HomeMy WebLinkAbout31 - Concession at Corona del Mar State BeachCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 31
June 12, 2007
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: City Manager's Office
Dave Kiff, Assistant City Manager
dkiffCaD-citv.newport- beach.ca.us or 949 - 644 -3002
SUBJECT: Award of Concession at Corona del Mar State Beach
ISSUE:
Who should be selected as the next food, beverage, and beach goods concessionaire
at Corona del Mar State Beach?
RECOMMENDATIONS:
1) Select Rudy's as the next concessionaire at CDM State Beach based on the
proposal submitted by Todd Carson and James "Rudy" Kaminski in response to
City's recent Request for Proposals for the CDM concessionaire; and
2) Authorize the Mayor to execute a Concession Agreement as attached to this staff
report; or
3) Direct staff to reject all bids and prepare and issue a new Request for Proposals.
DISCUSSION:
Background:
From November 1991 through September 2005, Kilmer Enterprises managed the
Corona del Mar State Beach concession. During that time, Kilmer Enterprises paid 45%
of its monthly gross receipts for rent. In the last calendar year of its operation, 2004,
Kilmer Enterprises paid $100,420.00 to the City.
In September 2005, the concession agreement with Kilmer Enterprises was terminated
in order to commence construction of the Corona del Mar Beachgoer Amenities
Improvement Project (the "Project "). The Project included 1,043 square feet for a
concessions facility, and opened in fall 2006, without a concessionaire.
Award of CDM Concession
June 12, 2007
Page 2
Council Policy F -7 requires the City to "seek revenue equivalent to the open market
value of the highest and best use; and, whenever possible the City shall conduct an
open bid or proposal process to insure the highest financial return" in negotiations
regarding the lease of non - residential income property.
Process. On October 27, 2005, the City issued a Request for Proposals for the
concession operations at Corona del Mar State Beach. After careful review, City staff
recommended, and City Council selected, Kilmer Enterprises to be the concessionaire.
Unfortunately, an agreement could not be reached. On April 16, 2007, the City issued
another Request for Proposals.
Recommendation. The City received one proposal to its RFP. Rudy's Pub and Grill,
an established business in Newport Beach, provided a response which included a
temporary trailer for the summer while the tenant improvements are built, a suggested
menu, and references. In addition, Rudy's Pub and Grill had good and creative ideas
about the concession (please see the attached proposal).
Because Rudy's concept (which is more of a restaurant setting serving breakfast, lunch,
and dinner — as well as a request to serve beer and wine with lunch and dinner) is a
significant change from what has been out at the site, we sent a letter on June 4ffi to
residents on Breaker's Drive and Ocean Avenue to ensure that they knew about the
proposal and had a chance to weigh in. I will be happy to update the Council with any
comments I receive from that letter (attached) at the time this item is heard.
After the RFP period closed, we heard from at least one other individual who was
disappointed that she missed the RFP window. She asked if she could submit a
proposal — I told her that we needed to respect the RFP process, bring Rudy's concepts
to Council, and hear the concept as Rudy submitted it. If Council is unhappy with the
concept, it can reject the bids and re -open another (3`d) RFP.
Proposed Terms of Agreement. If the Council approves this item, it would also
authorize the Mayor to enter into the attached formal Concession Agreement with
Rudy's. A summary of the Agreement's terms is attached:
TERM: 5 years,.with two 5 -year extensions
RENT: If they get a liquor license: $100,000 /yr or 10% of gross sales, whichever is greater
If no liquor license: $48,000 /yr or 10% of gross sales, whichever is greater
RENT COMMENCEMENT: Earlier of May 1, 2008, or 5 months after receipt of Certificate of
Occupancy
TENANT IMPROVEMENTS: Concessionaire must install service runs, including gas, water,
and electricity, and completing interior finishes and supplying all
necessary equipment.
Award of CDM Concession
June 12, 2007
Page 3
INSURANCE: Concessionaire must provide insurance as required by the Request for Proposal,
and as approved by the City's Risk Manager.
HOURS OF OPERATION: (a) Daily from Memorial Day through September 15:
10:00 a.m. through 10:00 p.m.
(b) From September 16 to the day before Memorial Day:
Weekend days (Saturday and Sunday) -
11:00 a.m. through 5:00 p.m. or later if Tenant so desires,
but no later than the time that the beach closes
Week days (Monday through Friday) —
Hours at Tenant's discretion
ENVIRONMENTAL PROTECTION Concessionaire must use food packaging consistent with
good environmental practices, including prohibiting Styrofoam from the premises, minimizing the
use of PVC plastics, and providing both trash receptacles and places for customers to dispose
of recyclable products.
Prepared by:
Evelyn Tseng, Income Contracts
Administrator
Attachments: Rudy's Pub & Grill proposal
Proposed Concession Agreement
Letter to Area Residents
Submitted by:
Dav <iff, AssistanAity Manager
May 4, 2007
Evelyn Tseng
Revenue Division of Newport Beach
3300 Newport Blvd.
PO Box 1768
Newport Beach, CA 92658
RE: RFP of the concession operation and tenant improvements at CDM state beach
I am pleased to present the following Counter -Lease proposal. All terms of the lease
agreement attached to the RFP are acceptable, except for the following:
TENANT: Rudy's Pub and Grill
LEASE
COMMENCEMENT: After issuance of C.O.P.
RETAIL PREMISES: CDM State Beach
RETAIL USE: Concession /Restaurant (Food, Beer & Wine, Misc. beach -
related products)
SIZE (APPROX.): 1,043 SgFt building
RENTAL RATE: See Exhibit "B" (Proposed Concession Lease Agreement)
Percentage rates to be based on gross annual sales
PRE -PAID RENT: None
RENTAL INCREASE: See Exhibit "B"
NNN COST: See Exhibit "B"
SECURITY DEPOSIT: $0
W W W. RUDY S P UBAND GRILL
Phone (949) 723 -0293 Fax (949) 723 -5612
3110 Newport Boulevard • Newport Beach, Ca 92663
FREE RENT: 5 Months free rent
LEASE TERM: 5 years with Two (5) year options
TENANT
IMPROVEMENTS: Tenant to pay for all TI's.
EXPIRATION: Friday, May 11" at 5 PM PST
GUARANTEE: PERSONAL
If you agree to the above counter - proposal, please sign below and return this proposal
to me by May 11,2008 and we will draft a new lease for your execution. If you have
any questions please feel free to contact me. This proposal is informational only, and
has no legal binding effect on either party until fully executed leases are delivered to
both Lessor and Lessee.
Sincerely,
Todd Carson'
Rudy's Pub and Grill
Agreed and Accepted:
Lessor:
Lessee:
Date
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a �
LEASE AGREEMENT
Corona del Mar Concession
This Lease is made and entered into as of the _ day of ( "Effective Date "),
by and between the City of Newport Beach, a municipal corporation ( "City ") and Rudy's
Pub and Grill CDM, LLC ( "Tenant ").
RECITALS
A. Corona del Mar State Beach is part of the California State Parks system, but
is operated by the City pursuant to the Operating Agreement by and between the City and
the State of California, dated August 1, 1999 (the "Operating Agreement "). Pursuant to the
Operating Agreement, City agreed "to develop, operate, control and maintain the premises
as public recreational beach and park with related concession..."
B. In September 2005, the concession then located at Corona del Mar State
Beach was closed to commence construction of the Corona del Mar Beachgoer Amenities
Improvement Project (the "Project "). The Project includes one thousand forty -three (1,043)
square foot concession facility which is depicted on Exhibit "A" and incorporated herein by
this reference ( "Premises ").
C. The City issued a Request for Proposal for Concession Operations and
Tenant Improvements at Corona del Mar State Beach, and received four (4) proposals.
Based upon experience and pricing, the City entered into negotiations with Mr. Gordon
Kilmer. However, the City ultimately was not able to reach agreement with Mr. Kilmer. In
_, 2007, a new RFP was issued and City selected Tenant.
1
D. Tenant and City desire to enter into a Lease of the Premises for the purpose
of allowing Tenant to operate a concession area intended to provide food /drink service and
beach rentals to beach visitors ( "Concession ").
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 improvements, additions, alterations, changes, or
modifications of the Premises made by Tenant including, but not limited to fixtures and
signage.
thereof.
(b) Authorized City Representative — is the City Manager or designee
(c) CCU - the City of Newport Beach, and any Successor to City's interest
to the Project.
(d) 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.
(e) Good Condition - neat and broom - clean, and is equivalent to similar
phrases referring to physical adequacy in appearance and for use.
(f) Law - any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any municipal, county, state,
2
federal, or other government agency or authority having jurisdiction over the Parties hereto
or the Premises.
(g) Maintenance or Maintain - repairs, replacement, maintenance,
repainting, and cleaning.
(h) 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.
(i) Provision - any term, covenant, condition, or clause in this Lease that
defines, establishes, or limits the performance required or permitted by either party.
0) Rent - Base Rent, Percentage Rent, taxes, and other similar charges
payable by Tenant under the provisions of this Lease.
(k) Rent Commencement Date - the Rent Commencement Date shall be
the earlier of five (5) months after the issuance of the Certificate of Occuancy or May 1,
NMI
(1) 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.
(m) Tenant — and any Successor.
(n) 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)
Base Rent
§4.1
(b)
Claims
§10.1
(c)
Concession
Recitals, §D
(d)
Gross Sales
§4.5
(e)
Hazardous Materials
§17
M
(f)
Indemnified Parties
§6.3
(g)
Option Term(s)
§3.2
(h)
Percentage Rent
§4.2 (a)
(i)
Project
Recitals, §B
Q)
Premises
Recitals, §B
(k)
Term
§3.1
2. LEASE OF PREMISES
City leases the Premises to Tenant and Tenant leases the Premises from City for
the Term and on the conditions in this Lease. City finds it to be in the public interest and
consistent with park uses to grant an exclusive right to operate a Concession at the Corona
del Mar State Beach. Therefore, City hereby grants to Tenant the exclusive right, privilege
and concession to conduct a business at the Premises engaged in selling such items as
those described in Section 5. 1, Business Purposes. Tenant agrees to accept the Premises
in an "as is" condition as tendered by City. Tenant agrees that no representations with
respect to the condition or improvements of the Premises have been made by City except
as specifically set forth in this Lease.
3. TERM
3.1 Term of Lease. The Term of this Lease shall be five (5) years from the
Effective Date unless terminated sooner as provided in Section 14.
32 Option to Extend. Provided Tenant is not then in 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, on the same terms and
conditions as contained in this Lease. Tenant must exercise the option by giving City
4
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 Sections 3.1
and 3.2.
4. RENT
4.1 Base Rent.
(a) Without Liquor License. Base Rent shall be established at Forty -Eight
Thousand and no /100 Dollars ($48,000.00) per year for the initial year of the Lease, and
adjusted pursuant to Section 4.1(d) below.
(b) With Liquor License. Notwithstanding the foregoing, if Tenant obtains
a liquor license from the California Department of Alcoholic Beverage Control or its
successor agency, and all other necessary licenses and permits, including, but not limited
to, a use permit from the City, then Base Rent shall be established at One Hundred
Thousand and no /100 Dollars ($100,000.00) per year from the date Tenant is legally
authorized to sell alcohol from the Premises, and adjusted pursuant to Section 4.1(d).
(c) Payment. 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.
(d) Adjustment. Annually, upon the anniversary date of the Rent
Commencement Date, the Base Rent shall be adjusted in proportion to changes in the
Consumer Price Index, but in no event shall the adjustment be greater than three percent
(3 %) for each year. Such adjustment shall be made by multiplying the original Base Rent
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by a fraction, the numerator of which is the value of the Consumer Price Index for the
calendar month three (3) months preceding the calendar month for which such adjustment
is to be made and the denominator of which is the value of the Consumer Price Index for
the same calendar month immediately prior to the Rent Commencement Date. For
example, if the adjustment is to occur effective June 1, 2008, the index to be used for the
numerator is the index for the month of March 2008 and the index to be used for the
denominator is the index for the month of March preceding the Rent Commencement Date.
In no event shall the adjusted rent be reduced below the Base Rent immediately preceding
any adjustment. The "Consumer Price Index" to be used in such calculation is the
Consumer Price Index, All Urban Consumers (All Items), for the Los Angeles Anaheim
Riverside Metropolitan Area, published by the United States Department of Labor, Bureau
of Labor Statistics (1982 -84 = 100). If both an official index and one or more unofficial
indices are published, the official index shall be used. If said Consumer Price Index is no
longer published at the adjustment date, it shall be constructed by conversion tables
included in such new index.
4.2 Percentage Rent.
(a) Payment. Tenant shall and will pay to City, the Percentage Rent.
`Percentage Rent' shall be calculated by multiplying ten percent (10 %) by the total Gross
Sales (as defined in Section 4.6) made in, upon, or from the Premises and /or otherwise
attributable to the Premises during each lease year of the Term hereof, as may be
extended as provided herein.
(b) Accounting and Payment. Within twenty -five (25) days after the end of
each calendar month for the term hereof, as may be extended as provided herein,
commencing with the twenty -fifth (25th) day of the month following the Rent
Commencement Date, and ending with the twenty -fifth (25th) day of the month next
succeeding the last month of the Term, as may be extended as provided herein, Tenant
shall furnish to City a statement in writing, certified by Tenant and a Certified Public
C:
Accountant to be correct, showing the total Gross Sales made in, upon, or from and /or
otherwise attributable to the Premises during the preceding calendar month (or fractional
month at the beginning of the term if the Rent Commencement Date is other than the first
day of a month), and shall accompany each such statement with a payment to City equal
to said percentage of the total monthly Gross Sales made in, upon, or from or otherwise
attributable to the Premises during each calendar month. The Base Rent, when paid for
that month, shall be a credit against the Percentage Rent due for that month.
4.3 Summer Rent. Notwithstanding the foregoing, from June _, 2007, through
September 30, 2007, Tenant shall pay five percent (5 %) of the Gross Sales derived from
the temporary services provided pursuant to Section 5.14.
4.4 Revenue from Premises' Use in Film. Television, and /or Advertising. Tenant
may allow the Premises to be used for film, television production, advertising production, or
other media vehicle upon written approval from the City. One -half (1/2) of all monetary
revenue received by Tenant as compensation or other payment for the use of the Premises
in a film, television production, advertising production, or other media vehicle shall be paid
to City. Any revenue collected pursuant to this Section shall be considered Rent, and such
amounts shall be in addition to, and not a credit towards, any Base Rent or Percentage
Rent due pursuant to this Agreement. The payment of revenue pursuant to this Section
shall occur not less than sixty (60) days after Tenant receives this compensation or other
payment.
4.5 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.
4.6 Gross Sales.
(a) The term "Gross Sales" means:
(1) all money, cash receipts, assets, property or other things of
value, including but not limited to gross charges, sales, rentals, fees and commissions
7
made or earned by Tenant and /or all the assignees, sublicensees, licensees, permittees or
concessionaires thereof, whether collected or accrued from any business, use or
occupation, or any combination thereof, originating, transacted or performed in whole or in
part, on the Premises, including but not limited to rentals, the rendering or supplying of
services and the sale of goods, wares or merchandise, whether wholesale or retail,
whether for cash or credit, or otherwise, and including the value of all consideration other
than money received for any of the foregoing, without, except as expressly provided in
Section 4.5(b), deduction from gross receipts for any overhead or cost or expense of
operations, such as, but without limitation to salaries, wages, costs of goods, interest, debt
amortization, credit, collection costs, discount from credit card operations, insurance and
taxes. Each installment or credit sale shall be treated as a sale for the full price in the
month during which such sale is made, irrespective of whether or when Tenant receives
payment therefor. Gross Sales shall include any amount allowed upon any "trade in," the
full retail price of any merchandise delivered or redeemed for trading stamps or coupons
and all deposits not refunded to purchasers;
(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); and
(4) Rentals of any beach equipment, beach furniture, goods, wares
or merchandise.
(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:
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(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 amount of returns to shippers or manufacturers;
(3) 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;
(4) Sales of trade fixtures or personal property to be replaced by
Tenant that are not considered stock in trade;
(5) Sums and credits received in the settlement of claims for loss of
or damage to merchandise;
(6) Meals provided for officers or employees without charge;
(7) Meals, goods or products provided for promotional or publicity
purposes without charge;
business;
(8) Cash refunds made to customers in the ordinary course of
(9) 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;
(10) Discounted sales to employees of Tenant, not to exceed two
percent (2 %) of the monthly Gross Sales;
(11) Uncollectible credit accounts and other bad debts, not to
exceed two percent (2 %) of the monthly Gross Sales;
(12) Amounts paid to charge card or credit card issuers; and
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(13) Any revenue collected pursuant to Section 4.4.
(c) Annual Statements of Gross Sales. Within thirty (30) days after the
end of each calendar year during the Term hereof, as may be extended as provided
herein, Tenant shall furnish to City a statement in writing, certified by Tenant and a
Certified Public Accountant to be correct, showing the total Gross Sales made in, upon, or
from and /or otherwise attributable to the Premises during the preceding calendar year (or
fractional year at the beginning of the term if the Rent Commencement Date is other than
the first day of the year).
(d) Annual Rent Reconciliation. Within sixty (60) days after the end of
each calendar year, City shall determine the amount of Rent due based on the Gross
Sales of Tenant during the calendar year, and the sums paid to City as Base Rent and
Percentage Rent. If Tenant has paid to the City more Percentage Rent than the Base
Rent, City shall retain any amount of the Percentage Rent in excess of the Base Rent. If
Tenant has paid the City less Percentage Rent than the Base Rent required under the
Lease, Tenant shall pay the difference to the City within thirty (30) days of City's
determination.
(e) 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.
(f) Production of Statement. Records and Audit. Tenant shall keep at the
Premises (and shall require any permitted subtenant to keep at the Premises) full,
complete and proper books, records and accounts of its daily Gross Sales, both for cash
and on credit, at any time operated in the Premises. Tenant agrees to make available for
inspection by City at the Premises, a complete and accurate set of books and records of all
sales of goods, wares, and merchandise and revenue derived from the conduct of
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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. 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 two (2)
years 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 to the 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 calendar 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 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 twenty (20) days and if there is an
overpayment, City shall refund the amount of the overpayment within twenty (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
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arrangements, the sale or transfer of City's interest in the Premises, pursuant to order of a
court or administrative tribunal, or to collect any outstanding Rent.
(g) Tenant's Gross Sales Audit. In the event of any independent audit by
City in accordance with this Lease, Tenant may contest the results of City's independent
audit by performing a confirming audit within sixty (60) days of receipt of City's independent
audit results and supporting evidence, using an independent Certified Public Accountant
reasonably acceptable to City. If Tenant's audit discloses that City's independent audit was
incorrect by more than five percent (5 %), then City shall pay the cost of Tenant's contesting
audit.
(h) 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.
4.7 Late Payment. Tenant hereby acknowledges that late payment by Tenant to
City of Monthly Base Rent, Percentage Rent, or other sums due hereunder will cause City
to incur costs not contemplated by this Lease, the exact amount of which is extremely
difficult to ascertain. Such costs include, but are not limited to, processing and accounting
charges. Accordingly, any payment of any sum to be paid by Tenant not paid within five
(5) days of its due date shall be subject to a ten percent (10 %) late charge. City and
Tenant agree that this late charge represents a reasonable estimate of such costs and
expenses and is fair compensation to City for its loss suffered by such late payment by
Tenant.
4.8 Interest on Unpaid Sums. Unpaid sums due to either City or Tenant under
this Lease shall bear interest at the rate of ten percent (10 %) per annum on the unpaid
balance, including but not limited to late payment penalties, from the date due until paid.
5. BUSINESS PURPOSES AND USE OF PREMISES
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5.1 Business Purposes. The Premises are to be used by Tenant for the
operation of a concession selling food, non - alcoholic beverages (unless all licenses,
permits and other approvals for the sale of alcoholic beverages are obtained by Tenant),
and beach - related products such as firewood, umbrellas, beach chairs, boogie boards, and
other beach - related merchandise. Tenant's proposed menu, proposed rental items and
proposed sales merchandise are attached as Exhibit "B ".
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.
Deliveries shall be made and completed between 7a.m. and 6 p.m. on non - holiday
weekdays.
5.3 Prohibited Uses. Tenant shall not sell or permit to be kept, used, displayed or
sold in or about the Premises (a) pornographic or sexually explicit books, magazines,
literature, films or other printed material, sexual paraphernalia, or other material which
would be considered lewd, obscene or licentious, (b) any article which may be prohibited
by standard forms of fire insurance policies, or (c) any alcoholic beverages unless
expressly permitted hereunder. Tenant shall not use, or permit to be used, the Premises
or any part thereof for the installation or on Premises use of any vending machine, gaming
machine or video or arcade game unless expressly permitted by this Lease. Tenant shall
not use or permit the use of the Premises in any manner that (a) creates a nuisance or (b)
violates any Law. Tenant shall not offer entertainment or broadcast music or entertainment
through exterior speakers or other form of transmission.
5.4 Food Packaging and Debris. Tenant shall use food packaging consistent
with good environmental practices, including prohibiting Styrofoam from the Premises,
minimizing the use of PVC plastics (especially plastic bags for carrying food), and providing
both trash receptacles and places for customers to dispose of recyclable products.
5.5 Outdoor Dining. Tenant may be permitted to expand restaurant service to
include outdoor dining, subject to prior written approval of the City Manager and in
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accordance with City zoning codes, which shall not be unreasonably withheld, and State
requirements.
5.6 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 Section. Tenant may close the Concession on Thanksgiving Day,
Christmas Day, during periods of remodeling, reconstruction, inventory and emergencies
(including substantially inclement weather) or to comply with Laws. Notwithstanding the
foregoing, if Tenant can show, on the second (2nd) anniversary of the Rent
Commencement Date, consistently low gross sales on certain days of the year, then
Tenant may close the Concession on those days upon written approval of City Manager.
Unless otherwise approved in writing by the City Manager, which approval shall not be
unreasonably withheld, the Concession shall follow this schedule of operations:
(a) Daily from Memorial Day through September 15:
10:00 a.m. through 10:00 p.m.
(b) From September 16 to the day before Memorial Day:
Weekend days (Saturday and Sunday) -
11:00 a.m. through 5:00 p.m. or later if Tenant so desires, but no later
than the time that the beach closes
Week days (Monday through Friday) —
Hours at Tenant's discretion
57 Food Preparation. Tenant shall install, at Tenant's own expense, fire
protective systems in grill, deep fry, and cooking areas which are required by City, County,
and state fire ordinances, and such system when installed shall qualify for full fire
protective credits allowed by the fire insurance rating and regulatory body in whose
jurisdiction the Premises is located. Tenant shall also install adequate ventilation systems
to operate the cooking area.
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5.8 Advertising Display. Tenant may, at its own expense, place signs in or upon
the Premises subject to the prior written consent of the City Manager as to the size, type,
number, 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.
5.9 Personnel. Tenant shall be responsible for hiring the necessary personnel
to conduct the daily operation of Concession. Tenant shall comply with all federal, state,
and local Laws related to minimum wage, social security, nondiscrimination, ADA,
unemployment compensation, and workers' compensation. If required by the City,
employees shall wear a uniform and /or identification badge.
5.10 Independent Contractor. It is understood that Tenant is an independent
contractor and not an agent or employee of City. Nothing in this Lease shall be deemed to
constitute approval for Tenant or any of Tenant's employees or agents, to be the agents or
employees of City. City shall have no interest in the business of Tenant.
5.11 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 approval will not be unreasonably withheld but
may be conditioned.
5.12 Parking for Employees. Depending on availability, City shall provide up to four
(4) free parking spaces for Tenant's employees. There shall be no designated Tenant
parking. It shall be Tenant's responsibility to notify its employees as to the location of
available parking. Tenant shall cause its employees to comply with the procedures and
regulations established by City from time -to -time to control parking.
5.13 Validated or Short-Term Parking. If feasible and if so requested by Tenant,
City shall offer Tenant the right to participate in a parking validation program or short-term
parking program (where customers can park in the Corona Del Mar Parking Lot for two (2)
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hours or less while eating at the Concession) that allows Concession customers to pay a
reduced parking rate for off -peak use of the Concession. Off -peak use includes non -
holiday days between October 1 and May 1 and non - holiday weekdays between October 1
and May.
5.14 Temporary Services — Summer 2007. Tenant shall provide concession
services from a trailer or other mobile structure (to be reviewed and approved by City
Manager), for the summer of 2007, from June _, 2007 to September 30, 2007. City will
use its best efforts to cooperate with Tenant in permitting a viable temporary services
vehicle to accommodate visitor needs.
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 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 levied or assessed
against Tenant's leasehold interest in the Premises or any personal property installed on
the Premises.
61 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
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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
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 indemnify, defend and hold harmless
the City, its council members, boards, commissions, officers, employees, Authorized City
Representatives, agents and volunteers ( "Indemnified Parties ") 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.
Tenant shall make all arrangements for utilities installation and pay for all utilities
furnished to or used on the Premises, including, without limitation, gas, electricity, water,
telephone service, and cable TV. Tenant may use City's trash enclosures or public trash
cans, provided however, that City may, at City's discretion, require Tenant to arrange for its
own refuse collection. Any repair to utility lines within the Premises is the sole
responsibility of Tenant. Tenant shall service and maintain the Concession's 1500 - gallon
grease interceptor. Refuse collection and grease interceptor maintenance shall occur
between 7 a.m. and 6 p.m. on non - holiday weekdays.
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8. ALTERATIONS TO THE PREMISES.
8.1 Tenant Improvements. Tenant acknowledges that City has delivered the
Premises without any improvements, and it shall be Tenant's responsibility to install service
runs, including gas, water and electricity, in addition to completing interior finishes,
installing equipment and providing other improvements (including a restroom) as necessary
for the Concession to operate. All Tenant improvement plans and construction shall be
subject to the prior written approval of the City Manager. Tenant improvements shall be
performed between 7 a.m. and 6 p.m. on non - holiday weekdays. Any contractors hired by
Tenant shall be fully licensed and bonded. Tenant's contractors shall obtain insurance in
an amount and form to be approved by City's Risk Manager, including workers
compensation insurance as required by law, general liability, automobile liability and
builder's risk insurance covering improvements to be constructed, all pursuant to standard
industry custom and practice.
8.2 Permits. Tenant shall obtain building permits, health department permits and
other required permits prior to commencement of Tenant improvements, and shall pay all
costs therefor.
8.3 Quality of Work Performed. All alterations, maintenance and other work shall
be performed in a good and workmanlike manner, shall comply with the plans and
specifications submitted to City, and shall comply with all applicable governmental permit
requirements and Laws in force at the time permits are issued.
8.4 Payment of Costs. Tenant shall pay all costs related to the construction of
the improvements and any Alterations by Tenant or its agents.
8.5 Liens. Tenant shall keep the Premises free from any liens arising out of any
work performed, material furnished, or obligation incurred by Tenant or alleged to have
been incurred by Tenant.
8.6 Disposition of Alterations at Expiration or Lease Termination. Any Alterations
made to the Premises shall remain on, and be surrendered with, the Premises on
in
Expiration or Termination of this Lease (excluding Tenant's fixtures, equipment, furniture,
and moveable decorations). 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. If City requires removal of Alterations, Tenant shall, at
its cost, remove the Alterations and restore the Premises to a broom -clean condition 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 moveable partitions, machinery, equipment, furniture, and trade fixtures
previously installed by Tenant, provided that Tenant repairs any damage to the Premises
caused by removal.
9. MAINTENANCE OF PREMISES
9.1 Maintenance and Repair by Tenant and CitV. Tenant agrees that it will keep
the Premises in Good Condition. Graffiti shall be called in to the City's Graffiti Hotline for
removal. 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 Section shall be
payable as additional Rent. All furnishings, equipment, facilities, improvements,
alterations, attachments and appurtenances not provided by City, but required for
concession operations, including all kitchen equipment and interior furnishings, shall be
maintained in Good Condition and repair by Tenant at its cost. 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 Entry by Citv. Upon twenty -four (24) hour notice to Tenant, City and its
Authorized City Representatives may enter .upon and inspect the Premises at any
reasonable time for any lawful purpose. In case of emergency, City or its Authorized City
Representative may enter the Premises by whatever force necessary if Tenant is not
19
present to open and permit an entry. 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.
10. INDEMNITY AND EXCULPATION: INSURANCE
10.1 Hold- Harmless Clause. Tenant agrees to indemnify, defend and hold
harmless the Indemnified Parties from and against any and all claims (including, without
limitation, claims for bodily injury, death or damage to property), demands, obligations,
damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities,
costs and expenses (including, without limitation, attorney's fees, disbursements and court
costs) of every kind and nature whatsoever (individually, a "Claim'; collectively, "Claims "),
which may arise from or in any manner relate (directly or indirectly) to 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 or damage to personal property
caused or allegedly caused by the condition of the Premises or an act or omission of
Tenant or an agent, contractor, subcontractor, supplier, 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 /or
(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.
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Tenant's obligations pursuant to this Subsection shall not extend to any Claim
proximately caused by the sole negligence, willful misconduct, or unlawful or fraudulent
conduct on the part of the Indemnified Parties.
10.2 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 sole negligence, intentional or willful acts of the Indemnified Parties.
Except as otherwise expressly provided in this Lease, Tenant waives all claims against the
Indemnified Parties arising for any reason other than the sole negligence, intentional or
willful acts of the Indemnified Parties. City shall not be liable to Tenant for any damage to
the Premises, Tenant's property, Tenant's goodwill, or Tenant's business income, caused
in whole or in part by acts of nature including, without limitation, waves, wind and ocean
currents.
10.3 Insurance. In addition to insurance required of Tenant to be obtained,
provided, and maintained during the construction of the improvements, and without limiting
Tenant's indemnification of City, Tenant shall obtain, provide and maintain at its own
expense during the Term of this Lease, a policy or policies of liability insurance of the type
and amounts described below and in a form satisfactory to City.
(a) Certificates of Insurance. Tenant shall provide certificates of insurance
with original endorsements to City as evidence of the insurance coverage required herein.
Insurance certificates must be approved by City's Risk Manager prior to execution of this
Lease by the City. Current certification of insurance shall be kept on file with City at all
times during the Term of this Lease.
(b) Signature. A person authorized by the insurer to bind coverage on its
behalf shall sign certification of all required policies.
(c) Acceptable Insurers. All insurance policies shall be issued by an
insurance company currently authorized by the Insurance Commissioner to transact
business of insurance in the State of California, with an assigned policyholders' Rating of
21
A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the
latest edition of Best's Key Rating Guide, unless otherwise approved by the City's Risk
Manager.
(d) Coverage Requirements,
i. Workers' Compensation Coverage. Tenant shall maintain
Workers' Compensation Insurance at statutory limits and Employer's Liability Insurance at
One Million and 00/100 Dollars ($1,000,000.00) for his or her employees in accordance
with the laws of the State of California. Any notice of cancellation or non - renewal of all
Workers' Compensation policies must be received by City at least thirty (30) calendar days
(ten (10) calendar days written notice of non - payment of premium) prior to such change.
The insurer shall agree to waive all rights of subrogation against City, its officers, agents,
employees and volunteers for all losses that relate in any way to this Lease.
ii. General Liability Coverage. Tenant shall maintain commercial
general liability insurance in an amount not less than Two Million and 00/100 Dollars
($2,000,000.00) per occurrence for bodily injury, personal injury, and property damage,
including without limitation, contractual liability. If commercial general liability insurance or
other form with a general aggregate limit is used, either the general aggregate limit shall
apply separately to the work to be performed under this Lease, or the general aggregate
limit shall be at least twice the required occurrence limit.
iii. Automobile Liability Coverage. Tenant shall maintain
automobile insurance covering bodily injury and property damage for all activities of the
Tenant arising out of or in connection with the services to be performed under this Lease,
including coverage for any owned, hired, non -owned or rented vehicles, in an amount not
less than Two Million Dollars and 00/100 Dollars ($2,000,000.00) combined single limit for
each occurrence.
iv. Fire and Extended Coverage. Tenant shall maintain fire and
extended coverage insurance, together with insurance against vandalism, theft and
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malicious mischief, on the improvements and fixtures, alterations, trade fixtures, signs,
equipment, personal property and inventory on or upon the Premises from loss or damage
to the extent of their full replacement value.
V. Tenant shall maintain loss of rent insurance insuring that the
Monthly 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 by a risk insured
under a special form property coverage policy including vandalism and malicious mischief
endorsements.
(e) Endorsements. Each insurance policy shall be endorsed with the
following specific language:
i. The City, its elected or appointed officers, officials, employees,
agents and volunteers, and the State of California, its elected or appointed officers,
officials, employees, agents and volunteers, are to be covered as additional insureds, with
respect to liability arising out of work performed by or on behalf of the Tenant.
ii. This policy shall be considered primary insurance as respects to
City, its elected or appointed officers, officials, employees, agents and volunteers as
respects to all claims, losses, or liability arising directly or indirectly from the Tenant's
operations or services provided to City. Any insurance maintained by City, including any
self- insured retention City may have, shall be considered excess insurance only and not
contributory with the insurance provided hereunder.
iii. This insurance shall act for each insured and additional insured
as though a separate policy had been written for each, except with respect to the limits of
liability of the insuring company.
iv. The insurer waives all rights of subrogation against City, its
elected or appointed officers, officials, employees, agents and volunteers.
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V. Any failure to comply with reporting provisions of the policies
shall not affect coverage provided to City, its elected or appointed officers, officials,
employees, agents or volunteers.
vi. The insurance provided by this policy shall not be suspended,
voided, canceled, or reduced in coverage or in limits, by either party except after thirty (30)
calendar days (ten (10) calendar days written notice of non - payment of premium) written
notice has been received by City.
(f) Timely Notice of Claims. Tenant shall give City prompt and timely
notice of claim made or suit instituted arising out of or resulting from Tenant's performance
under this Lease.
(g) Additional Insurance.
i. Tenant shall also procure and maintain, at its own cost and
expense, any additional kinds of insurance, which in its own judgment may be necessary
for its proper protection and prosecution of the work.
ii. In the event Tenant's Risk Manager determines that (i) the
Tenant's activities in the Premises creates an increased or decreased risk of loss to City,
(ii) greater insurance coverage is required due to the passage of time, or (iii) changes in
the industry require different coverages be obtained, Tenant agrees that the minimum
limits of any insurance policy required to be obtained by Tenant may be changed
accordingly upon receipt of written notice from the Risk Manager, provided that Tenant
shall have the right to appeal a determination of increased coverage by the Risk Manager
to the City Council within ten (10) days of receipt of notice from the Risk Manager. Not
more frequently than once every year, Tenant may increase the insurance coverage as
reasonably required by City so that at all times, the amount of liability and Premises
damage insurance coverage maintained by Tenant reasonably and fully protects City.
24
(h) Subcontractors. In the event Tenant subcontracts, the contract
between Tenant and such subcontractor shall require the subcontractor to maintain the
same policies of insurance that Tenant is required to maintain pursuant to this Section.
11. DAMAGE OR DESTRUCTION OF PROJECT /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,
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 may 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 Project (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 damage or destruction of
improvements located on the Premises not giving rise to Tenant's option to terminate 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 Project. In the event that all or a portion of the Project is
damaged, and 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:
25
(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
(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 the Project 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 Project 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. Monthly Rent shall abate in proportion to the
area of the Premises that is rendered unusable. The abatement of Monthly 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, if
any, equal to the amount of Monthly Rent pursuant to coverage required by Section 10.3.
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12.2 Abatement/Maintenance. Tenant shall not be entitled to any abatement of
Rent for Maintenance that occurs during the Maintenance period.
13. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT, SUBLETTING AND
ENCUMBERING
13.1 Prohibition of Assignment. City and Tenant 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,
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 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
27
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, or Successor of Tenant. For purposes hereof, an
"Affiliate ", a "Subsidiary", 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 purposes of this
Section, "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 less 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.
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 default and breach of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant;
04:3
(b) The failure by Tenant 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;
(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; and
(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 as required by this Lease, City shall have the remedies described in
this Section in addition to all other rights and remedies provided by law or equity, to which
City may resort cumulatively or in the alternative.
ca
(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 atonement. No act by or on behalf of City under this provision
shall constitute a Termination of this Lease unless City gives Tenant specific written notice
of Termination.
(2) 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:
(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
30
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 Propert y. 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
Concession in any manner tending to indicate that the Concession is affiliated with, part of
or operated in conjunction with Tenant's business.
(b) 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 constitute a waiver of default or of any remedy for default or render City liable
for any loss or damage resulting from performance.
(c) 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.
15. SUBJECT TO STATE OPERATING AGREEMENT
The Premises are located on property that is the subject of an Operating Agreement
from the State of California to the City. Tenant shall not take any action that would cause
the City to be in violation of any provisions of that Operating Agreement. If the State of
California terminates the Operating Agreement, this Lease shall terminate as a result and
the Parties shall be released from all liabilities and obligations under this Lease.
31
16. 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.
17. NO CONFLICTS OF USE, HAZARDOUS MATERIALS.
City represents and warrants that, to the best of City's knowledge, (i) Tenant's use of
the Premises does not conflict with applicable Laws, and City knows of no reason why
Tenant would be unable to obtain all required permits, licenses and approvals from the
appropriate governmental authorities; (ii) the Project 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 Project is free of any and all Hazardous Materials as of the date of
this Lease. In the event that the presence of any Hazardous Materials not caused by
Tenant is detected at the Project 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 at the Project and the presence or the remediation materially affects Tenant's
ability to conduct its business in 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,
32
including, without limitation, any "hazardous substances ", "hazardous wastes ", "hazardous
materials" or "toxic substances" under applicable federal, state and local laws, ordinances
and regulations.
18. 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
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, 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; or
(b) Terminate this Lease if City's default materially interferes with Tenant's use of
the Premises for its 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.
19. 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: CITY OF NEWPORT BEACH
Attention: City Manager
3300 Newport Boulevard
Newport Beach, CA 92658
33
(949) 644 -3000
If to Tenant, to:
20. 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.
21. COMPLIANCE WITH ALL LAWS
Tenant shall at its own cost and expense comply with all statutes, ordinances,
regulations and requirements of all governmental entities, including federal, state, county or
municipal, whether now in force or hereinafter enacted. In addition, all work prepared by
Tenant shall conform to applicable City, county, state and federal laws, rules, regulations
and permit requirements and be subject to approval of the City Manager and the City.
22. WAIVERS
The waiver by either party of any breach or violation of any term, covenant or
condition of this Lease, or of any ordinance, law or regulation, shall not be deemed to be a
waiver of any other term, covenant, condition, ordinance, law or regulation, or of any
subsequent breach or violation of the same or other term, covenant, condition, ordinance,
law or regulation. The subsequent acceptance by either party of any fee, performance, or
other consideration which may become due or owing under this Lease, shall not be
deemed to be a waiver of any preceding breach or violation by the other party of any term,
condition, covenant of this Lease or any applicable law, ordinance or regulation.
34
23. SEVERABILITY
If any term or portion of this Lease is held to be invalid, illegal, or otherwise
unenforceable by a court of competent jurisdiction, the remaining provisions of this Lease
shall continue in full force and effect.
24. APPLICABLE LAW
This Lease shall be construed in accordance with the laws of the State of California
in effect at the time of the execution of this Lease. Any action brought relating to this Lease
shall be adjudicated in a court of competent jurisdiction in the County of Orange.
25. ENTIRE AGREEMENT; AMENDMENTS
25.1 The terms and conditions of this Lease, all exhibits attached, and all
documents expressly incorporated by reference, represent the entire agreement of the
parties with respect to the subject matter of this Lease.
25.2 This Lease shall supersede any and all prior agreements, oral or written,
regarding the subject matter between Tenant and City.
25.3 No other agreement, promise or statement, written or oral, relating to the
subject matter of this Lease, shall be valid or binding, except by way of a written
amendment to this Lease.
25.4 The terms and conditions of this Lease shall not be altered or modified
except by a written amendment to this Lease signed by Tenant and City.
25.5 If any conflicts arise between the terms and conditions of this Lease, and the
terms and conditions of the attached exhibits or the documents expressly incorporated by
reference, the terms and conditions of this Lease shall control.
35
25.6 Any obligation of the parties relating to monies owed, as well as those
provisions relating to limitations on liability and actions, shall survive termination or
expiration of this Lease.
25.7 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.
26. TIME IS OF THE ESSENCE
Time is of the essence for this Lease.
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. INTERPRETATION
The terms of this Lease shall be construed in accordance with the meaning of the
language used and shall not be construed for or against either party by reason of the
authorship of this Lease or any other rule of construction which might otherwise apply.
36
29. 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.
30, 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.
31. 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.
32. 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.
33. CITY BUSINESS LICENSE
Tenant shall obtain and maintain during the duration of this Lease, a City business
license as required by the Newport Beach Municipal Code.
37
34. COSTS AND ATTORNEYS FEES
The prevailing party in any action brought to enforce the terms and conditions of this
Lease, or arising out of the performance of this Lease, shall not be entitled to recover its
attorneys' fees.
[Signature page follows]
38
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first
written above.
CITY OF NEWPORT BEACH ( "City "),
a Municipal Corporation
Steve Rosansky, Mayor of Newport Beach
ATTEST:
LaVonne Harkless
City Clerk
0
APPROVED AS TO FORM:
Aaron Harp
Assistant City Attorney
( "Tenant ")
, President
39
June 5, 2007
Dear Neighbor:
Last year, the City completed a major renovation of Corona del Mar State Beach.
Among other things, we demolished a number of structures, rebuilt restrooms, and
consolidated the concession space.
For about a year, we have attempted to bring in a concession to operate the new food
facility (which now sits in the same structure as the lifeguard observation building).
During the current bid process, Rudy's restaurant ( Rudy's with a "d ") submitted a good
proposal. However, they submitted a concept that's a bit different from the snack bar
which previously operated at Big Corona for so long.
Rudy's intends to operate more like The Beachcomber restaurant at Crystal Cove, and
serve breakfast, lunch and dinner. They also hope to be able to sell wine and beer with
meals (also like The Beachcomber). They will close each evening no later than the
beach is closed (10:00 p.m.), respecting the existing beach curfew.
Because the proposed concession operation will be different from what you're familiar
with as a neighbor of CDM State Beach, I would like your feedback on Rudy's concept.
It may be a good change if you want to enjoy breakfast or coffee at the beach during
quiet cool mornings.
The Rudy's proposal is up for consideration by the City Council on June 120'. 1 would
appreciate your comments, questions, or concerns (by phone or e-mail) sometime
before then. I have attached the menu that Rudy's submitted during the bid process so
you can get a sense of what they intend to offer.
Thank you in advance for taking the time to weigh in. I can be reached at 949 - 644 -3002
or dkiff (aDcitv.newport- beach.ca.us.
Sincerely,
DAVE KIFF
Assistant City Manager
City of Newport Beach
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