HomeMy WebLinkAboutC-3090(A) - Harbor Island, 829 - Consent to Assignment Agreement 2005 - "Balboa Yacht Basin Office"9 • C -30go
CONSENT TO ASSIGNMENT AGREEMENT
This Assignment of Lease Agreement ( "Agreement ") is entered into this to day
of p 2005, by and between Anthony B. Duni and Ann M. Duni ( "Duns "),
Hentage Yacht Sales, Inc., a California corporation ( "Tenant ") and the City of Newport
Beach, a municipal corporation (the "City ").
RECITALS
A. WHEREAS, Tenant has leased those certain Premises ( "Premises ") described in
that certain lease by and between Tenant and City, dated August 1, 2001 (the
"Lease ") which is attached hereto as Exhibit "A" and incorporated herein by this
reference;
B. WHEREAS, the Lease requires City's prior written consent in the event of
Tenant's assignment of Lease;
C. WHEREAS, Tenant is not in default in the payment of rent or any other amount
under the Lease through and including July 31, 2005, or, to the knowledge of
City, of any other covenant or condition to be observed or performed by the
Tenant under the Lease;
D. WHEREAS, the term of the Lease commenced on August 1, 2001, and continues
through July 31, 2006;
E. WHEREAS, the Lease contains one (1) option term exercisable by Tenant which
would extend the term of the Lease to July 31, 2011 ( "First Option Term ");
F. WHEREAS, the Dunis and Tenant desire to enter into an Agreement for the
Purchase and Sale of Stock of Heritage Yacht Sales, Inc. ( "Purchase and Sale
Agreement ") which is attached hereto as Exhibit `B" and incorporated herein by
this reference, pursuant to which the Dunis require, as a condition precedent to the
Agreement, an additional five (5) year option term, which would extend the term
to July 31, 2016; and
G. WHEREAS, the the parties to this Agreement desire to enter into this Agreement
subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of performance by the parties of the
promises, covenants and conditions herein contained, the parties hereto agree as
follows:
Assignment.
The parties agree that this Agreement is conditioned on the Dunis'and Tenant's
execution of the Purchase and Sale Agreement and First Amendment to Lease
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Agreement, attached hereto as Exhibit "C" and incorporated herein by this
reference ( "Lease Amendment "), on or before August 5, 2005. If the Purchase
and Sale Agreement and Lease Amendment are not executed and returned to the
City by August 12, 2005, then this Agreement shall be null and void, shall be
automatically terminated and shall be of no further force and effect. Provided that
the Purchase and Sale Agreement and Lease Amendment are executed and
returned to the City by August 12, 2005, then this Agreement shall constitute the
City's formal written acknowledgement and consent to the Tenant's assignment
of its right, title and interest and to the Lease to the Danis.
2. Compliance.
Provided that this Agreement is not terminated in accordance with Section 1, the
Danis agree to be bound by and comply with all terms, conditions and obligations
of the Lease and Lease Amendment.
Effect on other Agreements.
Except as expressly modified herein, all other provisions, terms and covenants set
forth in the Lease and Lease Amendment shall remain unchanged and shall be in
full force and effect.
4. Interoretatiom Venue; Governing Law.
This Agreement shall be construed according to its fair meaning and as if
prepared by both parties hereto. This Agreement shall be construed in accordance
with the laws of the State of California. Any action brought relating to this
Agreement shall be adjudicated in a court of competent jurisdiction in the County
of Orange. Titles and captions are for convenience only and shall not constitute a
portion of this Agreement. As used in this Agreement, masculine, feminine or
neuter gender and the singular or plural number shall each be deemed to include
the others wherever and whenever the context so dictates.
No Waiver.
No delay or omission by either party hereto in exercising any right or power
accruing upon the compliance or failure of performance by the other party hereto
under the provisions of this Agreement shall impair any such right or power or be
construed to be a waiver thereof. A waiver by either party hereto of a breach of
any of the covenants, conditions or agreements hereof to be performed by the
other party shall not be construed as a waiver of any succeeding breach of the
same or other covenants, agreements, restrictions or conditions hereof.
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6. Modifications.
Any alteration, change or modification of or to this Agreement, in order to
become effective, shall be made by written instrument or endorsement thereon
and in each such instance executed on behalf of each party hereto.
Severability.
If any term, provision, condition or covenant of this Agreement or the application
thereof to any party or circumstances shall, to any extent, be held invalid or
unenforceable, the remainder of this instrument, or the application of such term,
provisions, condition or covenant to persons or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
8. Execution in Counterparts.
This Agreement may be executed in several counterparts, and all so executed
shall constitute one agreement binding on all parties hereto, notwithstanding that
all parties are not signatories to the original or the same counterpart.
9. Assignment.
Neither party shall have the right to assign this Agreement or any interest or right
hereunder without the prior written consent of the other party.
10. Attorneys Fees.
In any action between the parties hereto, seeking enforcement of any of the terms
and provisions of this Agreement, the prevailing party in such action shall not be
entitled to recover from the other party its attorney's fees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.
DUNIS :
C7
th y B. Xni
Ann M. Duni
ATTEST:
City Clerk
APPROVED AS TO FORM:
X C.
Assistant City Attorney
TENANT:
HERITAGE YACHT SALES, INC.
a California corporation
By:
Its: -5
By:
Its:
CITY OF NEWPORT BEACH
a municipal corporation
Its:
• EXHIBIT "A" is
LEASE AGREEMENT
HERITAGE YACHT SALES, INC.
THIS LEASE is made and effective as of the 1st day of August, 2001 ( "Effective
Date "), by and between the CITY OF NEWPORT BEACH, a Municipal Corporation
( "City') and HERITAGE YACHT SALES, INC., a California Corporation ( "Tenant').
RECITALS
A. City is owner of certain harbor frontage and tidelands, together with
certain abutting upland property known as "Balboa Yacht Basin" located on Harbor
Island Drive in the City of Newport Beach, County of Orange in the State of California.
A portion of a commercial building in the Balboa Yacht Basin is currently being used by
Tenant for a yacht sales office, ( "Premises "). Tenant is occupying approximately 780
square feet of space pursuant to a Lease dated July 9, 1996.
B. Tenant and City desire to enter into a new Lease to allow Tenant to
continue to operate a yacht sales business in new premises in an adjacent building at
the Balboa Yacht Basin upon revised terms and conditions as provided in this
Agreement.
C. Rent has been determined based upon a comparison and analysis of
similar bay front office space within the City of Newport Beach.
D. The uses to be made of the property subject to this Lease are consistent
with provisions of the Local Coastal Plan and General Plan of the City of Newport
Beach, and the terms and conditions in this Lease are consistent with the provisions of
the City Charter and the ordinances of the City of Newport Beach.
E. The uses to be made of the property subject to this Lease are consistent
with provisions of the Tideland Grant pursuant to yvhich the City obtained title to the
property.
Be
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AGREEMENT
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NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, City and Tenant 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) C — the CITY OF NEWPORT BEACH.
(d) 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.
(e) Damages — monetary compensation or indemnity that can be
recovered in the courts by any Person who has suffered Damage.
(f) Days — means calendar days, subject to extension for any
weekend or day when banks are not open in California if a deadline
occurs on any such Day.
(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 clean, safe, physical condition of the
Premises and each portion of the Premises in compliance with all
applicable governmental laws and regulations.
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(i) Hazardous Materials — shall mean any substance whose nature
and /or quantity of existence, storage, use, manufacture, disposal or
effect, renders such substance and /or the user thereof and /or the
owner of real property affected thereby, subject to or controlled by
federal, state or local law, or regulation because such substance is
actually or potentially injurious or a threat to public health or welfare
or to the environment; or because such substance under federal,
state or local law requires remediation, removal, cleanup or other
action to bring such substance any areas impacted into
conformance with applicable law.
Q) Hold Harmless — to protect, defend, indemnify and hold harmless
the other party (including the employees, agents and other
potentially liable parties) 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.
(k) 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
and /or the Premises.
(I) Lease Year —means each calendar year of the term. (For
illustration, Lease Year one (1) is from January 1, 2001 to
December 31, 2001.)
(m) Maintenance or Maintain — repairs replacement, maintenance,
repainting, and cleaning.
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(n) Material Default — means the failure of Tenant to cure a default
under Section 16, below, by the applicable Tenant cure deadline
which cure reasonably exceeds Five Thousand Dollars
($5,000.00).
(o) 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.
(p) Premises — those portions of the Balboa Yacht Basin designated
on Exhibit "A" encompassing the yacht sales office to be located
at 829 Harbor Island Drive, including all structures and
improvements located within the Premises, comprised as of the
date of this Lease as approximately 580 square feet of office area.
(q) Provision — any term, covenant, condition, or clause in this Lease
that defines, establishes, or limits the performance required or
permitted by either Party.
(r) Rent —Rent, late payment penalties, interest, taxes, and other
similar monetary amounts and charges payable by Tenant under
the Provisions of this Lease.
(s) Rent Commencement Date — the Rent Commencement Date (and
the Effective Date) shall be August 1, 2001.
(t) 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.
(u) Tenant — HERITAGE YACHTS SALES, INC., a California
corporation, and any approved Successor.
(V) Termination — the termination of this Lease, for any reason, prior to
Expiration.
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2. LEASE OF PREMISES
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City leases the Premises to Tenant and Tenant leases the Premises from City for
the Term and on the conditions contained in this Lease.
3. TERM
3.1 Base Term. The `Base Term" of this Lease shall be Five (5) years from
the Effective Date and shall expired on July 31, 2006 unless extended as provided in
3.2 below or terminated in accordance with the other provisions of this Lease.
3.2 Option to Extend. Provided Tenant is not then in Material Default, both at
the time of Tenant notice of exercise and also at the start of such Option Term, Tenant
may extend the term of this Lease for one additional term of Five (5) years (the "Option
Term ") commencing on Expiration of the Base Term. Tenant may exercise the
extension option by giving City written notice of its intention to do so on or before
February 1, 2006. If exercised, the Option Term shall expire on July 31, 2011•.
3.3 Terms of Lease. The "Term" is defined as the Base Term and, if
exercised, the Option Term.
3.4 Hold Over. Should Tenant hold over and continue in possession of the
Premises after Expiration of the Base Term or the Option Term, Tenant's continued
occupancy of the Premises shall be considered a month -to -month tenancy subject to
termination by either Party upon Thirty (30) days advance notice and also to all the
terms and conditions of this Lease, except the provisions of Sections 3.1 and 3.2.
4. RENT
4.1 LESSEE agrees to pay LESSOR for the use and occupancy of the
premises the sum of $12,876.00 per year payable in monthly installments of $1,073.00
in advance on or before the first day of the each month.
4.2 Any payment due from LESSEE to LESSOR under the provisions of this
Lease which is not paid within seven (7) days of the date due shall be subject to a late
charge of $50.00 plus interest on the amount due at the rate of ten percent (10 %) per
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annum from the date due and payable by the terms of this Lease until the same shall
be paid. All late charges and interest payments hereunder, shall, as incurred, become
rent due under this Lease. All payments shall be paid in lawful money of the United
States.
4.3 Periodic Rental adjustment: Rent shall be increased, effective August 1,
2003, August 1, 2005 during the Base Term and August 2, 2007 and August 1, 2009
during the Option Term, if exercised, based on the percentage change in the cost of
doing business as measured by the U.S. Department of Labor, Bureau of Labor
Statistics, Consumer Price Index, for all urban consumers for the Los Angeles, Long
Beach, Anaheim areas, all items (1967 =100) for the preceding twenty -four (24) months.
5. BUSINESS PURPOSES AND USE OF PREMISES
5.1 "Approved Use ". The Premises are to be used by Tenant:
(a) For the principal operation of a yacht sales brokerage office; and
(b) Tenant may not use the Premises for any other use except with
prior written consent of the City.
5.2 Operation of Premises. Tenant shall operate and manage the Premises
in a manner comparable to other high quality businesses providing similar yacht sales
brokerage. Tenant shall not use or permit the use of the Premises in any manner that:
(a) creates a nuisance; (b) violates any Law; or (c) is not in compliance with all statute,
laws, permits, use restrictions and regulations of City applicable to the Premises,
Tenant and /or Tenant's use of the Premises. Tenant assumes the risk of and shall
cause all its workman, customers and independent contractors to also comply with all
laws regarding their activities at the Premises.
5.3 Sales Restrictions. Tenant shall not display, sell or store merchandise
outside the defined exterior walls and permanent doorways of said Premises, and no
sale by auction in, upon or from said Premises, whether said auction be voluntary,
involuntary, pursuant to any assignment for benefit of creditors or pursuant to any
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bankruptcy or other solvency proceedings, shall be conducted except such auctions
that may be conducted by officers of a court with respect to any vessels in custody of
Tenant.
5.4 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, 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 as to graphic design and sign placement.
5.5 Independent Contractor. City shall have no interest in the business of
Tenant, and no liability for the business operations or Gross Sales of Tenant, whether
or not caused by City's enforcement of City laws and regulations which apply to the
Premises and /or Tenant.
5.6 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 on the condition that such event occurs once during the Term.
5.7 Parking. Tenant shall have non - exclusive right, in common with other
Lessees and Tenants of Lessor, to the use of parking area(s) in the Balboa Yacht Basin
which Lessor may from time to time designate for patron and employee parking.
6. TAXES, LICENSES AND OTHER OBLIGATIONS
6.1 Payment of Taxes. Tenant acknowledges that this Lease may create a
possessory interest subject to property taxation and that Tenant shall pay 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
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against Tenant's leasehold interest in the Premises any Tenant fixture, improvement,
equipment and other personal and other Tenant property (including any such property
of any customer of Tenant) installed or located on the Premises from time to time.
Tenant shall pay directly to the appropriate taxing authorities all such taxes at least Ten
(10) days before delinquency and before any fine, interest or penalty is due or imposed
by operation of law and furnish to the City with Tenant's next Rent installment a copy of
Tenant's payment check and the Tax bill thereby paid. Tenant shall not be required to
pay any real property taxes or assessments based upon City's ownership interest in the.
Premises.
6.2 Payment of Obligations. Tenant shall promptly pay, when due, any and
all bills, debts, liabilities and obligations incurred by or charged to 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 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 and City shall execute any instrument or document necessary or advisable in
connection with the proceeding or contest as long as City is not required to bear any
cost nor be liable for payment of such Taxes. If requested Tenant, on final
determination of the proceeding or contest, shall immediately pay such disputed tax
and also discharge any decision or judgment rendered, together with all related costs,
charges, interest and penalties and provide City with a copy of Tenant's payment and
the underlying bill for such Taxes being paid with Tenant's next Rent payment. Tenant
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shall indemnify and 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. Any such contest of
Taxes be Tenant shall be concluded (meaning that such Taxes shall be fully paid or
cancelled by the Tax Authority) by Tenant within Eighteen (18) months of starting such
action, or end of the Term, if earlier.
6.4 License. Tenant shall maintain in good standing all required licenses and
permits required for operation of the business on the Premises, including but not limited
to a City Business License.
7. UTILITIES AND REFUSE COLLECTION
7.1 Basic Utilities. Tenant shall make all arrangements for and pay for all
utilities furnished to or used on the Premises, including, without limitation,
electricity, telephone service, cable TV and janitorial service.. Tenant
bears all risk of interruption, cancellation and/or disruption of utility
services, as well as the cost of all utilities Tenant requires for its use of the
Premises.
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 so long as Tenant's
Approved Use is not thereby being changed.
(b) Non - Structural Alterations. Tenant shall have the right to make, at its sole
expense, such non - structural changes, alterations, improvements and
additions in and to the interior of the buildings, and Tenant may install
therein such trade fixtures and equipripent as it may deem advisable for
the conduct of its business for the Approved Use of the Premises.
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(c) 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 if
the Approved Use is not thereby changed. In granting or withholding
consent to proposed Alterations by Tenant, the City Manager shall
consider the impact of the proposed Alterations on public views adjacent
property owners, compliance of City codes and the impact of the
proposed Alterations on space available for public use of the Balboa
Yacht Basin. 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 or size of the building
structures on the Premises. The City Manager may also require Tenant to
provide, at Tenant's expense, appropriate engineering and feasibility
studies regarding the structural integrity of the Premises. Any damages or
destruction to the structural improvements or Tenant equipment at the
Premises shall not reduce or excuse Tenant's obligation to pay Rent in full
and on time.
(.d) 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.
(e) 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
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performed at the direction of Tenant. All construction improvements shall,
upon completion, become part of the Premises, owned by City.
(f) 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. City has no obligation to or liability to Tenant
incident to City's approval of Tenant's plans or issuance of permits for any
improvements to the Premises.
(g) Disposition of Alterations at Exoiration 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, at Tenant's
cost, 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 and solely
paid for by Tenant, provided that Tenant repairs any damage to the
Premises caused by removal and the structural future of the foundation
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and bulkhead areas of the Premises are not thereby worsened by such
Tenant removal.
9. REPAIRS AND MAINTENANCE OF PREMISES
9.1 Maintenance and Repair by Tenant. Tenant agrees that it will maintain
the Premises in Good Condition.
City may perform Maintenance or repairs in the event Tenant fails to commence
required Maintenance or repairs within Fifteen (15) 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 upon billing by City with the Tenant's next monthly Rent
payment.
(a) Entry by City. City and its Authorized Representatives may enter
upon and inspect the Premises at any reasonable time for
Maintenance or other purposes. 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.
(b) Additional Covenants of City Regarding 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 that may then
exist, provide Tenant with prior written notice of its intent to:
(i) perform any Maintenance, repair or remodeling of the
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Balboa Yacht Basin 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 at the Balboa Yacht
Basin that relate to any commercial enterprise which might
conflict or compete with Tenant's business operations on the
Premises so long as Tenant operates the Premises for the
Approved Use.
(2) Due Diligence by City Regarding Repairs. Whenever City
elects or is obligated to repair or restore the Premises or any
portion of the Balboa Yacht Basin, 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
City repairs and in accordance with all applicable Laws
subject to force majeure and inability to use same materials
by the City. The materials used in said repair or
reconstruction shall be as nearly like the original materials
as may then be reasonably procured.
9.2 Tenant is the long -time operator of the Premises, fully aware of the
condition of the Premises. Therefore, Tenant accepts the condition of the Premises as
of the date of this Lease without any current City warranty, representation or repair
obligation.
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10. LIENS
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Tenant shall not permit to be enforced against said Premises, or any part
thereof, any mechanics', materialman's, contractors' or other liens arising from, or any
claims for damages growing out of, any work or repair or alteration (except from the
actions of City), and Tenant shall pay or cause to be paid said liens and claims before
any action is brought to enforce the same against Tenant or the Premises, or shall
adequately indemnify City and the Premises by payment bonds acceptable to City and
as provided for by Law. Tenant agrees to Hold Harmless City and the Premises free
and harmless from all liability for any and all such liens and claims and all costs and
expenses in connection therewith. Tenant shall give City notice in writing before
commencing construction of any kind on the Premises and provide any additional
Tenant insurance required by this Lease.
11. INDEMNITY AND EXCULPATION, INSURANCE
11.1 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
goodwill, increased Tenant operating costs, or loss of business or income by Tenant
from any cause other than the gross negligent, intentional or willful acts of City or its
Authorized Representatives. Except as otherwise expressly provided in this Lease,
Tenant releases and also waives all claims against City for Damages arising for any
reason other than the gross 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 income, caused in whole or
in part by acts of nature including, without limitation, waves, wind and tidal flows.
11.2 Tenant Release and Hold - Harmless. Tenant releases the City and also
agrees to Hold Harmless the City, its elected officials, officers and employees from any
and all claims, liability, loss, Damage, or expenses resulting from Tenant's occupation
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and use of the Premises, specifically including, without limitation, any claim, liability,
loss, or Damage arising by and Tenant assumes all corresponding risk because 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; and
(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,
loss, liability, Damages, costs or fees that are proximately caused by the sole gross
negligence, willful misconduct, or unlawful or fraudulent conduct on the part of the City
or its officers or employees.
11.3 Insurance Limits.
(a) Liability Insurance. Tenant shall, at its own cost and expense,
secure and maintain during the entire Term a broad form
commercial general liability insurance issued by an insurance
company reasonably acceptable to City covering the acts and
omissions of Tenant, any Tenant employee, agent customer,
independent contractor or visitor to the Premises. 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
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this Lease in amounts not less than: combined single limit bodily
injury and property damage, including products /completed
operations liability and blanket contractual liability, of One Million
Dollars ($1,000,000.00) per occurrence, subject to increased limits
in accordance with Section 12.3(b) below.
(b) City's Ability to Increase Amount of Public Liability and Property
Damage Insurance. Not more frequently than once during the
Option Term, Tenant shall increase the insurance coverage as
reasonably required by City so that at all times, the amount of
public liability and property damage insurance coverage maintained
by Tenant reasonably and fully protects the City.
(c) Deductibles. Any deductible amount under each insurance policy
shall not exceed Seven Thousand Five Hundred Dollars
($7,500.00), and Tenant is responsible for payment of such amount
in the event of loss.
11.4 Fire Insurance on Building and Other Improvements. Tenant at its cost
shall maintain a policy of standard broad form all -risk fire and extended coverage
insurance, with vandalism and malicious mischief endorsements, to the extent of at
least full replacement value, for contents of the Premises with coverage for demolition
and compliance in a form acceptable to the City's Risk Manager.
11.5 Loss of Rent Insurance. Tenant at its cost shall maintain loss of rent
insurance (or business interruption insurance) insuring that the Rent will be paid to City
for a period up to Twelve (12) 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.
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11.6 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.
11.7 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. 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.
shall:
11.8 Other Insurance Matters. All the insurance required under this Lease
(a) Be issued by insurance companies authorized to do business in the
State of California, with a minimum Best Insurance Guide or
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financial rating of A -VII unless otherwise approved in advance by
City Risk Manager;
(b) Be issued as a primary policy;
(c) Be noncontributing with any insurance that may be carried by City;
(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;
and
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 Parry may maintain for its
own account any insurance not required under this Lease, but any such policy shall be
separate from and non - contributory in the event of loss covered by insurance carried by
the Party responsible for said loss.
12. DAMAGE OR DESTRUCTION OF PREMISES
12.1 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, at Tenant's sole cost and effort, 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), unless Tenant elects to
terminate this Lease under the conditions of this Section 13.1. Tenant can elect to
terminate this Lease, without any liability from the City, by giving notice of such election
to City within Sixty (60) days after the date of the occurrence of any casualty and also
proving to the reasonable satisfaction of City that eagh of these conditions are satisfied:
(a) the cost of the restoration exceeds the amount of any available insurance proceeds
by at least twice the annual Rent for the most recent Two (2) completed Lease Years;
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(b) at the time of such casualty Tenant maintained all insurance required by this Lease;
and (c) no act attributable to Tenant voided insurance coverage otherwise available
concerning said loss. If the Lease is so terminated: (x) all insurance proceeds
applicable to reconstruction (excluding Tenant's personal property therein) shall
assigned by Tenant; (y) Tenant shall pay any policy deductible to City; and (z) quitclaim
title to the Premises to City, as conditions of such termination. Notwithstanding such
Lease termination, Tenant shall Hold Harmless the City from any expenses, liability or
loss regarding damage or loss to boats being repaired or stored by Tenant at the
Premises and any other liability or loss incurred by Tenant concerning such casualty
and event,
12.2 Replacement of Tenant's Propert y. In the event of the damage or
destruction of improvements located on the Premises not giving rise to Tenant's option
to terminate this Lease under Section 13.1, above, 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 for the Approved Use.
12.3 Destruction of Balboa Yacht Basin. In the event that all or a portion of the
Balboa Yacht Basin or access to the Balboa Yacht Basin in areas to be maintained by
the City either under this Lease or because City owns such other areas, is damaged,
deteriorates or destroyed by fire or any other casualty not attributable to Tenant nor
covered by Tenant insurance and as a result the Premises or a material portion of the
Premises becomes inaccessible or commercially unusable for the Approved Use, and
the Damage or destruction cannot reasonably be repaired within Twelve (12) months
after the date of the casualty, City shall have the right, by notice to Tenant within Sixty
(60) days of such casualty, 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
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date of the casualty), in which case this Lease shall be terminated
Thirty (30) days following such City notice;
(b) Confirm 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 14,
below. 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 Balboa Yacht Basin pursuant to this Section
13.3(b) and City 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 further. liability to
Tenant under this Lease; or
(c) City has no liability to Tenant concerning such casualty or City
election to repair or not repair except solely arising under Section
12.1, above.
13. ABATEMENT OF RENT
In the event of Damage or destruction of the Premises or Damage to the Balboa
Yacht Basin that impacts the Premises and this Lease is not terminated, Tenant shall
continue to utilize the Premises for the operation of its business for the Approved Use
to the extent it may be practicable and commercially reasonable. Base Rent shall
abate in proportion to the area of the Premises that is rendered unusable for the
Approved Use. The abatement of Rent shall commence on the date that use of the
Premises is impacted and continue until the complgtion 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 and other monetary obligations pursuant to this Lease shall not
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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 Base Rent is contingent on payment
of insurance proceeds, if any, equal to the amount of Base Rent pursuant to coverage
required by Section 12.6, above.
14. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT, SUBLETTING AND
ENCUMBERING
14.1 Prohibition of Assignment. The Parties acknowledge that City is entering
into this Lease in reliance upon the business experience and abilities of Tenant and its
principals to operate the Premises for the Approved Use. Consequently, Tenant shall
not voluntarily delegate, 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 may be
withheld at the sole discretion of the City unless Tenant provides City with evidence
reasonably satisfactory to City that the: (a) proposed transferee has financial strength
and experience comparable to Tenant; (b) the use of the Premises by the proposed
transferee is consistent with the terms of this Lease and is for the Approved Use; (c)
proposed transferee agrees to assume all current and future Tenant obligations and
agrees that the City is not in default of the Lease; and (d) Tenant is not then in Material
Default 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 requiring City's consent above. However, 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
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require City's consent or approval if there is no change in the management of Tenant's
business and if such successor otherwise maintains the Approved Use and satisfies the
prior experience and business expertise tests above and is at least as creditworthy as
Tenant at the time this Lease is signed. 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.
14.2 Exceptions. Notwithstanding the foregoing paragraphs or anything to the
contrary contained herein, City's consent shall not be required for a transfer or
assignment of any stock or interest by a share holder or member if the Approved Use of
the Premises is maintained, Tenant and transferee provide City the Lease amendment
described in Section 15.2(b), above, if such transfer is to a spouse, children or
grandchildren or an assignment or subletting to an Affiliate, Subsidiary, or Successor of
Tenant 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 less
than Twenty Five Percent (25°/a) 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
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(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.
14.4 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.
15. DEFAULT
15.1 Default by Tenant. The occurrence of any one or more of the following
events shall constitute a "Material Default' of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant
(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) The failure of Tenant to observe or perform any of the "material"
(meaning costing Five Thousand Dollars ($5,000.00) or more to
fully remedy 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. However,
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no Thirty (30) day cure period is allowed for any Tenant caused
environmental event involving Hazardous Substances at the
Premises or otherwise caused by Tenant or Tenant's agents or
customers which likely costs Fifteen Thousand Dollars
($15,000.00), or more, to fully remediate. Immediately following
any such environmental event Tenant shall use Tenant's best
efforts to fully remediate or prove to City reasonable satisfaction
that remediation is underway and will be completed in Ninety (90)
days without any risk of further environmental damage to the
Premises and/or surrounding area.
(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.
(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.
15.2 Remedies.
(a) Cumulative Nature of Remedies~ If any Material Default by Tenant
shall continue to not be cured after notice and the cure period
provided under this Lease, City shall have the remedies described
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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:
{i) The value of any unpaid Rent or other charges that
are unpaid at the time of Termination;
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
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received through the exercise of reasonable diligence
as of the date of the award;
(iii) 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
(iv) 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 Premises in any manner tending to
indicate that the Premises 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
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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.
16. CONDEMNATION
16.1 Termination of the Lease. Tenant or the City 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 land area at the
Premises, or 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 for the Approved Use. 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.
16.2 No Termination of Lease. If this Lease is not terminated under Section
16.1, above, then this Lease shall terminate as to the portion of the Premises taken
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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
reasonable proportion to the area of the Premises so taken verses its impact on
Tenant's continued operations for the Approved Use.
16.3 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, the value of this
leasehold, 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 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.
17. SUBJECT TO STATE LANDS COMMISSIONbGRANT
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.
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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 for any
reason or prevents the Premises from being used for the Approved Use, this Lease
terminates as a result and the Parties shall be released from all liabilities and
obligations underthis Lease.
18. 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.
19. 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 since September 20, 1973. Tenant represents
and warrants that, to the best of Tenant's knowledge: (i) Tenant's continued use of the
Premises does not conflict with applicable Laws; (ii) the Premises is not and has not
been operated in violation of any environmental laws, rules or regulations and Tenant's
contemplated uses will not cause any such violation; and (iii) the Premises are free of
any and all Hazardous Materials as of the date of this Lease. In the event that the
presence of any Hazardous Material caused by Tenant is detected within the Premises
or adjacent to this Premises at any time during the Term of this Lease and any Option
Term all remedial or clean up work shall be immediately performed by Tenant at
Tenant's expense to fully remediate such environmental condition so that the Premises
and such affected area(s) are promptly brought into full compliance with all Laws. This
clause and this lease does not restrict or limit Tenant's right to lawfully use Hazardous
Materials on the Premises, if in strict conformance with all Laws.
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20. CITY'S DEFAULTS /TENANT'S REMEDIES
City shall be in Material Default if it fails to perform, or commence performance if
Tenant gives notice of nonperformance specifying the nature of and City does not cure
within Thirty (30) days or City commences performance within said Thirty (30) days
diligently completes said performance. In the event of City's Material Default, Tenant
may:
(a) Upon Fifteen (15) 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 Fifteen (15) days after a second demand by Tenant in which
case Tenant shall have no further or continuing obligations and City shall
have no liability to Tenant; or
(c) Commence an action for specific performance and recover costs and
expense, including reasonable attorney fees if Tenant is the prevailing
party.
21. 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 or upon delivery if personally
served or upon transmission if sent by facsimile. Unless notice of a different address
has been given in accordance with this Section, .all notices shall be addressed as
follows:
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If to City: CITY OF NEWPORT BEACH
Attention: City Manager
3300 Newport Boulevard
Newport Beach, CA, 92658
Facsimile: 949 - 644 -3020
If to Tenant: HERITAGE YACHT SALES, INC.
829 Harbor Island Drive
Newport Beach, CA, 92660
22. 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.
23. 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.
24. PARTIAL INVALIDITY
If any term or Provision of this Lease is declared invalid or unenforceable, the
remainder of this Lease shall not be affected.
25. 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
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governmental approvals so that Tenant's requests and applications are not
unreasonably denied or delayed.
26. 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 attorney or other advisors, and is complete understanding of the
overall 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 shall not be the basis for later
claim that all or part of this Lease is not enforceable or was not understood by a Party
when this Lease was signed. No provision of this Lease may be amended or varied
except by an agreement in writing signed by the Parties or their respective Subcessors.
27. 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. All time deadlines are meant to be
strictly construed. A "day" means a calendar day, with extension if a deadline occurs on
a weekend or day when banks are not open in California.
28. 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.
29. NO BROKERS
Each party warrants to and for the beneftlof the other than it has had no
dealings with any real estate broker or other agent (attomeys excepted) in connection
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with the negotiation or making of this Lease, and that no commission, fee or other
compensation is owed regarding this Lease by such other Parry.
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.
City Clerk
AP VE AS TO FORM:
Robin . Clauson
Assistant City Attorney
F:l userslcatl sharedldalAg \HeritageYachtl080601 Final.doc
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CITY OF NEWPORT BEACH ( "City "),
a Municipal Corporation
Garold B. Adams, May
HERITAGE YACHT SALES, INC.
A California Corporation ( "Tennant ")
By:
Its:
By: (�
• MUM "B" •
AGREEMENT FOR THE PURCHASE AND SALE OF STOCK OF
HERITAGE YACHT SALES, INC.
THIS AGREEMENT FOR THE PURCHASE AND SALE OF STOCK OF
HERITAGE YACHT SALES, INC. ( "Agreement ") is made this first day of August, 2005 by and
among HERITAGE YACHT SALES, INC., a California corporation ( "Company "); DONALD
ROSS and 71LLAINE ROSS (collectively, "Shareholders "); and ANTHONY B. DUNI and ANN
M. DUNI (collectively, "Buyer ").
RECITALS
A. Company and Shareholders are engaged in the yacht brokerage business
(the "Business ") with its principal business office located at 829 Harbor Island Drive, Newport
Beach, California 92660 (the "Premises ").
B. Shareholders represent that they own all of the outstanding stock of
Company (collectively, the "Shares ").
C. Shareholders desire to sell to Buyer, and Buyer desires to purchase from
Shareholders, all of the Shares, on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
Purchase and Sale of Shares of Company.
1.1 Purchase and Sale of Shares. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date (as hereinafter defined), Shareholders shall sell,
transfer, assign and deliver all of the issued and outstanding shares of capital stock of Company
(i.e., the Shares) to Buyer, and Buyer shall purchase the Shares from the Shareholders, in
exchange for the consideration set forth in Section 1.2 below. The total number of shares of
Company owned by each Shareholder, and to be sold to Buyer hereunder, is set forth on Exhibit
"A" attached hereto.
1.2 Consideration for the Shares. As the total consideration payable to
Shareholders by Buyer for the purchase of the Shares (the "Shares Consideration "), Buyer agrees
pay to Shareholders, in the aggregate, up to the total sum of One Hundred Eighty Thousand
Dollars ($180,000) as follows:
(a) Ninety Thousand Dollars ($90,000) on the Closing Date (the
"Initial Payment ");
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the Closing Date;
of the Closing Date;
of the Closing Date; and
(b) Twenty Thousand Dollars ($20,000) on the first anniversary of
(c) Twenty Thousand Dollars ($20,000) on the second anniversary
(d) Twenty Thousand Dollars ($20,000) on the third anniversary
(e) Provided that the Gross Commission Threshold as set forth in
this subparagraph (e) below is met, Thirty Thousand Dollars ($30,000) shall be payable to Seller
on the fourth anniversary of the Closing Date (the "Contingent Payment "). The "Gross
Commission Threshold" shall be met if the gross commissions received by the Company and its
agents during the four (4) year period following the Closing Date from all office locations equals
or exceeds Nine Hundred Sixty Thousand Dollars ($960,000); provided, however, that if any
time during such period the Company is only operating from the Newport Beach office, then the
dollar threshold amount shall be prorated between $640,000 and $960,000, based on the time
that the Newport Beach office is the sole location. The parties acknowledge and agree that the
Contingent Payment shall not be payable by Buyer in the event that the Gross Commission
Threshold is not met.
(f) The parties acknowledge that the Shares Consideration shall be
paid by Buyer whether or not Don Ross continues to contribute to the Company.
The Shares Consideration shall be subject to further adjustment and offset
as set forth in Section 1.3 below.
1.3 Adjustment of the Shares Consideration. The parties
acknowledges that the Shares Consideration for the Shares as set forth in Section 1.2 is based on
the assumption and understanding that, as of the Closing Date and thereafter, there shall exist no
debt, liability, claim or obligation of Company, which Company has or may become obligated to
pay or satisfy, of any nature, whether accrued, absolute, contingent or otherwise, whether due or
to become due or whether asserted or unasserted, that relates to any period prior to the Closing
Date (the "Pre- existing Liabilities "). The parties acknowledge that the term "Pre- existing
Liabilities" includes, but is not limited to, any claims under the Lease relating to the payment or
rent or performance of the lessee's obligations for all periods prior to the Closing Date
(including, the fact that the lessor under the Lease has not been billing Company for the CPI
adjustment called for under the Lease). Shareholders shall indemnify, defend and hold Buyer
and Company harmless from and against any and all of the Pre - Existing Liabilities. Buyer shall
have the right to offset from the Shares Consideration (or any other sums payable to
Shareholders hereunder) the amount of any Pre - Existing Liabilities paid for by Buyer or
Company.
1.4 If the corporation is sold before the four (4) year period is
complete, the gross commission will be prorated as described in 1.2(e) to determine if the final
$30,000 payment has been earned. Any of the three (3) annual $20,000 payments that not been
made will be made at the time of sale.
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2. Contribution of Assets Held by Shareholders. In the event that
Shareholders hold any tangible or intangible assets used in the operation of the Business in their
individual capacities, then at the Closing, Shareholders shall, upon Buyer's request, transfer and
assign such assets to Company for no additional consideration.
3. Closine.
3.1 Closin . The consummation of the purchase and sale of the Shares
shall take place at 11:00 a.m., on August 12005, at Newport Beach, California, or at such other
time and place as may be mutually agreed by the parties (the "Closing ") and shall be effective as
of 12:01 a.m., on August 1, 2005 (the "Closing Date "). In the event that the Lease Amendment
and/or the Lease Consent have not been obtained by the scheduled Closing Date, Buyer shall
have the right to extend the Closing Date for such additional period or periods as may be
necessary to obtain the Lease Amendment and/or Lease Consent. At the Closing, the
Shareholders shall deliver each and all of the items which the Shareholders are required to
deliver pursuant to Section 3.2 hereof, and Buyer shall deliver each and all of the items which
Buyer is required to deliver pursuant to Section 3.3 hereof.
3.2 The Shareholders' Obligations at Closing. At the Closing, the
Shareholders shall deliver, or cause to be delivered, to Buyer, the following items:
(i) The certificates representing the Shares, registered in the names
of the Shareholders, each duly endorsed by the appropriate Shareholder, for transfer, or
accompanied by an assignment of the Shares duly executed by the appropriate Shareholder. On
submission of the certificates to Company for transfer, Company shall issue to Buyer a
certificate representing the Shares.
(ii) If available, the stock book, stock ledger, minute book and
corporate seal of Company.
(iii) Certified copies of Company's articles of incorporation and
bylaws, and certified resolutions of Company's board of directors and shareholders, in form
satisfactory to counsel for Buyer, authorizing and approving the execution, delivery and
performance of this Agreement and the consummation of the transactions contemplated hereby.
(iv) The written resignations of all the officers and directors of
Company.
(v) The consents of any third party or of any governmental agency
which may be required for Company or the Shareholders to consummate the transactions
contemplated herein (including, without limitation, the consent of the City of Newport Beach in
connection with the assignment of the lease between the City of Newport Beach and Company
with respect to the Premises (the "Lease ").
(vi) The assignments of Broker Salesperson Contracts duly
consented to by the broker salespersons.
(vii) A certificate executed by the Shareholders, dated the Closing
Date, certifying that their representations and warranties in this Agreement are true and correct at
and as of the Closing Date, as though each representation and warranty had been made on that
date.
(viii) Any and all other documents and instruments which in the
reasonable opinion of counsel to Buyer will be necessary to effectuate the terms and conditions
of this Agreement and the obligations of Company or the Shareholders hereunder.
3.3 Buyer's Obligations at Closing. At the Closing, Buyer shall
deliver, or cause to be delivered, to the Shareholders the following items:
(i) Buyer's check in the amount of the Initial Payment.
(ii) Any and all other documents and instruments which in the
reasonable opinion of counsel to Company and the Shareholders will be necessary to effectuate
the terms and conditions of this Agreement and the obligations of Buyer hereunder.
4. Other Covenants and Agreements.
4.1 Noncompetition. Each of Shareholders hereby agree that he or she
will not at any time within the five (S) year period following the Closing Date, directly or
indirectly, engage in or have any interest in any person, firm, corporation or other entity, whether
as an employee, officer, director, agent, independent contractor, security holder, creditor,
consultant, or otherwise, that engages in any activity in the Counties of Los Angeles, Orange or
San Diego, California, which activity is the same as, similar to, or competitive with any activity
now engaged in by Company. Each of Shareholders further agrees, without limiting the
generality of the foregoing sentence, that he or she will not, either directly or indirectly, (a) make
known to any person, firm, or corporation, any confidential information or trade secrets of
Company, or (b) call on, solicit or take away, or attempt to call on, solicit or take away any
customers, listings, or broker salespersons with whom such Shareholder dealt with or became
aware of as a result of Shareholder's past, present or future affiliation with Company.
Shareholder acknowledges and agrees that all information regarding the foregoing will be or has
been received in confidence by Shareholder as a fiduciary of Company. Shareholder
acknowledges and agrees that he or she has transferred the goodwill of the business of Company
to Buyer within the meaning of California Business and Professions Code Section 16601. The
parties acknowledge and agree that the covenants contained in this Section 4.1 above are fair and
reasonable in light of the facts and circumstances and are vital to the successful operation of
Company's business in the future. The parties agree that in the event a court or arbitrator should
decline to enforce any provision of this Section 4. 1, such provision shall be deemed modified to
the extent necessary to render such provision enforceable by such court or arbitrator.
Shareholder acknowledges that any breach by Shareholder of the provisions of this Section 4.1
will give rise to irreparable injury to Company and Buyer, which injury will be inadequately
measurable or compensable in damages. Accordingly, Company and Buyer may seek and obtain
injunctive relief against any such breach, in addition to any other remedies that may be available.
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Each of Shareholders further acknowledges and agrees that his or her experience and capabilities
are such that he or she can obtain employment outside the scope of activities described in Section
4. 1, and that any enforcement of an injunction against breach of Section 4.1 will not prevent
Shareholder from earning a reasonable livelihood.
4.2 Broker Salesperson Contract. At and conditioned upon the
Closing, Company and Donald Ross shall enter into a Broker - Salesperson Contract (Independent
Contractor) in the form of Exhibit "B" attached hereto.
4.3 Lease Amendment. Shareholders shall use their best efforts to
obtain from the City prior to the Closing an amendment to the Lease providing for one additional
five year option to extend the Lease (commencing on July 31, 2011) on the same terms and
conditions applicable to the existing five year option to extend under the Lease (the "Lease
Amendment "). The obtainment of the Lease Amendment shall be a condition precedent to
Buyer's obligations under this Agreement.
4.4 S Corporation Election. Shareholders agree to make the election
under Section 1377(a)(2) of the Internal Revenue Code of 1986 (or any successor provision) to
treat the taxable year in which the Closing Date occurs as two taxable years, the first of which
ends on the Closing Date, for purposes of allocating Company's taxable income among the
shareholders for such taxable year.
Representations and Warranties.
5.1 Representations and Warranties of the Shareholders. The
Shareholders hereby represent and warrant to Buyer, which representations and warranties shall
be true, complete and correct as of the date hereof and the Closing as follows:
(i) Due Organization of Compan y. Company is a
corporation duly organized, validly existing, and in good standing under the laws of California,
and has all necessary corporate powers to own its properties and to carry on its business as now
owned and operated by it.
(ii) Capitalization. The authorized capital stock of Company
consists of 100,000 shares of capital stock, of which shares (i.e., the Shares) are
issued and outstanding. The Shares constitute all of the issued and outstanding shares of
Company. All the Company Shares are validly issued, fully paid, and nonassessable, and all the
Shares have been so issued in full compliance with all federal and state securities laws. There
are no outstanding subscriptions, options, rights, warrants, convertible securities, or other
agreements or commitments obligating Company to issue or to transfer from treasury any
additional shares of its capital stock of any class.
(iii) Title To Company Shares. The Shareholders are the owners
beneficially and of record, of all the Company Shares as set forth on Exhibit "A," free and clear
of all liens, encumbrances, security agreements, equities, options, claims, charges, and
restrictions. The Shareholders have full power to transfer the Company Shares to Buyer without
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obtaining the consent, approval, or lack of disapproval of any other person or governmental
authority. Upon delivery to Buyer of the certificates representing the Shares at the Closing, duly
endorsed by the Shareholders, and upon payment of the consideration thereon in accordance with
Section 1 above, the Company Shares will have been duly transferred and delivered to Buyer and
good and marketable title thereto, free and clear of all liens, charges, claims, security interests
and encumbrances, will have been passed to Buyer.
(iv) Subsidiaries. Company does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation, partnership, business,
trust.
(v) Licensee Status. Each Shareholder is a "licensee" as defined
in California Business and Professions Code, and there is no pending or threatened action or
proceeding before any licensing authority that may adversely affect any Shareholder's status as a
licensee.
(vi) Authority to Execute and Perform Agreements. Company and
the Shareholders each have the full legal right and power and all authority and approval required
to enter into, execute and deliver this Agreement and to perform their respective obligations
hereunder. This Agreement has been duly executed and delivered and constitutes the valid and
binding obligation of Company and the Shareholders enforceable in accordance with its terms.
No approval or consent of any foreign, federal, state, county, local or other governmental or
regulatory body and no approval or consent of any other person is required in connection with
the execution and delivery by Company and the Shareholders of this Agreement and the
consummation and performance by Company and the Shareholders of the transactions
contemplated hereby.
(vii) Financial Statements. Exhibit "C" to this Agreement sets
forth the balance sheets of Company as of December 31, 2004 and December 31, 2003, and the
related statements of income and retained earnings and other information for the two (2) years
ending on those dates. The financial statements and information contained in Exhibit "_" are
hereinafter collectively referred to as the "Financial Statements." The financial statements
contained in Exhibit " " have been prepared in accordance with generally accepted accounting
principles consistently followed by Company throughout the periods indicated and prior periods,
and fairly present the financial position of Company as of the dates of the balance sheets
included in Exhibit "_ ", and the results of Company's operations for the periods indicated. Since
the date of the most recent balance sheet contained in the Financial Statements, there has not
been any change in the financial condition or operations of Company; except for changes in the
ordinary course of business which changes have not in the aggregate been materially adverse.
(viii) Liabilities. Company does not have nor will there be as of
or after the Closing any Pre - existing Liabilities..
(ix) Taxes. Within the times and in the manner prescribed by law,
Company has filed all federal, state, and local tax returns required by law and has paid all taxes,
assessments, and penalties due and payable; such tax returns reflect the correct and full amount
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of any tax liability owing; and Company or Shareholders, as applicable, has made all estimated
tax payments, payroll tax payments, sales tax payments and other tax payments due or payable
up through the Closing Date. The federal income tax returns of Company have not been audited
within the last five years by the United States Internal Revenue Service nor have the California
income tax returns been audited by the California Franchise Tax Board within that time period.
The provision for taxes reflected in the Estimated Company Balance Sheet is adequate for any
and all federal, state, county, and local taxes for the period ending on the date of that balance
sheet and for all prior periods, whether or not disputed. There are no present disputes as to taxes
of any nature payable by Company.
(x) Real Propert y. Schedule 5.1(x) to this Agreement is a
complete and accurate list of all real property leased by Company (collectively, the "Leased
Property "). Schedule 5.1(x) also contains a description of all fixtures and leasehold
improvements located on the Leased Property. Company has furnished to Buyer true and
complete copies of all leases (including amendments thereto) regarding the Leased Property. All
such leases are valid and legally binding and there exists no default or event that with notice or
lapse of time, or both, would constitute a default by any party under any such lease. Except as
disclosed in Schedule 5.1(x), the Leased Property (including improvements and fixtures) is in
good operating condition and repair, ordinary wear and tear excepted. Company does not own
any real property in fee simple.
(xi) Tangible Personal Propert y. Schedule 5.1(xi) to this
Agreement is a complete and accurate description of all tangible personal property owned by, in
the possession of, or used by Company in connection with its business. Except as stated in
Schedule 5.1(xi), no personal property used by Company in connection with its business is held
under any lease, security agreement, conditional sales contract, or other title retention or security
arrangement, or is other than in the possession and under the control of Company. True and
complete copies of all such leases and security arrangements have been fumished to Buyer by
the Shareholders. The tangible personal property reflected in Schedule 5.1(xi) constitutes all
such tangible personal property necessary for the conduct by Company of its business as now
conducted. Except as disclosed in Schedule 5.1(xi), all tangible personal property used in
Company's business is in good operating condition and repair, ordinary wear and tear excepted.
(xii) Accounts Receivable. All accounts receivable of Company
shown on its most recent balance sheet included in the Financial Statements and all accounts
receivable of Company created after the date thereof and prior to the Closing, arose from valid
transactions in the ordinary course of business and have been collected or to the best knowledge
of the Shareholders are collectible in the aggregate recorded amounts.
(xiii) Trade Names, Trademarks and Copyrights. Except as set
forth on Schedule 5.1(xii), Company does not use any trademark, service mark, trade name, or
copyright in its business, and does not own any trademarks, trademark registrations or
applications, trade names, service marks, copyrights, or copyright registration or applications.
No person owns any trademark, trademark registration or application, service mark, trade name,
copyright, or copyright registration or application the use of which is necessary in connection
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with the operation of Company's business or in connection with the performance of any contract
to which Company is a party.
(xiv) Title to Assets. Except as set forth in this Agreement and the
Exhibits or Schedules hereto, Company has good and marketable title to all its assets and
interests in assets, whether real, personal, mixed, tangible or intangible, which constitute all the
assets and interests in the assets that are used in its business. All of such assets are free and clear
of restrictions on or conditions to transfer or assignment, and free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way, covenants,
conditions, or restrictions, except for those disclosed in the Financial Statements or in the other
Exhibits or Schedules to this Agreement.
(xv) Employment and Benefits Contracts. Company has no
employees. There are no employment contracts, deferred compensation contracts, collective
bargaining agreements, and pension, bonus, profit sharing, stock option, or other agreements
providing for employee remuneration or benefits with respect to Company.
(xvi) Insurance Policies. Schedule 5.1(xvi) to this Agreement is a
complete and accurate description of all insurance policies held by Company concerning its
business and properties. True and complete copies of all such insurance policies have been
furnished by the Shareholders to Buyer. Company now maintains and has maintained insurance
protection against all liabilities, claims and risks against which it is customary to insure.
Company is not in default with respect to the payment of premiums on any such policies.
(xvii) Other Contracts. Company is not a party to, nor is the
property of Company bound by, any agreement not expressly disclosed in Schedule 5.1(xvii) of
this Agreement, and any agreements so disclosed, were entered into in the ordinary course of
business. As to the agreements listed in Schedule 5.1(xvii) or in any other Schedule to this
Agreement, Shareholders have provided true and complete copies of such agreements to Buyer.
There is no default or event that with notice or lapse of time, or both, would constitute a default
by any party to any of the agreements referred to in this Section. Company has not received any
notice that any party to any of these agreements intends to cancel or terminate any of these
agreements or to exercise or not exercise any options under any of these agreements. Company
is not a party to nor is Company bound by any agreement which in any material manner limits or
restricts Company from competing in any line of business or carrying on or expanding the nature
or geographical scope of its business anywhere in the State of California.
(xviii) Compliance With Laws. Company has not received notice
of any violation of any applicable federal, state, or local statute, law, or regulation (including,
without limitation, any applicable building, zoning, or other law, ordinance, or regulation)
affecting its properties or the operation of its business, and there are not any such violations.
(xix) Litigation. There is no suit, action, arbitration or legal,
administrative, or other proceeding, or governmental investigation pending or threatened against
or affecting Company, or its business, assets, or financial condition.
(xx) Broker - Salesperson Independent Contractors. Schedule
5.1(xx) is a complete and accurate list of the names of all broker - salesperson independent
contractors of Company together with a complete and accurate copy of such independent
contractors written agreement with Company.
(xxi) Lack of Conflicts. Except asset forth in Schedule 5.1(xxi),
no past or present shareholder or employee of Company has any interest in any competitor or
supplier of Company, owns any real or personal property leased to Company, owns any patents,
service marks or other rights of property which affects any asset of Company, or has any
transactions with Company not elsewhere disclosed in this Agreement.
(xxii) Agreement Will Not Cause Breach. Except as set forth in
Schedule 5.1(xxii), the consummation of the transactions contemplated by this Agreement will
not result in or constitute any of the following: (i) a default or an event that, with notice or lapse
of time, or both, would be a default, breach, or violation of the organizational documents of
Company or any lease, license, promissory note, conditional sales contract, commitment,
indenture, mortgage, security agreement, or other agreement, instrument or arrangement to
which Company or the Shareholders is a party or by which any of them or their assets are bound;
(ii) an event that would permit any party to terminate any agreement material to the operation of
Company's business; or (iii) the creation or imposition of any lien, charge, or encumbrance on
any of the assets of Company.
(xxiii) Absence of Specified Changes. Except as set forth in
Schedule 5.1(xxiii), since the date of the most recent financial statements attached hereto as
Exhibit "C," there has not been any: (1) Transaction by Company except in the ordinary course
of business as conducted on that date; (2) Capital expenditure by Company; (3) Material adverse
change in the financial condition, liabilities, assets, business, or prospects of Company; (4)
Destruction, damage to, or loss of any asset of Company (whether or not covered by insurance)
that materially and adversely affects the financial condition, business, or prospects of Company;
(5) Change in accounting methods or practices (including, without limitation, any change in
depreciation or amortization policies or rates) by Company; (6) Revaluation by Company of any
of its assets; (7) Declaration, setting aside, or payment of a dividend or other distribution in
respect of stock of Company, or any direct or indirect redemption, purchase or other acquisition
by Company of any of its stock; (8) Increase in the salary or other compensation payable or to
become payable by Company to any of its employees or independent contractors, or the
declaration, payment, or commitment or obligation of any kind for the payment, by Company of
a bonus or other additional salary or compensation to any such person; (9) Sale or transfer of any
asset of Company except in the ordinary course of business; (10) Amendment or termination of
any contract, agreement, or license to which Company is a party, except in the ordinary course of
business; (11) Loan by Company to any person or entity, or guaranty by Company of any loan;
(12) Mortgage, pledge, or other encumbrance of any asset of Company; (13) Waiver or release of
any right or claim of Company, except in the ordinary course of business; (14) Commencement
or notice or threat of commencement of any civil litigation or any governmental proceeding
against or investigation of Company; (15) Labor trouble or claim of wrongful discharge or other
unlawful labor practice or action; (16) Issuance or sale by Company of stock; (17) Agreement by
Company to do any of the things described in the preceding clauses (I ) through (16); or (18)
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Other event or condition of any character that has or might reasonably have a material and
adverse effect on the financial condition, business, assets, liabilities, or prospects of Company.
(xxiv) Environmental Matters.
(a) Company is conducting and has at all times conducted
its business and operation in compliance with all applicable statutes, laws, rules, regulations,
ordinances, permits, orders, decrees or other obligations lawfully imposed by government
authority in effect at the relevant times pertaining to protection of the environment, the treatment,
emission, and discharge of gaseous, particulate, and effluent pollutants and the generation,
manufacture, production, refinement, processing, use, handling, storage, treatment, removal,
transport, transloading, cleanup, decontamination, discharge and disposal of Hazardous
Substances (as hereinafter defined), including, without limitation, those statutes, laws, rules, and
regulations set forth in subsection (f) below (collectively, "Environmental Laws "), and no
proceedings are pending or, to the knowledge of the Shareholders, threatened against Company
with respect to the foregoing matters;
(b) Company has not received any notice that it is
considered to be a potentially responsible party with respect to any site listed or proposed to be
listed on the National Priorities List pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601, et seq.
( "CERCLA "), or any registry or inventory of hazardous waste or similar sites maintained by any
state of the United States of America or under any similar Environmental Law;
(c) There are no conditions (including, without limitation,
the past or present existence of any underground storage tank on any such property, the presence
of any Hazardous Substance in, on or about any such property or the migration of any Hazardous
Substance from or across any such property) existing on any of the properties currently or
formerly owned, leased, or occupied by Company that may require remedial investigation,
action, removal, or closure by Company under any Environmental Laws;
(d) No claim, demand, or action has been made or
threatened against or upon Company, or, to the knowledge of the Shareholders, any person or
entity from whom or to whom Company has at any time leased any property, based upon or
relating to alleged damage to health caused by any Hazardous Substance;
(e) There have been no environmental inspections,
investigations, studies, tests, reviews, or other analyses conducted in relation to any property
currently owned or leased by Company during the time that Company has owned or leased such
property, except as may have been performed by or on behalf of Company, or by any federal,
state, or local environmental agency or authority, as part of routine monitoring of environmental
compliance; and
(f) For purposes of this Agreement, "Hazardous
Substance" shall mean (x) any flammable, ignitable, corrosive, reactive, radioactive or explosive
substance or material, hazardous waste, toxic substance or related material, (y) any other
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substance or material defined or designated as a hazardous or toxic substance, material or waste
by applicable federal, state, or local laws or regulations (including, without limitation, any
Environmental Laws) currently in effect or as amended or promulgated in the future, and (z)
such other substances, materials and wastes that are or become regulated under applicable
federal, state, or local laws or regulations, and shall include, without limitation:
(1) those substances included within the definitions
of "hazardous substances ", "hazardous materials ", "toxic substances ", or "solid waste" in
CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq., and
the Hazardous Materials Transportation Act, 49 U.S.C. Sections 1801 et seq., and in the
regulations promulgated pursuant to said Environmental Laws;
(2) those substances listed in the United States
Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR
Part 302 and amendments thereto); and
(3) any material, waste, or substance that is, in
whole or in part, (w) petroleum, (x) asbestos, (y) polychlorinated biphenyls, or (z) designated as
a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. § 1321) or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. § 1317), or Section 112 or other
Section of the Clean Air Act, as amended.
(xxv) Permits and Licenses. Schedule 5.1(xxv) is a complete and
accurate list of all permits and licenses held by Company or required in connection with the
operation of its business.
(xxvi) Full Disclosure. None of the representations and warranties
made by the Shareholders or Company, or made in any certificate or memorandum furnished or
to be furnished by the Shareholders or Company, or on their behalf, contains or will contain any
untrue statement of a material fact, or omit any material fact the omission of which would be
misleading.
6. The Shareholders' Obligations Before Closing. The Shareholders
covenant that from the date of this Agreement until the Closing:
6.1 Buyer's Access to Premises and hiformation. Buyer and his
counsel, accountants, and other representatives shall have full access during normal business
hours to all properties, books, accounts, records, contracts, and documents of or relating to
Company. The Shareholders shall furnish or cause to be furnished to Buyer and his
representatives all data and information concerning the business, finances, and properties of
Company that may reasonably be requested.
6.2 Conduct of Business in Normal Course. Company will carry on its
business and activities diligently and in the same manner as previously carried out, and shall not
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make or institute any unusual or novel methods of accounting or operation that will vary
materially from those methods used by Company as of the date of this Agreement.
6.3 Preservation of Business and Relationships. Company will use its
best efforts to preserve its business organizations intact, to keep available to Buyer its present
employees, and to preserve its present relationships with customers, suppliers, and others having
business relationships with Company.
6.4 Maintenance of Insurance. Company will continue to carry its
existing insurance, subject to variations in amounts required by the ordinary operations of its
business.
6.5 New Transactions. Company will not, without Buyer's written
consent, do or agree to do any of the following acts: (a) enter into any contract, commitment, or
transaction not in the usual and ordinary course of its business; (b) enter into any contract,
commitment, or transaction in the usual and ordinary course of business involving an amount
exceeding Five Hundred Dollars ($500), individually, or Two Thousand Five Hundred Dollars
($2,500) in the aggregate; (c) make any capital expenditures or enter into any leases of capital
equipment or property; or (d) sell or dispose of any capital assets.
6.6 Existing Agreements. Company will not modify, amend, cancel,
or terminate any of their existing contracts or agreements, or agree to do any of those acts, except
in the usual and ordinary course of its business.
6.7 Representations and Warranties True at Closing. All
representations and warranties of Company and/or the Shareholders set forth in this Agreement
will also be true and correct as of the Closing as if made on that date.
Conditions Precedent to Performance.
7.1 Conditions Precedent to Buyer's Performance. Buyer's obligations
under this Agreement are subject to the full, complete and timely satisfaction and discharge, at or
before the Closing, of each and all of the following conditions. Buyer may waive any or all of
these conditions in whole or in part without prior notice; provided, however, that no such waiver
of a condition shall constitute a waiver by Buyer of any of its other rights or remedies, at law or
in equity, if Company or the Shareholders should be in default of any of their respective
representations, warranties, or covenants under this Agreement.
(i) Representations and Warranties. Each and all of the
representations and warranties of Company and the Shareholders contained in this Agreement
shall be complete, true and correct as represented or warranted as of the date hereof and through
and including the Closing.
(ii) Covenants and Agreements. Company and the Shareholders
shall have performed and complied with each and all of the covenants, agreements, terms and
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conditions to be performed and complied with by them, on or before the Closing pursuant to the
provisions of this Agreement.
(iii) Litigation. No action, suit or proceeding before any court or
governmental body or authority, pertaining to the transactions contemplated by this Agreement,
or its consummation, shall have been instituted or threatened on or before the Closing.
(iv) No Material Adverse Change. Prior to the Closing, there shall
have not been any material adverse change in the financial condition or the results of operations
of Company and there shall not have been any material loss or damage to the property of
Company, whether or not insured, that materially affects Company's ability to conduct its
business.
(v) Consents. The parties shall have obtained all necessary
agreements, consents and approvals of any other third parties or governmental agencies to the
consummation of the transactions contemplated by this Agreement or otherwise pertaining to the
matters covered by it (including, without limitation, the Lease Amendment and the landlord's
consent under the Lease to the transfer of the shares (the "Lease Consent ").
(vi) Items to be Delivered. The Shareholders shall have delivered
to Buyer, on or before the Closing each and all of the items set forth in Section 3.2 hereof.
(vii) Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered to Buyer under this Agreement
shall be reasonably satisfactory to Buyer.
(viii) Due Diligence Review. The completion of Buyer's due
diligence review of Company to the reasonable satisfaction of Buyer.
8. Survival of Representations and Warranties. The parties hereby
acknowledge and agree that each and all of the representations, warranties, covenants and
agreements contained herein or in any exhibit hereto shall survive the execution of this
Agreement and the Closing of the transactions contemplated herein. No representations or
warranties whatsoever are made by any party to this Agreement, except as specifically set forth
in this Agreement or the other agreements provided for in this Agreement.
9. Post- Closing Obligations.
9.1 The Shareholders' Indemnity. The Shareholders shall jointly and
severally indemnify, defend, and hold harmless Buyer and Company against and in respect of
any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries,
and deficiencies, including interest, penalties, and reasonable attorneys' fees, that Buyer or
Company shall incur or suffer, which arise, result from, or relate to (i) any breach of, or failure
by Company or the Shareholders to perform, any of their respective representations, warranties,
covenants, or agreements in this Agreement or in any schedule, certificate, exhibit, or other
agreement furnished or to be furnished by any of them under this Agreement, (ii) any debt,
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liability or obligation whatsoever of Company, whether accrued, absolute, contingent, known,
unknown or otherwise, that arose from, relates to or is connected with the ownership or operation
of Company prior to the Closing Date, or (iii) any matter, event or condition that is the subject of
indemnity by the Shareholders elsewhere in this Agreement. Buyer shall have the right to offset
against any sums payable to the Shareholders by Buyer under this Agreement (or under any other
agreement contemplated by this Agreement) the amount of any such loss, damage or expense
incurred by Buyer which is subject to indemnification pursuant to this Section 9.1.
Buyer shall promptly notify the Shareholders of the existence of
any claim, demand, or other matter to which their indemnification obligations would apply, and
shall give them a reasonable opportunity to defend the same at their own expense and with
counsel of their own selection; provided, that Buyer shall at all times also have the right to fully
participate in the defense at its own expense. If the Shareholders shall, within a reasonable time
after this notice, fail to defend, Buyer shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business judgment), the claim or
other matter on behalf, for the account, and at the risk, of the Shareholders. If the claim is one
that cannot by its nature be defended solely by the Shareholders, then Buyer shall make available
all information and assistance that the Shareholders may reasonably request.
10. Miscellaneous.
10.1 Finder's or Broker's Fees. Each of the parties represents and
warrants that it has dealt with no broker or finder in connection with any of the transactions
contemplated by this Agreement, and, insofar as it knows, no broker or other person is entitled to
any commission or finder's fee in connection with any of these transactions and each of the
parties hereby indemnifies the other against any commission or finder's fees such indemnifying
party may have incurred.
10.2 Expenses. Except as otherwise provided in this Agreement and
any other agreements entered into pursuant to this Agreement, all legal and other costs and
expenses incurred in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expense.
10.3 Effect of Headings. The subject headings of the Sections of this
Agreement are included for purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
10.4 Entire Agreement; Modification; Waiver. This Agreement and the
agreements to be entered into pursuant to this Agreement constitute the entire agreement
between the parties pertaining to the subject matter contained in it and supersedes all other prior
and contemporaneous agreements, representations, and understandings of the parties. No
supplement, modification, or amendment of this Agreement shall be binding unless executed in
writing by all the parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in writing by the
party making the waiver.
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10.5 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Execution and delivery of any counterpart may be
via facsimile. Any party delivering a facsimile of his signature shall thereafter also provide a
manually executed original signature at such party's earliest convenience.
10.6 Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this Agreement on
any persons other than the parties to it and their respective successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provision give any third persons any right
of subrogation or action over against any party to this Agreement.
10.7 Assi ent. No party to this Agreement may assign any of its
rights, or delegate any of its duties, under this Agreement and any such purported assignment
shall be void.
10.8 Recovery of Litination Costs. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
10.9 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is to be given, or on
the second day after mailing if mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly addressed as follows:
To Company or the Shareholders:
With a copy to:
To Buyer: Anthony B. Duni
Ann M. Duni
Berth 202
Wilmington, California 90744
With a copy to: Stephen A. Del Guercio, Esq.
Demetriou, Del Guercio, Springer & Francis, LLP
801 South Grand Avenue, 10th Floor
Los Angeles, California 90017
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Any party may change its address for purposes of this Section by giving the other parties written
notice of the new address in the manner set forth above.
10.10 Goveming Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of California.
10.11 Publicity. Except as otherwise set forth in this Agreement, the
parties shall keep confidential the transactions contemplated by this Agreement. All notices to
third parties and all other publicity concerning the transactions shall be jointly planned,
coordinated and approved by and between Buyer and Company.
10.12 Exhibits and Schedules. If, at the time of execution of this
Agreement, any exhibits or schedules pertaining to Company or the Shareholders is not attached
to this Agreement, the Shareholders shall promptly and prior to the Closing, furnish such exhibit
or schedule to Buyer, which exhibit or schedule shall be deemed incorporated into this
Agreement as if attached hereto at the time of execution. As a condition precedent to Buyer's
obligations under this Agreement, Buyer shall have the right to approve the form and content of
any such subsequently provided exhibit or schedule.
10.13 Termination. Subject to the provisions of Section 3.1 relating to
the postponement of the Closing Date, any party may on the Closing Date terminate this
Agreement without liability to such party, if any condition precedent for the benefit of such party
set forth in this Agreement has not been satisfied. If either Buyer, on the one hand, or the
Company Parties, on the other hand, materially default in the due and timely performance of any
of their representations, warranties, covenants or agreements under this Agreement, the
nondefaulting parties may on the Closing Date give notice of termination of this Agreement in
the manner provided in Section 10.9. The term "Company Parties" means either the
Shareholders or Company or all of them.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on
the day and year first above written.
BUYER:
ANTHONY B. DUNI
ANN M. DUNI
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COMPANY:
HERITAGE YACHT SALES, INC.
a California corporation
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THE SHAREHOLDERS:
DONALD ROSS
JILLAINE ROSS
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• EXHIBIT "C" •
FIRST AMENDMENT TO
LEASE AGREEMENT
This First Amendment to the Lease Agreement is entered into this _th of August,
2005, by and between Anthony B. Duni and Ann M. Duni (collectively, "Tenant ") and
the City of Newport Beach ( "City ").
RECITALS
On August 1, 2001, City entered into a Lease Agreement ( "Lease ") with Heritage
Yacht Sales, Inc., a California corporation ( "Heritage ") which is attached hereto
as Exhibit "A ").
2. Heritage and Tenant entered into an Agreement for the Purchase and Sale of
Stock of Heritage Yachts Sales, Inc. ( "Heritage "), dated 2005
( "Purchase and Sale Agreement'), in which Tenant purchased all the shares of
stock in Heritage.
3. Concurrent with the execution of the Purchase and Sale Agreement, the City
consented to the Assignment of the Lease from Heritage to Tenant, and Tenant
agreed to be bound by the terms and conditions of the Lease.
4. City and Tenant now desire to amend the Lease to reflect the new terms and
conditions as provided below.
Now therefore, City and Tenant hereby agree as follows:
1. Term.
Article 3 is hereby deleted in its entirety and replaced with the following:
3. TERM.
3.1 Base Term. The "Base Term" of this Lease shall be five (5) years
from the Effective Date and shall expire on July 31, 2006, unless
extended as provided in Sections 3.2 and 3.3 below or terminated
in accordance with the other provisions of this Lease.
3.2 First Option Term. Provided Tenant is not in default of any
provision of the Lease during the Base Term, Tenant may extend
the term of this Lease for an additional term of five (5) years
( "First Option Term ") which shall commence on the Expiration of
the Base Term. Tenant may exercise the First Option Term
extension by giving City written notice of its intention to do so on
or before February 1, 2006. If exercised, the First Option Term
shall expire on July 31, 2011.
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3.3 Second Option Term. Provided Tenant is not in default of any
provision of the Lease during the Base Term and/or First Option
Term, Tenant may extend the term of this Lease for an additional
term of five (5) years ( "Second Option Term ") which shall
commence on the Expiration of the First Option Term. Tenant
may exercise the Second Option Term extension by giving City
written notice of its intention to do so on or before February 1,
2011. If exercised, the Second Option Term shall expire on July
31, 2016.
3.4 First and Second Option Term. If Tenant is in default of any term,
condition, or provision of the Lease during the Base Term and/or
the First Option Term , City may, in its sole discretion, revoke the
First Option Term or Second Option Tenn by written notification
to Tenant, even if Tenant should cure its default prior to City's
revocation. If City revokes the First Option Term or Second
Option Term, the Lease shall terminate on July 31, 2006, or if
Tenant has exercised its First Option Term extension, shall
terminate on July 31, 2011.
3.5 Terms of Lease. The "Term" is defined as the Base Term and, if
exercised, the First Option Term and the Second Option Term.
3.6 Hold Over. Should Tenant hold over and continue in possession of
the Premises after the Expiration of the Base Term, First Option
Term or Second Option Term, Tenant's continued occupancy of
the Premises shall be considered a month -to -month tenancy subject
to tennination by either Party upon thirty (30) days advance notice
and also to all the terms and conditions of this Lease, except the
provisions of Sections 3.1, 3.2 and 3.3.
Default and Remedies.
Article 15 of the Lease is hereby deleted in its entirety and replaced with the
following:
15. DEFAULT
15.1 The occurrence of any one or more of the following shall
constitute a default by Tenant:
(a) Failure of Tenant to pay rent due hereunder within thirty
(30) days after written notice from Lessor; or
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(b) Any failure by Tenant to perform any of the other terms,
conditions or covenants of this Lease to be observed or
performed by Lessee after thirty (30) days written notice
from Lessor; or
(c) Tenant becoming insolvent or filing any debtor
proceedings, or should any adjudications in bankruptcy be
rendered against Tenant, or should Tenant take or have
taken against it, in any court pursuant to any statute either
of the United States or of any State, a petition in
bankruptcy or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of
Tenant's property, and should the same not be discharged
within one hundred twenty (120) days thereafter; or
(d) Tenant permitting the Premises to become vacant or
unoccupied for fifteen (15) consecutive days after written
notice to Tenant (except for vacancies caused by any force
majeure or by remodeling, reconstruction, alteration or
repairs permitted under this Lease); or
(e) The appointment of a trustee or receiver to take possession
of substantially all of the assets of Tenant located at the
Premises or Tenant's interest in this Lease or the Premises,
where possession is not restored within thirty (30) days.
15.2 Except for the payment of rent, if the nature of Tenant's default or
breach under this paragraph is such that more than thirty (30) days
are reasonably required for its cure, then Tenant shall not be
deemed to be in default or breach if Tenant commences such cure
within such thirty (30) day period and diligently proceeds with
such cure to completion.
15.3 Remedies. In the event of a default or breach by Tenant and
Tenant's failure to cure such default or breach, City may at any
time and with or without notice do any one or more of the
following:
(a) Re -enter the Premises, remove all persons and property,
and repossess and enjoy such Premises.
(b) Terminate this Lease and Tenant's right of possession of
the Premises. Such termination shall be effective upon
City's giving written notice and upon receipt of such
notice, Tenant shall immediately surrender possession of
the Premises to City.
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(c) Maintain this Lease in full force and effect and recover any
rental, royalty, or other consideration as it becomes due,
without terminating Tenant's right of possession, regardless
of whether Tenant shall have abandoned the Premises.
(d) Exercise any other right or remedy which City may have at
law or equity.
Lease.
Except as expressly modified herein, all other provisions, terms, covenants and
conditions of the Lease shall remain unchanged and in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Consent as of the date
first written above.
TENANT:
Anthony B. Duni
Ann M. Duni
CITY OF NEWPORT BEACH
a municipal corporation
Its:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Assistant City Attorney