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Reso 74-18 Master Lease 725 Embarcadero Roses Landing_a
RESOLUTION NO. 74-18 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA, APPROVING A NEW MASTER LEASE AGREEMENT FOR LEASE SITE 82-85/82W-85W, LOCATED AT 725 EMBARCADERO, AND COMMONLY KNOWN AS "ROSE'S LANDING" THE CITY COUNCIL City of Morro Bay, California WHEREAS, the City of Morro Bay ("City") is the lessor of certain properties on the Morro Bay Waterfront described as City Tidelands leases and properties; and WHEREAS, 725 Embarcadero LLC ("Tenant") has been the lessee of Lease Site 82-85/82W- 85W since 1988 and is a tenant in good standing; and WHEREAS, Tenant has received Concept Plan approval from the Planning Commission and City Council for conversion of the second story restaurant space to ten transient occupancy hotel units, and including other public access improvements as -proposed; and WHEREAS, Tenant desires to complete the hotel room conversion project in exchange for a new 50-year master lease agreement; and WHEREAS, it is in the City and Tenant's mutual best interest the hotel room conversion project and other improvements are timely completed. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, as follows: 1. The attached new Master Lease Agreement for Lease Site 82-85/82W-85W is hereby approved. 2. The Mayor is hereby authorized to execute said Master Lease Agreement. PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 25th day of September 2018 on the following vote: AYES: NOES: ABSENT: ABSTAI N Irons, Davis, Headdingw , Makoetski, McPherson None None None t JA L. IR NS, May ATTEST: NA SWANSON, City Clerk � � •" ("CITY"} Article1 FIXE TE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a . . . . . . . a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 002 Section1.1 Term..............................................................................................2 Section1. 2 No Extensions ................................................... 9...........................2 Section1.03 Fold ver......................................................................................2 Section1. Replacement.................................................................................. 3 Article2 NT ............................... ........................................................................................... 3 Section 2.01 Annual Minimum Rent................................................................. 3 SectionCalculation of New Minimum Rent..............................................4 Section 2.04 Percentage Rent............................................................................5 SectionReimbursements............................................................................8 Section 2.06 Penalty and Interest.......................................................................8 Article3 USE �F PREMISES...................................................................................................8 SectionPermitted Uses..............................................................................8 Section 3.02 Unauthorized Use..........................................................................9 III Section 3.04 Competition. . 00*0 Section. 3.05 Hazardous Materials..................................................................010 Section 3.06 Tidelands Trust. 00000*000 000 00006 0 a 00000**o 0000*0000006 see 0*000 000000600000000 000 G000eeo I I Section 3.07 Compliance with Law. Section 3.08 rite or Nuisance. Section3.09 Use by CITY...............................................................................12 Construction Approval................................................................12 Constructionon......................................................................12 O11 � 1.0024/506729.1 S/RwS/Cbcty.Harb®r.011011.a�r.Mast�rL�ase �1- Mechanics° Liens. I 3 wnerslhip of Improvements......................................................014 Article 5 LEASEI�OLD MORTGAGES.................................................................................14 Section 6.01 Maintenance by TENANT..........................................................14 Section 6.02 Seativalls and Revetment.............................................................15 Section 6.03 Legal equirements....................................................................15 Section 6.04 Failure to Repair.........................................................................15 Section 6.05 Inspection by CITY.....................................................................IS Section 6.06 TENANT°S Duty to Restore Premises........................................16 Section 6.08 Destruction Due to Risk Not Covered by Insurance...................17 Article 7 INDEMNITY AND INSURANCE..........................................................................18 Section 7.O l Indemnity Agreement.................................................................18 Section 7.02 Liability Insurance......................................................................19 Section 7.03 Worker°s Compensation..............................................................19 Section 7.04 Property Insurance......................................................................19 Section 7.05 Additional Coverage. Section 7.06 General Requirements.................................................................20 Section 7.07 No Subrogation. Section 7.08 TENANT'S Waiver. Section 7.09 Insurance Not a Limit. Article8 TAXES AN FEES..................................................................................................22 Section 8.01 TENANT to Pay Taxes...............................................................22 Section 8.02 TENANT to Pay License and Permit Fees.................................22 Section 8.03 Utilities........................................................................................22 011��.0024/5©6729.1 S/RWS/Cbcty.I--�ar�®r.011011.agr.Mas��rLease-ll- CU1N1jh1v11NATION.009000000000000.000..............................................................................22 Section 9.01 Total Condemnation....................................................................22 Section 9.02 Condemnation Award.................................................................23 Section 9.03 Termination for Martial Taking...................................................24 Section 9. Rent Abatement for artial Taking.............................................2 Section 9.06 Temporary Taking......................................................................25 AS SIGN ENT ANL� SU�LEASIN.....................................................................25 Section 10.01 No Assignment Without CITY'S Consent..................................25 Section 10.03 Application for Assignment........................................................26 Section 10.04 Probate Transfer of Assignment.................................................27 Section 10.05 No Sublease Without CITY'S Consent.......................................27 Section 10.06 Subtenant Subject to Lease Terms..............................................27 Section 10.07 Consent Form Agreement...........................................................28 Section 10.09 Nondisturbance...........................................................................28 DEFAULTAN TE INATION..........................................................................28 Section 11.01 Abandonment y TENANT........................................................28 Section 11.02 Termination for breach y TENANT. Section 11.03 Termination for Failure to May Rent. Section 11.04 Lender May Cure Default. 00000040 0*09 600606006e 0000000 00040000040*66 0000**029 Section 11.05 Attorneys' Fees. . 6 a 6 e a e 0 0 0 0 0 0 0 0 029 Section 11.06 amages for �reach....................................................................30 Section 11.07 Cumulative Remedies.................................................................3 0 Section 11.0 8 Waiver of reach........................................................................3 Section 11. 9 Surrender of Mre ises.................................................................31 0 � 1 � 1.0024/�06729. � S/I-�WS/Crrlbc�.Harb�r.0110 � � .agr. Ma.sterLease-�l�- Article 12 IVIESCELLANEOUS.................................................................................................31 Article 13 Section 12.01 Attorneys' Fees............................................................................31 Section 12.02 Notices...00..000.00000..000000000000000000000.0000000009000000900.00.00.00.00.0000:....000000031 Section 12.03 Governing Law and Jurisdiction.................................................32 Section 12.0 Binding on Successors................................................................32 Section 12.05 Partial Invalidity..........................................................................32 Section 2.06 Sole and Only Agreement...........................................................32 Section 12.07 Modlficatlon................................................................................33 Section 12.08 Time of Essence..........................................................................33 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE.................................34 Section 13.01 Section 13.04 Pudic Restrooms........................................................................34 Construction of Improvements...................................................3 4 Valet Parking Rent Credit and Hotel Parking Spaces .................3 5 01181.0024/506729.1 S/RWS/Cmbcty.Harbor.O11011.agr.MasterLease-1'V- This LEASE is made and entered into by and between the CITY OF MORRO BAY, a municipal corporation of the State of California herein called CITY, and 725 Embarcadero LLC, a limited liability company, currently doing business as Rose's Landing (Doug Redican), herein called TENANT. WI-IEREAS, the State of California granted certain tide and submerged lands located within the CITY limits of CITY to the County of San Luis Obispo and to its successors, being Chapter 1076, Statutes of 1947, as amended by Chapter 413, Statutes of 1955, Chapter 1874, Statutes of 1957, and Chapter 70, Statutes of 1960, first extraordinary session; which Statutes may be amended from time to time by the Legislature of the State of California; all of which Statutes are expressly recognized and agreed to be in full force and effect by the parties hereto; WI-IEREAS, the parties hereto recognize and agree that on July 17, 1964, the CITY of Morro Bay, Lessor herein, succeeded to all of the right, title and interest of the County of San Luis Obispo in and to all of the tide and submerged lands conveyed to said County by the State of California pursuant to the above mentioned acts; and WHEREAS, judgment has been entered. on October 14, 1968, in the case of CITY of Morro Bay, Plaintiff, versus County of San Luis Obispo, and State of California, Defendants, by the Superior Court of the State of California in and for the County of San Luis Obispo, #30417, adjudging and decreeing, among other things, that the title to said tide and submerged lands so conveyed by the State of California to the County of San Luis Obispo in trust, as set forth above, passed automatically to the CITY of Morro Bay upon the date of its incorporation as a CITY on the 17th day of July, 1964; and WHEREAS, TENANT accepts the within Lease with full knowledge that there is no warranty of title in and to the within described premises by CITY to TENANT; and WHEREAS, in order to develop and improve Morro Bay Harbor and to assist in carrying out the provisions of the tideland grant as aforesaid, and in order to provide facilities for the accommodation of those using Morro Bay Harbor, CITY desires to lease to TENANT the within described property upon the terms and conditions set forth h erein; ii � i• • � • i 1 .• - - - NOW, I HEREFORE, in consideration of the covenants to be performed and the rental to be paid by TENANT to CITY, CITY leases to TENANT, and TENANT leases from CITY, all of the following premises (herein collectively referred to as the "Premises") in the CITY of Morro Bay, County of San Luis Obispo, State of California, described as follows: This property is delineated on Parcel Map of the CITY of Morro Bay No. 68-30, which map was recorded on October 10, 1968, in Book 3, Page 10 of Parcel Maps in the Office of the County Recorder, San Luis Obispo County, California. A copy of said Map is attached hereto as Exhibit A and made a part hereof by reference. Section 1.01 Term. The term of this Lease shall be a period of 50 years, commencing October 1, 2018 (the "Commencement Date"). The term of this Lease shall terminate without notice on September 3 0, 2068, unless sooner terminated as herein provided. The term of this Lease shall not be extended nor shall this Lease be renewed. Requests for continued use of the Premises shall be treated as an application for a new lease and shall require appropriate application to the CITY with all required supporting information and documents, CITY Council approval and the execution of a new CITY lease, containing the then most current terms, covenants, conditions and rent schedules. If TENANT holds the demised Premises after the expiration of the term of this Lease with the consent of the CITY, express or implied, then such holding over (in the absence of a written agreement between CITY and TENANT with respect thereto) shall be deemed to create a tenancy from month to month, terminable on 3 0-days' written notice from either party to the other, at a monthly rental equal to two hundred percent (200%) of the average total Rent per month for the twelve (12) months immediately preceding the expiration of the Lease, and otherwise subject to each and every term, covenant and condition of this Lease. 0 � 1 � 1.0024/506729.1 l�Taster Luse 11 /01 -2- Subject to the next paragraph, as of the Commencement Date, this Lease shall extinguish and replace every prior lease between CITY and TENANT respecting the Premises, if any. Any right or interest held by the TENANT pursuant to any existing lease with respect to the Premises, which is not granted pursuant to this Lease, shall be extinguished as of the Commencement Date If on or before March 31, 2019, approved by CITY' S Harbor Director TENANT does not provide satisfactory evidence, as and City Attorney, TENANT has obtained all the financing necessary to commence and complete the Project (as this Lease shall automatically terminate, without any notice to effect and (ii) the lease between CITY and TENANT for the Premises that was in effect prior to this Lease, shall be reinstituted and remain in full force and effect subject to all of that lease's terms and conditions. TENANT agrees to pay to CITY a minimum guaranteed annual rental for the use and occupancy of the Premises, in an initial amount of $63 065.67 per year (the "Minimum Rent"), payable in advance in equal semiannual installments on January 1 and July 1 each year during the term of the Lease. If the Commencement Date is other than January 1 or July 1, then TENANT shall pay, on the Commencement Date, the proportionate amount of the Minimum Rent payable for the period from the Commencement Date until the next payment date of anuary I or July 1, as the case may be. If the term of the Lease expires on a date other than December 31 or June 3 then TENANT'S final installment of Minimum Rent shall be proportionate to the time remaining in the term. All Rent, including the Minimum Rent and the Percentage Rent, shall be paid in lawful money of the United States of America, without offset or deduction and shall be paid to CITY at City Hall located at 595 Harbor Street, Morro Bay, California, or at such other place or places CITY may from time to time designate by written notice delivered to TENANT. (1) The parties agree, as of every July 1 following the Commencement Date (each, a "CPI Adjustment Date"), except as outlined in section 2.03 hereof, the annual Minimum Rent shall be adjusted in direct proportion to any upward or downward movement in the Consumer 011 � 1.0024/�06729.1 Master Lease 11/0 � -3 - Price Index for January 1, 2018, which is hereby agreed to be 261.235 (Base Index). The percentage adjustment for any given year shall be based on the monthly average Index for the calendar year immediately preceding the CPI Adjustment Date as compared with the Base Index. The Consumer Price Index referred to herein is the Consumer Price Index (all items indexes, all urban consumers) for Los Angeles — Long Beach — Anaheim, California, compiled and published by the United States Department of Labor, Bureau of Labor Statistics, 1982-84 Base Year = 100 the ' ° Index") (2) The Annual Minimum Rent shall be adjusted as of each CPI Adjustment Date, and will remain in effect as adjusted until the next CPI Adjustment Date. As an illustration only, if the Base Index (Jan. 1, 1999 CPI) is 166.1 and the monthly average CPI for 2000 is 171.6, then the percentage increase is equal to 3.31 %® Therefore, the Minimum Rent would be increased by 3.31 % as of July 1, 2001, and would continue at that rate through June 3 0, 2002. (3) If the United States Department of Labor, Bureau of Labor Statistics, shall cease to compile and make public the Index as now constituted and issued, but shall substitute another index in its place, then said substituted index shall be used for the purpose of adjusting the Minimum Rent for the Premises. If the Index ischanged so that the base year differs from that in effect on the Lease Commencement Date, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. At the end of the initial five (5) years and of each five-year period thereafter, a new Minimum Rent shall be calculated for the following five (5) year period (each, a "Subsequent Rental Period") as follows: A. The Minimum Rent shall be subject to adjustment by appraisal as of the fifth anniversary of the Commencement Date and every five years thereafter (each, an "Appraisal Adjustment Date"). CITY, at its own cost and expense, shall retain an independent qualified appraiser for determination of the fair market value of said premises. Not more than nine (9) months prior to each Appraisal Adjustment Date, CITY shall provide written notice to TENANT of the pending appraisal and the appraiser selected by the CITY to determine the fair market value of the Premises, excluding fixtures and improvements unless such are expressly included in the description of the leasehold hereinabove. If TENANT does not reject CITY's appraiser in writing and within thirty (30) days after CITY's notice of its determination, then the Minimum Rent for the Subsequent Rental Period shall be in the amount determined by CITY as outlined in O1 ��1.0®24/Sa6729.1 Master Lease I1/a1 -4- this Section 2.03. If TENANT rejects CITY's appraiser within thirty (30) days following CITY's notice to TENANT, then within fifteen (15) days after such 30-day period, each party, at its own cost, shall select an independent professionally designated appraiser who is a member of the American Institute of Real Estate Appraisers, or the Society of Real Estate Appraisers with a designation of MAI (Member of American Institute), SRPA (Senior Real Estate Analysis), to appraise the fair market value of the Premises. CITY may rely on its original appraisal, or select a new appraiser, at its cost. If a party does not appoint an appraiser within fifteen (15) days after the other party has given notice of the name of its appraiser, then the single appraiser appointed shall be the sole appraiser. Each appraiser shall conduct an independent appraisal within thirty (30) days after appointment. If the parties are unable to agree on the Minimum Rent for the Subsequent Rental Period within thirty (30) days after receiving the appraisal(s), then each party shall select one member of athree-member committee. The two so selected members shall select the third member, and this committee shall by majority vote select one or the other of the appraisals. The Minimum Rent determined on the basis of the selected appraisal shall be final and binding and all costs associated with the three -member committee shall be paid equally by B. In the event the appraisal. process is not concluded on or before the Appraisal Adjustment Date, the Minimum Rent shall be adjusted retroactively to such Appraisal Adjustment Date as set out hereinbelow when said appraisal process is completed. C. The total Rent payable, including both the Minimum Rent and the Percentage Rent for each year within the applicable previous five-year period, shall be averaged to produce the average annual total Rent payable for such previous period. D. The new Minimum Rent for the five-year period commencing on each Appraisal Adjustment Date shall be eight percent (8%) of the fair market value of the Premises (as established in paragraph A. above.) The new Mlnlmum. Rent shall be divided by two to determine the semiannual payments and shall be paid by TENANT to CITY on the first of each January and July thereafter, or paid monthly at the option of TENANT. This new Minimum Rent shall be adjusted each following year in proportion to any increase in the Consumer Price Index as set out in Section 2.02 of this Lease. The Base Index shall be adjusted upon each Calculation of new Minimum Rent as set out in this section so that the Base Index for CPI adjustment shall be the Consumer Price Index for January 1 of the year of the calculation of new Minimum Rent. I NOW A. In addition to the Minimum Rent, TENANT agrees to pay to CITY at the time and in the manner hereinafter specified, as additional Rent for the use and occupancy of the Premises, a 011 � 1.0024/5®6729. � Master Lease i 1/01 -� - sum equal to the following for all TENANT'S Gross Sales as hereinafter defined: three percent (3%) for all restaurant/food service, beer and wine and sales from the "Kellie's Candy" retail shop; ten percent (l0%) for all liquor sales at the bar; five percentfor all retail sales (excepting those from "Kellie's Candy"); five percent (5%) from transient occupancy/hotel use; and ten percent (10%) for vessel slip and tie-up fees, less the amount of the Minimum Rent paid. pursuant to this Lease (the "Percentage Rent"). B. The term "Gross Sales," as used herein, shall mean (subject to the exceptions and authorized deductions as hereinafter set forth), the total selling price and the total gross amount received by TENANT from all rentals, merchandise sold and services rendered in, on or from the Premises by TENANT, its sublessees, licensees, or concessionaires, both for cash and on credit including, but not limited to, rentals of dockage space, leasing and servicing operations and ticket sales, and if on credit whether or not payment be actually made therefore, all charges for services, alterations or repairs made in or upon the Premises; the gross amount received by TENANT for merchandise sold pursuant to orders received in the Premises, though filled elsewhere; and the gross amount received by TENANT from any and all. other sources of income derived from the business conducted upon the Premises. C. Notwithstanding the other provisions of Section 2.04, the term "Gross Sales" shall not include the following items, and such items may be deducted from Gross Sales to the extent they have been included therein or have been included in a prior computation of Gross Sales or for which a Percentage Rent has been paid under this Lease to CITY: (1) Credits and refunds made to customers for merchandise returned or exchanged; (2) Any sales or excise taxes otherwise includable in Gross Sales as defined in this Section because such taxes are part of the total selling price of merchandise or services rendered in, from, or on the Premises, where TENANT must account for and remit the taxes to the government entity or entities by which they are imposed; and (3) With respect to credit card sales, fees retained or withheld by the issuer and/or merchant bank pursuant to TENANT'S credit card acceptance agreement, and (4) Rental payments to TENANT from sublessees whose total gross sales are included in gross sales computations. D . TENANT shall keep or cause to be kept full, complete, and accurate records, and books of account in accordance with accepted accounting practices showing the total amount of Gross Sales, as defined herein, made each calendar month in, on or from the Premises. TENANT shall keep said records and books of account within San Luis Obispo County and shall notify CITY in advance of their location at all times. Furthermore, TENANT shall at the time of sale and in the presence of the customer cause the full selling price of each piece of merchandise, each rental received and each service rendered in, on or from the Premises to be recorded in a 011 � 1.0024/506729.1 Ivlasier Lease 11 /� 1 - - cash register or cash registers that have cumulative totals and are sealed in accordance with standard commercial practices. Said records, books of account and cash register tapes, including any sales tax reports that TENANT may be required to furnish any government or governmental agency shall at all reasonable times be open to the inspection of CITY, CITY'S auditor, or other authorized representative or agent of CITY. TENANT consents to the release of sales tax information to CITY and on demand will furnish to CITY a copy of the sales tax reports, quarterly reports and any audit reports of sales for confidential internal use of the CITY in determining Gross Sales for TENANT. TENANT consents and authorizes CITY to request such information directly from the State Board of Equalization or other state agency with which sales tax information is filed. E. By July 31 of each year, TENANT shall furnish CITY with a statement, to be certified by TENANT as current, true and accurate, which shall set forth the Gross Sales of each department, sublessee, licensee and concession operating in, on or from the Premises for the previous twelve (12) calendar months, ending June 30, just concluded, and the authorized deductions, if any, therefrom; and with it TENANT shall pay to CITY the amount of the Percentage Rent which is due to CITY as shown thereby. If TENANT shall at any time cause an audit of sales of TENANT'S business to be made by a public accountant, then TENANT shall furnish CITY with a copy of said audit without cost or expense to CITY. CITY may, once in any twelve-month period, cause an audit of the business of TENANT to be made by a public accountant of CITY' S own selection. TENANT shall, upon receiving written notice of CITY'S desire for such an audit deliver and make available all such books, records and cash register tapes to the public or certified public accountant selected by CITY. Furthermore, TENANT shall promptly on demand reimburse CITY for the full cost and expense of said audit, should the audit disclose that the questioned statement or statements understated Gross Sales by five percent (5%) or more but less than ten percent (10%). In the event that an audit performed at CITY'S request discloses that TENANT understated Gross Sales by less than 5%, the cost of such audit shall be paid by CITY. In the event any audit or other review of records discloses that the amounts reported as Gross Sales was understated by TENANT by ten percent (10%) or more, CITY shall not only be entitled to recover from TENANT all costs of audit and review, but shall also be entitled to recover from TENANT a penalty equal to two times the Percentage Rent due pursuant to this Lease on such unreported amounts. Whenever any audit discloses that Gross Sales were understated by any amount, TENANT shall immediately pay the additional Percentage Rent therein shown to be payable by TENANT to CITY, together with interest at the Default Rate thereon, from the date the Percentage Rent was payable until the date paid. F. CITY shall be entitled at any time within five (5) years after the receipt of any such Percentage Rent payment, to question the sufficiency of the amount thereof and/or the accuracy 011�1.0�24/SQ672g.1 1�✓Iasier Lease I1/Ol -�- of the statement or statements furnished by TENANT to justify the same. For the purpose of enabling CITY to check the accuracy of any such statement or statements, TENANT shall for said period of five (5) years after submission to CITY of any such statement keep all of TENANT'S records, including sales tax returns, all cash register tapes and other data which in any way bear upon or are required to establish in detail TENANT'S Gross Sales and any authorized deductions therefrom as shown by any such statements and shall upon request make the same available to CITY for examination. If TENANT fails to perform. any term or covenant of this Lease, then CITY may, but is not obligated to, perform such term or covenant, and TENANT shall reimburse CITY therefore as additional Rent hereunder. As an illustration and not as a limitation, if TENANT fails to procure the insurance required by this Lease, then CITY may, but is not obligated to, obtain such insurance, with the cost of the premiums being due to CITY upon demand as additional Rent. (1) If any Rent is not received within ten (10) days following the date on which the Rent first became due, then TENANT shall pay a late penalty of ten percent (10%) of the amount of the Rent in addition to the Rent. (2) In addition to the penalty, TENANT shall pay interest at the rate of one percent (1 %) per month or fraction thereof or the maximum amount permitted by law as of the date this Lease is signed, whichever is greater (the "Default Rate"), on the amount of th penalty, from the date on which R includes any sums advanced by the CITY. Rent e Rent, exclusive of the first became delinquent until paid. The term "Rent" CITY and any unpaid amounts due from TENANT to the The Premises shall, during the term of this Lease, be used for the purpose of operating and conducting thereon and therein the uses permitted by, and in compliance with, Conditional Use Permit Nos. 72-00 and UPO-359, as it may be amended from time to time, and for no other purpose. At the Commencement Date, such uses include mixed -use retail, bar and restaurant, vessel slips/tie-up and transient occupancy (hotel). Ol 181.Oa24/506729.1 I'viaster ease 11/01 - - TENANT agrees to allow only those uses authorized in Section 3.01, IICreinaboveand any unauthorized use thereof shall constitute a breach of this Lease and shall, at the option of CITY, terminate this Lease. Failure to actively and diligently conduct the business authorized herein constitutes a breach of the agreement and shall, at the option of CITY, terminate this lease. (1) TENANT shall during the term of this Lease conduct business of the nature specified in Section 3.01 of this Lease on the Premises in an efficient and diligent manner and keep the Premises open for the conduct of business continuously and without interruption for at least six hours each day of the year except one day each week and legal holidays. This provision shall not apply if the Premises shall be closed and the business of TENANT is temporarily shut down for a period ry not to exceed fourteen (14) calendar days in any calendar year repairs, aintenance or other construction deemed necessary by TENANT. not apply if the Premises shall be closed and the business of TENANT is temporarily shut down as authorized or required by the CITY Manager or on account of strikes, walkouts, or causes beyond the control of TENANT or for not more than three (3) days out of respect to the memory of an officer, employee, or close relative of any officer or employee of TENANT. •• • (2} TENANT shall operate TENANT'S business on the Premises with due diligence and efficiency and in like manner as comparable businesses operated in the CITY or the coastal area of San Luis Obispo County, so as to produce the maximum amount of Gross Sales and gross receipts from services which may be produced from TENANT'S business; and TENANT at all times shall carry on Premises, a stock or merchandise of such size, character, and quality as is reasonable, designed to produce the maximum return to TENANT, when the sale of merchandise is a permitted use under this Lease. During the term of this Lease, TENANT shall not directly nor indirectly acquire or establish any similar or competing business within a radius of five (5) miles from the location of the Premises, provided, however, that TENANT may, with prior written approval from CITY, own or operate more than one business, whether or not competing and similar along the Embarcadero upon CITY lease sites. The purpose of this section is to prevent and prohibit TENANT from reducing revenue to CITY by diverting business from the operation at the O1 ��1.0024/506729.1 Masier Lease I l/O1 - Premises to another similar business owned by TENANT within the CITY but not upon a CITY lease site from which CITY is paid rent based on Gross Sales. (1) TENANT shall not transport, use, store, maintain, generate, dispose, release, treat or discharge any "Hazardous Material" (as defined below) upon or about the Premises (such. activities being hereafter referred to as "Hazardous Materials Activities"), nor permit TENANT'S employees, agents, or contractors to engage in Hazardous Materials Activities upon or about the Premises, except as allowed by applicable law. The term "HazardousMaterial" for purposes hereof shall mean any chemical, substance, material or waste or component thereof which is now or hereafter listed, defined or regulated as a hazardous or toxic chemical, substance, material or waste or component thereof by any federal, state or local governing or regulatory body having j urisdiction, or which would trigger any employee or community "rightAo-know" requirements adopted by any such body. All Hazardous Materials Activities at the Premises shall be conducted strictly in accordance with all applicable laws and regulations. If TENANT shall transport any hazardous waste from the Premises, such transportation shall be done only by a contractor duly licensed to haul hazardous waste and shall use only a duly licensed disposal site approved by TENANT'S liability insurer. (2) TENANT shall promptly notify CITY of: (i) any enforcement, cleanup or other regulatory action taken or threatened by any governmental or regulatory authority with respect to the presence of any Hazardous Material on the Premises or the migration thereof from or to other property, (11) any demands or claims made or threatened by any party against TENANT or the Premises relating to any loss or injury resulting from any Hazardous Material on or from the Premises, and (111) any matters where TENANT is required by applicable law to give a notice to any governmental or regulatory authority respecting any Hazardous Material on the Premises. CITY shall have the right (but not the obligation) to inspect the Premises, to take such remedial action on the Premises, as CITY may deem appropriate, and to join and participate, as a party, in Illy legal proceedings or actions affecting the Premises initiated in connection with any environmental, health or safety law. (3) If any Hazardous Material is released, discharged or disposed of by TENANT or its employees, agents or contractors, on or about the Premises in violation of the foregoing provisions, TENANT shall immediately notify CITY. CITY remedial action as CITY deems appropriate, in which event may elect either to take such TENANT shall reimburse CITY for all costs thereof within ten (10) days after demand, or direct TENANT to perform such remediation. If CITY directs TENANT to perform the remediation, TENANT shall immediately 011 � 1.0024/506729.1 Maser Lease 11/01 - � - take such remedial action, as CITY shall direct. TENANT shall, properly and in compliance with applicable laws clean up and remove the Hazardous Material from the Premises and any other affected property at TENANT'S expense. If CITY directs TENANT to perform remediation hereunder and if TENANT shall fail to comply with the provisions of this Section within five (5} days after written notice by CITY, or such shorter time as may be required by applicable law or in order to minimize any hazard to persons or property, CITY may but shall not be obligated to) arrange for such compliance directly or as TENANT'S agent through contractors or other parties selected by CITY at TENANT'S expense (without limiting CITY'S other remedies under this Lease or applicable law). TENANT shall use and occupy the Premises in strict compliance with the Tidelands Trust purposes under which the Premises or any portion thereof are held by CITY pursuant to the grants from the State of California as set forth in this Lease. municipal, county, state and federal authorities now in force, or which may hereafter be in force, pertaining to the Premises, and shall faithfully observe in the use of the Premises all local, municipal and county ordinances and state and federal statutes, rules, regulations and orders now in force or which may hereafter be in force (collectively, "Legal Requirements") provided that TENANT shall not be required to comply with any Legal Requirement imposed by the CITY that would substantially deprive TENANT of a material benefit under this lease unless such Legal Requirement has been imposed or required by a county, state or federal authority. The judgment of any court of competent jurisdiction, or the admission of TENANT in any action or proceeding against TENANT, whether CITY be a party thereto or not, that TENANT has violated any such Legal Requirement in the use of the Premises shall be conclusive of that fact as between CITY and TENANT. TENANT shall not commit or permit the commission by others of any waste on the Premises; TENANT shall not maintain, commit, or pe it the maintenance or commission of any nuisance as defined by law on the Premises; and TENANT shall not use or permit the use of the Premises for any unlawful purpose. 0 I � 8 � .Oi�24/506729.1 Master Lease I i /®1 - � � (1) Subj ect to I ENANT`s rights hereunder to possession of the Premises, CITY may grant licenses to, or otherwise authorize, other persons and entities permitting uses of the Morro Bay Harbor. (2) CITY also retains and reserves for itself, its successors and assigns, all oil, gas, petroleum and other mineral or hydrocarbon substances in and under the lands leased hereby together with right to prospect and extract all such substances. (1) TENANT shall not make or permit any other person to make any alterations or structural additions or structural modifications to the Premises or to any structure thereon or facility appurtenant thereto if the cost thereof shall exceed ten thousand dollars ($10,000), without the prior written consent of CITY. The consent to be obtained pursuant to this Section 4.01(1) shall be requested from the Harbor Director, or the City's designee, for CITY® If the Harbor Director or any future successor to the duties of the City's Harbor Director, or the City's designee, gives such consent to proceed, it is understood that such consent is given by CITY only in its capacity as the landlord under this Lease and not as the permit -issuing authority. TENANT remains obligated to obtain any needed building permits and comply with Al applicable planning processes. (2) Where required by the Morro .Bay unicipal Code, California Coastal Act, Corps of Engineers or any other state or federal agency having authority over the proposed project, then all Conditional Use Permits, Concept Plans, Precise Plans, Coastal Development Plans, and any other required plans or permits shall be applied for and approved prior to any construction, alteration or repairs. (1) Prior to the commencement of any construction the cost of which is greater than the amount of one hundred thousand dollars ($100,000}, TENANT shall file with the Morro Bay CITY Clerk a final detailed Civil Engineer `s, Registered Architect's or Licensed and Bonded General Contractor's estimate of the cost of construction and installation of improvements on the Premises. Said estimate must be submitted to the CITY Engineer for approval. TENANT shall file with the Morro Bay CITY Clerk a faithful performance bond, in a form and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY but not in 01 I � 1.0024/506729.1 Master Lease 1 I /O l - 2- excess of one hundred percent (100®/®) of the final detailed cost estimate, securing the faithful performance of TENANT or its contractor in the completion of said construction. (2) TENANT shall also file with the Morro Bay CITY Clerk a Labor and materials bond, in a form and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY but not in excess of one hundred percent (100%) of the final detailed cost estimate, securing the payment of all claims for the performance of labor or services on, or the furnishing of materials for, the performance of said construction. (3) In lieu of the above referenced bonds, TENANT may post cash deposits or may make other mutually satisfactory arrangements to guarantee the completion of construction projects. In the event the contractor bonds the project, CITY may be named as additional indemnitee to comply with these requirements. At all times during the term of this Lease, TENANT shall keep the Premises and all buildings, installations and other improvements now or hereafter located on the Premises free and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed on or furnished to the Premises. TENANT further agrees to at all times, save CITY free and harmless and indemnify CITY against all claims for labor or materials in connection with any improvement, repairs, or alterations on the Premises, and the cost of defending against such claims, including reasonable attorneys' fees. Should TENANT fail to pay and discharge or cause the Premises to be released from such liens or claim of liens within ten (10) days after the filing of such lien or levy, TENANT shall upon written notification be required to immediately deposit with CITY a bond conditioned for payment in full of all claims on which said lien or levy has been filed. Such b WO and shall be acknowledged by TENANT as principal and by a company or licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company as surety. The bf eneiciary of any ur secity instrument which instrument is on record with CITY, shall have the right to file such a bond on behalf of TENANT. CITY shall have right to post and keep posted on the Premises notices of non -responsibility and any other notices that may be provided by law or which CITY may deem proper for the protection of CITY and Premises from such liens. TENANT shall give CITY notice at least twenty (20) days prior to commencement of any work on the Premises to afford CITY the opportunity to post such notices. ®11 � 1.002�-/506729. i Master Lease 11/O l -1 � - The parties agree CITY has the option and right to require TENANT to remove all buildings, structures, installations, improvements of any kind or other property belonging to or placed upon the Premises by TENANT at the termination of this Lease, however occurring, providing CITY gives notice, in writing, no later than thirty (30) days prior to the termination of the Lease, of its decision to require that such improvements be removed. The parties agree that if the CITY exercises its option, then at the termination of this Lease, however occurring, TENANT shall have sixty (60) days thereafter to remove all buildings, structures, facilities, installations, improvements and other property belonging to TENANT from the Premises. If CITY exercises such option and TENANT fails to remove all such improvements and other property within sixty (60) days after the termination of this Lease, then CITY shall have the right to have any or all such improvements and other property removed at the expense of TENANT. If CITY does not exercise its option to remove (or require the removal of) the improvements and other property, then title to such improvements and other property shall vest in CITY and TENANT shall not remove same. Tenant shall not mortgage, securitize or hypothecate the leasehold interest in whole or any part without the prior written approval of City as evidenced by a resolution of the City Council of the City of Morro Bay. 1f 6.01 • a expense, keep and maintain all improvements now or hereafter on the Premises in good order and repair and in a safe and clean condition. Furthermore, TENANT shall, at TENANT'S own cost and expense, maintain at all times during the term of this Lease the whole of the Premises in a clean, sanitary, neat and orderly condition. CITY may, at the sole option of CITY, clean and clear the Premises, at TENANT'S cost and expense, in the event TENANT fails to clean and clear the Premises i accordance with this Section to the satisfaction of CITY after 15-days' written notice to TENANT from CITY of CITY' S intent to exercise this option. 01181.0024/506729.1 Master Lease 11/01 - - At all times during the term of this Lease, TENANT shall at TENANT'S own cost and expense repair, maintain, replace and rebuild as necessary, the improvements, pilings, bulkheads, seawalls, revetment, piers, posts and any structures or other improvements located in the water portion of the Premises, Further, TENANT shall at TENANT'S own cost and expense conduct maintenance surveys at reasonable intervals to locate and determine needed repairs. At all times during the term of this Lease, TENANT, at no cost to CITY, shall° (1) Make all alterations, additions, or repairs to the Premises or the improvements or facilities on the Premises required by any Legal Requirements (as defined in Section 3.07 above) now or hereafter made or issued; (2) Observe and comply with all Legal Requirements now or hereafter made or issued respecting the Premises or the improvements or facilities located thereon; (3) Obtain all required permits pursuant to the Morro Bay Municipal Code or State law prior to the initiation of any repair or maintenance activity; and (4) Indemnify and hold CITY and the property of CITY, including the Premises, free and harmless from any and all liability, loss, damages, fines, penalties, claims and actions resulting from TENANT'S failure to comply with and perform the requirements of this section. I the event failure to repair results in a hazardous or unsafe condition, CITY shall have the right and option but not the obligation to close and prohibit access to the unsafe portion of the Premises until such repairs are completed and accomplished and the Premises rendered safe for public use. In addition, if TENANT fails to repair any hazardous or unsafe condition within ten (10) days after written notice thereof from CITY, CITY shall have the right, but not the obligation, to perform such repair at TENANT'S expense. TENANT shall reimburse CITY for any such repair undertaken by CITY, promptly upon CITY'S demand, as additional Rent. Failure by CITY to enforce any of the provisions of this Article shall not constitute a waiver of these provisions and CITY may at any time enforce all of the provisions of this Article, requiring all necessary repairs, rebuilding or replacement. CITY or CITY'S agents, representatives, or employees may enter the Premises at all reasonable times for the purpose of inspecting the Premises to date ine whether TENANT is 011 � 1.0024/506729.1 Maser Lease 11/01 ®1 � complying with the terms of this Lease and for the purpose of doing other lawful acts that may be necessary to protect CITY'S interest in the Premises under this Lease or to perform CITY'S duties under this Lease. (1) Except as provided in Section 6.07 below, if at any time during this Lease, any improvements now or hereafter on the Premises are destroyed in whole or in part by the elements, or any other cause not the fault of TENANT or CITY, this Lease shall continue in full force and effect and TENANT, at TENANT'S own cost and expense, shall repair and restore the damaged or destroyed improvement(s) according to the original plan thereof or according to such modified plans therefore as shall be approved in writing by CITY. The work of permitting, repair and restoration shall be commenced by TENANT within one hundred eighty (180) days after the damage or destruction occurs shall be pursued with due diligence, and shall be completed not later than one year after the work is commenced, unless the parties hereto mutually agree, in writing, to an extension. In all other respects, the work of repair and restoration shall be done in accordance with the requirements for construction work on the Premises set forth in Article 4 of this Lease. Any failure by TENANT either to commence or to complete repair and restoration as required by this Section 6.06 shall be a material default under this Lease. (2) Any and all insurance proceeds that become payable at any time during the term of this Lease because of damage to or destruction of any improvements on the Premises shall be paid to TENANT and applied by TENANT toward the cost of repairing and restoring the damaged or destroyed improvements in the manner required by this Section 6.06, or, if this Lease is terminated, then applied as provided in Section 6.07. Except as set forth in Section 6.08 below, TENANT'S obligation to restore pursuant to this Section shall exist whether or not funds are available from insurance proceeds. 1111111111111111111 OR (1) Notwithstanding the provisions of Section 6.06 of this Lease; TENANT shall have the option of terminating this Lease as provided in this Section 6.07 if: (a) During the last fifteen (15) years of the term of this Lease, any improvements now or hereafter on the Premises are so damaged or destroyed by the elements or any cause not the fault of TENANT or CITY, that they cannot be repaired and restored as required by Section 6.06 of this Lease at a cost not exceeding thirty-five percent (3 5%) of the cost of replacing all improvements if they had been totally destroyed at the time of such damage; or O11��.OQ24/506729.1 faster Lease 11/01 -1 - (b) During the last ten (10) years of the term of this Lease, any improvements now or hereafter on the Premises are so damaged or destroyed by the elements or any cause not the fault of TENANT or CITY, that they cannot be repaired and restored as required by Section 6.06 of this Lease at a cost not exceeding fifteen percent (15%) of the cost of replacing all improvements if they had been totally destroyed at the time of such damage. (2) TENANT may exercise its right to terminate pursuant to this Section 6.07 by providing written notice to CITY within one hundred eighty (180) days following damage or destruction as described herein. Such termination shall be effective on the last day of the calendar month following the month in which TENANT provides its notice. (3) If TENANT fails to commence or complete repair and restoration as required by Section 6.06, CITY shall have all rights and remedies with respect to TENANT's default, including but not limited to termination of this Lease pursuant to Article 11. (4) If this Lease is terminated as a result of damage or destruction, then any insurance proceeds received with respect to the improvements shall be applied or distributedin the following order: (c) to each Lender under a Leasehold Encumbrance, in order of lien priority, an amount not to exceed the amount due under such Leasehold Encumbrance; then (d) to CITY, an amount equal to the present value, as of the date of termination, of the total IVlinimum Dent for the remainder of the Ter ; then (e) the remaining proceeds, if any, to TENANT. cti n 6.08 Destruction Due to Riskof Covered Insurance. Notwithstanding anything to the contrary in Section 6.06 of this Lease, TENANT shall have the right to to inate this Lease at any time if the improvements o the Premises are damaged or destroyed by a casualty for which TENANT is not required under this Lease to carry insurance and the cost to repair or restore such improvements exceeds fifty percent (50%) of the fair market value of all the improvements on the Premises immediately prior to the damage or 0 � 1 � 1.0024/5067�9. I l�Ia der Lease 11/01 -17 0 (1) TENANT shall indemnify and hold CITY, and the property of CITY (including the Premises and any improvements now or hereafter on the Premises), and the CITY'S officers, officials, employees and volunteers harmless from any and all liability, claims, loss, damages, and expenses, including attorney fees and litigation expenses, resulting from TENANT'S occupation and use of the Premises or any negligent act or omission of the TENANT or any of its subtenants, employees, contractors or anyone for whom TENANT may be liable, specifically including, without limitation, any liability, claim, loss, damage, or expense arising by reason of: (a) The death or injury of any person, including TENANT or any person who is an employee or agent of TENANT, or by reason of the damage to or destruction of any property, including property owned by TENANT or by any person who is an employee or agent of TENANT, from any cause whatever while such person or property is in or on the Premises or in any way connected with the Premises or with any of the improvements or personal property on the Premises; (b) The death or injury of any person, including TENANT or any person who is an employee or agent of TENANT, or by reason of the damage to or destruction of any property, including property owned by TENANT or any person who is an employee or agent of TENANT, caused or allegedly caused by either (1) the condition of the Premises or any improvement placed on the Premises by TENANT, or (11) any act or omission on the Premises by TENANT or any person in, on, or about the Premises with or without the permission and consent of TENANT; (c) Any work performed on the Premises or materials furnished to the Premises at the instance or request of TENANT or any person or entity acting for or on behalf of TENANT; (d) TENANT'S failure to perform any provision of this Lease or to comply with any Legal Requirement imposed on TENANT or the Premises. (2) TENANT'S obligations pursuant to this Section to indemnify and hold harmless do not extend to any liability, claim, loss, damage or expense arising from CITY'S active negligence or willful misconduct. IN Ii �` • . During the term of this Lease, TENANT shall maintain at its cost Commercial General Liability insurance with coverages at least as broad as ISO Forms labeled "City of Morro Bay Insurance requirements for Lessees", Certificate of Insurance — City of Morro Bay", and "Additional Insureds —Managers or Lessors of Premises' attached hereto as Exhibit B and made a part hereof as may be updated or changed from time to time at the sole discretion of the CITY, insuring against claims for bodily injury (including death), property damage, contractual liability, personal injury and advertising injury occurring on the Premises or from operations located in any part of the Premises. Such insurance shall afford protection in amounts no less than One Million Dollars ($1,000,000) per occurrence for bodily injury, personal injury and property damage, provided that if insurance with a general aggregate limit is used, either the general aggregate limit shall apply separately to the Premises or the general aggregate limit shall be twice the occurrence limit stated in this Section. All liability insurance carried by TENANT hereunder shall name CITY, its officers, officials, employees and volunteers as additional insureds, and shall be primary insurance with respect to such additional insureds. TENANT shall include all its subtenants as insureds under TENANT's liability policies or shall furnish separate certificates and endorsements for each subtenant. All coverages for subtenants shall comply with all requirements of this Article Seven. TENANT shall maintain at TENANT'S own expense and keep in full force and effect during the term of this Lease, Worker's Compensation Insurance as provided by law. Said insurance shall contain a waiver of subrogation rights against CITY. TENANT shall also maintain employer's liability insurance with minimum coverage of $1,000,000 per accident for bodily injury or disease. TENANT shall, at its cost, at all times during the term of this Lease keep all improvements and other structures on the Premises, as well as any and all additions, improvements and betterments thereto, insured for one hundred percent (100%) of their full replacement cost with no co-insurance provision against loss or destruction by the perils covered by "all risk" (excluding earthquake) property damage insurance policies. Any loss payable under such insurance shall be payable to TENANT, CITY, and any Lender under a Leasehold Encumbrance pursuant to Article 5 of this Lease, as their interests may appear, and such proceeds shall be used and applied in the manner required by Article 6 of this Lease. a 11 � 1.0024/5�6729.1 Maser Lease 11/01 -1 - (1) If TENANT has (or is required by any Legal Requirement to have) a liquor license and is selling or distributing alcoholic beverages on the Premises, then TENANT shall maintain liquor liability coverage in appropriate amounts. TENANT shall require any subtenant who has or is required by any Legal Requirement to have) a liquor license and who is selling or distributing alcoholic beverages on the Premises, to maintain such coverage. (2) TENANT shal covering TENANT's pers replacement value of suc such insurance. o h 1 maintain "all risk" (excluding earthquake) property damage insurance val property located at the Premises, in amounts not less than the full personal property. CITY shall have no interest in the proceeds of (3) TENANT shall, at TENANT's own expense, obtain and maintain any additional insurance coverages that CITY may reasonably require. As illustration only and not as a limitation, in appropriate circumstances such additional insurance may include increased general ion coverage, business automobile liability, boiler and liability limits, business interrupt machinery insurance and/or builder's risk insurance. However, TENANT shall not be required to maintain additional coverages that are in excess of those typically maintained by similarly situated tenants in the Morro day area. Except as specifically provided to the contrary, all the insurance required pursuant to this Article Seven shall be subject to the requirements of this Section 7.06. (1) Maintenance of proper insurance coverage is a material element of this Lease and failure to maintain or renew coverage or to provide evidence of coverage and/or renewal may be treated by the CITY as a material breach of contract. TENANT shall forward the CITY specifications and forms to TENANT'S insurance agent for compliance. (2) CITY may at any time require TENANT to increase the minimum coverage limits for insurance required by this Lease, but every such increase shall be reasonable under the circumstances. (3) All policies shall be issued by insurance companies authorized to issue such insurance in California, with an A.M. Best's rating of no less than A:VII. (4) Any deductibles or self -insured retentions must be declared to and approved by CITY. At the option of CITY, either: the insurer shall reduce or eliminate such deductibles or self -insured retentions as respects CITY, its officers, officials, employees and volunteers; or the TENANT shall provide a financial guarantee satisfactory to CITY guaranteeing payment of losses and related investigations, claim administration and defense expenses. (5) Each insurance policy required by this Lease shall be endorsed to state that coverage shall not be cancelled or reduced, except after thirty-3 o-days' prior written notice by certified mail, return receipt requested, has been given to CITY. (6) TENANT shall furnish CITY with certificates and amendatory endorsements effecting the coverage required by this Lease. The endorsements shall be on forms provided by CITY or on other than CITY's forms, provided those endorsements or policies conform to the requirements. All. certificates and endorsements are to be received and approved by CITY before use of the Premises, and promptly following any renewal or replacement. CITY reserves the right at any time to require complete, certified copies of all required insurance policies, including endorsements effecting the coverage required by these specifications. (7) TENANT'S insurance coverage shall be primary insurance as respects CITY, its officers, officials, employees, and volunteers. Any insurance or self insurance maintained by CITY, its officers, officials, employees, or volunteers shall be excess of TENANT's insurance and shall not contribute with it. TENANT agrees that in the event of loss due to any of the perils for which it has agreed to provide insurance, TENANT shall look solely to its insurance for recovery. TENANT hereby grants to the CITY, on behalf of any insurer providing insurance to either TENANT or CITY with respect to TENANT'S occupancy of the Premises, a waiver of any rights to subrogation which any such insurer of said TENANT may acquire against the CITY by virtue of the payment of any loss under such insurance. Each insurance policy required under this Lease including those insuring TENANT against claims, expense, or liability for injury to persons or property shall provide that the insurer shall not acquire by subrogation any right to recovery which TENANT has expressly waived in writing prior to the occurrence of the loss. TENANT hereby waives any right of recovery against CITY for each claim, expense, liability, or business interruption, or other loss, except where caused by CITY'S active negligence or willful misconduct. TENANT agrees that to the extent that TENANT fails to acquire insurance, TENANT shall not have any claim against CITY for any loss that results from i risk or peril that would have been included in such insurance. -2- - improvement, or other development of any nature whatsoever, erected, installed, or maintained by `TENANT or by reason of the business or other activity of TENANT upon or in connection with the Premises. TENANT shall pay all possessory interest taxes applicable to the Premises. TENANT shall pay any fees imposed by law for licenses or permits for any business or activities including construction by TENANT upon the Premises. including the Premises, free and harmless from all charges for the furnishing of gas, water, electricity, telephone service, and for other public utilities to the Premises during the term of this Lease and for the removal of garbage and rubbish from the Premises during the term of this Lease. If title and possession to all of the Premises is permanently taken for any public or quasi - public use under any statute, or by the right of eminent domain, then this Lease shall terminate on the date that possession of the Premises is taken, and both CITY and TENANT shall thereafter be released from all obligations, including Dent, all of which shall be prorated to the ..ate of termination except those specified in Sect*on M -22- �• ► 11 • • • • • Any compensation or damages awarded or payable because of the jJCllllallCllL taking of all or any portion of the Premises by eminent domain shall be allocated. between CITY and TENANT as follows: (1) All compensation or damages awarded or payable for the taking by eminent domain of any land that is part of the Premises shall be paid to and be the sole property of CITY free and clear of any claim of TENANT or any person claiming rights to the Premises through or under TENANT. (2) All compensation or damages awarde or payable which is specifically attributed by the taking party to the "good will" of TENANT'S business shall be paid to and be the sole property of TENANT. (3) All compensation or damages awarded or payable because of any improvements constructed or located on the portion of the Premises taken by eminent domain where only a portion of the Premises is taken by eminent domain, and TENANT is not entitled to or does not terminate this Lease, shall be applied in the manner specified in Section 9.04 toward the replacement of such improvements with equivalent new improvements on the remaining portions (4) All compensation or damages awarded or payable because of any improvements constructed or located on the portion of the Premises taken by eminent domain where this Lease is terminated because of the taking by eminent domain, whether all or only a portion of the Premises is taken by eminent domain, shall be allocated between CITY and TENANT as follows: (a) That percentage of the compensation or damages awarded or payable because of the improvements that equals the percentage of the full term of this Lease that has, at the time of the taking, not expired shall belong to and be the sole property of TENANT. (b) That percentage of the compensation or damages awarded or payable because of the improvements that equals the percentage o the full term of this Lease that has, at the time of the taking, expired shall belong to and be the sole property of CITY. It 1 taking date that the agency or entity exercising the eminent domain power, takes, title, or the date that it takes physical possession of the portion of the Premises, whichever shall first occur. 0�1�1.a024/506729.� Ma t�rL�a � 1�/01 _2�� (5) Any severance damages awarded or payable because only a portion of the Premises is taken by eminent domain shall be the sole and separate property of CITY. Should, during the term of this Lease, title and possession of anly a portion of the Premises be taken for any public or quasi -public use under any statute, or by right of eminent domain, TENANT may, at TENANT'S option, terminate this Lease by serving written notice of termination on CITY within ninety (90) days after TENANT has been deprived of actual physical possession of the portion of the Premises taken for such public use. This Lease shall terminate on the first day of the calendar month. following the calendar month in which the notice of termination described in this section is served on CITY. On termination of this Lease pursuant to this Article, all subleases and subtenancies in or an the Premises ar any portion of the Premises created by TENANT under this Lease shall also terminate and the Premises shall be delivered to CITY free and clear of all such subleases and subtenancies, provided, however, that CITY may, at CITY'S option, by mailing written notice to a subtenant allow any subtenant to ittorn to CITY and continue such subtenant's occupancy on the Premises as a TENANT of CITY. On termination of this Lease pursuant to this section, however, both CITY and TENANT shall be released from all obligations under this Lease, except those specified in Section 9.02 of this Lease. Should, during the term of this Lease, title and possession of only a portion of the Premises be taken under the power of eminent domain by any public or quasi -public agency or entity and TENANT does not terminate this Lease, then this Lease shall terminate as to the portion of the Premises taken under eminent domain on the date actual physical possession of the portion taken by eminent domain is taken by the agency or entity exercising the eminent domain power. Furthermore, the Rent payable under this Lease shall, as of that time be reduced in the same proportion of the Premises taken by eminent domain bears to the full value of the Premises at that time; provided however, that TENANT shall make a good faith effort to replace any improvements or facilities with equivalent new facilities on the remaining portion of the Premises and do all other acts at TENANT'S own cost and expense required by the eminent domain taking to make the remaining portion of the Premises fit for the use specified in this Lease. 01181.0024/506729.1 �✓Iaster �ea.s� I l/QI -2- A voluntary conveyance by CITY, with the consent of TENANT, of title to all or a portion of the Premises to a public or quasi -public agency or entity in lieu of and under threat by such agency or entity to take the same by eminent domain proceedings shall be considered a taking of title to all or such portion of the Premises under the power of eminent domain subject to the provisions of this Article. If the possession of the Premises or any portion thereof should be taken under the power of eminent domain by any public or quasi -public agency or entity for a limited period not extending beyond the term of this Lease, then this Lease shall not terminate (except as provided in this Section 9.06) and. TENANT shall continue to perform all its obligations hereunder, except only to the extent that TENANT is prevented from performing such obligations by reason of such taking. TENANT shall be entitled to receive the entire amount of compensation or damages awarded because of such temporary taking. If a temporary taking extends for more than thirty-six (36) months, then TENANT shall have the right to terminate this Lease, and TENANT shall be entitled to receive, out of the compensation or damages awarded because of such temporary taking, the amount that is attributable to the period of time u until the effective date of TENANT'S termination of this Lease. Except as provided in this Article 10, TENANT shall not assign or otherwise transfer this Lease, any right or interest in this Lease, or any right or interest in the rremises or any of the improvements that may now or hereafter be constructed or installed on the Premises without the express written consent of CITY evidenced by resolution first had and obtained. Any assignment or transfer by TENANT without the prior written consent of CITY, whether it be voluntary or involuntary, by operation of law or otherwise, is void and shall, at the option of CITY, terminate this Lease. A consent by CITY to one assignment shall not be deemed to be a consent to any subsequent assignment of this Lease by TENANT. CITY shall not unreasonably nor arbitrarily withhold its approval to the assignment or transfer of this Lease to an assignee who is financially reliable and qualified to conduct the business for which this Lease was granted. It is mutually agreed that the TENANT'S qualifications are a part of the consideration O l l S � . �Q24/506729.1 piaster Lease 11 /01 -2 � - for granting of this Lease and said party does hereby agree to maintain active control and supervision of the operation conducted on the Premises. For purposes of this Article l o, the following transactions will be deemed to be assignments or transfers. (a) A change in ownership effected voluntarily, involuntarily, or by operation of law, within a twelve-month (12-month) period, of twenty-five percent (25%) or more of the partners or members or twenty-five percent (25%) or more of the partnership or membership interests; or (b) The dissolution of the partnership or limited liability company without its immediate reconstitution. (2) If TENANT is a closely held corporation (i.e., one whose stock is not publicly held and not traded through an exchange or over the counter): than an aggregate of twenty-five percent (25%) of the voting shares of TENANT (other than to immediate family members by reason of gift or death); or (b) The dissolution, merger, consolidation, or other reorganization of TENANT. A condition of an assignment shall be that TENANT shall file with the CITY an application to assign the leasehold prepared by the prospective assignee. Concurrently with filing the application, TENANT shall pay a reasonable fee associated with the cost pf processing said application, in cash or certified or cashier's check to enable CITY adequately to investigate the proposed assignee's qualifications as a permitted assignee. CITY shall not be required to account for the use of the sum paid. If the proposed assignee's net worth on the date of assignment is not sufficient to reasonably guarantee successful operation of the Premises in compliance with all applicable CITY, County, State and federal requirements, CITY may withhold approval of the assignment or condition it upon TENANT'S guarantee of such assignee's obligations hereunder for such period as CITY deems advisable. Net worth shall mean the amount by which the total of all assets shall exceed the total of all liabilities as Q 118 �.Q024/j06729. � IVlasier Lase � �/0 � -2 determined in accordance with general accepted accounting principles as approved by CITY' S auditor, or other authorized representative or agent. If TENANT is a individual, nothing herein contained will prevent the transfer of this Lease by will, or by operation of law under the intestacy provisions of the California Probate Code as it may be amended from time to time. Probate sale of the leasehold interest will not be permitted without the consent of the CITY, evidenced by resolution, first had and obtained. TENANT shall not sublease the whole nor any part of the Premises, or license, permit, or otherwise allow any other person (the employees of TENANT excepted) to occupy or use the Premises, or any portion thereof, without the prior written c any future successor to the duties of the City's Harbor Director. A consent to one subletting, occupation, Licensing or use shall not be deemed to be a consent to any subsequent subletting, occupation, licensing or use by another person. Any sublease or license without CITY°S written consent shall be void, and shall at CITY'S option, terminate this Lease. CITY shall not unreasonably nor arbitrarily withhold its consent to sublet to one who is qualified and financially reliable. CITY'S consent to any occupation, use, or licensing shall be in CITY'S sole and absolute discretion. Notwithstanding any provisions herein to the contrary, the terms °assignment,°° "subletting," "occupation," or "use," shall not be construed or interpreted to mean or include the temporary, short term renting or leasing of boat slips, motel, hotel, or apartment accommodations on the premises. Any and all subleases shall be expressly made subject to all the terms, covenants, and conditions of this Lease. In no event shall the term of any sublease extend beyond the term of this Lease. Subject to Section 10.09 termination of this Lease prior to the expiration of this Lease term shall also terminate any and all subleases. A breach of the terms of this Lease by a subtenant shall constitute a breach on the part of TENANT and shall subject both the subtenant and TENANT to all the remedies provided to CITY herein and by law. Failure by any subtenant to report Gross Sales or to pay Percentage Rent due from subtenant shall constitute a breach of this lease. TENANT hereby agrees to and does guarantee payment of such Percentage Rent due )y a subtenant under the terms of this leasl Ol i � 1.0024/50�729.1 faster Luse 11/Q 1 ���- Prior to any consent by CITY to any sublease hereof, TENANT shall cause to be executed between TENANT and any subtenant an agreement making the CITY a third party beneficiary, in a form acceptable to CITY, whereby the subtenant agrees to be bound by all of the terms, covenants and conditions of this Lease. Further, it is agreed by TENANT that any default by the subtenant of any of the terms, covenants and conditions of this Lease shall be deemed to be violations by TENANT of this Lease and that all remedies of CITY for such violation, including termination of this Lease, shall immediately be enforceable by CITY against TENANT. TENANT shall apply any and all monies received from any subtenant first to the payment of obligations of the subtenant to CITY. Prior to approval by CITY to any sublease hereof, TENANT shall agree to be primarily and jointly and severally liable to CITY for all obligations due CITY by any subtenant, including the payment of rents, and TENANT shall agree that CITY may proceed directly against TENANT for any obligation owing CITY by the subtenant. If this Lease is guaranteed, neither the sublease nor CITY' S approval thereof shall release the guarantor from its obligations pursuant to the guaranty. on the terms set forth below, CITY may enter into agreements with subtenants providing that in the event of any termination of this Lease prior to the expiration date, CITY will not terminate or otherwise disturb the rights of the subtenant under such sublease, but will instead honor such sublease as if such agreement had been entered into directly between Landlord and such subtenant, conditioned upon such subtenant's agreement to attorn to Landlord and full performance of all obligations under the sublease in question ("Non -Disturbance Agreement"). CITY agrees to execute a Non -Disturbance Agreement in connection with a particular sublease provided that Tenant provides CITY with a copy of the sublease, and the Non -Disturbance Agreement is customary in form and substance and otherwise reasonably acceptable to CITY. Should TENANT breach this Lease and abandon all or any part o the Premises prior to the scheduled expiration of the term of this Lease, CITY may continue this Lease in effect by not Q 11 � 1.0�2,4/5�6729. � 1VIa ter Le�s� 11/O l -2 - terminating TENANT'S right to possession of the Premises, in which event CITY shall be entitled to enforce all CITY'S rights and remedies under this Lease including the right to recover the Rent specified in this Lease as it becomes due under this Lease. All covenants and agreements contained in this Lease are declared to be conditions to this Lease and to the term hereby demised to TENANT. Should TENANT fail to perform any covenant, condition, or agreement contained in this Lease, except for payment of any Rent or other monetary amount due, and such failure is not cured within thirty (30) days after written notice thereof is served on TENANT, then CITY may terminate this Lease immediately, and in the event of such termination, TENANT shall have no further rights hereunder and TENANT shall thereupon forthwith remove from the Premises and shall have no further right or claim thereto and CITY shall immediately thereupon have the right to re-enter and take possession of the Premises, subject only to appropriate legal process. If any payment of Rent i.s not made as herein provided and such failure to pay is not cured within three (3) days after written notice thereof is served on the TENANT, CITY shall have the option to immediately terminate this Lease; and in the event of such termination, TENANT shall have no further right or claim thereto and CITY shall immediately thereupon have the right to re-enter and take possession of the Premises, subject only to appropriate legal CITY shall afford the Lender under any Leasehold Encumbrance of record with CITY the right to cure any default by TENANT of the covenants, conditions, or agreements hereof, as provided. in Article 5 of this Lease. In the event the CITY finds it necessary to retain an attorney in connection with the default by the TENANT or enforcement of any of the terms, conditions, and covenants of this Lease, even though litigation is not instituted, TENANT shall pay to CITY its reasonable attorneys' fees. Non-payment of attorneys' fees by TENANT within three (3) days after written notice is served on TENANT shall give rise to an independent legal action by CITY to collect same. If CITY is successful in such legal action, CITY shall also be entitled to attorney fees and costs for the collection action. To the extent that CITY is represented by the City Attorney, a reasonable sum for such attorneys' services will be included as attorneys' fees. If TENANT defaults in the performance of any covenant, condition or agreement contained in this Lease and the default be incurable or not be cured within the time period set forth hereinabove, then CITY may terminate this Lease and: (a) The worth at the time of award of the unpaid rent which had been earned at the time of termination of the Lease; (b) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination of the Lease until the time of award exceeds the amount of rental loss that TENANT proves could have been reasonably avoided; (c) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of rental loss that TENANT (d) Any other amount necessary to compensate CITY for all detriment proximately caused by TENANT'S failure to perform its obligations under this Lease; and (2) Bring an action, in addition to or in lieu of the action described in subparagraph (1) of this Section, to re-enter and regain possession of the Premises in the manner provided by the laws of unlawful detainer of the State of California then in effect. cumulative with and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this Lease. The waiver by CITY of any breach by TENANT of any of the provisions of this Lease shall not constitute a continuing waiver or a waiver of any subsequent breach y TENANT either of the same or a different provision of this Lease. -30- On expiration or sooner termination of this Lease, TENANT shall surrender the Premises, and, subject to Section 4.04, all improvements in or on the Premises, and all facilities in any way appertaining to the Premises, to CITY in good, safe, and clean condition, reasonable wear and tear excepted. ► ►T�C� Premises, this Lease, or the rights and duties of either in relation thereto, the party, CITY or TENANT, prevailing in such litigation shall be entitled, in addition to such other relief as may be granted in the litigation, to a reasonable sum as and for its attorneys' fees In such elfintl which shall be determined by the court in such litigation or in a separate action brought for that purpose. The "prevailing" party shall mean the party who obtains substantially the relief sought by that party. To the extent that CITY is represented by the CITY Attorney, a reasonable sum II IlI III I shall be in writing. They shall be served either personally, or by registered or certified mail. Any notice or demand to CITY may be given to: wlt a copy to Harbor Director 1275 Embarcadero Morro Bay, California 93442 City Manager of the City of Morro Bay City Hall 595 Harbo IIIIIIII Ol 181.OQ24/506729.1 Master Lease 11/O1 -31- Doug Kedican 725 Embarcadero LLC 1427 Doral Ct. in Luis Obispo, CA 93401 This Lease, and all matters relating to this Lease, shall be governed by the laws of the State of California in force at the time any need for interpretation of this Lease or any decision concerning this Lease arises. CITY and TENANT consent to exclusive personal and subject natter jurisdiction in the Superior Court of the State of California in and for the county where the Premises are located, and each party waives any claim that such court is not a convenient forum. Each party hereby specifically waives the provisions of California Code of Civil Procedure Section 394, and any successor statute thereto. Subject to the provisions herein relating to assignment and subletting each and all of the terms, conditions, and agreements herein contained shall be binding upon and inure to the benefit of the successors and assigns of any and all of the parties hereto; and all of the parties hereto shall be jointly and severally liable hereunder. either invalid, void, or unenforceable, the remaining p f orce and effect unimpaired by the holding.11 rovisions of this Lease shall remain in full Subject to the provisions of the second paragraph of Section 1.04, (i) this Lease, including all exhibits incorporated by reference, constitutes the sole and only agreement between CITY and TENANT respecting the Premises and the leasing of the Premises to TENANT and (ii) any other agreements or representations respecting the Premises and their leasing to TENANT by CITY, which are not expressly set forth in this Lease, are null and void. The lease terms herein specified correctly set forth the obligations of CITY and TENANT as of the date of this Lease. NO modlficatlon, amendment, or alteration of this Lease shall be valid unless it is in writing and signed by both parties. 0 � 1 � 1.0024/506729.1 1_V�aster I,eas� � 1 /01 -3 2- 1VIAYOR and CITY CLEF:K pursuant to prior CITY Council approval. Notwithstanding CITY Council approval, no agreement shall become effective until such agreement is in fact executed by the MAYOR and CITY CLERK. TENANT understands this Lease may not be modified by oral statements by any person representing the CITY including the MAYOR and CITY CLERK. TENANT specifically agrees not to rely on oral statements, purported oral waivers, or purported oral modifications and agrees not to rely upon purported written modifications unless they eet the requirements of this paragraph and are approved in writing pursuant to formal City Council action and a subsequent written modification signed by the MAYOR and CITY CLERK. If the title of any person authorized to act for CITY under this Lease sha11 be changed during the term of this Lease, then the person who succeeds to substantially the same responsibilities with respect to CITY shall have the authority to act for CITY under this Lease. • is - • - 11 Lease, execute a memorandum or "short form" of this Lease, which shall describe the parties, set forth a description of the leased premises, specify the term of this Lease, and incorporate this Lease by reference. 011 � 1.0024/506729.1 Master Lease 11 /01 -� 3 - • ' iI ' 1111111• • Restroos completed per CUP #UPO-342 shall be made available to the public during business hours and. TENANT shall maintain signage in prominent locations, which clearly identifies the restrooms are available to the general public. In the case of a dispute over location and design of signage, the Harbor Director may designate two locations for "public restroom" signs of a type and design to be determined by the CITY. Furthermore, said restrooms shall be made available after business hours to slipholders on TENANT'S Lease Site. CITY and TENANT agree TENANT will construct improvements to the Premises as outlined in Conditional Use Permit No. UPO-359 (CUP) consisting of conversion of the second floor restaurant use to a ten -room boutique hotel with a hotel lobby on the south side of the first floor, building facade alterations, addition of three outdoor decks for hotel use, three hotel unit patios partial dedicated public view deck and improved public bayside and vertical access (Prof ect) and valued at a minimum of $1,250,000. Failure to complete the Pro ect and to comply with all conditions of the CUP, as evidenced by a final building permit inspection as required by CITY in its governmental capacity, in addition to providing proof of expenses as evidenced by copies of invoices by the proscribed timeline shall be a material default of the Lease Agreement and subject to any remedies outlined in Article 11 herein, including termination of the Lease. TENANT acknowledges construction of the Project on the premises as outlined in the CUP requires, but may not be limited to, obtaining a permit from the California Coastal Commission, a City Precise Plan, and a City Building Permit. It is TENANT'S obligation to fully investigate the issues and costs in obtaining those approvals. Failure to obtain any and all required permits and approvals for the Proj ect shall not be a reason for failure to comply with this section. TENANT further acknowledges the CUP and construction of the Project may require repair or replacement of all of portions of the docks, existing buildings, revetments, access ways, sidewalks, drainage systems and other current improvements on the Premises to the standards of the City Engineer and TENANT agrees to meet those standards through review and revision of the final Building Plans Improvements on the Premises. 011 � 1.0024/506729.1 Master Lease 11 /01 iill 111111• • - • • • - iI • . • •• • - • •' . . • • • A. Avoid any pollution of the atmosphere or littering of land or water by or originating in or about the Premises or caused by TENANT'S construction activltl e s . eighborhood will be able to comfortably enjoybusiness , • facilities in the area. C. Prevent any pollutants, including but not limited to petroleum products, from entering Morro Bay waters. arking or traffic delays or impairment without prior consent of CITY. ecti .0 aie ar inch a rest and ®tel ar in_ Spaces A. Rent Credit for valet Services. CITY agrees to credit up to $25,000, annually, against Rent otherwise due to assist TENANT with paying for parking valet services for Parking Patrons' vehicles to be parked in the Parking Spaces (Rent Credit). The Rent Credit shall be reduced by any revenues received by TENANT for valet parking fees or charges to hotel customers. TENANT shall, on a regular basis as reasonably requested by CITY' S Harbor irector, provide reports, financial data and other information for CITY' S Financial Director to determine the total amount of Rent Credit to be allowed for that current year. CITY' S City Council shall also annually review this provision. That review will be to determine if changes are warranted and required. If after consultation with TENANT, CITY determines changes are required and TENANT does not agree with those changes, then CITY may impose the changes, including rescission of some of all of the rent credit, upon 12o-days' written notice to TENANT. O l l � 1.0024/506729. � Master ,ease 11 /O l -� 5 Unless extended by an amendment to this Lease, the provisions of this Paragraph A. shall terminate on the fifth full calendar year after the Commencement Date. B. Parking Spaces. CITY shall reserve ten spaces at CITY' S parking lot located at the northeast corner of Pacific Street and Market Avenue (Parking Spaces) exclusively for overnight parking of vehicles of patrons staying at the hotel on the Premises (Parking Patrons) during the hours of 3:00 p.m. and 11:00 a.m. TENANT shall pay CITY $4,262.50 per year for that exclusive use of the Parking Spaces. The Parking Spaces shall be designated by signs (and standards/poles to attach the signs), all provided by TENANT, at its costs, indicating the Parking Spaces are so reserved for Parking Patrons. The signage and standards shall be approved by CITY' S Community Development Director and installed by CITY employees at no additional cost to TENANT. Annually, CITY' S City Council shall review this provision and determine if changes are required to best serve the general public and TENANT. If after consultation with TENANT, CITY determines changes are warranted and required and TENANT does not agree with those changes, then CITY may impose the changes, including rescission of permission to use the Parking Spaces, upon 120-days' written notice to TENANT. EXECUTED on CITY OF MORRO BAY ATTEST ptiSD Dan�'Swanson,`�ITY CLERK awGc��s ol�i 725 Embarcadero LLC a Limited Liability Company By: By: County, California. can, Manager 01181.0024/506729.1 Master Lease 11/01 -3 6- al C 011 � 1.0024/506729.1 S/RS/Crnbciy.I�arb�r.011011.abr.I�asterLease -1 c f G o� !3 c� V D -�, D z D �� � � o D' �y� n Q � � a A n ¢' fl o D o U} Q n z C} n O a r C) ��m �p O � n (�] N z D --j „ z � o � � . � O � m � � Zi 0 D :�7 OO R .F ST��-�7 «� ��f�f ��' e •. _t Fdt ._� �S. �- ���� xt 3 s,�� (x����� � r y t�� �_ 'St,1 r; � �� C', o t i E A?.f 3z f t t 4 3L• I � i I r I r ai �0 t �a � y �. � t i' �� 4 �� q �i � XJ t t `� � } 3 l�LZBS' t Y � S� � � � `� r E p � I e �, � � -�------ i . _�.�� �� v� t ����� � �Q�� � � rr � � 1 Shtcf 8 of !3 Page l of l A tt� l ,�. t , ";-ILLI a � M�... 4 Y Ilk L � L Al I IV r - y .�ILIA .wrr � r a. .r a. IV 40 vjw ,:, N aa.i + ILL ' LVIVIVILIL .. .AAA... "n Cc� ?012 Diciiral Man Produrts. All rights rPsprvpd. 595 Harbor St. •, �,. (805) • 11 AX (805)i• Lessee shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property which may arise from or in connection with the Lessee's operation and use of the leased premises. The cost of such insurance shall be borne by the Lessee. i 1. Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001). 2. Workers' Compensation insurance as required by the State of California and Employer's Liability Insurance (for lessees with employees). 3. Property insurance against all risks of loss to any tenant improvements or betterments. l . general Liability: 2 ® Employer's Liability: 3 . Property Insurance General Liability Insurance or other M with a general aggregate limit is used, either s project/location or the general aggregate limit all be twice the required occurrence limit. ' ICI III per •- for bodily injury or disease, 11 replacement cost withno coinsurance )vision. 01181.0024/506729.1 S/RWS/Cmbcty.Harbor.011011.agr.Mas�erLease tWoo ri i' rro aj nsurance Requirements for Lessees )ptionof -r: the insurer shall reduceor eliminate deductiblesor -- etentions as respects the City, its officers, officials, employees and volunteers; or the Lessee hall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and elated investigations, claim administration and defense expenses. The general liability policy is to contain, or be endorsed to contain, the following provisions l . The City, its officers, officials, employees, and volunteers are to be covered as insureds with respect to liability arising out of ownership, maintenance or use of that part of the premises leased to the Lessee. 2. The Lessee's insurance coverage shall be primary insurance as respects the City, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, or volunteers shall be excess of the Lessee's insurance and shall not contribute with it. 3. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be canceled, except after 3 0-days' prior written notice by certified mail, return receipt requested, has been given to the City. other ItheCity's forms,provided those endorsements or policies conform o the equirements. All certificates and endorsements are to be received and approved by the City e - fore use of City premises. The City reserves the right to require complete, certified copies of ill required insurance policies, including endorsements effecting the coverage required by these eci ications at any time. 01181.0024/506729.1 Spec C 6 •'iorro nsurance Requirements for Lessees lessee Lessee shall include all sublessees as insureds under its policies or shall furnish separate certificates and endorsements for each sub -lessee. All coverages for sublessees shall be subject to all of the requirements stated herein. Insurance\SpecC Rev. 8/01 01181.0024/� 06729.1 SpecC 7 !t [TrIorro nsurance Requirements for Lessees • • !1VFF � '• "OLICY NUMBER: Commercial General Liability t NUMBER. This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART. 1 1. Designation of Premises (Part Leased to You): 2. Name of Person or Organization (Additional Insured): City of Morro Bay 3. Additional Premium: (If no entry appears above, the information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement.) �-I IS A.l®T I�SU D (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of the ownership, maintenance or use of that part of the premises leased to you and shown in the Schedule and subject to the following additional exclusions: This insurance does not apply to: 1. Any "occurrence" which takes place after you cease to be a tenant in that premises. 2. Structural alterations, new construction or demolition operations performed by or on behalf of the person or organization shown in the schedule. Modifications to ISO form CG 20 11 11 85: 1. The Insured scheduled above includes the Insured's elected or appointed officers, officials, employees and volunteers. 2. This insurance shall be primary as respects the Insured shown in the schedule above, or if excess, shall stand in an unbroken chain of coverage excess of the Named Insured's scheduled underlying primary coverage. In either event, any other insurance maintained by the Insured scheduled above shall be in excess of this insurance and shall not be called upon to contribute with it. 3. The insurance afforded by this policy shall not be canceled except after thirty days prior written notice by certified mail return receipt requested has been given to the City. Signature -Authorized Representative Address CG 20 11 11 85 Insurance Services Office, Inc. Form (Modified} InsuranceTorm#3 Rev. 8/01 01181.0024/506729.1 Spec C • a