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HomeMy WebLinkAboutReso 28-22 Three Stacks 10-Year Lease AgreementRESOLUTION NO. 28-22 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA APPROVING A NEW TEN-YEAR BUILDING LEASE AGREEMENT FOR LEASE SITE 69-70/69W-70W BETWEEN THE CITY OF MORRO BAY AND THREE STACKS AND A ROCK BREWING COMPANY, LLC LOCATED AT 595 EMBARCADERO ROAD 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, on August 13, 2019, the City approved a short-term Building Lease Agreement with Three Stacks and a Rock Brewing Company LLC ("Three Stacks") while Three Stacks and the City completed significant improvements to enable Three Stacks to occupy and operate from the building on Lease Site 69-70/69W-70W; and WHEREAS, the City has completed its improvements and Three Stacks is nearing completion of its improvements; and WHEREAS, the City and Three Stacks have agreed upon a new ten-year Building Lease Agreement for Three Stacks' occupation of the building. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, as follows: 1. The attached new ten-year Building Lease Agreement with Three Stacks and a Rock Brewing Company for the building on Lease Site 69-70/69W- 70W is hereby approved. 2. The Mayor is hereby authorized to execute said Agreement. PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 12th day of April, 2022 on the following vote: AYES. Headding, Addis, Barton, Ford NOES* Heller ABSENT: None John He ing`,-Mayor ATTEST: -S( m Dana Swanson, City Clerk COMMERCIAL BUILDING LEASE AGREEMENT by and between CITY OF MORRO BAY, a municipal corporation "Landlord" and Three Stacks and a Rock Brewing Company, LLC a California limited liability company "Tenant" 01181.0024/780141.1 Section TABLE OF CONTENTS Title Page 1. Lease of Premises; Condition of Premises 4 2. Effective Date; Term 4 3. Rent and Performance Standards 6 4. Uses 8 5. Real Estate Taxes 10 6. Personal Property Taxes 10 7. Maintenance & Repairs 10 8. Alterations 13 9. Compliance with Laws 13 10. Insurance 13 11. Indemnification 15 12. No Liens 15 13. Signs 16 14. Utilities 16 15. Entry and Inspection 16 16. Damage and Destruction 17 17. Assignment and Subletting 18 18. Default and Remedies; Termination 19 19. Surrender of Premises 21 20. Force Majeure 21 21. Estoppel Certificate 22 22. Subordination 22 23. Condemnation 22 24. Use of Landlord's Name 22 25. Trade Fixtures 22 26. Quiet Enjoyment 23 27. Holdover 23 01181.0024/780141.1 1 28. Notice and Waiver Regarding Relocation, Goodwill, Property 23 Interest and Condemnation 29. Miscellaneous 24 Exhibit A Depiction of Premises 01181.0024/780141.1 2 COMMERCIAL BUILDING LEASE AGREEMENT THIS COMMERCIAL BUILDING LEASE AGREEMENT ("this Lease") is made effective this 1st day of May, 2022, by and between the CITY OF MORRO BAY, a municipal corporation ("Landlord"), and Three Stacks and a Rock Brewing Company, LLC., a California limited liability company ("Tenant"). Landlord and Tenant are sometimes individually referred to as a "Party' and jointly as the "Parties." RECITALS: A. The State of California passed certain tide and submerged lands located within the Morro Bay City Limits to the County of San Luis Obispo and to its successors, being Chapter 1076, Statutes of 1947, as amended by Chaptei 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 Statues expressly recognize and agreed to be in full force and effect by the Parties hereto. B. The Parties hereto recognize and agree on July 17, 1964, Landlord 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. C. Judgement has been entered on October 14, 1964, in the case of the 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 Landlord upon the date of its incorporation as a city on the 17th day of July, 1964. D. Tenant accepts this Lease with the full knowledge there is no warranty of title in and to the Premises, as defined below, by Landlord to Tenant. E. 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 Moiro Bay Harbor, Landlord desires to lease to Tenant the Premises upon the terms and conditions set forth below: The portions of the Building, as defined in Subdivision F., below, which housed the former Morro Bay Aquarium" and identified as Spaces A, B, C and D, as described and depicted on the attached Exhibit A is the subject of this Lease, and is also referred to as the "Premises.' In addition, an area of approximately 10' X 8' near the wharf and abutting the rear (ocean -side) of the Space D outside of the Building in which is located a walk-in freezer will also be included as part of the Premises ("Freezer Area'). The upstairs second story portions of the Building, other (non -Freezer Area) outside portions of the rear (ocean -side) of the Building, wharf and boat dock (the "Remainder') are expressly 01181.0024/780141.1 3 excluded from this Lease, and Landlord retains the right (i) to rent or lease some or all of those portions of the Building to a third paity(ies), or (ii) to use some of all of the Reminder for Landlord's own needs, at Landlord s option; provided, that said third party rents, leases or Landlord uses (i) do not unduly interfere with Tenant's quiet enjoyment of the Premises as stipulated in Section 26, and (ii) are not a business or entity that directly competes or conflicts with Tenant's business. F. In order to develop and improve Morro Bay Harbor and to assist in carrying out the provisions of this Lease, the Premises are located in the structure (the "Building") located at 595 Embarcadero Road on Lease Site 69-70/69W-70W (the "Lease Site') on Landlord's waterfront (the "Waterfront Area"). G. The Parties desire to enter into a written lease agreement and to confirm the rights and obhgations of both Parties therein Pursuant to the terms of this Lease, Landlord desires to lease to Tenant, and Tenant desires to lease fiom Landlord, the Premises for Tenant's sole exclusive use, subject to the rights of Landlord to use and lease, to others, the Remainder, as provided in Recital E., above. NOW, THEREFORE, in consideration of the above Recitals and the mutual promises of the Parties set forth in this Lease, Landlord and Tenant hereby agiee as follows: 1. LEASE OF PREMISES; CONDITION OF PREMISES. 1.1. Lease. Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the Premises (as defined in the Recitals incorporated herein) solely for the uses specified in Section 4. 1.2. Condition of Premises. Tenant acknowledges it has and shall accept the Premises from Landlord in its "AS IS" condition without representation or warranty. Tenant has inspected the Premises and is aware of its condition. Pursuant to California Civil Code Section 1938, Tenant is advised the Piemises have not undergone an inspection by a Certified Access Specialist, and, therefore, Landlord is not aware if the Premises comply with the applicable construction -related accessibility standards pursuant to Civil Code Section 55.53. 2. EFFECTIVE DATE; TERM. 2.1. Effective Date. This Lease shall be deemed effective as of May 1, 2022 (the "Effective Date"). All other Tenant's rights and obligations under this Lease shall commence as of the Effective Date. 2.2. Term. The term of this Lease (the "Term') shall commence upon the Effective Date for a fixed term of ten years, and terminate without notice on April 30, 2032, unless otherwise amended by the Parties pursuant to Sections 2.4, 2.5 or 29.14. 2.3. Right to Terminate. Tenant shall have the right to terminate this Lease at any time, upon providing Landlord at least sixty -days' written notice to Landlord. 01181.0024/780141.1 4 2.4. Right to Tenant to Exercise Option. Tenant shall have the option (the ' Remainder Option") to include the Remainder or portions of the Remainder in Tenant's Lease at mutually -agreeable teims and conditions. Tenant and Landlord agree, in good faith to negotiate an equitable amendment to this Lease to incorporate the Remainder or portion of the Remaindei in the Lease if Tenant desires to exercise the Remainder Option. That desire must be communicated in writing to City's Harbor Director no less than 180 days and no more than 730 days after the Effective Date, as defined below. 2.5. Exclusive Right to Negotiate New Long -Term Ground Lease Agreement and Site Redevelopment Project. Provided Tenant has not been in default of any of its obligations under this Lease upon the fifth annual anniversary of the Effective Date, Tenant shall have the right to enter into a ninety -day period of exclusive negotiation with Landlord to redevelop the Premises, Building, Remainder and entirety of Lease Site in exchange for consideration of a long-term ground lease agreement. 01181.0024/780141.1 5 3. RENT & PERFORMANCE STANDARD. 3.1. Monthly Rent. Tenant agrees to pay Twenty-three Thousand Dollars ($23,000) per 12-month period on an equally -divided monthly basis in advance due no later than the 10th day of month for which rent is being paid (the "Monthly Rent") The first monthly payment of the Monthly Rent shall be due upon the Effective Date. The Freezer Area rent shall be Seventy-five Dollars ($75.00) per month. 3.2. CPI Adjustment to Monthly Rent. -Commencing on July 1, 2023, and each subsequent July 1 thereafter, (each, a `CPI Adjustment Date"), the Monthly Rent shall be adjusted in direct proportion to any upward or downward movement in the Consumer Price Index for January 1, 2022, which is hereby agreed to be 301.209 (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 — Anaheim — Riverside, California, compiled and published by the United States Department of labor, Bureau of Labor Statistics, 1982- 84 Base Year = 100 (the Index) The Monthly 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 is 166.1 and the monthly average CPI for the previous year is 171.6, then the percentage increase is equal to 3.31%. The CPI increase or decrease shall not exceed 3% in any one year; provided, that if the CPI increases or decreases over 6%, then the maximum CPI increase shall. be 3% plus half the increase or decrease over 6%. As an illustration only, if the CPI increase is 8%, then the new CPI rent calculation would be one half the difference between 6% and 8% or 1%, added to the maximum 3% for a new 4% CPI. 3.3. Percentage Rent. In partial consideration of completing the improvements stipulated in Section 3.4 of this Lease, Tenant shall have no percentage rent payment obligations for the first twelve full -calendar months of tenancy after the Effective Date At least sixty days prior to the end of the first twelve full -calendar months of tenancy after the Effective Date, Tenant and Landlord agree, in good faith, to negotiate an equitable Percent Rent rate for any firture tenancy of the Premises If an agreement cannot be reached, then that Percentage Rent shall be the same as applicable in the City's Harbor Department Lease Management Policy. 3.4. Performance Standards - Tenant. As material consideration for.this Lease, Tenant covenants to diligently maintain and repair the Premises in compliance with Section 7.1, as well as satisfactorily complete the items listed in Sections 3.4.1 and 3 4.2 (the "Tenant Performance Standard")* provided Tenant shall expend as least $120,000 on actual hard construction costs for the items listed in Section 3.4 2; and provided, further, that Tenant shall provide the Harbor Director with satisfactory documentation evidencing those expenditures. 01181.0024/780141.1 6 3. RENT & PERFORMANCE STANDARD. 3.1. Monthly Rent. Tenant agrees to pay Twenty-three Thousand Dollars ($23,000) per 12-month period on an equally -divided monthly basis in advance due no later than the 10`1' day of month for which rent is being paid (the "Monthly Rent"). The first monthly payment of the Monthly Rent shall be due upon the Effective Date. The Monthly Rent includes Seventy-five Dollars ($75.00) per month for the Freezer Area. 3.2. CPI Adjustment to Monthly Rent. -Commencing on July 1, 2023, and each subsequent July 1 thereafter, (each, a `CPI Adjustment Date"), the Monthly Rent shall be adjusted in direct proportion to any upward or downward movement in the Consumer Price Index for January 1, 2022, which is hereby agreed to be 301.209 (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 Consumes Price Index (all items indexes all urban consumers) for Los Angeles — Anaheim — Riverside, California, compiled and published by the United States Department of labor, Bureau of Labor Statistics, 1982- 84 Base Year = 100 (the Index). The Monthly 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 is 166.1 and the monthly average CPI foi the previous year is 171.6, then the percentage increase is equal to 3.31%. The CPI increase or decrease shall not exceed 3% in any one year; provided, that if the CPI increases or decreases over 6%, then the maximum CPI increase shall be 3% plus half the increase of decrease over 6%. As an illustration only, if the CPI increase is 8%, then the new CPI lent calculation would be one half the difference between 6% and 8% or 1%, added to the maximum 3% for a new 4% CPI. 3.3. Percentage Rent. In partial consideration of completing the improvements stipulated in Section 3.4 of this Lease, Tenant shall have no percentage rent payment obligations for the first twelve full -calendar months of tenancy after the Effective Date. At least sixty days prior to the end of the first twelve fiill-calendar months of tenancy after the Effective Date, Tenant and Landlord agree, in good faith to negotiate an equitable Percent Rent rate for any fitture tenancy of the Premises If an agreement cannot be reached, then that Percentage Rent shall be the same as applicable in the City's Harbor Department Lease Management Policy. 3.4. Performance Standards - Tenant. As material consideration for this Lease, Tenant covenants to diligently maintain and repair the Premises in compliance with Section 7.1, as well as satisfactorily complete the items listed in Sections 3.4.1 and 3.4 2 (the "Tenant Performance Standaid") provided, Tenant shall expend as least $120 000 on actual hard construction costs for the items listed in Section 3.4 2; and provided, further that Tenant shall provide the Harbor Director with satisfactory documentation evidencing those expenditures. 01181.0024/780141.1 6 3.4.1. On or before 90 days after the Effective Date, the following shall be completed: • Remodel Space A to accommodate a beer tasting, food and retail room for guests • Enlargement of the existing restroom under the stairs in Space A to meet the American with Disability Act (ADA) accessibility standards, • Clean up/restoration of floors, walls and windows and supply all necessary fixtures to accomplish renovation of the Space A portion of the building, • Construct a deck in the open-air Space C portion of the building over the old aquarium seal tanks, • Install a power wheelchair lift for ADA access to the Space C deck, if required by the ADA, • Complete all necessary lighting improvements, • Complete plumbing improvements, including correction of the floor drainage in Space B to diain to the municipal sewer system, • Complete improvements necessary to make the front entrance door ADA- compliant, if required by the ADA, • Installation of a code -compliant automatic fire sprinkler system in the ground floor spaces of the Premises. • Appropriate tenant improvements to realize Tenant's vision for the Premises and necessary to operate as a brewery and beer tasting/food service facility regularly open to the public. 3.4.2. On or before sixty days prior to the first twelve full months of tenancy, provide the City Manager and Harbor Director a financial report of Tenant s Gross Sales, as defined, to be used for negotiation of Percentage Rent as indicated in Section 3.2. ' Gross Sales," as used herein shall mean (subject to the exceptions and authorized deductions as herein set forth) the total selling price and the total gross amount received by Tenant from all merchandise sold and services rendered in, on or from the Premises by Tenant, its sublessees licensees or concessionaires, both for cash or on credit, and if on credit whether or not payment be actually made therefore, the gross amount received by Tenant for merchandise sold pursuant to orders received in the Premises, even if filled elsewhere, and the gross amount received by Tenant ftom any and all other sources of income derived from the business being conducted upon the Premises. Notwithstanding the other provisions of Section 3.4.2, the term "Gross Sales" shall not include the following items and such may be deducted from Gross Sales to the extent they have been included therein: • Credits and refunds made to customers for merchandise returned or exchanged, • 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 01181.0024/780141.1 7 must account for and remit the taxes to the government entity or entities by which they are imposed, • With respect to credit card sales, fees retained or withheld by the issuer and/or merchant bank pursuant to Tenant's credit card acceptance agieement, and • Rental payments to Tenant from sublessees, licensees or concessionaires whose total gross sales are included in gross sales computations. 3.5. Performance Standards - Landlord. As material consideration for this Lease, Landlord has diligently maintained and repaired the Premises in compliance with Section 7.2, as well as satisfactorily completed the items listed in Subsection 3.5.1. 3.5.1 • Removed and disposed of the chain link fencing and support structure enclosing the open-air portion of Space C of the Premises, • Ensured the various electrical panels and electrical components such as, but not limited to, power to light switches and power outlets are code -compliant and in working, operational condition and with all unused electrical components removed in Spaces A, B C and D, and • Removed the old aquarium fish tanks and tank stand structures for the fish tanks in Space B. • Installed an interior seismic shear wall between Spaces A and B as - recommended by Tenant's engineer of record. 3.6. Payment of Rent. All Rent and all other monetary obligations to be paid by Tenant to Landlord shall be in lawful money of the United States of' America at the addiess specified in Section 29.12, or such other addiess as Landlord shall notify Tenant in writing. 3.7. Late Payment. Any payment of any sum to be paid by Tenant, not paid within ten days after its due date, shall be subject to a ten percent late charge. 3.8. Security Deposit. Tenant is not required to provide, and has not provided, a security deposit to Landlord. 4. USES. 4.1. Authorized Uses; Minimum Program Requirements. 4.1.1. Authorized Uses. Tenant shall use the Premises solely as brewery and beer/food tasting facility, including ancillary sales and services directly related to those uses. 4.2. Prohibited Uses. Tenant shall not use, or permit the Premises, or any part thereof, to be used for any purpose or purposes other than those express uses specified in Section 4.1.1. 01181.0024/780141.1 8 Tenant shall not sell or permit to be displayed, performed, sold, kept, or used in or about the Premises any conduct, which may be prohibited by standard forms of fire insurance policies. Tenant shall not violate any and all requirements, pertaining to the use of the Premises of any insurance organization or company necessary for the maintenance of reasonable fire and public liability insurance, covering the buildings within the Premises and appurtenances. Tenant shall not permit smoking or vaping on any portion of the Premises. Tenant shall not commit, or suffer to be committed, any waste upon the Premises, or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenant or occupant of the Watei front Area. Tenant shall not conduct or permit to be conducted any sale by auction in, upon or from the Premises whether said auction be voluntary involuntary, pursuant to any assignment for the payment of creditors, or pursuant to any bankruptcy or other solvency proceeding nor display any "going out of business" or similar sign. Tenant shall not engage in any activity in, on or about the Premises that violates any Environmental Law, as defined below, and shall promptly, at Tenant's sole cost and expense, take all investigatory and/or remedial action required or ordered by any governmental agency or Environmental Law for clean-up and removal of any contamination involving any Hazardous Material created or caused directly or indirectly, by Tenant. The term 'Environmental Law" shall mean any federal, state or local law, statute, ordinance or regulation pertaining to health, industrial hygiene or the environmental conditions on, under or about the Premises, including, without limitation, (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (`CERCLA"), 42 U.S.C. Sections 9601, et seq.; (ii) the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901, et seq.; (iii) California Health and Safety Code Section 25100, et seq.; (iv) the Safe Drinking Water and Toxic Enforcement Act of 1986, California Health and Safety Code Section 25249.5, et seq.; (v) California Health and Safety Code Section 25359.7; (vi) California Health and Safety Code Section 25915; (vii) the Federal Water Pollution Control Act, 33 U.S C. Sections 1317, et seq.; (viii) California Water Code Section 13000 et seq.; and (ix) California Civil Code Section 3479, et seq., as such laws are amended and the regulations and administrative codes applicable thereto. The term "Hazardous Material" includes, without limitation, any material or substance which is (i) defined or listed as a "hazardous waste", "extremely hazardous waste," "restrictive hazardous waste " or ` hazardous substance' or considered a waste, condition of pollution or nuisance under the Environmental Laws; (ii) petroleum or a petroleum product or fraction thereof; (iii) asbestos; and/or (iv) substances known by the State of California to cause cancer and/or reproductive toxicity. It is the intent of the Parties hereto to construe the terms "Hazardous Materials" and ` Environmental Laws ' in their broadest sense Tenant shall provide all notices required pursuant to the Safe Drinking Water and Toxic Enforcement Act of 1986, California Health and Safety Code Section 25249.5, et seq. Tenant shall 01181.0024/780141.1 9 provide prompt written notice to Landlord of the existence of Hazardous Materials on the Piemises and all notices of violation of the Environmental Laws received by Tenant. Notwithstanding the foregoing, Tenant is not responsible for the remediation or removal of any Hazardous Materials, which Tenant did not directly or indirectly cause to be placed at the Premises. 4.3. Abandonment. Tenant shall not vacate or abandon the Premises at any time during the Term. Upon termination of this Lease for any reason, any personal property belonging to Tenant and left on the Premises shall be deemed to be abandoned and, at the option of Landlord, shall become the property of Landlord. 5. REAL ESTATE TAXES. Tenant shall pay any and all real property taxes applicable to Tenant's possessory interest in the Piemises. All such payments shall be made at least ten days prior to the due date of the apphcable installment. Tenant shall promptly (at least five days prior to the due date) furnish Landloid with satisfactory evidence such taxes have been paid. If any such taxes to be paid by Tenant shall cover any period of time after the expiration or earlier termination of the Term hereof, then Tenant s share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year that this Lease is in effect; and Tenant may apply to the County of San Luis Obispo (the "County") for reimbursement of any overpayments after such proration Notwithstanding anything above to the contrary, to the extent any assessment is levied against the Premises payable in installments, Tenant shall pay all installments coming due and payable during the Initial Term and any Extended Term. Tenant acknowledges, although Landlord is a municipal entity exempt from real property taxes, Tenant's possessory interest under this Lease may be subject to real property taxation Upon request, Landloid agrees to work with Tenant to assist in providing information to the County Tax Assessor to reduce the valuation of Tenant's possessory interest in the Premises. Landlord provides no assurance to Tenant that it will be successful in such efforts and that Tenant may be required to pay real property taxes. 6. PERSONAL PROPERTY TAXES. During the Initial Term or any Extended Term, Tenant shall pay prior to delinquency all taxes assessed against the levied upon fixtures, furnishings equipment and all other personal property owned by Tenant (excluding Landlord's personal property) located in the Premises, and when possible, Tenant shall cause said fixtures, furnishings, equipment and other personal property to be assessed and billed separately from Landlord's personal property. In the event any or all of Tenant's fixtures, furnishings, equipment and other personal property shall be assessed and taxed with Premises, Tenant shall pay its share of such taxes within ten days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant's property. 7. MAINTENANCE AND REPAIRS. 7.1. Maintenance and Repair by Tenant. Except the specific maintenance obligations of Landlord as set forth in Sections 3.4 and 7.2, Tenant shall at all times during the 01181.0024/780141.1 10 Term, and at Tenant's sole cost and expense keep, maintain and repair the Premises in good and sanitary order, condition, and repair. Such maintenance obligations shall include, but not be limited to, any equipment installed by Tenant, furnishings (such as seating, carpeting and drapes, mirrors, and interior repainting) and landscaping. Tenant shall keep the Premises in good and sanitary order on a daily basis. Upon termination of this Lease, the Premises shall be surrendered in a good, clean and sanitary "broom clean" condition, except for reasonable use and wear. Tenant agrees to surrender the Premises in the condition after all improvements or alternations, which have been approved by Landlord and installed by Tenant pursuant to Section 8.1, have been satisfactorily completed. If Landlord wants to reserve the right to require Tenant to remove any of those improvements and alterations upon the expiration or earlier termination of this Lease, then Landlord must reserve such right in its notice of approval any of those improvements or alterations. If Tenant is required to remove any improvements from the Premises upon termination of this Lease, then Tenant shall do so at Tenant's sole cost and expense, and Tenant will repair any damage to the Premises caused by such removal. Tenant shall promptly notify Landlord in writing of any condition in the Premises that require necessary repairs by Landlord (the `Repair Notice' ), which shall be made by Landlord as set forth in Section 7.2. Tenant acknowledges Tenant's maintenance obligations under this Section are material considerations to Landlord for this Lease; and, therefore, this Section 7.1 shall be construed liberally for the protection and preservation of the Premises. 7.2. Limited Maintenance and Repair by Landlord. Landlord shall be responsible to maintain in good repair and in compliance with all applicable laws, ordinances and regulations, at Landlord's sole cost and expense, only (i) the physical structure of the Premises, such as the structural elements, roof, plumbing, water heating system, electrical systems, HVAC equipment and exterior painting, and (ii) subject to the financial limitations set forth below. Notwithstanding the foregoing, Landlord shall not be required to make repairs necessitated by reason of (i) the negligence or willful misconduct of Tenant, or any of Tenant s staff, volunteers, students, contractors, invitees, subtenants, patrons or customers, (ii) the failure of Tenant to perform or observe and promptly report to Landlord any conditions the repair of which are Landlord's responsibility or (iii) the failure of Tenant to perform or observe the conditions or agreements in this Lease, or caused by unauthorized alterations additions or improvements made by Tenant or anyone claiming under Tenant (collectively the "Tenant Caused Damages' ). Tenant shall be solely responsible, at its sole cost and expense, to repair any Tenant Caused Damages. Upon receipt of a Repair Notice, Landlord shall have a reasonable period of time (not to exceed five business days) to commence necessary repairs. Upon commencement of necessary repairs, Landlord shall use reasonable efforts to diligently complete same. At a time and date reasonably agreed to by the Parties, the Parties shall jointly 01181.0024/780141.1 11 conduct an annual inspection of the Premises to aid Landlord in determining if any repairs by Landlord may be necessary. Any renovation work performed by Landlord to the Premises shall not unreasonably interfere with Tenant's operations, to the extent practicable. Notwithstanding the foregoing and Landlord's Performance Standard obligations under Section 3.5, Landlord's repaii obligations are specifically limited in that Landlord shall not be required to make repairs the cost of which exceeds the Rent actually received by Landlord from Tenant, as set forth below. During the Term, Landlord shall maintain a cumulative on -going record of all Rent received by Landlord (` Landlord Repair Fund"). Any repairs and maintenance costs incurred by Landlord under this Section 7.2 shall reduce the Landlord Repair Fund. If at any time when a repair or maintenance item which is Landloid's responsibility under this Section 7.2 then Landlord shall only be obligated to make such repaii to the extent the current balance of the Landlord Repair Fund is sufficient to pay the cost of such repair. However, if the repair item is critical foi Tenant's operation of the Premises, then Landlord shall promptly make such repair, but the cost of such shall reduce the Landlord Repair Fund. If Landlord elects in its sole discretion, to make repairs notwithstanding the foregoing limitations then such election shall not be deemed a waives of this limitation with respect to future repairs and the cost of such repairs shall reduce the Landlord Repair Fund. 01181.0024/780141.1 12 8. ALTERATIONS 8.1 To Premises. Tenant shall not make any alterations to the Premises, or any part thereof, outside those stipulated in Section 3.4 without the prior written consent of Landlord and m compliance with any and all necessary permits and/or entitlements. If Tenant wishes to make additional improvements to the Premises then Tenant shall notify Landlord m writing specifying in reasonable detail the proposed alterations and the cost thereof. Within fifteen days after receiving such notice fiom Tenant Landlord shall send written notice to Tenant indicating whether Landlord approves or disapproves of the contemplated improvements. The City Manager may act on behalf of Landlord for approvals or disapprovals under this Section. Landlord's approval shall not be unreasonably withheld and any disapproval shall be in writing and shall explain the reasons for the denial However, as a condition to granting its approval to any of the improvements, Landlord may require Tenant to provide Landlord with reasonably satisfactory evidence of Tenant's financial ability to pay for the costs of the improvements and may require a completion bond be provided to Landloid or other security reasonably acceptable to Landlord. Any such alterations shall comply with all applicable laws and regulations. All improvements (excluding minor improvements as determined by Landlord) shall be under the supervision of a licensed architect or structural engmeei (at Tenant's cost) and made in accordance with plans and specifications approved in writing by Landlord, in its governmental and landlord capacities, prior to the commencement of such work. All work shall be done in a good and workmanlike manner, diligently prosecuted to completion and completed in compliance with Section 12. All such improvements shall immediately be deemed a part of the Premises and may not be removed by Tenant. Prior to commencing any work of improvement hereunder, Tenant shall notify Landlord so that Landlord can post and record an appropriate Notice of Non -Responsibility. 9. COMPLIANCE WITH LAWS. Except as to the specific obligations of Landlord under Section 7.2, Tenant shall, at its sole cost and expense, comply with all of the requirements of all municipal, state and federal authorities now in force or which may hereafter be in force pertaining to the use of the Premises, and shall faithfully observe in said use all municipal ordinances including, but not limited to, the General Plan and zoning ordinances, state and federal statutes of other governmental regulations now in force or which shall hereinafter be in force. The judgment of any court of competent jurisdiction, or the admission of Tenant in any action or proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such order or statute in said use, shall be conclusive of that fact as between Landlord and Tenant. 10. INSURANCE. 10.1. Landlord to Provide Property Insurance. Landlord shall maintain at Landloid's sole cost and expense, fire, and excess coverage insurance throughout the team of this Lease, on all buildings and improvements located on the Premises (and fixtures thereto), in an amount equal to one hundred percent of the replacement value of the Premises, together with such other insurance, coverages and endorsements as Landlord may determine in its sole discretion. Tenant hereby waives any right of 01181.0024/780141.1 13 recovery from Landlord, its officers and employees, and Landlord hereby waives any right of loss or damage (including consequential loss) resulting from any of the perils insured against as a result of said insurance. 10.2. Tenant's Insurance Obligations. 10.2.1. Liability Insurance. During the entire term of this Lease, Tenant shall, at Tenant s sole cost and expense, for the mutual benefit of Landlord and Tenant, maintain comprehensive general liability insurance insuring against claims for bodily injury, death or property damage occurring in, upon or about the Premises, written on a per occurrence basis in an amount not less than either (i) a combined single limit of Five Million Dollars ($5,000,000) for bodily injury, death, and property damage or (ii) bodily injury limits of Five Hundied Thousand Dollars ($500,000) per person, One Million Dollars ($1,000,000) per occurrence and One Million Dollars ($1,000 000) products and completed operations and property damage limits of Two Hundred Fifty Thousand Dollars ($250,000) per occurrence and One Million Dollars ($1,000,000) in the aggregate. 10.2.2. Worker's Compensation Insurance. Tenant shall, at Tenant's sole cost and expense, maintain a policy of worker's compensation insurance in an amount as will fully comply with the laws of the State of California and which shall indemnify, insure and provide legal defense for both Tenant and Landlord against any loss, claim or damage arising from any injuries or occupational diseases occurring to any worker employed by or any persons retained by Tenant in the course of conducting Tenant's business in the Premises. 10.2.3. Business Automobile Coverage Insurance Tenant shall, at Tenant's sole cost and expense, for the mutual benefit of Landlord and Tenant, maintain Business Auto Coverage on ISO Business Auto Coverage from CA 00 01 including symbol 1 (Any Auto) or the exact equivalent, with combined single limits of liability not less than One Million Dollars ($1,000,000) per accident. If Tenant owns no vehicles, then this requirement may be satisfied by a non -owned auto endorsement to the general liability policy described above. If Tenant or Tenant's employees will use personal autos in any way for the operation of any business on the Premises, then Tenant shall provide evidence of personal auto liability coverage for each such person 10.2.4. General Provisions. All of the policies of insurance required to be procured by Tenant pursuant to this Section 10.2 shall be primary insurance and pursuant to Subsections 10.2.1 and .3 shall name Landlord, its employees and agents as additional insureds. All policies shall waive all rights of subrogation and provide that said insurance may not be amended or canceled without providing thirty -days' prior written notice by registered mail to Landlord, unless the cancellation is for non-payment 01181.0024/780141.1 14 of a premium and then such written notice shall be no less than ten days. Within ten business days after execution of this Lease by the last Party to sign, and at least thirty days prior to the expiration of any insurance policy, Tenant shall provide Landlord with certificates of insurance and full copies of the insurance policies evidencing the mandatory insurance coverages written by insurance companies acceptable to Landlord, licensed to do business in California and rated A:VII or better by Best's Insurance Guide. Landlord may require an increase in the coverage and/or the types of coverage from time to time upon written notice to Tenant. Each of the Parties, on behalf of their respective insurance companies insuring such property of either Landlord or Tenant against such loss, waive any right of subrogation that it may have against the other. 11. INDEMNIFICATION. Tenant shall indemnify, protect, defend and hold harmless the Premises, Landlord and its managers, officers, directors, members, employees, agents, contractors partners and lenders, from and against any and all claims, and/or damages, costs, liens, judgments, penalties, permits reasonable attorneys' and consultant's fees, expenses and/or liabilities arising out of, involving, or in dealing with, the occupancy of the Premises by Tenant, the conduct of Tenant's business, any act, omission or neglect of Tenant or any of, its officers, directors, members, employees, agents, invitees, customers or contractors, and out of any breach by Tenant in the performance in a timely manner of any obligation on Tenant's part to be performed under this Lease, except for matters which are the result of Landlord's gross negligence, intentional wrongful acts, or in default of this Lease. The foregoing shall include, but not be limited to, all costs of the defense or pursuit of any claim or any action or proceeding involved therein, and whether or not (in the case of claims made against Landlord) litigated and/or reduced to judgment. In case any action or proceeding is brought against Landlord by reason of any of the foregoing matters, Tenant upon notice from Landlord shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord and Landlord shall cooperate with Tenant in such defense. Landloid need not have first paid any such claim in order to be so indemnified. In addition, Landloid may require Tenant to pay Landlord's reasonable attorneys' fees and costs in defending against or participating in such claim, action or proceeding if Landlord shall decide, in its exercise of reasonable judgment it is unsatisfied with the representation of its interest by Tenant or its counsel. Landlord shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Tenant Tenant's employees contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, earthquake, flood, terrorism, steam, electricity, gas, water or rain or from the breakage, leakage, obstruction or other any other cause, whether the said injury or damage results from conditions arising upon the Premises or from other source or places, unless such injury or damage is finally determined to be the result of the gross negligence or willful misconduct of Landlord or any of Landlord's employees contractors or agents. 12. NO LIENS. Tenant shall keep the Premises, free from any liens arising out of any work performed, material furnished, or obhgation incurred by Tenant or alleged to have been incurred by Tenant. If Tenant shall fail to pay any charge for which a mechanic's lien claim 01181.0024/780141.1 15 and suit to foreclose the lien have been filed, and shall not have obtained the release of said lien from the property subject to such lien, then Landlord may (but shall not be so required to) pay said claim and any costs, and the amount so paid, together with reasonable attorneys fees incurred in connection therewith shall be immediately due and owing from Tenant to Landlord, together with interest at the rate prescribed in Section 30.6, on the amount of the mechanic's lien claim 13. SIGNS. Tenant shall not place or permit to be placed any signs upon the exterior or in the windows of the Premises without Landlord s prior written consent. Any sign installed without such approval shall be immediately removed by Tenant and, if said sign is not removed by Tenant within three days of written notice from Landlord to Tenant, then Landlord may remove and destroy said sign without Tenant's approval and without any liability to Tenant. Tenant shall not modify or altei any of the signs without the prior written approval of the City Manager for Landlord, which approval shall not be unreasonably withheld or delayed. Landlord shall reply to any proposed alteration within fourteen days from submission. Any revision shall comply with the Morro Bay Municipal Code requirements related to signage prior to any revisions actually being made to the signs. Tenant shall maintain the signs in good condition and repair at all times during the entire term at its sole cost and expense. 14. UTILITIES. 14.1. Tenant's Responsibilities. Tenant shall pay, before delinquency, all charges for water, gas, heat, electricity, power, sewer, telephone service, solid waste collection and all other services and utilities used in, upon, or about the Premises by Tenant or any of its subtenants, licensees, or concessionaires during the entire term of this Lease. Tenant shall pay such fees, assessments or charges as may be levied for the operation, maintenance and service of such facilities and shall comply with reasonable rules and regulations established from time to time for use thereof Tenant shall insure that trash and debris produced by the activities on Piemises do not accumulate on the Premises. Tenant shall not be responsible for any utility charges of any other tenant to whom Landlord may lease other portions of the Building, wharf or dock behind the Building; and each such tenant shall have utilities separately metered or otherwise monitored to account for utility charges to be paid by that tenant. As between Landlord and Tenant, Landlord shall be responsible for having metering and accounting provided. 15. ENTRY AND INSPECTION. Tenant shall permit Landlord and its employees and agents to enter into and upon the Premises at all reasonable times for the purpose of inspecting the same, or for the purpose of making repairs, alterations or additions or performing the improvements to any portion of said building(s), including the erection and maintenance of such scaffolding, canopy, and fences as may be required or for the purpose of posting notices of non -responsibility for alterations additions or repairs, or for the purpose of placing upon the Premises any usual or ordinary signs for public safety as determined by Landlord Landlord shall be permitted to do any of the above without any rebate of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises thereby occasioned. Landlord shall make reasonable efforts to coordinate times for any repairs 01181.0024/780141.1 16 deemed necessary with Tenant to reduce to the extent practicable any interference with Tenant s use of the Premises. Tenant shall permit Landloid, at any time within ninety days prior to the expiration of the Term, to place upon the Premises any usual or ordinary ` For Lease' or "Foi Sale" signs, and during such ninety -day period, Landlord or its agents may, during normal business hours, enter upon said Premises and exhibit the same to prospective tenants or purchasers. 16. DAMAGE AND DESTRUCTION. 16.1. Notice to Landlord. Tenant shall give prompt notice to Landlord in case of any fire or other damage to the Premises. 16.2. Partial Casualty to Premises. If the Premises shall be damaged by any casualty including, but not limited to, civil unrest vandalism, a fire, flood or earthquake, such that (i) the cost of replacement or repair of the Premises is less than or equal to fifty percent of the total replacement cost thereof or (ii) the cost of replacement or repair of damage to the Premises, and any structures comprising the Premises, when aggregated together is less than or equal to fifty percent of the total replacement cost thereof, then Landlord shall promptly repair and restore the same to substantially the condition thereof immediately prior to said damage or destruction. If insurance proceeds at e forthcoming, then Landlord shall not be obligated to commence the restoration and/or repair until Landlord has received said insurance proceeds. Landlord shall take all reasonable steps necessary so as to obtain such insurance proceeds promptly so as to prevent delay in restoring and/or repairing the Premises to its prior condition. 16.3. Substantial Damage to Premises. If the Premises shall be damaged or destroyed by any casualty (or the other matters described above), such that (i) the cost of replacement or repair of the Premises exceeds one -years' rent, or (ii) the cost of replacement or repair of damage to the Premises, and any of the other structures comprising the Premises, when aggregated together exceeds one -years' rent total, then Landlord may elect to either replace or repair the damage as aforesaid, cancel this Lease by written notice of cancellation given to Tenant within ninety days after the date of the casualty, or allow Tenant to cause repairs to be made to City standards. This Lease shall cease and terminate twenty days following Tenant's receipt of Landlord's cancellation notice* and Tenant shall vacate and surrender the Premises to Landlord in accordance with the terms of this Lease. 16.4. Reconstruction. In the event of any reconstruction of the Premises under this Section 16 Landloid shall be obligated to reconstruct the Premises only to the extent of the condition of the Premises prior to the damage. 16.5. Rent Abatement. In the event any casualty to the Premises is such that operations are impossible or impractical during the reconstruction as determined by Tenant, Tenant shall be entitled to abatement of the Rent for actual number of business days closed based on a pro-rata ratio of the total days in the month. 01181.0024/780141.1 17 16.6. Termination. Upon any termination of this Lease under any of the provisions of this Section 16, the Parties shall be released thereby without further obligations to the other Panty coincident with the suriendei of possession of the Premises to Landlord, except for obligations which have theretofore accrued and be then unpaid, and except for Tenant's obligations under Section 11. 16.7. Determination of Percentage of Damage or Destruction. If either Landlord or Tenant contends the percentage of the damage or destruction referred to above exceeds one -year's rent total and the other Party disagrees, then the determination of the percentage shall be made in writing by a senior officer of the insurance company that is to make insurance proceeds available for replacement or repair. If said insurance company elects not to render such a determination in a timely manner, or no determination is rendered for any other reason then, in such event, upon fifteen - days' prior written notice to Tenant, then Landlord s determination shall be deemed the agreed upon determination of the damage on destruction. 17. ASSIGNMENT AND SUBLETTING. 17.1. Assignment and Subletting. Tenant shall not sublet the Premises or assign this Lease without the prior written consent of Landloid. Landlord shall not unreasonably withhold its consent to an assigmnent or sublease to a proposed assignee or subtenant. In no event shall Landlord be required to approve of any assignment or sublease, which would result in a violation of any other agreements to which Landlord is a party and/or for which all of the following criteria are not met. a. The proposed assignee or subtenant has submitted to Landlord financial statements showing the proposed assignee's or subtenant's financial condition, including net worth and liquidity, is equal to or greater than Tenant's financial condition; b. The proposed assignee or subtenant is morally and financially responsible; and c. Tenant is not in default in the payment of Rent or the performance of any obligations under this Lease. Any such assignment shall be subject to all of the terms and conditions of this Lease, including, but not limited to, the use restrictions, and the proposed assignee or subtenant shall assume the obligations of Tenant under this Lease in writing in form satisfactory to Landlord The proposed assignee or subtenant shall simultaneously provide to Landlord an estoppel certificate in the form described in Section 21. Consent by Landloid to one assignment or subletting shall not be deemed to be consent to any subsequent assigmnent or subletting. Any assignment or subletting without the prior written consent of Landlord shall be void, shall constitute a material breach of this Lease, and shall, at the option of Landlord, terminate this Lease. Neither this Lease nor any interest therein shall be assignable as to the interest of Tenant by operation of law. 01181.0024/780141.1 18 Landlord shall be under no obligation to consider a request for its consent to an assignment or sublease until Tenant shall have submitted in writing to Landlord a request for Landlord's consent to such assignment or sublease, a history of the proposed assignee's or subtenant's business experience and financial viability and such other information as required by Landlord to verify that the criteria set forth herein are met. 18. DEFAULT AND REMEDIES; TERMINATION. 18.1. Default by Tenant. The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant: (i) Failure to pay any Rent or other monetary payment required hereunder to Landlord within five days after receiving notice from Landlord of Tenant's failure to pay any such obligation when due under this Lease. (ii) Failure to perform any provision of this Lease (other than the payment of money), if the failure to perform is not cured within thirty days after receiving written notice of the default from Landlord. If the default cannot be reasonably cured within thirty days, then Tenant shall not be in default of this Lease if Tenant commences to cure the default within the thirty -day period and diligently and in good faith continues to cuie the default, but within no more than one hundred eighty days from commencement of the cure. (iii) Failure of Tenant to meet or comply with any Tenant Performance Standard. (iv) Vacation or abandonment of the Premises by Tenant. (v) Making a general assignment for the benefit of creditors. (vi) Filing of a voluntary petition in bankruptcy or the adjudication of Tenant as a bankrupt. Appointment of a receiver to take possession of all of substantially all the assets of Tenant located at the Premises or of Tenant's leasehold interest in the Premises. (viii) Filing by any creditor of Tenant of an involuntary petition in bankruptcy which is not dismissed within sixty days after filing. (ix) Attachment, execution or other judicial seizure of all or substantially all of the assets of Tenant or Tenant's leasehold where such an attachment, execution or seizure is not discharged within sixty days. In the event of' any such default or breach by Tenant, Landlord may at any time thereafter, without further notice or demand, rectify or cure such default, and any 01181.0024/780141.1 19 sums expended by Landlord for such purposes shall be paid by Tenant to Landlord upon demand and as additional Rent hereunder. In the event of any such default or breach by Tenant Landlord shall have the right to continue the lease in full force and effect and enforce all of its rights and remedies under this Lease, including the right to recover the Rent as it becomes due under this Lease or Landlord shall have the right at any time thereafter to elect to terminate the Lease and Tenant's right to possession thereunder. Upon such termination, Landlord shall have the right to recover from Tenant: (a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination; (b) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; and (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 such Rent loss that Tenant proves could be reasonably avoided. The "worth at the time of award" of the amounts referred to in subparagraphs (a), b), and (c) above shall be computed by allowing interest (or by discounting in the case of subparagraph (c)) at three percent over the prime rate, but in no event greater than the maximum rate permitted by law. For purposes of this Section. "Rent" shall include all sums payable pursuant to this Lease on a regular basis; including reimbursement of real estate taxes and any similar amounts. The payment shall be computed on the basis of the average monthly amount thereof accruing during any preceding twelve-month period selected by Landlord, except that if it becomes necessary to compute such Rent before such a twelve-month period has occurred, then the Rent shall be computed on the basis of the average monthly amount hereof accruing during such shorter period. Such efforts as Landlord may make to mitigate the damages caused by Tenant's breach of this Lease shall not constitute a waiver of Landlord's right to recover damages against Tenant hereunder. Notwithstanding any of the foregoing, the breach of this Lease by Tenant, or an abandonment of the Premises by Tenant shall not constitute a termination of this Lease, or of Tenant's right of possession hereunder unless and until Landlord elects to do so, and until such time Landlord shall have the right to enforce all of its rights and remedies under this Lease, including the right to recover rent, and all other payments to be made by Tenant hereunder, as they become due. Failure of Landlord to terminate this Lease shall not prevent Landlord from later terminating this Lease or constitute a waiver of Landlord s right to do so. 01181.0024/780141.1 20 18.2. No Waiver. Acceptance of any payment under this Lease shall not be deemed a waiver of any default or a waiver of any of Landlord's remedies 18.3. Landlord's Default. Except as may be elsewhere expressly provided in this Lease, Landlord shall not be in default, unless Landloid fails to perform obligations required of Landloid within a reasonable time, but in no event later than thirty days after written notice by Tenant to Landlord, specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty days ate required for performance, then Landlord shall not be deemed in default if Landlord commences performance within the thirty -day period and thereafter diligently prosecutes the same to completion. 18.4. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, whet ever possible, be cumulative with all other remedies at law or in equity, except Tenant i) cannot seek money damages or pursue an action in law; and ii) is instead limited to bringing a proceeding in the nature of specific performance, injunctive relief or mandamus, or any other action in equity to enforce any applicable provision of this Lease. 18.5. Termination. 18.5.1. The Parties acknowledge this Lease shall be terminated immediately at the occurrence of any of the following events: a. By expiration of the Lease; b. By mutual agreement of both Parties; or c. In the case of casualty as provided for in Section 16.6. 18.5.2. The Parties acknowledge this Lease may be terminated by Landlord upon thirty -days' written notice if Tenant fails to meet any Performance Standard. 18.5.3. Except as set forth in Section 2.3, termination of this Lease shall not extinguish Tenant s obligations to pay Rent or its other obligations including indemnification of Landlord. 19. SURRENDER OF PREMISES The voluntary or other surrender of the Premises by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall at the option of Landlord, terminate all 01 any existing subleases o1 licensees, or may, at the option of Landlord, operate as an assignment to it of any or all of such subleases or licenses. 20. FORCE MAJEURE. If either Party hereto shall be delayed or prevented from the performance of any act required hereunder by reason of acts of God, strikes, lockouts, labor troubles, inability to procure materials, restrictive governmental laws or regulations or other cause without fault and beyond the control of the Party obligated (financial inability excepted), then performance of such act shall be excused for the period of the delay and the 01181.0024/780141.1 21 period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, nothing in this Section 20 shall excuse Tenant from the prompt payment of any Rent. 21. ESTOPPEL CERTIFICATE Tenant shall, at any time and from time to time upon not less than twenty -days' prior notice from Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying this Lease is unmodified and is in full force and effect and the dates to which the Rent has been paid, and stating whether or not to the best knowledge Landlord is in default under this Lease, and, if in default, specifying in reasonable detail each such default, and such other matters as Landlord may reasonably request, it being intended that any such statement delivered by Tenant may be relied upon by Landlord or any prospective purchaser of the fee or any prospective mortgagee or encumbrancer thereof. 22. SUBORDINATION. The rights of Tenant shall be and are subject and subordinate at all times to the lien of any mortgage now or hereafter in force against the Premises, and Tenant shall promptly execute and deliver such further instruments subordinating this Lease to the lien of any such mortgage as shall be requested by Landlord. 23. CONDEMNATION. In the event a condemnation or transfer in lieu thereof results in a taking of any substantial and/or material portion of the Premises, Landlord or Tenant may, upon written notice given to the other Party within thirty days after such taking or transfer in lieu thereof, terminate this Lease. In connection therewith, Landlord and Tenant acknowledge that: a. Landlord (acting as the City of Morro Bay) possesses the power to take the Premises through eminent domain proceedings; and b. The business to be conducted by Tenant upon the Premises is not a viable business without financial assistance from Landlord, therefore if Tenant must vacate the Premises, it will be extremely impractical if not impossible, for Tenant to operate its business elsewhere. Therefore, upon such termination Tenant shall have the right to claim and recover from Landlord and/or the condemning authority only the amount equal to the value of any improvements installed by Tenant Tenant shall not receive any value related to the leasehold value of the property which shall be paid solely to Landlord. 24. USE OF LANDLORD'S NAME. Tenant shall not use Landlord's name for advertising or promotion. without Landlord's prior written consent, which may be granted or withheld in its sole discretion. 25. TRADE FIXTURES. Tenant has the right to use the Landlord's personal property located on the Premises, but Tenant shall, at its own cost and expense, install and equip the Premises with all furniture, fixtures, trade fixtures, equipment and personal property reasonably required for the operation of Tenant's business. Any and all fixtures and appurtenances installed by Tenant shall conform with the requirements of all applicable laws and regulations. All furniture equipment, and trade fixtures installed by Tenant shall remain the 01181.0024/780141.1 22 property of Tenant during the Term of this Lease, but Tenant shall not remove any trade fixtures during the Term hereof without Landlord's prior written consent which may be provided by the City Manager on behalf of the Landlord. On termination of this Lease, Tenant may, provided Tenant is not in default of this Lease, remove at its own expense all trade fixtures equipment and its personal property. At termination of this Lease, if Tenant has left any merchandise, furniture, equipment, signs, trade fixtures or other personal property in the Premises, then Landlord may give Tenant written notice to remove such property. In the event such property is not removed within fifteen days after the date of said notice, Landlord may dispose of said property in any manner whatsoever and Tenant hereby waives any claim or right to said property or any proceeds derived from the sale thereof. Any damage to the Premises resulting from the installation or removal of any of said trade fixtures or equipment shall be repaired by Tenant at Tenant's sole cost and expense. 26. QUIET ENJOYMENT. As long as Tenant is not in default under this Lease, Tenant shall have quiet enjoyment of the Premises during the Term. 27. HOLDOVER. Tenant has no right to retain possession of the Premises or any part thereof beyond the expiration or earlier termination of this Lease Any holding over after the expiration or earlier termination of the Initial Term or any Extended Term, as applicable, with the consent of Landlord, express or implied, shall be construed to be a tenancy from month -to -month, cancelable upon thirty -days' written notice, and at a monthly rent equal to two hundred percent of the Rent set forth in Section 3.1 and upon terms and conditions as existed during the last month of the Initial Term or Extended Term, as applicable. 28. NOTICE AND WAIVER REGARDING RELOCATION, GOODWILL, PROPERTY INTEREST AND CONDEMNATION 28.1. Tenant knowingly and voluntarily acknowledges and agrees upon its vacation of the Premises at the end of the Lease term, upon the sooner termination thereof for any reason, or vacation, of the Premises under any circumstances, in no event shall Tenant be entitled or shall Landlord, including its employees, agents and assignees, be required to provide any relocation benefits, compensation for loss of goodwill or assistance under any applicable federal, state, or local laws or regulations including without limitation, the Uniform Relocation Assistance Laws, California Government Code Section 7260 et seq Further Tenant being fully informed of any and all of its rights and obligations and all laws and regulations (including without limitation, the Uniform Relocation Assistance Laws, California Government Code Section 7260 et seq.) in connection therewith fully waives releases and rejects any and all relocation assistance and benefits relating to or in any respect connected with Tenant vacating the Premises. 28.2. Tenant knowingly and voluntarily acknowledges and agrees upon its vacation of the Premises at the end of the Term upon the sooner termination thereof for any reason, or vacation, of the Premises under any other circumstances, in no event shall Tenant be entitled or shall Landlord be required to provide any compensation or consideration to Tenant for the leasehold interest of Tenant, improvements pertaining to realty, personal property, fixtures and equipment, pie -condemnation damages, 01181.0024/780141.1 23 severance damages or interest and litigation expenses, whether based on condemnation, invei se condemnation or any other reason. Upon vacation of the Premises or termination of the Lease, Tenant knowingly waives and sun enders any claims or rights to the leasehold interest, improvements pertaining to realty, personal property, fixtures and equipment, pre -condemnation damages, severance damages or interest and litigation expenses. 29. MISCELLANEOUS. 29.1. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties, their successors and assigns and be governed by the laws of the State of California. Any litigation between the Parties hereto concerning this Lease shall be initiated in the Superior Court of the State of California for the County. 29.2. Partial Invalidity. If any term, covenant, condition or provision of this Lease is held by a court of competent jurisdiction to be invalid, void, or unenforceable, then the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereof. 29.3. Successors in Interest. The covenants herein contained shall, subject to the provisions as to assignment apply to and bind the heirs, successors, executors, administrators and assigns of all the Parties hereto, and each and all, including the Party making the assignment, shall be jointly and severally liable hereunder. 29.4. No Oral Agreements. This Lease covers in full each and every agreement of every kind or nature whatsoever between the Parties hereto concerning this Lease, and all preliminary negotiations and agreements of whatsoever kind or nature are merged herein, and there are no oral agreements. Tenant acknowledges no representations or warranties of any kind or nature not specifically set forth herein have been made by Landlord or its employees, agents or representatives. 29.5. Interest. Any sum due to Landlord under this Lease shall bear simple interest from and after its due date at a rate equal to ten percent per month until paid to Landlord, but not in excess of the maximum rate permitted by law. 29.6. Authority. Each individual executing this Lease on behalf of Tenant represents and warrants that he or she is duly authonzed to execute and deliver this Lease on behalf of Tenant and that this Lease is binding upon Tenant in accordance with its terms. 29.7. Time. Time is of the essence of this Lease. 29.8. Consistency. Each provision herein shall be interpreted so as to be consistent with every other provision. 29.9. Relationship of Parties The relationship of the Parties is that of Landlord and Tenant, and it is expressly understood and agreed Landlord does not in any way or for any purpose become a partner of Tenant in the conduct of Tenant's business or otherwise, or a joint venture with Tenant. 01181.0024/780141.1 24 29.10. Non -Discrimination. Tenant herein covenants by and for Tenant, Tenant's successors, heirs, executors, administrators and assigns, and all persons claiming under or through Tenant, and this Lease is made and accepted upon and subject to the following conditions: that there shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, sexual preference or identity or ancestry, in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the Premises, nor shall the Tenant, or any person claiming under or through Tenant, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, Tenants, subtenants, subtenants or vendees of the Premises. 29.11. Non -Collusion. No official, officer, or employee of Landlord has any financial interest direct or indirect, in this Lease, nor shall any official, officer, or employee of Landlord participate in any decision relating to this Agreement which may affect his/her financial interest or the financial interest of any corporation, partnership, or association in which (s)he is directly or indirectly interested, or in violation of any interest of any corporation, partnership, or association in which (s)he is directly or indirectly interested, or in violation of any State or municipal statute or regulation. The determination of "financial interest" shall be consistent with State law and shall not include interest found to be "remote" or non interest pursuant to California Government Code Sections 1091 and 1091.5. Tenant represents and warrants that (i) it has not paid or given, and will not pay or give, to any third party including, but not limited to Tenant or any of its officials, officers, or employees, any money, consideration, or other thing of value as a result or consequence of obtaining this Lease and (ii) it has not engaged in any act(s) omission(s), or other conduct or collusion that would result in the payment of any money, consideration, or other thing of value to any third party including, but not limited to, any official, officer or employee of Landlord as a result or consequence of obtaining this Lease. Tenant is aware of and understands that any such act(s), omission(s) or other conduct resulting in the payment of money, consideration, or other thing of value will render this Lease void and of no force or effect. 29.12. Notices. Wherever in this Lease it shall be required or permitted that notice and demand be given or served by either Party to this Lease to or on the other, such notice or demand shall be given or served in writing and shall not be deemed to have been duly given or served unless in writing, and personally served or forwarded by certified mail, postage prepaid, addressed as specified below. Either Party may change the address set forth below by written notice by certified mail to the other. Any notice or demand given by certified mail shall be effective one (1) day subsequent to mailing 01181.0024/780141.1 25 Landlord: With a copy to: Tenant: City of Morro Bay Attn: City Manager 595 Harbor Street Morro Bay, CA 94585 Aleshire & Wynder, LLP Attn Chris F. Neumeyer, City Attorney 18881 Von Kalman Ave., Suite 1700, Irvine CA 92612 Three Stacks and a Rock Brewing Company, LLC Attn: Ananda Nettnin 400 Surf St. Morro Bay, California 93442 29.13. Not an Offer. The submission of this Lease and any ancillary documents to Tenant shall not constitute an offer to lease, and Landlord shall have no obligation of any kind, express or implied, to lease the Premises to Tenant until Landlord has approved, executed and returned to Tenant a folly signed copy of this Lease. 29.14. Amendments. This Lease may be modified or amended only in writing executed by both Parties and approved by Landlord in accordance with applicable law. 29.15. Exhibits. Exhibit A is attached hereto and incorporated herein by reference. 29.16. Acknowledgement of Content. Each Party acknowledges they have read and fully understand the contents of this Lease and have had an opportunity to consult with an attorney regarding the same. This Lease represents the entire and integrated agreement between the Parties with respect to the subject matter hereof and supersedes all prior negotiations, representations or agreements, either written or oral. 01181.0024/780141.1 26 IN WITNESS WHEREOF, the Parties have duly executed this Lease on the day and year first above written in Morro Bay, California. LANDLORD: CITY OF MORRO BAY, a municipal corporation By: Sec) Qo-iliiis, City Manager P67 3 , 2022 r ATTEST: nitiNsv‘ ana Swanson, City Clerk APPROVED AS TO FORM: ALESHIRE & WYNDER, LLP 01181.0024/780141.1 27 TENANT: THREE STACKS AND A ROCK BREWING COMPANY, LLC., a California limited liability company By: 2i / %Z-o 'L' , 2022 (Attach Notary Acknowledgements for Tenant) EXHIBIT A DEPICTION OF PREMISES The Premises consist of Spaces A, B, C and D as depicted on the figure following. (The Building on Lease Site 69-70/69W-70W) 01181.0024/780141.1 EXHIBIT A Freezer NOT TO SCALE. DOORS, WIN- DOWS NOT SHOWN. (BAY) (EMBARCADERO) 1 CALIFOU IA ACKNOWLEDGMENT CIVIL CODE § 1189 A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. State of California County of� /�'�a� (0)7r/" On �" rX (fi -ogo� Date personally appeared before me, Z /ryl��/ic, Here Insert Name and Title of the Officer /Man /VW& Aletzt,/2Th Name(s) of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s)4s/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same irr-h-isther/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. 'R ry TRACEY ELIZABETH SERINO Notary Public • California San Luis Obispo County Commission it 2339085 My Comm. Expires Dec 4, 2024 Place Notary Seal and/or Stamp Above I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal- fSignatu OPTIONAL 4'/ ignature f Notary Public Completing this information can deter alteration of the document or fraudulent reattachment of this form to an unintended document. Description of Attached Docyment /�'� Title or Type of Document: (J972L/7U'ZLitJ tt1eLk'akO*3QefingAt Number of Pages &nail ad, Document Date: {/ Signer(s) Other Than Named Above:(.916#4,/%S/ Capacity(ies) Cla4 Signer's Name: 7/6 /k) d by Sign r s ❑ Corporate Officer - Title(s): ❑ Partner - Limited • General ■ ❑ Individual Trustee CQther: Signer is Representing: ■ ;, ❑ Attorney in Fact CC- 3uardian or Conservator Signer's Name: ❑ Corporate Officer - Title(s): ❑ Partner - ❑ Limited ❑ General ❑ Individual ❑ Attorney in Fact ❑ Trustee 4, Guardian or Conservator ther: 77)- enl�;�1Y1 Signer is Representing: •..•••••••..•c.•. • ••••:%•..•. •.••%%f•• •••• • • .f� �• .f .••• .•.:•: 1•: y.en• • irce .•: •.•::•::• ...S•:•.•::••'•••'••a' '.�)0;•'.•• u•'..'i • . �.•• •.••.•• .y.•a'•• ••.•. .'••• •'•. ✓.'*h•-s-a --•te -. • .tee .�0• ie•z0. 0:• •'s'-.ti•-. ^i'"•. •-•' ✓-aa a•rii •• •.. ..• •'•• •• a • 2019 National Notary Association 4.10