HomeMy WebLinkAboutReso 49-18 Mater Lease THMT 122W-123W 1205 EmbarcaderoRESOLUTION NO.49=18
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA
APPROVING A 32-YEAR MASTER LEASE AGREEMENT FOR
LEASE SITE 122-123/122W-123W, AND EXTENSION OF 122W-123W
BETWEEN THE CITY OF MORRO BAY AND THMT, INC., LOCATED AT 1205
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, Measure D was established by a vote of the people of Morro Bay on June
2, 1981 to establish and preserve a waterfront zone for commercial and recreational fishing
starting at Beach Street and ending at Target Rock; and
WHEREAS, the Harbor Hut was a pre -established restaurant at 1205 Embarcadero
when Measure D was enacted, and thus is a itgrandfathered13 non -conforming use in the
Measure D zone; and
WHEREAS, THMT, Inc. (Troy and Heather Leage) has been the lessee of Lease Site
122-123/122W 123W, and Extension of 122W-123W, since 2009 and is a tenant in good
standing; and
WHEREAS, THMT is proposing to continue to operate the site, and to complete
improvements to the site consisting of new docks/slips, significant structural repairs and
improvements and has contributed its fair share costs of the HarborWalk; and
WHEREAS, in accordance with the City's Master Lease Policy, the City and lessee
have agreed to a new 32-year lease agreement for Lease Site 122-123/122W-123W, and
Extension of 122W-123W located at 1205 Embarcadero,
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay,
California, as follows:
1. The attached new Master Lease Agreement for Lease Site 122-123/122W
123W, and Extension of 122W-123W is hereby approved.
2. The Mayor is hereby authorized to execute said Master Lease Agreement.
PASSED AND ADOPTED by the City Council of the City of Morro Bay at a
regular meeting thereof held on the 26th day of June, 2018 on the following vote:
AYES: Irons, Davis, Headding, Makowetski
NOES: None
ABSENT: McPherson
ATTEST:
Lori M. Kudzma, Deputy City Clerk
Jano L. Irons, Mayor
by and between
the CITY OF MORRO BAY
("CITY")
THMT, Inc. ("TENANT")
Article 1
Article 2
Article 3
Article 4
TABLE OF CONTENTS
FIXEDTERM.............................................................................................................2
Section1.01 Term..............................................................................................2
Section 1.02 No Extensions...............................................................................2
Section1.03 Hold Over......................................................................................2
Section 1.04 Replacement..................................................................................3
RENT..........................................................................................................................3
Section 2.01 Annual Minimum Rent.................................................................3
Section 2.03 Calculation of New Annual Minimum Rent.................................4
Section 2.04 Percentage Rent............................................................................5
Section 2.05 Reimbursements............................................................................7
Section 2.06 Penalty and Interest.......................................................................8
USEOF PREMISES...................................................................................................8
Section 3.01 Permitted Uses..............................................................................8
Section 3.02 Unauthorized Use..........................................................................8
Section 3.03 Operation of Business -Hours of Operation.................................8
Section 3.04 Competition...................................................................................9
Section 3.05 Hazardous Materials. 0400 000*009
Section 3.06 Tidelands Trust, I
Section 3.07 Compliance with Law. . 0 * 9 * 0 6 0 9 0 v 4 0 9 * 0 a 0 0 0 0 p 9 p 9 9 0 0 p 9 p 9 0 f 4 0 * * * 0 * * 0 * 0 * 0 6 6 a 0 6 6 a a 0 0 4 0 0 0 0 0 a I I
Section 3.08 Waste or Nuisance. . 0 p 0 9 0 9 0 p 0 p 9 v 9 9 0 6 0 9 0 * 9 . 9 9 9 p 9 9 9 9 q # 0 9 * 0 p * * 6 * 0 0 & 0 0 & a a a 0 * a a 0 6 * 0 0 * a 0 6 0 a 6 * 0 11
Section 3.09 Use by CITY. 4 0 6 p 9 9 9 4 a 9 4 v 9 4 * 0 0 v 6 9 0 9 0 * 0 6 4 * # W * * 0 9 q 0 # q 0 4 0 0 * * * * * 0 0 0 * 6 * & 0 6 * a & * 0 0 0 * & 0 0 & 6 a 0 0 0 0 a 0 a 0 11
CONSTRUCTION, ALTERATION AND REPAIRS.............................................12
Section 4.01 Construction Approval................................................................12
Section 4.02 Construction Bond......................................................................12
Section 4.03 Mechanics' Liens.........................................................................13
Section 4.04 Ownership of Improvements.......................................................13
01181.0024/477ll21 JWP -1-
Section 2.01 Annual Minimum Rent.................................................................3
Section 2.03 Calculation of New Annual Minimum Rent.................................4
Section 2.04 Percentage Rent............................................................................5
Section 2.05 Reimbursements............................................................................7
Section 2.06 Penalty and Interest.......................................................................8
USEOF PREMISES...................................................................................................8
Section 3.01 Permitted Uses..............................................................................8
Section 3.02 Unauthorized Use..........................................................................8
Section 3.03 Operation of Business -Hours of Operation.................................8
Section 3.04 Competition...................................................................................9
Section 3.05 Hazardous Materials. 0400 000*009
Section 3.06 Tidelands Trust, I
Section 3.07 Compliance with Law. . 0 * 9 * 0 6 0 9 0 v 4 0 9 * 0 a 0 0 0 0 p 9 p 9 9 0 0 p 9 p 9 0 f 4 0 * * * 0 * * 0 * 0 * 0 6 6 a 0 6 6 a a 0 0 4 0 0 0 0 0 a I I
Section 3.08 Waste or Nuisance. . 0 p 0 9 0 9 0 p 0 p 9 v 9 9 0 6 0 9 0 * 9 . 9 9 9 p 9 9 9 9 q # 0 9 * 0 p * * 6 * 0 0 & 0 0 & a a a 0 * a a 0 6 * 0 0 * a 0 6 0 a 6 * 0 11
Section 3.09 Use by CITY. 4 0 6 p 9 9 9 4 a 9 4 v 9 4 * 0 0 v 6 9 0 9 0 * 0 6 4 * # W * * 0 9 q 0 # q 0 4 0 0 * * * * * 0 0 0 * 6 * & 0 6 * a & * 0 0 0 * & 0 0 & 6 a 0 0 0 0 a 0 a 0 11
CONSTRUCTION, ALTERATION AND REPAIRS.............................................12
Section 4.01 Construction Approval................................................................12
Section 4.02 Construction Bond......................................................................12
Section 4.03 Mechanics' Liens.........................................................................13
Section 4.04 Ownership of Improvements.......................................................13
01181.0024/477ll21 JWP -1-
Article 5
Article 6
Article 7
Article 8
Article 9
LEASEHOLD MORTGAGES.................................................................................14
REPAIRS, MAINTENANCE AND RESTORATION............................................14
Section 6.01 Maintenance by TENANT..........................................................14
Section 6.02 Seawalls and Revetment.............................................................14
Section 6.03 Legal Requirements....................................................................15
Section 6.04 Failure to Repair.........................................................................15
Section 6.05 Inspection by CITY.....................................................................15
Section 6.08 Destruction Due to Risk Not Covered by Insurance...................17
INDEMNITY AND INSURANCE..........................................................................18
Section 7.01 Indemnity Agreement.................................................................18
Section 7.02 Liability Insurance......................................................................19
Section 7.03 Worker's Compensation..............................................................19
Section 7.04 Property Insurance......................................................................19
Section 7.05 Additional Coverage...................................................................20
Section 7.06 General Requirements.................................................................20
Section 7.07 No Subrogation...........................................................................21
Section 7.08 TENANT'S Waiver.
Section 7.09 Insurance Not a Limit,
TAXESAND FEES..................................................................................................22
Section 8.01 TENANT to Pay Taxes. . # 0 0 0 a * a 0 & 6 a . 6 * * & & & a a 0 0 0 & a 0 * 0 0 0 0 0 0 0 0 0 a 0 0 9 V p 9 0000409990*04*000622
Section 8.02 TENANT to Pay License and Permit Fees.
Section 8.03 Utilities........................................................................................22
CONDEMNATION..................................................................................................22
Section 9.01 Total Condemnation....................................................................22
SectionCondemnation Award.................................................................22
Section 9.03 Termination for Partial Taking...................................................23
O1181.0024/477112.1 JWP -11-
Section 9.01 Total Condemnation....................................................................22
SectionCondemnation Award.................................................................22
Section 9.03 Termination for Partial Taking...................................................23
O1181.0024/477112.1 JWP -11-
Article 10
Article 11
Article 12
Section 9.04 Rent Abatement for Partial Taking.............................................24
Section 9.05 Conveyance in Lieu of Eminent Domain....................................24
Section 9.06 Temporary Taking.0000.....0009....4999.6.090.0.0.0..0....0.....6.6......600....0..000.24
ASSIGNMENT AND SUBLEASING.....................................................................25
Section 10.01 No Assignment Without CITY'S Consent..................................25
Section 10.03 Application for Assignment........................................................26
Section 10.04 Probate Transfer of Assignment.................................................26
Section 10.06 Subtenant Subject to Lease Terms..............................................27
Section 10.07 Consent Form Agreement...........................................................27
Section 10.09 Nondisturbance...........................................................................28
DEFAULT AND TERMINATION..........................................................................28
Section 11.01 Abandonment by TENANT........................................................28
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...........................................................29
Section 11.05 Damages for Breach....................................................................29
Section 11.06 Cumulative Remedies.
Section 11.07 Waiver of Breach, . 0 * * * 6 6 a 6 4 & 0 & 6 0 & * a a & 0 a & 6 0 a 4 0 0 4 0 0 0 a 4 * 0 0 0 0 0 * 0 * 0 0 0 a 4 * 9 a 4 a 6 0 0 p 9 t000too0*00030
Section 11.08 Surrender of Premises. a 0 a & * * 0 & a 0 0 0 0 0 0 0 a * 4 a 0 0 M 0 a 0 * 030
MISCELLANEOUS.................................................................................................30
Section12.01 Notices........................................................................................30
Section 12.02 Governing Law and jurisdiction.
Section 12.03 Binding on Successors. I
Section 12.04 Partial Invaty..........................................................................31
Section 12.05 Sole and Only Agreement...........................................................31
01181.0024/477112.] JWP -lll-
Section 12mo Modification................................................................................31
Section 12.01 Time of Essence..........................................................................32
Section 12.08 Memorandum of Lease for Recording........................................32
Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE.................................32
Section 13.01 Rescission of Old Lease..............................................................32
Section 13.02 Completion of Improvements.....................................................32
Section 13.03 Lease Restriction.........................................................................33
Section 13.04 Construction of Improvements...................................................34
01181.0024/477ll21 JWP -1V-
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 THMT, Inc., a California
corporation, herein called TENANT (sometimes referred to, individually, as the Party or
collectively, as the "Parties").
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 hereto; 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,
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 CITY upon the date of its incorporation as a CITY on the 17th day of July, 1964;
and
WHEREAS, TENANT accepts this 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 Morro Bay Harbor and to assist in carrying
out the provisions of the tideland grant as aforesaid, and in order to provide facilities for the
accommodation of those using Morro Bay Harbor, CITY desires to lease to TENANT the within
described property upon the terms and conditions set forth herein;
01181.0024/477112.1
Page 1
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 CITY, County of
San Luis Obispo, State of California, described as follows: Lease Site 122423/122W423W and
Extension of Lease Site 122W423W (the "Premises").
The Premises is delineated on Parcel Map of CITY 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 the Map is attached hereto as Exhibit A and made
a part hereof by reference.
Section 1.01 Term.
The term of this Lease shall be a period of thirty-two years, commencing July 1, 2018, (the
"Commencement Date") and terminating, without notice, on July 1, 2050, unless sooner
terminated as herein provided (the "Term").
Section 1.02 No Extensions.
The Term shall not be extended nor shall this Lease be renewed, except as provided by
Section 13.03. Other than as permitted by Section 13.03, any requests for continued use of the
Premises after the Term, including as may be extended pursuant to Section 13.03, shall be treated
as an application for a new lease and shall require appropriate application to CITY with all required
supporting information and documents, CITY' S City Council approval and the execution of a new
CITY lease, containing the then most current terms, covenants, conditions and rent schedules.
Section 1.03 Hold Over.
If TENANT holds the Premises after the expiration of the Term with the consent of CITY,
express or implied, then such holding over (in the absence of a written agreement between CITY
and TENANT with respect thereto) shall be deemed to create a tenancy from month -to -month,
terminable on thirty -days' written notice from either party to the other, at a monthly rental equal
to two hundred percent of the average total Rent per month for the twelve months immediately
preceding the expiration of this Lease, and otherwise subject to each and every term, covenant and
condition of this Lease.
Page 2
r-
As of the Commencement Date, this Lease shall extinguish and replace every prior lease
between CITY and TENANT respecting the Premises, if any. Any right or interest held by the
TENANT pursuant to any existing lease with respect to the Premises which is not granted pursuant
to this Lease shall be extinguished as of the Commencement Date of this Lease.
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 $60,(AAA .00 per year (the "Annual Minimum
Rent"), payable in advance in monthly installments on the 1 st of each month each year during the
term of the Lease starting July 1, 2018. All Rent, including the Annual Minimum Rent and the
Percentage Rent, shall be paid in lawful money of the United States of America, without offset or
deduction and shall be paid to CITY at City Hall located at 595 Harbor Street, Morro Bay,
California, or at such other place or places CITY may from time to time designate by written notice
delivered to TENANT.
Section 2.02 CPI Adjustment to Annual Minimum Rent.
(1) The Parties agree, commencing July 1, 2019, as of every July 1 following the
Commencement Date (each, a "CPI Adjustment Date"), except as outlined in section 2.03 hereof,
the Annual Minimum Rent shall be adjusted in direct proportion to any upward or downward
movement in the Consumer Price Index for January 1, 2018 which is hereby agreed to be 261.235
(Base Index). The percentage adjustment for any given year shall be based on the monthly average
Index for the calendar year immediately preceding the CPI Adjustment Date as compared with the
Base Index. The Consumer Price Index refereed to herein is the Consumer Price Index (all items
indexes, all urban consumers) for Los Angeles —Long Beach -Anaheim, California, compiled and
published by the United States Department of Labor, Bureau of Labor Statistics, 1982-84
Base Year = 100 (the "Index")
(2) The Annual Minimum Rent shall be adjusted as of each CPI Adjustment Date, and will
remain in effect as adjusted until the next CPI Adjustment Date. As an illustration only, if the
Base Index (Jan. 1, 1999 CPI) is 166.1 and the monthly average CPI for 2000 is 171.6, then the
percentage increase is equal to 3.31%. Therefore, the Annual Minimum Rent would be increased
by 3.31% as of July 1, 2001, and would continue at that rate through June 30, 2002.
Page 3
(3) If the United States Department of Labor, Bureau of Labor Statistics, shall cease to
compile and make public the Index as now constituted and issued, but shall substitute another
index in its place, then said substituted index shall be used for the purpose of adjusting the Annual
Minimum Rent for the Premises. If the Index is changed so that the base year differs from that in
effect on the Lease Commencement Date, then the Index shall be converted in accordance with
the conversion factor published by the United States Department of Labor, Bureau of Labor
Statistics.
Section 2.03 Calculation of New Annual IVlinimum Rent.
Starting with calculation of the New Annual Minimum Rent for the 2023/2024 Fiscal Year,
and then at the end of each five-year period thereafter, a new Annual Minimum Rent shall be
calculated for the following five-year period (each, a "Subsequent Rental Period") as follows:
(1) The Annual Minimum Rent shall be subject to adjustment by appraisal for the
2023/2024 Fiscal Year, and then every five years thereafter (each, an "Appraisal Adjustment
)ate"). CITY, at its own cost and expense, shall retain an independent qualified appraiser for
determination of the fair market value of said premises. Not more than nine months prior to each
Appraisal Adjustment Date, CITY shall provide written notice to TENANT of the pending
appraisal and the appraiser selected by CITY to determine the fair market value of the Premises,
excluding fixtures and improvements unless such are expressly included in the description of the
leasehold hereinabove. If TENANT does not reject CITY's appraiser in writing and within thirty
days after CITY's notice of its determination, then the Annual Minimum Rent for the Subsequent
Rental Period shall be in the amount determined by CITY as outlined in this Section 2.03. If
TENANT rejects CITY's appraiser within thirty days following CITY's notice to TENANT, then
within fifteen days after such thirty -day period, each party, at its own cost, shall select an
independent professionally designated appraiser who is a member of the American Institute of
Real Estate Appraisers, or the Society of Real Estate Appraisers with a designation of MAI
(Member of American Institute), SRPA (Senior Real Estate Analysis), to appraise the fair market
value of the Premises. CITY may rely on its original appraisal, or select a new appraiser, at its
cost. If a party does not appoint an appraiser within fifteen days after the other party has given
notice of the name of its appraiser, then the single appraiser appointed shall be the sole appraiser.
Each appraiser shall conduct an independent appraisal within thirty days after appointment. If the
Parties are unable to agree on the Annual Minimum Rent for the Subsequent Rental Period within
thirty days after receiving the appraisal(s), then each Party shall select one member of a three -
member committee. The two so selected members shall select the third member, and that
committee shall by majority vote select one or the other of the appraisals. The Annual Minimum
Page 4
Rent determined on the basis of the selected appraisal shall be final and binding and all costs
associated with the three -member committee shall be paid equally by CITY and TENANT.
(2) In the event the appraisal process is not concluded on or before the Appraisal
Adjustment Date, the Annual Minimum Rent shall be adjusted retroactively to such Appraisal
Adjustment Date as set out hereinbelow when said appraisal process is completed.
(3) The total Rent payable, including both the Annual Minimum Rent and the Percentage
Rent for each year within the applicable previous five-year period, shall be averaged to produce
the average annual total Rent payable for such previous period.
(4) The new Annual Minimum Rent for the five-year period commencing on each
Appraisal Adjustment Date shall be the greater amount of seventy-five percent of the average of
the total yearly Rent payable during the previous five-year period (as set out in subparagraph 2.03
(3), above) or eight percent of the fair market value of the Premises (as established in subparagraph
2.03 (1), above.) The new Annual Minimum Rent shall be divided by two to determine the
semiannual payments and shall be paid by TENANT to CITY on the first of each January and July
thereafter. This new Annual Minimum Rent shall be adjusted each following year in proportion
to any increase in the Consumer Price Index as set out in Section 2.02 of this Lease. The base
index shall be adjusted upon each Calculation of new Annual Minimum Rent as set out in this
section so that the Base index for CPI adjustment shall be the Consumer Price Index for January 1
A the year of the calculation of new Annual Minimum Rent.
Section 2.04 Percentage Rent.
(1) In addition to the Annual Minimum Rent, TENANT agrees to pay to CITY, at the time
and in the manner hereinafter specified as additional Rent for the use and occupancy of the
Premises, a percentage of TENANT'S Gross Sales, as detailed in Exhibit B, attached hereto, less
the amount of the Minimum Rent paid for the reporting period pursuant to this Lease (the
"Percentage Rent").
(2) The term "Gross Sales," as used herein, shall mean (subject to the exceptions and
authorized deductions as hereinafter set forth): (i) 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, (ii) the gross amount received by TENANT
for merchandise sold pursuant to orders received in the Premises, though filled elsewhere and (iii)
the gross amount received by TENANT from any and all other sources of income derived from
the business conducted upon the Premises.
Page 5
(3) Notwithstanding the other provisions of this Section 2.04, the term "Gross Sales" shall
not include the following items, and such items may be deducted from Gross Sales to the extent
they have been included therein or have been included in a prior computation of Gross Sales or for
which a Percentage Rent has been paid under this Lease to CITY:
a) Credits and refunds made to customers for merchandise returned or exchanged,
b) Any sales or excise taxes otherwise includable in Gross Sales as defined in this Section
because such taxes are part of the total selling price of merchandise or services rendered in, from,
or on the Premises, where TENANT must account for and remit the taxes to the government entity
or entities by which they are imposed,
c) With respect to credit card sales, fees retained or withheld by the issuer or merchant
bank pursuant to TENANT'S credit card acceptance agreement, and
d) Rental payments to TENANT from sublessees whose total gross sales are included in
gross sales computations.
(4) TENANT shall keep or cause to be kept full, complete, and accurate records, and books
of account in accordance with accepted accounting practices showing the total amount of Gross
Sales, as defined herein, made each calendar month in, on or from the Premises. TENANT shall
keep said records and books of account within San Luis Obispo County and shall notify CITY in
advance of their location at all times. Furthermore, TENANT shall at the time of sale and in the
presence of the customer cause the full selling price of each piece of merchandise, each rental
received and each service rendered in, on or from the Premises to be recorded in a cash register or
cash registers that have cumulative totals and are sealed in accordance with standard commercial
practices. Those records, books of account and cash register tapes, including any sales tax reports
that TENANT may be required to furnish any government or governmental agency, shall at all
reasonable times be open to the inspection of CITY, CITY'S auditor, or other authorized
representative or agent of CITY. TENANT consents to the release of sales tax information to
CITY and on demand will furnish to CITY a copy of the sales tax reports, quarterly reports and
any audit reports of sales for confidential internal use of 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.
(5) By July 31 of each year, TENANT shall furnish CITY with a statement, to be certified
by TENANT as current, true and accurate, which shall set forth the Gross Sales of each department,
sublease, licensee and concession operating, on or from the Premises for the previous twelve
calendar -months, ending June 30, just concluded, and the authorized deductions, if any, therefrom;
and with it TENANT shall pay to CITY the amount of the Percentage Rent which is due to CITY
as shown thereby. If TENANT shall at any time cause an audit of sales of TENANT'S business
to be made by a public accountant, then TENANT shall furnish CITY with a copy of said audit
Page 6
without cost or expense to CITY. CITY may, once in any twelve-month period, cause an audit of
the business of TENANT to be made by a public accountant of CITY'S own selection. TENANT
shall, upon receiving written notice of CITY'S desire for such an audit deliver and make available
all such books, records and cash register tapes to the public or certified public accountant selected
by CITY. Furthermore, TENANT shall promptly on demand reimburse CITY for the full cost and
expense of said audit, if the audit discloses the questioned statement or statements understated
Gross Sales by five percent (5%) or more but less than ten percent. In the event an audit performed
at CITY'S request discloses TENANT understated Gross Sales by less than 5%, the cost of such
audit shall be paid by CITY. In the event any audit or other review of records discloses that the
amounts reported as Gross Sales was understated by TENANT by ten percent or more, CITY shall
not only be entitled to recover from TENANT all costs of audit and review but shall also be entitled
to recover from TENANT a penalty equal to two times the Percentage Rent due pursuant to this
Lease on such unreported amounts. Whenever any audit discloses Gross Sales were understated
by any amount, TENANT shall immediately pay the additional Percentage Rent therein shown to
be payable by TENANT to CITY, together with interest at the Default Rate thereon, from the date
the Percentage Rent was payable until the date paid.
(6) CITY shall be entitled at any time within five (5) years after the receipt of any such
Percentage Rent payment, to question the sufficiency of the amount thereof and/or the accuracy of
the statement or statements furnished by TENANT to justify the same. For the purpose of enabling
CITY to check the accuracy of any such statement or statements, TENANT shall, for that period
of five (5) years after submission to CITY of any such statement, keep all of TENANT'S records,
including sales tax returns, all cash register tapes and other data which in any way bear upon or
are required to establish in detail TENANT'S Gross Sales and shall upon request make the 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 term or covenant, and TENANT shall reimburse CITY for the costs
incurred by CITY for such performance as additional Rent hereunder. As an illustration and not
as a limitation, if TENANT fails to procure the insurance required by this Lease, then CITY may,
but is not obligated to, obtain such insurance, with the cost of the premiums, plus 5%, being due
to CITY upon demand as additional Rent.
Page 7
(1) If any Rent is not received within ten days following the date on which the Rent first
became due, then TENANT shall pay a late penalty of ten percent of the amount of the Rent in
addition to the Rent.
(2) In addition to the penalty, TENANT shall pay interest at the rate of one percent per
month or fraction thereof or the maximum amount permitted by law as of the date this Lease is
signed, whichever is greater (the "Default Rate"), on the amount of 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 CITY and any unpaid amounts due from TENANT to CITY.
Section 3.01 Permitted Uses.
The Premises shall, during the term of this Lease, be used only for the purpose of operating
and conducting thereon and therein the uses permitted by and in compliance with (i) Conditional
Use Permit (CUP) Number UPO-058, CUP 02-01, Coastal Development Permit (CDP) Number
3-08-025 and CDP Number 3-08-025 Al. and (ii) if issued, any new CUP or CDP number(s) or
Minor Use Permits (MUP) or amendment to any or all of those approvals, after a request from
TENANT for the new CUPS, CDPs, MUPs or amendments, and for no other purpose (collectively,
the "Entitlements"). The Parties agree and acknowledge all the terms and conditions contained in
this Lease shall be deemed to be materially consistent with the Conditions of Approval as set forth
in the Entitlements. On the effective date of this Lease, the Entitlements include the following
permitted uses: food service, both dining room and take-out, sale of alcoholic beverages, berthing
of vessels, ticket and charter sales as permitted in the Entitlements and pursuant to Measure D, and
for uses normally incidental thereto and directly allied to such uses, subject to any approvals
required under the CITY's Conditional, Minor or Temporary Use Permit processes, or as those
permits may be amended.
Section 3.02 Unauthorized Use.
TENANT agrees to conduct and allow only those uses authorized in Sections 3.01 and
13.02 at the Premises. Any unauthorized use of the Premises shall constitute a breach of this Lease
and shall, at the option of CITY, terminate this Lease.
Section 3.03 Operation of Business -Hours of Operation.
Failure to actively and gently conduct the business authorized herein constitutes a
breach of this Lease and shall, at the option of CITY, terminate this Lease.
Page 8
(1) TENANT shall during the term of this Lease conduct business of the nature specified
in Section 3.01 of this Lease on the Premises in an efficient and diligent manner and keep the
Premises open for the conduct of business continuously and without interruption for at least six
hours each day of the year, except one day each week and legal holidays. This provision shall not
apply if the Premises shall be closed and the business of TENANT is temporarily shut down for a
period not to exceed fourteen calendar days in any calendar year to make necessary repairs,
maintenance or other construction deemed necessary by TENANT. This provision shall not apply
if the Premises shall be closed and the business of TENANT is temporarily shut down as authorized
or required by CITY'S City Manager or on account of strikes, walkouts, or causes beyond the
control of TENANT or for not more than three days out of respect to the memory of an officer,
employee, or close relative of any officer or employee of TENANT.
(2) TENANT shall operate TENANT'S business on the Premises with due diligence and
efficiency and in like manner as comparable businesses operated in CITY or the coastal area of
San Luis Obispo County, so as to produce the maximum amount of Gross Sales and gross receipts
from services which may be produced from TENANT'S business; and TENANT at all times shall
carry on Premises, a stock or merchandise of such size, character, and quality as is reasonable,
designed to produce the maximum return to TENANT, when the sale of merchandise is a permitted
use under this Lease.
Section 3.04 Competition.
During the term of this Lease, TENANT shall not directly nor indirectly acquire or
establish any similar or competing business within a radius of two miles from the location of the
Premises; provided, however, that TENANT may, own or operate more than one business, whether
or not competing and similar along the Embarcadero upon CITY lease sites. The purpose of this
section is to prevent and prohibit TENANT from reducing revenue to CITY by diverting business
from the operation at the Premises to another business owned by TENANT located within the area
included in that radius, but not upon a CITY lease site from which CITY is paid rent based on
Gross Sales.
Section 3.05 Hazardous Materials.
(1) TENANT shall not transport, use, store, maintain, generate, dispose, release, treat or
discharge any "Hazardous Material" (as defined below) upon or about the Premises (such activities
being hereafter referred to as "Hazardous Materials Activities"), nor permit TENANT'S
employees, agents, or contractors to engage in Hazardous Materials Activities upon or about the
Premises, except as allowed by applicable law. The tenn "Hazardous Material" for purposes
hereof shall mean any chemical, substance, material or waste or component thereof which is now
or hereafter listed, defined or regulated as a hazardous or toxic chemical, substance, material or
waste or component thereof by any federal, state or local governing or regulatory body having
jurisdiction, or which would trigger any employee or community "rightAo-know" requirements
adopted by any such body. All Hazardous Materials Activities at the Premises shall be conducted
strictly in accordance with all applicable laws and regulations. If TENANT shall transport any
hazardous waste from the Premises, then such transportation shall be done only by a contractor
July licensed to haul hazardous waste and shall use only a duly licensed disposal site approved by
TENANT'S liability insurer.
(2) TENANT shall promptly notify CITY of: (i) any enforcement, cleanup or other
regulatory action taken or threatened by any governmental or regulatory authority with respect to
the presence of any Hazardous Material on the Premises or the migration thereof from or to other
property, (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 (iii) any matters where TENANT is required by applicable law to give a notice to
any governmental or regulatory authority respecting any Hazardous Material on the Premises.
CITY shall have the right (but not the obligation) to inspect the Premises, to take such remedial
action on the Premises, as CITY may deem appropriate, and to join and participate, as a party, in
any legal proceedings or actions affecting the Premises initiated in connection with any
environmental, health or safety law.
(3) If any Hazardous Material is released, discharged or disposed of by TENANT or its
employees, agents or contractors, on or about the Premises in violation of the foregoing provisions,
then TENANT shall immediately notify CITY. CITY may elect either to take such remedial action
as CITY deems appropriate, in which event TENANT shall reimburse CITY for all costs thereof
within ten days after demand, or direct TENANT to perform such remediation. If CITY directs
TENANT to perform the remediation, then TENANT shall immediately take such remedial action,
as CITY shall direct. TENANT shall, properly and in compliance with applicable laws clean up
and remove the Hazardous Material from the Premises and any other affected property at
TENANT'S expense. If CITY directs TENANT to perform remediation hereunder and if
TENANT fails to comply with the provisions of this Section within five (5) days after
written notice by CITY, or such shorter time as may be required by applicable law or in order to
minimize any hazard to persons or property, then CITY may (but shall not be obligated to) arrange
for such compliance directly or as TENANT'S agent through contractors or other parties selected
by CITY at TENANT'S expense (without limiting CITY'S other remedies under this Lease or
applicable law).
Page 10
Section 3.06 Tidelands Trust.
TENANT shall use and occupy the Premises in strict compliance with the Tidelands Trust
purposes under which the Premises or any portion thereof are held by CITY pursuant to the grants
from the State of California as set forth in this Lease.
Section 3.07 Compliance with Law.
TENANT shall, 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 shall faithfully observe in the use of the Premises all local,
municipal and county ordinances, rules, regulations and orders and state and federal statutes, rules,
regulations and orders now in force or which may hereafter be in force (collectively, "Legal
Requirements"); provided, that TENANT shall not be required to comply with any Legal
Requirement imposed by CITY, after the commencement date of this Lease, that would
substantially deprive TENANT of a material benefit under this Lease, unless such Legal
Requirement has been imposed or required by a county, state or federal authority; and provided
further, however, that the Parties understand and agree this Lease does not, itself, provide any
vested rights to TENANT or any its successors or assigns, regarding CITY' S adoption of any new
or amended land use regulations that may be apply to the Premises. 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, TENANT has violated any such Legal
Requirement in the use of the Premises shall be conclusive of that fact, as between CITY and
TENANT.
Section 3.08 Waste or Nuisance.
TENANT shall not commit or permit the commission by others of any waste on the
Premises; TENANT shall not maintain, commit, or permit the maintenance or commission of any
nuisance as defined by law on the Premises; and TENANT shall not use or permit the use of the
Premises for any unlawful purpose.
Section 3.09 Use by CITY.
(1) 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.
Page 11
(2) CITY also retains and reserves for itself, its successors and assigns, all on, 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.
Section 4,01 Construction approval.
(1) TENANT shall not make or permit any other person to make any alterations or
structural additions or structural modifications to the Premises or to any structure thereon or
facility appurtenant thereto if the cost thereof shall exceed Ten Thousand Dollars ($10,000),
without the prior written consent of CITY. The consent to be obtained pursuant to this
Section 4.01(1) shall be requested from CITY'S Harbor Director, or CITY'S designee. If the
Harbor Director or any future successor to the duties of the Harbor Director, or CITY'S designee,
gives such consent to proceed, it is understood that such consent is given by CITY only in its
capacity as the landlord under this Lease and not as the permit -issuing authority. TENANT
remains obligated to obtain any needed building permits and comply with all applicable planning
processes.
(2) 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 shall be applied for and approved prior to any construction, alteration or
repairs.
Section 4.02 Construction Bond.
(1) Prior to the commencement of any construction the cost of which is greater than the
amount of One Hundred Thousand Dollars (15100,000), TENANT shall We with the CITY"s City
Clerk a final detailed Civil Engineer's, Registered Architect's or Licensed and Bonded General
Contractor's estimate of the cost of construction and installation of improvements on the Premises.
Said estimate must be submitted to CITY'S City Engineer for approval. TENANT shall file with
CITY'S City Clerk a faithful performance bond, in a form and issued by a corporate surety
company satisfactory to CITY, in an amount satisfactory to CITY, but not in excess of
one hundred percent of the final detailed cost estimate, securing the faithful performance of
TENANT or its contractor in the completion of said construction.
(2) TENANT shall also file with CITY'S City Clerk a labor and materials bond, in a form
and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY
but not in excess of one hundred percent of the final detailed cost estimate, securing the payment
Page 12
A all claims for the performance of labor or services on, or the furnishing of materials for, the
performance of said construction.
(3) In lieu of the above referenced bonds, TENANT may post cash deposits or may make
other mutually satisfactory arrangements to guarantee the completion of construction projects. In
the event the contractor bonds the project, CITY may be named as additional indemnitee to comply
with these requirements.
Section 4.03 Mechanics' Liens.
At all times during the term of this Lease, TENANT shall keep the Premises and all
buildings, installations and other improvements now or hereafter located on the Premises free and
clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed
on or furnished to the Premises. TENANT further agrees to at all times, save CITY free and
harmless and indemnify CITY against all claims for labor or materials in connection with any
improvement, repairs, or alterations on the Premises, and the cost of defending against such claims,
including reasonable attorneys' fees. If TENANT fails to pay and discharge or cause the Premises
to be released from such liens or claim of liens within ten days after the filing of such lien or levy,
then TENANT shall upon written notification be required to immediately deposit with CITY a
bond conditioned for payment in full of all claims on which said lien or levy has been filed. Such
bond shall 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 insurance company as surety. The beneficiary of any security instrument which instrument
is on record with CITY, shall have the right to file such a bond on behalf of TENANT. CITY shall
have right to post and keep posted on the Premises notices of non -responsibility and any other
notices that may be provided by law or which CITY may deem proper for the protection of CITY
and Premises from such liens. TENANT shall give CITY notice at least twenty days prior to
commencement of any work on the Premises to afford CITY the opportunity to post such notices.
Section 4.04 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 the
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 shall have
sixty days thereafter to remove all buildings, structures, facilities, installations, improvements and
other property belonging to TENANT from the Premises.
If CITY exercises such option and
Page 13
TENANT fails to remove all such improvements and other property within sixty days after the
termination of this Lease, then CITY shall have the right to have any or all such improvements
and other property removed at the expense of TENANT. If CITY does not exercise its option to
remove (or require the removal of) the improvements and other property, then title to such
improvements and other property shall vest in CITY and TENANT shall not remove same.
Tenant shall not mortgage, securitize or hypothecate the leasehold interest in whole
or any part without the prior written approval of CITY as evidenced by a resolution of CITY'S
City Council.
Section 6.01 Il�aintenance by TENANT.
At all times during the term of this Lease, TENANT shall, at TENANT'S own cost and
expense, keep and maintain all improvements now or hereafter on the Premises in good order and
repair and in a safe and clean condition. Furthermore, TENANT shall, at TENANT'S own cost
and expense, maintain at all times during the term of this Lease the whole of the Premises in a
clean, sanitary, neat and orderly condition. CITY may, at the sole option of CITY, clean and clear
the Premises, at TENANT'S cost and expense, in the event TENANT fails to clean and clear the
Premises in accordance with this Section to the satisfaction of CITY after fifteen -days' written
notice to TENANT from CITY of CITY'S intent to exercise this option.
Section 6.02 Seawalls and Revetment.
TENANT understands and agrees by entering into this Lease TENANT is taking and
accepting the improvements, pilings, bulkheads, seawalls, revetment, piers, posts and any
structures or other improvements located in the water portion of the Premises (the "Seaside
Improvements") in their AS4S condition and without any express or implied warranty of condition
or usability by CITY. With that understanding, at all times during the term of this Lease, TENANT
shall, at TENANT'S own cost and expense, repair, maintain, replace and rebuild ("Repairs") as
necessary, the Seaside Improvements. Further, TENANT, at TENANT'S own cost and expense,
shall, as often as reasonably needed to properly meet the obligations set forth in this Section 6.02,
conduct maintenance surveys to locate and determine needed Repairs and as soon as possible,
thereafter, commence and complete Repairs deemed necessary by each survey. CITY, at
TENANT'S costs, may, but is not required to, have one or more of those surveys conducted if
TENANT fails to obtain a survey within thirty days after CITY provides a written demand that a
Page 14
survey be completed, if CITY, in its discretion, decides to transmit that demand. No default of
this Lease will result due to the failure to obtain a survey with or without a written demand.
However, if a survey is obtained, then a material breach of this Lease will result if Seaside
Improvements are not completed as recommended by a survey.
Section 6.03 Legal Requirements.
At all times during the term of this Lease, TENANT, at no cost to CITY, shall:
(1) Make all alterations, additions, or repairs to the Premises or the
improvements or facilities on the Premises required by any Legal Requirements (as defined in
Section 3.07, above) now or hereafter made or issued;
(2) Observe and comply with all Legal Requirements now or hereafter made or
issued respecting the Premises or the improvements or facilities located thereon;
(3) Obtain all required permits pursuant to the Morro Bay Municipal Code or
State law prior to the initiation of any repair or maintenance activity; and
(4) Indemnify, defend and hold harmless CITY and each of its officers and
employees and the property of CITY, including the Premises, from any and all liability, loss,
damages, fines, penalties, claims and actions resulting from TENANT'S failure to comply with
and perform the requirements of this section.
Section 6.04 Failure to Repair.
In the event failure to repair results in a hazardous or unsafe condition, CITY shall have
the right and option, but not the obligation, to close and prohibit access to the unsafe portion of the
Premises until such repairs are completed and accomplished and the Premises rendered safe for
public use. In addition, if TENANT fails to repair any hazardous or unsafe condition within ten
days after written notice thereof from CITY, then CITY shall have the right, but not the obligation,
to perform such repair at TENANT'S expense. TENANT shall reimburse CITY for any such repair
undertaken by CITY, promptly upon CITY'S demand, as additional Rent. Failure by CITY to
enforce any of the provisions of this Article shall not constitute a waiver of those provisions and
CITY may at any time enforce all of the provisions of 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 for the purpose of doing other lawful acts that may be
Page 15
necessary to protect CITY'S interest in the Premises under this Lease or to perform CITY'S duties
under this Lease.
Section 6.06 TENANT'S Duty to Restore Premises.
(1) Except as provided in Section 6.07, below, if at any time during this Lease, any
improvements now or hereafter on the Premises are destroyed in whole or in part by the elements,
or any other cause not the fault of TENANT or CITY, then this Lease shall continue in full force
and effect and TENANT, at TENANT'S own cost and expense, shall repair and restore the
damaged or destroyed improvement(s) according to the original plan thereof or according to such
modified plans therefore as shall be approved in writing by CITY. The work of permitting, repair
and restoration shall be commenced by TENANT within one hundred eighty days after the damage
or destruction occurs shall be pursued with due diligence, and shall be completed not later than
one year after the work is commenced, unless the Parties mutually agree, in writing, to an
extension. In all other respects, the work of repair and restoration shall be done in accordance with
the requirements for construction work on the Premises set forth in Article 4 of this Lease. Any
failure by TENANT either to commence or to complete repair and restoration as required by this
Section 6.06 shall be a material default under this Lease.
(2) Any and all insurance proceeds that become payable at any time during the term of this
Lease because of damage to or destruction of any improvements on the Premises shall be paid to
TENANT and applied by TENANT toward the cost of repairing and restoring the damaged or
destroyed improvements in the manner required by this Section 6.06, or, if this Lease is terminated,
then applied as provided in Section 6.07. Except as set forth in Section 6.08 below, TENANT'S
obligation to restore pursuant to this Section shall exist whether or not funds are available from
insurance proceeds.
Section 6.07 Termination of Lease for Destruction.
(1) Notwithstanding the provisions of Section 6.06 of this Lease, TENANT shall have the
option of terminating this Lease as provided in this Section 6.07
(a) During the Term of this Lease, any improvements now or hereafter on the
Premises are so dammaged or destroyed by the elements or any cause not the fault of TENANT or
CITY, that they cannot be repaired and restored as required by Section 6.06 of this Lease at a cost
not exceeding thirty-five percent of the cost of replacing all improvements if they had been totally
destroyed at the time of such damage; or
(b) During the last ten years of the term of this Lease, any improvements now or
hereafter on the Premmises are so damaged or destroyed by the elements or any cause not the fault
Page 16
Af TENANT or CITY, that they cannot be repaired and restored as required by Section 6.06 of this
Lease at a cost not exceeding fifteen percent of the cost of replacing all improvements if they had
been totally destroyed at the time of such damage.
(2) TENANT may exercise its right to terminate pursuant to this Section 6.07 by provng
written notice to CITY within one hundred eighty days following damage or destruction as
described herein. Such termination shall be effective on the last day of the calendar month
following the month in which TENANT provides its notice.
(3) If TENANT fails to commence or complete repair and restoration as required by
Section 6:06, then CITY shall have all rights and remedies with respect to TENANT's default,
including, but not limited to, termination of this Lease pursuant to Article 1 I .
(4) If this Lease is terminated as a result of damage or destruction, then any insurance
proceeds received with respect to the improvements shall be applied or distributed in the following
order:
debris; then
then
(a) first, to the demolition of the improvements and removal of all demolition
(b) to any accrued and unpaid Rent as of the effective date of the termination;
(c) to each Lender under a Leasehold Encumbrance, in order of lien priority,
an amount not to exceed the amount due under such Leasehold Encumbrance; then
(d) to CITY, an amount equal to the present value, as of the date of termination,
of the total Annual Minimum Rent for the remainder of the Term; then
(e) 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 shall
have 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 fifty percent of the fair market value
of all the improvements on the Premises immediately prior to the damage or destruction.
Page 17
Section 7.01 Indemnity Agreement.
(1) TENANT shall indemnify, defend and hold harmless CITY, and the property of CITY
(including the Premises and any improvements now or hereafter on the Premises), and each of
CITY'S officers, officials, employees and volunteers from any and all liability, claims, loss,
damages, and expenses, including reasonable attorney's fees and litigation expenses ("Damages"),
resulting from any act or omission relating to this Lease of TENANT or any of its officers,
employees, agents, representatives, subtenants, contractors, subcontractors or anyone for whom
TENANT may be liable, specifically including, without limitation, any liability, claim, loss,
damage, or expense arising by reason of:
(a) The death or injury of any person, including TENANT or any person who is an
employee or agent of TENANT, or by reason of the damage to or destruction of any property,
including property owned by TENANT or by any person who is an employee or agent of
TENANT, from any cause whatever while such person or property is in or on the Premises or in
any way connected with the Premises or with any of the improvements or personal property on the
Premises;
(b) The death or injury of any person, including TENANT or any person who is an
employee or agent of TENANT, or by reason of the damage to or destruction of any property,
including property owned by TENANT or any person who is an employee or agent of TENANT,
caused or allegedly caused by either (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;
(c) Any work performed on the Premises or materials furnished to the Premises at
the instance or request of TENANT or any person or entity acting for or on behalf of TENANT;
or
(d) TENANT'S failure to perform any provision of this Lease or to comply with
any Legal Requirement imposed on TENANT or the Premises.
(2) TENANT'S obligations pursuant to this Section to indemnify and hold harmless apply
only to the extent TENANT or any of its officers, employees, agents, representatives, subtenants,
contractors or subcontractors or anyone for whom TENANT may be liable caused Damages.
Page 18
Section 7.02 Liaty Insurance.
During the term of this Lease, TENANT shall maintain at its cost Commercial General
Liability insurance with coverages at least as broad as ISO Forms labeled "City of Morro Bay
Insurance requirements for Lessees," Certificate of Insurance — City of Morro Bay", and
"Additional Insureds — Managers or Lessors of Premises" attached hereto as Exhibit C and made
a part hereof as may be updated or changed from time to time at the sole discretion of the CITY,
insuring against claims for bodily injury (including death), property damage, contractual liability,
personal injury and advertising injury occurring on the Premises or from operations located in any
part of the Premises. Such insurance shall afford protection in amounts no less than One Million
Dollars ($1,000,000) per occurrence for bodily injury, personal injury and property damage,
provided that if insurance with a general aggregate limit is used, either the general aggregate limit
shall apply separately to the Premises or the general aggregate limit shall be twice the occurrence
limit stated in this Section. All liability insurance carried by TENANT hereunder shall name
CITY, its officers, officials, employees and volunteers as additional insureds, and shall be primary
insurance with respect to such additional insureds. TENANT shall include all its subtenants as
insureds under TENANT's liability policies or shall furnish separate certificates and endorsements
for each subtenant. All coverages for subtenants shall comply with all requirements of this Article
Seven.
Section 7.03 Worker's Compensation.
TENANT shall maintain at TENANT'S own expense and keep in full force and effect
during the term of this Lease, Worker's Compensation Insurance as provided by law. Said
insurance shall contain a waiver of subrogation rights against CITY. TENANT shall also maintain
employer's liability insurance with minimum coverage of $1,000,000 per accident for bodily injury
or disease.
Section i.04 Property Insurance.
TENANT shall, at its cost, at all times during the term of this Lease keep all improvements
and other structures on the Premises, as well as any and all additions, improvements and
betterments thereto, insured for one hundred percent of their full replacement cost with no co-
insurance provision against loss or destruction by the perils covered by "all risk" (excluding
earthquake) property damage insurance policies. Any loss payable under such insurance shall be
payable to TENANT, CITY, and any Lender under a Leasehold Encumbrance pursuant to Article 5 of
this Lease, as their interests may appear, and such proceeds shall be used and applied in the manner
requireA by Article 6 of this Lease.
Page 19
Section 7.05 Additional Coverage.
TENANT shall also maintain, at its expense, Lite insurance described in this Section 7.05.
(1) If TENANT has (or is required by any Legal Requirement to have) a liquor license and
is selling or distributing alcoholic beverages on the Premises, then TENANT shall maintain liquor
Liability coverage in appropriate amounts. TENANT shall require any subtenant who has (or is
required by any Legal Requirement to have) a liquor license and who is selling or distributing
alcoholic beverages on the Premises, to maintain such coverage.
(2) TENANT shall maintain "all risk" (excluding earthquake) property damage insurance
covering TENANT's personal property located at the Premises, in amounts not less than the full
replacement value of such personal property. CITY shall have no interest in the proceeds of such
insurance.
(3) TENANT shall, at TENANT's own expense, obtain and maintain any additional
insurance coverages that CITY may reasonably require. As illustration only and not as a limitation,
in appropriate circumstances such additional insurance may include increased general liability
limits, business interruption coverage, business automobile liability, boiler and machinery
insurance and/or builder's risk insurance. However, TENANT shall not be required to maintain
additional coverages that are in excess of those typically maintained by similarly situated tenants
in the Morro Bay area.
Section 7.06 General Requirements.
Except as specifically provided to the contrary, all the insurance required pursuant to this
Article Seven shall be subject to the requirements of this Section 7.06.
(1) Maintenance of proper insurance coverage is a material element of this Lease and
failure to maintain or renew coverage or to provide evidence of coverage and/or renewal may be
treated by the CITY as a material breach of contract. TENANT shall forward CITY'S
specifications and forms to TENANT'S insurance agent for compliance.
(2) CITY may at any time require TENANT to increase the minimum coverage limits for
insurance required by this Lease, but every such increase shall be reasonable under the
circumstances.
(3) All policies shall be issued by insurance companies authorized to issue such insurance
in California, with an A.M. Best's rating of no less than A:VII.
(4) Any deductibles or self -insured retentions must be declared to and approved by CITY.
At the option of CITY, either: the insurer shall reduce or eliminate such deductibles or self -insured
Page 20
retentions as respects CITY, its officers, officials, employees and volunteers; or the TENANT shall
provide a financial guarantee satisfactory to CITY guaranteeing payment of losses and related
investigations, claim administration and defense expenses.
(5) Each insurance policy required by this Lease shall be endorsed to state that coverage
shall not be cancelled or reduced, except after thirty -days' prior written notice by certified mail,
return receipt requested, has been given to CITY.
(6) TENANT shall furnish CITY with certificates and amendatory endorsements effecting
the coverage required by this Lease. The endorsements shall be on forms provided by CITY or on
other than CITY's forms, provided those endorsements or policies conform to the requirements.
All certificates and endorsements are to be received and approved by CITY before use of the
Premises, and promptly following any renewal or replacement. CITY reserves the right at any time
to require complete, certified copies of all required insurance policies, including endorsements
effecting the coverage required by these specifications.
(7) TENANT'S insurance coverage shall be primary insurance as respects CITY, its
officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by
CITY, its officers, officials, employees, or volunteers shall be excess of TENANT'S insurance and
shall not contribute with it.
Section 7.07 No Subrogation.
TENANT agrees that in the event of loss due to any of the perils for which it has agreed to
provide insurance, TENANT shall look solely to its insurance for recovery. TENANT hereby
grants to the CITY, on behalf of any insurer providing insurance to either TENANT or CITY with
respect to TENANT'S occupancy of the Premises, a waiver of any rights to subrogation which any
such insurer of said TENANT may acquire against the CITY by virtue of the payment of any loss
under such insurance. Each insurance policy required under this Lease including those insuring
TENANT against claims, expense, or liability for injury to persons or property shall provide that
the insurer shall not acquire by subrogation any right to recovery which TENANT has expressly
waived in writing prior to the occurrence of the loss.
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 shall not have any claim against CITY for any loss that results from a risk or peril that
would have been included in such insurance.
Page 21
Section 7.09 insurance Not a Limit.
The insurance requirements of this Article 7 are independent of, and do not limit or modify,
TENANT'S indemnification and other obligations pursuant to this Lease.
TENANT shall pay, before delinquency, all taxes and assessments levied upon or assessed.
to TENANT on 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 shall be solely responsible to pay all possessory interest taxes applicable
to the Premises.
Section 8.02 TENANT to Pay License and Permit Fees.
TENANT shall pay any fees imposed by law for licenses or permits for any business or
activities including construction by TENANT upon the Premises.
Section 8.03 Utilities.
TENANT shall pay, or cause to be paid, and hold harmless CITY and the property of CITY,
including the Premises, from all charges for the furnishing of gas, water, electricity, telephone
service, and for other public utilities to the Premises during the term of this Lease and for the
removal of garbage and rubbish from the Premises during the term of this Lease.
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 shall terminate on
the date that possession of the Premises is taken, and both CITY and TENANT shall thereafter be
released from all obligations, including Rent, all of which shall 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 shall be allocated between CITY and TENANT
as follows:
Page 22
(1) All compensation or damages awarded or payable for the taking by eminent domain of
any land that is part of the Premises shall be paid to and be the sole property of CITY free and
clear of any claim of TENANT or any person claiming rights to the Premises through or under
TENANT.
(2) All compensation or damages awarded or payable which is specifically attributed by
the taking party to the "good will" of TENANT'S business shall be paid to and be the sole property
A TENANT.
(3) All compensation or damages awarded or payable because of any improvements
constructed or located on the portion of the Premises taken by eminent domain where only a
portion of the Premises is taken by eminent domain, and TENANT is not entitled to or does not
terminate this Lease, shall be applied in the manner specified in Section 9.04 toward the
replacement of such improvements with equivalent new improvements on the remaining portions
of the Premises.
(4) All compensation or damages awarded or payable because of any improvements
constructed or located on the portion of the Premises taken by eminent domain. where this Lease
is terminated because of the taking by eminent domain, whether all or only a portion of the
Premises is taken by eminent domain, shall be allocated between CITY and TENANT as follows:
(a) That percentage of the compensation or damages awarded or payable because
of the improvements that equals the percentage of the full term of this Lease that has, at the time
A the taking, not expired shall belong to and be the sole property of TENANT.
(b) That percentage of the compensation or damages awarded or payable because
of the improvements that equals the percentage of the full term of this Lease that has, at the time
A the taking, expired shall belong to and be the sole property of CITY.
(c) The term "time of taking" as used in this Section shall mean 12:01 a.m. of the
date that the agency or entity exercising the eminent domain power, takes, title, or the date that it
takes physical possession of the portion of the Premises, whichever shall first occur.
(5) Any severance damages awarded or payable because only a portion of the Premises is
taken by eminent domain shall be the sole and separate property of CITY.
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
Page 23
on CITY within ninety days after TENANT has been deprived of actual physical possession of the
portion of the Premises taken for such public use. This Lease shall terminate on the first day of
the calendar month following the calendar month in which the notice of termination described in
this section is served on CITY. On termination of this Lease pursuant to this Article, all subleases
and subtenancies in or on the Premises or any portion of the Premises created by TENANT under
this Lease shall also terminate and the Premises shall be delivered to CITY free and clear of all
such subleases and subtenancies; provided, however, that CITY may, at CITY'S option, by mailing
written notice to a subtenant allow any subtenant to attorn to CITY and continue such subtenant's
occupancy on the Premises as a TENANT of CITY. On termination of this Lease pursuant to this
section, however, both CITY and TENANT shall be released from all obligations under this Lease,
except those specified in Section 9.02 of this Lease.
Section 9.04 Rent Abatement for Partial 'faking.
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 shall terminate as to the portion of the
Premises taken under eminent domain on the date actual physical possession of the portion taken
by eminent domain is taken by the agency or entity exercising the eminent domain power.
Furthermore, the Rent payable under this Lease shall, as of that time be reduced in the same
proportion of the Premises taken by eminent domain bears to the full value of the Premises at that
time; provided, however, that TENANT shall make a good faith effort to replace any
improvements or facilities with equivalent new facilities on the remaining portion of the Premises
and do all other acts at TENANT'S own cost and expense required by the eminent domain taking
to make the remaining portion of the Premises fit for the use specified in this Lease.
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 wine by eminent domain proceedings shall be considered a taking of
title to all or such portion of the Premises under the power of eminent domain subject to the
provisions of this Article.
Section 9.06 Temporary Taking.
If the possession of the Premises or any portion thereof should be taken under the power
of eminent domain by any public orquasi-public agency or entity for a limited period not extending
beyond the term of this Lease, then this Lease shall not terminate (except as provided in this
Page 24
Section 9.06) and TENANT shall continue to perform all its obligations hereunder, except only to
the extent that TENANT is prevented from performing such obligations by reason of such taking.
TENANT shall be entitled to receive the entire amount of compensation or damages awarded
because of such temporary taking. If a temporary taking extends for more than thirty-six months,
then TENANT shall have the right to terminate this Lease, and TENANT shall be entitled to
receive, out of the compensation or damages awarded because of such temporary taking, the
amount that is attributable to the period of time up until the effective date of TENANT'S
termination of this Lease.
Section 10.01 No Assignment 11Vithout CITY'S Consent.
Except as provided in this Article 10, TENANT shall not assign or otherwise transfer this
Lease, any right or interest in this Lease, or any right or interest in the Premises or any of the
improvements that may now or hereafter be constructed or installed on the Premises without the
express written consent of CITY evidenced by resolution first had and obtained. Any assignment
or transfer by TENANT without the prior written consent of CITY, whether it be voluntary or
involuntary, by operation of law or otherwise, is void and shall, at the option of CITY, terminate
this Lease. A consent by CITY to one assignment shall not be deemed to be a consent to any
subsequent assignment of this Lease by TENANT. CITY shall not unreasonably nor arbitrarily
withhold its approval to the assignment or transfer of this Lease to an assignee who is financially
reliable and qualified to conduct the business for which this Lease was granted. It is mutually
agreed TENANT'S qualifications are a part of the consideration for granting of this Lease and said
parry does hereby agree to maintain active control and supervision of the operation conducted on
the Premises.
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:
(I) If TENANT is a partnership or limited liability company:
(a) A change in ownership effected voluntarily, involuntarily, or by operation of
law, within atwelve-month period, of twenty-five percent or more of the partners or members or
twenty-five percent or more of the partnership or membership interests; or
(b) The dissolution of the partnership or limited liability company without its
immediate reconstitution.
Page 25
(2) If TENANT is a closely held corporation (i.e., one whose stock is not publicly held and
not traded through an exchange or over the counter):
(a) The sale or other transfer, within a twelve-month period, of more than an
aggregate of twenty-five percent %J the voting shares of TENANT (other than to immediate family
members by reason of gift or death); or
(b) The dissolution, merger, consolidation, or other reorganization of TENANT.
Section 10.03 Application for Assignment.
A condition of an assignment shall be TENANT shall file with the CITY an application to
assign the leasehold prepared by the prospective assignee. Concurrently with filing the
application, TENANT shall pay a reasonable fee associated with the cost of processing said
application, in cash or certified or cashier's check to enable CITY adequately to investigate the
proposed assignee's qualifications as a permitted assignee. CITY shall not be required to account
for the use of the sum paid. If the proposed assignee's net worth on the date of assignment is not
sufficient to reasonably guarantee successful operation of the Premises in compliance with all
applicable CITY, County, State and federal requirements, 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 shall mean the amount by which the total of
all assets shall 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.
Section 10.04 Probate Transfer of Assignment.
If TENANT is an individual, then nothing herein contained will prevent the transfer of this
Lease by will, or by operation of law under the intestacy provisions of the California Probate Code
as it may be amended from time to time. Probate sale of the leasehold interest will not be permitted
without the consent of the CITY, evidenced by resolution, first had and obtained.
Section 10.05 No Sublease Without CITY'S Consent.
TENANT shall not sublease the whole nor any part of the Premises, or license, permit, or
otherwise allow any other person (the employees of TENANT excepted) to occupy or use the
Premises, or any portion thereof, without the prior written consent of CITY'S Harbor Director, or
any future successor to the duties of CITY'S Harbor Director. A consent to one subletting,
occupation, licensing or use shall not be deemed to be a consent to any subsequent subletting,
occupation, licensing or use by another person. Any sublease or license without CITY'S
written consent shall be void, and shall at CITY'S option, terminate this Lease. CITY shall not
Page 26
unreasonably nor arbitrarily withhold its consent to sublet to one who is qualified and financially
reliable. CITY'S consent to any occupation, use, or licensing shall be in CITY'S sole and absolute
discretion. Notwithstanding any provisions herein to the contrary, the terms "assignment,"
"subletting," "occupation," or "use," shall not be construed or interpreted to mean or include the
temporary, short term renting or leasing of boat slips, motel, hotel, or apartment accommodations
on the premises.
Section 10.06 Subtenant Subiect to Lease Terms.
Any and all subleases shall be expressly made subject to all the terms, covenants, and
conditions of this Lease. In no event shall the term of any sublease extend beyond the term of this
Lease. Subject to Section 10.09, termination of this Lease prior to the expiration of this Lease
term shall also terminate any and all subleases. A breach of the terms of this Lease by a subtenant
shall constitute a breach on the part of TENANT and shall subject both the subtenant and TENANT
to all the remedies provided to CITY herein and by law. Failure by any subtenant to report Gross
Sales or to pay Percentage Rent due from subtenant shall constitute a breach of this lease.
TENANT hereby agrees to and does guarantee payment of such Percentage Rent due by a
subtenant under the terns of this lease.
Section 10.07 Consent Form Agreement.
Prior to any consent by CITY to any sublease hereof, TENANT shall cause to be executed
between TENANT and any subtenant an agreement malting the CITY a third party beneficiary, in
a form acceptable to CITY, whereby the subtenant agrees to be bound by all of the terms, covenants
and conditions of this Lease. Further, it is agreed by TENANT any default by the subtenant of
any of the terms, covenants and conditions of this Lease shall be deemed to be violations by
TENANT of this Lease and that all remedies of CITY for such violation, including termination of
this Lease, shall immediately be enforceable by CITY against TENANT. TENANT shall apply
any and all monies received from any subtenant first to the payment of obligations of the subtenant
to CITY.
Section 10.08 TENANT and Guarantor Remain Liable.
Prior to approval by CITY to any sublease hereof, TENANT shall agree to be primarily
and jointly and severally liable to CITY for all obligations due CITY by any subtenant, including
the payment of rents, and TENANT shall agree CITY may proceed directly against TENANT for
any obligation owing CITY by the subtenant. If this Lease is guaranteed, then neither the sublease
nor CITY'S approval thereof shall release the guarantor from its obligations pursuant to the
guaranty.
Page 27
Section 10.09 Nondisturbance.
On the terms set forth below, CITY may enter into agreements with subtenants providing
that in the event of any termination of this Lease prior to the expiration date, CITY will not
terminate or otherwise disturb the rights of the subtenant under such sublease, but will instead
honor such sublease as if such agreement had been entered into directly between Landlord and
such subtenant, conditioned upon such subtenant's agreement to attorn to Landlord and full
performance of all obligations under the sublease in question ("Non -Disturbance Agreement").
CITY agrees to execute a Non -Disturbance Agreement in connection with a particular sublease
provided that Tenant provides CITY with a copy of the sublease, and the Non -Disturbance
Agreement is customary in form and substance and otherwise reasonably acceptable to CITY.
Section 11.01 Abandonment by TENANT.
If TENANT breaches this Lease and abandons 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 shall be entitled
to enforce all CITY'S rights and remedies under this Lease including the right to recover the Rent
specified in this Lease as it becomes due under this Lease.
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
amount due, and such failure is not cured within thirty days after written notice thereof is served
on TENANT, then CITY may terminate this Lease immediately, and in the event of such
termination, TENANT shall have no further rights hereunder and TENANT shall thereupon
forthwith remove from the Premises and shall have no further right or claim thereto and CITY
shall immediately thereupon have the right to re-enter and take possession of the Premises, subject
only to appropriate legal process.
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 after written notice thereof is served on the TENANT, then CITY shall have the
option to immediately terminate this Lease; and in the event of such termination, TENANT shall
Page 28
have no further right or claim thereto and CITY shall immediately thereupon have the right to re-
enter and take possession of the Premises, subject only to appropriate legal process.
Section 11.04 Lender (Vlay Cure Default.
CITY shall afford the Lender under any Leasehold Encumbrance of record with CITY, as
provided in Article 5 of this Lease, the right to cure any default by TENANT of the covenants,
conditions, or agreements hereof.
Section 11.05 Damages for breach.
If TENANT defaults in the performance of any covenant, condition or agreement contained
in this Lease and the default be incurable or not be cured within the time period set forth
hereinabove, then CITY may terminate this Lease and:
(1) Bring an action 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 of the Lease;
(b) The worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination of the Lease until the time of award exceeds the amount
of rental loss that TENANT proves could have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of rental loss that TENANT proves
could be reasonably avoided; and
(d) Any other amount necessary to compensate CITY for all detriment proximately
caused by TENANT'S failure to perform its obligations under this Lease; and
(2) Bring an action, in addition to or in lieu of the action described in subparagraph (1) of
this Section, to re-enter and regain possession of the Premises in the manner provided by the laws
of unlawful detainer of the State of California then in effect.
Section 11.06 Cumulative Remedies.
The remedies available to CITY in this Article shall not be exclusive but shall be
cumulative with and in addition to all remedies now or hereafter allowed by law or elsewhere
provided in this Lease.
Page 29
The waiver by CITY of any breach by TENANT of any of the provisions of this Lease
shall not constitute a continuing waiver or a waiver of any subsequent breach by TENANT either
of the same or a different provision of this Lease.
Section 11.08 Surrender of Premises.
On expiration or sooner termination of this Lease, TENANT shall surrender the Premises,
and, subject to Section 4.04, all improvements in or on the Premises, and all facilities in any way
appertaining to the Premises, to CITY in good, safe, and clean condition, reasonable wear and tear
excepted.
Section 12.01 Notices.
Any and all notice or demands by or from CITY to TENANT, or TENANT to CITY, shall
be in writing. They shall be served either personally, or by registered or certified mail. Any notice
or demand to CITY may be given to:
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 may be given at:
THMT, Inc.
Troy and Heather Leage
PO Box 1257
Morro Bay, CA 93443
Such addresses may be changed by written notice by either party to the other party.
Page 30
Section 12.02 Governing Law and Jurisdiction.
This Lease, and all matters relating to this Lease, shall be governed by the laws of the State
of California in force at the time any need for interpretation of this Lease or any decision
concerning this Lease arises. CITY and TENANT consent to exclusive personal and subject 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 that such court is not a convenient forum.
Each party hereby specifically waives the provisions of California Code of Civil Procedure Section
394, and any successor statute thereto.
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 shall be binding upon and inure to the benefit
of the successors and assigns of any and all of the Parties; and all of the Parties shall be jointly and
severally liable hereunder.
Section 12.04 Partial Invalid
If any provision of this Lease is held by a court of competent jurisdiction to be either
invalid, void, or unenforceable, then the remaining provisions of this Lease shall remain in full
force and effect unimpaired by the holding.
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. Any other agreements or representations respecting the Premises and their leasing
to TENANT by CITY, which are not expressly set forth in this Lease, are null and void. The lease
terms herein specified correctly set forth the obligations of CITY and TENANT as of the date of
this Lease. No modification, amendment, or alteration of this Lease shall be valid unless it is in
writing and signed by both parties.
Section 12.06 Modification.
This Lease shall not be modified except pursuant to a written agreement executed by
CITY' S Mayor and City Clerk pursuant to prior CITY's City Council approval. Notwithstanding
CITY'S City Council approval, no agreement shall become effective until such agreement is in
fact executed by CITY'S Mayor and City Clerk. TENANT understands this Lease may not be
modified by oral statements by any person representing CITY, including CITY'S Mayor and City
Clerk. TENANT specifically agrees not to rely on oral statements, purported oral waivers, or
Page 31
purported oral modifications and agrees not to rely upon purported written modifications unless
they meet the requirements of this paragraph and are approved in writing pursuant to formal City
Council action and a subsequent written modification signed by CITY' S Mayor and City Clerk.
If the title of any person authorized to act for CITY under this Lease shall be changed during the
term of this Lease, then the person who succeeds to substantially the same responsibilities with
respect to CITY shall have the authority to act for CITY under this Lease.
Section 12.07 Time of Essence.
Time is expressly declared to be the essence of this Lease.
Section 12.08 Memorandum of Lease for Recording.
CITY and TENANT shall, at the request of either at any time during the term of this Lease,
execute a memorandum or "short form" of this Lease, which shall describe the Parties, set forth a
description of the Premises, specify the Term, and incorporate this Lease by reference.
The following provisions apply to this Lease site only:
Section 13.01 Rescission of Old Lease
CITY and TENANT understand and agree this Lease rescinds and revokes the
previous lease between CITY and TENANT more particularly described as that certain lease
originally assigned to TENANT and commencing July 1, 1998 for the Premises, including all
amendments made thereto.
Section 13.02 Completion of Improvements
TENANT must complete improvements to the Premises with minimum hard and soft
construction costs of $400,000.00 (plus the structural improvements cost in #2 below, TBD),
Page 32
including shared costs with adjacent tenant at Lease Site 124-128/124W-I28W & 113W (currently
operating as Morro Bay Landing), as follows:
1. Complete the water lease dock and slip improvements as outlined in Coastal
Development Permit (CDP) No. 3-08-025, 3-08-025-A1 and Conditional Use Permit
No. UPO-058 (the "Slip Improvements") as follows:
A. A complete application for building permits for the Dock and Slip Improvements
must be filed with CITY no later than July 31, 2018.
B. Payment of all building permits fees and building permits issued no later than May
31, 2019.
C. Commencement of construction of the Dock and Slip Improvements must
commence no later than sixty days after CITY, in its governmental capacity, has
issued the building permit. For purposes of this provision, commence shall mean
when TENANT has expended at least $40,000 on hard construction costs for the
project.
D. Construction of the Dock and Slip Improvements must be completed, as evidenced
by CITY'S issuance, in its governmental capacity, of a certificate of occupancy, or
final inspection approval, as applicable, no later than one year after building permits
are issued.
2. Complete structural improvements to Premises, as outlined in inspection report by
Land/Sea Interface dated August 23, 2016 (attached hereto as Exhibit D), in accordance
with the timeline stipulated in the report, but in no case later than December 31, 2021.
In addition, it is recognized and documented TENANT'S obligation toward TENANT'S
share of the HarborWallc improvements completed by CITY abutting the Premises is $45,543 and
due and payable on terms mutually acceptable to TENANT and CITY.
Section 13.03 Lease Restriction
In consideration of the issuance of Coastal Development Permit Nos. 3-08-025 and 3-08-
25-A1, TENANT and CITY agree all of the terms and conditions of CDP 3-08-025 and 3-08-025-
A1, as amended, are conditions of the Lease. TENANT and CITY agree not to modify or amend
any portion of this Lease consisting of the conditions of the amended CDP's or that would
Page 33
contradict the terms and conditions of the amended CDP's without the prior written approval of
the Executive Director of the Coastal Commission.
Section 13.04 Construction of Improvements
TENANT acknowledges TENANT'S construction of any and all proposed improvements
of the Premises requires, but may not be limited to, obtaining a permit from the California Coastal
Commission, U.S. Army Corps of Engineers, and a CITY Building Permit. It is TENANT'S
obligation to fully investigate the issues and costs in obtaining those permits. Failure to obtain any
and all required permits and approvals for said construction shall not be a reason for failure to
comply with any of the obligations of this Lease. TENANT further acknowledges construction of
TENANT'S improvements may require repair or replacement of all or portions of the docks,
existing buildings, revetments, access ways, sidewalks, drainage systems and other current
improvements on the Premises to the standards of CITY'S City Engineer and TENANT agrees to
meet those standards through review and revision of final Building Plans prior to issuance of a
Building Permit for the construction of improvements on the Premises.
During construction of all improvements contemplated in this Lease, TENANT shall take
all measures to:
A. Avoid any pollution of the atmosphere or littering of land or water by or originating
in or about the Premises or caused by TENANT'S construction activities,
B. Keep the noise level on the Premises to a minimum so persons in the neighborhood
will be able to comfortably enjoy business and facilities in the area,
C. Prevent any pollutants, including but not limited to petroleum products, from
entering Morro Bay waters,
D. Avoid negative impacts on surrounding businesses,
E. Prohibit storage of materials or equipment on public property and avoid parking or
traffic delays or impairment without prior consent of CITY and
F. Keep the construction site in a sightly, orderly, and safe manner at all times.
EXECUTED on J , 2018, at 6Q-u- ,
DIN�yao County, California, which shall be considered effective
date of this Lease.
Page 34
Ja
D/I
na Swanson, City Clerlc
THMT, Inc. a Ci ifornia,cbWoratton
By:
By:
it's President
Page 35
EXHIBIT A
COPY OF PARCEL MAP
(IMMEDIATELY BEHIND THIS PAGE)
FOOD SERVICE
RETAIL SALES &SERVICE
VESSELS
l�v:nDIMMOI
PERCENTAGE RENTS
Restaurant, Dining Room
Snack Bar, Delicatessen
Fast Food, Convenience Food
Bar/Lounge, Liquor
Bar/Lounge, Beer & Wine
Tenant/Subtenant
Tie-up, Pier/Fixed Piles
Tie-up, Slips/Floating Docks
Ticket Sales
Sales Aboard Vessels
5%
OTHER SALES NOT LISTED SPECIFICALLY 10%
<-;
.c�'.,
W
�-;
0
�-
'- i
�' W
ri
z-i ii�''
1��
V !
u
w�
��
�f
.-1
u�
z�
z,
ca
T�
U.
i
CU C1.7 �,E -
- iL CL i �;f
�' � I
- � ,0-'vGs-t 3,SI.9E1
I
1
tt cU 3
i
._ � -
1'
� � t
cz� �± 3
,noa2i �
i
1 (}
i L � � Y:� V
c-� �-•� ��% C:
rA0'ZOI o,
- CL CLi 3 ��
j u% a5
t�' .D(i'2$I ti ,CO'D8 P:SI.SEN r
i
�� � - i
pl
FJ ni
t_J nn��nr .-. .-+� .-.... ......-�. � __.. _ � __ �__-
Wf
S V
i—�
F-i
r�-r
u
U
___
.—, i�.Q '.'—
t
cv 3
Y UrY(�
°K .o/r
Q) .C'j(
iii
z
w�
9
d
� r
� O
p... ---�
i__1 �
J n
G �(
m i �
� � l""
r
U �
o i�
� � a u.t
� OL
� � A�
., lA..
a }
� �
� �
u� �
O
Ll LL'
CC_2018-06-26 Page 98 of 375
595 Harbor St.
Morro Bay, CA 93442
(805)772-6200
FAX (805) 772-7329
(NO AUTO RISKS)
Lessee shall procure and maintain for the duration of the contract insurance against claims for
injuries to persons or damages to property which may arise from or in connection with the
Lessee's operation and use of the leased premises. The cost of such insurance shall be borne by
the Lessee.
Nlininruyrt Scope of InsuNunce
Coverage shall be at least as broad as:
1. Insurance Services Office Commercial General Liability coverage (occurrence
form CG 0001).
2. Workers' Compensation insurance as required by the State of California and
Employer's Liability Insurance (for lessees with employees).
3. Property insurance against all risks of loss to any tenant improvements or
betterments.
1Vlinirnum Limits of InsuYance
Lessee shall maintain limits no less than:
1
2
3
01181.0024/477112.1
General Liability: $1,000,000 per occurrence for bodily injury,
personal injury and property damage. If
Commercial General Liability Insurance or other
form with a general aggregate limit is used, either
the general aggregate limit shall apply separately to
this project/location or the general aggregate limit
shall be twice the required occurrence limit.
Employer's Liability: $1,000,000 per accident for bodily injury or disease.
Property Insurance: Full replacement cost with no coinsurance penalty
provision.
Page 5
City of Morro Bay
Insurance Requirements for Lessees
Deductibles tend Self-InsuYed Retentions
Any deductibles or self -insured retentions must be declared to and approved by the City. At the
option of the City, either: the insurer shall reduce or eliminate such deductibles or self -insured
retentions as respects the City, its officers, officials, employees and volunteers; or the Lessee
shall provide a financial guarantee satisfactory to the City guaranteeing payment of losses and
related investigations, claim administration and defense expenses.
®theN InsuYance �ovisions
The general liability policy is to contain, or be endorsed to contain, the following provisions:
1. The City, its officers, officials, employees, and volunteers are to be covered as
insureds with respect to liability arising out of ownership, maintenance or use of
that part of the premises leased to the Lessee.
2. The Lessee's insurance coverage shall be primary insurance as respects the City,
its officers, officials, employees, and volunteers. Any insurance or self-insurance
maintained by the City, its officers, officials, employees, or volunteers shall be
excess of the Lessee's insurance and shall not contribute with it.
3. Each insurance policy required by this clause shall be endorsed to state that
coverage shall not be canceled, except after thirty -days' prior written notice by
certified mail, return receipt requested, has been given to the City.
Acceptability of InsuNers
Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:VII.
T�eNifzcation of Coverage
Lessee shall furnish the City with original certificates and amendatory endorsements effecting
coverage required by this clause. The endorsements should be on forms provided by the City or
on other than the City's forms, provided those endorsements or policies conform to the
requirements. All certificates and endorsements are to be received and approved by the City
before use of City premises. The City reserves the right to require complete, certified copies of
all required insurance policies, including endorsements effecting the coverage required by these
specifications at any time.
01181.0024/4771121 JWP
1
City of Morro Bay
Insurance Requirements for Lessees
Sub -lessee
Lessee shall include all sub -lessees as insureds under its policies or shall furnish separate
certificates and endorsements for each sub -lessee. All coverages for sub -lessees shall be subject
to all of the requirements stated herein.
01181.0024/477112.1 JWP
1
City of fVlorro bay
Insurance Requirements for Lessees
Reproduction of Insurance Services Office, Inc. Form
INSURER: ISO Form CG 20 1 I I1 85 (Modified)
POLICY NUMBER: Commercial General Liability
ENDORSEMENT NUMBER:
THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY.
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART,
1. Designation of Premises (Part Leased to You):
2. Name of Person or Organization (Additional Insured): City of Morro Bay
3. Additional Premium:
(If no entry appears above, the information required to complete this endorsement
will be shown in the Declarations as applicable to this endorsement.)
WH® I� AN INSURED (Section II) is amended to include as an insured the person or organization shown in
the Schedule, but only with respect to liability arising out of the ownership, maintenance or use of that part of the
premises leased to you and shown in the Schedule and subject to the following additional exclusions:
This insurance does not apply to:
1. Any "occurrence" which takes place after you cease to be a tenant in that premises.
2. Structural alterations, new construction or demolition operations performed by or on behalf of the person
or organization shown in the schedule.
Modifications to ISO form CG 20 11 11 85:
1. The Insured scheduled above includes the Insured's elected or appointed officers, officials, employees
and volunteers.
2. This insurance shall be primary as respects the Insured shown in the schedule above, or if excess, shall
stand in an unbroken chain of coverage excess of the Named Insured's scheduled underlying primary
coverage. In either event, any other insurance maintained by the Insured scheduled above shall be in
excess of this insurance and shall not be called upon to contribute with it.
3. The insurance afforded by this policy shall not be canceled except after thirty days prior written notice
by certified mail return receipt requested has been given to the City.
Address
CG 20 11 11 85 Insurance Services Office, Inc. Form (Modified)
01181.0024/477ll21 JWP
Signature -Authorized Representative
I
LAND/SEA INTERFACE REPORT
(Immediately behind this page)
01181.0024/477112.1 JWP
Exhibit D
COi8794-357941
Marine workshop
201 Main St.
Morro Bay, Calif. 93442
1-B05-772'8436
home office 1405 528-3944
Fax, 1-805-7724436
&mail, land.sealnterface,
morrol ayogmal.com
00
29 28
f IL1htG tZETAfA
0 RING8
R
J NVI ^TI=V WL) L
PRACING
U
� r:I;j FL4ATINC
DUCK
ll
Y
SEA INTERFACE
L A51: BfFI:124w, 140vv
Hur
E
ARCHITECTURE
COMMUMN
SEAWALLS , DOCKS
WHARFS, MOORINGS
ENVIROMENTAL STUDIES,
a MAINTENANCE, REPORTS
i
4X12 VIA BRACING _�
4X12 TREATED
4X12 TREATED
STRfNCERS —
4XI2 TREATED
12' VIA Ti'`IwATi:
wD PILINGS--
EX15TING FLOA
fll
��~lil! If fl
ll�1 fl �
UU U
I:ESTAj1IZAAlT
i
CnNCRETE
Exhibit D
C018794-357941
Marine workshop
201 Main St.
Morro Bay, Calif_ 93442
1.805-772-8436
home office 1-805 528-3944
Fax, 1-805-772-8436
E-mail, land.sea.interface,
morrobay@grnail. corn
BEN
I3�r
BEN
BEN
13EI�
BEN
DATE: 8-23-i6
1. P' �. i. .
N CONSTRUCTION
. _DIVISION
SURVEYEASE 131TE DOCKS
SEAWALLS
LEASE SITE 122WO 123W WHARFS, MOORINGS
ENVI
'! !
MAINTENANCE, REPO]
SUBJECU WATER LEASE SITE 122W,123W IMPROVEMENTS
MORRO BAY, CALIFORNIA
STATUS: SURVEY WORK COMPLETED 8-24-16
SURVEY WORK WAS PERFORMED ON 8A9,26,30 BY ONSITE OSSI RVATION,
UNDER WATER VIDEO AND DIVE SURVEY.
STATUS OF ANY SEWALLS, REVETMENTS, BULKHEAD, PILINGS PIER
AND OTHER IMPROVEMENTS LOCATED IN THE WATER PORTION OF LEASE SITE
RECOMMENDATION FOR MAINTENANCE OR REPAIR WORK AND TIME LINE
DOCKAGE
LEASE SITE #22W,123W CONaIST OF A HEAVYTIMPER WOOBaTRUCTURAL SYSTEM A RESTAURANT, OUTDOOR DINING
AND FLOATING
H.1 TREATED DECKING, STRINGERS,CAPfa AND PILING . CONC.BLK, HEADWALL, CONC. BULKHEAD , SUPPORT THE RESTAURANT
TREATED WD PILING SECURE THE FLOATING DOCK AND GANGWAY. ONGOING MAINTENANCE OF THE PUILDING'S STRUCTURE
CONTINUES TO PROVIDE N1=C1=55ARE REPAIRS ANY ADTIiTIONAL
WORK TO ENLARGE OR REMODEL THE BUILDING OR SITE WILL REQUIRE ADDITfONAL PLANS AND PERMITS
NO ASSESMENT OF PILING STRUCTURAL INTEGRi'I�'` BELOW MUD L[NE
G-d-GOOD p�- �'�g AA; Q�:�y
r�FAJIZev.Ap
� y � ,,�p�� L
o
O o-
1
HEAD WALL
X
CONC.13LL SOME UNDERMWEI
2
BULKHEAD
G
X
CONG. POURED IN PLACE
3
REVETMENT
G
X
SOME SURFACE DEGRATION HA
IT#4
12A2 CAP & 8 PILINGS
G
X
PILING SECURED W1 PIN CONNECTION
IT 5
12X12 CAP & 2 PILINGS
G
X
PILING SECURED Wl PIN GONNEG
ITS
12X12 CAP & 11 PILINGS
G
X
PILING SECURED W1 PIN CONNECTION
IT 7
12X12 CAP & 8 PILINGS
G
X
piiinge wi in connection d ia. bract
IT 8
12X12 CAP & 4 PILINGS
G
X
pilings w1 pin connection d ia, brad
IT 9
12Xi2 CAP & 8 PILINGS
G
X
PILING SECURED W1 PIN CONNECTION
10
4X12 DIA BRACING
F
X
DIA. BRACE
11
4X12 DIA BRACING
F
X
DIA. BRACE
12
4X12 DIA BRACING
F
X
DIA. BRACE
13
4XI2 DIA BRACING
F
X
DIA. BRACE DETERIORATED @ W
14
4X12 DIA BRACING
F
X
DIA. BRACE DETERIORATED 0 W
15
4XI2 DIA BRACING
F
X
DIA. BRACE DETERIORATED @ W
16
012 DIA BRACING
F
X
DIA. BRACE DETERIORATED 0 W
17
4X12 DIA 13RACING
F
X
DIA. BRACE DETERIORATED @ W
18
4X12 DIA 13RACING
F
X
DIA. BRACE' DETERIORATED 0 WA
19
2.5XI2 STRINGERS
G
X
H.Y. D.F. STRINGER/ PIN/ 13RACK
h'G
S OCCURED
TION
ng need 6lsierinc
ng need tictedni
ATERLINE
ATERLINE
ATERLINE
ATERLINE
ATERLINE
TERiINE
ET CONNECTION
Exhibit D
A, H D ;
C018794-357941
Marine workshop
204 Main St.
Morro Hay, Calif. 93442
1-805-772-8436
home office 1-805 528-3944
c, 1-20SJ7M429
F-mall, land.sea.interface.
morrobay@gmaii.com
LEASE SITE i22W.123W
CO v
SEAWALLS , DOCKS
WHARFS, MOORINGS
ENVIROMENTAL STUDIES,
MAINTENANCE, REPORTS
P��� ��•�
�44��•- OJ��� �t3�~� `�,�Y JyQP�rGv �jti�Pt��v ��.�'�
20
DECKING
G
X
TREATED PECKING MAY NEED R
ENAILING
T
�
NT
�iT
W
r
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW MAVE BEEN ISSUED TO THE INSURED NRMED ABOVE FpR 7ME POLICY PERJpD
INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY- CONTRACTOR OTHER DOCUMENT WITH RESPECT TO WHICH THIS
CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES, LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS,
SHOULD
INSR
LTR'TYPE
A
OF INSI$2ANCE
X COMMERCIAL GENERAL LIABILITY
ADDL
I D
SUBR
POLICY NUMBER
POLICY EFF
M DD
POLICY EXP
N
LIMITS
EACH OCCURRENCE
1,000,000
DAMAGE TO RENTED
REp�{ISE,�(Eaoccurrence}_
50O,OOQ
$
Cu1M5-�nADE � OCCUR
X Liquor Liab $1 MIM
�
SKA56$9$099
09/09/2017
0910$d201$
MED EXP An one erson
15,000
PERSONAL&ADV INJURY
$ 1,000,000
GENERAL AGGREGATE
2,000,000
GEHL AGGREGATE LIMIT APPLIES PER:
POLICY ❑ JECT ®LOC
OTHER:
PRODUCTS-COMP/OPAGG
_
2,000,000
LIQUOR LIABILIT
$ 19000,000
AUTOMOBILE LIABILITY
EO aBINE SINGLE LIMIT
$
ANY AUTO
BODILY INJURY Per erson
BODILY INJURY Per accident
$
OWNED SCHEDULED
AUTOS ONLY AUTOS
�
AUTOS ONLY AUTOS ONLY
PPe°acci".."t MAGE
UMBRELLA LIAB
EACH OCCURRENCE
$
FOCCUR
EXCESS LIAR
CLAIMS -MADE
AGGREGATE
$
DED
RETENTION$
WORKERS COMPENSATION
AND EMPLOYERS' LIABILITY YIN
ANY PROPRIETORiPARTNERlE XECUTIVE
�MaFrICC� EMVFXCLUDED?
(Ma wwnnjj
MIA
� TUT
ERH-
E.L. EACH ACCIDENT
$
E.L. DISEASE - EA EMPLOYEE
$
ibe und
DEer
S RIP�TION OF OPERATIONS below
E.L. DISEASE -1 �JLICY L MIT
DESCRIPTION OF OPERATIONS 1 LOCATIONS I VEHICLES (ACORD 101, Additional Remarks Schedule, may be attached if more space is required)
Re: Lease Site 122.1231122W423W and EXT. 122W123W Morro Bay, GA.
See form attached as triggered by written contract:
GL: Additional Insured/Lessor of Premise= CG2011 0196.
ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE
Ci of iViorro Ba Harbor De t. THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN
ty y p ACCORDANCE WITH THE POLICY PROVISit7NS.
Susan Lichtenbaum
1275 Embarcadero
Morro Bay, CA 93442 AUTHORIZED REPRESENTATIVE
ACORD 25 (2016103) U 19884015 ACORD CORPORATION. All rights reserved.
The ACORD name and logo are registered marks of ACORD
I W4 '/1lil►Til'.i 4z;
�• s• - ..I .-. I. •
1205 .D.O
CITY OF •..• BADEPT
Y HARBOR
fib+ ►�^�"Mur3�li�i��r)�i:Zil
z � �[�rrV�r�rfi�riur
Information required to complete this Schedule, if not shown above, wil! be shown in the Declarations.
Section 11 - iiVho Is An Insured is amended to
include as an additional insured the persons)
or organization(s) shown in the Schedule, but
only with respect to liability arising out of the
ownership, maintenance or use of that part of
the premises leased to you and shown in the
Schedule and subject to the following ad&
tional exclusions:
This insurance does not apply to:
1. Any "occurrence" which takes place after
you cease to be a tenant in that premises.
Structural alterations, new construction
or demolition operations performed by or
on behalf of the person(s) or organiza�
tion(s) shown in the Schedule.
However:
1. 'The insurance afforded to such additional
insured only applies to the extent permit-
ted by law; and
L If coverage provided to the additional in-
sured is required by a contract or agree-
ment, the insurance afforded to such
additional insured will not be broader
than that which you are required by the
contract or agreement to provide for such
additional insured.
With respect to the insurance afforded
to
these additional insureds, the following is
added to Section III Limits Of Insurance:
If coverage provided to the additional insured
is required by a contract or agreement, the
most we will pay on behalf of the additional
insured is the amount of insurance:
1. Required by the contract or agreement;
or
2. Available under the applicable Limits of
Insurance shown in the Declarations;
whichever is less.
This endorsement shall not increase the ap-
plicable Limits of Insurance shown in the Dec-
larations.