrees to take all lawful and feasible
actions which the Water Replenishment District of Southern California or the
Watermaster reasonably requests to enable the Lessee to use the Groundwater.
This lease of Groundwater is granted subject to the following conditions:
A. Lessee shall extract the Groundwater on behalf of City during the Lease
term and put the same to beneficial use and Lessee shall not by exercise of its
rights under this Lease acquire any right to extract water independent of the
rights of City. The parties agree that the lease of the Groundwater by Lessee
hereunder shall not affect or be a basis for any determination of reduction,
loss or forfeiture of rights of City to the Groundwater, and shall not affect
the validity of the existing water rights held by City. At the expiration or
termination of this Lease, all rights to the Groundwater shall automatically
revert to City.
B. Lessee shall pay assessments levied by the Water Replenishment District
of Southern California on the pumping of said Groundwater by Lessee, and the
Watermaster costs attributable to the Groundwater.
C. Lessee shall notify the District and the Watermaster that said pumping
was done pursuant to this Lease.
D. Lessee shall note, in any recording of water production for the period of
this Lease, that said pumping was done pursuant to this Lease.
Section 3. Term. The term of the Lease of the Water System and of the
Groundwater shall be fifteen years unless earlier terminated as provided in
this Lease (the "Term"). The Term of this Lease shall commence on
February 27, 1996 (the "Closing Date"). City and Lessee shall jointly read
the meters of all customers in the Service Area within 1 business days prior
to (a) the Closing Date and (b) the expiration or termination of this Lease.
All monies for services rendered and water sold prior to the Closing Date
meter readings and after the expiration or termination of the Lease meter
readings shall be the property of the City. All monies for services rendered
and water sold after the Closing Date meter readings and through the
expiration or termination of the Lease meter readings shall be the property of
Lessee.
Section 4. Use. Subject to the provisions of this Lease, Lessee agrees to use
the Water System and, to the extent permitted by applicable law, the
Groundwater for the purpose of furnishing water service to customers.
Lessee agrees to furnish water service to all customers in the Service Area
in accordance with the applicable rules relating to service at all times
during the Term of the Lease.
Section 5. Lump Sum Payment. In consideration of this Lease, Lessee agrees to
pay the City a lump sum (the "Lump Sum") of six million five hundred fifteen
thousand and two dollars ($6,515,002.00) within 15 days of the Closing Date
of this Lease. City agrees to promptly pay the West Basin Municipal Water
District all amounts due and owing by City through the Closing Date out of
the amounts received by City hereunder. The Lump Sum payment is not a security
deposit.
Section 6. Base Rent. Lessee agrees to pay to City as annual rental
(hereinafter called the "Base Rental") for the use of the Water System, the
sum of one hundred thousand dollars ($100,000). The Base Rental shall be paid
to City on the basis of City's fiscal year which commences July 1st and ends
on June 30th. The Base Rental for any partial fiscal year shall be prorated
on a daily basis. The first payment of Base Rental shall be paid within thirty
(30) days from the Closing Date and shall be in an amount computed to the end
of the then current month. Thereafter, said payments of Base Rental shall be
due and payable, for each fiscal year that this Lease is in effect, without
demand, notice, deduction or offset, in equal monthly installments in advance
on the first day of each month. Beginning on July 1, 1997, the Base Rental
shall be increased or decreased each year on July 1 by the same percentage
that Lessee's rates charged to customers served by the Water System increased
or decreased (exclusive of pass-through increases or decreases in the costs
of water, power and City-imposed fees) compared to the rates in effect on
July 1 of the prior year, provided, however, that in no event will the Base
Rental be less than the amount set forth in the first sentence of this Section.
Section 7. Repair, Maintenance and Operation. Lessee shall at its own expense
throughout the Term of this Lease, repair and perform maintenance of the Water
System in accordance with customary utility practices and shall operate the
Water System and pay all costs and expenses of operating the same (including
the costs of all utilities, and all public charges, taxes and assessments of
any nature whatsoever), it being understood and agreed that City shall be
under no obligation to pay any cost or expense of any kind or character in
connection with or related to the repair, management, operation or maintenance
of the Water System during the Term of this Lease, except as provided in
Section 10. Lessee shall report to City on a quarterly basis concerning
water quality and customer complaints. Lessee shall use its best efforts to
respond to calls for customer assistance within a reasonable time; for example,
under normal circumstances, response to calls concerning leaks shall be within
24 hours of the call and response to calls for major main breaks resulting in
street flooding shall be within 1 hour. Repairs to the street or public
right-of-way following excavation shall be timely and completed in a fashion
acceptable to the City Engineer. Failure to properly complete street repairs
following reasonable written notice by City will result in the work being
completed by City or its contractor and billed to Lessee. Lessee shall
promptly pay any such bill.
Section 8. Rates and Charges. Lessee shall propose to City reasonable rates
and charges that Lessee will impose for the water to be delivered to the
customers served by the Water System. Such rates shall require approval by
City, which approval shall not be unreasonably withheld. Any disapproval
shall state the reasons therefor. In determining reasonable rates and charges,
City shall consider all relevant information, including the California Public
Utilities Commission-approved rates for Lessee in similar, nearby
municipalities. Lessee may ask City to approve increases in rates from time
to time. City shall act on all requests for rate increases within 30 days of
receipt of the request. In cases of natural disaster, other emergencies or
acts of God, City recognizes that extraordinary rate relief on an expedited
basis may be necessary and City agrees to expeditiously approve any such
reasonably requested rate relief. In the event City does not act on any
requested rate relief either within the 30 day period or on an expedited basis,
as the case may be, and such rate relief is subsequently approved or ordered,
the water rates and charges shall be adjusted to subsequently recover from
customers over a reasonable period of time such amounts as are necessary to
place Lessee in the same position it would have been in if the approved or
ordered rates had been in effect from and after the end of such 30 day
period or the date when such expedited approval should have been received.
Notwithstanding the foregoing, Lessee may pass through to customers in the
Service Area in a manner substantially similar to that permitted by the
California Public Utilities Commission any increases in the cost of water or
power (to the extent not already reflected in rates), as well as any new
City-imposed fees, charges, taxes, license or permit fees, so long as
Lessee promptly passes through in a manner substantially similar to that
permitted by the California Public Utilities Commission any decreases in
water or power costs. Lessee shall, at City's request, provide City with any
information which it may reasonably request documenting any changes in the
cost of water or power. Lessee may also impose conservation or rationing
penalties on those customers exceeding their allocations, in the event of
mandatory water rationing involving penalties imposed by the West Basin
Municipal Water District. City's obligations under this Section 8 shall be
specifically enforceable by Lessee.
Section 9. Customer Billing and Collections.
A. Lessee shall bill and collect from customers receiving water through the
Water System on the basis of the rates approved by City pursuant to Section 8,
as adjusted for any pass-through adjustments permitted or required by the
provisions of Section 8, and shall own, keep and retain all proceeds from
such collections as the sole property of Lessee. Lessee shall propose rules
relating to service substantially similar to those imposed by Lessee in
similar adjacent localities with such modifications as City approves, and
City shall approve such rules if they are reasonable and comply with all
provisions of law applicable to municipally owned water systems. Any
amendments thereto shall be submitted to City for approval.
B. In addition, Lessee shall bill and collect on behalf of City from customers
receiving water through the Water System any additional amounts which City may
assess as a utility user's tax or sewer service fee on such customers and shall
promptly pay all such amounts to City.
C. City agrees to cooperate with Lessee in collection of unpaid/delinquent
accounts.
Section 10. Capital Improvements.
A. "Capital Improvements" shall mean any major improvements to the
Water System that extend its life or increase its function, including, for
example, pipeline replacements, construction of or major improvements to the
reservoirs, major improvements to the treatment plant, new wells, meter
replacements and similar items. Capital Improvements shall not mean
maintenance activities in accordance with customary utility practices,
including, for example, repair of pipeline leaks, painting or coating of the
interior or exterior of reservoirs, repair of defective meters, repair of
pumps and controls, and similar items.
B. Except in case of emergency, Lessee shall obtain prior approval of City
before making Capital Improvements to the Water System. Lessee shall present
a description of the proposed Capital Improvement(s), together with a statement
of the purpose and need for it/them and the estimated costs thereof, to City
for review. City may approve the Capital Improvement(s) subject to such
conditions, including costs, as City deems appropriate, and if in its sole
judgment it/they are warranted for the continued operation of the Water
System to serve customers in the Service Area in a safe manner or to enable
the Water System to be operated or the Groundwater to be used in compliance
with all provisions of Applicable Law (defined in Section 31). Capital
Improvements shall conform in all respects to City specifications and
requirements for such work, and final plans and specifications shall be
subject to approval by the Director of Public Works or his designee. Such
Capital Improvements shall become part of the Water System and title shall
vest in City immediately upon completion of construction.
C. Lessee shall construct and install any Capital Improvements in
accordance with all requirements, including, but not limited to, competitive
bidding and prevailing wage rates, that would be applicable if City carried
out the work as a public improvement.
D. Lessee shall prepare and submit to City an annual report describing the
Capital Improvement(s) constructed in each year, including the actual costs
of each Capital Improvement and the total for the year. The report shall
include such documentation of the costs as City may request.
E. Unless City and Lessee enter a new lease within 90 days from the date of
the expiration or termination of this Lease, the value of the Capital
Improvements to the Water System installed by Lessee during the Term of this
Lease shall be calculated. The value shall be determined as of the final day
of this Lease, based on Lessee's actual cost of each Capital Improvement
(including the reasonable value of in-house design, engineering, inspection and
related overhead costs), reduced by depreciation from the date of installation
of the Capital Improvement to the date of expiration or termination of the
Lease ("Reimbursable Value"). Depreciation shall be computed in accordance
with the practice of the California Public Utilities Commission, except that
in no event shall the depreciation period exceed 30 years. Capital
Improvements installed by Lessee but paid for by a third party (i.e.
a developer) or from the proceeds of insurance, shall not be included in the
calculation of Reimbursable Value under this subsection.
F. Upon the expiration or termination of this Lease, Lessee shall deliver to
City a quitclaim deed to the Water System, including all Capital Improvements,
free and clear of all liens and encumbrances, and City shall reimburse Lessee
for the Reimbursable Value of the Capital Improvements as follows:
(i) within 90 days after the expiration or termination of this Lease, the
Reimbursable Value of the Capital Improvements as of the date of expiration or
termination of this Lease shall be determined to the reasonable satisfaction
of City (and Lessee shall promptly provide all information required for City
to make such determination);
(ii) a total amount shall be calculated as the amount required to amortize
over a 15 year period, in equal monthly installments, the Reimbursable Value
of the Capital Improvements, together with annual simple interest at the rate
of one percent (1%) over the per annum rate of interest City would earn on
investments in the Local Agency Investment Fund;
(iii) the total of the payments calculated under (ii) above, shall be divided
by 180 to determine the periodic payment (the "Periodic Payment"); and
(iv) commencing on the first of the month next succeeding the date 90 days
after expiration or termination of this Lease, and on the first of each month
thereafter until the total amount of the Reimbursable Value, together with
interest, has been paid, the City shall pay a sum equal to the Periodic
Payment which shall be applied first to interest calculated as provided in
Subsection (ii) above and then applied to reduction of principal; provided
that the City shall have the option at any time, and from time to time, to
accelerate said payments by making additional payments in reduction of
principal or to prepay the entire remaining principal without penalty. City
pledges Water System revenues accruing to City after the expiration or
termination of this Lease as the source for repayment of this obligation and
covenants to set the rates for water at a sufficient level to cover the
reimbursements set forth in this Section; provided, however, that if at the
expiration or termination of this Lease, City sells all or substantially all
of the Water System and/or Groundwater or leases the Water System and/or
Groundwater to a third party, City shall apply the net proceeds thereof
toward prepayment of the Reimbursable Value due to Lessee. Such reimbursements
shall not be a debt of the City, nor a charge, lien or encumbrance, legal
or equitable, upon any of its property or upon any of its income or receipts
or revenues, other than the Water System revenues which have been pledged to
the payment thereof as provided above. The provisions of this Section 10 F.
shall be specifically enforceable by Lessee, and shall survive the expiration
or termination of this Lease.
Section 11. Employees. Lessee agrees to offer to hire the current employees
of City who work with the City Water System in comparable positions, at or
above current total City compensation, including pay and benefits, as employees
of Lessee and otherwise upon terms and conditions applicable to employees of
Lessee in similar positions. Those employees who worked for City will be
utilized to the maximum extent possible to provide service to the
Hawthorne area and in any event will be utilized in the Los Angeles Basin,
including the South Bay service area, unless voluntarily transferred to another
service area. Upon the expiration or termination of this Lease, if City takes
over operation of the Water System, and if the City hires employees to run the
Water System, it will give first consideration, subject to its personnel rules
and any applicable memorandum of understanding with City employees, to
Lessee's employees who had been running the Water System on the date of the
expiration or termination of this Lease.
Section 12. Insurance.
A. Obligations of Lessee. During the term of this Lease, Lessee at its own
cost and expense shall maintain insurance, issued by a carrier or carriers
acceptable to City, as follows:
(1) Commercial general liability insurance in the single limit
amount of not less than $5,000,000, written on an occurrence basis. Such
insurance shall include coverage for injury (including death) or damage to
persons and/or property arising out of the operations of Lessee pursuant to
this Lease. The policy shall include coverage for liability assumed under
this Lease for personal injury, property damage and all other insurable
claims as an "insured contract" for the performance of Lessee's indemnity
obligations under this Lease.
(2) Workers' compensation insurance, or a certificate of self-insurance,
insuring against liability under the Workers' Compensation Insurance and Safety
Act now in force in California, or any act hereafter enacted as an amendment
or supplement thereto or in lieu thereof. Such insurance shall fully cover
all persons employed by Lessee in connection with its operations under this
Lease for claims of death or bodily injury arising in connection with their
employment by Lessee pursuant to its operations under this Lease.
(3) Automobile (vehicle) liability insurance on an occurrence basis
for bodily injury and/or property damage in a single limit amount of not
less than one million dollars ($1,000,000).
B. All policies of insurance shall contain an endorsement in favor of City
and its officers, agents and employees listing them as additional insureds.
C. The parties shall periodically review the insurance required hereby for
the purpose of agreeing on increases in the minimum limits of such insurance,
from time to time, to amounts which may be reasonable and customary for
similar facilities of like size and operation.
D. All insurance shall be effected under policies issued by insurers of
recognized responsibility, licensed or permitted to do business in the State
of California and reasonably acceptable to City.
E. All policies of insurance issued by the respective insurers shall provide
that such policies shall not be cancelled or materially changed without at
least thirty (30) days' prior written notice to Lessee and to City. Copies
of such policies shall be deposited with City, together with appropriate
evidence of payment of the premiums therefor, prior to the Closing Date.
Copies of all renewed or new policies, together with evidence of payment, shall
likewise be deposited with City prior to expiration dates of expiring or
non-renewed policies.
F. The limits of insurance required by this Lease or as carried by Lessee
shall not limit the liability of Lessee nor relieve Lessee of any obligation
hereunder.
G. Lessee shall cause each insurance policy obtained by it to provide that
the insurance company waives all rights of recovery by way of subrogation
against City in connection with any damage covered by any policy.
Section 13. Liens and Encumbrances. City agrees to keep the Water System and
Groundwater free and clear of all liens, security interests and encumbrances,
except for those consented to by Lessee. Lessee agrees to keep the Water
System and the Groundwater free and clear of all liens, security interests
and encumbrances, except for those consented to by the City.
Section 14. Surrender Upon Expiration or Termination. Upon expiration or
termination of this Lease, Lessee agrees that it shall surrender to City the
Water System in good order and condition and in a state of repair that is
consistent with prudent use and maintenance in accordance with customary
utility standards, except for reasonable wear and tear.
Section 15. Default and Remedies.
A. The occurrence of any of the following shall constitute a default by
Lessee:
(1) If Lessee fails to make any payment to City or to any third party
required by this Lease as and when due, or to obtain and maintain any insurance
required by this Lease, where such failure continues for ten days following
receipt of written notice from City specifying the failure;
(2) If Lessee fails to perform any of its other covenants or agreements
herein contained, where such failure continues for thirty days following
receipt of written notice from City specifying the failure;
(3) Notwithstanding subsection (2) above, if a failure to perform
cannot feasibly be cured within thirty days, for example, a major repair, if
Lessee fails to commence and diligently proceed toward full performance of
the cure within thirty days following receipt of written notice from City
specifying the failure, or if Lessee fails to complete such performance within
a reasonable time; or
(4) (a) If Lessee is or becomes bankrupt or insolvent or makes any
general arrangement or assignment for the benefit of creditors; (b) if Lessee
becomes a "debtor" as defined in 11 U.S.C. Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within 90 days); (c) if a trustee or receiver is appointed
to take possession of substantially all of Lessee's assets or of Lessee's
interest in this Lease and possession is not restored to Lessee within 60 days;
or (d) if a writ of attachment or execution is levied on, or there is a
judicial seizure of, substantially all of Lessee's assets or of Lessee's
interest in this Lease and such seizure is not discharged within 60 days.
B. If City shall default in the performance of any of its covenants or
agreements contained herein and such default shall continue for a period of
thirty days after receipt by City from Lessee of written notice specifying
the nature of the default, then Lessee may at its option, upon 30 days written
notice, cancel and terminate this Lease. In the case of a default which cannot
feasibly be cured within 30 days, if City fails to commence performance and
diligently proceed toward full performance within 30 days after receipt of
notice by Lessee of City's failure to perform or fails to complete performance
within a reasonable time thereafter, Lessee may, upon 15 days notice, terminate
this Lease.
C. In the event of a termination due to a default of City or invalidity of
this Lease, City shall refund to Lessee a pro-rata portion of the Lump Sum
paid by Lessee pursuant to Section 5, calculated by multiplying the Lump Sum
amount by a fraction the numerator of which is the number of months remaining
in the Lease term and the denominator of which is 180. City may refund such
sum, with interest from the date of termination of this Lease at the
rate of one percent over the per annum rate of interest paid on investments
in the Local Agency Investment Fund, over a period extending to the end of the
original Term of this Lease, and may prepay all or a part thereof without
penalty. In the event of a termination due to a default of City, Lessee shall
also be entitled to damages for any losses suffered as a direct result
of the Lease termination.
D. In the event of a termination due to a default of Lessee within the Lease
Term, City shall retain $500,000 of the Lump Sum paid by Lessee pursuant to
Section 5, and shall refund to Lessee a portion of the remainder of the Lump
Sum, calculated by subtracting the $500,000 from the Lump Sum, and multiplying
the remainder by a fraction the numerator of which is the number of months
remaining in the Lease Term and the denominator of which is 180. City may
refund such sum, with interest from the date of termination of the Lease at
the rate one per cent (1%) over the per annum rate of interest paid
on investments in the Local Agency Investment Fund, over a period extending
to the end of the original Term of this Lease and may prepay all or a part
thereof without penalty. Notwithstanding the preceding sections, and without
limiting any other remedy of City, City shall be entitled to offset against
any refund to Lessee any damages or other sums payable to City in connection
with Lessee's default.
E. City shall have the following remedies if Lessee commits a default.
These remedies are not exclusive; they are cumulative in addition to any
remedies now or later allowed by law.
(i) Lessee's Right to Possession Not Terminated. In the event of a
default by Lessee, during the continuance of the default and for so long
thereafter as any damages or other sums payable by Lessee in connection with
such default remain unpaid, City can continue this Lease in full force and
effect, and the Lease will continue in effect as long as City does not
terminate Lessee's right to possession, and City shall have the right to
collect the rent when due. In the event that Lessee ceases to operate the
Water System, City can enter the Water System and relet the Water System and
the Groundwater, or any part of it, to third parties for Lessee's account.
Lessee shall be liable immediately to City for all costs City incurs
in reletting the Water System and the Groundwater. Reletting can be for a
period shorter or longer than the remaining Term of this Lease. Lessee shall
pay to City the rent due under this Lease on the dates the rent is due, less
the rent City receives from any reletting. No act by City allowed by this
section shall terminate this Lease unless City notifies Lessee that
City elects to terminate this Lease.
(ii) Termination of Lessee's Right to Possession. In the event of a
default by Lessee, during the continuance of the default and for so long
thereafter as any damages or other sums payable by Lessee in connection with
such default remain unpaid, City can terminate Lessee's right to possession
of the Water System and the Groundwater at any time. No act by City other
than giving notice to Lessee shall terminate this Lease. Acts of maintenance,
efforts to relet the Water System and the Groundwater or the appointment of a
receiver on City's initiative to protect City's interest under this Lease
(other than the appointment of a receiver to perform all of Lessee's
obligations hereunder) shall not constitute a termination of Lessee's right
to possession. On termination, City has the right to recover from Lessee:
(a) The worth, at the time of the award, of the unpaid rent
that had been earned at the time of termination of this Lease;
(b) The worth, at the time of the award, of the amount by
which the unpaid rent that would have been earned after the date of termination
of this Lease until the time of award exceeds the amount of the loss of rent
that Lessee proves could have been reasonably avoided;
(c) The worth, at the time of the award, of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Lessee proves could have been
reasonably avoided; and
(d) Any other amount necessary to compensate City for all
detriment proximately caused by Lessee's default.
"The worth, at the time of the award," as used in subsections (a) and (b) of
this section, is to be computed by allowing interest at the maximum rate an
individual is permitted by law to charge. "The worth, at the time of the
award," as referred to in subsection (c) of this section, is to be computed
by discounting the amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of the award, plus one percent (1%).
(iii) City's Right to Cure Lessee's Default. City, at any time after Lessee
commits a default, can cure the default at Lessee's cost. If City, at any
time, by reason of Lessee's default, pays any sum or does any act that requires
the payment of any sum, the sum paid by City shall be due immediately from
Lessee to City at the time the sum is paid, and if paid at a later date shall
bear interest at the maximum rate an individual is permitted by law
to charge from the date the sum is paid by City until City is reimbursed by
Lessee. The sum, together with interest on it, shall be additional rent.
F. Notwithstanding any provision of this Section 15 to the contrary, if a
default or failure to perform by Lessee poses a threat to public heath or
safety, City shall so notify Lessee, and if Lessee fails to take corrective
action within the time specified in such notice, City may enter the Water
System and take all necessary action at Lessee's expense. Lessee shall
promptly reimburse City for its costs.
Section 16. Assignment. Lessee agrees not to assign this Lease or sublet the
Water System or any portion thereof without the consent of City, which
consent shall not be unreasonably withheld.
Section 17. Discharge of Liens. Lessee agrees to pay and discharge all claims
for materials, parts, labor, water, power and other consumables and supplies
furnished at Lessee's instance or request upon or to the Water System and to
keep the Water System free and clear of all liens resulting from such claims.
City agrees to pay and discharge all claims and obligations for materials,
parts, labor, water, power and other consumables and supplies furnished at
City's instance or request upon or to the Water System prior to the
commencement of the Term of this Agreement.
Section 18. Indemnity. Lessee agrees to hold City, and its officers, agents
and employees, free and harmless of and from, and to defend, indemnify, and
protect City, and its officers, agents and employees, against all liability,
loss, claims, demands, damage, expense, costs (including, without limitation,
reasonable attorneys' fees and all costs and fees of litigation and its
threat) of any kind or nature arising out of or in any way connected with this
Lease or Lessee's performance or obligations under this Lease to the maximum
extent permitted by law. The expiration or termination of this Lease and/or
the termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the Term hereof or by reason of Lessee's occupancy of the
Water System. Without in any way limiting the foregoing, Lessee shall be
solely responsible for, and agrees to defend and indemnify City and hold City
harmless for any third party claim or action challenging the validity of this
Lease. In the event this Lease is declared invalid, Lessee waives any claim
it may have against City in connection therewith, other than any claim for
reimbursement for Capital Improvements or refunds pursuant to Section 15 C.
City agrees to hold Lessee, and its officers, agents and employees, free and
harmless of and from, and to defend and indemnify Lessee, and its officers,
agents and employees, against all liability, loss, claims, demands, damage,
expense, costs (including, without limitation, all costs and fees of litigation
and its threat) of any kind or nature arising from claims by third parties
or governmental agencies and resulting from negligence, gross negligence,
recklessness or willful misconduct by City in connection with City's ownership
or operation of the Water System prior to the Closing Date.
Section 19. California Law. This Lease shall be governed by the laws of the
State of California.
Section 20. Notices. All notices, statements, demands, requests, consents,
approvals, authorizations, offers, agreements, appointments or designations
hereunder by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party, if sent by United States
registered mail, return receipt requested, postage prepaid and addressed
as follows:
City: City of Hawthorne
City Clerk
City Hall
4455 W. 125th Street
Hawthorne, California 90250
Lessee: California Water Service Company
1720 North First Street
San Jose, CA 95112
or at such other address as either party shall later designate for such purpose
by written notice to the other party. Mailed notice shall be deemed given on
the date of delivery shown on the receipt card.
Section 21. Waiver. The waiver by City of any breach by Lessee of any term,
covenant or condition hereof shall not operate as a waiver of any subsequent
breach of the same or any other term, covenant or condition hereof. The
waiver by Lessee of any breach by City of any term, covenant or condition
hereof shall not operate as a waiver of any subsequent breach of the same or
any other term, covenant or condition hereof.
Section 22. Representation. City hereby represents and warrants to Lessee that
the City owns the Water System and has rights to the Groundwater, free and
clear of any and all liens, security interests and encumbrances, other than
the claims of the West Basin Municipal Water District, which City agrees to
satisfy out of the proceeds of the Lump Sum payment received by City pursuant
to Section 5.
Section 23. Nondiscrimination. Lessee covenants by and for itself, its
officers and assigns, and all persons claiming under or through it, and this
Lease is made and accepted upon and subject to the following conditions:
that there shall be no discrimination against or segregation of any person
or group of persons, on account of sex, race, color, creed, national
origin, or ancestry, in the leasing, transferring, use, or enjoyment of the
Water System nor shall Lessee itself, or any person claiming under or through
it, establish or permit any such practice or practices of discrimination or
segregation.
Section 24. Counterparts. This Lease may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original, but all together shall constitute but one and the same Lease.
Section 25. Amendments. This Lease may be amended or modified only in writing
signed by the parties thereto.
Section 26. Dispute Resolution. Except as specified below, in the event that
any dispute, controversy, or claim shall arise between the parties to this
Lease with regard to any of the provisions of this Lease or the performance
of the terms and conditions of this Lease by any party, such dispute shall be
settled by binding arbitration under the rules of the American Arbitration
Association and by an arbitrator selected from the Southern California
Judicial Panel of Arbitrators of the J.A.M.S./ENDISPUTE ADR Professionals.
The cost of Arbitration shall be borne equally by the parties to the dispute.
Judgment upon the award of the arbitrator may be entered in any court having
jurisdiction thereof. Either party may demand that arbitration proceed on
an expedited basis, in which case the arbitrator shall set an expedited
schedule. Except as specified below, each party to this Lease hereby waives
any right to trial by a jury/court in any action or proceeding arising out of
or in any way relating to this Lease or to any of the transactions contemplated
by this Lease. The sole exceptions to this arbitration provision shall be that
(i) City may seek equitable relief when, in its judgment, such relief is
required to preserve and protect the public health and safety, and
(ii) Lessee may seek specific performance of its rights to the extent
specifically set forth in this Lease.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE
ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "DISPUTE RESOLUTION"
PROVISION, DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND
YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED
IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP
YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE
SPECIFICALLY INCLUDED IN THE "DISPUTE RESOLUTION" PROVISION. IF YOU REFUSE TO
SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED
TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE.
YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS SECTION 26 TO NEUTRAL
ARBITRATION.
INITIALS: BC____ PCN
City Lessee
Section 27. Taxes and Assessments; Possessory Interest. Lessee shall pay all
taxes, assessments, fees, levies, charges, license or permit fees and other
governmental charges of any kind or nature which are or may be at any time
or from time to time during the Term of this Lease levied, charged, assessed
or imposed upon or against the Water System or the Groundwater or the leasehold
estate created hereby or which may be imposed upon any taxable interest of
Lessee acquired pursuant to this Lease. Without limiting the generality of
the foregoing, Lessee acknowledges that this Lease may create a possessory
interest which may be subject to property taxation and that Lessee may be
subject to the payment of property taxes levied on such interest. Any such
tax shall be the sole responsibility of Lessee.
Section 28. Supplies, Tools and Equipment. Lessee agrees to buy from City the
supplies, tools, and equipment listed in Exhibit C for the lump sum of ten
thousand dollars ($10,000).
Section 29. Attorneys' Fees. If any party to this Lease commences legal
proceedings or arbitration to interpret this Lease, to enforce any of its
terms or for damages for its breach, the prevailing party shall be entitled
to recover reasonable attorneys' fees.
Section 30. Net Lease. This Lease shall be deemed and construed to be a "net
lease" and Lessee hereby agrees that the rental provided for herein shall be
an absolute net return to City free and clear of any expenses, charges or
setoffs whatsoever except as provided in Section 10 F.
Section 31. Compliance with Law. Except as otherwise provided in this Lease,
Lessee shall, at Lessee's sole cost and expense, diligently and in a timely
manner, comply in all material respects with all "Applicable Laws," which
term is used in this Lease to include all laws, rules, regulations, ordinances,
directives, covenants, easements and restrictions of record, permits, and
requirements of any applicable fire insurance underwriter or rating
bureau, relating in any manner to the Water System or the Groundwater
(including but not limited to matters pertaining to (i) industrial hygiene,
(ii) environmental conditions on, in, under or about the Water System or the
Groundwater, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance,
removal, transportation, storage, spill or release of any Hazardous
Substance or storage tank), now in effect or which may hereafter come into
effect, and whether or not reflecting a change in policy from any previously
existing policy. Lessee shall notify City in writing (with copies of any
documents involved) of any threatened or actual claim, notice, inquiry,
citation, warning, complaint or report pertaining to or involving failure by
Lessee, the Water System or the Groundwater to comply with any Applicable Law.
Section 32. Hazardous Substances.
A. Lessee will not cause or permit to occur any release, generation,
manufacture, storage, treatment, transportation, or disposal of Hazardous
Substance (defined below) on, in, under, or from the Water System or the
Groundwater or any portion of it in violation of Applicable Laws. If Lessee
does cause or permit any release or disposal of any Hazardous Substance on,
in, or under the Water System or any portion of it, Lessee, at its own
cost and expense, will immediately take such action as is necessary to
detain the spread of and remove the Hazardous Substance to the complete
satisfaction of City and other appropriate governmental authorities.
Lessee shall promptly notify City of any release or disposal (of which
Lessee has knowledge or becomes aware) of any Hazardous Substance on, in,
under or from the Water System or the Groundwater.
B. Lessee agrees to indemnify, defend (with counsel reasonably acceptable
to City) and hold City and City's officers, agents and employees free and
harmless from and against, all losses, liabilities, obligations, penalties,
claims, litigation, demands, defenses, costs, judgments, suits, proceedings,
damages (including consequential damages), disbursements or expenses of any
kind (including attorneys' and experts' fees and expenses and fees and
expenses incurred in investigating, defending, or prosecuting any litigation,
claim, or proceeding) that may at any time be imposed upon, incurred by,
asserted, or awarded against City in connection with or arising from or out of:
(1) any Hazardous Substance, on, in, under, or affecting all or any
portion of the Water System or the Groundwater, excluding any Hazardous
Substance released, generated or disposed by City;
(2) any breach of any covenant or agreement of Lessee contained or
referred to in this section;
(3) any violation or claim of violation by Lessee of any Applicable
Law; or
(4) the imposition of any lien for the recovery of any costs for
environmental cleanup or other response costs relating to the release or
threatened release of Hazardous Substance, excluding any Hazardous Substance
released, generated or disposed by City.
The expiration or termination of this Lease and/or the termination of Lessee's
right to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the Term
hereof or by reason of Lessee's occupancy of the Water System and the
Groundwater.
C. For purposes of this Lease, "Hazardous Substance" means any substance,
material or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste," "restricted
hazardous waste" or similar term under any provision of any federal, state
or local law and includes, without limitation, hydrocarbons, petroleum,
gasoline, crude oil or any products, by-products or fractions thereof.
Section 33. City's Access. City and City's agents shall have the right to
enter the Water System at any time in the case of an emergency, and otherwise
at reasonable times and on reasonable prior notice for the following purposes
(i) to determine whether the Water System is in good condition as required by
this Lease and whether Lessee is complying with its obligations under this
Lease;
(ii) to serve, post or keep posted any notices required or allowed
by law or under this Lease, and (iii) as City may otherwise reasonably deem
necessary.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed
and attested by their proper officers thereunto duly authorized, and their
official seals to be hereto affixed, as of the day and year first above
written.
CITY OF HAWTHORNE
By Bud Cormier
Mayor
ATTEST:
Candace Sullivan
City Clerk
APPROVED AS TO FORM:
City Attorney
CALIFORNIA WATER SERVICE COMPANY
By P. C. Nelson
President
EXHIBIT A--Service Area
EXHIBIT B -- Water System
EXHIBIT C -- Supplies, Tools, and Equipment