Motion-Secondary: PUGLIA ENGINEERING, INC., A CORPORATION VS. BAE SYSTEMS SHIP REPAIR INC., A CORPORATION ET AL

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                                PHILLIPS, ERLEWINE, GIVEN & CAR

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R. SCOTT ERLEWINE (State Bar No. 095106)
PHILLIPS, ERLEWINE, GIVEN & CARLIN LLP

39 Mesa Street, Suite 201
The Presidio

San Francisco, CA 94129
Telephone: 415-398-0900
Fax: 415-398-0911
Email: rse@phillaw.com

Attorneys for Plaintiff
Puglia Engineering, Inc.

ELECTRONICALLY

FILED

Superior Court of California,
County of San Francisco

08/03/2017
Clerk of the Court
BY: DAVID YUEN
Deputy Clerk

SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO

PUGLIA ENGINEERING, INC., a
Washington corporation,

Plaintiff,
Vv.

BAE SYSTEM SHIP REPAIR, INC., a
Delaware corporation, BAE SYSTEMS SAN
FRANCISCO SHIP REPAIR, INC., a
California corporation, CITY AND
COUNTY OF SAN FRANCISCO, a
municipal corporation, operating by and
through the San Francisco Port Commission,

Defendant.

Case No: CGC-17-557087

EXHIBIT A (PART 1) TO
DECLARATION OF R. SCOTT
ERLEWINE IN SUPPORT OF
PLAINTIFF’S OPPOSITION TO
DEFENDANTS BAE SYSTEMS SHIP
REPAIR INC. AND BAE SYSTEMS,
INC.’S MOTION TO DISMISS AND
DEMURRER

Date: August 16, 2017
Time: 9:30 a.m.
Department: 302

Judge: Hon. Harold Kahn

Complaint Filed: February 15, 2017
Trial Date: Not Yet Set

1

EXH A (PART 1) TO DECL. OF COUNSEL ISO OPP. TO MOTION TO DISMISS AND DEMURRER
Case No. CGC-17-557087EXHIBIT ACo Ow YN DH PB WN

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Case 3:17-cv-01444-JSC Document 27 Filed 04/20/17 Page 1 of 5

DENNIS J. HERRERA, State Bar #139669

City Attorney 7

YVONNE R. MERE, State Bar #173594

Chief of Complex and Affirmative Litigation
OWEN J. CLEMENTS, State Bar #141805
MATTHEW D. GOLDBERG, State Bar #240776
Deputy City Attorneys

Fox Plaza

1390 Market Street, 6th Floor

San Francisco, California 94102-5408

Telephone: (415) 554-3944
Facsimile: (415) 437-4644
E-Mail: Owen.Clements @sfgov.org

Attorneys for Defendant

CITY AND COUNTY OF SAN FRANCISCO

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

PUGLIA ENGINEERING, INC., a
corporation,

Plaintiff,
vs.

BAE SYSTEMS SHIP REPAIR INC., a
corporation, BAE SYSTEMS SAN
FRANCISCO SHIP REPAIR INC., a
corporation; BAE SYSTEMS, INC., a
corporation; CITY AND COUNTY OF SAN
FRANCISCO, a municipal corporation; and
DOES 1-20,

Defendants.

Roybal Decl. re Remand Motion and Transfer Motion
USDC Case No. 3:17-cv-1444-JSC

Case No. 3:17-cv-1444-JSC

Declaration of Gerard L. Roybal In Support of
Defendant City and County of San Francisco’s
Non-Opposition to Plaintiff's Motion for Remand
and Opposition to BAE Systems’ Motion to Transfer
This Case to the Southern District of New York

Hearing Date: May 18, 2017
Time: 9:00 a.m.
Place: Courtroom F, 15th Floor
Judge: Jacqueline Scott Corley
Complaint Filed: February 15, 2017
Removal Filed: March 16, 2017
Trial Date: Not Set
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Case 3:17-cv-01444-JSC Document 27 Filed 04/20/17 Page 2 of 5

I, Gerard Lee Roybal, declare as follows:

1. Tam a Maritime Marketing Manager for the Port of San Francisco (“the Port”). I have
personal knowledge of the facts set forth below, except for those facts stated upon information and
belief. If called to testify to the facts stated below, I could and would testify to them competently.

2. Thave worked for the Port in various capacities since 1993. Since 1993, my
responsibilities have always included overseeing ship repair activities at Port properties.

The San Francisco Shipyard, located at Piers 68 and 70 (“the Shipyard”), has long been the most
significant ship repair operation at the Port. It is now the only significant commercial ship repair yard
located on Port property.

3. The allegations of paragraph 3 are based on my review of the Port’s records, which I
am informed and believe are accurate. Ships have been built and repaired at the Shipyard for over 150
years. The Shipyard has been involved with building and repairing steel ships since the founding of
Union Iron Works in 1883. The USS Olympia was built there and launched in 1891. That ship
became the flagship of the U.S. Pacific Fleet under Commodore Dewey during the Spanish-American
War, and played a central role at the Battle of Manila. Substantial improvements were made to the
Shipyard during both World War One and World War Two in order to support naval activities. The
last ship built in the Shipyard was the USS Bradley in 1965. After 1965, the Shipyard focused on ship
repair under the Bethlehem Steel Company. Military and government contracts were the core of the
Shipyard’s work.

4, After military base closures on the West Coast in the early 1990s, the Shipyard lost
much of its military business. The Port worked with Southwest Marine, a predecessor in interest to
BAE Systems San Francisco Ship Repair (““BAE-SF”), to restructure the Shipyard’s lease. The lease
was restructured to help Southwest Marine transition from defense work to commercial ship repair,
in order to preserve ship repair operations at the Shipyard. I was hired on June 21, 1993 as part of that
effort, and I have worked with the operators of the Shipyard ever since.

5. The Port has a commitment to supporting ship repair activities on Port property, and
especially at the Shipyard. Ship repair constitutes a significant maritime use of Port property.

Operations at the Shipyard historically have directly employed hundreds of skilled trade laborers on an

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on-going basis. The Shipyard has employed many more skilled workers in peak periods, such as
during cruise ship repair jobs. The Shipyard also indirectly supports many other jobs by attracting
maritime commerce to the Port through increased activities of cruise ships, cargo vessels, and military
ships. The Port thus has a vital interest in continuing ship repair operations at the Shipyard.

6. The Port owns the land on which the Shipyard is located. The Port also owns valuable
equipment that is used in connection with the Shipyard’s operation, including Drydock Eureka,
Drydock #2, and a number of cranes. For many years, the Port has leased the Shipyard and the
associated equipment to various operators. The Port has received monthly rental payments and other
revenues associated with the Shipyard’s operations under these leases. For example, the Port received
revenues of $1,409,014 from the Shipyard in 2016.

7. The Shipyard started operating under the BAE name on June 24, 2005. I have been the
primary Port property manager for the Shipyard since before that time. On March 24, 2015, the Port
Commission authorized the Executive Director of the Port to enter into a new 20-year lease with BAE-
SF for the continued operation of the Shipyard (Lease No. L-15875, hereinafter “the Lease”). I was
one of the lead negotiators of that Lease for the Port. A true and correct copy of the Lease is attached
hereto as Exhibit A.

8. Under the terms of the Lease, BAE-SF was required, at its sole cost and expense, to
maintain and repair the Shipyard and its associated equipment in good condition. Specifically, under
sections 13.1 and 13.3 and other provisions of the Lease, BAE-SF was required to properly maintain
Drydock Eureka and Drydock No. 2 and other Port equipment. Under section 13.7 of the Lease, BAE-
SF was required to perform dredging activities in connection with its operation of the Shipyard.

And under section 30 of the Lease, BAE-SF was required to use commercially reasonable efforts to
ensure the continuous use of the Shipyard and the Drydocks.

9. In December 2016, BAE-SF’s parent companies, BAE Systems Inc. and BAE Systems
Ship Repair, Inc., requested that the Port consent to the transfer of the Shipyard’s operations to Puglia
Engineering, Inc. (“Puglia”). Among other arguments in support of the transfer, I understand that
BAE Systems and Puglia asserted that Puglia’s status as a certified small business would allow Puglia

to win more work for the Shipyard than the BAE entities could.

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10. In January 2017, Puglia informed the Port that BAE-SF had failed to perform several
material obligations under the Lease. According to Puglia, BAE-SF had failed, among other things, to
(1) maintain and repair Drydock Eureka, which made it unusable and unable to meet a January 17,
2017 re-certification deadline; (2) dredge the site for many years, other than limited dredging to permit
access to Drydock #2, which further impacted the ability to use Drydock Eureka; and (3) adequately
maintain and repair Drydock #2. Puglia claimed that BAE Systems misrepresented and/or failed to
disclose this information to Puglia. Puglia claimed that as a result of these defaults, Puglia would be
unable to operate the Shipyard on a financially viable basis.

11. On February 17, 2017, the Port issued a notice of default to Puglia, BAE-SF, and BAE
Systems, for failure to pay rent and other amounts owed under the Lease, and for failure to perform
lease obligations relating to the maintenance and repair of the drydocks and other Port equipment,
dredging, and continuous operation of the Shipyard. A true and correct copy of that notice of default
is attached hereto as Exhibit B. To date, the defaults relating to the Port’s drydocks and other
equipment, dredging, and continuous operation of the Shipyard including both drydocks remain
uncured.

12. In March 2017, Puglia and the Port entered into a Tolling and Interim Operating
Agreement to allow for the continued operation of the Shipyard. A true and correct copy of that
agreement is attached hereto as Exhibit C. This Agreement, effective as of February 28, 2017, has a
term of 90 days (subject to extension by mutual agreement). See Ex. C, § 3. If the Agreement is not
extended, it will expire at the end of May 2017.

13. Tam aware that a number of current and former managers of BAE-SF’s operations at
the Shipyard are currently located, at least part of the time, in the San Francisco Bay Area. All of the
Port’s employees who have had significant involvement with the Shipyard over the past few years also
live and work in the Bay Area.

14. In my understanding, most of the relevant evidence relating to BAE System’s operation
of the Shipyard prior to January 2017 is located at the Shipyard or at the Port. For example, when the
Port has requested reports relating to the maintenance and repair of the Shipyard’s drydocks and

dredging activities at the Shipyard, such reports have typically been provided by the Shipyard. The

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Port also has a substantial volume of its own records relating to the Shipyard’s operation over the

years, including my own files. All of these Port records are located in San Francisco.

I declare under penalty of perjury under the laws of the United States that the foregoing is true

and correct and that this declaration was executed on April 2 17 at San Francisco, California.

nee a LA ROYBAL

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EXHIBIT ACase 3:17-cv-01444-JSC Document 27-1 Filed 04/20/17 Page 2 of 168

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~PORT=

SAN FRANCISCO

CITY AND COUNTY OF SAN FRANCISCO
EDWIN M. LEE, MAYOR

LEASE NO. L-15875
By AND BETWEEN

THE CITY AND County OF SAN FRANCISCO
OPERATING BY AND THROUGH THE
SAN FRANCISCO PORT COMMISSION
AND

BAE SYSTEMS SAN FRANCISCO SHIP REPAIR INC.,
A CALIFORNIA CORPORATION

PORTION OF PIERS 68 AND 70 AND SWL 349

MONIQUE MOYER
EXECUTIVE DIRECTOR

SAN FRANCISCO PORT COMMISSION

LESLIE KATZ, PRESIDENT
WILLIE ADAMS, VICE PRESIDENT
KIMBERLY BRANDON, COMMISSIONER
MEL MURPHY, COMMISSIONER
DOREEN WOO Ho, COMMISSIONER

BAE Lease (L-15875) 4/30/15 as\portias201411500146\0101237 L doeCase 3:17-cv-01444-JSC Document 27-1 Filed 04/20/17 Page 3 of 168

TABLE OF CONTENTS
Page

1. REPRESENTATIONS AND WARRANTIES OF TENANT .......cscscessesecsssceesesseenessenesesees 1
2. Sa Eero eee cere te elelahalahabdadadadadatetetetelahabababalsdadadutaletatehehelabahavndadatadatatatahahalahalasda 2
3. DEFINITIONS. .........sscssssssssssssesssssssssssssssecssesssessssesssesssssssesesssssesersssesssesssesssessssssvaseresenssesssenae 2
4. PREMISES; AS-IS CONDITION ..0....cceceececececes cscs cs eseeeeee cece tee sesceessesseeseeeteterereteteteeeececiee LL

4.1. Premises...

4.2. As-Is Condition...

43. Reversion Area:

4.4. BAE Master Plan ”

4.5. Right of First Offer; Buildings 111 and 60.0.0... eeeeeseeeeseeeeeeseseeresesneaeseeeeneae 13

4.6. Proximity of Development Projects ......ccessecesesessesessesessesessescsteasseraeeresssueesaeateneae 14

47. No Light, Air or View Easement .0.0.0.0.0.0.0.0.ccceceeeesecscececeeeceesesesesnseessececacaeaeaeeeseseen 14

4.8. | Unique Nature of Premises..

4.9. Port's Rights Regarding Premises

4.10. Accessibility Inspection Disclosure ........cccceseeceseeseseeseereseseesesteeesteseseeaeereseseeseseneeneee 15

4.11. No Right to Encroach.
5. TERM OF LEASE; TERMINATION RIGHTS

S.1.

5.2. Termination Rights occ ceesecccseseeseeneseeesesssessesescsessseeeeasseesseesuesneassneneesseente 16

5.3. Waiver of Relocation Benefits .............cecceseessecseseesesseesersneseeseesesseesesneesecsnesesseeenesees 17
6.

Minimum Rent

6.2. Percentage Rett 0... ececceeseeseseeseeresesseacseecenssesussersesesecseerssesseaeseseessesesacseeeseeseeees 17

6.3. — Adjustments to ReNt........ccccceecessessecesesessssneseenesesessseresesesasesesseseacensasecasesesaseneasensaeaees 19

6.4. Rent Credit for Princess Agreement

6.5. Books and Records

6.6. No Joint Venture.

GT AMM satatattadodsdedadstatatatatatababdedadededdadatatatatabchabalededadatedatatstabsbatataledudededadatatat otabstabdealde

6.8. — Default Interest... ecseesceseeseesessessessesseeeaneesessecsessserssssssnesseassessssessecsseneseseassnee 21

6.9. Late Charges/Habitual Late Payer 2.0.0... cccessecsesseeesscesecseresneesessessecaeereserenscaneenteese 21

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6.10. Returned Checks .......c.ececceec cesses eecesesnessseeseeessesnessseesssessesnssesseasseasecesseseeassassensieanen 21
eA aINGt Tica tetetatacadadatatatulatatatabatdessdedadadedalatatslabahabdadudadstudatatalatatabatadadededadstatatatatatabsatta, 21
6.12. Additional Charges ........c.ccccscessesesssesesesessssseseeeesesessesessesesasenssseesacsneaserasesesesaneseeeeseoess 22

EXTENSION OPTION

7.1. Option to Extend Term
7.2. Rent and Other Terms
SPECIFIC TENANT OBLIGATIONS. .0.0.eeececccsceceesteeseeesesessestsseeeesesesseeneeeseeacsneseeneneanes 23

8.1. Shoreside Power.

8.2. Building Baseline Conditions; Repair and Maintenance .........c.sseessesessecsseseeseeeesnee 25

8.3. Crane Demolition and Removal.
8.4. Pier 68 High Water Platform Demolition and Removal ............scesesseseesseseeeeeeeenes 26

8.5. | Replacement/Disposition of Drydocks .....

8.6. Evaluation of Drydocks; Drydock #2 Capital Investment; Rent Credits

8.7. Transformer Removal and Disposal; Rent Credit:
8.8. | Demolition and Removal of Buildings 38 and 119; Rent Credi

8.9. Electrical Supply Relocation; Rent Credits 0... .ieecseesesseseeseeesneeresseerecaeeneaneeresnee 29
8.10. General Conditions for Rent Credits; Cap on Rent Credits 0.0... 29
SECURITY DEPOSIT ........ccccscesscesseesseesseesserssesssersseesseessesseesseessseesnessneeseeesesseessecaseessecsnecenee 30

9.1. Security Deposit... cece eeceeecseeceseseesesneesetenesteseeseseeeaeseseetsasssaeerestsneanseeeee ene dO.
9.2. Letter of Credit...
9.3. Environmental Oversight Deposit.
USE OF THE PREMISES
10.1. Permitted Use

10.2. Prohibited Use... esses eeseeceeseeereeeeseeeseeeceneseeeeneetsnssrsenesaneacsesesesseesesansensneserees 32
10.3. Notice of Prohibited Use Charge... .ccccccceessenseceesesesnesesnesssesseenesesneesseseseseenss 33
COMPLIANCE WITH LAWS AND REGULATIONS ......0.ccccecessesseeseeseseeesneansneeeene dd

PORT ACTING AS OWNER OF PROPERTY; REGULATORY APPROVALS:
COMPLIANCE WITH CITY'S RISK MANAGER'S REQUIREMENTS,

12.1. Port Acting as Owner of Property... ccccceseeseeeeeeeeceeeresereseecaeececececeserecereeneaeeeaeess 34
12.2. Regulatory Approvals...

12.3. Compliance with City's Risk Manager's Requirements ..........0..0..:ecscesseeeeeeseeseeeeees 35
MAINTENANCE AND REPAIRS ......ccscsscescessecseessesssesessesseesseseeseteessnessesssenssesssecseaseeansenssees 35

13.1. Tenant’s General Maintenance and Repair Obligations ..........ccseceseeseeeeereeeeseeees 35

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13.2. Intentionally Left Blank... 35
13.3. Maintenance Standards for Port Equipment

13.4. Modification/Removal/Disposition of Port’s Equipment
13.5. Port's Right to Inspect; Annual Inspections
13.6. Port's Right to Repair
13.7. Dredging
14. UTILITIES AND SERVICE

Lett eS eerste cidadedadelatababebababababdededelodaletsbabatabssdesadodadatalsbalatel slat ade! 40
14.2. S€rVviCeS ...cecssscssecsssssscsssessesssesssecsvessvessserssecssecssscsssesssesseesssssssessesesecesecesecesecsvecssacssesssed 41
14.3. On-Site Renewable Energy .......c.cccecccccecsesesseseesesessescesesesecseeseseescsnsaeecesesesaceneseeeenesey Al
15. TMPROVEMENTS AND ALTERATIONS.......0.:ccscesesesesnsceeeesesessesneseseessseesseneeeseeasseenseened Al
15.1. Port Consent Required 0... eecceecececeseee cece eeesesecseeeeseseeeceseseeecseeesecssesesacseeseeneaeense! 41
15.2. Construction Requirement.........c.cccsecessessssesesresessessssesesesseseseescsesesesesesesaseneusenesesees 42
15.3. Improvements Part of Realty 0... eeeecsessecsesseesesseeseceeesseeneeeveneeaceneeasarssesaneeneanseeney 43
15.4. Removal of Improvement........cccccccsecesesseeeeeeesssecssesesesseersscsnenssesseerssesssereneseeeeneens 44
15.5. Removal of Non-Permitted Improvement ..........escceseseseseeseseesesneseeeesesseaeeneneeneneanes 44
L516. Sits total atabatctctdataeadodatatalattatabldeftadafateltabaabaadtdedslafadattatstatalacdhdbdafeldafatatetatatcdaldbt 44
15.7. Port's Alterations ..........ccssssecsssssessesssessesseseesesseesesssssessssessnesseaneesesssesessesssssesnessneenay 44
16. HAZARDOUS MATERIALS 1.0... .secsecce cece cece cesescsceeeceeeeeeecee seve sassecnsssecesecaneserecaecanenesseeees A:
16.1. Requirements for Handling... cece eesesesseseesestssesseseseeasseasesesnesesaeensseeseeaees 44
16.2. Tenant Responsibility
16.3. Tenant's Environmental Condition Notification Requirements .....0.....cceceeeseeeeeee 45
16.4. Requirement to Remediate..... ce eecccceccseseseseseeeeeeeeeeteneeseseseneseeeseeseeeneneneneaneneaseenee 46
16.5. Port's Right to Audit 2... eeeseceeeeeteeceeseeeeenesesaeeeseeeneeeseeeneeeecenseeseesseeesees! AT
16.6. Notification Of Asbest0S .......c.scecsesseesesssesessseeseessesesseeseeseeressnessssseesecssesssesesessesseeaneeneay AT
16.7. Notification Of Lead ........cccecesesseseeseeseessssessesseesessecsseeneseesussussneenessassesseeseceeseesnseneey 48
16.8. Stormwater Pollution Prevention... eeeeesecseeseeseesseenessessesseeseseeeeeesneeeees 48
16.9. Presence of Hazardous Materials ...........ccscessesssessseesesseesessesessessecssesssesesessesseseneenesy 48
16 OCSurvivad sl lddalodedladelatabslabersbabaadadedalelalabebelubsbsteadadsdedalalatelatessbabaads 49
17. ENVIRONMENTAL REQUIREMENTS .........cessceesceeseeseesseessessseesuessuessussucssecssecsseesseessed 49
17.1. Water Conservation Plan
17.2. Wastewater and Under-Pier Utility Maintenance Plan... seseseeeeeeeseeeeneaes 49
17.3. Performance Energy Benchmarking of Buildings ........0.00.0.c0cccseeceseeeseeeeereeesreeeeeeeee! 49

BAE Lease (L-15875) 4/30/15 iii ns\portias2014\1500146\0101237 L doc20.

23.

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17.4. Hazardous Materials On or In Drydocks
17.5. Kiln Area Survey...

17.6. Maximize Use of Shoreside Power System
17.7. Green Demolition...
17.8. Sharing of Hazardous Materials Information
17.9. Pier 70 Risk Management Plan..

17.10. Best Management Practices....
SOUTHERN WATERFRONT COMMUNITY BENEFITS AND BEAUTIFICATION

18.2. Workforce Participation. .....c.ccccsessscsssecsssessessenesessscceeenesessesesseeseasseeneecasesseacanenseeseanes 51
18.3. Other Requirements 20.0... eececesee ce ceseceeeeseceeeeseseeeeeseseseesneseeeeseenseeeseesseessesseeneeesees 51
INSURANCE

19.1, Required Insurance Coverage ..c.ecccssesessesesssesesssesseresesceresseteasseeaeersseseearsesseeseene 2
19.2. Claims-Made Policies ........cccscsesseesesscesssessenesseesesssesscssesesesissssensssseseesssecesesesneeenes 34
19.3. Annual Aggregate Limits... cceesseseseesssseeeenesnssceesseseesesnssceesstsnssesesaestssceneneensaeanes 54
19.4. Payment of Premiums ............ cece ce teceseceeceeeeeseeesecetesesecaeeescetercaeceeecesernseraueeeeeearente 54
19.5. Waiver of Subrogation Rights .........ceccsssssessesssesesseeseeereseeevecsesneesesueesesaverecereereaneesees 54

19.6. General Insurance Matters
DAMAGE AND DESTRUCTION.
EMINENT DOMAIN .
21.1. General
21.2. Partial Takings

21.3. Temporary Takings
21.4. Award; Waiver; Termination of Lease; Rent.
INDEMNITY AND EXCULPATION ..
22.1. General Indemnity

22.2. Hazardous Materials Indemimity 0.00.0... ccs esceseecseenesesssscseseereasseeeeeseseeaseneseeneee 57
22.3. Scope of Indemmnities; Duty to Defend... eeececeeesseseeneseereseeeeseseceeereesseasseeeeenae 57
22.4. Exculpation and Waivet..i...cccsccccsseeessesessesescsecenesesessestssesteasssseerssesisssaneseenenesnes 57
DDS SUPVAV AL h lededelededebelebabchabsededededaledetetetabeeeherdedvdedededebelebabebabendedsdedadedatedelerabeherdedvd 58
TRANSFER, ASSIGNMENT AND SUBLETTING uuu... cece cecesseeseeeeeteaeseeseereseseaeseeneenae 58
23.1. Transfer to Affiliate oo... .csceseeeseesesseeseessesnessessesssessssessersssssseesssscssesssesssesesersneseeseee 58

BAE Lease (L-15875) 4/30/15 iv ns\portias2014\1500146\0101237 L doe24,
25.

26.

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23.2. Transfer to Non-A ffiliate 0... eeesncesnessseesseasecacecsssesneaenanseseessarscseasenanenanen 58
23.3. Subleasing .........cssscsssesssssssssosssseesssessssesssseasssessnsensscenssvsensegsssoesssesssseesessessvssesesevee 59
23.4. Transfer Agreement and Sublease Requirement .............cccccscessesseeereseseserseeseeeesenees 60

23.5. Non-Compliance.

23.6. Reimbursement
23.7.

23.8. Acknowledgement ..0........ccsecesceesessesceceseesescseesesesteeeeeesesecaestesseueseseecseseseesesnsseeusee 60
23.9. Transfer Definitions ..........cccessessesseeseesseresseeesseeseaseessssessecsenessssesssesseessenssansseeanessees 60
DEFAULT BY TENANT......cccscscssssssessssssssesssessscssesssesssecssessvecssscaserssscsnscsssessecsassssresseserecenese 60
PORT'S REMEDIES .......cceccccccescsseseescsnesesscsceeseseeaesnesseuesesessesesesscseseeseeseaesesseeseresessssnesseseee 62
25.1. Tenant's Right to Possession Not Terminated ..0.........cccceceseeseeseeeneeesseesesntenrenneneees 62

25.2. Termination of Tenant's Right to Possession
25.3. Appointment of Receiver
25.4. Port's Right to Cure Tenant's Default

25.5. No Accord and Satisfaction

25.6. Waiver of Redemption ......c.cccsccssessseseresessenssnessereseseeneseseeneseeneseeeassneaeereseseeaeanensensee! 64
25.7. Habitual Late Payer... cece eceseeseesesesresessesceueaeencaeesesesaseeasesesscarsneesersseseeaesnesseused 64
25.8. Remedies Not Exclusive .....cesccssecsesseessssessesseesessessssssesssssessseesesssessssserecssessseseessnee 64
LITIGATION EXPENSES; ATTORNEYS! FEES ..........ccccscecececesescees cece este tees cate eeneneseeee es OF
26.1. Litigation Expenses........c.cccscecseesessesessesesressseseeuesesncseesesesasscaueseseassesseseseseeaseneseeucee 64

26.2. Appeals
26.3. In-house Attorneys.
PORT'S ENTRY ON PREMISES

27.1. Entry for Inspection .........ceceeeeccceceecceeeseeceeseeeceeeseeecneeseeeeneaesesseeseneseasereessesaeseeesensee 64
27.2. General Entry... cccscsssscssesssesssssesseresesscsssesssssssssscsssescsssesssessssesssersssscsssessesnsnes 65
27.3. Emergency Entry... ceeeecccsessseseseeseseseseeeseeeeeeeeenssesesesssesesesseeeeeeenenenesueneaeeeeesee 65
27.4. No Liability. eee ce nee cscesceeseseaessesnsassesnssesesnsusseseeseeneassceseeseesecassueseneee 65
27.5.  Nondisturbance ......cccccsecsseseseeessessecsesseeesessessessessserssssesersussesseesesssssesssesssasesrsnesessnee 65
SURRENDER AND QUITCLAIM. 0... cceccceccecececesescseseeeeceeeseeeseseseseeeneeseeeseeeneesasaneneneanaes 65

28.1. Surrender
28.2. Quitclaim
28.3. Abandoned Property
28.4. SUIVIVAL sees eeeecseeseesseeseesseesssesseeseessseneenessesseasserssessessssesssseassnensessserseeeeseesneeeed 66

BAE Lease (L-15875) 4/30/15 v ns\portias2014\1500146\0101237 L doe30.
31.
32.

33.
34.

Case 3:17-cv-01444-JSC Document 27-1 Filed 04/20/17 Page 8 of 168

HOLDING OVER
29.1. Terms of Holdover Tenancy 00... esestesesesseercsceesesecaeereseeneassecatereessaeaeseeeeensae 66
29.2. With Comsent ......cccccceseessesseseesessessessnessserssnesseesesssesscssssassnesssenseassnsesssasesssesesneaneenensee 67

29.3. Without Consent...

29.4. Renewal Letter of Credit
CONTINUOUS OPERATIONS

QUIET ENJOYMENT ...0..eccecececcssessecseeesesecseecesessesesesseeeeseseeeeessescsesesseuesssesecsueseseesesneseeaee 67
TAXES AND ASSESSMENTS ......cscssssesssecssecssecssecssecesecssecssecssecssecasesssstasessssarssssisasesseneaseess 67
32.1. Payment Of Taxes....cececesscsesessesssessseresesscseseneeesesessssesessaeerssesesseseaserssesecasaneseeseneenes 67
32.2. Possessory Interest Tax......ecceceesecceesessesrescseesesesseesssessacseseseesesnesseeesesesaceneseeeseeees 68
ITT NS aes ae en tra ent eer evr verve ttt area

CITY AND PORT REQUIREMENTS

34.1. Nondiscriminatio:

34.2. Requiring Health Benefits for Covered Employe
34.3. First Source Hiring

34.4. Resource-Efficient Facilities and Green Building Requirements ...........cceseeeeeeees 71
34.5. Prohibition of Tobacco Sales and Advertising .....0......cccsceceeeeeeteesteeeeeaeeneeeeneneenes 71
34.6. Prohibition of Alcoholic Beverages Advertising .........c.csscsscessesseeeeresesneerseereensseenes 71

34.7. Graffiti Removal ...............

34.8. Restrictions on the Use of Pesticides
34.9. MacBride Principles Northern Ireland
34.10. Tropical Hardwood and Virgin Redwood Ban

34.11. Preservative-Treated Wood Containing Arsenic .

34.12. Notification of Limitations on Contributions .......0......eceeeeeereseceeeesseseeeeeeneteeeees 73
34.13. Sunshine Ordinance .........cececseseseesecseeseesessessessesssesssseesersussessssesssesssesssesssesesersneeensnse 73
34.14. Conflicts of Interest... cccecceccseeessessessneseessesesssesessessessesnesnseussnesnsssessessessessnsenesnes 73
34.15.

34.16. Prevailing Wages and Working Conditions.......0.ccccccseessseseesesseseeresesseeseeseeneseenes 74
34.17. Public Transit Information 0.0.0.0... eeseseesecaesecesecseeseesneeasseessesseeseeeeesessnseneanse 74
34.18.

34.19. Consideration Of Criminal History In Hiring And Employment Decision:
34.20. Local Hire
34.21. San Francisco Bottled Water Ordinance.........ccscecsececiessesseesecsessnessieesiesnsesnesnee 76

BAE Lease (L-15875) 4/30/15 vi ns\portias2014\1500146\0101237 L doe36.
37.

38.

39.

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MINERAL RESERVATION. 76
NOTICES.
MISCELLANEOUS PROVISIONS.

37.1. California Law

37.2. Entire Agreement
37.3. Amendments
37.4. Severability ..

37.5. Interpretation Of Lease oo... cecesesesessesecseseesseessesnsseseesesessesnsseenesssessssessesneasseesseesacanee 77
37.6. SUCCESSOTS ....ssessecseseseressrssessessecssssecsusssersenecsesnecnesseenssesssassneosecnserssnsesecseesesesesneaneenennee 78
37.7. Real Estate Broker's Fees ..........c.sccccecsesesseessessessesseesesseesesseseesnsescsnessessseserseesessneseesnse 78
37.8. Counterparts .........cccccscesesssseesesssesssssencsnsssseessesesesnsseeessssecsesesscenesssnssssesscsecassessessseenes 78
SiO AMOI cabal ledadadedatadalatabababobdededadadetadalatabslababahalesadadedadulatobebababaldaaadadedadlatatababalalalesade 78
37.10. No Implied Waiver ........ccccccesesesescesesessesresessesesesseeresesssasseseseesesssaseeseseraceneseeneseaees 78
37.11. Time is Of Essence ........csscessessssesseesseessesssesssesssesseesseessesssesessesnsesnsesnsesseseeaseessecssanssee 78
37.12. Cumulative Remedies ........cccccsessecseeseesnesesssesesssesssssesessessessseenssssssesseeresssesessnseessnee 78
37.13. Survival of Indemmities .......c0.ccccsescsessssesessseesseesseessesseesssessesseeeserssetsseeeserssersseeesessee 78
37.14. Relationship of the Parties 2.0.0... ceseceesesesseeeeseseeesseseeeaeseecsiesescaeeneeseneneanes 78
37.15. No Recording .....ccececcsecseesssccsescseesseresesesersesceessesnsecsesseseraeenssceneassecseerssesnserseeseensaeenas 79

37.16. Additional Written Agreement Required 0.0.2.0... sec eeeseeseeeeseeteesteeeeneseeeeneee TD
LIMITATION ON DAMAGES
38.1. No Recourse Beyond Value of Facility

38.2. Non-Liability of City Officials, Employees and Agents ........ccsessseeeseereseeeeneees 79
38.3. Limitation on Port's Liability Upon Transfer... cceecseceseseeeseeeeeeeeeeneteneneneneeenes 79
TENANT ESTOPPEL CERTIFICATES ..0.0....cceceeseseseseseeeeseeceeeceeseseseeeseeeenesseecseasscaeeesneeee 79

EXHIBITS AND SCHEDULES

EXHIBIT A-1 DESCRIPTION OF PREMISES

EXHIBIT A-2,_ REVERSION AREAS

EXHIBIT A-3_ PORT’S EQUIPMENT LIST AND LOCATION MAP
EXHIBITB = PROJECTED BAE RENTAL PAYMENTS

EXHIBITC = QUARTERLY VES!

L UTILIZATION REPORT

ExHiBITD ~—BAE MASTER PLAN REQUIREMENTS

EXHIBIT E == VEHICULAR CIRCULATION AND PARKING PLAN
EXHIBIT F — DELIVERABLES SUMMARY

EXHIBITG —SHORESIDE POWER SYSTEM AS BUILTS
EXHIBIT H = SUMMARY OF SECRETARY’S STANDARDS

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EXHIBITI = FORM QUARTERLY PERCENTAGE RENT STATEMENT
EXHIBIT J) = FORM ANNUAL STATEMENT

EXHIBIT K — SHORESIDE POWER REPORTING FORMS

EXHIBITL — BASELINE REPAIRS ACTION LIST

EXHIBITM — BEAUTIFICATION IMPROVEMENTS CONCEPT
EXHIBITN — FoRM LETTER OF CREDIT

EXHIBITO — ESTOPPEL CERTIFICATE

SCHEDULE 1 PREMISES METES AND BOUNDS

SCHEDULE 2 BUILDING INVENTORY

SCHEDULE3 DESCRIPTIONS OF DRYDOCKS

SCHEDULE 4 ASBESTOS NOTIFICATION AND INFORMATION

SCHEDULES SUBSTRUCTURE REPORT(S) — PROVIDED UNDER SEPARATE
COVER DATED APRIL 30, 2015

SCHEDULE 6 FEMA DISCLOSURE NOTICE

SCHEDULE 7 LOCATION AND IDENTIFICATION NUMBERS OF PCB OIL-CONTAINING
EQUIPMENT

SCHEDULE 8 WEEKLY AND MONTHLY CRANE INSPECTION AND REPAIR PROTOCOLS FORM

SCHEDULE 9 ENVIRONMENTAL REPORTS AND DOCUMENTS REGARDING HAZARDOUS
MATERIALS

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Page 11 of 168

BASIC LEASE INFORMATION

1. Lease Date: January 1, 2015
2. Lease Number: L-15875
3. Landlord or Port: City and County of San Francisco, a municipal
corporation, operating by and through the San Francisco
Port Commission
4, Landlord's Address: Port of San Francisco
Pier 1
San Francisco, California 94111
Attention: Director of Maritime
Telephone: (415) 274-0400
Facsimile: (415) 274-0494
3. Tenant: BAE Systems San Francisco Ship Repair Inc., a California
corporation (“Tenant” or “BAE”)
6. Tenant’s Main Contact Bill Dunbar, General Manager
Person and Mailing BAE Systems San Francisco Ship Repair Inc.
Address: 70 Pier Bldg. 105
San Francisco, CA 94107-3193
7. Tenant's Billing Contact and | BAE Systems San Francisco Ship Repair Inc.
Address: 70 Pier Bldg. 105
San Francisco, CA 94107-3193
8. Tenant's Emergency David Penaloza, Facilities Manager
Contact and Address: BAE Systems San Francisco Ship Repair Inc.
70 Pier Bldg. 105
San Francisco, CA 94107-3193
Telephone: (415) 710-0633
Facsimile: (415) 558-8466
9. Tenant's Insurance Contact | Ellen Vinck, Director of Risk Management
and Address: BAE Systems Ship Repair
2205 East Belt Street, Floor of Sampson Street
San Diego, CA 92113
Telephone: (619) 557-4297
Facsimile: (619) 239-1751
10. Tenant’s Parking Contact David Penaloza, Facilities Manager

and Address:

BAE Systems San Francisco Ship Repair Inc.
70 Pier Bldg. 105
San Francisco, CA 94107-3193

(415) 710-0633
(415) 558-8466

Telephone:
Facsimile:

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11. Contact Information for CT Corporation
Tenant's Agent for Service 818 West Seventh St. 2nd Floor
of Process: Lost Angeles CA 90017

12. Premises; Reservation of The Premises consists of the following portions of Piers
Rights: 68 and 70: approximately: (a) 14.8 acres (645,370 square

feet) of improved land; (b) 17.5 acres (761,690 square
feet) of submerged lands at “Pier 68” and “SWL 349”; (c)
a total of 183,466 square feet of building floor area from
nineteen (19) buildings; and (d) Port’s Equipment, all as
shown on the attached Exhibit A- I and A-3.

Tenant accepts the Premises subject to the following
matters of record: all existing liens, encumbrances,
charges, conditions, covenants, easements, restrictions,
and rights-of-way, including without limitation and
reserving to Port and City (and their Agents) the right to
enter the Premises upon reasonable prior written notice to
Tenant to inspect, maintain, repair and restore or remove
the sewer (in the approximate location as shown on
Exhibit A-1 for informational purposes only) and to
conduct other reasonably necessary work in order to
address safety and/or preservation of the sewer. In no
event will the activities conducted under this provision
constitute an actual or constructive eviction of Tenant,
entitle Tenant to any abatement or diminution of Rent, or
otherwise relieve Tenant from any of its obligations under
this Lease and Tenant hereby waives any and all Claims
against Port, City and their Agents arising out of any
inconvenience or disturbance from the activities. Port will
provide reasonable prior notice and will work with Tenant
to minimize disruption from work under this section.

13. Access: In connection with this Lease, Port hereby grants to
Tenant the following rights:

(A) access to Building 102 to allow Tenant to enter the
building and to operate, repair and maintain electric utility
infrastructure (including meters, transformers and other
switchgear) located in Building 102 which serves the
Premises; and

(B) vehicular and pedestrian ingress and egress to
Building 19 and other areas of the Premises in the form of
anon-exclusive, non-possessory revocable license ("the
License") for the area east of Building 19 as shown on
Exhibit A-1 (“License Area”). This License shall expire,
without further notice or action by the parties, upon the
opening of the extension of 20th Street (after which the
License Area will be part of the new public street). The
rights provided by this License are subject to all of the
terms and conditions of this Lease as if the License Area
is part of the Premises, but Tenant agrees and
acknowledges that, the License is non-exclusive, non-
possessory and revocable and that Port may, in its sole and

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absolute discretion, upon prior written notice to Tenant,
revoke or terminate the License at any time prior to its
expiration, without cause and without obligation to pay
any consideration to Tenant.

14. Reversion Areas:

In light of Port’s development goals for the Premises and
vicinity, Port and Tenant agree that Tenant shall surrender
certain portions of the Premises (each a “Reversion Area”)
as shown in Exhibit A-2) to the Port prior to the
Expiration Date in the manner described in Section 4.3.
Tenant’s rent obligations shall not be modified or
amended by Tenant's timely surrender of such areas to
Port.

15. Length of Term:

Twenty (20) years

16. Commencement Date:

May 1, 2015

17. Anniversary Date:

April 1st of each year of the Term

18. Expiration Date:

April 30, 2035

19. Termination Rights:

The parties’ termination rights are set forth in Section 5.

20. Right of First Offer:

As discussed in Section 4.4 below, Tenant shall have a

right of first offer to lease Building 6 and to continue to
lease Building 111 after the relevant reversion date for

Building 111.

21. Extension Options:

As described in Section 7, Tenant shall have two (2)
options to extend the Term for a period of five (5) years
each (each an “Extension Option”) by providing written
notice to Port no later than twenty-four (24) months prior
to the Expiration Date.

22. Rent:

As further described in Section 6, Rent shall be: (i) the
annual Minimum Rent paid in equal monthly payments
plus (ii) a Percentage Rent payment equal to 3.3% of
annual Gross Revenues in excess of the Minimum Rent.
Percentage Rent shall be paid quarterly in arrears and
reconciled annually as provided in Section 6.2.

Rent shall be adjusted annually and a market rate
adjustment will be effective on the Tenth (10)
Anniversary Date in accordance with Section 6.3 below.

Exhibit B attached hereto shows the projected rental
payments through 2025.

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23. Initial Annual Minimum
Rent:

One Million Two Hundred Thousand Dollars
($1,200,000)

24. Security Deposit:

Seven Hundred Sixty-Nine Thousand ($769,000) in the
form of a letter of credit meeting the criteria in Section 9.2
below and subject to Port’s acceptance. The parties agree
that this amount can be used for the purposes described in
Section 9.1 and represents twice the anticipated monthly
Minimum Rent in lease year ten (10) plus an amount of
$500,000 based on an assessment of potential
environmental risks posed by Tenant’s operations. The
parties further agree that, if Tenant fails to comply with
the Environmental Requirements in Section 17, Port may
reassess the adequacy of the portion of the Security
Deposit with respect to environmental risks.

25. Environmental Oversight
Deposit:

Ten Thousand Dollars ($10,000) — See Section 9.3 below.

26. Rent Credits:

(A) Section 6.4 sets forth the terms and conditions under
which Tenant may receive up to a maximum amount of
$1.2 million of rent credits for certain improvements to
Drydock #2 initiated under the Prior Lease in connection
with the Princess Agreement.

(B) Sections 8.6 through 8.10 set forth the terms and
conditions under which Tenant may receive rent credits
for up to: (i) twenty-five percent (25%) of the cost of new
improvements to extend the useful life of Drydock #2 up
to a maximum total amount of $2 million; (ii) fifty percent
(50%) of the costs of Transformer Removal Activities;
(iii) fifty percent (50%) of the costs of demolition and
removal of Buildings 38 and 119; and (iv) fifty percent
(50%) of the costs of electrical supply relocation
necessitated by Port’s relocation of the power source for
the Premises. The maximum total rent credit under (i)
shall be two million dollars ($2,000,000) and the
maximum total rent credit under (ii) — (iv) above shall be
one million dollars ($1,000,000).

Except for the rent credits described in (A), any rent credit
that cannot be applied in the lease year in which it is
incurred by Tenant because (i) the maximum annual rent
credit of $300,000 will be exceeded in that lease year or
(ii) the amount of the rent credit owed for that lease year
exceeds the amount of Percentage Rent due for that lease
year shall earn simple interest at a rate of 3.5% annually
until the rent credit is applied.

Notwithstanding any other provision of this Lease, the
maximum rent credit available to Tenant is $4.2 million to
be taken in a maximum annual amount of Three Hundred
Thousand Dollars ($300,000) per lease year (“Maximum
Annual Rent Credit”) against Percentage Rent over the
Term (a maximum period of twenty (20) years).

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Other than as set forth in Sections 6.4 and 8.6 through
8.10, Port shall have no obligation to provide, and Tenant
shall not be entitled to, a rent credit, tenant improvement
allowance or any other form of reimbursement, abatement
or credit in connection with its obligations under this
Lease. Any unapplied or unused portion of any rent credit
shall remain the property of Port, and Tenant shall have no
interest in said funds. Rent credits cannot be applied
retroactively.

Notwithstanding anything to the contrary in this Lease, in
no event shall Tenant receive any rent credit in the event
Tenant is in default, or an event has occurred which, with
the passage of time or the giving of notice, or both, would
constitute a default. Upon the occurrence of a Tenant
Event of Default during a period in which Tenant is
eligible for rent credits, Tenant’s right to apply any rent
credit shall cease and shall not be reinstated until the
Tenant Event of Default is cured.

27. Permitted Use:

The Premises shall be used for day-to-day shipbuilding
and ship repair operations on a twenty-four (24) hour
seven (7) day a week basis and such uses that are
ancillary, associated with and support such operations,
including related non-retail commercial, industrial and/or
maritime uses. Tenant shall seek Port’s prior written
consent for any material new or modified uses. If Port
approves such material new or modified uses, Port may
impose reasonable conditions on such uses. Material new
or modified uses include: a new non-maritime related
business; a use that would require further environmental
review; a new or modified use requiring new
infrastructure, equipment and/or buildings; a new or
modified use that poses potential new environmental
risks: and a new or modified use that would significantly
impact Tenant’s Gross Revenues.

28. Utilities:

Port makes no guarantee about the availability of Utilities,
and Tenant acknowledges that Utility capacity may not be
available at the current levels throughout the Term. With
respect to electric capacity, the parties understand that,
given new commercial and residential developments in the
immediately vicinity of the Premises, Tenant will be
limited to its historic peak use of five and one-half (5.5)
megawatts for the Shoreside Power System and one (1)
megawatt for the rest of Tenant’s operations unless and
until such time that additional capacity is created at the
initiative of Port, Tenant or another entity. If Tenant
desires to increase its electric usage above the historic
peak levels stated above, Port will assist in coordinating
between Tenant, other Port tenants and the provider to
establish additional infrastructure and capacity. If
Tenant’s planned electric usage increase will result in an

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increase to Tenant’s Rent under this Lease or will
otherwise benefit the Port (in either case, as determined by
Port), Port will meet and discuss possible cost-sharing for
new electric infrastructure with Tenant on a good faith
basis.

Tenant is encouraged to participate in Port’s utility master
planning for Pier 70.

29. Maintenance and Repair
Obligations:

Tenant’s obligations with respect to: (i) the Shoreside
Power System (including payment of the Equipment
Charge); (ii) building conditions; (iii) crane evaluation and
removal; (iv) Pier 68 High Water Platform; (v) useful life
and disposition of the drydocks (as detailed in Sections

8.5 and 8.6; (vi) PCB-containing equipment; (vii)
Buildings 38 and 119; and (viii) electrical supply
relocation are set forth in Section 8.

Tenant’s general maintenance and repair obligations are
set forth in Section 13. Specific standards for repair and
maintenance of Port’s Equipment are set forth in Section
13.3.

30. Dredging:

The parties’ obligations are set forth in Section 13.7.

31. Southern Waterfront
Beautification and
Community Benefits
Program:

Tenant shall implement the Southern Waterfront
Beautification and Community Benefits Program
described in Section 18. Failure to comply with the
program is a material breach of this Lease.

32. Quarterly Vessel Utilization
Report:

No later than the date that is thirty (30) days after the
expiration of each Calendar Quarter, Tenant shall submit a
vessel utilization report to Port substantially in the form of
the Quarterly Vessel Utilization Report attached hereto as
Exhibit C, which includes the following information for
the previous Calendar Quarter: (i) the name and number
of days that each ship was in drydock or berthed at the
Premises, (ii) whether the ship utilized the Shoreside
Power System; (iii) the average and maximum daily
number of employees employed by Tenant at the
Premises, (iv) the number of contracts executed by Tenant
for ship repair or shipbuilding work, and (v) the vessel
name and dollar amount of each such contract. To the
extent applicable, Tenant shall clearly mark the specific
information contained in the Quarterly Vessel Utilization
Report as “confidential/proprietary/trade secret” and, to
the extent permitted by Law, Port shall keep such
information confidential.

33. Planning:

Master Planning. Tenant will cooperate with Port in its
planning and implementation of the Port’s Pier 70 Master
Plan. No later than the Second (2"™) Anniversary Date of

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this Lease, Tenant shall submit to Port an update to BAE’s
Master Plan dated July 16, 2008 for the Premises
(including any Reversion Areas for which the Port has not
provided a Reversion Area Notice) describing BAE’s long
range planning and anticipated changes to building
programs and business operations during the Term
(including any Extension Term) that addresses Tenant’s
proposed measures to address sea level rise/climate
change and its marketing plan and satisfies all the terms
and conditions of Exhibit D. At Port’s request, at any
time, including in any Reversion Area Notice and by the
date specified in any Reversion Area Notice, Tenant shall
update its Master Plan to describe changes to its
operations due to surrender of the relevant Reversion Area
or to address other specific issues requested by Port.

Vehicular Circulation and Parking Plan. Tenant has
provided the attached Vehicular Circulation and Parking
Plan (Exhibit E) which describes Tenant’s current on- and
off-Premises parking capacity, uses, circulation and
anticipated needs for employee, contractors, vendors and
customers. At Port’s request in any Reversion Area
Notice and by the date specified in any Reversion Area
Notice, Tenant shall update its Vehicular Circulation and
Parking Plan to describe changes to its due to surrender of
the relevant Reversion Area.

Good Neighbor Coordination. The Parties acknowledge
that the nature of Tenant’s ship repair operations might
generate noise and lights which can be heard or seen
outside of the Premises. The Parties also acknowledge
that the anticipated commercial and residential
developments planned for Pier 70, and more specifically
to the immediate south of the Premises, will bring visitors,
residents and customers to Pier 70. In order to address
potential issues that might arise, the parties agree to
cooperate with each other, Port’s developers and other
interested parties on developing good neighbor strategies
to minimize the potential impacts of noise, sound, and
light from Tenant’s operations during certain periods of
the day and week. Such strategies might include Tenant’s
advance community notice of when higher than usual
noise, sound, or light are anticipated and developers’
mitigation of potential impacts through site and building
design, orientation and soundproofing.

34. Replacement/Disposition of
drydocks:

No later than the Second 2") Anniversary Date, or
sooner at the request of either party, Port and Tenant shall
meet to collaboratively determine the feasibility of
replacing, by the end of the Term or sooner, Drydock #2
and Drydock Eureka with similar drydocks, at least one of
which is capable of servicing post-Panamax vessels and
certain preferred marine vessels. If replacing either is
feasible, the parties will work together to develop a plan,

BAE Lease (L-15875) 4/30/15

BLI-7 n:\portias2014\1 500146\01012371 doeCase 3:17-cv-01444-JSC Document 27-1 Filed 04/20/17 Page 18 of 168

including possible financing, for replacing it. Any such
plan will be subject to mutual agreement of the parties,
further environmental review and Port Commission and/or
Board of Supervisors’ approval, each in its sole discretion.

Tenant shall cooperate in good faith with Port to address
the ultimate dispositio