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C-2326 - Lease Agreement - Balboa Pier Concession - Ruby's Diner's Inc.
LEASE AGREEMENT Balboa Pier Concession RUBY'S DINER, INC. THIS LEASE is made and entered into as of the 1s` day of July, 2000 ("Effective Date"), by and between the CITY OF NEWPORT BEACH, a municipal corporation ("City") and RUBY'S DINER, INC., a California corporation ("Tenant"). RECITALS A. City is the owner of the Balboa Pier ("Pier"), described in Exhibit B, and a structure located at the end of the Pier that is currently being used by Tenant as a Restaurant ("Premises") and is described in Exhibit A. Tenant is occupying the Premises pursuant to a Lease dated March 8, 1982 that is recorded in the Official Records of Orange County, California ("Old Lease"). B. Tenant and City desire to enter into a new Lease of the Premises for the purpose of allowing Tenant to continue to operate of a full -service, small scale eating and drinking establishment with limited take-out service (collectively referred to as the "Restaurant") as those terms are defined in the Newport Beach Municipal Code. City will grant Tenant an exclusive right to conduct limited food and beverage sales on the Pier ancillary to the Restaurant ("Accessory Area"). Balboa Pier Concession Lease — June 20, 2000 1 AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants herein contained, City and Tenant hereby agree as follows: 1. DEFINITIONS 1.1 General Definitions. As used in this Lease, the following words and phrases shall have the following meanings: (a) Alteration - any addition or change to, or modification of, the Premises made by Tenant including, without limitation, fixtures. (b) Authorized Representative - any officer, agent, employee, or independent contractor retained or employed by either Party, acting within authority given by that Party. (c) City - the City of Newport Beach, and any Successor to City's interest in the Pier. (d) Consumer Price Index or CPI - the Consumer Price Index for All Urban Consumers, Los Angeles - Anaheim - Riverside (1982-84 = 100) as published and compiled by the Department of Labor or, in the event the Department of Labor no longer publishes the CPI, the index most similar to the CPI. (e) Damage - an injury to or death of any Person, or the damage destruction, or loss of property caused by another Person's acts or omissions. (f) Damages - monetary compensation or indemnity that can be recovered in the courts by any Person who has suffered Damage. (g) Expiration - the lapse of the time specified as the Term of this Lease, including any extension of the Term resulting from the exercise of an option to extend. (h) Good Condition - the good physical condition of the Premises and each portion of the Premises, including, without limitation, signs, windows, show windows, Balboa Pier Concession Lease — June 20, 2000 2 and appurtenances. "In good condition" means neat and broom -clean, and is equivalent to similar phrases referring to physical adequacy in appearance and for use. (i) Hold Harmless - to defend and indemnify from all liability, losses, penalties, Damage, costs, attorney fees, expenses, causes of action, claims, or judgments arising out of or related to any Damage to any Person or property. (j) Law - any judicial decision, statute, constitution, ordinance, resolution, regulation, rule, administrative order, or other requirement of any municipal, county, state, federal, or other government agency or authority having jurisdiction over the Parties or the Premises. (k) Maintenance or Maintain - repairs, replacement, maintenance, repainting, and cleaning. (I) Person - one or more natural persons, or legal entities, including, without limitation, partnerships, corporations, trusts, estates, associations, or a combination of natural persons and legal entities. (m) Premises - those portions of the Pier designated on Exhibit A as the Restaurant and Accessory Area. (n) Provision - any term, covenant, condition, or clause in this Lease that defines, establishes, or limits the performance required or permitted by either Party. (o) Rent - Base Rent, Percentage Rent, taxes, and other similar charges payable by Tenant under the Provisions of this Lease. (p) Rent Commencement Date - the Rent Commencement Date (and the Effective Date) shall be July 1, 2000. (q) Successor - assignee, transferee, personal representative, heir, or other Person succeeding lawfully, and pursuant to the provisions of this Lease, to the rights or obligations of either Party. (r) Tenant - RUBY's DINER, INC., a California corporation, and any Successor. Balboa Pier Concession Lease — June 20, 2000 3 (s) Termination - the termination of this Lease, for any reason, prior to Expiration. . 1.2 Other Definitions. - The following additional terms are defined in the following sections of this Lease: (a) ABC §5.7 (b) Gross Sales §4.4 (c) Lease Year §4.2 (e) (d) Percentage Rent §4.2 (a) (e) Base Rent §4.1 (a) (f) Pier Recital A (g) Restaurant and Accessory Area Recital B (h) Term §3.1 2. LEASE OF PREMISES 2.1 Agreement to Lease. City leases the Premises to Tenant and Tenant leases the Premises from City for the Term and on the conditions in this Lease. 2.2 Exclusivity. Tenant shall operate a Restaurant on the Premises. Tenant shall have the exclusive right to serve and sell food and beverages on the Pier. 3. TERM 3.1 Term of Lease. The Term of this Lease shall be fifteen (15) years from the Effective Date unless sooner terminated as provided in Section 14. 3.2 Option to Extend. Provided Tenant is not then in material default, Tenant may extend the term of this Lease for two additional successive terms of five (5) years (the "Option Term" or Option Terms) the first commencing on Expiration of the initial Term and the second commencing on Expiration of the first Option Term. Tenant may exercise the Balboa Pier Concession Lease — June 20, 2000 4 option by giving City written notice of its intention to do so at least three (3) months prior to Expiration of the initial Term or the first Option Term. 3.3 Hold Over. Should Tenant, with City's consent, hold over and continue in possession of the Premises after Expiration of the Term or any Option Term, Tenant's continued occupancy of the Premises shall be considered a month -to -month tenancy subject to all the terms and conditions of this Lease, except the provisions of Subsections 3.1 and 3.2. 4. RENT 4.1 Base Rent. (a) Base Rent. From and after the Rent Commencement Date, Tenant shall pay Base Rent to City in the sum of Thirty Thousand and no/100 Dollars ($30,000.00) per year during the Term. Base Rent shall be paid in equal monthly installments of Two -Thousand Five Hundred and no/100 Dollars ($2,500.00). Base Rent for each full month shall be due on the first day of that month. Base Rent for any partial month shall be prorated in accordance with the actual number of days in that month and shall be due on the first day of that month that falls within the Term. (b) Periodic Adjustment. On the eighth (8th), twelfth (12th) and, assuming Tenant's exercise of the options to extend the Term, the sixteenth (161, and twentieth (20th) anniversaries of the Rent Commencement Date, the Base Rent shall be increased by the lesser of the cumulative percentage increase in the CPI or three percent (3%) per year. The cumulative percentage increase in the CPI shall be determined based on the increases during the period from the Rent Commencement Date or the date of the previous adjustment (whichever is appropriate) to the last date prior to the anniversary on which the CPI was published (typically the CPI for any given month is published approximately sixty (60) days after the end of that month). Balboa Pier Concession Lease — June 20, 2000 5 4.2 Percentage Rent. (a) Percentage Rent. In addition to Base Rent, Tenant shall pay Percentage Rent. The "Percentage Rent" shall be calculated by multiplying the Gross Sales Percentage Rate, as specified in Subsection 4.2(b), by the total Gross Sales (as defined in Subsection 4.4) attributable to the Premises during each Lease Year. Base Rent payments made during any Lease Year shall be credited against the Percentage Rent due that Lease Year. (b) Percentage Rate. Percentage Rent will be based on the following annual Percentage Rate: Gross Sales Increment Percentage Rate Up to $1,000,000 6.0% $1,000,000 and Over 6.5% Percentage Rent shall be determined by multiplying each Gross Sales increment by the applicable Percentage Rates. For example, Percentage Rent on annual Gross Sales of $1,100,000 would be approximately $66,500 which equals six percent (6%) on the first $1,000,000 of Gross Sales plus six and a half percent (6.5%) of the Gross Sales Increment between $1,000,000 and $1,100,000. (c) Method of Payment. Percentage Rent shall be due and payable twenty-five (25) days after the end of each month. The Base Rent, when paid for a month, shall be a credit against the Percentage Rent due for that month. (d) Annual Rent Adjustment. Within sixty (60) days after the end of each Lease Year, City shall determine the amount of Rent due based on the Gross Sales of Tenant during the Lease Year and the sums paid to City as Base Rent and Percentage Rent. If Tenant has paid to City more Rent than is required, City shall refund the excess Rent to Tenant within 20 days after the determination. If Tenant has paid City less Rent, Tenant Balboa Pier Concession Lease — June 20, 2000 6 shall pay the difference to City within 20 days after receipt of notice that additional Rent is due. (e) Lease Year. For the purposes of Rent and Rent payments, the Lease Year shall begin on January 1 and end on December 31 of each year. 4.3 Payment Location. Rent shall be payable at the office of the City's Revenue Division at 3300 Newport Boulevard, Newport Beach, California, or at such other place or places as City may from time to time designate by written notice delivered to Tenant. 4.4 Gross Sales. (a) The term "Gross Sales" means: (1) The entire amount of the actual sales price, whether wholesale or retail, and whether wholly or partly for cash, on credit or in exchange for any other product, commodity, service, commercial paper or forbearance, of all sales of merchandise and all charges made by or on behalf of Tenant from or upon the Premises; (2) Orders taken in or from the Premises, even if the orders are filled elsewhere, and sales by any subtenant in or from the Premises; (3) Gross receipts of all coin -operated devices that are placed on the Premises by Tenant or pursuant to any rent concession, percentage or other arrangement (but excluding revenue from telephones that are collected by a public and/or private utility). (b) Exclusions from Gross Sales. Gross Sales shall not include, or if included there shall be deducted (but only to the extent they have been included), the following: (1) Sales and use taxes, so-called luxury taxes, consumers' excise taxes, gross receipts taxes, and other similar taxes now or in the future imposed on the sale of merchandise or services, but only if such taxes are added to the selling price and collected from customers. (2) The transfer or exchange of merchandise between the stores or businesses of Tenant, if any, where such transfers or exchanges of merchandise are made solely for the convenient operation of a business owned and operated by Tenant and not for the Balboa Pier Concession Lease — June 20, 2000 7 purpose of consummating a prior sale made in, to or from the Premises or for the purpose of depriving City of the benefit of a sale that otherwise would be made in, at or from the Premises. (3) The amount of returns to shippers or manufacturers. (4) The amount of any cash or credit refund made upon any sale where the merchandise sold or some portion is returned by the purchaser. Each sale upon installment or credit shall be treated as a sale for the full price in the month during which such sale shall be made, irrespective of the time when Tenant shall receive payment (whether in full or partial) from its customers. (5) Sales of trade fixtures or personal property to be replaced by Tenant that are not considered stock in trade. (6) Sums and credits received in the settlement of claims for Toss of or damage to merchandise. (7) Gift certificates, or similar vouchers, until such time as they shall have been converted into a sale by redemption. (8) Meals provided for officers or employees without charge. (9) Meals, goods or products provided for promotional or publicity purposes without charge. (10) Cash refunds made to customers in the ordinary course of business. (11) Value added taxes ("VAT") or other taxes added to the selling price of products and other similar taxes now or hereafter imposed upon the sale of merchandise or services, whether such taxes are added to, or included in the selling price. (12) Discounted sales to employees of Tenant, not to exceed two percent (2%) of Gross Sales. (13) Uncollectible credit accounts and other bad debts, not to exceed two percent (2%) of Gross Sales. (14) Amounts paid to charge card or credit card issuers. Balboa Pier Concession Lease — June 20, 2000 8 (c) Statements of Gross Sales. Tenant shall furnish to City statements of Tenant's Gross Sales within twenty-five (25) days after the end of each month, and annual statements of Gross Sales within thirty (30) days after the end of each Lease Year. Each statement shall be signed and certified to be correct by an Authorized Representative of Tenant. (d) Sales and Charges. All sales and charges shall be recorded by means of cash registers that display the amount of the transaction certifying the amount recorded. The register shall be equipped with devices that log in daily sales totals, and record on tapes the transaction numbers and sales details. At the end of each day the tape will record the total sales for that day. (e) Production of Statement, Records and Audit. Tenant agrees to make available for inspection by City at the Premises or at Tenant's corporate headquarters in Orange County, California, a complete and accurate set of books and records of all sales of merchandise and revenue derived from the conduct of business or activity in, at or from the Premises from which Gross Sales can be determined. Tenant shall also make available, upon City request, all supporting records, exclusive of federal, state and local tax returns. Tenant shall also furnish City copies of its quarterly California sales and use tax returns at the time each is filed with the State of California. Tenant shall retain and preserve for at least one (1) year all records, books, bankbooks or duplicate deposit books and other evidence of Gross Sales. City shall have the right, upon reasonable notice, during the Term and within one hundred eighty (180) days after Expiration or Termination of this Lease to inspect and audit Tenant's books and records and to make transcripts to verify the Rent due City. The audit may be conducted at any reasonable time during normal business hours. Tenant shall cooperate with City in making the inspection and conducting the audit. City shall also be entitled, once during each Lease Year and once within one hundred eighty (180) days after Expiration or Termination of this Lease, to an independent audit of Tenant's books of account, records, cash receipts, and other pertinent Balboa Pier Concession Lease — June 20, 2000 9 data to determine Tenant's Gross Sales. The audit shall be conducted at City's sole cost and expense by a certified public accountant designated by City. The audit shall be limited to the determination of Gross Sales and shall be conducted during usual business hours in a manner that minimizes any interference with the conduct of Tenant's regular business operations. If the audit concludes that there is a deficiency in the payment of any Rent, the deficiency shall become due and payable within 20 days and if there is an overpayment, City shall refund the amount of the overpayment within 20 days. City shall bear its costs of the audit unless the audit shows that Tenant understated Gross Sales by more than five percent (5%), in which case Tenant shall pay all City's reasonable costs of the audit. City shall keep any information gained from such statements, inspections or audits confidential to the maximum extent permitted by law. City shall not disclose financial information received in confidence and pursuant to this Lease except to carry out the purposes of this Lease unless disclosure is required (rather than permitted) by law. However, City may disclose the results of any audit in connection with any financing arrangements, the sale or transfer of City's interest in the Premises, or pursuant to order of a court or administrative tribunal. (f) Tenant's Gross Sales Audit. In the event of any audit by City in accordance with this Lease, Tenant may contest the results of City's audit by performing a confirming audit within thirty (30) days of receipt of City's audit results and supporting evidence, using an independent public accountant reasonably acceptable to City. If Tenant's audit discloses that City's audit was incorrect by more than five percent (5%), then City shall pay the cost of Tenant's contesting audit. (g) Acceptance. The acceptance by City of any money paid to City by Tenant as Percentage Rent for the Premises, as shown by any statement furnished by Tenant, shall not be construed as an admission of the accuracy of said statement, or of the sufficiency of the amount of the Percentage Rent payment. Balboa Pier Concession Lease — June 20, 2000 10 4.5 Interest on Unpaid Rent. Rent and other sums due City under this Lease shall bear interest at the rate of ten percent (10%) per annum on the unpaid balance from the date due until paid. 4.6 Pier/Premises Rent Credit. (a) Pier Repair Project. City shall pay $25,000 to Tenant upon execution of this Agreement to compensate Tenant for anticipated reductions in Gross Sales caused by the City's current pier repair project. Except those provisions of this Lease related to Rent Abatement, Tenant agrees that this payment is the sole and only consideration to which Tenant is entitled with respect to the current repair of the Pier being done by City through December 31, 2000. (b) Building Improvement Rent Credit. City shall provide Tenant with a Building Improvement Rent Credit (Rent Credit) not to exceed a total of $30,000. Tenant may deduct the Rent Credit from Tenant's rental payment during the 2000 and 2001 calendar years following Tenant's completion of the Building Improvements identified in Exhibit C. Tenant may, with the consent of City Manager, which shall not be unreasonably withheld, extend a portion of this Rent Credit into the next fiscal year following completion of the Building Improvement(s). 4.7 Revenue from the Pier and/or Premises' Use in Film, Television, and/or Advertising. One-half of all monetary revenue received by Tenant as compensation or other payment for the use of the Premises or Pier in a film, television production, advertising production, or other media vehicle shall be distributed to City. Tenant shall have the right, without compensation to the City, to use the premises for filming or recording promotional or advertising material for Tenant or Tenant's business. The distribution of revenue pursuant to this Subsection shall occur not less than 60 days after Tenant receives this compensation or other payment. Balboa Pier Concession Lease — June 20, 2000 11 5. BUSINESS PURPOSES AND USE OF PREMISES 5.1 Business Purposes. The Premises are to be used by Tenant for the operation of a combination sit-down, casual food -service restaurant, together with a take- out food service window. Tenant shall also have the exclusive right to operate a mobile food and/or coffee cart on the Pier, pursuant to written approval by the City Manager which may be withdrawn by the City Manager at his or her sole discretion upon thirty days written notice to Tenant. 5.2 Operation of Premises. Tenant shall operate and manage the Premises in a manner comparable to other high quality businesses providing similar food and services. Tenant shall not use or permit the use of the Premises in any manner that (i) creates a nuisance or (ii) violates any Law. Tenant shall not offer entertainment or broadcast music or entertainment through exterior speakers or other form of transmission. Tenant may use a customer paging system. 5.3 Outdoor Dining. Tenant shall be permitted to expand restaurant service to include outdoor dining on the Pier, subject to prior written approval of the City Manager and in accordance with City zoning codes, which shall not be unreasonably withheld. City shall make its best efforts to provide a safe environment free of hazards relating to fishing and/or casting prior to approving any outdoor dining on the Pier 5.4 Continuous Operation. Weather permitting, Tenant shall keep the Premises in operation and open to the public for business each calendar day of the year in accordance with the schedule in this Subsection. Tenant may close the Restaurant on Thanksgiving Day and Christmas Day and during periods of remodeling, reconstruction, inventory and emergencies (including substantially inclement weather) or to comply with laws. Unless otherwise approved in writing by the City Manager, which shall not be unreasonably withheld, the restaurant shall follow this schedule of operations (a) Weekdays (Monday through Friday) from September 1 through May 31: Balboa Pier Concession Lease — June 20, 2000 12 Tenant shall serve lunch and dinner daily, with minimum hours of operation 11:30 a.m. through 9:00 p.m. (b) Weekdays (Monday through Friday) from June 1 through August 31: Tenant shall serve breakfast, lunch, and dinner daily, with minimum hours of operation 7:00 a.m. to 9:00 p.m. (c) Any weekend day (Saturday and Sunday): Tenant shall serve breakfast, lunch, and dinner, with minimum hours of operation 7:00 a.m. to 9:00 p.m. Tenant may choose to serve only lunch and dinner during days when Tenant determines that climactic conditions make Restaurant's operations unprofitable. (d) At Tenant's option, the Tenant may serve breakfast on weekdays (Monday through Friday) from September 1 through May 31. If breakfast is served on weekdays during these months, the Restaurant will open at 7: 00 a.m. 5.5 Advertising Display. Tenant may, at its own expense, place signs in or upon the Premises, or the base of the Pier, subject to the prior written consent of the City Manager as to the size, type, design and method of installation. All signage placed by Tenant on, in or about the Premises shall remain the property of Tenant and shall be removed by Tenant upon termination or Expiration of this Lease at Tenant's expense; and any damage caused by removal shall be repaired at Tenant's expense. The permanent signage in place as of the Execution Date of this lease shall be deemed approved by the City and the City Manager. 5.6 Independent Contractor. City shall have no interest in the business of Tenant. 5.7 Alcoholic Beverages. If Tenant at any time holds a beer and wine license for the Premises from the California Department of Alcoholic Beverage Control ("ABC"), Tenant may engage in the types of sales permitted under that license. Tenant shall not sell any alcoholic beverages other than beer and wine. Tenant shall comply with all of the Balboa Pier Concession Lease — June 20, 2000 13 rules and regulations of ABC and all of the terms and conditions of any license granted by ABC. 5.8 No Distress Sales. No auction, fire, bankruptcy, "going out of business" or other distress sales of any nature may be conducted on the Premises without the prior written consent of the City Manager, which will not be unreasonably withheld, conditioned. 5.9 Delivery Access. Except as provided in this Subsection, neither Tenant nor Tenant's suppliers may operate vehicles on the Pier without the prior written consent of City. City consents to Tenant's use of a 3/4 ton van or comparable vehicle, or such other vehicle as may be mutually acceptable to City and Tenant, on the Pier for delivery purposes, so long as not more than one (1) vehicle operated by Tenant is on the Pier at any time and the vehicle is not parked on the Pier any longer than necessary for completion of the task at hand. 5.10 Parking and Parking Permits for Employees. City shall have the right to control parking by Tenant's employees by commercially reasonable means, and Tenant shall cause its employees to comply with the procedures and regulations established by City from time -to -time to control parking. City shall provide a total of four (4) parking permits annually to Tenant for use of the Balboa Pier parking lot by employees and shall keep the Pier reasonably accessible for Tenant's delivery vehicle. The permits issued by the City shall be designed to permit use by different employees from day to day. 5.11 Validated Parking. City is in the process of planning improvements and modifications to the configuration and operating protocol of the Balboa Pier Parking Lot including an increase in the amount of short-term parking and a validation program. City shall offer Tenant the right to participate in any validation program or short term parking program to Tenant on terms and conditions that are as favorable as any offered to other property owners in the Balboa Villlage area with the exception of the Grand Opening event or other one-time special event held at the Balboa Theater. Tenant shall have the right to request modifications to this Lease relative to participation in any validation or short term Balboa Pier Concession Lease — June 20, 2000 14 parking program in light of Tenant's payment to the tidelands fund, the high cost of parking in relation to Tenant's typical ticket price, and the distance between the Premises and the Balboa Pier Parking Lot. 5.12. No Smoking. No smoking shall be permitted on the Premises. 6. TAXES, LICENSES AND OTHER OBLIGATIONS 6.1 Payment of Taxes. Tenant shall pay directly to the appropriate taxing authorities all taxes applicable to this Lease, fixtures and Tenant's personal property on the Premises, that are levied or assessed against Tenant during the Term. Taxes shall be paid at least ten (10) days before delinquency and before any fine, interest or penalty is due or imposed by operation of law. Tenant shall, upon request, promptly furnish to the City satisfactory evidence of payment. Tenant shall not be required to pay any real property taxes or assessments. Tenant acknowledges that this Lease may create a possessory interest subject to property taxation and that Tenant may be subject to the payment of property taxes levied on such interest. Tenant shall pay, before delinquency all taxes, assessments, license fees and other charges (Taxes) that are, during the Term, levied or assessed against Tenant's leasehold interest in the Premises or any personal property installed on the Premises. 6.2 Payment of Obligations. Tenant shall promptly pay, when due, any and all bills, debts, liabilities and obligations incurred by Tenant in connection with Tenant's occupation and use of the Premises. 6.3 Challenge to Taxes. Tenant shall have the right in good faith, at its sole cost and expense, to contest the amount or legality of any Taxes on or attributable to this Lease, the Premises, Tenant's personal property, or Tenant's occupation and use of the Premises, including the right to apply for reduction. If Tenant seeks a reduction or contests such taxes, Tenant's failure to pay the taxes shall not constitute a default as long as Tenant complies with the provisions of this Section. City shall not be required to join in any Balboa Pier Concession Lease — June 20, 2000 15 proceeding or contest brought by Tenant unless the provisions of any Law require that the proceeding or contest be brought by or in the name of City or any owner of the Premises. In that case, City shall join in the proceeding or contest or permit it to be brought in City's name as long as City is not required to bear any cost. If requested by Tenant, City shall execute any instrument or document necessary or advisable in connection with the proceeding or contest. Tenant, on final determination of the proceeding or contest, shall immediately pay or discharge any decision or judgment rendered, together with all related costs, charges, interest and penalties. Tenant shall Hold Harmless the City and its officers and employees from and against any liability, claim, demand, penalty, cost or expense arising out of or in connection with any contest by Tenant pursuant to this Section. 7. UTILITIES AND REFUSE COLLECTION. (a) Basic Utilities. Tenant shall make all arrangements for and pay for all utilities furnished to or used on the Premises, including, without limitation, gas, electricity, water, telephone service, cable TV and janitorial service. Tenant shall be entitled to water service under the same terms and conditions as any other occupant of the Pier and shall pay the same fees, rate or rates as any other customer of the City. Any repair to utility lines within the Premises is the sole responsibility of Tenant. Tenant shall be responsible for the servicing and maintenance of the sewage holding tank. (b) Refuse Collection. Tenant shall keep the Premises free and clean of rubbish and litter and shall deposit accumulated rubbish and litter in containers designated by City. Trash containers shall be kept in an approved enclosed area. Tenant shall pay City, in addition to any Rent or other charges, a monthly fee of Two Hundred Dollars ($200) in consideration of which City shall provide refuse collection service seven (7) days per week. Tenant shall comply with the provisions of the Newport Beach Municipal Code relative to the deposit of material to be collected by City. On the third anniversary of the Rent Commencement Date and every three years thereafter during the Term or any Option Balboa Pier Concession Lease — June 20, 2000 16 Term, the monthly refuse fee shall be adjusted. The adjustment in the monthly refuse fee shall reflect (i) the percentage increase in the quantity of refuse collected during the preceding twelve (12) month period (for which information regarding the quantity of refuse collected from the Premises is available) when compared to the quantity of refuse collected during the first twelve (12) months of this Lease ("Base Year"); and (ii) the percentage increase in the landfill fees City is required to pay to dispose of the refuse. Any single increase in the monthly refuse fee shall not exceed twenty percent (20%) of the then current monthly fee. At no time during the term of this Agreement shall the monthly fee exceed $400 per month. City shall provide an adequate amount of containers for Tenant's business operations. 8. ALTERATIONS TO THE PREMISES. (a) Alterations Requiring Building Permits. Any alteration that requires a building permit from City shall require the written consent of the City Manager which shall not be unreasonably withheld. (b) Alterations Costing More than $50,000. Tenant shall not make any Alterations (other than non-structural Alterations costing less than Fifty Thousand Dollars [$50,000.00]) to the Premises without the prior written consent of the City Manager which shall not be unreasonably withheld. In granting or withholding consent to proposed Alterations by Tenant, the City Manager shall consider the impact of the proposed Alterations on public views and the impact of the proposed Alterations on space available for public use of the Pier for fishing and other activities. The City Manager may require, as a condition of approval, that Tenant agree to amendments to this Lease, including amendments increasing the amount of Rent payable under this Lease if the proposed Alterations would materially increase the floor area of the structures on the Premises. The City Manager may also require Tenant to provide, at Tenant's expense, appropriate engineering and feasibility studies regarding the Balboa Pier Concession Lease — June 20, 2000 17 structural integrity of the Pier and the Premises. City consents to Alterations that are in substantial conformity with preliminary plans approved by City and attached as Exhibit C. (c) Quality of Work Performed. All work shall be performed in a good and workmanlike manner, shall substantially comply with the plans and specifications submitted to City and shall comply with all applicable governmental permits and Laws in force at the time permits are issued. (d) Payment of Costs. Tenant shall pay all costs related to the construction of any Alterations by Tenant or its agents. Tenant shall keep the Premises free and clear of all mechanics' liens resulting from construction performed at the direction of Tenant. (e) Indemnification. Tenant shall Hold Harmless City and its officers and employees with respect to any Damage or Damages related to any work performed on the Premises by Tenant. City shall promptly provide Tenant with a copy of any claim filed by any third party with respect to work performed by Tenant. (f) Disposition of Alterations at Expiration or Lease Termination. Any Alterations made to the Premises shall remain on, and be surrendered with, the Premises on Expiration or Termination of this Lease (excluding Tenant's fixtures, equipment, furniture, movable decorations and the like). However, City may elect not less than thirty (30) days prior to Expiration or Termination of this Lease, to require Tenant to remove any Alterations that Tenant has made to the Premises, except those Alterations existing as of the date of this Lease or approved by City. If City requires removal of Alterations, Tenant shall, at its cost, remove the Alterations and restore the Premises to its condition prior to installation of such Alterations, ordinary wear and tear excepted, before the last day of the Term, or within thirty (30) days after notice is given, whichever is later. Prior to Expiration or within fifteen (15) days after Termination of this Lease, Tenant may remove any movable partitions, machinery, equipment, furniture, and trade fixtures previously installed by Tenant, provided that Tenant repairs any damage to the Premises caused by removal. Balboa Pier Concession Lease — June 20, 2000 18 9. MAINTENANCE OF PREMISES 9.1 Maintenance and Repair by Tenant and City. Tenant agrees that it will keep the Premises in Good Condition. Tenant's Maintenance responsibilities include washing bird droppings and dirt off the Premises, including roof, windows and exterior walls as needed, but not less than once every ninety (90) days. Graffiti shall be removed or painted over by Tenant as soon as reasonably practicable. City may perform Maintenance or repairs in the event Tenant fails to commence required Maintenance or repairs within three (3) business days after receipt of notice to do so. The cost of any Maintenance or repairs by the City pursuant to this Subsection shall be payable as additional Rent. All furnishings, equipment, facilities, improvements, alterations, attachments and appurtenances not provided by City, but required for the Restaurant, including all kitchen equipment and interior furnishings, shall be maintained in Good Condition and repair by Tenant at its cost. Tenant also agrees to keep the southerly eighty (80) feet of the Balboa Pier, including all benches, free from rubbish, debris and garbage related to the operation of the Restaurant. The City may perform required cleaning and charge the costs to Tenant if the Tenant fails to perform within five (5) days after notice to do so and continue to Maintain the area as required by this Lease. 9.2 Maintenance and Repair of Pier. City agrees, at its expense, to Maintain the Pier in good repair. City shall repair, Maintain and replace Pier pilings and the under - structure of the Pier as necessary to ensure structural integrity. City shall have the right to resurface the Pier or conduct any other emergency maintenance and/or emergency repair at any time during the initial Term or any Option Term. City shall use its best efforts to schedule any Maintenance, repair or construction on or of the Pier or Premises during the period from November 1 through the end of February (Maintenance Period) when Tenant's Gross Sales are historically lower than the average monthly Gross Sales. City shall also use its best efforts to ensure that construction, repair or Maintenance of or on the Pier or Balboa Pier Concession Lease — June 20, 2000 19 Premises does not prevent public access to the Premises and that all such activity is conducted in a manner that minimizes the extent and duration of any impact on Tenant's customers. (a) Tenant's Option to Terminate. Tenant may terminate this Lease by giving City thirty (30) days written notice if City fails to repair or Maintain and replace Pier pilings within a reasonable time after notice from Tenant and Tenant is unable to generate a fair and reasonable profit from the Restaurant due to the condition of the Pier or Premises. (b) City's Ability to Close Pier. City shall not be liable for any loss or Damage suffered by Tenant and caused by the malfunction of any service, equipment or facility provided by City. City may close the Pier if the City Manager or City Council City determines that any condition exists which poses a significant threat to public health and safety. In such event, Tenant shall vacate the Premises and the provisions of this Lease regarding abatement of Rent (Subsection 12.2) and Tenant's right to terminate in the event of prolonged closure (Subsection 12.1) shall apply. (c) Entry by City. City and its Authorized Representatives may enter upon and inspect the Premises at any reasonable time for Maintenance or other purposes. Upon consultation with and assistance by City, Tenant shall install a Knox Box within three (3) months of the Effective Date of this Lease. In case of emergency, City or its Authorized Representatives may enter the Premises by the master key if Tenant is not present to open and permit an entry. During entry City and its Authorized Representatives shall exercise reasonable care relative to the Premises and to Tenant's property. Any entry to the Premises by City shall not be construed as a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof. (d) Additional Covenants of City Regarding Operation of the Pier and Maintenance Obligations. In addition to other provisions of this Lease: (1) Written Notice, Interference with Business Operations, and Additional Improvements. City shall, at the earliest time reasonably possible given the circumstances Balboa Pier Concession Lease — June 20, 2000 20 that may then exist, provide Tenant with prior written notice of its intent to: (i) perform any Maintenance, repair or remodeling of the Pier which may reasonably be expected to adversely affect, by interference with access, visibility, availability of utilities or otherwise, Tenant's business operations at the Premises or any portion; or (ii) except in the case of an emergency, enter upon the Premises for any of the purposes set forth in this Lease. City agrees not to construct any additional improvements on the Pier that relate to any commercial enterprise which might conflict or compete with Tenant's business operations on the Premises. (2) Due Diligence by City Regarding Repairs. Whenever City elects or is obligated to repair or restore the Premises or any portion of the Pier, City shall proceed, at City's cost and with due diligence to repair or rebuild the same, including any additions or improvements made by City or by Tenant with City's consent, in accordance with the same plan and design as existed immediately before such damage or destruction occurred and in accordance with all applicable Laws. City will use its best efforts to maintain sufficient access to the Premises during all repair periods. The materials used in said repair or reconstruction shall be as nearly like the original materials as may then be reasonably procured. 10. INDEMNITY AND EXCULPATION; INSURANCE 10.1 Exculpation of City. Except as otherwise expressly provided in this Lease, City shall not be liable to Tenant for any damage to Tenant or Tenant's property from any cause other than the negligent, intentional or willful acts of City or its Authorized Representatives. Except as otherwise expressly provided in this Lease, Tenant waives all claims against City for Damages arising for any reason other than the negligent, intentional or willful acts of City or its Authorized Representatives. City shall not be liable to Tenant for any Damage to the Premises, Tenant's property, Tenant's goodwill, or Tenant's business Balboa Pier Concession Lease — June 20, 2000 21 income, caused in whole or in part by acts of nature including, without limitation, waves, wind and ocean currents. 10.2 Hold -Harmless Clause. Tenant agrees to Hold Harmless the City, its officers and employees from any and all claims, liability, Toss, Damage, or expenses resulting from Tenant's occupation and use of the Premises, specifically including, without limitation, any claim, liability, loss, or Damage arising by reason of: (a) The death or injury of any Person caused or allegedly caused by the condition of the Premises or an act or omission of Tenant or an agent, contractor, employee, servant, sublessee or concessionaire of Tenant; (b) Any work performed on the Premises or materials furnished to the Premises at the request of Tenant or any agent or employee of Tenant, with the exception of Maintenance performed by City; and (c) Tenant's failure to perform any provision of this Lease or to comply with any requirement of Law or any requirement imposed on the Premises by any duly authorized governmental agency or political subdivision. Tenant's obligations pursuant to this Subsection shall not extend to any claim, Toss, liability, Damage, costs or fees that are proximately caused by the sole negligence, willful misconduct, or unlawful or fraudulent conduct on the part of the City or its officers or employees. 10.3 Insurance Limits. (a) Bodily Injury and Property Damage Insurance Thresholds. Tenant shall, at its own cost and expense, secure and maintain during the entire Term, and any Option Term of this Lease a broad form comprehensive coverage policy of public liability insurance issued by an insurance company reasonably acceptable to City. The policy shall name City, and its officers, employees and agents as additional insureds and protect, against loss or liability caused by or connected with Tenant's occupation and use of the Premises under this Lease in amounts not less than: combined single limit bodily injury and property Balboa Pier Concession Lease — June 20, 2000 22 damage, including products/completed operations liability and blanket contractual liability, of $1,000,000 per occurrence. (b) City's Ability to Increase Amount of Public Liability and Property Damage Insurance. Not more frequently than once every three (3) years, Tenant shall increase the insurance coverage as reasonably required by City if, in the opinion of the City or its employees or agents, the amount of public liability and property damage insurance coverage at that time is not reasonably adequate to fully protect the City. , 10.4 Fire Insurance on Building and Other Improvements. Tenant at its cost shall maintain on the Buildings and other improvements that are or become a part of the Premises a policy of standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements, to the extent of at least full replacement value, in a form acceptable to the City's Risk Manager. The insurance policy shall be issued in the names of City and Tenant, as their interests appear. The insurance policy shall provide that any proceeds shall be made payable to City and Tenant jointly. 10.5 Determination of Replacement Value. The "full replacement value" of the Buildings and other improvements to be insured under Subsection 10.4 shall be determined by the company issuing the insurance policy at the time the policy is initially obtained. Not more frequently than once each year, either Party shall have the right to notify the other Party that it elects to have the replacement value re -determined by an insurance company. The re -determination shall be made promptly and in accordance with the rules and practices of the Board of Fire Underwriters, or a like board recognized and generally accepted by the insurance company. Each Party shall be promptly notified of the re -determination by the company. The insurance policy shall be adjusted according to the re -determination. 10.6 Loss of Rent Insurance. Tenant at its cost shall maintain loss of rent insurance insuring that the Base Rent will be paid to City for a period up to six (6) months if the Premises are destroyed or rendered unusable or inaccessible for commercial purposes Balboa Pier Concession Lease — June 20, 2000 23 by a risk insured under a special form property coverage policy including vandalism and malicious mischief endorsements. 10.7 Workers' Compensation. Tenant shall comply with all of the provisions of the Workers' Compensation Insurance and Safety Acts of the State of California, the applicable provisions of Divisions 4 and 5 of the California Labor Code. 10.8 Waiver of Subrogation. The parties release each other, and their respective Authorized Representatives, from any claims for Damage to any Person or to the Premises and to the fixtures, personal property, and Alterations of either in or on the Premises that are caused by or result from risks insured against under any insurance policies carried by the parties and in force at the time of any Damage or required to be carried under this Lease. Tenant shall cause each insurance policy obtained by it to provide that the insurance company waives all rights of recovery by way of subrogation against the City in connection with any Damage covered by any policy of property insurance. Neither party shall be liable to the other for any Damage caused by fire or any of the risks insured against under any insurance policy required by this Lease. If any insurance policy cannot be obtained with a waiver of subrogation, or is obtainable only by the payment of an additional premium charge above that charged by the insurance company issuing policies without a waiver of subrogation, the Party undertaking to obtain the insurance shall notify the other Party of this fact. The other Party shall have a period of twenty (20) days after receiving the notice either to place the insurance with a company that is reasonably satisfactory to the other Party and that will carry the insurance with a waiver of subrogation, or to agree to pay the additional premium. The Party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance involved if the insurance cannot be obtained with a waiver of subrogation or the other Party refuses to pay the additional premium, 10.9 Other Insurance Matters. All the insurance required under this Lease shall: Balboa Pier Concession Lease — June 20, 2000 24 (a) Be issued by insurance companies authorized to do business in the State of California, acceptable to City; (b) Be issued as a primary policy; (c) Be noncontributing with any insurance that may be carried by City; and (d) Contain an endorsement requiring thirty (30) days written notice from the insurance company to both Parties before cancellation or material change in the coverage, scope or amount of the policy. Each policy, or a certificate of the policy, together with evidence of payment of premiums, shall be deposited with City, and on renewal of the policy not less than thirty (30) days before expiration of the term of the policy. Either Party may effect for its own account any insurance not required under this Lease. 10.10 Insurance Proceeds. If Tenant elects not to terminate this Lease, City shall promptly pay to Tenant all insurance proceeds, if any, payable to City for repair or replacement of Tenant's fixtures, equipment, display cases and other personal property that Tenant is obligated to maintain, repair or replace under this Lease in the event of any Damage to the Premises or property caused by fire or any other casualty. If, during the last year of the Term or any extension thereof, twenty percent (20%) or more of the Premises or the Pier is damaged or destroyed, or any damage which City or Tenant elects or is obligated under this Lease to repair will take more than ninety (90) days to complete, Tenant shall have the right to terminate this Lease as of the date of such damage or destruction by written notice to City, given within thirty (30) days after such damage or destruction and City may retain any and all proceeds of insurance paid to City. 11. DAMAGE OR DESTRUCTION OF PIER/PREMISES 11.1 Destruction of Premises. If the Premises are totally or partially destroyed, rendering the Premises or any portion thereof totally or partially inaccessible or unusable, Balboa Pier Concession Lease — June 20, 2000 25 Tenant shall restore the Premises to substantially the same condition as immediately prior to such destruction (including all trade fixtures, personal property, improvements and Alterations as are installed by Tenant, which shall be replaced by Tenant at its expense). Tenant shall not be responsible for restoring any portion of the Pier, including, but not limited to, the portion of the Pier on which the Premises are located or the Accessory Area. Tenant can elect to terminate this Lease by giving notice of such election to City within sixty (60) days after the date of the occurrence of any casualty if the cost of the restoration exceeds the amount of any available insurance proceeds, if the damage has been caused by an uninsured casualty or event, or if Tenant reasonably estimates that repairs of the Premises will take more than six (6) months. Upon such termination, insurance proceeds applicable to reconstruction of the Building(s) (excluding Tenant's personal property therein) shall be paid to City and Tenant shall have no further liability or obligations under this Lease. 11.2 Replacement of Tenant's Property. In the event of the damage or destruction of improvements located on the Premises not giving rise to Tenant's option to termination of this Lease, Tenant shall, at its own expense, replace and repair all Tenant's trade fixtures, equipment, machinery, furnishings, furniture and inventory as soon as reasonably possible to permit the prompt continuation of Tenant's business at the Premises. 11.3 Destruction of Pier. In the event that all or a portion of the Pier or access to the Pier is damaged, deteriorates or destroyed by fire or any other casualty the Premises or a material portion becomes inaccessible or commercially unusable, and the Damage or destruction cannot reasonably be repaired within twelve (12) months after the date of the casualty, City shall have the right to either: (a) Terminate this Lease by giving to Tenant written notice (which notice shall be given, if at all, within thirty (30) days following the date of the casualty), in which case this Lease shall be terminated thirty (30) days following the date of the casualty; or Balboa Pier Concession Lease — June 20, 2000 26 (b) Give Tenant written notice of City's intention to repair such damage as soon as reasonably possible at City's expense, in which event this Lease shall continue in full force and effect; however, Rent shall be abated in accordance with the procedures set forth in Section 12. Tenant may terminate this Lease by giving City written notice at any time prior to the commencement of repairs if City agrees to repair Pier pursuant to this Section and fails to commence repairs within one hundred twenty (120) days after giving Tenant written notice of its intention to repair. In such event, this Lease shall terminate as of the date of notice from Tenant to City, and City shall have no liability under this Lease. 12. ABATEMENT OF RENT 12.1 General Rule. In the event of Damage or destruction of the Premises or Damage to the Pier that impacts the Premises and this Lease is not terminated, Tenant shall continue to utilize the Premises for the operation of its business to the extent it may be practicable and commercially reasonable. Base Rent and Percentage Rent shall abate in proportion to the area of the Premises that is rendered unusable. The abatement of Rent shall commence on the date that use of the Premises is impacted and continue until the completion of those repairs necessary to restore full use of the Premises and Tenant's re -opening of the Premises. Tenant's obligation to pay Taxes pursuant to this Lease shall not be abated or reduced. Rent shall not abate if the Damage or destruction to the Premises is the result of the negligence or willful conduct of Tenant or its employees, officers or agents. Tenant's right to abatement of Rent is contingent on payment of insurance proceeds to City equal to the amount of Base Rent pursuant to coverage required by Subsection 10.6. Following the expiration of such coverage, Tenant's right to rent abatement shall continue until Tenant reopens business operations at the Premises. 12.2 Abatement/Maintenance. Tenant shall not be entitled to any abatement of Rent for Maintenance that occurs during the Maintenance Period. Tenant shall be entitled to a Rent abatement whenever the City performs regularly scheduled Pier Maintenance Balboa Pier Concession Lease — June 20, 2000 27 that adversely impacts access to or operation of the Premises outside of the Maintenance Period. The Rent abatement shall be in proportion to the reduction in usable area of the Premises or access to the Premises whichever is greater. The Rent abatement shall be applicable for each day or portion of a day that Maintenance is performed outside of the Maintenance Period. 13. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT, SUBLETTING AND ENCUMBERING 13.1 Prohibition of Assignment. The Parties acknowledge that City is entering into this Lease in reliance upon the experience and abilities of Tenant and its principals. Consequently, Tenant shall not voluntarily assign or encumber its interest in this Lease or in the Premises, or sublease substantially all or any part of the Premises, or allow any other person or entity (except Tenant's Authorized Representatives) to occupy or use all or any part of the Premises without the prior written consent of City, which shall not be unreasonably withheld. City's consent to any assignment, subletting or other transfer is subject to Tenant providing City with evidence reasonably satisfactory to City that the proposed transferee has financial strength and restaurant or food service experience comparable to Tenant and the use of the Premises by the proposed transferee is consistent with the terms of this Lease. Except as otherwise expressly provided herein, any dissolution, merger, consolidation, reorganization of Tenant, or the sale or other transfer resulting in a transfer of a controlling percentage of the capital stock of Tenant (other than a transfer by will, devise, bequest, intestate succession, a transfer to or between the family members of Doug Cavanaugh or Ralph Kosmides, or a transfer to or between one or more trusts for the benefit of Doug Cavanaugh, Ralph Kosmides and/or their family members), shall be deemed a voluntary assignment; provided, however, that the sale or transfer of a controlling percentage of the capital stock of Tenant pursuant to a public offering(s) of equity or debt instruments issued by Tenant, or other transfers of Balboa Pier Concession Lease — June 20, 2000 28 publicly traded capital stock or debt instruments shall not constitute a voluntary assignment and shall not require City's consent or approval. The phrase "controlling percentage" means the ownership of, or the right to vote, stock possession of at least fifty percent (50%) of the total combined voting power of all classes of Tenant's capital stock issued, outstanding, and entitled to vote for the election of directors, except for ownership of publicly traded shares, warrants or similar equity interests in Tenant traded on a national exchange or over-the-counter markets. 13.2 Exceptions. Notwithstanding the foregoing paragraphs or anything to the contrary contained herein, City's consent shall not be required for an assignment or subletting to an Affiliate, Subsidiary, Franchisee or Successor of Tenant (for purposes hereof, an "Affiliate", a "Subsidiary", a "Franchisee" and a "Successor" of Tenant are defined as follows: (a) an "Affiliate" is any corporation or other entity which directly or indirectly controls or is controlled or is under common control with Tenant (for this purpose, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation or other entity, whether through the ownership of voting securities or by contract or otherwise); (b) a "Subsidiary" shall mean any corporation or other entity not Tess than twenty- five percent (25%) of whose outstanding stock shall, at the time, be owned directly or indirectly by Tenant and which is at least as creditworthy as Tenant; and (c) a "Successor" shall mean a corporation or other entity in which or with which Tenant is merged or consolidated, in accordance with applicable statutory provisions for merger or consolidation of corporations or a corporation or other entity acquiring a substantial portion of the property and assets of Tenant. (d) A "Franchisee" shall mean a franchisee who shall operate the Premises pursuant to the business purposes set forth in Section 5.1, who shall meet all of Tenant's franchising Balboa Pier Concession Lease — June 20, 2000 29 program requirements, and who shall have executed Tenant's standard franchise agreement. 13.3 Continuing Effect. City's consent to any assignment, encumbrance, or sublease shall not relieve Tenant from its obligations or liabilities under this Lease nor act as a waiver of the requirement that such consent be obtained to any subsequent assignment, encumbrance or sublease. 14. DEFAULT 14.1 Default by Tenant. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Tenant: (a) The vacating or abandonment of the Premises by Tenant. (b) The failure by Tenant two (2) times in any six (6) month period to make any payment of Rent or any other payment required by this Lease, as and when due, when such failure shall continue for a period of ten (10) days after written notice of default from City to Tenant. (c) Except as specified in Subsection 14.1(b), the failure of Tenant to observe or perform any of the material covenants, conditions or provisions of this Lease to be observed or performed by Tenant where such failure shall continue for a period of thirty (30) days after written notice thereof from City to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. (d) The making by Tenant of any general arrangement or assignment for the benefit of creditors. Balboa Pier Concession Lease — June 20, 2000 30 (e) Tenant becomes a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days). (f) The appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such appointment is not discharged within sixty (60) days. (g) The attachment, execution or the judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged within sixty (60) days. 14.2 Remedies. (a) Cumulative Nature of Remedies. If any default by Tenant shall continue without cure and after notice as required by this Lease, City shall have the remedies described in this Subsection in addition to all other rights and remedies provided by law or equity, to which City may resort cumulatively or in the alternative. (1) Reentry without Termination. City may reenter the Premises, and, without terminating this Lease, re -let all or a portion of the Premises. City may execute any leases made under this provision in City's name and shall be entitled to all rents from the use, operation, or occupancy of the Premises. Tenant shall nevertheless pay to City on the dates specified in this Lease the equivalent of all sums required of Tenant under this Lease, plus City's expenses in conjunction with re -letting, less the proceeds of any re - letting or attornment. No act by or on behalf of City under this provision shall constitute a Termination of this Lease unless City gives Tenant specific notice of Termination. (2) Termination. City may terminate this Lease by giving Tenant notice of Termination. In the event City terminates this Lease, City may recover possession of the Premises (which Tenant shall surrender and vacate upon demand) and remove all Persons and property. City shall be entitled to recover the following as damages: Balboa Pier Concession Lease — June 20, 2000 31 (A) The value of any unpaid Rent or other charges that are unpaid at the time of Termination; (B) The value of the Rent and other charges that would have accrued after Termination less the amount of Rent and charges the City received or could have received through the exercise of reasonable diligence as of the date of the award; (C) Any other amount necessary to reasonably compensate City for the detriment proximately caused by Tenant's failure to perform its obligations under this Lease; and (D) At City's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time -to -time by applicable California law. City shall be entitled to interest at the rate of ten percent (10%) per annum on all Rent and other charges from the date due or the date they would have accrued. City shall also be entitled to an award of the costs and expenses incurred by City in maintaining or preserving the Premises after default, preparing the Premises for re -letting, or repairing any damage caused by the act or omission of Tenant. (3) Use of Tenant's Personal Property. City may use Tenant's personal property and trade fixtures located on the Premises or any of such property and fixtures without compensation or liability to tenant for use or damage. In the alternative City may store the property and fixtures at the cost of Tenant. City shall not operate the Restaurant in any manner tending to indicate that the Restaurant is affiliated with, part of or operated in conjunction with Tenant's business. (c) City's Right to Cure Tenant's Default. Upon continuance of any material default beyond applicable notice and cure periods, City may, but is not obligated to, cure the default at Tenant's cost. If City pays any money or performs any act required of, but not paid or performed by, Tenant after notice, the payment and/or the reasonable cost of performance shall be due as additional Rent not later than five (5) days after service of a written demand accompanied by supporting documentation. No such payment or act shall Balboa Pier Concession Lease — June 20, 2000 32 constitute a waiver of default or of any remedy for default or render City liable for any loss or damage resulting from performance. (d) Waiver of Rights. Tenant waives any right of redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 or 1179, or under any other present or future law, in the event Tenant is evicted or City takes possession of the Premises by reason of any default by Tenant. Balboa Pier Concession Lease — June 20, 2000 33 15. CONDEMNATION 15.1 Eminent Domain Proceedings. Tenant shall have the right to terminate this Lease as of the date a public agency with lawful authority to condemn obtains possession or title to ten percent (10%) or more of the floor area within the Premises, the condemnation materially affects the conduct of Tenant's business in the Premises, or the Premises will no longer be suitable for the conduct of Tenant's business. In the event of Termination pursuant to this Subsection, Base Rent shall be prorated to the date of Termination, any unearned Rent shall be refunded to Tenant and Tenant shall have no further obligations under this Lease. Tenant shall not grant a right of entry to any condemnor without the written consent of City. 15.2 Proportionate Termination of Lease. Should Tenant not elect to terminate this Lease or should any taking not be sufficient to permit termination, this Lease shall terminate as to the portion of the Premises taken upon the date which possession of said portion is taken, but this Lease shall continue in force and effect as to the remainder of the Premises. Tenant shall, in the event of a taking of any portion of the Premises, be entitled to a reduction in the Base Rent in proportion to the percentage reduction in the area of the Premises attributable to the taking. 15.3 Allocation of Award. In the event that an award is made for an entire or partial taking or for damage to the Premises or any interest therein in any action in direct or inverse condemnation or in the event of a taking under the power of eminent domain, the parties hereto agree that their respective rights to the award or compensation paid shall be as follows: (a) City shall be entitled to that Portion of the award received for the taking of the real property within the Premises, including all buildings and other improvements to which City is entitled on Expiration or Termination of this Lease, and for severance damages. (b) Tenant shall be entitled to any award that may be made for the taking of or injury to Tenant's business and profits, including any amount attributable to Tenant's Balboa Pier Concession Lease — June 20, 2000 34 personal property, fixtures, installations, or improvements in or on the Premises, Tenant's relocation expenses, but excluding any "bonus value" attributable to this Lease. (c) Any interest payable on the total award shall be divided between City and Tenant in the same ratio as are the awards granted to them pursuant to the other provisions of this Section. 16. SUBJECT TO STATE LANDS COMMISSION GRANT The Premises are located on property that is the subject of a grant from the State of California to the City that is administered by the State Lands Commission. Tenant shall not take any action that would cause the City to be in violation of any provisions of that grant. If the State Lands Commission terminates this grant, this Lease terminates as a result and the Parties shall be released from all liabilities and obligations under this Lease 17. WASTE OR NUISANCE Tenant shall not commit or permit the commission of any waste on the Premises. Tenant shall not maintain, commit, or permit any nuisance as defined in Section 3479 of the California Civil Code on the Premises. Tenant shall not use or permit the use of the Premises for any unlawful purpose. 18. NO CONFLICTS OF USE, HAZARDOUS MATERIALS. The Parties acknowledge that Tenant has been in possession of the Premises pursuant to the provisions of a Lease dated March 8, 1982. City represents and warrants that, to the best of City's knowledge, (i) Tenant's continued use of the Premises does not conflict with applicable Laws, and City knows of no reason why Tenant would be unable to retain all required permits, licenses and approvals from the appropriate governmental authorities; (ii) the Pier is not in violation of any environmental laws, rules or regulations and Tenant's contemplated uses will not cause any such violation; and (iii) the Pier is free Balboa Pier Concession Lease — June 20, 2000 35 of any and all Hazardous Materials as of the date of this Lease.. In the event that the presence of any Hazardous Material not caused by Tenant is detected on the Pier (i) prior to the Effective Date, or (ii) at any time during the Term of this Lease and any Option Term all remedial work shall be performed by City at City's expense. Tenant's obligation to open shall be delayed until the remedial work is completed if the remedial work is performed prior to Tenant opening for business. Tenant's obligation to pay Rent shall be abated in direct proportion to the extent Tenant is unable to conduct its business upon the Premises as a result of any remedial work that is performed subsequent to Tenant opening for business. Tenant shall have the right (but not the obligation) to terminate this Lease, upon thirty (30) days advance written notice to City in the event that Hazardous Materials are detected on the Pier and the presence or the remediation materially affects Tenant's ability to conduct its business in the Premises. City and Tenant shall indemnify, defend and hold harmless Tenant, the other (and their directors, officers, employees and agents - the "Indemnitees") from and against any and all liability, including all costs of defense and the cost of any required or necessary repair, disposal or remediation, arising out of the use, generation, transportation, storage, release or disposal of Hazardous Materials on or about the Pier and/or the Premises. "Hazardous Materials" shall mean any oil, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminated or polluting materials, substances or wastes, including, without limitation, any "hazardous substances", "hazardous wastes", "hazardous materials" or "toxic substances" under applicable federal, state and local laws, ordinances and regulations. 19. CITY'S DEFAULTS/TENANT'S REMEDIES. City shall be in default if it fails to perform, or commence performance if the obligation requires more than ten (10) days to complete, any material obligation within ten (10) days after receipt of written notice by Tenant to City specifying the nature of such Balboa Pier Concession Lease — June 20, 2000 36 default. City shall also be in default if it commences performance within ten (10) days but fails to diligently complete performance. In the event of City's default, Tenant may: (a) Upon five (5) days notice to City cure any such default by City and City shall reimburse Tenant the amount of all costs and expenses incurred by Tenant in curing the default, together with interest and expenses at the maximum rate then allowed by law; (b) Terminate this Lease if City's default materially interferes with Tenant's use of the Premises for their intended purpose and City fails to cure such default within ten (10) days after a second demand by Tenant in which case Tenant shall have no further or continuing obligations; or (c) Commence an action for specific performance and recover costs and expense, including reasonable attorney fees if Tenant is the prevailing party. 20. NOTICES Any notice, demand, request, consent, approval or communication that either Party desires or is required to give shall be in writing and shall be deemed given three (3) days after deposit into the United States registered mail, postage prepaid, by registered or certified mail, return receipt requested. Unless notice of a different address has been given in accordance with this Section, all notices shall be addressed as follows: If to City, to: If to Tenant, to: Balboa Pier Concession Lease — June 20, 2000 CITY OF NEWPORT BEACH Attention: City Manager 3300 Newport Boulevard Newport Beach, CA 92663 RUBY'S DINER, INC. 110 Newport Center Drive, Suite 110 Newport Beach, CA 92660 Attention: Douglas Cavanaugh and Ralph Kosmides 37 21. SURRENDER OF PREMISES At the Expiration or earlier Termination of this Lease, Tenant shall surrender to City the possession of the Premises. Tenant shall leave the surrendered Premises, required personal property and fixtures in good and broom -clean condition, reasonable wear and tear excepted. All property that Tenant is not required to surrender, but that Tenant does abandon shall, at City's election, become City's property at Expiration or Termination. 22. WAIVER The waiver by City or Tenant of any breach of this Lease by the other shall not be deemed to be a waiver of any term, covenant, or condition or any subsequent breach. The acceptance of Rent by City shall not be deemed a waiver of any breach by Tenant other than the failure to pay the particular rent accepted. 23. PARTIAL INVALIDITY If any term or Provision of this Lease is declared invalid or unenforceable, the remainder of this Lease shall not be affected. 24. GOVERNING LAW This Lease shall be governed by the laws of the State of California. Neither City's execution of this Lease nor any consent or approval given by City in its capacity as landlord shall affect City's powers and duties as a governmental body. Any consent or approval Tenant is required to obtain from City pursuant to this Lease is in addition to any permits or approvals Tenant is required to obtain pursuant to law or ordinance. However, City shall attempt to coordinate its procedures for giving contractual and governmental approvals so that Tenant's requests and applications are not unreasonably denied or delayed. Balboa Pier Concession Lease — June 20, 2000 38 25. ENTIRE AGREEMENT; MODIFICATION This Lease contains the entire agreement between the Parties. No verbal agreement or implied covenant shall be held to vary the provisions of this Lease. Each Party has relied on its own inspection of the Premises and examination of this Lease, the counsel of its own advisors, and the warranties, representations, and covenants in this Lease. The failure or refusal of either Party to inspect the Premises, to read this Lease or other documents, or to obtain legal or other advice relevant to this transaction constitutes a waiver of any objection, contention, or claim that might have been based on such reading, inspection, or advice. No provision of this Lease may be amended or varied except by an agreement in writing signed by the Parties or their respective Successors. 26. TIME OF ESSENCE Time is of the essence with respect to the performance of every Provision of this Lease in which time of performance is a factor. 27. SUCCESSORS Subject to the Provisions of this Lease on assignment and subletting, each and all of the covenants and conditions of this Lease shall be binding on and shall inure to the benefit of the heirs, successors, executors, administrators, assigns, and personal representatives of the respective parties. 28. BROKERS Each party warrants to and for the benefit of the other than it has had no dealings with any real estate broker or other agent (attorneys excepted) in connection with the negotiation or making of this Lease. Balboa Pier Concession Lease — June 20, 2000 39 29. TABLE OF CONTENTS; HEADINGS The table of contents of this Lease and the captions of the various sections of this Lease are for convenience and ease of reference only and do not define, limit, augment, or describe the scope, content, or intent of this Lease. 30. GENDER; NUMBER The neuter gender includes the feminine and masculine, the masculine includes the feminine and neuter, and the feminine includes the neuter, and each includes corporation, partnership, or other legal entity whenever the context requires. The singular number includes the plural whenever the context so requires. 31. EXHIBITS All exhibits to which reference is made in this Lease are incorporated by reference. Any reference to "this Lease" includes matters incorporated by reference. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first written above. ATTEST: CITY OF NEWPORT BEACH ("City"), a Municipal Corporation By: John LaVonne Harkless City Clerk Balboa Pier Concession Lease — June 20, 2000 yes, or of Newport Beach 40 RUBY'S RESTAURANT GROUP A California Corporation ("Tenant") By: APP •VED AS TO FORM: obert Burnham City Attorney Balboa Pier Concession Lease — June 20, 2000 Douglas Cavanaug%President 41 Exhibit A Depiction of Premises • Balboa Pier Concession Lease — June 20, 2000 Restaurant Premises 42 Exhibit B Vicinity Map .) t « / G �: %9 9/ , , .//. / e ie § ^ , & f -,.....„� 2 Balboa Pier Balboa Pier Concession Lease — June 20, 2000 » , ` g -In- : / 43 Exhibit C Building Improvements funded via Rent Credit (to be added) Balboa Pier Concession Lease — June 20, 2000 44 CITY OF NEWPORT BEACH March 7, 1997 Doug Cavanaugh Ruby's Diner, Inc. 110 Newport Center Drive, Suite 110 Newport Beach, CA 92660 Dear Doug: The current City Concession Agreement with Ruby's Diner, Inc. to authorize a concession operation on Balboa Pier expires on March 31, 1997. The City and Ruby's Diner are currently in good faith negotiations to execute a new agreement. These negotiations may extend past the current Agreement termination date. This letter authorizes Ruby's Diner to continue to operate the concession and occupy the Premises on a month to month tenancy, subject to all the terms and conditions of the current agreement. This month to month tenancy may be terminated by either party with thirty (30) days written notice. Sincerely, P Peggy Duc Assistant to the City Manager Approved by Ruby's Diner, Inc. 3-7-91 Doug Cavanaugh Date City Hall • 3300 Newport Boulevard • Newport Beach, California 92663-3884 AMENDMENT TO CONCESSION AGREEMENT FOR BALBOA PIER THIS AMENDMENT TO CONCESSION AGREEMENT, made and entered • into this / �t ay of , 1984, by and between the CITY OF NEWPORT BEACH, a municipal corporation, hereinafter referred to as "CITY", and Douglas S. Cavanaugh, hereinafter referred to as "Concessionaire." W ITNESSET H: WHEREAS, the CITY and Concessionaire entered into a Concession Agreement, dated March 8, 1982, whereby Concessionaire was given certain rights to operate a restaurant at the end of Balboa Pier; and WHEREAS, the Concession Agreement has a term of ten (10) years, commencing on March 8, 1982; and WHEREAS, Concessionaire has requested an amendment to this Agreement to extend such term for a period of five (5) years; and WHEREAS, Concessionaire, as of the date of this Amendment, has fully complied with the terms and conditions of the Concession Agreement, and it is appropriate to amend that Agreement to extend the term so long as Concessionaire agrees to comply with terms and conditions of the Agreement and any subsequent amendments to the Agreement. NOW, THEREFORE, the parties agree as follows: 1. Paragraph 2(a) of the Concession Agreement, dated March 8, 1982, shall be amended to read as follows: "(a) This Agreement shall be in effect for a period of fifteen (15) years from the date of execution unless sooner terminated as hereinafter provided. At the expiration of this term, the Concessionaire shall have first right of refusual in continuing to operate this Concession without the necessity of the operation going out to bid. 2. The purpose of this Amendment is to extend the termination date of the Concession Agreement, dated March 8, 1982, from March 8, 1992 to March 8, 1997. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. CITY OF NEWPORT BEACH, a Municipal Corporation By: By: ATTEST: City Clerk APPROVED AS TO FORM: ty Attorney 4‘,/Le— Mayor CITY DOUGLCA!ANA ONCESSIONAIRE AMENDMENT TO CONCESSION AGREEMENT BALBOA PIER THIS AMENDMENT to Concession Agreement, made and entered into this /i day of /�(�. , 1983, by and between THE CITY OF NEWPORT BEACH, a Municipal Corporation, hereinafter referred to as "City", and DOUGLAS CAVANAUGH, hereinafter referred to as "Concessionaire", witnesseth: WHEREAS, City and Concessionaire entered into a Concession Agreement dated March 8, 1982, whereby Conces- sionaire was given certain rights to operate a restaurant at the end of Balboa Pier; and WHEREAS, the Concession Agreement grants to the Concessionaire the use of an existing building; and WHEREAS, the Concession Agreement obligates City to provide garbage and refuse service to the Balboa Pier; and WHEREAS, Concessionaire has requested an amendment of the Concession Agreement to allow Concessionaire to expand the existing building for the purpose of adding storage space; and WHEREAS, the volume of garbage and refuse generated by the Concessionaire has exceeded the amounts anticipated; and WHEREAS, Concessionaire, as of the date of this amendment, has fully complied with the terms and conditions of the Concession Agreement and it is appropriate to amend this agreement to allow Concessionaire to expand the existing building and to obligate Concessionaire to provide an enclosure for refuse storage. NOW, THEREFORE, the parties agree as follows: 1. Section 7 (c) of the Concession Agreement dated March 8, 1982, shall be amended to read as follows: (c) City will provide garbage and refuse pick-up service on the Balboa Pier. Concessionaire shall provide or build an enclosure, for the storage of refuse, with a volume of six (6) cubic yards or more and with a design and a location acceptable to the City Manager. 2. Section 9 (a) shall be amended to read as.follows: (a) It is mutually understood that the existing concession building on the Balboa Pier has been carefully examined by Concessionaire prior to the time his proposal was submittedto the City. It is further understood that City is not responsible for having the exterior or interior of said building finished or remodeled. Concessionaire agrees to finish or remodel the interior of the building and install all cabinets, fixtures, and equipment and maintain the same during the term hereof and connect all utilities necessary for Concessionaire's operations hereunder. Concessionaire shall pay all costs of doing the work hereunder. Concessionaire may expand the existing building upon submitting such plans and drawings as may be required by, and upon receiving the approval of, the City Council. All work on the buildings by Concessionaire shall be done in accordance with plans and specifications approved by the Building Department, and pursuant to a building permit issued bypCity. Only first-class materials shall be used and all work must be performed and completed in a good and workmanlike manner by duly licensed contractor(s). All cabinets and fixtures shall be of first-class materials. The type, style, materials and workmanshipof the cabinets and fixtures shall be subject to the approval of City, and, if any are disapproved, they shall be reconstructed or replaced as necessary to obtain said approval. Executed by the parties hereto on on the day and year first above written. ATTEST: City Clerk APPROVED AS TO FORM - 2 CITY Y CONCESSIONAIRE ougavanaug After recording, please return to BANK OF NEWPORT 530 32nd St. Newport Beach CA 92663 Attention of Stephen Sto&sdill FOR RECORDER'S USE ONLY (Seller or Lessor) into a contract with Rubyts, a partnership, dba of Ralph Kosmides and Douglas S. Cavanaugh (Purchaser or Lessee) coveringn all equipment and fixtures (not attached to, or made a part of, the building) LANDLORD'S WAIVER Whereas, Bank of Newport has entered now (to be) installed or kept at.#.1..Balb©...I?ier...Balboa,...Cali ornia..92661 (Fullocal addrei of Purchaser or Lessee) The undersigned, landlord -of the said premises, in consideration of the said contract and the deliv- ery of the said chattel to the said purchaser or lessee, by these presents does waive and relinquish unto the said seller or lessor and assigns, all rights of levy for rent and all claims and demands of every kind against the said chattel to be or now installed, under the said contract, this said waiver to continue until full compliance by said purchaser or lessee with the terms and conditions of said contract, it being agreed that as between the undersigned landlord and said seller or lessor of said chattel, said chattel shall be and remain personal property notwithstanding the fact that it is affixed to the realty.and that it shall at all times prior to the complete fulfillment of said contract be freely removable by said seller or lessor. IN WITNESS WHEREOF, set my hand and seal this 6th day of D..ceznbex , A.D., 19&.3 Address CITY 0,tOREA til..Balb.oa..P.i.er -CD_ 1, 1 Landlord Balboa CA 92661 CITY MANAGER STATE OF CALIFORNIA County of On DEC 0 6 jgAi. before me, the undersigned, a Notary Public in and for said state, personally appeared Pp h L LcAYMN (r r-r MaryAF: rI, ( '— 9F Acw2--''rr �o�K known to me to be the person whose name subscribed to the within and -foregoing instrument and acknowledged to me that 1,-4 executed the same. Witness my hand and official seal /,�tn(i C-signature } ss. L Title OFFICIAL SEAL WILL!AM E BROWN NCTNRY PUBLIC - CALIFORNIA PRINCIPAL OFFICE IN ORANGE CIUNTY My Commission Exp. Aug.10,1984 Notary stamp above J AMENDMENT TO CONCESSION AGREEMENT BALBOA PIER THIS AMENDMENT to Concession Agreement, made and entered into this eday of 1983, by and between THE CITY OF NEWPORT BEACH, a Municipal Corporation, hereinafter referred to as "City", and DOUGLAS CAVANAUGH, hereinafter referred to as "Concessionaire", witnesseth: WHEREAS, City and Concessionaire entered into a Concession Agreement dated March 8, 1982, whereby Concessionaire was given certain rights to operate a restaurant at the end of Balboa Pier; and WHEREAS, the Concession Agreement prohibits Concessionaire from seeking to obtain a license to sell alcoholic beverages on the Balboa Pier; and WHEREAS, Concessionaire has requested an amendment of this agreement to allow Concessionaire to seek to obtain an on - sale beer and wine liquor license; and WHEREAS, Concessionaire, as of the date of this amendment, has fully complied with the terms and conditions of the Concession Agreement, and it is appropriate to amend that agreement to allow Concessionaire to obtain an on -sale beer and wine liquor license, so long as Concessionaire agrees to comply with the terms and conditions of this amendment. NOW, THEREFORE, the parties agree as follows: 1. Paragraph 1 (b) of the Concession Agreement dated March 8, 1982, shall be amended to read as follows: (b) Concessionaire shall have the right to seek a liquor license from the Alcoholic Beverage Control Board granting him the right to sell beer and wine on premises. In the event that Concessionaire obtains such a license, Concessionaire shall be entitled to sell beer and wine within the confines of the restaurant currently operated by Concessionaire at the end of the - 1 - Balboa Pier. Concessionaire shall comply with all of the rules and regulations of the Alcoholic Beverage Control Board and comply with all of the terms and conditions of any license granted by that Board. Concessionaire shall take all steps necessary to ensure that no alcoholic beverages leave the premises or are dispensed through any take-out window. Concessionaire shall strictly supervise all sale of beer and wine to ensure that there is no excessive consumption of alcohol on premises. Concessionaire understands and agrees that City will review the business practices of Concessionaire with respect to the sale of alcohol, the review to occur within sixty (60) days from the date on which such sale commences, and thereafter will continually monitor any sale of alcoholic beverages by Concessionaire, pursuant to license, to determine if there is any increase in alcohol -related incidents in and around the Balboa Pier which either result from, or appear to result from, the sale of alcoholic beverages by Concessionaire. In the event the City determines that there is evidence an increase in alcohol -related incidents in and around the Balboa Pier, that result from, or appear to result from, the sale of alcoholic beverages by Concessionaire, the City shall give written notice to Concessionaire of its intention to amend the terms of the Concession Agreement to restore the prohibition against the sale of alcoholic beverages, and within ten (10) days from the date that notice Concessionaire shall cease the sale of alcoholic beverages. At the conclusion of the ten (10) day period this lease shall be deemed amended such that the sale of alcoholic beverages by Concessionaire is prohibited. Concessionaire understands and agrees that the City is empowered, pursuant this agreement, to prohibit Concessionaire from selling or dispensing alcoholic beverages, notwithstanding the fact that Concessionaire may have a license or permit issued by the Alcoholic Beverage Control Board which pemits the sale of beer to of and wine. Concessionaire also understands and agrees that he acquires no rights to receive compensation from the City, with regard to any expenses incurred in obtaining a liquor license, should the City determine to prohibit the sale of alcoholic beverages by further amendment of this ageement. Concessionaire further stipulates that there has been an increase in alcohol - related incidents in and around the Balboa Pier in recent months, which have prompted the City to take, or consider taking, action necessary to reduce those incidents, and that there is a substantial risk that, should these incidents continue, this agreement will be amended to preclude the sale of alcoholic beverages by Concessionaire. Finally, Concessionaire stipulates and agrees that this lease may be unilaterally amended by City to prohibit the sale of alcohol as provided in this amendment, without a hearing or opportunity to present evidence, and Concessionaire expressly waives and gives up the right to protest or challenge such amendment and the right to any notice of amendment other than that provided herein. Executed by the parties hereto on the day and year first above written. CITY ATTEST: APP OVED AS TO F City Attorney Mayor CONCESSIONAIRE Doug Cava augh AMENDMENT TO AGREEMENT This is an amendment to that certain Agreement between Douglas Cavanaugh, hereinafter called "Concessionaire" and the City of Newport Beach, hereinafter called "City." WHEREAS, on March 8, 1982, the City Council approved a Balboa Pier Concession Agreement; and WHEREAS, pursuant to that Agreement, Concessionaire was permitted to block the southerly 80 ft. of the pier during the construction phase of the project for a maximum period of 75 days from the Agreement date; and WHEREAS, pursuant to some construction problems, Concessionaire desires additional time for the permitted closure. NOW, THEREFORE, the City Council of the city of Newport Beach does hereby amend the referred to contract as follows: 1. Concessionaire may block the southerly 80 ft. during the construction phase of the project which is now extended to July 1, 1982. 2. Any additional extension is subject to written notice to the City and approval by the City Council. Attest: Date: Date: APPROVED AS TO FORM 7))) City Attorney Date: City of Newport Beach , City Clerk Conce `sionaire Mayor — 01302 Co CONCESSION AGREEMENT BALBOA PIER This agreement, made and entered into this 8th day of March , 1982, between the CITY OF NEWPORT BEACH, a municipal corporation, hereinafter referred to as "City," and Douglas Cavanaugh to as "Concessionaire" WITNESSETH , hereinafter referred WHEREAS, the City is the owner and is in possession and control of a certain pier known as Balboa Pier, located in the City of Newport Beach, which extends into and over the water of the Pacific Ocean, at the southerly extension of Main Street, which pier is used by the general public for the purpose of fishing and other recreation; and WHEREAS, it is the opinion of the City Council that it is advisable that the operation and the maintenance of the concession on said pier be continued for the use and convenience of the public and all persons using the pier for fishing and recreational purposes; and WHEREAS, Concessionaire has made a proposal to City to operate and maintain the concession on the Balboa Pier; and WHEREAS, the proposed arrangement is mutually agreeable to City and the Concessionaire, NOW, THEREFORE, in consideration of the payments hereinafter specified and the faithful performance of the other covenants of this agreement by Concessionaire, City hereby grants to Concessionaire a concession, privilege and right to operate lunch stands, bait and tackle concessions on said pier subject to the following terms, covenants and conditions: EXHIBITa 1. Concession: (a) City hereby grants to Concessionaire the exclusive right, privilege and concession to conduct lunch stands, bait and fishing tackle concessions on the Balboa Pier for the vending of light foods and sandwiches, soft drinks, coffee, ice cream or ice cream products, cigars, cigarettes and tobaccos, candies, chewing gum, suntan lotions, film, sunglasses, and other items of fishing tackle, lines, hooks, lure and weights. The sale of said items shall be subject to the prior written approval of the City Manager. Concessionaire agrees to provide all necessary fixtures, goods, merchandise, labor and equipment required for the vending of the above items or any other items permitted to be sold. (b) The consumption of alcoholic beverages on the pier is prohibited. Concessionaire shall not seek a license to sell alcoholic beverages on the pier. (c) City reserves the right to prohibit the use, display, sale or rental of any machine, item or article which it deems objectionable or beyond the scope of merchandise deemed necessary by City for proper service to the public. This includes but is not limited to the right to restrict or prohibit vending machines of all kinds and machines producing music or any other noise or sound. Prices shall be fixed by Concessionaire, but must not be in excess of prevailing prices in the City of Newport Beach for similar products, and City reserves the right to establish and from time to time revise a schedule of maximum prices for any or all items sold or rented by the public by Concessionaire. All food and beverage products sold shall be of high quality, and failure to maintain quality deemed satisfactory by City shall be deemed a breach of this agreement. Unimpaired use of the Balboa Pier by the public is to be maintained from the time the concession opens for business. Concessionaire may block southerly 80 feet during the construction phase of the project for a maximum period of 75 days from the date of this agreement. (d) Concessionaire shall be subject to all state and local laws, rules and regulations and shall pay taxes lawfully assessed, prior to delinquency, and shall obtain and display at all times a business license and all permits required by the appropriate county, city or state health authorities certifying that the premises occupied, the equipment, the products sold, and the method of selling meet all current regulations, including health regulations. 2. Term of Agreement: (a) This agreement shall be in effect for a period of 10 years from the date of execution unless sooner terminated as hereinafter provided. At the expiration of this term the Concessionaire shall have first right of refusal in continuing to operate the concession without the necessity of the operation going out to bid. (b) Concessionaire may remain open for business daily at any time, but shall keep the lunch stands, bait and tackle concessions open for business on every day, at least from 10:00 a.m. to 6:00 p.m., with the option to be open from 7 a.m. to 10:00 p.m., from June 15 to September 30, all dates inclusive, during each year. Different dates and hours may be fixed by Concessionaire with the approval of the City. Concessionaire shall use his best efforts to open on weekends during the winter months, depending on the weather and if there is sufficient demand. 3. Compensation to City: Concessionaire shall pay to City the following amounts as consideration for this license: (a) From the opening of the concession for business throughout the concession term, Concessionaire shall pay to City a monthly payment of $1,000.00 per month for the months of June, July, August and September, plus five and one-half percent (5.5%) of the monthly gross receipts for each and every month of the term, including the months listed above. Payment shall be made to the City monthly on or before the 20th day of the month following the month of operation. If Concessionaire is prevented from operating said concession during a part of June, July, August or September, by any cause beyond his control, the required fixed monthly payment shall be prorated in the ratio which the actual operating period bears to the full month for which said fixed monthly payment is required. City shall be the sole judge as to whether the cause preventing operation is beyond control of Concessionaire. (b) The term "gross receipts" wherever used in this agreement is intended to and shall mean all monies, property or any other thing of value received by Concessionaire through the operation of said concession, or from any other business or activity carried on upon said area or any portion thereof by Concessionaire, or others with his approval, without any deduction or deductions; it being understood, however, that the term "gross receipts" shall not include any sales or excise taxes imposed by any governmental entity and collected by Concessionaire or deposits made with Concessionaire to guarantee the return of rental equipment. (c) Concessionaire covenants and agrees that it will, at all times during the term of this lease, keep or cause to be kept true and complete books, records and accounts of all financial transactions in the operation of all businesses, concessions, services, and activities of whatsoever nature conducted on or from said premises. The records must be supported by documents from which the original entry of the transaction was made, including sales slips, cash register tapes and purchases invoices. All sales and charges shall be recorded by means of cash registers which display to the customers the amounts of the transactions certifying the amounts recorded. The registers shall be equipped with devices which lock in daily sales totals, and which shall record on tapes the transaction numbers and sales details. At the end of each day the tape will record the total sales for that day and the Concessionaire will verify the total gross sales each day by signing his or her name on the tape. (d) Concessionaire covenants and agrees to deliver to City, not later than the loth day of each month, a true and correct statement of all gross receipts and gross sales for the preceding calendar month, showing separately: (1) The gross sales and gross receipts from each business, concession, service, coin operated machine or activity conducted on or from said premises. - 4 - (2) The total gross sales and gross receipts itemized as to each of the separate categories of gross sales and gross receipts upon which the percentage rentals herein reserved are based. (e) All books, cash register tapes, records and accounts of every kind or nature kept by the Concessionaire relating to the operation of the concessions shall, at all reasonable time, be open and made available for inspection or audit by City, its agents or employees or the duly authorized agents and employees of City upon request. (f) City and the duly authorized agents and employees of City shall have the right to audit any or all such books, records and accounts for the purpose of verifying the percentage payment required to be paid to the City hereunder. If such audit shall show that the percentage payment required to be paid the City is greater than the amount reported or paid by Concessionaire, Concessionaire covenants and agrees to immediately pay the costs of the audit, as well as the additional rental shown to be payable by Concessionaire to City; otherwise, such costs shall be borne by City. City reserves the right to install any accounting devices or machines, with or without personnel, for the purposes of accounting or audit. If such audit shall disclose any willful and substantial inaccuracies, this agreement at the option of City may be thereupon cancelled and terminated. (g) All payments shall be to the City at the office of the Director of Finance in the City Hall. 4. Posting of Rates and Prices, Advertising Signs, Trade Name: (a) Concessionaire shall post rates and prices on said pier at such places as may be designated by City. (b) All advertising matter to be published or circulated by or on behalf of Concessionaire shall be subject to approval in writing by City whose approval or denial shall, if possible, be granted within five (5) working days from the date submitted by Concessionaire for review. (.c) Concessionaire shall not place or allow any signs, placards, or advertising matter to be placed or maintained on, or attached to, the buildings or elsewhere on said pier or associated parking lot without the prior written consent of City, and such business signs shall be placed, maintained and attached in such manner as City prescribed prior to such placing. Any signs placed in said area shall be removed promptly upon request by City. (d) Concessionaire shall not use any trade name, style or title in any way in the conduct of the business without the same having been approved by City in writing. Concessionaire shall protect and hold City harmless against all claims and actions arising from use of any name, style or title even though the same has received prior approval of City. 5. Assignment: This Concession Agreement shall not be sold, assigned, transferred, mortgaged, pledged or hypothecated by Concessionaire without the prior written consent of City, nor shall Concessionaire sublet the premises or any part thereof or permit the same to be occupied by any other person whomsoever without the prior written approval of City whose consent shall not be unreasonably withheld. 6. Operation of Business: Concessionaire agrees to assume said right, privilege and concession hereby granted and to operate said concessions on the Balboa Pier for the purposes and in the manner and according to the terms and conditions herein stated, reserving, however, to City the right of ingress and egress to inspect said piers and all buildings, equipment and fixtures thereon, as deemed necessary by City. In accepting the concession hereby granted, Concessionaire understands that the volume of business to be done and the quantity of food, beverages and service to the public to be required are subject to fluctuation and depend upon season and the weather and other unpredictable factors. Notwithstanding the uncertainties involved, Concessionaire agrees to supply the demand as it arises and to maintain an adequate supply of labor, food, beverages and equipment to do so. Concessionaire further agrees to use his best effort to upgrade and encourage business and public use of said pier. 7. Utilities and Severage: (a) Newport Beach water is available to the buildings on the pier. Concessionaire shall be entitled to water service under the same terms as any other occupant of the premises of the City and shall pay the same fees, rate or rates as any other occupant. (b) Newport Beach sewer service is not available to the building on the pier. It is understood that a new sewage holding tank is required. Concessionaire will be responsible for the cost of servicing the holding tank. Concessionaire shall furnish and install it subject to specifications approved by City's Public Works Department. Concessionaire shall provide and maintain, at its sole cost and expense, any chemical toilets and other appurtenant equipment for sewage disposal required by the Orange County Health Department in the operation of the business. Concessionaire shall make arrangements for such other utility services as are necessary for the operation of the businesses and shall promptly pay all charges for utilities when due. (c) City will provide garbage and refuse pickup service on the Balboa Pier. (d) There is no commercial gas available on the pier. A new commercial gas service shall be installed by the Concessionaire subject to specifications approved by City's Public Works Department. (e) There is a light duty electrical service to the concession building. Should a larger capacity service be required or should the existing light duty service require re- placement or repair to place the concession building into operation, said work shall be accomplished at the expense of Concessionaire. 8. Parking Restrictions: (a) Concessionaire agrees to permit only one vehicle owned and operated by him or his employees at any one time on the pier for the purpose of serving his business. Said vehicle shall not be parked on the pier any longer than necessary for completion of the task at hand. (b) Vendors and deliveryman serving the concession may drive vehicles on the pier subject to a maximum gross vehicle weight of 10,000 pounds; and to any other restrictions imposed by the City relative to vehicle size, weight or other factors. (c) The City will provide a total of two (2) parking permits to the Concessionaire for use of the Balboa Pier parking lot by himself or his employees. 9. Finishing Buildings and Furnishing Fixtures: (a) It is mutually understood that the existing concession building on the Balboa Pier has been carefully examined by Concessionaire prior to the time his proposal was submitted to the City. It is further understood that City is not responsible for having the exterior or interior of said building finished or remodeled. Concessionaire agrees to finish or remodel the interior of the building and install all cabinets, fixtures and equipment and maintain the same during the term hereof and connect all utilities necessary for Concessionaire's operations hereunder. Concessionaire shall pay all costs of doing the work hereunder. All work on the buildings by Concessionaire shall be done in accordance with plans and specifications approved by the Building Department, and pursuant to a building permit issued by City. Only first-class materials shall be used and all work must be performed and completed in a good and workmanlike manner by duly licensed contractor(s). All cabinets and fixtures shall be of first-class materials. The type, style, materials and workmanship of the cabinets and fixtures shall be subject to the approval of City, and, if any such are disapproved, they shall be reconstructed or replaced as necessary to obtain said approval. (b) Concessionaire shall pay in full for the completion of the interior of the buildings as herein required at the time the work is done. (c) Concessionaire agrees to refurbish the exterior of the building including sandblasting, repairing, and finishing. (d) All fixtures and equipment installed by Concessionaire shall remain the property of Concessionaire, except 8 to the extent any such fixtures or equipment are attached to and made a part of the building, in which case they shall become the property of the City, at no expense to City. Upon termination of this agreement, all rights of Concessionaire shall end and Concessionaire shall, within thirty (30) days after the date of termination, remove all equipment and materials belonging to him and, in the event he fails to do so, all equipment and materials remaining shall be deemed abandoned by him and shall become the property of City, with full power and authority to control, use or dispose of same. 10. Ongoing Maintenance and Repairs. The buildings and the pipe lines, conduits, electrical equipment and other equipment on said pier are the property of City. Except as otherwise provided herein, the ongoing maintenance and repair of the electrical service lines outside of the building, the water supply piping outside of the building and the gas lines outside of the building shall be the responsibility of the City. City shall cause any of these necessary maintenance or repairs to be accomplished with ten (10) days from receipt of written notice from Concessionaire. Concessionaire agrees to keep the building and all said interior equipment and appurtenances in good condition and repair to the satisfaction of the City and shall, as necessary, replace any such equipment, at its own expense, and shall turn the above -mentioned equipment over to the City at the end of other termination of this agreement in as good condition as it is at the time of execution of this agreement, reasonable wear excepted. Concessionaire shall bring the existing building up to City Building Code standards, when applicable, with ninety (90) days after execution hereof. Concessionaire's ongoing maintenance and repair obligation includes, but is not limited to, the sewage holding tank, the exterior walls and roof, interior partitions of the building, window frames, doors, interior and exterior painting, and repair and replacement of windows in the buildings. If any exterior or interior painting or repair is required and Concessionaire fails or refuses to so paint or repair, City shall cause the painting or repair to be done at the expense of Concessionaire, after ten (10) days' written notice from City to do specific items of maintenance or repair as required herein. 9 Concessionaire shall reimburse the City for such cost within fifteen (15) days after being billed therefor to the City. In addition, the exterior color scheme and signing of all pier buildings shall be subject to the approval of the City Manager. 11. Financial Contribution by the City: In order to assist Concessionaire in placing the City facility into operation, City shall provide $25,000 to be allocated to Concessionaire pursuant to specific approvals by the City Manager's office and the Public Works Director of billings and work progress reports. 12. Pier Areas Cleaning: Concessionaire shall keep the southerly 80 feet of the Balboa Pier (the area where the deck widens), all benches and the areas set aside for fish cleaning on the pier, and the exterior and interior of the building clean and sanitary and free from rubbish, debris, and garbage of every kind at all times throughout the term of this Concession Agreement, to the satisfaction of the City Manager. 13. Failure to Maintain and Clean: If Concessionaire fails to comply with the requirements of Paragraphs 10 and 12 of this agreement with regard to maintenance and cleaning of the buildings, equipment and pier area, the City Manager shall notify Concessionaire by personal service or by certified mail of such failure, and if the deficiencies are not corrected by Concessionaire within five (5) days following the receipt of the notice, the City Manager may proceed to have the work done and Concessionaire shall be obligated to reimburse City for the costs thereof. Failure on the part of Concessionaire to reimburse City within thirty (30) days receipt of such billing shall result in automatic termination of this agreement. 14. Independent Contractor: City shall have no interest in the operation of the lunch stands, bait or tackle concessions, and shall not be responsible for any injury or damage to the person or property of Concessionaire suffered or sustained in the operation of the lunch stands or bait and tackle concessions. It is under- stood and agreed that Concessionaire operates both the lunch stands bait and tackle concessions as an independent contractor. - 10 - 15. Hold Harmless - Insurance: (a) Concessionaire agrees to release, and to protect and save harmless, City and its officers, agents and employees from any and all claims, loss or liability on account of injury, loss or injury to any person or persons or property suffered or sustained in, on, or about the premises or elsewhere by any person or persons whomsoever in any manner directly or indirectly arising out of or by reason of the conduct of Concessionaire's business or the use of equipment, consumption of food or drink or the use or occupancy of said premises by Concessionaire or by any person claiming under Concessionaire. (b) Concessionaire shall, at all times during the term of this agreement, maintain in full force and effect, with respect to this agreement, a policy or policies of comprehensive liability insurance (bodily injury, including death, property damage, product's liability, contractual and automobile) with minimum limits of Five Hundred Thousand Dollars ($500,000.00) combined single limit, naming the City and its officers, agents, and employees, as additional insured and further providing an endorsement as follows: "1. The City of Newport Beach, its officers and employees are hereby declared to be additional insureds in the policy described insofar as they may be held liable for injuries or death to a person or persons, or damage to property occurring in or about the leased premises, whether or not caused by their sole or contributing negligence. This policy shall be primary and non-contributing with any other insurance available to the City of Newport Beach, and will include a severability of interest clause. "2. If this policy is cancelled or materially altered so as to affect the coverages, at least thirty (30) days' prior written notice by registered mail of such cancellation or alteration will be sent to the City of Newport Beach, in care of the City Manager, 3300 Newport Boulevard, P. 0. Box 1768, Newport Beach, California 92663-3884." (c) Said policy or policies shall be in a form satisfactory to City and certificates issued by the insuring company shall be submitted to City concurrently with the execution of this agreement. Certificates for each and any new or renewal policy or policies effective during the term of this agreement shall be submitted to City at least twenty (20) days prior to the effective date of such policy or policies. 16. Workers' Compensation Insurance: Concessionaire shall obtain and maintain any necessary workers' compensation insurance for all employees of Concessionaire, and shall provide City with a certificate evidencing such insurance coverage issued by an admitted insurer or a consent to a self -insure issued by the State of California, Director of Industrial Relations. 17. Destruction of Premises and Fire Insurance: (a) It is understood and agreed that City need not replace the buildings, piers, or any part thereof, or any of the City equipment used in connection with Concessionaire's operations under this Concession Agreement in case the same should be destroyed by fire, accident, catastrophe or any other cause, including obsolescense, deterioration or decay. Should the buildings, piers or said equipment be destroyed or damaged to the extent that construction is needed, City has complete discretion to determine whether said building, pier, or equipment shall be restored or reconstructed and City may give Concessionaire written notice of its intent to restore or repair said building, pieror equipment within sixty (60) days of damage or destruction. Concessionaire may elect to terminate this agreement upon thirty (30) days' notice to City after City's determination not to restore or repair the buildings. If any such damage or destruction should occur, Concessionaire's obligation to pay rent shall be suspended on the concession for the period of time his business operations are completely and necessarily suspended. (b) Concessionaire agrees to maintain a fire insurance policy satisfactory to the City Attorney with extended coverage on the fixtures and equipment used by Concessionaire, insuring the same - 12 - to the full insurable value thereof. In the event of destruction, loss or damage to Concessionaire's fixtures, Concessionaire shall begin work to repair or replace damaged or destroyed fixtures and equipment within thirty (30) days after notice from the City to do so and complete the same as rapidly as possible. Should the cost of replacing, repairing and restoring such fixtures and equipment exceed the insurance proceeds, Concessionaire shall pay the remainder of such cost. Notwithstanding the interruption of the business of Concessionaire while work of replacing fixtures and equipment is being done, this agreement shall continue in effect. (c) Should the pier deteriorate, or be damaged, demolished or destroyed, for any reason, City shall not be obliged to Concessionaire, in any fashion, for any loss of trade, business, goodwill, fixtures, equipment or other property of Concessionaire resulting from such demolition or destruction. 18. Administration of Agreement: For the purpose of the administration of this agreement by City, "City" shall mean the City Manager and any officer and employee of the City authorized by him to administer the contract. If Concessionaire is dissatisfied with any action or decision of the City, Concessionaire may take the matter to the City Council for review. The decision by the City Council shall be final. 19. Notices: (a) All notices herein provided to be given, or which may be given, by either party to the other, shall be deemed to have been fully given when made in writing and deposited in the United States mail at Newport Beach, California, certified and postage prepaid, and addresses as follows: To the Concessionaire at: Douglas S. Cavanaugh 114 Garnet Street Balboa Island, CA 92662 And to the City at: Ralph L. Kosmides or 1906 Court Street Newport Beach, CA 92663 City of Newport Beach 3300 Newport Boulevard P.O. Box 1768 Newport Beach, California 92663-3884 Attention: City Manager. - 13 - (b) The address to which the notices shall or may be mailed as aforesaid by either party shall or may be changed by written notice, given by such party to the other, as hereinbefore provided; but, nothing herein contained shall preclude the giving of any such notice by personal service. 20. Contract Rights Only: The parties agree that Concessionaire is not a lessee or tenant of the premises or any part thereof and that the only rights of Concessionaire are those provided in this agreement. Should Concessionaire be deemed a lessee or tenant, Concessionaire hereby specifically waives all rights under Section 1942 of the Civil Code of the State of California. 21. Cost of Litigation. Concessionaire and City agree that if any action is brought by either party to enforce the terms of this agreement, the cost and expenses of said action, including reasonable attorneys' fees, shall be borne by the party who is found to have violated the terms of this agreement. 22. Limited Waiver: No waiver by City of any term or condition of the contract or of any breach thereof by Concessionaire shall constitute a waiver of any other term or condition or of any other or future breach. 23. Automatic Termination: Should any person other than Concessionaire secure possession of the licenses portions of the Balboa Pier or any part thereof or secure any rights under this contract by a writ of attachment or execution or by any voluntary or involuntary assignment or by any petition, receivership or proceedings in bankruptcy or any other operation of law whatsoever, and remain in possession or maintain any right or rights for a period of five (5) days, this agreement shall automatically terminate without any action on part of City, and City may enter and take possession of the premises, buildings and fixtures and remove all persons and property therefrom notwithstanding any other provisions of law or of this agreement. - 14 - 24. Termination: Should Concessionaire fail to fully perform any term or covenant of this agreement, City may provide Concessionaire with written notice of default which shall require Concessionaire to correct or remedy any such failure ten (10) days of receipt of service of said notice. within Should Concessionaire fail to correct or remedy such default or defaults, this agreement shall be deemed terminated upon the expiration of said ten (10) day period, and City may re-enter and control the premises and remove any property of Concessionaire found in the premises. Concessionaire's obligation to pay rent shall continue after re-entry until such time as City shall relet the premises or release Concessionaire from its obligation to pay rent by written notice. 25. Prompt Performance Required: Time is of the essence of this agreement. IN WITNESS WHEREOF, the parties have executed this agreement as of the day and year first above written. ATTEST: City Clerk APPROVED AS TO FORM: CITY OF NEWPORT BEACH, a Municipal Corporation By By Na<1 PA/dAt or Pro Tem CITY CONCESSIONAIRE City Attorney - 15 -