HomeMy WebLinkAboutReso 80-20 Interim MLA 86-86WRESOLUTION NO. 80-20
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA
APPROVING A THREE-YEAR INTERIM MASTER LEASE AGREEMENT
FOR LEASE SITE 86/86W BETWEEN THE CITY OF MORRO BAY
AND LIBERTINE BREWING COMPANY, LOCATED AT 801 EMBARCADERO
THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, the City of Morro Bay is the lessor of certain properties on the Morro
Bay Waterfront described as City Tidelands leases and properties; and
WHEREAS, the Libertine Brewing Company (owner Eric Newton) has been the
major subtenant at Lease Site 86/86W since October 2015 under the current master
tenant 801 Embarcadero LLC (Burt Caldwell), doing business as the Libertine Pub; and
WHEREAS, as the current interim master lease agreement with 801
Embarcadero LLC expires on September 30, 2020 and 801 Embarcadero LLC is letting
the lease site revert to the City; and
WHEREAS, the City desires an uninterrupted tenancy of the Libertine Pub and to
enter into a new three-year interim master lease agreement with the Libertine Brewing
Company while the Libertine Brewing Company develops a Tong -term redevelopment
plan for the lease site for the City's future consideration; and
WHEREAS, in accordance with the City's new Master Lease Policy, the City and
Libertine Brewing Company have agreed to a new three-year interim master lease
agreement for Lease Site 86/86W located at 801 Embarcadero.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro
Bay, California, as follows:
1. The attached new Interim Master Lease Agreement for Lease Site
86/86W is hereby approved.
2. The Mayor is hereby authorized to execute said Interim Master Lease
Agreement.
PASSED AND ADOPTED by the City Council of the City of Morro Bay at a
regular meeting thereof held on the 22nd day of September, 2020 on the following vote:
AYES' Headding, Addis, Davis, Heller, Pherson
NOES. None
ABSENT: None
John
ATTEST:
Swanson, City Clerk
ding, Mayor
LEASE
by and between
the CITY OF MORRO BAY
("CITY")
and
LIBERTINE BREWING COMPANY
("TENANT")
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TABLE OF CONTENTS
Article 1 FIXED TERM 2
Section 1.01 Term. 2
Section 1.02 No Extensions.. 2
Section 1.03 Hold Over 2
Section 1.04 Replacement 3
Article 2 RENT 3
Section 2.01 Annual Minimum Rent. 3
Section.2,02 CPI Adjustment to Annual Minimum Rent.. 3
Section 2.03 Reserved 4
Section 2.04 Percentage Rent, 4
Section 2.05 Reimbursements 6
Section 2.06 Penalty and Interest 7
Section 2.07 Past Due Rent Resulting from COVID-19 Pandemic 7
Article 3 USE OF PREMISES 7
Section 3.01 Permitted Uses, 7
Section 3.02 Unauthorized Use 8
Section 3.03 Operation of Business - Hours of Operation 8
Section 3,04 Competition 8
Section 3,05 Environmental Considerations and Hazardous Materials. 9
Section 3,06 Tidelands Trust, 10
Section 3.07 Compliance with Law, 10
Section 3.08 Waste or Nuisance. 11
Section 3,09 Use by CITY, 11
Article 4 CONSTRUCTION,. ALTERATION AND REPAIRS 11
Section 4.01 Construction Approval 11
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Section 4,02
Section 4,03
Section 4.04
Construction Bond, 12
Mechanics' Liens 12.
Ownership of Improvements 13
Article 5 LEASEHOLD MORTGAGES 13
Article 6
Article 7'
Article 8
REPAIRS, MAINTENANCE AND RESTORATION
Section 6.01
Section. 6.02
Section 6,03
Section 6,04
Section 6.05
Section 6.06
Section 6.07
Section 6,08
Maintenance by TENANT.
Seawalls and. Revetment,
Legal Requirements,
Failure to Repair.
Inspection by CITY
TENANT'S Duty to Restore Premises
Termination of Lease for Destruction
Destruction Due to Risk Not Covered by Insurance.
INDEMNITY AND INSURANCE
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7,05
Section 7.06
Section 7.07
Section 7.08
Section 7,09
TAXES AND FEES
Section 8,01 TENANT to Pay Taxes, ....
Section 8.02 TENANT to Pay License and Permit Fees.
Section 8.03. Utilities
1.4
14.
14
14.
15
15
1.5
16
17
Indemnity Agreement.
Liability Insurance,
Worker's Compensation,
Property Insurance.
Additional Coverage.
General Requirements
No Subrogation;
TENANT'S Waiver.
Insurance Not a Limit. 21
17
17
18
18
18
19
19
20
21
21
21
21
21
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Article 9 CONDEMNATION 21
Section 9,01 Total Condemnation 21
Section 9.02 Condemnation Award. 22
Section 9,03 Termination for Partial Taking. 23
Section 9,04 Rent Abatement for Partial Taking, 23
Section 9.05 Conveyance in Lieu of Eminent Domain 24
Section 9.06 Temporary Taking. 24
Article 10 ASSIGNMENT AND SUBLEASING 24
Section 10.01 No Assignment Without CITY'S Consent. 24
Section 10.02 Change of Ownership as Assignment, 25
Section 10.03 Application for Assignment 25
Section 10.04 Probate Transfer of Assignment. 26
Section 10.05 No Sublease Without CITY'S Consent. 26
Section 10.06 Subtenant Subject to Lease Terms, 26
Section 10.07 Consent to Sublease Agreement. 27
Section 10.08 TENANT and Guarantor Remain Liable. 27
Section 10,09 Nondisturbance, 27
Article 11 DEFAULT AND TERMINATION 27
Section 11,01 Abandonment by TENANT, 27
Section 11.02 Termination for Breach by TENANT.. 28
Section 11.03 Termination for. Failure to Pay Rent. 28
Section 11.04 Lender May Cure Default. 28
Section 11.05 Damages for Breach 28
Section 11.06 Cumulative Remedies, 29
Section 11.07 Waiver of Breach. 29
Section 11.08 Surrender of Premises, 29
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Article 12 MISCELLANEOUS
Section 12.01
Section.12.02
Section 12.03
Section 12,04
Section 12.05
Section 12.06
Section 12.07
Section 12.08
Section 12.09
29
Notices. 29
Governing Law and. Jurisdiction.. 30
Binding on Successors. 30
Partial Invalidity 30
Sole and Only Agreement: 31
Modification 31
Time of Essence. 31
Reserved 31
Force Majeure, 31
Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE 32
Section 13,01 TENANT to Submit Lease Site Redevelopment Plans 32
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LEASE
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 Llbeitine Brewing
Company, a California corporation, herein. called TENANT. (CITY and TENANT, at times, are
referredto herein individually as Party and collectively as Parties)
WITNESSETH
WHEREAS, 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; and
WHEREAS, the Parties hereto recognize and agree, on. July 17, 1964, CITY 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, 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 CITY 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 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 Mono 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 herein;
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NOW, THEREFORE, 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.:
Lease Site 86/86W
This Premises 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 parthei eof by refer enee.
Article 1 FIXED TERM
Section 1.01 Term.
The term of this. Lease is a period of three years, commencing October 1, 2020 (the
"Commencement Date"). The term of this Lease will terminate without notice on September 30,
2023, unless sooner terminatedas herein provided.
Section 1.02 No Extensions.
The term of this Lease will not be extended nor will this Lease be renewed. Requestsfor
continued use of the Premises will be treated as an application for a. new lease and will require
appropriate application to the CITY with all required supporting information. and documents,
CITY Council approval and the execution of a CITY lease, containing the then most current
terms, covenants, conditions andrent. schedules.
Section 1.03Hold Over.
If TENANT holds the Premises after the expiration of the term of this Leasewith the
consentof the CITY, express or implied then such holding over (in the absence of a
writtenagreement between CITY and TENANT with respect thereto) will be deemed to create a
tenancy from month -to -month, terminable on 30-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) monthsimmediately preceding the expiration of this Lease, and otherwise
subject to each and every term, covenant and condition of this Lease.
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Section 1.04 Replacement.
Subject to the next paragraph, as of the Commencement Date, this Lease will 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, will be extinguished as of the Commencement Date.
of this Lease.
Article 2 RENT
Section 2.01 Annual Minimum Rent.
TENANT agrees to pay to CITY a minimum guaranteed annual rental for the use and
occupancy of the Premises, in an initial amount of $32,000 per calendar year (the 'Minimum
Rent'), payable in advance and at the option of TENANT either in equal semiannual installments
or equal monthly installments. If paid in equal semiannual installments, then such installments
must be on January 1 and July 1 each year during the term of the Lease. If the Commencement
Date isother than January 1 or July 1,. then TENANT must 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 January 1 or July 1, as the case may be.. If the term of the Lease
expires on a date other than December 31 or June 30, then TENANT S final installment of
Minimum Rent must be proportionate to the time remaining in the term. If paid in equal monthly
installments, then each monthly installment must. be paid no later than the tenth day of each
applicable month, All Rent, including the Minimum Rent and the Percentage Rent, must be paid
in lawful money of the United States of America, without offset or deduction and must 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.
Section 2.02 CPI Adiustment to Annual Minimum Rent.
A. The Parties agree, as of every July 1 following the Commencement Date (each, a "CPI
Adjustment Date"), the annual Minimum Rent will be adjusted in direct proportion to any upward
or downward movement in the Consumer Price Index for January 1, 2020, which is hereby agreed
to be 277.755 (Base Index) The percentage adjustment for any given year will 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 refereed to herein is the Consumer
Price Index (all items indexes, all. urban consumers) for Los Angeles — Long Beach — Anaheim,
•
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California, compiled and published by the United States Department. of Labor, Bureau of Labor
Statistics, 1982-84 Base Year . 100 (the "Index")
B, The Annual Minimum Rent will be adjusted asof 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% o
as of July 1, 2001, and would continue at that rate through June 30, 2002..
C. If the United States Department of Labor, Bureau of Labor Statistics, ceases to compile
and make public the Index as now constituted and issued,but substitutes: another index in its place,
then said substituted index must be used for the purpose of adjusting the Minimum Rent for the
Premises. If the Index is changed so the base year differs from that in effect on the Commencement
Date, then the Index must be converted in accordance with the conversion factor published • by the
United States. Department of Labor, Bureau of Labor Statistics.
Section 2.03 Reserved..
Section 2.04 Percentage Rent,
A, In addition to the. Minimum Rent, TENANT agrees to pay to CITY, at the time and in
themanner hereinafter specified, as additional Rent for the use and occupancy of the Premises, a
sum equal to the following for all TENANT'S Gross Sales as hereinafter defined
(1) 3% for restaurant/dining,
(2) 5% for fast food/convenience food,.
(3) 10% forbar/lounge andbeer and wine,
(4) 5% for retail sales,
(5) 10% for boat tie-up and
(6) 5% for all other uses,
less the amount of the Minimum Rent paid pursuant to this Lease (the "Percentage Rent").
B. The term "Gloss Sales," as used herein, means .(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
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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 fiom the business
conducted upon. the Premises.
C. Notwithstanding the other provisions of Section 2.04, the term "Gross Sales" does not
include the following items, and suchitems may be deducted from Gross Sales to the extent they
have been included therein or have been included in a pi ior 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 sellingprice 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 bythe issuerand/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 ,must keep or cause to be kept full, complete, and accurate records, and
books of account in accordancewith accepted accounting practices showing the total amount of
Gross Sales, as defined herein, made each calendar month in, on or from the Premises. TENANT
must keep said records and books of account within. San Luis Obispo County and will notify CITY
In advance of their location at all times. Furthermore, TENANT must, 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 acash 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 or
income tax returns TENANT may be required to furnish any government or governmental agency,
and income and bank statements must, at all reasonable times, be open to the inspection of CITY,
CITY'S auditor, or other authorized representative or agent of CITY, if necessary 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 must furnish CITY with a statement, to be certified
by TENANT as current, true and accurate, which must set forth the Gross Sales of each
department, sublessee, licensee and concession operating in, on or from the Premises for the
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previous. 12 calendar months, ending June 30, just concluded,. and the authorizeddeductions, if
any, therefrom; and with it TENANT must pay to CITY the amount of the Percentage Rent, which
is due to CITY as shown thereby, If TENANT, at any time, causes an audit of sales of TENANT'S
businessto be made by a public accountant, then TENANT must furnish CITY with a copy of said
audit withoutcost or expense to CITY. CITY may, once in any twelve-month period, cause an
audit of the business of TENANT to be madeby a certified public accountant or CITY personnel
of CITY'S own selection. TENANT must, upon receiving wiitten notice of CITY'S desire for such
an audit, deliver and make available all suchbooks, records andcash register tapes to the certified
public accountant or CITY personnel selected by CITY. Furthermore, TENANT must promptly,
on demand, reimburse CITY for the .full cost and expense of said audit,if the audit discloses the
questioned statement or statements understated. Gross Sales by 5 peicent or more butless than ten.
percent. In the eventan audit performed. at. CITY'S request discloses TENANT understated Gross
Sales by less than 5 percent, the cost of such audit will be: paid by CITY. In the event any audit or
other review of records discloses the amounts reported as Gross Sales were understated by
TENANT by 10 percent or more, CITY will not only be entitledto recover from TENANT all
costs of audit and review, but will .also be entitledto recover from TENANT a penalty equal to
two times the Percentage Rent due pursuant to this Lease on such unrepoi ted amounts. Whenever
any audit discloses that Gross Sales were understated by any amount, TENANT must 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 Rentwas payable until the
date paid.
F. CITY will be entitled at any time within. five years after the receipt of any such
Percentage Rent payment,. to question the sufficiency of the amount thereof or the accuracy 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 must, forsaid period
of five years after submission to CITY of any such statement, keep all of TENANT'S records,
including sales tax returns, all cash register tapes, income tax returns and income and bank
statements 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 must, upon request, makethe same available to CITY for examination.
Section 2.05 Reimbursements:
If TENANT fails to perform any term or covenant of this Lease, then. CITY may, but is not
obligated to, perform such team of covenant, and TENANT must reimburse CITY therefore as
additional Rent hereunder, As an illustration andnot as a limitation, if TENANT fails to procure
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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.
Section 2.06. Penalty and Interest.
A. If any Rent is not received within ten days following the date on which the Rent
first became due, then TENANT must pay a late penalty of ten percentof the amount of the Rent
in addition to the Rent.
B. In addition to the penalty, TENANT must pay interest at the rate of one percent per
month or fractionthereof 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 the Rent, exclusive of the
penalty, from the date on which Rent first became delinquent until paid. The term "Rent" includes
any sums advanced by the CITY and any unpaid amounts due fiom TENANT to the CITY.
Section 2.07 Past Due Rent Resulting from COVID-19 Pandemic..
TENANT was a subtenant of the Premises, pursuant to those certain expired lease and
sublease. Due to the COvID 19 pandemic (Pandemic), CITY granted a temporary delay in
payment of Rents due to CITY from it tenants of Tideland. Trust property, including TENANT'S
previous sublessor; and, therefore, TENANT'S payment of rent to its sublessor was also
temporarily delayed. The Pandemic is continuing after the Commencement Date. CITY, in its
sole discretion, shall make a final decision regarding when and if the temporarily delayed Rents
shall be paid to CITY by its tenants (Final Delayed Rent Decision). Within 30 days after TENANT
is advised, in writing, of the Final Delayed. Rent. Decision, TENANT agrees to make payment, in
full, toits sublessor of past due sub -rents in the same way that sublessor may be required tomake
payments to CITY of the temporarily delayed Rents. Notwithstanding the foregoing provisions of
this section, TENANT shall not delay in paying CITY any of the Rent due pursuant to this Lease.
Article 3 USE OF PREMISES
Section 3.01 Permitted Uses.
The Premises must, 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 No. , of any other use permits approved by CITY in its
governmental capacity, as they may be amended from time to time, and for no other purpose. At
the Commencement Date, such uses include restaurant and food service, bar and retail sales and a
clock for commercial and pleasure vessels and including passenger -for -hire vessels,
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Section 3.02 Unauthorized Use.
TENANT agrees to: allow only those uses authorized in Section.3,01, hereinabove and any
unauthorized use thereof constitutes a breach of this Lease and may, at the option of CITY,
terminate this Lease.
Section 3.03 Operation of Business - Hours of Operation.
Failure to actively .and diligently conduct the business authorized herein constitutes a
breach of this Lease and may, at the option of CITY, terminate this Lease,
A. TENANT must, 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 andwithout interruption for at least
six hours each day of the year, except one day eachweek and legal holidays. This provision does
not. apply if the Premises is closed and the business of TENANT is temporarily shut downfor a
period not to exceed 14 calendar days in any calendar year to make necessary repairs, maintenance
or other construction deemed necessary by TENANT. This provision does not apply if the
Premises is 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 days outof respect to the memory of an officer, employee, or close
relative of any officer or employee of TENANT,
B, 'TENANT must operate TENANT'S business on the Premises with due diligence
and efficiency and m like manner as comparablebusinesses operated in CITY or the coastal area
of San Luis Obispo County,. so as to produce the maximum amount of Gross Sales and gross
receipts fromservices, which maybe produced from TENANT'S business; and TENANT at all
times must carry on Premises, a stockor 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.
Section 3.04 Competition.
During the termof this Lease,. TENANT must not directly nor indirectly acquire or
establish any similai or competing business within a. radius of five miles from the location. of the
Premises, provided, however, that TENANT may, with prior written approval from CITY, own or
operate more thanone business, whetheior not competing and similar,. along the Enibarcadero
upon one or more 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 Premises to another
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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.
Section 3.05 Environmental Considerations and Hazardous Materials.
A. TENANT must, at all times, comply with applicable environmental regulations,.
including, where applicable and practical, government- and industry -adopted environmental best
management practices and programs,
B. TENANT must 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 "Hazardous Material" for purposes
hereof means any chemical, substance, material or waste or component thereof which is now or
hereafter listed, definedor 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
jurisdiction, or which would trigger any employee or community "right -to -know" requirements
adopted by any such body. All Hazardous Materials Activities at the Premises must be conducted
strictly in accordance with all applicable laws and regulations. If TENANT transports, or has
transported, any hazardous waste from the Premises, then such transportation must be done only
by a contractor duly licensed to haul hazardous waste and only a duly licensed site approved. by
TENANT'S liability insurer must be used for disposal of that hazardous waste.
C. TENANT must promptly notify CITY of: (i) any enforcement, cleanup or other
regulatory action takenor 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, (ii) 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 (rii) any matters where TENANT is required by applicable law to give a notice to
any governmental or regulatory authority respecting any Hazardous Materialon the Premises.
CITY has 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 any
legal proceedings or actions affecting the Premises initiated in connection with any environmental,
health or safety law,
D, 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
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provisions, TENANT must immediately notify CITY.. CITY may elect either to take such remedial
action as CITY deems appropriate, inwhich event TENANT must reimburse CITY for all costs
thereof within tendays after demand, or direct TENANT to perform such remediation. If CITY
directs TENANT to perform the remediation, then TENANT must immediately take such remedial
action, as CrrY directs, TENANT must, 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 fails_ to comply with the provisions of this Section within five days after written notice
by CITY, or such shorter time as may be required by applicable lava or in orderto minimize any
hazard to personsor property, then CITY may (but is notbe obligatedto) grange for such
compliance directly or as TENANT'S agentthrough contractors or other parties selected by CITY
at TENANT'S expense (without limiting CITY'S other remedies under this Lease or applicable
law).
Section 3.06 Tidelands Trust,
In addition. tothe obligations set forth in this Article, TENANT must use and occupy the
Premises in. strict compliance with the Tidelands Trust purposes,as established by law or
Interpretation. of the California State Lands. Commission.
Section 3.07 Compliance with Law,
TENANT must, at no cost to CITY, comply with all of the requirements of all local,.
municipal, county, state and federal authorities now in force, or which may hereafter be in force,
pertaining to the Premises, and faithfully observe in the use of the Premises all local, municipal
and county rules, regulations and 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 TENANTwill not be requited to comply with any Legal Requirement imposed by
CITY that would substantially deprive TENANT of a material benefit under this Lease, unless
such Legal Requirement has been imposed or required (i) by a county, state or federal authority or
(ii) to preserve public health and safety and applied to similar businesses within CITY'S
jurisdiction., 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 will be conclusive
of that fact as between CITY and TENANT.
01181,0020(669016,1 JWP 40n
Section 3.08 Waste or Nuisance.
TENANT must not commit or permit the commission by others of any waste on the
Premises TENANT must not maintain, commit, or permit the maintenance of commission of any
nuisance as defined by law on the Premises; and TENANT must not use or permit the use of the
Premises for any unlawful purpose,
Section 3.09 Use by CITY.
A. Subject to TENANT'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.
B. 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.
Article 4 CONSTRUCTION, ALTERATION AND REPAIRS
Section 4.01 Construction Approval.
A, TENANT must 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 exceeds Ten Thousand Dollars ($10,000), without
the prior writtenconsent of CITY. The consent to be obtained pursuant to this Section 4.01(1)
must 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, then it is understood 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 all applicable land use
entitlement processes.
B. Where required by the Morro. Bay Municipal 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 must be applied for and approved prior to any construction,
alteration or repairs.
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Section 4,02. Construction Bond.
A. Prior to the commencement of any •construction. the cost of which is greater than
the amount • of One Hundred Thousand Dollars ($100,000), TENANT must file; with CITY'S City
Clerk, a final detailed Civil Engineer's, Registered Architect's ox Licensed and Bonded General
Contractor's estimate of the cost of construction and installationof improvements onthe Premises.
Said estimate must be submitted to CITY'S City Engineer for approval. TENANT must file with
the. 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 inexcess of 1.O. % of the final
detailed cost estimate, securing the faithful peifoimance of TENANT or its contractor in the
completion of said. construction.
B. TENANT must also file with. the City Clerka labor and materials bond, in a form
and issued by a corpoiate surety company satisfactory to CITY, in an amount satisfactory to CITY,
but not in .excess of 100% of the final detailedcost estimate, securing the payment of all claims
for the performance of labor of services on, or the furnishing of materials for, the performance of
said construction.
C. 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
mdemnitee to comply with these requirements.
Section:4.03 Mechanics' Liens,
At all times during the term of this Lease,. TENANT must .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 andindemnify and defend 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. If TENANT fails to pay and discharge or cause
the Premises to be released from such liens or claim of hens within 10 days after the filing of such.
lien or levy, then. TENANT must, upon written notification, immediately deposit with CITY a
bond conditioned foipayment in filly of all claims on which said lien or levy has been filed. Such
bond must be acknowledged by TENANT as principal and by a company or corporation licensed
by the Insurance Commissioner of the State of California to transact the business of a fidelity and
surety insui ante company as surety. The beneficiary of any security instrument which instrument
is on record with CITY, must have the right to file a claim for payment from such a bond on behalf
01181.0024/669016.1 JWP "12'
of TENANT. CITY has the right to post and keep posted on the Premises notices of non-
responsibility and any othernotices thatmay be provided by law or which CITY may deemproper
for the protection of CITY and Premises from such liens. TENANT must give CITY notice at
least 20days prior to commencement of any work on the Premises to afford CITY the .opportunity
to post such notices.
Section4.04 Ownership of Improvements.
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 days prior to the termination of this
Lease, of its decision to require such improvements be removed. The Parties agree, if CITY
exercises its option, then at the termination of this Lease, however occurring, TENANT will have
sixty days thereafter to rernove all buildings, structures, facilities, installations, improvements and
other property belonging to TENANT from the Premises, If CITY exercises such option. and
TENANT failsto remove all .such improvements and other property within sixty daysafter the
termination of this Lease, then CITY has 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 rernove (or
require the removal of) the improvements and other property, then title to such improvements and
other property vests in CITY and TENANT must not remove same.
Article 5 LEASEHOLD MORTGAGES
Tenant must not mortgage, securitize or hypothecate the leasehold interest created
by this Lease in whole or any part, without the prior written approval of CITY, as evidenced by a
resolution of the City Council. of CITY.
CITY will not approve financing related to or using that leasehold interest created
by this Lease as collateral, unless such financing is (i) to install or construct capital improvements
an the Premises, (ii) to install or construct CITY -requested public improvements or provide other
benefits in the Tidelands Trust area, the latter as approved by the Harbor Director or (iii) to reduce
the interest rate of existing approved debt secured by leasehold interest created by this Lease
without redeeming any equity in the leasehold interest.
01181.0024/669016.1 JWP -13-
Article 6 REPAIRS, MAINTENANCE AND RESTORATION
Section 6.01 Maintenance. by TENANT.
At all times during the term of this Lease, TENANT must, at TENANT'S own cost and
expense, keep and maintain, in good order and repan andin a safe and "broom clean" condition,.
all improvements now or hereafter on the Premises, .including any public spaces, common areas,.
rights -of -.way,. sidewalks and other areasof spaces, even if not on the Premises but utilized as part
of TENANT'S business operations, Furtheimore, TENANT must, at TENANT'S own cost and
expense, maintain at all times during the term of this Lease the whole of the Premises and other
areas utilized for TENANT'S business operations as described above m a clean, sanitary, neat and
orderly ` broom clean" condition. CITY may, at the sole option of CITY,but not obligation,, clean,
clear, maintain or repair the Premises, any improvements thereonor areas used by TENANT, as
described above, at TENANT'S. cost and expense, in the event TENANT falls to clean, clear
maintain or make repairs, in accordance with this Section to the satisfaction of CITY, after 15-
days' writtennotice to TENANT from CITY of CITY'S intent to exercise this option.
Section 6.02 Seawalls and Revetment.
At all times during the term of this Lease, TENANT must, 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 must, at TENANT'S own cost and expense, conduct
maintenance andstructural inspections,. evaluations or suiveys, by a qualified individual or firm,
at reasonable intervals not to exceed ten years, to locate and determine needed maintenance, repairs
or replacements of these improvements.
Section 6.03 Legal Requirements.
At all times during the term of this. Lease, TENANT, at no cost to CITY,, must:
(1) Make all alterations, additions, of repairs to the Premises or the
improvements or facilities on the Premises required by any Legal Requirements (as defined in.
Section 3,07, above);
(2) Observe and comply with. all Legal Requirements 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: theinitiation of any repair or maintenance activity and
(4) Indemnify, defend andhold harmless. CITY and the property of CITY,
including the Premises, from any and all liability, loss,. damages, fines, penalties, claims and
01181.0024/669016.1 JWP -14-
actions resulting, from TENANT'S failure to comply with and perform the requirements of this
section.
Section 6.04 Failure to Repair.
In the event failure to repair results in a hazardous or unsafe condition, CITY has 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 foi public use.
In addition, if TENANT fails to repair any hazardous or unsafe condition within ten days after
written notice thereof from CITY, then CITY has the right, but not the obligation, to perform such
repair at TENANT'S expense. TENANT must 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 does not constitute a waiver of these provisions and CITY may, at any
time, enforce all of the provisionsof this Article, requiring all. necessary repairs, rebuilding or
replacement.
Section 6,05 Inspection by CITY,
CITY or CITY'S agents, representatives, or employees may enter the Premises at all
reasonable times for the purpose of inspecting the. Premises to determine whether TENANT is
complying with the terms of this Lease and foi the purpose of doing other lawful acts that may be
necessary to piotect CITY'S interest in the Premises under this Lease or to perform CITY S duties
under this Lease or in its governmental capacity.
Section 6,06 TENANT'S Duty to Restore Premises.
A. 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, then this Lease will continue in full force
and effect and TENANT,. at TENANT'S own cost and expense, must repair and restore the
damaged or destroyed improvement(s) according to the original plan thereof or according to such
modified plans therefor as are approved in writing by CITY. The work of permitting, repair and
restoration must be (i) commenced by TENANT within 180 days after the damage or destruction
occurs, (i1) pursued with due diligence, and (ii1) completed not later than 12 full calendar months
after the work is commenced, unless the Parties mutually agree, in writing, to an extension. In all
other respects, the work of repair and restoration must 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
constitutes a material default under this Lease.
01181,0024/669016.1 JWP -i 5-
B. 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 will be paid to
TENANT and applied by TENANT toward the cost of repairing and restoring the damaged or
destroyed improvements in the mannerrequired by this Section 6.06, or, if this Lease is terminated,
then applied as provided in Section 6,07.. Except asset forth in Section 6.08 below, TENANT'S
obligation to restore pursuantto this Section exist whether or not fundsare available from
insurance proceeds.
Section 6.07 Termination of Lease for Destruction.
A. Notwithstanding the provisions of Section 6.06 of this Lease, TENANT has the.
option of terminating this Lease as provided in this Section 6.07 if any improvement now or
hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault
of TENANT or CITY, the improvement cannot be repairedand restored as required by
Section 6,06 of this Lease at a cost not exceeding 35 percent of the cost of replacing all
improvements if they .had been totally destroyed atthe time of such damage.
B. TENANT may exercise its right to terminate pursuant to this Section 6.07 by
providing written notice. to CITY within 180 days following. damage or destruction as described
herein. Such termination is effective on the last day of the calendar month following themonth in
which TENANT provides its notice.
C. If TENANT fails to commence or complete repair and restoration as required by
Section 6.06, then CITY has all lights and remedies. with respect to TENANT'S default, including,
but not limited to, termination of this Lease pursuant to Article 11.
D. If this Lease is terminated as a result of damageor destruction, then any insurance.
proceedsreceived with respect to the improvements: will be applied or distributed in the following
order:.
(1) first, to the demolition of the improvements and removal of all demolition
debris; then
(2) to any accrued and unpaid Rent as of the effective date of the termination; then
(3) 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
(4) to CITY, an amount equal to the present value, as of the date of termination, of
the total Minimum Rent for the remainder of the Term; then
01181.0024/669016.1 JWP '16-
(5). the remaining proceeds,if any, to TENANT.
Section 6.08 Destruction Due to Risk Not Covered by Insurance.
Notwithstanding anything to the contrary in Section. 6.06 of this Lease, TENANT has the
right to terminate this Lease, at any time, if the improvements on 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 50 percent of the fair market value of
all the improvements on. the Premises immediately priorto the damage or destruction.
Article 7 INDEMNITY AND INSURANCE
Section 7.01 Indemnity Agreement.
A. TENANT hereby agrees to indemnify, defend and hold harmless CITY, and the
property of CITY (including the Premises and any improvements now or hereafter on the
Premises), and CITY'S officers, officials, employees and volunteers from any and all liability,
claims, loss, damages, and expenses, including ieasonabie attorney's 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 officers, subtenants, employees, contractors, invitees or anyone for
whom TENANT may be liable, specifically including, without limitation, any liability, claim, loss,
damage, or expense wising by reason of:
(1) The death or injury of any person, including TENANT or any person who is an
officer, employee, Conti actor,subtenant, invitee 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 Premisesor in any way connected with the Premises or with any of the improvements or
personal property on the Premises;
(2) The death or injury of any person, including TENANT or any person who is an
officer, employee, contractor, subtenant, invitee 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
officer, employee, Conti actor, subtenant, invitee or agent of TENANT, caused or allegedly caused
by either (i) the condition of the Premises or any improvement placed on the Premises by
TENANT, or (ii) 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;
01181.0024/669016.1 JWP -17-
(3) Any work performed on the. Premises or materials furnished to the Premises at
the. insistence or iequest of TENANT or any person or entity acting for or on behalf of TENANT;
(4) `iENANT'S failure to perform any provisionof this Lease or to comply with
any Legal Requirement imposed on TENANT or the Premises.
B, TENANT'S obligations pursuant to this Sectionto indemnify and hold harmless do not
extend to any liability, claim, loss,damage or expense arising from CITY'S active negligence or
willful misconduct.
Section 7.02 Liability Insurance.
During the termof this Lease, TENANT must maintain at its cost Commercial General
Liability insurance with coverages as described in. CITY"S .HARBOR DEPARTMENT LEASE
MANAGEMENT POLICY, as may be updated or changed from time to time at the sole discretion
of the CITY. Such coverages must insure against claims for bodily injury (including death),
property damage,. contractual liability, personal injury and advertising injury occurring on the
Premisesor from operations located in any part of the Premises. Such insurance mustafford
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 ageneral aggregate
limit is used, then either the general aggregate limit will apply separately to the Premises of the
general aggregate limit will be twice the occurrence limit stated in this Section. All liability
insurance carried by TENANT hereunder will name CITY, its officers, officials,employees and
volunteers as additional insureds,, and be primary insurance with respect to such .additional
insureds; TENANT must include all its subtenants as insureds under TENANT'S liability policies
or furnish separate certificates and endorsements for each. subtenant. All coverages for subtenants
must comply with all requihements of this Article Seven.
Section 7,03 Worker's Compensation.
TENANT must maintain at TENANT'S own expense and keep in full forceand effect
during the term of this Lease, Worker's Compensation Insurance as provided by law, Said
insurance must containa waiver of subrogation rights against CITY; TENANT must also maintain
employer's liability insurance with minimum coveiage of $1,000,000 per accident for bodily injury
or disease.
Section 7.04 Property Insurance..
TENANT must, 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 alladditions, improvements and
01181:00241669076.1 JWP
-18-
betterments thereto, insured for 100. percent) 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 coverage under such insurance must be payable to
TENANT, CITY, and any Lender under a Leasehold Encumbrance approved pursuant to Article 5 of
this Lease, as their interests may appear, and such proceeds must be used and applied in the manner
requiredby Article 6 of this Lease,
Section 7.05 Additional Coverage.
TENANT must also maintain, at its sole expense, the insurance described in this
Section 7.05.
A. 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 must maintain liquor
liability coverage in appropriate amounts. TENANT must 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.
B. TENANT must maintain "all risk" (excluding earthquake) property damage insurance
covering.'I'ENANT's personal property located at the Premises, in amounts not less than the full
replacement value of such personal property. CITY has no interest in the proceeds of such
insurance.
C. TENANT must obtain and maintain any additional insurance coverages CITY may
reasonably require, As illustration only and not as a limitation, in appropriate circumstances such
additional insurance may include increased general liability limits,business interruption coverage,
business automobile liability boiler and machinery insuranceor builder's risk insurance.
TENANT, however is not required to maintain additional coverages that are in excess of those
typically maintained by similarly situated tenants in the Morro Bay area,
Section 7.06 General Requirements,
Except as specifically provided to the contrary, all the insurance required pursuant to this
Article Sevenis subject to the requuernents of this Section 7.06.
A. 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 must forward CITY'S
specifications and forms to TENANT'S insurance agent for compliance.
01181.0024/66901641 awr -19-
B. CITY may, at any time, require TENANT to increase the minimum coverage limits for
insurance required by this Lease, but every such increase must be seasonable under the
circumstances.
C. Allpolicies must be issued by insurance companies authorized to issue such insurance
in California, with an.A.M. Best'srating of no less than A:VIZ.
D. Any deductibles or self -insured retentionsmust be declaredto and approved by CITY.
Atthe option of CITY, either: (i) the insurer must reduceor eliminate such deductibles or self -
insured .retentionsas respects. CITY, its officers, officials, employees andvolunteers or (ii)
TENANT. mustprovide a financial guarantee satisfactory to CITY guaranteeing payment of losses
and related investigations,claim. administration and defense expenses.
E. Each insurance policy required by this Lease must be endorsed to state coverage will
not be cancelled or reduced, except after 30-days' prior written notice by certified mail, .return
receiptrequested, has been given to CITY.
F. TENANT must furnish CITY with certificates and amendatory endorsements effecting
the coverage required by this Lease. The endorsements must be on forms provided by CITY or on
other than CITY's forms; provided, that those endorsements or policies conform to the
requirements. All certificatesand endorsements are to be received and approved by Cfi Y 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.
G. TENANT'S insurance coverage must be primary insurance as respects CITY, its
officers, officials, employees,. and volunteers. Any insurance or self-insurance maintained by
CITY, its officers, officials, employeesor volunteers will be excess of TENANT'S insuranceand
will notcontribute with it.
Section 7.07 No Subrogation.
TENANT agrees, in the event of loss due to any of the perils for which it has agreedto
provide insurance, TENANT will.. look solely to itsinsurance for recovery. TENANT hereby
grants to the CITY, on behalf of any insurei 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 TENANT may acquire against CITY by virtue of the payment of any loss
under such insurance. Each insurance policy requiredunder this Lease, including those insuring
TENANT against claims, expense, or liability for injury to persons or property, must provide the
insurei will not acquire by subrogation any right to recovery.
01181.00241669016, I JWP -20`
Section 7.08 TENANT'S Waiver.
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, to the extent TENANT fails to acquire insurance,
TENANT will not have any claim against. CITY for any loss that results from a risk or peril that
would have been included in such insurance.
Section 7.09 Insurance Not a Limit.
The insurance requirements of this Article are independent of, and do not limit or modify,
TENANT'S indemnification,defense, hold harmless and other obligations pursuant to this Lease.
Article 8 TAXES AND FEES
Section 8.01 TENANT to Pav Taxes.
TENANT must pay, beforedelinquency, all taxes and assessments .levied upon or assessed.
to TENANTon the Premises by reason of this Lease or of any equipment, appliances,
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 must pay all possessory interest taxes applicableto the Premises,
Section 8.02 TENANT to Pav License and Permit Fees.
TENANT must pay any fees imposed by Legal. Requirements for. licenses or permits for
any business or activities including construction. by TENANT upon the Premises.
Section 8.03 Utilities.
TENANT must (i) pay, or cause tobe paid and (ii) hold harmless CITY and the property
of CITY,including the Premises,from all charges for the furnishing of gas, water, electricity,
telecomrnunicatron 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.
Article 9 CONDEMNATION
Section 9.01 Total Condemnation.
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 will be considered
01181,0024/669016,11WP -21-
terminated on the date that possession of the Premises is taken; and both CITY and TENANT will
thereafter be released from all obligations, including Rent, all of which will be prorated to the date
of termination, except those specified in Section 9.02 of this Lease.
Section 9,02 Condemnation Award.
Any compensation or damages awarded or payable because of the permanent taking of all
or any portion of the Premises by eminent domain will be allocated between CITY and TENANT
as follows:
A. All compensation or damages awarded or payable for the taking by eminentdomain of
any land that is part of the Premises will 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.
B. All compensation or damages awarded or payable which is specifically attributed by
the taking party to the "good will' of TENANT'S business willbe paid to and be the sole property
of TENANT.
C. 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, will be applied in the manner specified in Section 9.04 toward the
replacement of such improvements with equivalent new improvements on the remaining portions
of the Premises.
A. All compensation or damages awardedor payable because of any improvements
constructed or located on the portion of the Premises taken by eminent. domain where this Lease
isterminated because of the taking by eminent domain, whether all or only a portion of the
Premises is taken by eminent domain, will be allocated between CITY and TENANT as follows:
(1) That percentage of the compensation or damages awarded or payable because
of theimprovements that equals thepercentage of the fullterm of this Lease that has, at the time
of the taking, not expired will belong to and be the sole property of TENANT.
(2) 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,. expired will belong to and be the sole property of CITY.
0118L0020669016.17WP '22"
(3) The term "time of taking," as used in this Section, means 12:01 a.m, of the date
the agency or entity exercising the eminent domain power, takes title to or the date it takes physical
possession of the portion of the Premises, whichever first occurs,
E. Any severance damages awarded or payable because only a portion of the Premises is
taken by eminent domain will be the sole and separate property of CITY.
Section 9.03 Termination for Partial Taking.
If, during the term of this Lease, title and possession of only a portion of the Premises is
taken for any public or quasi -public use under any statute, or by right of eminent domain, then
TENANT may, at TENANT'S option, terminate this Lease by serving written notice of termination
on CITY within 90 days after TENANT has been deprived of actual physical possession of the
portion of the Premises taken for such public use. This Lease will 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 on the. Premises or any portion of the Premises created by TENANT under this
Lease will also terminate and the Premises must be delivered to CITY free and cleat 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 attoin to CITY and continue suchsubtenant's
occupancy on the Premises as a TENANT of CITY. On termination of this Lease pursuant to this
section, however, both CITY and TENANT will be released from all obligations under this Lease,
except those specified in Section 9.02 of this Lease.
Section 9.04 Rent Abatement for Partial Taking.
If, during the term of this Lease, title and possession of only a portion of the Premises is
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 will terminate as to the portion of the
Premises taken under eminent domain on the date actual physicalpossession 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 will, 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 will make a good faith effort to ieplace any improvements
or facilities with equivalentnew facilities on the remaining portion of the Piemises 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,
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Section 9.05 Conveyance in .Lieu of Eminent Domain.
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 will. be considered a taking of
title to all of such portion of the Premises under the power of eminent domain subject to the
provisions of this. Article.
Section. 9.06 Temporary Taking.
If the possession of the Premises or any portion thereof are 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 will not terminate .(except as provided in this Section
9.06) and TENANT must continue to perform .all its obligations hereunder, except only to the
extent TENANT is prevented from performing suchobligations by reasonof such taking
TENANT will be entitledto receive the entire amount of compensation or damages awarded
because of such temporary taking. If a temporary taking extends for more. than 3.6 months, then
TENANT will have the right to terminate this Lease, and TENANT will be entitled toreceive; out
of the compensation or damages awarded because of such temporary taking, theamount that is
attributable to the period of time up until the effective date of TENANT'S termination of this Lease.
Article 10 ASSIGNMENT AND SUBLEASING
Section 10.01 No Assignment: Without CITY'S Consent.
Except as providedin this Article 10, TENANT must not assign or otherwise transfer this
Lease, any right or interest in: this Lease, or any right or interest in the Premises or any of the
improvements that may now or hereafter be constructed or installed on the. Premises without the
expresswritten consent of CITY first had and obtained. Any assignment or transfer by TENANT
without the prior written consent of CITY, as evidenced by a resolution of the City Council,
whether it be voluntary or involuntary, by operation of law or otherwise, is void and may, at the
option of CITY, terminate this Lease. A consent by CITY to one assignment will not be deemed
to be a consent to any subsequent assignment of this Lease by TENANT, CITY will not
unreasonably nor arbitrarily withhold its appioval 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 TENANT'S qualifications are a part of the consideration for granting
of this Lease and said party does hereby agree to maintain active control and supervision of the
operation conducted on the Premises.
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Section 10,02 Change of Ownership as Assignment.
For purposes of this Article 10, the .following transactions will be deemed to be
assignments or transfers:
A, If TENANT is a partnership or limited liability company:
(1) A change in ownershipeffected voluntarily, involuntarily, or by operation of
law, within a 12-month period, of 25 percent or more of the partners or members or 25 percent or
more of the partnership or membership interests; or
(2) The dissolution. of the partnership or limited liability company without its
immediate reconstitution.
B. 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):
(1) The sale or other transfer within a 12-month period, of more than an aggregate
of 25 percent of the votingshares of TENANT (other than to immediate family members by reason
of gift or death); or
(2) The dissolution, merger, consolidation, or other reorganization of TENANT.
Section 10.03 Application for Assignment.
A condition of an assignment is TENANT must file with CITY an application to assign its
leasehold interest prepared by the prospective assignee. Concurrently with filing the application,
TENANT must pay a reasonable fee associated with the cost of processing said application, in
cash or certified or cashier's check to enable CITY adequately to investigate the proposed
assignee's qualifications, financial reliability and suitability as a permitted assignee. CITY is not
be required to account for the use of the sum paid. If the proposed assignee's net worth, financial
.
reliability and qualificationson the date of assignment are not sufficient to reasonably guarantee
successful operation of the Premises in compliance with all applicable CITY, County, State and
federal requirements, then 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 means the amount by which the total of all assets exceed the total of all
liabilities as determined in accordance with general accepted accounting. principles as approved by
CITY S auditor, or other authorized representative or agent.
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Section 10.04 Probate Transfer of Assignment.
If TENANT is an individual, nothing herein contained will prevent the transfer of this
Lease by trust, will, or by operation of law under the intestacy piovisions of the .California Probate
Code as it may be amended from time to time. Probate sale of the leasehold interestwill not be
permitted without the consent of the CITY, evidenced by a City Council resolution, first had and
obtained.
Section 10.05 No Sublease Without CITY'S Consent.
TENANT must 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
Piemises, or any portion. thereof, without the prior written consent of CITY's Harbor Director, or
any future successor to the duties of the City's Harbor Director. The process for obtaining that
consent will not begin until TENANT has filed an application to sublease and paid a reasonable
fee, as determined by CITY, associated with the cost of processing the application. A consent to
one subletting, occupation, licensing or use will 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 isvoid, and may, at CITY'S option,. terminate this Lease. CITY will 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 will be in CITY'S sole and absolute
discretion, Notwithstanding any provisions herein to the contrary, the terms "assignment,"
"subletting," "occupation,' or "use,' are not tobe construed or .interpreted to mean or include the:
temporary, short-term renting or leasing of boat slips, motel, hotel, or apartment accommodations,.
if any, on the Piemises..
Section 1.0.06 Subtenant Subject to Lease Terms.
Any and all subleases must be expressly made subject to all the terms, covenants, and
conditions of this Lease. In no event will the term ofany 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 also terminates any andall subleases. A breach of the termsof this Lease by a subtenant
constitutesa breach on the part of TENANT and subjects 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 constitutes a breach of this Lease. TENANT hereby
agrees to and does guarantee payment of such Percentage Rent due by a subtenant under the terms
of this lease.
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Section 10.07 Consent to Sublease Agreement.
Prior to any consent by CITY to any sublease hereof', TENANT, CITY andany subtenant
must haveexecuted the CITY'S Consent to Sublease Agreement making CITY a third party
beneficiary, whereby the subtenant agrees to be bound by all of the terms, covenants and conditions
of this Lease. Further, it is agreed by TENANT any default by the subtenant of any of the terms
covenants and conditions of this Lease will be a violations by TENANT of this Lease and all
remedies of CITY for such violation, including termination of this Lease, may immediately be
enforceable by CITY against TENANT. TENANT must apply any and all monies received from
any subtenant first to the payment of obligations of the subtenant to CITY.
Section 10.08 TENANT and Guarantor Remain Liable.
Prior to approval by CITY to any sublease hereof, TENANT must 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 must agree. CITY may proceed directly against TENANT for
any obligation owed to CITY by the subtenant. If this Lease is guaranteed, then neither the
sublease nor CITY'S approval thereof will release the guarantor from its obligations pursuant to
the guaranty.
Section 10.09 Nondisturbance.
On the terms set forth below, CITY may enter into agreements with subtenants
establishing, 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 thatsublease had been entered into directly between CITY and such
subtenant, conditioned upon such subtenant's agreement to attorn to CITY 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.
Article 11 DEFAULT AND TERMINATION
Section.11.01 Abandonment by TENANT.
If TENANT breaches this Lease and abandon all or any part of the Premises prior to the
scheduled expiration of the term of this Lease, then CITY may continue this Lease in effect by not.
terminating TENANT'S right to possession of the Premises,in which event CITY may, at its
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option, enforce all CITY'S rights and remedies under this Lease including the right to recover the
Rent specified in this Leaseas it becomes due under this Lease..
Section 11.02. Termination for Breach by TENANT.
All. covenants and agreements contained in this Lease are declared to be conditions to this
Lease and to the term hereby demised to TENANT, If TENANT fails to perform any covenant,
condition, or agreement contained in this Lease, except for payment. of any Rent or other monetary
amountdue, and such failure is not. cured within 30 days: after written notice thereof is served on.
TENANT, then CITY may terminate this Lease immediately,andin the event of such termination,.
TENANT will have no further rights hereunder and TENANT must thereupon .forthwith remove
from the Premises and will have no further right o1 claim thereto and CITY will immediately
thereupon have the right to re-enter and take possession of the Premises,: subject only to appropriate
legal process.
Section 11,03 Termination for Failure to Pay Rent.
If any payment of Rent is not made as herein provided and such failure to pay is not cured
within three days aftei written notice thereof is served on the TENANT, then CITY will have the
option to immediately terminate this Lease; and inthe event of such termination, TENANT will
have no further right or claimthereto and CITY will immediately thereupon have the right to re-
enter and take possession of the Premises, subject only to appropriate legal process.
Section 11.04 Lender May Cure Default.
CITY hereby affords the lender under any Leasehold Encumbrance: of record with CITY the
right to cure any default by TENANT of the covenants, conditions, 01 agreements hereof, as provided
in Article 5 of this Lease.
Section 11,05 Damages for Breach.
If TENANT defaults in the performanceof 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. Bring an action to recover from TENANT:.
(1) The worth: atthe time of award of the unpaid Rent which had been earned at the
timeof termination of the Lease;
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(2) 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;
(3) 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 proves
could be reasonably avoided; and
(4) Any other amount necessary to compensate CITY for all detriment proximately
caused by TENANT'S failure to perform its obligations under this Lease; and
B. 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.
Section 11.06 Cumulative Remedies.
The remedies available to CITY in this Article are not exclusive, but are cumulative with
and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this
Lease.
Section 11.07 Waiver of Breach.
The waiver by CITY of any breach by TENANT of any of the provisions of this Lease
does not constitute a continuing waiver or a waiver of any subsequent breach by TENANT either
of .the same of a different provision of this Lease.
Section 11.08 Surrender of Premises.
On expiration or sooner termination of this Lease, TENANT must surrender the Premises,
and, subject to Section 4.04, all irnprovements 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,
Article 12 MISCELLANEOUS
Section 12.01 Notices..
Any and all notice or demands by or from CITY to TENANT, or TENANT to CITY, must
be in writing. They must be served either personally, or by iegistered or certified. mail. Any notice
or demand to CITY must be given to:
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with a copy to;:
Harbor Director
1275 Embarcadero.
Morro Bay,, CA 93442
City Manager of the City of Morro Bay
City Hall
595 Harbor Street
Morro Bay, CA 93442
Any notice or demand to TENANT must be given at:
Libertine Brewing Company
Attn: Eric Newton
2436 Broad Street
San Luis Obispo, C:A. 93401.
Such addresses may be changedby written noticeby either Party to the other Party.
Section 12.02 Governing Law and Jurisdiction.
This Lease, and all matters relating to this Lease, are governed by the laws of the State of
California. in force at the time any need for interpretationof this Lease or any decision concerning
this Lease arises. CITY and TENANT consent to exclusive personal and subject matter 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 such court isnot a convenient forum. Each Party hereby
specifically waives the provisions of California Code of Civil Procedure Section 394, and any
successor statute thereto.
Section 12.03 Binding on Successors.
Subject: to the provisions herein relating to assignment and subletting, each and all of the
terms, conditions,and agreements herein contained will be binding upon andinure to the benefit
of the successors and assigns of any and all of the Parties; and all of the Parties hereto are jointly
and severally liable hereunder.
Section 12.04 Partial invalidity.
If any provision of this Lease is held by a court of competent jurisdiction to be either
invalid, void, oz unenforceable then. the iemaming provisions of this Lease will remain in full
force andeffect unimpaired by the holding.
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Section 12.05 Sole and Only Agreement.
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 any other agreements or representations respecting the Piemises 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 Commencement Date,
Section 12.06 Modification.
This Lease can only be modified, amended or altered pursuant to a. written amendment
executed by the Mayor and attested to by City Clerk, pursuant to prior City Council approval.
Notwithstanding City Council approval, no amendment will become effective until it is in fact
executed by the Mayor and attested to by City Clerk and approved as to form by the City Attorney
(or designee), TENANT understands this Lease cannot be modified, amended or altered by oral
statements by any person representing CITY, including the Mayor and City Clerk. TENANT
specifically agrees not to rely on oral statements, purported .oral waivers, or purportedoral
modifications and agrees not to rely upon purported written modifications unless they meet the
requirements of this Section. If the title of any person authorized to act for CITY under this Lease
is changed during the term. of this Lease then the person who succeeds to substantially the same
responsibilities with respect to CITY will have the authority to act for CITY under this Lease.
Section 12.07 Time of Essence.
Time is expressly declared to bethe essence of this Lease.
Section 12.08 Reserved.
Section 12.09 Force Maieure.
If either Party hereto is delayed or hindered in or prevented from the performance of any
act required hereunder by reason of a strike, lock -out, labor trouble, inability to procure materials,
failure of power, governmental moratorium, riot insurrection, war, pandemic or other reason of a
like nature not the fault of the Party delaying in performing work or doing any act required under
the terms of this Lease, then performance and doing of such act will be excused for the period of
such delay. The Parties understand and agree, the foregoing will not extend any period of time for
the payment of Rent or other sums payable by either Party or any period of time for the written
exercise of an option or right by either Party.
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Article 1•3 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE
The following provisions apply to this. Lease site only:
Section 13.01 TENANT to Submit Lease Site. Redevelopment Plans
No later than. September 30, 2021, TENANT shall .submit for CITY'S consideration a
complete application for iedevelopment of the Premises, to include at a minimum the following
elements:
A. TENANT'S long-term vision for the Premises with a new building type and size and
all uses and operations. The application must include sufficient plan drawings and: renderings to
show the basic layout and visual aspects of the plan,
B. TENANT'S proposed redevelopment timeline,. and
C. TENANT'S redevelopment financing resources and plan.
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EXECUTED on OG-iO .-i" 6 , 200100, at can C.t S O Jspa
CITY OF MORRO BAY
TENANT
By
Eric
ATTEST:
ana Swanson, CITY CLERIC
APPROVED AS TO FORM:
(.106.c . Pk 7116
Chris F. Neumeyer, CI " ATT I J' M EY
01181.0024/669016.1 JWP -33-
County, California.
n, Chief Executive Officer
EXHIBIT A
COPY OF PARCEL MAP
(immediately following this page)
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