HomeMy WebLinkAboutReso 08-25 Ehibit MB Libertine Master Lease Agreement_unsigned4855-8063-9740 v4
LEASE
This LEASE (“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 California Coastal
Investments, LLC., a California Limited Liability Company, herein called TENANT. CITY and
TENANT, at times, are referred to herein individually as Party and collectively as Parties.
WITNESSETH:
WHEREAS, the State of California granted certain tide and submerged lands located
within the CITY limits of CITY to the County of San Luis Obispo and to its successors, being
Chapter 1076, Statutes of 1947, as amended by Chapter 413, Statutes of 1955, Chapter 1874,
Statutes of 1957, and Chapter 70, Statutes of 1960, first extraordinary session; which Statutes may
be amended from time to time by the Legislature of the State of California; all of which Statutes
are expressly recognized and agreed to be in full force and effect by the Parties; and
WHEREAS, the Parties hereto recognize and agree, on July 17, 1964, CITY succeeded to
all of the right, title and interest of the County of San Luis Obispo in and to all of the tide and
submerged lands conveyed to said County by the State of California pursuant to the above
mentioned acts; and
WHEREAS, judgment has been entered on October 14, 1968, in the case of City of
Morro Bay, Plaintiff, versus County of San Luis Obispo, and State of California, Defendants, by
the Superior Court of the State of California in and for the County of San Luis Obispo, #30417,
adjudging and decreeing, among other things, the title to said tide and submerged lands so
conveyed by the State of California to the County of San Luis Obispo in trust, as set forth above,
passed automatically to CITY upon the date of its incorporation as a city on the 17th day of July,
1964; and
WHEREAS, TENANT accepts the within Lease with full knowledge there is no warranty
of title in and to the within described premises by CITY to TENANT; and
WHEREAS, in order to develop and improve 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; and
WHEREAS, TENANT has provided satisfactory evidence to CITY that TENANT has
obtained all the financing necessary to commence and complete the improvements to the Premises
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(as defined in Section 13.02); and WHEREAS, this Lease fully restates, supersedes and terminates
that prior tenancy previously demised to TENANT pursuant to that “Lease By and Between the
City of Morro Bay and Libertine Brewing Company” dated October 1, 2020, as may have been
amended from time-to-time (the “Prior Lease”).
NOW, THEREFORE, in consideration of the covenants to be performed and the rental to
be paid by TENANT to CITY, CITY leases to TENANT, and TENANT leases from CITY, all of
the following premises (herein collectively referred to as the "Premises") in the CITY of
Morro Bay, County of San Luis Obispo, State of California, described as follows:
Lease Site 86/86W
This Premises are delineated on Parcel Map of the CITY of Morro Bay No. 68-30, which
map was recorded on October 10, 1968, in Book 3, Page 10 of Parcel Maps in the Office of the
County Recorder, San Luis Obispo County, California. A copy of said Map is attached hereto as
Exhibit A and made a part hereof by reference.
Article 1 FIXED TERM
Section 1.01 Term.
This Lease shall become effective as of the date it is fully executed by all Parties (the
“Effective Date”), with the Lease continuing for a period of 40 years from the date set for
completion of TENANT’s Improvements, such date being July 1, 2028 (the "Commencement
Date"). The term of this Lease will terminate without notice on June 30, 2068, unless sooner
terminated as herein provided.
Section 1.02 Extensions.
Per the City of Morro Bay Harbor Department Lease Management Policy, any additional
lease term (duration)to a lease must be by lease amendment, and generally only in exchange for
additional consideration from the Master Tenant. Full conditions are provided in the Lease
Management Policy.
Section 1.03 Hold Over.
If TENANT holds the Premises after the expiration of the term of this Lease with the
consent of the CITY, express or implied, then such holding over (in the absence of a
written agreement between CITY and TENANT with respect thereto) will be deemed to create a
tenancy from month-to-month, terminable on 30-days’ written notice from either Party to the
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other, at a monthly rental equal to two hundred percent (200%) of the average total Rent per month
for the twelve (12) months immediately preceding the expiration of this Lease, and otherwise
subject to each and every term, covenant and condition of this Lease.
Section 1.04 Replacement.
As of the Commencement Date, this Lease will extinguish, supersede and replace every
prior lease between CITY and TENANT respecting the Premises, including without limitation the
Prior Lease and any amendments or COLs (i.e., “consents of landowner,” as that term COL is
commonly understood in Morro Bay) attendant to such Prior Lease. Any right or interest held by
the TENANT pursuant to any existing lease with respect to the Premises, which is not granted
pursuant to this Lease, will be extinguished as of the Commencement Date of this Lease.
Article 2 RENT
Section 2.01 Annual Minimum Rent.
From and after the Effective Date, TENANT agrees to pay to CITY a minimum guaranteed
annual rental for the use and occupancy of the Premises, in an initial amount of $45,000 per year
(the "Minimum Rent"), payable in advance and at the option of TENANT either in equal
semiannual installments or equal monthly instalments. If paid in equal semiannual installments,
then such installments must be on January 1 and July 1 each year during the term of the Lease. If
the Effective Date is other than January 1 or July 1, then TENANT must pay, on the Effective
Date, the proportionate amount of the Minimum Rent payable for the period from the Effective
Date until the next payment date of January 1 or July 1, as the case may be. If the term of the
Lease expires on a date other than December 31 or June 30, then TENANT'S final installment of
Minimum Rent must be proportionate to the time remaining in the term. If paid in equal monthly
installments, then each\ monthly installment must be paid no later than the tenth day of each
applicable month. All Rent, including the Minimum Rent and the Percentage Rent, must be paid
in lawful money of the United States of America, without offset or deduction and must be paid to
CITY at City Hall located at 595 Harbor Street, Morro Bay, California, or at such other place or
places CITY may from time to time designate by written notice delivered to TENANT.
Section 2.02 CPI Adjustment to Annual Minimum Rent.
(1)The Parties agree, as of every July 1 following the Commencement Date (each, a "CPI
Adjustment Date"), except as outlined in section 2.03 hereof, the annual Minimum Rent will be
adjusted in direct proportion to any upward movement in the Consumer Price Index for January 1,
2024, which is hereby agreed to be 326.640 (Base Index). The percentage adjustment for any
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given year will be based on the monthly average Index for the calendar year immediately preceding
the CPI Adjustment Date as compared with the Base Index. The Consumer Price Index referred
to herein is the Consumer Price Index (all items indexes, all urban consumers) for Los Angeles –
Long Beach – Anaheim, California, compiled and published by the United States Department of
Labor, Bureau of Labor Statistics, 1982-84 Base Year = 100 (the "Index")
(2) The Annual Minimum Rent will be adjusted as of each CPI Adjustment Date, and will
remain in effect as adjusted until the next CPI Adjustment Date. As an illustration only, if the
Base Index (Jan. 1, 1999 CPI) is 166.1 and the monthly average CPI for 2000 is 171.6, then the
percentage increase is equal to 3.31%. Therefore, the Minimum Rent would be increased by 3.31%
as of July 1, 2001, and would continue at that rate through June 30, 2002.
(3) If the United States Department of Labor, Bureau of Labor Statistics, ceases to compile
and make public the Index as now constituted and issued, but substitutes another index in its place,
then said substituted index must be used for the purpose of adjusting the Minimum Rent for the
Premises. If the Index is changed so the base year differs from that in effect on the Lease Effective
Date, then the Index must be converted in accordance with the conversion factor published by the
United States Department of Labor, Bureau of Labor Statistics.
Section 2.03 Calculation of New Minimum Rent.
A. Starting July 1, 2028 (or such earlier date as appropriate should there be a sufficiently
earlier completion of Improvements), and upon each five-year anniversary thereafter, a new
Minimum Rent will be calculated for the following five-year period (each, a "Subsequent Rental
Period") as follows:
B. The Minimum Rent recalculated pursuant to Section 2.03(A) will be subject to
adjustment by appraisal every five years thereafter from the initial reappraisal provided by Section
2.03(A) (each, an "Appraisal Adjustment Date"). CITY, at its own cost and expense, will retain
an independent qualified appraiser for determination of the fair market value of the Premises. Not
more than nine (9) months prior to each Appraisal Adjustment Date, CITY will provide written
notice to TENANT of the pending appraisal and the appraiser selected by the CITY to determine
the fair market rental value of the Premises, excluding fixtures and improvements, unless such are
expressly included in the description of the leasehold interest created by this Lease. If TENANT
does not reject CITY's appraiser in writing and within thirty (30) days after CITY's notice of its
determination, then the Minimum Rent for the Subsequent Rental Period will be in the amount
determined by CITY as outlined in this Section 2.03. If TENANT rejects CITY's appraiser within
thirty (30) days following CITY's notice to TENANT, then within 15 days after such 30-day
period, each Party, at its own cost, will select an independent professionally designated appraiser
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who is a member of the American Institute of Real Estate Appraisers, or the Society of Real Estate
Appraisers with a designation of MAI (Member of American Institute), SRPA (Senior Real Estate
Analysis), to appraise the fair market value of the Premises. CITY may rely on its original
appraisal, or select a new appraiser, at its cost. If a Party does not appoint an appraiser within
fifteen (15) days after the other Party has given notice of the name of its appraiser, then the single
appraiser appointed will be the sole appraiser. Each appraiser will conduct an independent
appraisal within thirty (30) days after appointment. If the Parties are unable to agree on the
Minimum Rent for the Subsequent Rental Period within 30 days after receiving the appraisal(s),
then each Party will select one member of a three-member committee. The two so selected
members will select the third member, and this committee will, by majority vote, select one or the
other of the appraisals. The Minimum Rent determined on the basis of the selected appraisal will
be final and binding and all costs associated with the three-member committee will be paid equally
by CITY and TENANT.
C. In the event the appraisal process is not concluded on or before the Appraisal
Adjustment Date, the Minimum Rent will be adjusted retroactively to such Appraisal Adjustment
Date as set out hereinbelow when said appraisal process is completed.
D. The total Rent payable, including both the Minimum Rent and the Percentage Rent for
each year within the applicable previous five (5) year period, will be averaged to produce the
average annual total Rent payable for such previous period.
E. The new Minimum Rent for the five-year period commencing on each Appraisal
Adjustment Date shall be the greater amount of seventy-five percent (75%) of the average of the
total yearly Rent payable during the previous five-year period (as set out in paragraph (C) above)
or eight percent (8%) of the fair market value of the Premises (as established in paragraph (B)
above.) The new Minimum Rent will be divided by two to determine the semiannual payments
and will be paid by TENANT to CITY on the first of each January and July thereafter or paid
monthly at the option of TENANT. This new Minimum Rent will 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 will be adjusted upon each calculation of new Minimum Rent as set out in this
section so the Base Index for CPI adjustment will be the Consumer Price Index for January 1 of
the year of the calculation of new Minimum Rent.
Section 2.04 Percentage Rent.
A. In addition to the Minimum Rent, TENANT agrees to pay to CITY, at the time and in
the manner hereinafter specified, as additional Rent for the use and occupancy of the Premises, a
sum equal to the following for all TENANT'S Gross Sales as hereinafter defined:
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(1)Final Certificate of Occupancy: Up-to and until seven hundred and thirty (730) days
(i.e., two years) after the Improvements (as defined in Section 13.02) are entitled to be issued a
final Certificate of Occupancy, TENANT shall pay (i) Ten percent (10%) for vessel slip and tie-
up fees, plus (ii) Two percent (2%) for all other Gross Sales, less (iii) the amount of the Minimum
Rent paid pursuant to this Lease.
(2)Following Final Certificate of Occupancy: Following the timeframe stated in Section
2.04(A)(1) and thereafter, TENANT shall pay (i) Five percent (5%) for all retail sales, hotel use,
and convenience/take-out food sales; plus (ii) three percent (3%) for all restaurant sales and beer
and wine sales at the bar; plus (iii) Ten percent (10%) for vessel slip and tie-up fees and liquor
sales at the bar, and plus (iv) five percent (5%) for all other sales, less (v) the amount of the
Minimum Rent paid pursuant to this Lease.
(3)The Gross Sales percentages specified in this Sections 2.04(A), paragraphs (1) and (2),
are referred to as "Percentage Rent". Calculation of the Percentage Rent shall in no event result
in an amount less than the Minimum Rent—e.g., if deduction of Minimum Rent amount from the
Percentage Rent amounts would result in less than Minimum Rent, the Minimum Rent shall apply.
B.Notwithstanding the other provisions of Section 2.04, the term "Gross Sales" does not
include the following items, and such items may be deducted from Gross Sales to the extent they
have been included therein or have been included in a prior computation of Gross Sales or for
which a Percentage Rent has been paid under this Lease to CITY:
(1)Credits and refunds made to customers for merchandise returned or exchanged;
(2)Any sales or excise taxes otherwise includable in Gross Sales as defined in this Section
because such taxes are part of the total selling price of merchandise or services rendered in, from,
or on the Premises, where TENANT must account for and remit the taxes to the government entity
or entities by which they are imposed; and
(3)With respect to credit card sales, fees retained or withheld by the issuer and/or merchant
bank pursuant to TENANT'S credit card acceptance agreement, and
(4)Rental payments to TENANT from sublessees whose total gross sales are included in
Gross Sales computations.
C.TENANT must 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 must
keep said records and books of account within San Luis Obispo County and will notify CITY in
advance of their location at all times. Furthermore, TENANT must, at the time of sale and in the
presence of the customer, cause the full selling price of each piece of merchandise, each rental
received and each service rendered in, on or from the Premises to be recorded in a cash register or
cash registers that have cumulative totals and are sealed in accordance with standard commercial
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practices. Said records, books of account and cash register tapes, including any sales tax reports or
income tax returns TENANT may be required to furnish any government or governmental agency,
and income and bank statements must, at all reasonable times, be open to the inspection of CITY,
CITY'S auditor, or other authorized representative or agent of CITY, if necessary. TENANT
consents to the release of sales tax information to CITY and on demand will furnish to CITY a
copy of the sales tax reports, quarterly reports and any audit reports of sales for confidential
internal use of the CITY in determining Gross Sales for TENANT. TENANT consents and
authorizes CITY to request such information directly from the State Board of Equalization or other
state agency with which sales tax information is filed.
D. By July 31 of each year, TENANT must furnish CITY with a statement, to be certified
by TENANT as current, true and accurate, which must set forth the Gross Sales of each
department, sublessee, licensee and concession operating in, on or from the Premises for the
previous 12 calendar months, ending June 30, just concluded, and the authorized deductions, if
any, therefrom; and with it TENANT must pay to CITY the amount of the Percentage Rent, which
is due to CITY as shown thereby. If TENANT, at any time, causes an audit of sales of TENANT'S
business to be made by a public accountant, then TENANT must furnish CITY with a copy of said
audit without cost or expense to CITY. CITY may, once in any twelve-month period, cause an
audit of the business of TENANT to be made by a certified public accountant or CITY personnel
of CITY'S own selection. TENANT must, 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 certified
public accountant or CITY personnel selected by CITY. Furthermore, TENANT must promptly,
on demand, reimburse CITY for the full cost and expense of said audit, if the audit discloses the
questioned statement or statements understated Gross Sales by five percent (5%) or more but less
than ten percent (10%). In the event an audit performed at CITY'S request discloses TENANT
understated Gross Sales by less than five percent (5%), the cost of such audit will be paid by CITY.
In the event any audit or other review of records discloses the amounts reported as Gross Sales
were understated by TENANT by ten percent (10%) or more, CITY will not only be entitled to
recover from TENANT all costs of audit and review, but will also be entitled to recover from
TENANT a penalty equal to two times the Percentage Rent due pursuant to this Lease on such
unreported amounts. Whenever any audit discloses that Gross Sales were understated by any
amount, TENANT must immediately pay the additional Percentage Rent therein shown to be
payable by TENANT to CITY, together with interest at the Default Rate thereon, from the date
the Percentage Rent was payable until the date paid.
E. CITY will 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 or the accuracy of the
statement or statements furnished by TENANT to justify the same. For the purpose of enabling
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CITY to check the accuracy of any such statement or statements, TENANT must, for said period
of five years after submission to CITY of any such statement, keep all of TENANT'S records,
including sales tax returns, all cash register tapes, income tax returns and income and bank
statements and other data which in any way bear upon or are required to establish in detail
TENANT'S Gross Sales and any authorized deductions therefrom as shown by any such statements
and must, upon request, 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 must reimburse CITY therefore as
additional Rent hereunder. As an illustration and not as a limitation, if TENANT fails to procure
the insurance required by this Lease, then CITY may, but is not obligated to, obtain such insurance,
with the cost of the premiums being due to CITY upon demand as additional Rent.
Section 2.06 Penalty and Interest.
(1)If any Rent is not received within ten (10) days following the date on which the Rent
first became due, then TENANT must pay a late penalty of ten percent (10%) of the amount of the
Rent in addition to the Rent.
(2)In addition to the penalty, TENANT must pay interest at the rate of one percent (1%)
per month or fraction thereof or the maximum amount permitted by law as of the date this Lease
is signed, whichever is greater (the "Default Rate"), on the amount of the Rent, exclusive of the
penalty, from the date on which Rent first became delinquent until paid. The term "Rent" includes
any sums advanced by the CITY and any unpaid amounts due from TENANT to the CITY.
Article 3 USE OF PREMISES
Section 3.01 Permitted Uses.
The Premises must, from the Effective Date and during the term of this Lease, be used for
the purpose of constructing, operating and conducting thereon and therein the uses permitted by,
and in compliance with, Conditional Use Permit No. CUP22-09, or any other use permits approved
by CITY in its governmental capacity, as they may be amended from time to time, and for no other
purpose. Such uses include mixed-used retail, bar & restaurant, brewery, coffee shop, transient
occupancy (hotel), events/concerts, and vessel tie-up.
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Section 3.02 Unauthorized Use.
TENANT agrees to allow only those uses authorized in Section 3.01, hereinabove and any
unauthorized use thereof constitutes a breach of this Lease and may, at the option of CITY,
terminate this Lease.
Section 3.03 Operation of Business - Hours of Operation.
Failure to actively and diligently conduct the business authorized herein constitutes a
breach of this Lease and may, at the option of CITY, terminate this Lease.
(1) TENANT must, during the term of this Lease, conduct business of the nature specified
in Section 3.01 of this Lease on the Premises in an efficient and diligent manner and keep the
Premises open for the conduct of business continuously and without interruption for at least six
hours each day of the year, except one day each week and legal holidays. This provision does not
apply if the Premises is closed and the business of TENANT is temporarily shut down for a period
not to exceed 14 calendar days in any calendar year to make necessary repairs, maintenance or
other construction deemed necessary by TENANT. This provision does not apply if the Premises
is closed and the business of TENANT is temporarily shut down as authorized or required by the
City Manager or on account of strikes, walkouts, or causes beyond the control of TENANT or for
not more than three days out of respect to the memory of an officer, employee, or close relative of
any officer or employee of TENANT.
(2) TENANT must 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 must
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 must not directly nor indirectly acquire or
establish any similar or competing business within a radius of five miles from the location of the
Premises; provided, however, that TENANT may, with prior written approval from CITY, own or
operate more than one business, whether or not competing and similar, along the Embarcadero
upon one or more CITY lease sites. The purpose of this section is to prevent and prohibit TENANT
from reducing revenue to CITY by diverting business from the operation at the Premises to another
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similar business owned by TENANT within the CITY, but not upon a CITY lease site from which
CITY is paid rent based on Gross Sales.
Section 3.05 Environmental Considerations and Hazardous Materials.
(1) TENANT must, at all times, comply with applicable environmental regulations,
including, where applicable and practical, government- and industry-adopted environmental best
management practices and programs.
(2) TENANT must not transport, use, store, maintain, generate, dispose, release, treat or
discharge any "Hazardous Material" (as defined below) upon or about the Premises (such activities
being hereafter referred to as "Hazardous Materials Activities"), nor permit TENANT'S
employees, agents, or contractors to engage in Hazardous Materials Activities upon or about the
Premises, except as allowed by applicable law. The term "Hazardous Material" for purposes
hereof means any chemical, substance, material or waste or component thereof which is now or
hereafter listed, 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 "right-to-know" requirements
adopted by any such body. All Hazardous Materials Activities at the Premises must be conducted
strictly in accordance with all applicable laws and regulations. If TENANT transports, or has
transported, any hazardous waste from the Premises, then such transportation must be done only
by a contractor duly licensed to haul hazardous waste and only a duly licensed site approved by
TENANT'S liability insurer must be used for disposal of that hazardous waste.
(3) TENANT must 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 has the right (but not the obligation) to inspect the Premises, to take such remedial action
on the Premises, as CITY may deem appropriate, and to join and participate, as a party, in any
legal proceedings or actions affecting the Premises initiated in connection with any environmental,
health or safety law.
(4) 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,
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TENANT must immediately notify CITY. CITY may elect either to take such remedial action as
CITY deems appropriate, in which event TENANT must 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 must immediately take such remedial action,
as CITY directs. TENANT must, properly and in compliance with applicable laws, clean up and
remove the Hazardous Material from the Premises and any other affected property at TENANT'S
expense. If CITY directs TENANT to perform remediation hereunder and if TENANT fails to
comply with the provisions of this Section within five days after written notice by CITY, or such
shorter time as may be required by applicable law or in order to minimize any hazard to persons
or property, then CITY may (but is 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).
Section 3.06 Tidelands Trust.
In addition to the obligations set forth in this Article, TENANT must use and occupy the
Premises in strict compliance with the Tidelands Trust purposes, as established by law or
interpretation of the California State Lands Commission.
Section 3.07 Compliance with Law.
TENANT must, at no cost to CITY, comply with all of the requirements of all local,
municipal, county, state and federal authorities now in force, or which may hereafter be in force,
pertaining to the Premises, and faithfully observe in the use of the Premises all local, municipal
and county rules, regulations and ordinances and state and federal statutes, rules, regulations and
orders now in force or which may hereafter be in force (collectively, "Legal Requirements");
provided, that TENANT will not be required to comply with any Legal Requirement imposed by
CITY that would substantially deprive TENANT of a material benefit under this Lease, unless
such Legal Requirement has been imposed or required (i) by a county, state or federal authority or
(ii) to preserve public health and safety and applied to similar businesses within CITY’S
jurisdiction. The judgment of any court of competent jurisdiction, or the admission of TENANT
in any action or proceeding against TENANT, whether CITY be a party thereto or not, that
TENANT has violated any such Legal Requirement in the use of the Premises will be conclusive
of that fact as between CITY and TENANT.
Section 3.08 Waste or Nuisance.
TENANT must not commit or permit the commission by others of any waste on the
Premises; TENANT must not maintain, commit, or permit the maintenance or commission of any
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nuisance as defined by law on the Premises; and TENANT must not use or permit the use of the
Premises for any unlawful purpose.
Section 3.09 Use by CITY.
(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.
(2) CITY also retains and reserves for itself, its successors and assigns, all oil, gas,
petroleum and other mineral or hydrocarbon substances in and under the lands leased hereby
together with right to prospect and extract all such substances.
Article 4 CONSTRUCTION, ALTERATION AND REPAIRS
Section 4.01 Construction Approval.
(1) TENANT must not make or permit any other person to make any alterations or
structural additions or structural modifications to the Premises or to any structure thereon or
facility appurtenant thereto if the cost thereof exceeds Ten Thousand Dollars ($10,000), without
the prior written consent of CITY. The consent to be obtained pursuant to this Section 4.01(1)
must be requested from the Harbor Director, or the City’s designee, for CITY. If the Harbor
Director or any future successor to the duties of the City’s Harbor Director, or the City’s designee,
gives such consent to proceed, then it is understood such consent is given by CITY only in its
capacity as the landlord under this Lease and not as the permit-issuing authority. TENANT
remains obligated to obtain any needed building permits and comply with all applicable land use
entitlement processes.
(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 any proposed project upon
the Premises, then all Conditional Use Permits, Concept Plans, Precise Plans, Coastal
Development Plans, and any other required plans or permits must be applied for and approved
prior to any construction, alteration or repairs.
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 ($100,000), TENANT must file, with 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.
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Said estimate must be submitted to CITY’S City Engineer for approval. TENANT must file with
the City Clerk a faithful performance bond, in a form and issued by a corporate surety company
satisfactory to CITY, in an amount satisfactory to CITY, but not in excess of 100% of the final
detailed cost estimate, securing the faithful performance of TENANT or its contractor in the
completion of said construction.
(2)TENANT must also file with the 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 100% of the final detailed cost estimate, securing the payment of all claims for the
performance of labor or services on, or the furnishing of materials for, the performance of said
construction.
(3)In lieu of the above referenced bonds, TENANT may post cash deposits or may make
other mutually satisfactory arrangements to guarantee the completion of construction projects. In
the event the contractor bonds the project, CITY may be named as additional indemnitee to comply
with these requirements.
Section 4.03 Mechanics' Liens.
At all times during the term of this Lease, TENANT must keep the Premises and all
buildings, installations and other improvements now or hereafter located on the Premises free and
clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed
on or furnished to the Premises. TENANT further agrees to, at all times, save CITY free and
harmless and indemnify and defend CITY against all claims for labor or materials in connection
with any improvement, repairs, or alterations on the Premises, and the cost of defending against
such claims, including reasonable attorneys' fees. If TENANT fails to pay and discharge or cause
the Premises to be released from such liens or claim of liens within 10 days after the filing of such
lien or levy, then TENANT must, upon written notification, 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 must be acknowledged by TENANT as principal and by a company or corporation, licensed
by the Insurance Commissioner of the State of California to transact the business of a fidelity and
surety insurance company as surety. The beneficiary of any security instrument, which instrument
is on record with CITY, must have the right to file a claim for payment from such a bond on behalf
of TENANT. CITY has the 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 must give CITY notice at
least 20 days prior to commencement of any work on the Premises to afford CITY the opportunity
to post such notices.
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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 (30) days prior to the termination of
this Lease, of its decision to require such improvements be removed. The Parties agree, if CITY
exercises its option, then at the termination of this Lease, however occurring, TENANT will have
sixty (60) days thereafter to remove all buildings, structures, facilities, installations, improvements
and other property belonging to TENANT from the Premises. If CITY exercises such option and
TENANT fails to remove all such improvements and other property within sixty days after the
termination of this Lease, then CITY has the right to have any or all such improvements and other
property removed at the expense of TENANT. If CITY does not exercise its option to remove (or
require the removal of) the improvements and other property, then title to such improvements and
other property vests in CITY and TENANT must not remove same.
Article 5 LEASEHOLD MORTGAGES
TENANT must not mortgage, securitize or hypothecate the leasehold interest created by
this Lease, in whole or any part, without the prior written approval of CITY, as evidenced by a
resolution of the City Council of CITY.
CITY will not approve financing related to or using that leasehold interest created by this
Lease as collateral, unless such financing is (i) to install or construct capital improvements on the
Premises, (ii) to install or construct CITY-requested public improvements or provide other benefits
in the Tidelands Trust area, the latter as approved by the Harbor Director or (iii) to reduce the
interest rate of existing, approved debt secured by leasehold interest created by this Lease without
redeeming any equity in the leasehold interest. CITY shall not agree to subordinate any of its
interests in the Premises themselves or other direct interests held by the CITY as may result in a
forfeiture, foreclosure upon, or subordination of any CITY interests other than the leasehold
interest created by this Lease.
Article 6 REPAIRS, MAINTENANCE AND RESTORATION
Section 6.01 Maintenance by TENANT.
(1) At all times during the term of this Lease, TENANT must, at TENANT'S own cost and
expense, keep and maintain, in good order and repair and in a safe and “broom clean” condition,
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all improvements now or hereafter on the Premises, including any public spaces, common areas,
rights-of-way, sidewalks and other areas or spaces, even if not on the Premises but utilized as part
of TENANT’S business operations. Furthermore, TENANT must, at TENANT'S own cost and
expense, maintain at all times during the term of this Lease the whole of the Premises and other
areas utilized for TENANT’S business operations as described above in a clean, sanitary, neat and
orderly “broom clean” condition. CITY may, at the sole option of CITY, but not obligation,, clean,
clear, maintain or repair the Premises, any improvements thereon or areas used by TENANT, as
described above, at TENANT'S cost and expense, in the event TENANT fails to clean, clear
maintain or make repairs, in accordance with this Section to the satisfaction of CITY, after 15-
days' written notice to TENANT from CITY of CITY'S intent to exercise this option. Maintenance
and repairs shall be in conformance with the City Council adopted Master Lease Management
Policy, Exhibit H Inspection check list.
(2) In addition to, and not exclusive of, any other remedies available to CITY under law or
equity, the parties agree that in the event TENANT fails to comply with any terms of maintenance
or repair requirements under this Section 6.01 or Section 6.04, CITY’s damages would be
uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to
predict impacts to environment, CITY sales tax or Rent revenues, health or safety matters, and
other relevant factors. Within the (15) days following written notice as described in this section,
TENANT will either correct the deficiencies or have a schedule for repairs approved by the Habor
Director in writing. It is therefore agreed that the TENANT may be required by CITY to pay to
the CITY, in accordance with the following schedule for each and every calendar day of delay
beyond fifteen (15) days following written notice from CITY or exceedance of the schedule for
repair of such maintenance or repair deficiencies, the following sums due for each day’s delay:
• The sum of two hundred dollars ($200.00) per day for the first sixty (60) days.
• The sum of four hundred dollars ($400.00) per day for the following sixty (60)
days.
• The sum of six hundred dollars ($600.00) per day for the following sixty (60) days.
If maintenance and repair deficiencies are not corrected within one hundred and eighty days (180),
TENANT may be declared in default of this Lease. Nothing in this Section shall limit or waive
any legal rights or remedies available to the CITY; the remedies available to CITY in this Section
are not exclusive, but are cumulative with and in addition to all remedies now or hereafter allowed
by law or elsewhere provided in this Lease.
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Section 6.02 Seawalls and Revetment.
At all times during the term of this Lease, TENANT must, at TENANT'S own cost and
expense, repair, maintain, replace and rebuild, as necessary, the improvements, pilings, bulkheads,
seawalls, revetment, piers, posts and any structures or other improvements located in the water
portion of the Premises. Further, TENANT must, at TENANT'S own cost and expense, conduct
maintenance and structural inspections, evaluations or surveys, by a qualified individual or firm,
at reasonable intervals not to exceed ten years, to locate and determine needed maintenance, repairs
or replacements of these improvements.
Section 6.03 Legal Requirements.
At all times during the term of this Lease, TENANT, at no cost to CITY, must:
(1)Make all alterations, additions, 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);
(2)Observe and comply with all Legal Requirements respecting the Premises
or the improvements or facilities located thereon;
(3)Obtain all required permits pursuant to the Morro Bay Municipal Code or
State law prior to the initiation of any repair or maintenance activity; and
(4)Indemnify, defend and hold harmless CITY 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 has the right
and option, but not the obligation, to close and prohibit access to the unsafe portion of the Premises
until such repairs are completed and accomplished and the Premises rendered safe for public use.
In addition, if TENANT fails to repair any hazardous or unsafe condition within ten (10) days after
written notice thereof from CITY, then CITY has the right, but not the obligation, to perform such
repair at TENANT'S expense. TENANT must reimburse CITY for any such repair undertaken by
CITY, promptly upon CITY'S demand, as additional Rent. Failure by CITY to enforce any of the
provisions of this Article does not constitute a waiver of these provisions and CITY may, at any
time, enforce all of the provisions of this Article, requiring all necessary repairs, rebuilding or
replacement.
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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
necessary to protect CITY'S interest in the Premises under this Lease or to perform CITY'S duties
under this Lease or in its governmental capacity.
Section 6.06 TENANT'S Duty to Restore Premises.
(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 will continue in full force
and effect and TENANT, at TENANT'S own cost and expense, must repair and restore the
damaged or destroyed improvement(s) according to the original plan thereof or according to such
modified plans therefor as are approved in writing by CITY. The work of permitting, repair and
restoration must be (i) commenced by TENANT within 180 days after the damage or destruction
occurs, (ii) pursued with due diligence, and (iii) completed not later than 12 full calendar months
after the work is commenced, unless the Parties mutually agree, in writing, to an extension. In all
other respects, the work of repair and restoration must be done in accordance with the requirements
for construction work on the Premises set forth in Article 4 of this Lease. Any failure by TENANT
either to commence or to complete repair and restoration as required by this Section 6.06
constitutes a material default under this Lease.
(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 will 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 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 has the option
of terminating this Lease as provided in this Section 6.07 if:
(a) During the last 15 years of the term of this Lease, any improvement now or
hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault
of TENANT or CITY, the improvement cannot be repaired and restored as required by
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Section 6.06 of this Lease at a cost not exceeding 35 percent of the cost of replacing all
improvements if they had been totally destroyed at the time of such damage; or
(b) During the last 10 years of the term of this Lease, any improvement now or
hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault
of TENANT or CITY, the improvement cannot be repaired and restored as required by
Section 6.06 of this Lease at a cost not exceeding 15 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 providing
written notice to CITY within 180 days following damage or destruction as described herein. Such
termination is effective on the last day of the calendar month following 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 has all rights and remedies with respect to TENANT’S default, including,
but not limited to, termination of this Lease pursuant to Article 11.
(4) If this Lease is terminated as a result of damage or destruction, then any insurance
proceeds received with respect to the improvements will be applied or distributed in the following
order:
(a) first, to the demolition of the improvements and removal of all demolition
debris; then
(b) to any accrued and unpaid Rent as of the effective date of the termination;
then
(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 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 has the
right to terminate this Lease, at any time, if the improvements on the Premises are damaged or
destroyed by a casualty for which TENANT is not required under this Lease to carry insurance
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and the cost to repair or restore such improvements exceeds 50 percent of the fair market value of
all the improvements on the Premises immediately prior to the damage or destruction.
Article 7 INDEMNITY AND INSURANCE
Section 7.01 Indemnity Agreement.
(1)TENANT hereby agrees to indemnify, defend and hold harmless CITY, and the
property of CITY (including the Premises and any improvements now or hereafter on the
Premises), and CITY'S officers, officials, employees and volunteers from any and all liability,
claims, loss, damages, and expenses, including reasonable attorney’s fees and litigation expenses,
resulting from TENANT'S occupation and use of the Premises or any negligent act or omission of
the TENANT or any of its officers, subtenants, employees, contractors, invitees or anyone for
whom TENANT may be liable, specifically including, without limitation, any liability, claim, loss,
damage, or expense arising by reason of:
(a)The death or injury of any person, including TENANT or any person who is an
officer, employee, contractor, subtenant, invitee or agent of TENANT, or by reason of the damage
to or destruction of any property, including property owned by TENANT or 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
officer, employee, contractor, subtenant, invitee or agent of TENANT, or by reason of the damage
to or destruction of any property, including property owned by TENANT or any person who is an
officer, employee, contractor, subtenant, invitee or agent of TENANT, caused or allegedly caused
by either (i) the condition of the Premises or any improvement placed on the Premises by
TENANT, or (ii) any act or omission on the Premises by TENANT or any person in, on, or about
the Premises with or without the permission and consent of TENANT;
(c)Any work performed on the Premises or materials furnished to the Premises at
the insistence or request of TENANT or any person or entity acting for or on behalf of TENANT;
(d)TENANT'S failure to perform any provision of this Lease or to comply with
any Legal Requirement imposed on TENANT or the Premises.
4855-8063-9740 v4 -20-
(2)TENANT'S obligations pursuant to this Section to indemnify and hold harmless do not
extend to any liability, claim, loss, damage or expense arising from CITY'S active negligence or
willful misconduct.
Section 7.02 Liability Insurance.
During the term of this Lease, TENANT must maintain at its cost Commercial General
Liability insurance with coverages as described in CITY’s HARBOR DEPARTMENT LEASE
MANAGEMENT POLICY, as may be updated or changed from time to time at the sole discretion
of the CITY. Such coverages must insure against claims for bodily injury (including death),
property damage, contractual liability, personal injury and advertising injury occurring on the
Premises or from operations located in any part of the Premises. Such insurance must 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, then either the general aggregate limit will apply separately to the Premises or the
general aggregate limit will be twice the occurrence limit stated in this Section. All liability
insurance carried by TENANT hereunder will name CITY, its officers, officials, employees and
volunteers as additional insureds, and be primary insurance with respect to such additional
insureds. TENANT must include all its subtenants as insureds under TENANT's liability policies
or furnish separate certificates and endorsements for each subtenant. All coverages for subtenants
must comply with all requirements of this Article Seven.
Section 7.03 Worker's Compensation.
TENANT must 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 must contain a waiver of subrogation rights against CITY. TENANT must also maintain
employer's liability insurance with minimum coverage of $1,000,000 per accident for bodily injury
or disease.
Section 7.04 Property Insurance.
TENANT must, at its cost, at all times during the term of this Lease keep all improvements
and other structures on the Premises, as well as any and all additions, improvements and
betterments thereto, insured for 100 percent) of their full replacement cost with no co-insurance
provision against loss or destruction by the perils covered by "all risk" (excluding earthquake)
property damage insurance policies. Any loss coverage under such insurance must be payable to
TENANT, CITY, and any Lender under a Leasehold Encumbrance approved pursuant to Article 5 of
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this Lease, as their interests may appear, and such proceeds must be used and applied in the manner
required by Article 6 of this Lease.
Section 7.05 Additional Coverage.
TENANT must also maintain, at its sole expense, the insurance described in this
Section 7.05.
(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 must maintain liquor
liability coverage in appropriate amounts. TENANT must require any subtenant who has (or is
required by any Legal Requirement to have) a liquor license and who is selling or distributing
alcoholic beverages on the Premises, to maintain such coverage.
(2) TENANT must 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 has no interest in the proceeds of such
insurance.
(3) TENANT must obtain and maintain any additional insurance coverages CITY may
reasonably require. As illustration only and not as a limitation, in appropriate circumstances such
additional insurance may include increased general liability limits, business interruption coverage,
business automobile liability, boiler and machinery insurance or builder's risk insurance.
TENANT, however, is not required to maintain additional coverages that are in excess of those
typically maintained by similarly situated tenants in the Morro Bay area.
Section 7.06 General Requirements.
Except as specifically provided to the contrary, all the insurance required pursuant to this
Article Seven is 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 must 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 must be reasonable under the
circumstances.
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(3) All policies must 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: (i) the insurer must reduce or eliminate such deductibles or self-
insured retentions as respects CITY, its officers, officials, employees and volunteers or (ii)
TENANT must 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 must be endorsed to state coverage will
not be cancelled or reduced, except after 30-days' prior written notice by certified mail, return
receipt requested, has been given to CITY.
(6) TENANT must furnish CITY with certificates and amendatory endorsements effecting
the coverage required by this Lease. The endorsements must be on forms provided by CITY or on
other than CITY's forms; provided, that those endorsements or policies conform to the
requirements. All 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 must 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 will be excess of TENANT'S insurance and
will not contribute with it.
Section 7.07 No Subrogation.
TENANT agrees, in the event of loss due to any of the perils for which it has agreed to
provide insurance, TENANT will 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 TENANT may acquire against 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, must provide the
insurer will not acquire by subrogation any right to recovery.
4855-8063-9740 v4 -23-
Section 7.08 TENANT'S Waiver.
TENANT hereby waives any right of recovery against CITY for each claim, expense,
liability, or business interruption, or other loss, except where caused by CITY'S active negligence
or willful misconduct. TENANT agrees, to the extent TENANT fails to acquire insurance,
TENANT will not have any claim against CITY for any loss that results from a risk or peril that
would have been included in such insurance.
Section 7.09 Insurance Not a Limit.
The insurance requirements of this Article 7 are independent of, and do not limit or modify,
TENANT'S indemnification, defense, hold harmless and other obligations pursuant to this Lease.
Article 8 TAXES AND FEES
Section 8.01 TENANT to Pay Taxes.
TENANT must 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 must pay all possessory interest taxes applicable to the Premises.
Section 8.02 TENANT to Pay License and Permit Fees.
TENANT must pay any fees imposed by Legal Requirements for licenses or permits for
any business or activities including construction by TENANT upon the Premises.
Section 8.03 Utilities.
TENANT must (i) pay, or cause to be paid and (ii) hold harmless CITY and the property
of CITY, including the Premises, from all charges for the furnishing of gas, water, electricity,
telecommunication service, and for other public utilities to the Premises during the term of this
Lease and for the removal of garbage and rubbish from the Premises during the term of this Lease.
Article 9 CONDEMNATION
Section 9.01 Total Condemnation.
If title and possession to all of the Premises is permanently taken for any public or quasi-
public use under any statute, or by the right of eminent domain, then this Lease will be considered
terminated on the date that possession of the Premises is taken; and both CITY and TENANT will
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thereafter be released from all obligations, including Rent, all of which will be prorated to the date
of termination, except those specified in Section 9.02 of this Lease.
Section 9.02 Condemnation Award.
Any compensation or damages awarded or payable because of the permanent taking of all
or any portion of the Premises by eminent domain will be allocated between CITY and TENANT
as follows:
(1)All compensation or damages awarded or payable for the taking by eminent domain of
any land that is part of the Premises will be paid to and be the sole property of CITY free and clear
of any claim of TENANT or any person claiming rights to the Premises through or under
TENANT.
(2)All compensation or damages awarded or payable which is specifically attributed by
the taking party to the "good will" of TENANT'S business will be paid to and be the sole property
of TENANT.
(3)All compensation or damages awarded or payable because of any improvements
constructed or located on the portion of the Premises taken by eminent domain where only a
portion of the Premises is taken by eminent domain, and TENANT is not entitled to or does not
terminate this Lease, will be applied in the manner specified in Section 9.04 toward the
replacement of such improvements with equivalent new improvements on the remaining portions
of the Premises.
(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, will be allocated between CITY and TENANT as follows:
(a)That percentage of the compensation or damages awarded or payable because
of the improvements that equals the percentage of the full term of this Lease that has, at the time
of the taking, not expired will 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
of the taking, expired will belong to and be the sole property of CITY.
(c)The term "time of taking," as used in this Section, means 12:01 a.m. of the date
the agency or entity exercising the eminent domain power, takes title to or the date it takes physical
possession of the portion of the Premises, whichever first occurs.
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(5) Any severance damages awarded or payable because only a portion of the Premises is
taken by eminent domain will be the sole and separate property of CITY.
Section 9.03 Termination for Partial Taking.
If, during the term of this Lease, title and possession of only a portion of the Premises is
taken for any public or quasi-public use under any statute, or by right of eminent domain, then
TENANT may, at TENANT'S option, terminate this Lease by serving written notice of termination
on CITY within 90 days after TENANT has been deprived of actual physical possession of the
portion of the Premises taken for such public use. This Lease will terminate on the first day of the
calendar month following the calendar month in which the notice of termination described in this
section is served on CITY. On termination of this Lease, pursuant to this Article, all subleases and
subtenancies in or on the Premises or any portion of the Premises created by TENANT under this
Lease will also terminate and the Premises must be delivered to CITY free and 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 will be released from all obligations under this Lease,
except those specified in Section 9.02 of this Lease.
Section 9.04 Rent Abatement for Partial Taking.
If, during the term of this Lease, title and possession of only a portion of the Premises is
taken under the power of eminent domain by any public or quasi-public agency or entity and
TENANT does not terminate this Lease, then this Lease will terminate as to the portion of the
Premises taken under eminent domain on the date actual 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 will, as of that time be reduced in the same
proportion of the Premises taken by eminent domain bears to the full value of the Premises at that
time; provided however, that TENANT will make a good faith effort to 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 same by eminent domain proceedings will be considered a taking of
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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 are taken under the power of
eminent domain by any public or quasi-public agency or entity for a limited period not extending
beyond the term of this Lease, then this Lease will not terminate (except as provided in this Section
9.06) and TENANT must continue to perform all its obligations hereunder, except only to the
extent TENANT is prevented from performing such obligations by reason of such taking.
TENANT will 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 36 months, then
TENANT will have the right to terminate this Lease, and TENANT will 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.
Article 10 ASSIGNMENT AND SUBLEASING
Section 10.01 No Assignment Without CITY'S Consent.
Except as provided in this Article 10, TENANT must not assign or otherwise transfer this
Lease, any right or interest in this Lease, or any right or interest in the Premises or any of the
improvements that may now or hereafter be constructed or installed on the Premises without the
express written consent of CITY first had and obtained. Any assignment or transfer by TENANT
without the prior written consent of CITY, as evidenced by a resolution of the City Council,
whether it be voluntary or involuntary, by operation of law or otherwise, is void and may, at the
option of CITY, terminate this Lease. A consent by CITY to one assignment will not be deemed
to be a consent to any subsequent assignment of this Lease by TENANT. CITY will not
unreasonably nor arbitrarily withhold its 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 party 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:
(1)If TENANT is a partnership or limited liability company:
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(a) A change in ownership effected voluntarily, involuntarily, or by operation of
law, within a 12-month period, of 25 percent or more of the partners or members or 25 percent or
more of the partnership or membership interests; or
(b) The dissolution of the partnership or limited liability company without its
immediate reconstitution.
(2) If TENANT is a closely held corporation (i.e., one whose stock is not publicly held and
not traded through an exchange or over the counter):
(a) The sale or other transfer, within a 12-month period, of more than an aggregate
of 25 percent of the voting shares of TENANT (other than to immediate family members by reason
of gift or death); or
(b) The dissolution, merger, consolidation, or other reorganization of TENANT.
Section 10.03 Application for Assignment.
A condition of an assignment is TENANT must file with CITY an application to assign its
leasehold interest prepared by the prospective assignee. Concurrently with filing the application,
TENANT must pay a reasonable fee associated with the cost of processing said application, in
cash or certified or cashier's check to enable CITY adequately to investigate the proposed
assignee's qualifications, financial reliability and suitability as a permitted assignee. CITY is not
be required to account for the use of the sum paid. If the proposed assignee's net worth, financial
reliability and qualifications on the date of assignment are not sufficient to reasonably guarantee
successful operation of the Premises in compliance with all applicable CITY, County, State and
federal requirements, then CITY may withhold approval of the assignment or condition it upon
TENANT'S guarantee of such assignee's obligations hereunder for such period as CITY deems
advisable. Net worth means the amount by which the total of all assets exceed the total of all
liabilities as determined in accordance with general accepted accounting principles as approved by
CITY'S auditor, or other authorized representative or agent.
Section 10.04 Probate Transfer of Assignment.
If TENANT is an individual, nothing herein contained will prevent the transfer of this
Lease by trust, will, or by operation of law under the intestacy 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 a City Council resolution, first had and
obtained.
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Section 10.05 No Sublease Without CITY'S Consent.
TENANT must not sublease the whole nor any part of the Premises, or license, permit, or
otherwise allow any other person (the employees of TENANT excepted) to occupy or use the
Premises, or any portion thereof, without the prior written consent of CITY’s Harbor Director, or
any future successor to the duties of the City’s Harbor Director. The process for obtaining that
consent will not begin until TENANT has filed an application to sublease and paid a reasonable
fee, as determined by CITY, associated with the cost of processing the application. A consent to
one subletting, occupation, licensing or use will not be deemed to be a consent to any subsequent
subletting, occupation, licensing or use by another person. Any sublease or license without CITY'S
written consent is void, and may, at CITY'S option, terminate this Lease. CITY will not
unreasonably nor arbitrarily withhold its consent to sublet to one who is qualified and financially
reliable. CITY'S consent to any occupation, use, or licensing will be in CITY'S sole and absolute
discretion. Notwithstanding any provisions herein to the contrary, the terms "assignment,"
"subletting," "occupation," or "use," are not to be construed or interpreted to mean or include the
temporary, short-term renting or leasing of boat slips, motel, hotel, or apartment accommodations,
if any, on the Premises.
Section 10.06 Subtenant Subject to Lease Terms.
Any and all subleases must be expressly made subject to all the terms, covenants, and
conditions of this Lease. In no event will the term 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 also terminates any and all subleases. A breach of the terms of this Lease by a subtenant
constitutes a breach on the part of TENANT and subjects both the subtenant and TENANT to all
the remedies provided to CITY herein and by law. Failure by any subtenant to report Gross Sales
or to pay Percentage Rent due from subtenant constitutes a breach of this Lease. TENANT hereby
agrees to and does guarantee payment of such Percentage Rent due by a subtenant under the terms
of this lease.
Section 10.07 Consent to Sublease Agreement.
Prior to any consent by CITY to any sublease hereof, TENANT, CITY and any subtenant
must have executed the CITY’S Consent to Sublease Agreement making CITY a third party
beneficiary, whereby the subtenant agrees to be bound by all of the terms, covenants and conditions
of this Lease. Further, it is agreed by TENANT any default by the subtenant of any of the terms,
covenants and conditions of this Lease will be a violations by TENANT of this Lease and all
remedies of CITY for such violation, including termination of this Lease, may immediately be
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enforceable by CITY against TENANT. TENANT must apply any and all monies received from
any subtenant first to the payment of obligations of the subtenant to CITY.
Section 10.08 TENANT and Guarantor Remain Liable.
Prior to approval by CITY to any sublease hereof, TENANT must agree to be primarily
and jointly and severally liable to CITY for all obligations due CITY by any subtenant, including
the payment of rents; and TENANT must agree CITY may proceed directly against TENANT for
any obligation owed to CITY by the subtenant. If this Lease is guaranteed, then neither the
sublease nor CITY'S approval thereof will release the guarantor from its obligations pursuant to
the guaranty.
Section 10.09 Nondisturbance.
On the terms set forth below, CITY may enter into agreements with subtenants
establishing, in the event of any termination of this Lease prior to the expiration date, CITY will
not terminate or otherwise disturb the rights of the subtenant under such sublease, but will instead
honor such sublease as if that sublease had been entered into directly between CITY and such
subtenant, conditioned upon such subtenant's agreement to attorn to CITY and full performance
of all obligations under the sublease in question ("Non-Disturbance Agreement"). CITY agrees to
execute a Non-Disturbance Agreement in connection with a particular sublease; provided, that
Tenant provides CITY with a copy of the sublease, and the Non-Disturbance Agreement is
customary in form and substance and otherwise reasonably acceptable to CITY.
Article 11 DEFAULT AND TERMINATION
Section 11.01 Abandonment by TENANT.
If TENANT breaches this Lease and abandon all or any part of the Premises prior to the
scheduled expiration of the term of this Lease, then CITY may continue this Lease in effect by not
terminating TENANT'S right to possession of the Premises, in which event CITY may, at its
option, 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 (30) days after written notice thereof is
4855-8063-9740 v4 -30-
served on TENANT, then CITY may terminate this Lease immediately, and in the event of such
termination, TENANT will have no further rights hereunder and TENANT must thereupon
forthwith remove from the Premises and will have no further right or claim thereto and CITY will
immediately thereupon have the right to re-enter and take possession of the Premises, subject only
to appropriate legal process.
Section 11.03 Termination for Failure to Pay Rent.
If any payment of Rent is not made as herein provided and such failure to pay is not cured
within three (3) days after written notice thereof is served on the TENANT, then CITY will have
the option to immediately terminate this Lease; and in the event of such termination, TENANT
will have no further right or claim thereto and CITY will immediately thereupon have the right to
re-enter and take possession of the Premises, subject only to appropriate legal process.
Section 11.04 Lender May Cure Default.
CITY hereby affords the lender under any Leasehold Encumbrance of record with CITY the
right to cure any default by TENANT of the covenants, conditions, or agreements hereof, as provided
in Article 5 of this Lease.
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
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(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 are not exclusive, but are cumulative with
and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this
Lease.
Section 11.07 Waiver of Breach.
The waiver by CITY of any breach by TENANT of any of the provisions of this Lease
does not constitute a continuing waiver or a waiver of any subsequent breach by TENANT either
of the same or a different provision of this Lease.
Section 11.08 Surrender of Premises.
On expiration or sooner termination of this Lease, TENANT must surrender the Premises,
and, subject to Section 4.04, all 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 11.09 Cross-Defaults.
The Improvements to the Premises attendant to this Lease are described in Conditional Use
Permit CUP22-09. However, Conditional Use Permit CUP22-09 includes project construction and
conditions for improvements located outside the Premises. Nonetheless, the project as a whole
described in Conditional Use Permit CUP22-09 is intended and designed to harmonize with
TENANT’S use of the Premises and Improvements thereto. A default under the terms and
conditions of any of Conditional Use Permit CUP22-09 shall be a default under this Lease.
Article 12 MISCELLANEOUS
Section 12.01 Notices.
Any and all notice or demands by or from CITY to TENANT, or TENANT to CITY, must
be in writing. They must be served either personally, or by registered or certified mail. Any notice
or demand to CITY must be given to:
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Harbor Business Office
1275 Embarcadero
Morro Bay, CA 93442
with a copy to:
City Manager of the City of Morro Bay
City Hall
595 Harbor Street
Morro Bay, CA 93442
Any notice or demand to TENANT must be given at:
California Coastal Investments, LLC
PO Box 3260
San Luis Obispo, CA 93403
Such addresses may be changed by written notice by either Party to the other Party.
Section 12.02 Governing Law and Jurisdiction.
This Lease, and all matters relating to this Lease, are governed by the laws of the State of
California in force at the time any need for 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 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 will 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 hereto are jointly
and severally liable hereunder.
Section 12.04 Partial Invalidity.
If any provision of this Lease is held by a court of competent jurisdiction to be either
invalid, void, or unenforceable, then the remaining provisions of this Lease will remain in full
force and effect unimpaired by the holding.
4855-8063-9740 v4 -33-
Section 12.05 Reserved.
Section 12.06 Modification.
This Lease can only be modified, amended or altered pursuant to a written amendment
executed by the Mayor and attested to by City Clerk, pursuant to prior City Council approval.
Notwithstanding City Council approval, no amendment will become effective until it is in fact
executed by the Mayor and attested to by City Clerk and approved as to form by the City Attorney
(or designee). TENANT understands this Lease cannot be modified, amended or altered by oral
statements by any person representing CITY, including the Mayor and City Clerk. TENANT
specifically agrees not to rely on oral statements, purported oral waivers, or purported oral
modifications and agrees not to rely upon purported written modifications unless they meet the
requirements of this Section. If the title of any person authorized to act for CITY under this Lease
is changed during the term of this Lease, then the person who succeeds to substantially the same
responsibilities with respect to CITY will have the authority to act for CITY under this Lease.
Section 12.07 Time of Essence.
Time is expressly declared to be the essence of this Lease.
Section 12.08 Memorandum of Lease for Recording.
CITY and TENANT agree, at the request of either at any time during the term of this Lease,
to execute a Memorandum of Lease or "short form" of this Lease, which shall describe the Parties,
set forth a description of the Premises, specify the term of this Lease, and incorporate this Lease
by reference.
Section 12.09 Force Majeure.
If either Party hereto is delayed or hindered in or prevented from the performance of any
act required hereunder by reason of a strike, lock-out, labor trouble, inability to procure materials,
failure of power, governmental moratorium, riot, insurrection, war, pandemic or other reason of a
like nature not the fault of the Party delaying in performing work or doing any act required under
the terms of this Lease, then performance and doing of such act will be excused for the period of
such delay. The Parties understand and agree, the foregoing will not extend any period of time for
the payment of Rent or other sums payable by either Party or any period of time for the written
exercise of an option or right by either Party.
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Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE
The following provisions apply to the Lease Premises only:
Section 13.01 Public Restrooms
Restrooms completed in conformance with Conditional Use Permit CUP22-09 shall be
made available to the public during business hours and TENANT shall maintain signage in
prominent locations which clearly identifies that the restrooms are available to the general public.
In the case of a dispute over location and design of signage, the CITY’s Harbor Staff may designate
two locations for “public restroom” signs of a type and size to be determined by the CITY.
Section 13.02 TENANT’S Obligation to Redevelop Site.
(1)CITY and TENANT agree TENANT will construct improvements to the Premises as
outlined in the approved Conditional Use Permit No. #CUP22-09 and consisting of the following
(the “Improvements”). Improvements specific to the Lease Premises include:
A.Demolition/reconstruction of the Libertine building at 801 Embarcadero
B.Redevelopment to consist of first floor restaurant/brewery/coffee shop with 7-
unit hotel on the second floor with public viewing deck
C.Public coastal access with new 15’ wide Harborwalk gap extension connecting
to adjacent lease sites
D.7 steel piles, sleeving of 3 existing piles, new dock area with gangway ramp
and space for vessel tie-up
E.Removal of street end public parking to create a public plaza
F. Master sign program participation and approval
(2)TENANT shall perform the Improvements specific to the Premises in accordance with
the following milestones:
A.TENANT to submit for Building Permits for the Improvements no later than
August 1, 2025.
B. Commence construction of the Improvements within 1 month of receipt of
building permit, (Estimated 3-4 month for plan check) on or before January 1, 2026.
C. Completion of construction of all components of the Improvements no later than
within 30 months of receipt of building permit, on or before July 1, 2028.
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Completion shall mean when the Improvements are entitled to be issued a final
Certificate of Occupancy, including any and all Certificates of Occupancy required
for any sub-tenant of TENANT, as well as all Certificates of Occupancy required
of TENANT. TENANT shall provide evidence TENANT has incurred at least
$5,200,000.00 in costs to satisfactorily complete the Improvements on the Premises
pursuant of issuance of final Certificate of Occupancy.
D. Master lease construction and occupancy deadlines shall supersede the consent
of landowner deadlines approved by City Council on September 12, 2023, whereas,
if master lease deadlines are not met due to any reason within or outside the control
of TENANT, an extension of up to 180-days may be granted as reasonably
determined by the City Manager. Additional extensions to any or all of these dates
may be granted by the City Council in its sole discretion. During construction of
the Improvements, 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 that 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. Reasonably 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.
f.Keep the construction site in a sightly, orderly, and safe manner at all
times.
(3)TENANT shall perform all other project work as set forth in Conditional Use Permit
CUP22-09, which includes certain “public plaza” improvements located outside the Premises, and
as such work may proceed pursuant to a separate Special Encroachment Permit or other such
appropriate instrument or entitlement. The terms of such separate Special Encroachment Permit or
other entitlement are hereby incorporated by this reference into the terms of this Lease as though
set forth fully herein. A Plaza Improvement Plan must be approved by the CITY concurrent with
the public works agreement.
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(4) Liquidated Damages: If work is not completed in strict compliance with Sections 13.02
(1) (2) (3) of this Lease or in strict accordance with the schedule of performance provided by any
Improvement entitlements, it is understood, acknowledged and agreed that the CITY will suffer
damage. It is therefore agreed that the TENANT and its sureties shall pay to the CITY the sum of
$100.00 for each and every calendar day of delay beyond the completion date set in this Lease, or
beyond any completion schedule, construction schedule or Improvement milestones established in
or pursuant to related Improvement entitlements. TENANT expressly understands, acknowledges
and agrees that such liquidated damages can and shall be imposed if the TENANT does not meet
each and every aspect of any activity schedule, completion schedule, construction schedule or
Improvement milestones. If the CITY accepts work or makes any payment under this Lease after
a default by reason of delays, the acceptance of such work and/or payment(s) shall in no respect
constitute a waiver or modification of any provisions regarding Improvement deadlines, a
completion schedule, or the accrual of liquidated damages. This Section does not exclude recovery
of damages under the default provisions of this Lease, Improvement entitlements (including
without limitation Conditional Use Permit No.#CUP22-09), and is expressly in addition to the
City’s ability to seek other legal or equitable damages. To the extent required by Government Code
section 4215, TENANT shall not be assessed liquidated damages for delay in completion of the
work when such delay was caused by the failure of the CITY or owner of a utility to provide for
removal or relocation of utility facilities.
[SIGNATURE PAGE FOLLOWS]
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EXECUTED on ________________, 20___, at San Luis Obispo County, California.
CITY OF MORRO BAY TENANT
_________________________________
Carla Wixom, MAYOR
By: LEASEHOLDER DECLINED TO SIGN
Its: ________________________________
By: ________________________________
Its: ________________________________
ATTEST:
_________________________________
Dana Swanson, CITY CLERK
APPROVED AS TO FORM:
_____________________________________
____________________, CITY ATTORNEY
4855-8063-9740 v4 A-1
EXHIBIT A COPY OF PARCEL MAP
EXHIBIT A
4855-8063-9740 v4
L E A S E
by and between
the CITY OF MORRO BAY
("CITY")
and
Central Coastal Investments, LLC
("TENANT")
4855-8063-9740 v4 -i-
TABLE OF CONTENTS
Article 1 FIXED TERM .............................................................................................................2
Section 1.01 Term. .............................................................................................2
Section 1.02 Extensions. ....................................................................................2
Section 1.03 Hold Over......................................................................................2
Section 1.04 Replacement. .................................................................................3
Article 2 RENT ..........................................................................................................................3
Section 2.01 Annual Minimum Rent. ................................................................3
Section 2.02 CPI Adjustment to Annual Minimum Rent. .................................3
Section 2.03 Calculation of New Minimum Rent. .............................................4
Section 2.04 Percentage Rent. ...........................................................................5
Section 2.05 Reimbursements. ...........................................................................8
Section 2.06 Penalty and Interest. ......................................................................8
Article 3 USE OF PREMISES ...................................................................................................8
Section 3.01 Permitted Uses. .............................................................................8
Section 3.02 Unauthorized Use..........................................................................9
Section 3.03 Operation of Business - Hours of Operation.................................9
Section 3.04 Competition...................................................................................9
Section 3.05 Environmental Considerations and Hazardous Materials. ..........10
Section 3.06 Tidelands Trust. ..........................................................................11
Section 3.07 Compliance with Law. ................................................................11
Section 3.08 Waste or Nuisance. .....................................................................11
Section 3.09 Use by CITY. ..............................................................................12
Article 4 CONSTRUCTION, ALTERATION AND REPAIRS .............................................12
Section 4.01 Construction Approval. ...............................................................12
Section 4.02 Construction Bond. .....................................................................12
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Section 4.03 Mechanics' Liens. ........................................................................13
Section 4.04 Ownership of Improvements.......................................................14
Article 5 LEASEHOLD MORTGAGES .................................................................................14
Article 6 REPAIRS, MAINTENANCE AND RESTORATION ............................................14
Section 6.01 Maintenance by TENANT. .........................................................14
Section 6.02 Seawalls and Revetment. ............................................................16
Section 6.03 Legal Requirements. ...................................................................16
Section 6.04 Failure to Repair. ........................................................................16
Section 6.05 Inspection by CITY.....................................................................17
Section 6.06 TENANT'S Duty to Restore Premises. .......................................17
Section 6.07 Termination of Lease for Destruction. ........................................17
Section 6.08 Destruction Due to Risk Not Covered by Insurance. ..................18
Article 7 INDEMNITY AND INSURANCE ..........................................................................19
Section 7.01 Indemnity Agreement. ................................................................19
Section 7.02 Liability Insurance. .....................................................................20
Section 7.03 Worker's Compensation. .............................................................20
Section 7.04 Property Insurance. .....................................................................20
Section 7.05 Additional Coverage. ..................................................................21
Section 7.06 General Requirements. ................................................................21
Section 7.07 No Subrogation. ..........................................................................22
Section 7.08 TENANT'S Waiver. ....................................................................23
Section 7.09 Insurance Not a Limit. ................................................................23
Article 8 TAXES AND FEES ..................................................................................................23
Section 8.01 TENANT to Pay Taxes. ..............................................................23
Section 8.02 TENANT to Pay License and Permit Fees. ................................23
Section 8.03 Utilities. .......................................................................................23
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Article 9 CONDEMNATION ..................................................................................................23
Section 9.01 Total Condemnation....................................................................23
Section 9.02 Condemnation Award. ................................................................24
Section 9.03 Termination for Partial Taking. ..................................................25
Section 9.04 Rent Abatement for Partial Taking. ............................................25
Section 9.05 Conveyance in Lieu of Eminent Domain....................................25
Section 9.06 Temporary Taking. .....................................................................26
Article 10 ASSIGNMENT AND SUBLEASING .....................................................................26
Section 10.01 No Assignment Without CITY'S Consent. .................................26
Section 10.02 Change of Ownership as Assignment. ........................................26
Section 10.03 Application for Assignment. .......................................................27
Section 10.04 Probate Transfer of Assignment. ................................................27
Section 10.05 No Sublease Without CITY'S Consent. ......................................28
Section 10.06 Subtenant Subject to Lease Terms. .............................................28
Section 10.07 Consent to Sublease Agreement. ................................................28
Section 10.08 TENANT and Guarantor Remain Liable. ...................................29
Section 10.09 Nondisturbance. ..........................................................................29
Article 11 DEFAULT AND TERMINATION ..........................................................................29
Section 11.01 Abandonment by TENANT. .......................................................29
Section 11.02 Termination for Breach by TENANT. ........................................29
Section 11.03 Termination for Failure to Pay Rent. ..........................................30
Section 11.04 Lender May Cure Default. ..........................................................30
Section 11.05 Damages for Breach. ...................................................................30
Section 11.06 Cumulative Remedies. ................................................................31
Section 11.07 Waiver of Breach. .......................................................................31
Section 11.08 Surrender of Premises. ................................................................31
Section 11.09 Cross-Defaults.............................................................................31
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Article 12 MISCELLANEOUS .................................................................................................31
Section 12.01 Notices. .......................................................................................31
Section 12.02 Governing Law and Jurisdiction. ................................................32
Section 12.03 Binding on Successors. ...............................................................32
Section 12.04 Partial Invalidity..........................................................................32
Section 12.05 Reserved. .....................................................................................33
Section 12.06 Modification. ...............................................................................33
Section 12.07 Time of Essence. .........................................................................33
Section 12.08 Memorandum of Lease for Recording. .......................................33
Section 12.09 Force Majeure. ............................................................................33
Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE .................................34
Section 13.01 Public Restrooms ........................................................................34
Section 13.02 TENANT’S Obligation to Redevelop Site. ................................34
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