HomeMy WebLinkAbout14 - Amendment the Lease Agreement for Use of a Portion of the Balboa Pier Located at 1 Balboa PierQ �EwPpRT
CITY OF
s NEWPORT BEACH
`q44:09 City Council Staff Report
June 24, 2025
Agenda Item No. 14
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Seimone Jurjis, Assistant City Manager/Community Development
Director - 949-644-3232, sjurjis@newportbeachca.gov
PREPARED BY: Lauren Wooding Whitlinger, Real Property Administrator - 949-644-
3236, Iwooding@newportbeachca.gov
TITLE: Amendment No. One to the Lease Agreement with Ruby's Diner, Inc.
for Use of a Portion of the Balboa Pier Located at 1 Balboa Pier
ABSTRACT:
Constructed by the City of Newport Beach in 1939, the Balboa Pier extends over the
beach and ocean at Main Street on the Balboa Peninsula. Ruby's Diner, Inc. and its
successors have leased the concession building at the end of the Balboa Pier since 1982.
With the current lease expiring on July 1, 2025, the tenant requested an extension to
provide time to plan and design a major remodel project and to negotiate a new lease to
continue its business operations at the property. For the City Council's consideration is
Amendment No. One to the Lease Agreement (Attachment A) with Heritage
Management, Inc. (successor in interest to Ruby's Diner, Inc.), extending the use of a
portion of the Balboa Pier for a term of seven years. Also included is a request to waive
City Council Policy F-7, Income and Other Property.
RECOMMENDATIONS:
a) Find this matter is exempt from the California Environmental Quality Act (CEQA)
pursuant to Section 15301 (Existing facilities) of the CEQA Guidelines, California
Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential to
have a significant effect on the environment;
b) Authorize the City Manager and City Clerk to execute Amendment No. One to
Lease Agreement between the City of Newport Beach and Heritage Restaurant
Management, Inc. (successor in interest to Ruby's Diner, Inc.) for use of a portion of
the City property known as the Balboa Pier, located at 1 Balboa Pier, in a form
substantially similar to the amendment attached to the staff report; and
c) Approve a waiver of City Council Policy F-7, Income and Other Property based on the
findings contained in this staff report and the Agreement, that conducting an open bid
process or changing the tenant would result in excessive vacancy, and tenant
improvement allowances, expenses or rent concessions which would outweigh other
financial benefits.
14-1
Amendment No. One to the Lease Agreement with Ruby's Diner, Inc.
for Use of a Portion of the Balboa Pier Located at 1 Balboa Pier
June 24, 2025
Page 2
111f�A11AA1/�\1_
Concessions at the Balboa Pier
In 1939, the City of Newport Beach constructed what became known locally as the
Balboa Pier (Pier) at Main Street on the Balboa Peninsula as shown in Figure 1. The Pier,
which extends over the sand approximately 920 feet into the ocean, was constructed with
a small retail building at the end. The City leased the building to various third parties for
operation as a concession as well as a bait and tackle shop. After falling into disrepair,
the concession was closed in 1977 and left vacant for several years while the City
attempted to find a new operator. In 1982, the City received a proposal to reopen the
concession and entered into a lease agreement with Douglas Cavanaugh. After a small
remodel, the concession was opened for business in December 1982. While it was initially
intended to operate only seasonally, the success of the concession on the Pier led to the
creation of the now iconic restaurant brand - Ruby's Diner.
Figure 1, An aerial photograph of the Balboa Pier
14-2
Amendment No. One to the Lease Agreement with Ruby's Diner, Inc.
for Use of a Portion of the Balboa Pier Located at 1 Balboa Pier
June 24, 2025
Page 3
Ruby's Diner, Inc. and the Current Lease
After operating for several years at the Pier, Ruby's Diner, Inc. was incorporated in 1985,
and began operating year-round, serving hamburgers and shakes to visitors and
residents from the concession window, small dining room, and outdoor patio (collectively,
"Premises"), as shown in Figure 2 below. The success of the restaurant, named for
Mr. Cavanaugh's mother Ruby, allowed the brand to expand, opening additional locations
and concepts around Southern California.
I�
r
Figure 2, An aerial photograph of the Premises, as occupied by Ruby's Diner, Inc.
In November 1999, the City Council authorized the current lease agreement, which was
executed between the City and Ruby's Diner, Inc. on July 1, 2000 (Lease). The Lease,
provided as Attachment B to this report, had an original term of 15 years and included
two five-year option terms that have both been exercised. With no further extensions
available in the Lease, it is set to expire on July 1, 2025. Rent under the Lease is
calculated as the greater of base rent (currently set at or $46,835.40 per year, or
$3,902.95 per month) or percentage rent of 6% of gross sales up to $1,000,000 and 6.5%
of gross sales of more than $1,000,000 per year. The City has collected over $150,000
per year in percentage rent for the last three fiscal years.
In 2010, Ruby's Diner, Inc. franchised the restaurant location at the Pier to John Fisher
of Heritage Restaurant Management, Inc. (Tenant) consistent with the terms of the Lease.
In 2018, Ruby's Diner, Inc. filed for bankruptcy and its assets were subsequently sold to
RD Franchise Systems, LLC, which is the current franchisor for Ruby's Diner restaurants
14-3
Amendment No. One to the Lease Agreement with Ruby's Diner, Inc.
for Use of a Portion of the Balboa Pier Located at 1 Balboa Pier
June 24, 2025
Page 4
(Franchisor). The Tenant and Franchisor are working together to continue the success of
the brand and the restaurant at the Pier, as outlined in a letter to the City (Attachment C).
Over the last several years, the Tenant has sought to perform various maintenance and
repairs to the Premises. However, given the age and unique location of the structure, the
Tenant has requested a seven-year extension to the Lease term (Amendment), to allow
time to plan and obtain approvals for a larger redevelopment project. The Tenant seeks
to work with the City and Franchisor to develop a capital improvement project to extend
the life of the Premises and negotiate a new long-term lease to continue its operations of
the original Ruby's Diner restaurant on the Balboa Pier. City staff and the Tenant have
negotiated the terms of the Amendment and submit it for the City Council's consideration.
Amendment No. One to the Lease
The proposed terms of the Amendment, for continued use of the Premises, are
summarized below:
The term of the Lease is revised to include one additional seven-year option, for a
total possible term of 32 years, unless terminated earlier as provided by the Lease.
Execution of the Amendment shall constitute the Tenant's timely exercise of the
seven-year option term, and the new expiration date of the Lease shall be
July 1, 2032.
2. Starting July 1, 2025, and annually thereafter during the seven-year option term,
the base rent shall be increased by 3% over the then -effective base rent. Base rent
is currently set at $46,835.40 per year.
3. To comply with state law and the Newport Beach Municipal Code, the Tenant must
source separate all refuse from its restaurant operations. The City shall construct
a new enclosure for placement of the necessary waste containers for recycling and
organics materials at the base of the Pier. This cost shall be borne by the Tenant
up to $50,000.00 and reimbursed to the City as additional rent.
4. The cost of all refuse collection from the Premises, even if provided under the
City's contract, shall be the Tenant's sole responsibility and reimbursed to the City
as additional rent.
5. The Tenant must keep the Premises, including those areas outside of the
concession building used for outdoor dining within the southerly 80-feet of the Pier,
in good condition at its sole cost and expense.
6. The scope and limits of the Tenant's insurance requirements have been updated
to reflect current industry standards. The Tenant shall provide certificates of
insurance to the satisfaction of the City's risk manager, naming the City as
additional insured.
The Amendment has been reviewed by the City Attorney's Office and has been approved
as to form. The Tenant has reviewed and approved the terms of the Amendment.
14-4
Amendment No. One to the Lease Agreement with Ruby's Diner, Inc.
for Use of a Portion of the Balboa Pier Located at 1 Balboa Pier
June 24, 2025
Page 5
City Council Policy F-7, Income and Other Property
Due to the Tenant's long-term use of the Premises, and the unique services provided to
the community, staff did not conduct an open bid process to solicit proposals from other
operators, as typically required by City Council Policy F-7, Income and Other Property
(Policy) (Attachment D).
Staff believes the following findings can be made, as required by the Policy, when an
open bid is not conducted and a waiver is requested:
1. Converting the property to another use or changing the operator of the property
would result in excessive vacancy, which would outweigh other financial benefits;
and
2. The Tenant provides an essential or unique service to the community that might
not otherwise be provided were an open bid for use of the property be required.
California Surplus Land Act
Assembly Bill 1486 was signed into law in 2019, went into effect in 2020, and made
significant changes to the California Surplus Land Act (SLA) (Government Code §54220,
et seq.). With further updates to the legislation in 2024, and in compliance with the
updated SLA, the Amendment is not subject to the SLA since its terms do not provide for
a "disposition of surplus land" as the Tenant is limited to tenant improvements and no
development or demolition of the Premises shall occur.
FISCAL IMPACT:
Revenues collected pursuant to the proposed Amendment will continue to be posted to
the Tidelands Fund (10050505) and General Fund (01050505) accounts in the
Community Development Department and will be included in future years' budgets. The
revenues collected from the existing Lease are included in the budget for fiscal year
2025-26.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this matter exempt from the California
Environmental Quality Act (CEQA) pursuant to Section 15301 (Existing facilities) of the
CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3,
because it has no potential to have a significant effect on the environment. The
City Council's action authorizes execution of the Amendment for the Tenant's use of an
existing commercial space and the Tenant may pursue tenant improvements
(i.e., remodeling) pursuant to the Amendment.
14-5
Amendment No. One to the Lease Agreement with Ruby's Diner, Inc.
for Use of a Portion of the Balboa Pier Located at 1 Balboa Pier
June 24, 2025
Page 6
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A — Amendment No. One to Lease Agreement
Attachment B — Existing Lease Agreement
Attachment C — Letter from Ruby's Hospitality Group
Attachment D — City Council Policy F-7 - Income and Other Property
14-6
Attachment A
Amendment No. One to Lease Agreement
14-7
AMENDMENT NO. ONE TO
LEASE AGREEMENT BY AND BETWEEN
THE CITY OF NEWPORT BEACH AND
RUBY'S DINER, INC.
THIS AMENDMENT NO. ONE TO LEASE AGREEMENT ("Amendment No. One")
is made and entered into as of this 24 day of June, 2025 ("First Amendment Effective
Date"), by and between the CITY OF NEWPORT BEACH, a California municipal
corporation and charter city ("Lessor' or "City"), and HERITAGE RESTAURANT
MANAGEMENT, INC., a California corporation ("Lessee" or "Tenant"). Lessor and Lessee
are sometimes individually referred to herein as "Party" and collectively as the "Parties."
RECITALS
A. On July 1, 2000, Lessor and Ruby's Diner, Inc., a California corporation
("Ruby's"), entered into that certain Lease Agreement ("Lease") regarding a portion of the
Balboa Pier property owned by Lessor, which is identified as the "Premises" in the Lease,
for the operation of a restaurant business.
B. On November 12, 2010, Lessee purchased Ruby's restaurant business at
the Premises and has since been operating the restaurant business.
C. The Parties desire to enter into this Amendment No. One to increase the
number of options to extend, to adjust the base rent, to amend provisions regarding refuse
collection, to amend the terms of maintenance and repair, and update insurance
requirements and notice provisions under the Lease.
NOW, THEREFORE, it is mutually agreed by and between the undersigned
Parties as follows:
1. TERM
The Parties desire to provide for a third Option Term under the Lease to facilitate
Tenant's work and progress on a long term investment in the Premises with the intention
of entering into a new, long term lease agreement. Accordingly, Section 3.2 (Option to
Extend) of the Lease is amended in its entirety and replaced with the following:
"3.2. Option to Extend. Provided Tenant is not then in material default,
Tenant may extend the term of this Lease for two (2) additional successive terms
of five (5) years and then one (1) additional successive term of seven (7) years
(the "Option Term" or "Option Terms"). Tenant may exercise an Option Term by
giving City written notice of its intention to do so at least three (3) months prior to
Expiration of the initial Term or preceding Option Term, if any."
The Parties further agree that the Tenant validly exercised its right to exercise its
extension rights as to the first two (2) Option Terms, and that this Amendment No. One
constitutes Tenant's valid and timely written notice of its exercise of the third seven (7)
year Option Term.
14-8
2. RENT
Section 4.1(b) (Periodic Adjustment) of the Lease is amended in its entirety and
replaced with the following:
"(b) Periodic Adjustment. On the eighth (8th), twelfth
(12th) and, assuming Tenant's exercise of the options to
extend the Term, the sixteenth (16th), twentieth (20th), and
twenty-fourth (24th) anniversaries of the Rent Commencement
Date, the Base Rent shall be increased by the lesser of the
cumulative percentage increase in the CPI or three percent
(3%) per year. The cumulative percentage increase in the CPI
shall be determined based on the increases during the period
from the Rent Commencement Date or the date of the
previous adjustment (whichever is appropriate) to the last
date prior to the anniversary on which the CPI was published
(typically the CPI for any given month is published
approximately sixty (60) days after the end of that month). On
July 1, 2025 (i.e., the twenty-fifth (25th) anniversary of the Rent
Commencement Date), and on each successive anniversary
of the Rent Commencement Date thereafter during the Option
Term, the Base Rent shall be increased annually by three
percent (3%) per year over the then -effective Base Rent as of
such date."
3. UTILITIES AND REFUSE COLLECTION
Section 7(b) (Refuse Collection) is amended in its entirety and replaced with the
following:
"(b) Refuse Collection. Tenant shall keep the Premises
free and clean of rubbish and litter and shall deposit
"Municipal Solid Waste" (as the term is defined in Section
6.06.010 of the Newport Beach Municipal Code), recyclables,
and organics in containers designated by City. Refuse
containers shall be kept in approved and enclosed areas as
set forth below:
Maintenance. Tenant, at its sole cost and expense,
shall maintain all enclosures in a clean and good
condition. This includes pressure washing on a weekly
basis and the prompt clean-up of all spills. Tenant shall
provide the pressure washing schedule to the City.
Tenant shall use environmentally safe measures to
reasonably ensure no runoff or contamination to the
sensitive ocean and beach environment in which the
Premises exists.
Amendment No. One to Lease Agreement
Page 2
14-9
Trash Enclosure. Tenant shall deposit all Municipal
Solid Waste (e.g. garbage, trash, rubbish, etc.)
exclusively in the refuse container located in the trash
enclosure immediately adjacent to the Tenant's patio.
iii. Recycling and Organics Enclosure. Tenant is
responsible for constructing a new enclosure to secure
containers for recycling and organic waste only ("New
Enclosure"), at the concrete pad at the base of the
Balboa Pier, as further depicted in Exhibit F, attached
hereto and incorporated herein by reference. The
design, dimensions, and permitting of the New
Enclosure shall be subject to City review and approval,
the construction of which shall be complete no more
than one (1) year from the First Amendment Effective
Date, subject to force majeure delays including delays
in obtaining any necessary governmental approvals.
Alternatively in City's sole discretion, City may
construct the New Enclosure, the third party costs and
staff time for which (not to exceed Fifty Thousand
Dollars ($50,000.00) shall be charged to Tenant in
addition to Rent or any other charged and shall not be
used to offset any other Rents owed, Tenant shall
promptly remit payment to the City for the costs of the
New Enclosure within the later to occur of 60 days
following completion of the New Enclosure or 60 days
following demand by the City. The New Enclosure
shall be used exclusively for Tenant and its operations,
and Tenant shall have the right to secure (i.e. lock) the
New Enclosure and otherwise prevent any third party
from using the New Enclosure.
iv. Tenant shall be responsible to secure the recycling and
organics containers stored in the New Enclosure and
Tenant shall only deposit recycling and organic waste
in the containers designated for such waste. Tenant
shall be responsible for bringing Tenant's recycling and
organics containers to and from the New Enclosure
and endeavor to do so early each morning.
V. At City's discretion, City may cause the relocation of
the refuse containers and point of collection to shared
facilities within the adjacent Newport Beach Junior
Lifeguard building.
Amendment No. One to Lease Agreement
Page 3
14-10
vi. Tenant shall be responsible for removing any debris or
cleaning any trail left behind from carrying any refuse
to and from the Premises, and Tenant shall be
responsible for undertaking commercially reasonable
efforts to ensure that any off -Premises trash enclosure
is limited to Tenant's access only. Tenant shall
implement and maintain all commercially reasonable
measures required to prevent illegal dumping or use of
the containers and enclosures.
Tenant shall pay City, in addition to any Rent or other charges,
one hundred percent (100%) of the costs for refuse collection
and service, in consideration of which City shall provide refuse
collection and service, which scope of services shall be based
on Tenant's needs. Tenant agrees that the City's Refuse
Manager, at its reasonable discretion, may increase or
decrease the number of collection days per week and adjust
refuse collection fees accordingly, based upon Tenant's
volume of Municipal Solid Waste, recyclable materials and
organic waste generated. City shall provide an adequate
amount of containers for Tenant's business operations.
Alternatively, in accordance with state and local law, Tenant
may procure and contract for Tenant's own refuse collection,
the costs and scheduling of which Tenant shall be solely
responsible, in which case Tenant shall not be obligated to
pay City for those services which Tenant procured and
contracted for from such third parties.
Tenant shall comply with the provisions of the State of
California and local provisions, including the Newport Beach
Municipal Code ("NBMC"), relative to the deposit of material
to be collected by City."
4. MAINTENANCE OF PREMISES
Section 9.1 (Maintenance and Repair by Lessee and City) is amended in its
entirety and replaced with the following:
"9.1 Maintenance and Repair by Tenant and City. Tenant
agrees that it will keep the Premises in Good Condition.
Tenant's Maintenance responsibilities include washing bird
droppings and dirt off the Premises, including roof, windows
and exterior walls as needed, but not less than once every
ninety (90) days. Graffiti shall be removed or painted over by
Tenant as soon as reasonably practicable. Tenant shall
Maintain and perform repairs as necessary to the recycling
and organics enclosure and Premises including but not limited
Amendment No. One to Lease Agreement
Page 4
14-11
to the roof, windows, trash enclosure and all exterior work.
City may perform Maintenance or repairs in the event Tenant
fails to commence required Maintenance or repairs within
three (3) business days after receipt of notice to do so. The
cost of any Maintenance or repairs by the City pursuant to this
Subsection shall be payable as additional Rent. All
furnishings, equipment, facilities, improvements, alterations,
attachments and appurtenances not provided by City, but
required for the Restaurant, including all kitchen equipment
and interior furnishings, shall be maintained in Good
Condition and repair by Tenant at its cost.
Tenant also agrees to keep the southerly eighty (80) feet of
the Balboa Pier, including all benches, free from rubbish,
debris and garbage related to the operation of the Restaurant.
The City may perform required cleaning and charge the costs
to Tenant if the Tenant fails to perform within five (5) days after
notice to do so and continue to Maintain the area as required
by this Lease."
5. AFFILIATE
As of August 18, 2021, RD Franchise Systems, LLC, a Nevada limited liability
company ("RHG") succeeded to the rights and interests of Ruby's pursuant to that certain
Asset Sale and Settlement Agreement, as amended. Accordingly, for the sake of clarity
and for avoidance of doubt, RHG and any entity owned and controlled by RHG, or under
common ownership and control with RHG, qualifies as an "Affiliate" or "Successor" of
Ruby's within the meaning of Section 13.2 of the Lease, and as such may take
assignment of the Lease without City's consent.
6. INSURANCE
Section 10.3 (Insurance Limits) is amended in its entirety and replaced with the
following:
"10.3 Insurance. Without limiting Tenant's indemnification
of City, Tenant shall obtain, provide and maintain at its own
expense during the term of this Lease, a policy or policies of
liability insurance of the type and amounts specified in Exhibit
"E," attached hereto and incorporated herein by this
reference."
7. NOTICES
Section 20 (Notices) is amended in its entirety and replaced with the following:
Amendment No. One to Lease Agreement
Page 5
14-12
"Any notice, demand, request, consent, approval or
communication that either Party desires or is required to give
shall be in writing and shall be deemed given three (3) days
after deposit into the United States registered mail, postage
prepaid, by registered or certified mail, return receipt
requested. Unless notice of a different address has been
given in accordance with this Section, all notices shall be
addressed as follows:
If to City, to: City of Newport Beach
Attention: Real Property Administrator
100 Civic Center Drive
Newport Beach, CA 92660
If to Tenant, to: Heritage Restaurant Management, Inc.
19602 Country Lake Drive
Magnolia, TX 77355
With a Copy to: Ruby's Hospitality Group, LLC
10795 W. Twain Avenue, Suite 100
Las Vegas, Nevada 89135
Attn: President
8. INTEGRATED CONTRACT
Except as expressly modified herein, all other provisions, terms, and covenants
set forth in the Lease shall remain in full force and effect. In the event of a conflict between
any term, provision, or condition of this Amendment and any term, provision, or condition
of the Lease, the terms, provisions, or conditions of the Lease will control.
[SIGNATURES ON NEXT PAGE]
Amendment No. One to Lease Agreement
Page 6
14-13
IN WITNESS WHEREOF, the parties have caused this Amendment No. One to be
executed on the dates written below.
APPROVED AS TO FORM: LESSOR: CITY OF NEWPORT BEACH,
CITY ATTORNEY'S OFFICE a California municipal corporation and
charter city
Date: Date:
By: By:
Aar n C. Harp �G,L
Cit Attorney ' JX4
ATTEST:
Date:
Grace K. Leung
City Manager
LESSEE: HERITAGE RESTAURANT
MANAGEMENT, INC., a California
corporation
Date:
By: By:
Leilani I. Brown John A. Fisher
City Clerk Chief Executive Officer / Chief Financial
Officer
[END OF SIGNATURES]
Attachments: Exhibit E — Insurance Requirements
Exhibit F — Location of Recycling and Organics Enclosure
Amendment No. One to Lease Agreement
Page 7
14-14
IN WITNESS WHEREOF, the parties have caused this Amendment No. One to be
executed on the dates written below,
APPROVED AS TO FORM: LESSOR: CITY OF NEWPORT BEACH,
CITY ATTORNEY'S OFFICE a California municipal corporation and
charter city
Date: _I
By- By:
Aaron C. Harp Grace K. Leung
City Attorney
City Manager
ATTEST: LESSEE: HERITAGE RESTAURANT
Date:— MANAGEMENT, INC., a California
corporation
M
Leilani I. Brown
City Clerk
Attachments:
Date:
� J Fi
sher
isher
5W- —
Chief Executive OffiZer / Chief Financial
Officer
[END OF SIGNATURES]
Exhibit E — Insurance Requirements
Exhibit F — Location of Recycling and Organics Enclosure
Amendment No. One to Lease Agreement Page 7
14-15
EXHIBIT E
INSURANCE REQUIREMENTS
Without limiting the Lessee's indemnification of Lessor, Lessee shall procure and
maintain in full force and effect at its own expense during the term of this Agreement,
policies of insurance of the type and amounts described below and, in a form
satisfactory to Lessor. Lessor reserves the right to modify these requirements,
including limits, based on the nature of the risk, prior experience, insurer, coverage,
passage of time, or other special circumstances. If the existing policies do not meet
the insurance requirements set forth herein, Lessee agrees to amend, supplement, or
endorse the policies to do so.
1. Minimum Scope and Limit of Insurance.
A. Workers' Compensation Insurance with statutory limits and Employer's
Liability Insurance with a limit of at least one million dollars ($1,000,000)
each accident for bodily injury and each employee for bodily injury by
disease in accordance with the laws of the State of California.
Lessee shall submit to Lessor, along with a certificate of insurance, a waiver
of subrogation endorsement in favor of the Lessee, City of Newport Beach,
its City Council, boards and commissions, officers, agents, volunteers,
employees.
B. Commercial General Liability/Marine General Liability at least as broad as
Insurance Services Office "occurrence" form CG 00 01 covering land and
waterborne exposures including but not limited to coverage for bodily injury
and property damage, products and completed operations, contractual
liability, personal and advertising injury, independent contractors, and
defense costs excess of limit, in an amount not less than two million dollars
($2,000,000) per occurrence and four million dollars ($4,000,000) general
aggregate.
Lessee shall procure, maintain, and submit to Lessor evidence of Products -
Completed Operations coverage for a period of three (3) years from the time
the Agreement is terminated.
Lessee shall submit to Lessor, along with a certificate of insurance,
additional coverage as stated in Section 2. Endorsements.
C. Automobile Liability Insurance with coverage at least as broad as Insurance
Services Office Form CA 00 01 covering any auto (Code 1), or if Lessee
has no owned autos, coverage for hired autos (Code 8) and non -owned
autos (Code 9) with limit no less than one million dollars ($1,000,000) each
accident for bodily injury and property damage.
Amendment No. One to Lease Agreement Page E-1
14-16
Lessee shall submit to Lessor, along with a certificate of insurance,
additional coverage as stated in Section 2. Endorsements.
D. Property Insurance coverage shall be maintained on an "All Risk" basis
equal to the full replacement cost of Premises, with no coinsurance clause.
Lessee shall be solely responsible for the payment of any deductible.
Business Interruption insurance shall provide for monthly rent payable to
Lessor for at least twelve (12) months if the premises are destroyed,
unusable or inaccessible.
Lessee shall submit to Lessor, along with a certificate of insurance,
additional coverage as stated in Section 2. Endorsements.
E. Builder's Risk Insurance during construction, alteration or any
improvements on Premises, Lessee shall maintain Builder's Risk insurance
with no coinsurance clause to cover "All Risk" of physical loss including
coverage for loss or damage from collapse and all property stored off -site
or in transit. The value insured shall cover 100% of the completed contract
cost and include Boiler & Machinery and soft costs and shall be maintained
until full acceptance of completed work. Lessee shall be solely responsible
for the payment of any deductible.
F. Contractors Pollution Legal Liability or Pollution Legal Liability insurance
including onsite and offsite coverage for bodily injury (including death and
mental anguish), property damage, non -owned disposal site liability,
defense costs, cleanup costs, and pollution conditions that arise from or in
connection with the transportation (including loading and unloading) by or
on behalf of Lessee, of any waste or waste materials off or away from the
project site. Coverage shall be provided for both sudden and accidental
and gradual and continuous pollution events with limits no less than five
million dollars ($5,000,000) each loss and in the aggregate. The policy shall
not exclude any hazardous materials for which there is exposure.
Lessee shall submit to Lessor, along with a certificate of insurance,
additional coverage as stated in Section 2. Endorsements.
G. Excess/Umbrella Liability Insurance shall be "following form" of the
underlying policy coverage, terms, conditions, and provisions and shall
meet all the insurance requirements stated in this Agreement, including, but
not limited to the additional insured, primary & non-contributory and waiver
of subrogation insurance requirements stated herein. No insurance policies
or self-insurance maintained by the Lessor, whether primary, reinsurance
or excess, and which also apply to a loss covered hereunder, shall be called
upon to contribute to a loss until Lessee's primary and excess/umbrella
liability policies are exhausted.
Amendment No. One to Lease Agreement Page E-2
14-17
Lessor requires and shall be entitled to Lessee's broader coverage and/or the higher
limits if Lessee maintains broader coverage and/or higher limits than the minimums
shown above. Any available insurance proceeds excess of the specified minimum
limits of insurance and coverage shall be available to the Lessor. No representation
is made that the minimum insurance requirements of this Agreement are sufficient to
cover the obligations of Lessee under this Agreement.
2. Endorsements. Policies shall not comply if they include any limiting provision or
endorsement contrary to this Agreement, including but not limited to restricting
coverage to the sole liability of Lessee or excluding contractual liability. Policies
shall contain or be endorsed to contain the following provisions.
A. Additional Insured. The Lessor, City of Newport Beach, its City Council, boards
and commissions, officers, agents, volunteers, and employees shall be
covered as additional insureds with regard to liability and defense of suits or
claims arising out of the activities, work or operations performed by or on behalf
of the Lessee including materials, parts or equipment furnished in connection
with such work or operations on all liability policies, except professional liability.
Additional insured endorsements shall be at least as broad as ISO Form(s) CG
20 10 11 85; or both CG 20 10 or CG 20 26, and CG 20 37.
B. Primary and Non -Contributory. All liability policies shall be primary to and will
not seek contribution from any other insurance whether primary, excess,
umbrella, or contingent insurance, including deductible, or self-insurance
available to the Lessor, City of Newport Beach, its City Council, boards and
commissions, officers, agents, volunteers, and employees for all liability
policies.
The primary endorsements shall be at least as broad as ISO CG 20 01 04 13.
C. Waiver of Subrogation. All insurance policies shall contain or be endorsed to
waive subrogation against Lessor, City of Newport Beach, its City Council,
boards and commissions, officers, agents, volunteers, and employees. Lessee
hereby waives its own right of recovery against Lessor and shall require similar
written express waivers from each of its consultants, contractors, or
subcontractors. This provision applies regardless of whether the City has
received a waiver of subrogation endorsement from the insurer.
D. Loss Payee. Losses payable under the Property and Builder's Risk Insurance
policies, as they pertain to the Premises and related improvements (excluding
trade fixtures, personal property, furnishing, or equipment that remain the
property of Lessee under the terms of the Lease), shall be paid to the Lessor
as its interests may appear.
Amendment No. One to Lease Agreement Page E-3
14-18
3. Additional Agreements Between the Parties.
A. General Obligations. In the event Lessor determines that (i) the Lessee's
activities on the Premises creates an increased or decreased risk of loss to
the Lessor, (ii) greater insurance coverage is required due to the passage of
time, or (iii) changes in the industry require different coverage be obtained,
Lessee agrees that the minimum types and limits of any insurance policy
required to be obtained by Lessee or Lessee's consultants, contractors, or
subcontractors, may be changed accordingly upon receipt of written notice
from Lessor. With respect to changes in insurance requirements that are
available from Lessee's then -existing insurance carrier, Lessee shall deposit
certificates and endorsements evidencing acceptable insurance policies with
Lessor incorporating such changes within thirty (30) calendar days of receipt
of such notice. With respect to changes in insurance requirements that are
not available from Lessee's then existing insurance carrier, Lessee shall
deposit certificates evidencing acceptable insurance policies with Lessor,
incorporating such changes, within ninety (90) calendar days of receipt of
such notice.
B. Use of Premises. Lessee agrees not to use the Premises in any manner,
even if use is for purposes stated herein, that will result in the cancellation of
any insurance coverage for the Premises or adjoining property. Lessee
further agrees not to keep on the Premises or permit to be kept, used, or
sold thereon, anything prohibited by any insurance policy covering the
Premises. Lessee shall, at its sole expense, comply with all reasonable
requirements for maintaining the required insurance coverage on the
Premises.
C. Evidence of Insurance. All policies, endorsements, certificates, and/or
binders shall be subject to approval by the Lessor as to form and content.
These requirements are subject to amendment or waiver only if approved in
writing by the Lessor. The Lessor reserves the right to require complete,
certified copies of all required insurance policies, including endorsements
required by these specifications, at any time. The certificates and
endorsements for each insurance policy shall be signed by a person
authorized by that insurer to bind coverage on its behalf. At least fifteen (15)
days prior to the expiration of any such policy, evidence of insurance
showing that such insurance coverage has been renewed or extended shall
be filed with the Lessor. If such coverage is cancelled or reduced, Lessee
shall, within ten (10) days after receipt of written notice of such cancellation
or reduction of coverage, file with the Lessor evidence of insurance showing
that the required insurance has been reinstated or has been provided
through another insurance company or companies.
D. Acceptability of Insurers. Each such policy shall be from a company or
companies with a current A.M. Best's rating of no less than A-: VII and
authorized to do business in the State of California, or otherwise allowed to
Amendment No. One to Lease Agreement Page E-4
14-19
place insurance through surplus line brokers under applicable provisions of
the California Insurance Code or any federal law or otherwise approved by
the Lessor's Risk Manager.
E. Notice of Cancellation. All insurance policies shall contain or be endorsed
to provide that the insurance required by this Agreement shall not be
suspended, voided, canceled, or reduced in coverage or in limits until thirty
(30) days written notice has been served upon the Lessor, except ten (10)
days for non-payment of premium. It is Lessee's obligation to ensure that
provisions for such notice have been established.
F. Self -Insured Retentions. Self -insured retentions (SIR's) must be declared to
and approved by Lessor. Lessor may require Lessee to purchase coverage
with a lower retention or provide proof of ability to pay losses and related
investigations, claim administration, and defense expenses within the SIR.
The policy language shall provide, or be endorsed to provide, that the SIR
may be satisfied by either the named insured or Lessor. Self -insured
retentions shall be the sole responsibility of Lessee, or subcontractor who
procured such insurance. Lessor may deduct from any amounts otherwise
due Lessee to fund the SIR. The policy must also provide that defense costs,
including the allocated loss adjustment expenses, will satisfy the SIR.
G. Contractual Liability. The policy shall cover liability assumed under an
insured contract, including the tort liability of another assumed in a business
contract, with no endorsement or modification limiting the scope of coverage
for liability assumed under contract.
H. Reporting Requirements. Lessee shall give Lessor prompt and timely notice
of any claim made or suit arising out of or resulting from Lessee or Lessee's
agents, representatives, consultants, contractors, or subcontractors'
performance under this Agreement, including but not limited to any claims or
suits related to operational impacts or third -party injuries.
Subcontractors. Lessee shall be responsible for causing consultants,
contractors and/or subcontractors to purchase the same types and limits of
insurance in compliance with the terms of this Agreement, including adding
the City as an additional insured, providing primary and non-contributory
coverage and waiver of subrogation to the subcontractor's policies, and
meeting the following requirements:
1. Commercial General Liability/Marine Liability Endorsements. For
Commercial General Liability/Marine General Liability coverages,
contractors, consultants and/or subcontractors shall provide
coverage with a format at least as broad as provided by Insurance
Services Office form CG 20 38 04 13. Unless written approval is
granted by Lessor, contractors and/or subcontractors shall also
Amendment No. One to Lease Agreement
Page E-5
14-20
provide an additional insured endorsement at least as broad as ISO
Form CG 40 12 19.
2. Completed Operations. Lessee shall require and verify that Lessee's
construction contractors and subcontractors maintain commercial
general liability insurance, including products -completed operations,
for a period of at least five (5) years from the time that all work is
completed.
3. Design Professionals. Lessee shall require that Lessee's consultants,
contractors and/or subcontractors providing any design, engineering,
surveying, or architectural services for the Premises maintain
professional liability insurance that covers the services to be
performed, in the minimum amount of two million dollars ($2,000,000)
each claim and four million dollars ($4,000,000) in the aggregate. Any
policy inception date, continuity date, or retroactive date and all
subsequent insurance shall coincide or be effective on the first
Agreement for Lease of Premises. Lessee shall require that Lessee's
consultants, contractors and/or subcontractors agree to maintain
continuous coverage through a period of no less than five (5) years
after completion of the services performed.
4. Failure to Maintain Insurance. If Lessee or Lessee's consultants,
contractors or subcontractors fail or refuse to maintain insurance as
required in this Agreement, or fail to provide proof of insurance,
Lessor has the right to declare this Agreement in default without
further notice to Lessee, and Lessor shall be entitled to exercise all
available remedies.
Amendment No. One to Lease Agreement
Page E-6
14-21
EXHIBIT F
LOCATION OF RECYCLING AND ORGANICS ENCLOSURE
:r
iew
w j
•_i - i � r L1.f
Recyding Bins and
kEndosure Location
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Amendment No. One to Lease Agreement Page F-1
14-22
Attachment B
Lease Agreement
14-23
LEASE AGREEMENT
Balboa Pier Concession
RUBY'S DINER, INC.
THIS LEASE is made and entered into as of the 1" day of July, 2000 ("Effective Date"), by
and between the CITY OF NEWPORT BEACH, a municipal corporation ("City") and
RUBY'S DINER, INC., a California corporation ("Tenant")
RECITALS
A. City is the owner of the Balboa Pier ("Pier"), described in Exhibit B, and a
structure located at the end of the Pier that is currently being used by Tenant as a
Restaurant ("Premises") and is described in Exhibit A. Tenant is occupying the Premises
pursuant to a Lease dated March 8, 1982 that is recorded in the Official Records of Orange
County, California ("Old Lease").
B. Tenant and City desire to enter into a new Lease of the Premises for the
purpose of allowing Tenant to continue to operate of a full -service, small scale eating and
drinking establishment with limited take-out service (collectively referred to as the
"Restaurant") as those terms are defined in the Newport Beach Municipal Code. City will
grant Tenant an exclusive right to conduct limited food and beverage sales an the Pier
ancillary to the Restaurant ("Accessory Area")
Balboa Pier Concession Lease - June 20, 2000 1 14-24
l
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
City and Tenant hereby agree as follows:
9. 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.
in the Pier.
(c) City - the City of Newport Beach, and any Successor to City's interest
(d) Consumer Price Index or CPI - the Consumer Price Index for All Urban
Consumers, Los Angeles - Anaheim - Riverside (1 g82-84 = 100) as published and
compiled by the Department of Labor or, in the event the Department of Labor no longer
publishes the CPI, the index most similar to the CPI.
(e) Damage - an injury to or death of any Person, or .the damage
destruction, or loss of property caused by another Person's acts or omissions.
(f) Damages - monetary compensation or indemnity that can be
recovered in the courts by any Person who has suffered Damage.
(g) Expiration - the lapse of the time specified as the Term of this Lease,
including any extension of the Term resulting from the exercise of an option to extend.
(h) Good Condition - the good physical condition of the Premises and
each portion of the Premises, including, without limitation, signs, windows, show windows,
Balboa Pier Concession Lease — June 20, 2000 2 14-25
and appurtenances. "In good condition" means neat and broom -clean, and is equivalent to
similar phrases referring to physical adequacy in appearance and for use.
(i) Hold Harmless - to defend and indemnify from all liability, losses,
penalties, Damage, costs, attorney fees, expenses, causes of action, claims, or judgments
arising out of or related to any Damage to any Person or property.
U) Law - any judicial decision, statute, constitution, ordinance, resolution,
regulation, rule, administrative order, or other requirement of any municipal, county, state,
federal, or other government agency or authority having jurisdiction over the Parties or the
Premises.
(k) Maintenance or Maintain - repairs, replacement, maintenance,
repainting, and cleaning.
(1) Person - one or more natural persons, or legal entities, including,
without limitation, partnerships, corporations, trusts, estates, associations, or a combination
of natural persons and legal entities.
(m) Premises - those portions of the Pier designated on Exhibit. A as the
Restaurant and Accessory Area.
(n) Provision - any term, covenant, condition, or clause in this Lease that
defines, establishes, or limits the performance required or permitted by either Party.
(o) Rent - Base Rent, Percentage Rent, taxes, and other similar charges
payable by Tenant under the Provisions of this Lease.
(p) Rent Commencement Date - the Rent Commencement Date (and the
Effective Date) shall be July 1, 2000.
(q) Successor - assignee, transferee, personal representative, heir, or
other Person succeeding lawfully, and pursuant to the provisions of this Lease, to the rights
or obligations of either Party,
(r) Tenant - RUBY's DINER, INC., a California corporation, and any
Successor.
Balboa Pier Concession Lease — June 20, 2000 3 14-26
(s)
Expiration. .
Termination - the termination of this Lease, for any reason, prior to
1.2 Other Definitions, - The following additional terms are defined in the following
sections of this Lease:
(a)
ABC
§5.7
(b)
Gross Sales
§4.4
(c)
Lease Year
§4.2 (e)
(d)
Percentage Rent
§4.2 (a)
(e)
Base Rent
§4.1 (a)
(f)
Pier
Recital A
(g)
Restaurant and Accessory Area
Recital B
(h)
Term
§3.1
2. LEASE OF PREMISES
2.1 Agreement to lease. City leases the Premises to Tenant and Tenant leases
the Premises from City for the Team and on the conditions in this Lease.
2.2 Exclusivity. Tenant shall operate a Restaurant on the Premises. Tenant
shall have the exclusive right to serve and sell food and beverages on the Pier.
3. TERM
3.1 Term of Lease. The Term of this Lease shall be fifteen (15) years from the
Effective Date unless sooner terminated as provided in Section 14.
3.2 Option to Extend. Provided Tenant is not then in material default, Tenant
may extend the term of this Lease for two additional successive terms of five (5) years (the
"Option Term" or Option Terms) the first commencing on Expiration of the initial Term and
the second commencing on Expiration of the first Option Term. Tenant may exercise the
Sal boa Pier Concession Lease — June 20, 2000
14-27
option by giving City written notice of its intention to do so at least.three (3) months prior to
Expiration of the initial Term or the first Option Term.
3.3 Hold Over. Should Tenant, with City's consent, hold over and continue in
possession of the Premises after Expiration of the Term or any Option Term, Tenant's
continued occupancy of the Premises shall be considered a month -to -month tenancy
subject to all the terms and conditions of this lease, except the provisions of Subsections
3.1 and 3.2.
4. RENT
4.1 Base Rent.
(a) Base Rent. From and after the Rent Commencement Date, Tenant shall pay
Base Rent to City in the sum of Thirty Thousand and no1100 Dollars ($30,000.00) per year
during the Term. Base Rent shall be paid in equal monthly installments of Two -Thousand
Five Hundred and no1100 Dollars ($2,500.00). Base Rent for each full month shall be due
on the first day of that month. Base Rent for any partial month shall be prorated in
accordance with the actual number of days in that month and shall be due on the first day
of that month that falls within the Term.
(b) Periodic Adjustment. On the eighth (8'), twelfth (12') and, assuming
Tenant's exercise of the options to extend the Term, the sixteenth (16u'), and twentieth
(201h) anniversaries of the Rent Commencement Date, the Base Rent shall be- increased by
the lesser of the cumulative percentage increase in the CPI or three percent (3%) per.year.
The cumulative percentage increase in the CPI shall be determined based on the
increases during the period from the Rent Commencement Date or the date of the previous
adjustment (whichever is appropriate) to the last date prior to the anniversary on which the
CPI was published (typically the CPI for any given month is published approximately sixty
(60) days after the end of that month).
Balboa Pier Concession Lease - June 20, 2000 5 14-28
4.2 Percentage Rent.
(a)
Percentage Rent.
In addition
to Base Rent,
Tenant shall pay Percentage
Rent. The
"Percentage Rent"
shall be
calculated by
multiplying the Gross Sales
Percentage Rate, as specified in Subsection 4.2(b), by the total Gross Sales (as defined in
Subsection 4.4) attributable to the Premises during each Lease Year. Base Rent
payments made during any Lease Year shall be credited against the Percentage Rent due
that Lease Year.
(b) Percentage Rate. Percentage Rent will be based on the following annual
Percentage Rate:
Gross Sales Increment Percentage Rate
up to $1,000,000
$1,000,000 and Over
6.0%
6.5%
Percentage Rent shall be determined by multiplying each Gross Sales increment by the
applicable Percentage Rates. For example, Percentage Rent on annual Gross Sales of
$1,100,000 would be approximately $66,500 which equals six percent (6%) on the first
$1,000,000 of Gross Sales plus six and a half percent (6.5%) of the Gross Sales increment
between $1,000,000 and $1,100,000.
(c) Method of Payment. Percentage Rent shall be due and payable twenty-five (25)
days after the end of each month. The Base Rent, when paid for a month, shall be a credit
against the Percentage Rent due for that month.
(d)_Annual Rent Adjustment. Within sixty (60) days after the end of each Lease
Year, City shall determine the amount of Rent due based on the Gross Sales of Tenant
during the Lease Year and the sums paid to City as Base Rent and Percentage Rent. If
Tenant has paid to City more Rent than is required, City shall refund the excess Rent to
Tenant within 20 days after the determination. If Tenant has paid City less Rent, Tenant
Balboa Pier Concession Lease — June 20. 2000 6 14-29
shall pay the. difference to City within 20 days after receipt of notice that additional Rent is
due.
(e) Lease Year. For the purposes of Rent and Rent payments, the Lease Year
shall begin on January 1 and end on December 31 of each year.
4.3 Payment Location. Rent shall be payable at the office of the City's Revenue
Division at 3300 Newport Boulevard, Newport Beach, California, or at such other place or
places as City may from time to time designate by written notice delivered to Tenant. _
4.4 Gross Sales.
(a) The term "Gross Sales" means:
(1 ) The entire amount of the actual sales price, whether wholesale or retail, and
whether wholly or partly for cash, on credit or in exchange for any other product,
commodity, service, commercial paper or forbearance, of all sales of merchandise and all
charges made by or on behalf of Tenant from or upon the Premises;
(2) Orders taken in or from the Premises, even if the orders are filled elsewhere,
and sales by any subtenant in or from the Premises;
(3) Gross receipts of all coin -operated devices that are placed on the Premises
by Tenant or pursuant to any rent concession, percentage or other arrangement (but
excluding revenue from telephones that are collected by a public and/or private utility).
(b) Exclusions from Gross Sales. Gross Sales shall not include, or if included
there shall be deducted (but only to the extent they have been included), the following:
(1) Sales and use taxes, so-called luxury taxes, consumers' excise taxes, gross
receipts taxes, and other similar taxes now or in the future imposed on the sale of
merchandise or services, but only if such taxes are added to the selling price and collected
from customers.
(2) The transfer or exchange of merchandise between the stores or businesses
of Tenant, if any, where such transfers or exchanges of merchandise are made solely for
the convenient operation of a business owned and operated by Tenant and not for the
Baboa Pier Concession Lease — June 20, 2000 7 14-30
purpose of consummating a prior sale made in, to or from the Premises or for the purpose
of depriving City of the benefit of a sale that otherwise would be made in, at or from the
Premises.
(3) The amount of returns to shippers or manufacturers.
(4) The amount of any cash or credit refund made upon any sale where the
merchandise sold or some portion is returned by the purchaser. Each sale upon
installment or credit shall be treated as a sale for the full price in the month during which
such sale shall be made, irrespective of the time when Tenant shall receive payment
(whether in full or partial) from its customers.
(5) Sales of trade fixtures or personal property to be replaced by Tenant that are
not considered stock in trade.
(6) Sums and credits received in the settlement of claims for loss of or damage
to merchandise.
(7) Gift certificates, or similar vouchers, until such time as they shall have been
converted into a safe by redemption.
(8) Meals provided for officers or employees without charge.
(9) Meals, goods or products provided for promotional or publicity purposes
without charge.
(16) Cash refunds made to customers in the ordinary course of business.
(11) Value added taxes ("VAT") or other taxes added to the selling price of
products and other similar taxes now or hereafter imposed upon the sale of merchandise
or services, whether such taxes are added to, or included in the selling price.
(12) Discounted sales to employees of Tenant, not to exceed two percent (2%) of
Gross Sales.
(13) Uncollectible credit accounts and other bad debts, not to exceed two percent
(2%) of Gross Sales.
(14) Amounts paid to charge card or credit card issuers.
Balboa Pier Concession Lease — June 20. 2000 8 14-31
(c) . Statements of Gross Sales. Tenant shall furnish to City statements of
Tenant's Gross Sales within twenty-five (25) days after the end of each month, and annual
statements of Gross Sales within thirty (30) days after the end of each Lease Year. Each
statement shall be signed and certified to be correct by an Authorized Representative of
Tenant.
(d) Sales and Charoes. All sales and charges shall be recorded by means of
cash registers that display the amount of the transaction certifying the amount recorded.
The register shall be equipped with devices that log in daily sales totals, and record on
tapes the transaction numbers and sales details. At the end of each day the tape will
record the total sales for that day.
(e) Production of Statement. Records and Audit. Tenant agrees to make
available for inspection by City at the Premises or at Tenant's corporate headquarters in
Orange County, California, a complete and accurate set of books and records of all sales
of merchandise and revenue derived from the conduct of business or activity in, at or from
the Premises from which Gross Sales can be determined. Tenant shall also make
available, upon City request, all supporting records, exclusive of federal, state and local tax
returns. Tenant shall also furnish City copies of its quarterly California sales and use tax
returns at the time each is filed with the State of California. Tenant shall retain and
preserve for at least one (1) year all records, books, bankbooks or duplicate deposit books
and other evidence of Gross Sales. City shall have the right, upon reasonable notice,
during the Term and within one hundred eighty (180) days after Expiration or Termination
of this Lease to inspect and audit Tenant's books and records and to make transcripts to
verify the Rent due City. The audit may be conducted at any reasonable time during
normal business hours. Tenant shall cooperate with City in making the inspection and
conducting the audit. City shall also be entitled, once during each Lease Year and once
within one hundred eighty (180) days after Expiration or Termination of this Lease, to an
independent audit of Tenant's books of account, records, cash receipts, and other pertinent
Balboa Pier Concession Lease — June 20, 2000 9 14-32
data to determine Tenant's Gross Sales. The audit shall be conducted at City's sole cost
and expense by a certified public accountant designated by City. The audit shall be limited
to the determination of Gross Sales and shall be conducted during usual business hours in
a manner that minimizes any interference with the conduct of Tenant's regular business
operations. If the audit concludes that there is a deficiency in the payment of any Rent, the
deficiency shall become due and payable within 20 days and if there is an overpayment,
City shall refund the amount of the overpayment within 20 days. City shall bear its costs of
the audit unless the audit shows that Tenant understated Gross Sales by more than five
percent (5%), in which case Tenant shall pay all City's reasonable costs of the audit. City
shall keep any information gained from such statements, inspections or audits confidential
to the maximum extent permitted by law. City shall not disclose financial information
received in confidence and pursuant to this Lease except to carry out the purposes of this
Lease unless disclosure is required (rather than permitted) by law, However, City may
disclose the results of any audit in connection with any financing arrangements, the sale or
transfer of. City's interest in the Premises, or pursuant to order of a court or administrative
tribunal.
(f) Tenant's Gross Sales Audit. In the event of any audit by City in accordance
with this Lease, Tenant may contest the results of City's audit by performing a confirming
audit within thirty (30) days of receipt of City's audit results and supporting evidence, using
an independent public accountant reasonably acceptable to City. If Tenant's audit
discloses that City's audit was incorrect by more than five percent (5%), then City shall pay
the cost of Tenant's contesting audit.
(g) Acceptance. The acceptance by City of any money paid to City by Tenant as
Percentage Rent for the Premises, as shown by any statement furnished by Tenant, shall
not be construed as an admission of the accuracy of said statement, or of the sufficiency of
the amount of the Percentage Rent payment.
Balboa Pier Concession Lease — June 20, 2000 10
14-33
1
4.5 Interest on Unpaid Rent. Rent and other sums due City under this Lease
shall bear interest at the rate of ten percent (10%) per annum on the unpaid balance from
the date due until paid.
4.6 Pier/Premises Rent Credit.
(a) Pier Repair Project. City shall pay $25,000 to Tenant upon execution of this
Agreement to compensate Tenant for anticipated reductions in Gross Sales caused by the
City's current pier repair project. Except those provisions of this Lease related to Rent
Abatement, Tenant agrees that this payment is the safe and only consideration to which
Tenant is entitled with respect to the current repair of the Pier being done by City through
December 31, 2000.
(b) Building Improvement Rent Credit. City shall provide Tenant with a Building
Improvement Rent Credit (Rent Credit) not to exceed a total of $30,000. Tenant may
deduct the Rent Credit from Tenant's rental payment during the 2000 and 2001 calendar
years following Tenant's completion of the Building Improvements identified in Exhibit C.
Tenant may, with the consent of City Manager, which shall not be unreasonably withheld,
extend a portion of this Rent Credit into the next fiscal year following completion of the
Building Improvements).
4.7 Revenue from the Pier and/or Premises' Use in Film Television and/or
Advertising. One-half of all monetary revenue received by Tenant as compensation or
other payment for the use of the Premises or Pier in a film, television production,
advertising production, or other media vehicle shall be distributed to City. Tenant.shall
have the right, without compensation to the City, to use the premises for filming or
recording promotional or advertising material for Tenant or Tenant's business. The
distribution of revenue pursuant to this Subsection shall occur not less than 50 days after
Tenant receives this compensation or other payment.
Balboa Pier Concession Leas: - June 20, 2000 11 14-34
5. BUSINES&PURPOSES AND USE OF PREMISES
5.1 Business Purposes. The Premises are to be used by Tenant for the
operation of a combination sit-down, casual food -service restaurant, together with a take-
out food service window. Tenant shall also have the exclusive right to operate a mobile
food and/or coffee cart on the Pier, pursuant to written approval by the City Manager which
may be withdrawn by the City Manager at his or her sole discretion upon thirty days written
notice to Tenant.
5.2 Operation of Premises. Tenant shall operate and manage the Premises in
a manner comparable to other high quality businesses providing similar food and services.
Tenant shall not use or permit the use of the Premises in any manner that (i) creates a
nuisance or (ii) violates any Law. Tenant shall not offer entertainment or broadcast music
or entertainment through exterior speakers or other form of transmission. Tenant may use
a customer paging system.
5.3 Outdoor Dining. Tenant shall be permitted to expand restaurant service to
include outdoor dining on the Pier, subject to prior written approval of the City Manager and
in accordance with City zoning codes, which shall not be unreasonably withheld. City shall
make its best efforts to provide a safe environment free of hazards relating to fishing and/or
casting prior to approving any outdoor dining on the Pier
5.4 Continuous Operation. Weather permitting, Tenant shall keep the
Premises in operation and open to the public for business each calendar day of the year in
accordance with the schedule in this Subsection. Tenant may close the Restaurant on
Thanksgiving Day and Christmas Day and during periods of remodeling, reconstruction,
inventory and emergencies (including substantially inclement weather) or to comply with
laws. Unless otherwise approved in writing by the City Manager, which shall not be
unreasonably withheld, the restaurant shall follow this schedule of operations
(a) Weekdays (Monday through Friday) from September 1 through May 31:
Balboa Pier Concession Lease — June 20, 2000 12 14-35
Tenant shall serve lunch and dinner daily, with minimum hours of operation 11.:30
a.m. through 9:00 p.m.
(b) Weekdays (Monday through Friday) from June 1 through August 31:
Tenant shall serve breakfast, lunch, and dinner daily, with minimum hours of
operation 7:00 a.m. to 9:00 p.m.
(c) Any weekend day (Saturday and Sunday):
Tenant shall serve breakfast, lunch, and dinner, with minimum hours of operation
7:00 a.m. to 9:00 p.m. Tenant may choose to serve only lunch and dinner during
days when Tenant determines that climactic conditions make Restaurant's
operations unprofitable.
(d) At Tenant's option, the Tenant may serve breakfast on weekdays (Monday
through Friday) from September 1 through May 31. If breakfast is served on
weekdays during these months, the Restaurant will open at 7: 00 a.m.
5.5 Advertising Display. Tenant may, at its own expense, place signs in or upon
the Premises, ❑r the base of the Pier, subject to the prior written consent of the City
Manager as to the size, type, design and method of installation. All signage placed by
Tenant on, in or about the Premises shall remain the property of Tenant and shall be
removed by Tenant upon termination or Expiration of this Lease at Tenant's expense; and
any damage caused by removal shall be repaired at Tenant's expense. The permanent
signage in place as of the Execution Date of this lease shall be deemed approved by the
City and the City Manager.
5.5 Independent Contractor. City shall have no interest in the business of
Tenant.
5.7 Alcoholic Beverages. If Tenant at any time holds a beer and wine license for
the Premises from the California Department of Alcoholic Beverage Control ("ABC"),
Tenant may engage in the types of sales permitted under that license. Tenant shall not
sell any alcoholic beverages other than beer and wine. Tenant shall comply with all of the
Balboa Pier Concession Lease — June 20, 2000 1
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rules and regulations of ABC and all of the terms and conditions of any license granted by
5.8 No Distress Sales. No auction, fire, bankruptcy, "going out of business" or
other distress sales of any nature may be conducted on the Premises without the prior
written consent of the City Manager, which will not be unreasonably withheld, conditioned.
5.9 Delivery Access. Except as provided in this Subsection, neither Tenant nor
Tenant's suppliers may operate vehicles on the Pier without the prior written consent of
City. City consents to Tenant's use of a 3/ ton van or comparable vehicle, or such other
vehicle as may be mutually acceptable to City and Tenant, on the Pier for delivery
purposes, so long as not more than one (1) vehicle operated by Tenant is on the Pier at
any time and the vehicle is not parked on the Pier any longer than necessary for
completion of the task at hand.
5.10 Parking and Parking Permits for Employees. City small have the right to
control parking by Tenant's employees by commercially reasonable means, and Tenant
shall cause its employees to comply with the procedures and regulations established by
City from time -to -time to control parking. City shall provide a total of four (4) parking
permits annually to Tenant for use of the Balboa Pier parking lot by employees and shall
keep the Pier reasonably accessible for Tenant's delivery vehicle. The permits issued by
the City shall be designed to permit use by different employees from day to day.
5.11 Validated Parking. City is in the process of planning improvements and
modifications to the configuration and operating protocol of the Balboa Pier Parking Lot
including an increase in the amount of short-term parking and a validation program. City
shall offer Tenant the right to participate in any validation program or short term parking
program to Tenant on terms and conditions that are as favorable as any offered to other
property owners in the Balboa Villlage area with the exception of the Grand Opening event
or other one-time special event held at the Balboa Theater. Tenant shall have the right to
request modifications to this Lease relative to participation in any validation or short term
Balboa Pier Concession Lease — June 20, 2000 14 14-37
parking program in light of Tenant's payment to the tidelands fund; the high cost of parking
in relation to Tenant's typical ticket price, and the distance between the Premises and the
Balboa Pier Parking Lot.
5.12. No Smoking. No smoking shall be permitted on the Premises.
6. TAXES, LICENSES AND OTHER OBLIGATIONS
6.1 Payment of Taxes. Tenant shall pay directly to the' appropriate taxing
authorities all taxes applicable to this Lease, fixtures and Tenant's personal property on the
Premises, that are levied or assessed against Tenant during the Term. Taxes shall be
paid at least ten (1 Q) days before delinquency and before any fine, interest or penalty is
due or imposed by operation of law. Tenant shall, upon request, promptly furnish to the
City satisfactory evidence of payment. Tenant shall not be required to pay any real
property taxes or assessments. Tenant acknowledges that this Lease may create a
possessory interest subject to property taxation and that Tenant may be subject to the
payment of property taxes levied on such interest. Tenant shall pay, before delinquency all
taxes, assessments, license fees and other charges (Taxes) that are, during the Term,
levied or assessed against Tenant's leasehold interest in the Premises or any personal
property installed on the Premises.
6.2 Payment of Obligations. Tenant shall promptly pay, when due, any and all
bills, debts, liabilities and obligations incurred by Tenant in connection with Tenant's
occupation and use of the Premises.
6.3 Challenge to Taxes. Tenant shall have the right in good faith, at its sole cost
and expense, to contest the amount or legality of any Taxes on or attributable to this
Lease, the Premises, Tenant's personal property, or Tenant's occupation and use of the
Premises, including the right to apply for reduction. If Tenant seeks a reduction or contests
such taxes, Tenant's failure to pay the taxes shall not constitute a default as long as
Tenant complies with the provisions of this Section. City shall not be required to join in any
Balboa Pier Concession Lease — June 20, 2000 1
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proceeding or contest brought by Tenant unless the provisions of any Law require that the
proceeding or contest be brought by or in the name of City or any owner of the Premises.
In that case, City shall join in the proceeding or contest or permit it to be brought in City's
name as long as City is not required to bear any cost. If requested by Tenant, City shall
execute any instrument or document necessary or advisable in connection with the
proceeding or contest. Tenant, on final determination of the proceeding or contest, shall
immediately pay or discharge any decision or judgment rendered; together with all related
costs, charges, interest and penalties. Tenant shall Hold Harmless the City and its officers
and employees from and against any liability, claim, demand, penalty, cost or expense
arising out of or in connection with any contest by Tenant pursuant to this Section.
7. UTILITIES AND REFUSE COLLECTION.
(a) Basic Utilities. Tenant shall make all arrangements for and pay for all utilities
furnished to or used on the Premises, including, without limitation, gas, electricity, water,
telephone service, cable TV and janitorial service. Tenant shall be entitled to water service
under the same terms and conditions as any other occupant of the Pier and shall pay the
same fees, rate or rates as any other customer of the City. Any repair to utility lines within
the Premises is the sole responsibility of Tenant. Tenant shall be responsible for the
servicing and maintenance of the sewage holding tank.
(b) Refuse Collection. Tenant shall keep the Premises free and clean of rubbish
and litter and shall deposit accumulated rubbish and litter in containers designated by City.
Trash containers shall be kept in an approved enclosed area. Tenant shall pay City, in
addition to any Rent or other charges, a monthly fee of Two Hundred Dollars ($200) in
consideration of which City shall provide refuse collection service seven (7) days per week.
Tenant shall comply with the provisions of the Newport Beach Municipal Code relative to
the deposit of material to be collected by City. On the third anniversary of the R�
Commencement Date and every three years thereafter during the Term or any Option
Balboa Pier Concession Lease — June 20, 2000 16 14-39
Term, the monthly refuse fee shall be adjusted. The adjustment in the monthly refuse fee
shall reflect (i) the percentage increase in the quantity of refuse collected during the
preceding twelve (12) month period (for which information regarding the quantity of refuse
collected from the Premises is available) when compared to the quantity of refuse collected
during the first twelve (12) months of this Lease ("Base Year"); and (H) the percentage
increase in the landfill fees City is required to pay to dispose of the refuse. Any single
increase in the monthly refuse fee shall not exceed twenty percent (20%) of the then
current monthly fee. At no time during the term of this Agreement shall the monthly fee
exceed $400 per month. City shall provide an adequate amount of containers for Tenant's
business operations.
8. ALTERATIONS TO THE PREMISES.
(a) Alterations Requiring Building Permits. Any alteration that requires a building
permit from City shall require the written consent of the City Manager which shall not be
unreasonably withheld.
(b) Alterations Costing More than $50,000. Tenant shall not make any Alterations
(other than non-structural Alterations costing less than Fifty Thousand Dollars
[$50,000.00]) to the Premises without the prior written consent of the City Manager which
shall not be unreasonably withheld. In granting or withholding consent to proposed
Alterations by Tenant, the City Manager shall consider the impact of the proposed
Alterations on public views and the impact of the proposed Alterations on space
available for public use of the Pier for fishing and other activities. The City Manager
may require, as a condition of approval, that Tenant agree to amendments to this
Lease, including amendments increasing the amount of Rent payable under this
Lease if the proposed Alterations would materially increase the floor area of the
structures on the Premises. The City Manager may also require Tenant to provide,
at Tenant's expense, appropriate engineering and feasibility studies regarding the
Balboa Pier Concession Lease — June 20, 2000 17 14-40
structural integrity of the Pier and the Premises. City consents to Alterations that are
in substantial conformity with preliminary plans approved by City and attached as
Exhibit C.
(c) Quality of Work Performed. All work shall be performed in a good and
workmanlike manner, shall substantially comply with the plans and specifications submitted
to City and small comply with all applicable governmental permits and Laws in force at the
time permits are issued.
(d) Payment of Costs. Tenant shall pay all costs related to the construction of any
Alterations by Tenant or its agents. Tenant shall keep the Premises free and clear of all
mechanics' liens resulting from construction performed at the direction of Tenant.
(e) Indemnification. Tenant shall Hold Harmless City and its officers and employees
with respect to any Damage or Damages related to any work performed on the Premises
by Tenant. City shall promptly provide Tenant with a copy of any claim filed by any third
party with respect to work performed by Tenant.
(f) Disposition of Alterations at Expiration or Lease Termination. Any Alterations
made to the Premises shall remain on, and be surrendered with, the Premises on
Expiration or Termination of this Lease (excluding Tenant's fixtures, equipment, furniture,
movable decorations and the like). However, City may elect not less than thirty (30) days
prior to Expiration or Termination of this Lease, to require Tenant to remove any Alterations
that Tenant has made to the Premises, except those Alterations existing as of the date of
this Lease or approved by City. If City requires removal of Alterations, Tenant shall, ,at its
cost, remove the Alterations and restore the Premises to its condition prior to installation of
such Alterations, ordinary wear and tear excepted, before the last day of the Term, or
within thirty (30) days after notice is given, whichever is later. Prior to Expiration or within
fifteen (15) days after Termination of this Lease, Tenant may remove any movable
partitions, machinery, equipment, furniture, and trade fixtures previously installed by
Tenant, provided that Tenant repairs any damage to the Premises caused by removal_
Balboa Pier Concession Lease — June 20, 2000 18 14-41
9. MAINTENANCE OF PREMISES
9.1 Maintenance and Repair by Tenant and City. Tenant agrees that it will keep
the Premises in Good Condition. Tenant's Maintenance responsibilities include washing
bird droppings and dirt off the Premises, including roof, windows and exterior walls as
needed, but not less than once every ninety (90) days. Graffiti shall be removed or painted
over by Tenant as soon as reasonably practicable. City may perform Maintenance _or
repairs in the event Tenant fails to commence required Maintenance or repairs within three
(3) business days after receipt of notice to d❑ so. The cost of any Maintenance or repairs
by the City pursuant to this Subsection shall be payable as additional Rent. All furnishings,
equipment, facilities, improvements, alterations, attachments and appurtenances not
provided by City, but required for the Restaurant, including all kitchen equipment and
interior furnishings, shall be maintained in Good Condition and repair by Tenant at its cost.
Tenant also agrees to keep the southerly eighty (80) feet of the Balboa Pier, including all
benches, free from rubbish, debris and garbage related to the operation of the Restaurant.
The City may perform required cleaning and charge the costs to Tenant if the Tenant fails
to perform within five (5) days after notice to do so and continue to Maintain the area as
required by this Lease.
9.2 Maintenance and Repair of Pier. City agrees, at its expense, to Maintain the
Pier in good repair. City shall repair, Maintain and replace Pier pilings and the under -
structure of the Pier as necessary to ensure structural integrity. City shall have the right to
resurface the Pier or conduct any other emergency maintenance and/or emergency repair
at any time during the initial Term or any Option Term. City shall use its best efforts to
schedule any Maintenance, repair or construction on or of the Pier or Premises during the
period from November 1 through the end of February (Maintenance Period) when Tenant's
Gross Sales are historically lower than the average monthly Gross Sales. City shall also
use its best efforts to ensure that construction, repair or Maintenance of or on the Pier or
Balboa Pier Concession Lease — June 20. 2000 19
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Premises does not prevent public access to the Premises and that all such activity is
conducted in a manner that minimizes the extent and duration of any impact on Tenant's
customers.
(a) Tenant's Option to Terminate. Tenant may terminate this Lease by giving City
thirty (30) days written notice if City fails to repair or Maintain and replace Pier pilings within
a reasonable time after notice from Tenant and Tenant is unable to generate a fair and
reasonable profit from the Restaurant due to the condition of the Pier or Premises.
(b) City's Ability to Close Pier. City shall not be liable for any loss or Damage
suffered by Tenant and caused by the malfunction of any service, equipment or facility
provided by City. City may close the Pier if the City Manager or City Council City
determines that any condition exists which poses a significant threat to public health and
safety. In such event, Tenant shall vacate the Premises and the provisions of this Lease
regarding abatement of Rent (Subsection 12.2) and Tenant's right to terminate in the event
of prolonged closure (Subsection 12.1) shall apply.
(c) Entry by City. City and its Authorized Representatives may enter upon and
inspect the Premises at any reasonable time for Maintenance or other purposes. Upon
consultation with and assistance by City, Tenant shall install a Knox Box within three (3)
months of the Effective Date of this Lease. In case of emergency, City or its Authorized
Representatives may enter the Premises by the master key if Tenant is not present to open
and permit an entry. During entry City and its Authorized Representatives shall exercise
reasonable care relative to the Premises and to Tenant's property. Any entry to the
Premises by City shall not be construed as a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant from the Premises or any portion thereof.
(d) Additional Covenants of City Regardinq aeration of the Pier and Maintenance
Obligations. In addition to other provisions of this Lease:
(1) Written Notice Interference with Business Operations, and Additional
Improvements. City shall, at the earliest time reasonably possible given the circumstances
Balboa Pier Concession Lease — June 20. 2000 20
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that may. then exist, provide Tenant with prior written notice of its intent to: (i) perform any
Maintenance, repair or remodeling of the Pier which may reasonably be expected to
adversely affect, by interference with access, visibility, availability of utilities or otherwise,
Tenant's business operations at the Premises or any portion; or (ii) except in the case of an
emergency, enter upon the Premises for any of the purposes set forth in this Lease. City
agrees not to construct any additional improvements on the Pier that relate to any
commercial enterprise which might conflict or compete with Tenant's business operations
on the Premises.
(2) Due Diligence by City Regarding_ Repairs. Whenever City elects or is obligated
to repair or restore the Premises or any portion of the Pier, City shall proceed, at City's Cost
and with due diligence to repair or rebuild the same, including any additions or
improvements made by City or by Tenant with City's consent, in accordance with the same
plan and design as existed immediately before such damage or destruction occurred and
in accordance with all applicable Laws. City will use its best efforts to maintain sufficient
access to the Premises during all repair periods. The materials used in said repair or
reconstruction shall be as nearly like the original materials as may then be reasonably
procured.
10. INDEMNITY AND EXCULPATION, INSURANCE
10.1 Exculpation of City. Except as otherwise expressly provided in this Lease,
City shall not be liable to Tenant for any damage to Tenant or Tenant's property from any
cause other than the negligent, intentional or willful acts of City or its Authorized
Representatives. Except as otherwise expressly provided in this Lease, Tenant waives all
claims against City for Damages arising for any reason other than the negligent, intentional
or willful acts of City or its Authorized Representatives. City shall not be liable to Tenant for
any Damage to the Premises, Tenant's property, Tenant's goodwill, or Tenant's business
Balboa Pier Concession Lease — June 20, 2000 2
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income, caused in whole or in part by acts of nature including, -without limitation, waves,
wind and ocean currents.
10.2 Hold -Harmless Clause. Tenant agrees to Hold Harmless the City, its officers
and employees from any and all claims, liability, loss, Damage, or expenses resulting from
Tenant's occupation and use of the Premises, specifically including, without limitation, any
claim, liability, loss, or Damage arising by reason of:
(a) The death or injury of any Person caused or allegedly caused by the
condition of the Premises or an act or omission of Tenant or an agent, contractor,
employee, servant, sublessee or concessionaire of Tenant;
(b) Any work performed on the Premises or materials furnished to the Premises
at the request of Tenant or any agent or employee of Tenant, with the exception of
Maintenance performed by City; and
(c) Tenant's failure to perform any provision of this Lease or to comply with any
requirement of Law or any requirement imposed on the Premises by any duly authorized
governmental agency or political subdivision.
Tenant's obligations pursuant to this Subsection shall not extend to any claim, foss,
liability, Damage, costs or fees that are proximately caused by the sole negligence, willful
misconduct, or Unlawful or fraudulent conduct on the part of the City or its officers or
employees.
10.3 Insurance Limits.
(a) Bodily Injury._and Property Damage Insurance Thresholds. Tenant shall, at its
own cost and expense, secure and maintain during the entire Term, and any Option Term
of this Lease a broad form comprehensive coverage policy of public liability insurance
issued by an insurance company reasonably acceptable to City. The policy shall name
City, and its officers, employees and agents as additional insureds and protect, against
loss or liability caused by or connected with Tenant's occupation and use of the Premises
under this Lease in amounts not less than: combined single limit bodily injury and property
Balboa Pier Concession Lease — June 20, 2000 22
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1
damage, including products/completed operations liability and blanket contractual liability,
of $1,000,000 per occurrence.
(b) Cit 's Ability to Increase Amount of Public Liability and Property Damage
Insurance. Not more frequently than once every three (3) years, Tenant shall increase the
insurance coverage as reasonably required by City if, in the opinion of the City or its
employees or agents, the amount of public liability and property damage insurance
coverage at that time is not reasonably adequate to fully protect the City. ,
10.4 Fire Insurance on Building and Other Improvements. Tenant at its cost shall
maintain on the Buildings and other improvements that are or become a part of the
Premises a policy of standard fire and extended coverage insurance, with vandalism and
malicious mischief endorsements, to the extent of at least full replacement value, in a form
acceptable to the City's Risk Manager, The insurance policy shall be issued in the names
of City and Tenant, as their interests appear. The insurance policy shall provide that any
proceeds shall be made payable to City and Tenant jointly.
10.5 Determination of Replacement Value. The "full replacement value" of the
Buildings and other improvements to be insured under Subsection 10.4 shall be
determined by the company issuing the insurance policy at the time the policy is initially
obtained. Not more frequently than once each year, either Party shall have the right to
notify the other Party that it elects to have the replacement value re -determined by an
insurance company. The re -determination shall be made promptly and in accordance with
the rules and practices of the Board of Fire Underwriters, or a like board recognized and
generally accepted by the insurance company. Each Party shall be promptly notified of the
re -determination by the company. The insurance policy shall be adjusted according to the
re -determination.
10.6 Loss of Rent Insurance. Tenant at its cost shall maintain loss of rent
insurance insuring that the Base Rent will be paid to City for a period up to six (6) months if
the Premises are destroyed or rendered unusable or inaccessible for commercial purposes
Balboa Pier Concession Lease — June 20, 2000 23
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by a risk insured under a special form property coverage policy including vandalism and
malicious mischief endorsements.
10.7 Workers' Compensation. Tenant shall comply with all of the provisions of the
Workers' Compensation insurance and Safety Acts of the State of California, the
applicable provisions of Divisions 4 and 5 of the California Labor Code.
10.8 Waiver of Subrogation. The parties release each other, and their respective
Authorized Representatives, from any claims for Damage to any Person or to the Premises
and to the fixtures, personal property, and Alterations of either in or on the Premises that
are caused by or result from risks insured against under any insurance policies carried by
the parties and in force at the time of any Damage or required to be carried under this
Lease. Tenant shall cause each insurance policy obtained by it to provide that the
insurance company waives all rights of recovery by way of subrogation against the City in
connection with any Damage covered by any policy of property insurance. Neither party
shall be liable to the other for any Damage caused by fire or any of the risks insured
against under any insurance policy required by this Lease. If any insurance policy cannot
be obtained with a waiver of subrogation, or is obtainable only by the payment of an
additional premium charge above that charged by the insurance company issuing policies
without a waiver of subrogation, the Party undertaking to obtain the insurance shall notify
the other Party of this fact. The other Party shall have a period of twenty (20) days after
receiving the notice either to place the insurance with a company that is. reasonably
satisfactory to the other Party and that will carry the insurance with a waiver of subrogation,
or to agree to pay the additional premium. The Party is relieved of the obligation to obtain
a waiver of subrogation rights with respect to the particular insurance involved if the
insurance cannot be obtained with a waiver of subrogation or the other Party refuses to
pay the additional premium,
10.9 Other Insurance Matters. All the insurance required under this Lease shall:
Balboa Pier Concession Lease — June 20, 2000 24
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(a) Be issued by insurance companies authorized to do business in the State of,.
California, acceptable to City;
(b) Be issued as a primary policy;
(c) Be noncontributing with any insurance that may be carried by City; and
(d) Contain an endorsement requiring thirty (30) days written notice from the
insurance company to both Parties before cancellation or material change in the
coverage, scope or amount of the policy.
Each policy, or a certificate of the policy, together with evidence of payment of
premiums, shall be deposited with City, and on renewal of the policy not less than thirty
(30) days before expiration of the term of the policy, Either Party may effect for its own
account any insurance not required under this Lease.
10.10 Insurance Proceeds. If Tenant elects not to terminate this Lease, City shall
promptly pay to Tenant all insurance proceeds, if any, payable to City for repair or
replacement of Tenant's fixtures, equipment, display cases and other personal property
that Tenant is obligated to maintain, repair or replace under this Lease in the event of any
Damage to the Premises or property caused by fire or any other casualty. If, during the
last year of the Term or any extension thereof, twenty percent (20%) or more of the
Premises or the Pier is damaged or destroyed, or any damage which City or Tenant elects
or is obligated under this Lease to repair will take more than ninety (90) days to complete,
Tenant shall have the right to terminate this Lease as of the date of such damage or
destruction by written notice to City, given within thirty (30) days after such damage or
destruction and City may retain any and all proceeds of insurance paid to City.
11. DAMAGE OR DESTRUCTION OF PIER/PREMISES
11.1 Destruction of Premises. If the Premises are totally or partially destroyed,
rendering the Premises or any portion thereof totally or partially inaccessible or unusable,
Balboa Pier Concession Lease — June 20, 2000 25
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Tenant shall restore the Premises to substantially the same condition as immediately prior
to such destruction (including all trade fixtures, personal property, improvements and
Alterations as are installed by Tenant, which shall be replaced by Tenant at its expense).
Tenant shall not be responsible for restoring any portion of the Pier, including, but not
limited to, the portion of the Pier on which the Premises are located or the Accessory Area.
Tenant can elect to terminate this Lease by giving notice of such election to City within
sixty (60) days after the date of the occurrence of any casualty if the cost of the restoration
exceeds the amount of any available insurance proceeds, if the damage has been caused
by an uninsured casualty or event, or if Tenant reasonably estimates that repairs of the
Premises will take more than six (6) months. Upon such termination, insurance proceeds
applicable to reconstruction of the Building(s) (excluding Tenant's personal property
therein) shall be paid to City and Tenant shall have no further liability or obligations under
this Lease.
11.2 Replacement of Tenant's Property. In the event of the damage or destruction
of improvements located on the Premises not giving rise to Tenant's option to termination
of this Lease, Tenant shall, at its own expense, replace and repair all Tenant's trade
fixtures, equipment, machinery, furnishings, furniture and inventory as soon as reasonably
possible to permit the prompt continuation of Tenant's business at the Premises.
11.3 Destruction of Pier. In the event that all or a portion of the Pier or access to
the Pier is damaged, deteriorates or destroyed by fire or any other casualty the Premises
or a material portion becomes inaccessible or commercially unusable, and the Damage or
destruction cannot reasonably be repaired within twelve (12) months after the date of the
casualty, City shall have the right to either:
(a) Terminate this Lease by giving to Tenant written notice (which notice shall be
given, if at all, within thirty (30) days following the date of the casualty), in which case this
Lease shall be terminated thirty (30) days following the date of the casualty; or
Balboa Pier Concession Lease — June 20, 2000 25
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(b) Give Tenant written notice of City's intention to repair such damage as soon as
reasonably possible at City's expense, in which event this Lease shall continue in full force
and effect; however, Rent shall be abated in accordance with the procedures set forth in
Section 12. Tenant may terminate this Lease by giving City written notice at any time prior
to the commencement of repairs if City agrees to repair Pier pursuant to this Section and
fails to commence repairs within one hundred twenty (120) days after giving Tenant written
notice of its intention to repair. In such event, this Lease shall terminate as of the date_ of
notice from Tenant to City, and City shall have no liability under this Lease.
12. ABATEMENT OF RENT
12.1 General Rule. In the event of Damage or destruction of the Premises or
Damage to the Pier that impacts the Premises and this Lease is not terminated, Tenant
shall continue to utilize the Premises for the operation of its business to the extent it may
be practicable and commercially reasonable. Base Rent and Percentage Rent shall abate
in proportion to the area of the Premises that is rendered unusable. The abatement of
Rent shall commence on the date that use of the Premises is impacted and continue until
the completion of those repairs necessary to restore full use of the Premises and Tenant's
re -opening of the Premises. Tenant's obligation to pay Taxes pursuant to this Lease shall
not be abated or reduced. Rent shall not abate if the Damage or destruction to the
Premises is the result of the negligence or willful conduct of Tenant or its employees,
officers or agents. Tenant's right to abatement of Rent is contingent on payment of
insurance proceeds to City equal to the amount of Base Rent pursuant to coverage
required by Subsection 10.6. Following the expiration of such coverage, Tenant's right to
rent abatement shall continue until Tenant reopens business operations at the Premises.
12.2 Abatement/Maintenance. Tenant shall not be entitled to any abatement of
Rent for Maintenance that occurs during the Maintenance Period. Tenant shall be entitled
to a Rent abatement whenever the City performs regularly scheduled Pier Maintenance
Balboa Pier Concession Lease — June 20, 2000 27
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that adversely impacts access to or operation of the Premises outside of the Maintenance
Period. The Rent abatement shall be in proportion to the reduction in usable area of the
Premises or access to the Premises whichever is greater. The Rent abatement shall be
applicable for each day or portion of a day that Maintenance is performed outside of the
Maintenance Period.
13. PROHIBITION AGAINST VOLUNTARY ASSIGNMENT SUBLETTING AND
ENCUMBERING
13.1 Prohibition of Assignment. The Parties acknowledge that City is entering into
this Lease in reliance upon the experience and abilities of Tenant and its principals.
Consequently, Tenant shall not voluntarily assign or encumber its interest in this Lease or
in the Premises, or sublease substantially all or any part of the Premises, or allow any
other person or entity (except Tenant's Authorized Representatives) to occupy or use all or
any part of the Premises without the prior written consent of City, which shall not be
unreasonably withheld. City's consent to any assignment, subletting or other transfer is
subject to Tenant providing City with evidence reasonably satisfactory to City that the
proposed transferee has financial strength and restaurant or food service experience
comparable to Tenant and the use of the Premises by the proposed transferee is
consistent with the terms of this Lease. Except as otherwise expressly provided herein,
any dissolution, merger, consolidation, reorganization of Tenant, or the sale or other
transfer resulting in a transfer of a controlling percentage of the capital stock of Tenant
(other than a transfer by will, devise, bequest, intestate succession, a transfer to or
between the family members of Doug Cavanaugh or Ralph Kosmides, or a transfer to or
between one or more trusts for the benefit of Doug Cavanaugh, Ralph Kosmides and/or
their family members), shall be deemed a voluntary assignment; provided, however, that
the sale or transfer of a controlling percentage of the capital stock of Tenant pursuant to a
public offering(s) of equity or debt instruments issued by Tenant, or other transfers of
Balboa Pier Concession Lease — June 20, 2000 2$
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publicly traded capital stock or debt instruments shall not constitute a voluntary assignment
and shall not require City's consent or approval. The phrase "controlling percentage"
means the ownership of, or the right to vote, stock possession of at least fifty percent
(50%) of the total combined voting power of all classes of Tenant's capital stock issued,
outstanding, and entitled to vote for the election of directors, except for ownership of
publicly traded shares, warrants or similar equity interests in Tenant traded on a national
exchange or over-the-counter markets.
13.2 Exceptions. Notwithstanding the foregoing paragraphs or anything to the
contrary contained herein, City's consent shall not be required for an assignment or
subletting to an Affiliate, Subsidiary, Franchisee or Successor of Tenant (for purposes
hereof, an "Affiliate", a "Subsidiary", a "Franchisee" and a "Successor" of Tenant are
defined as follows:
(a) an "Affiliate" is any corporation or other entity which directly or indirectly controls
or is controlled or is under common control with Tenant (for this purpose, "control" shall
mean the possession, directly or indirectly, of the power to direct or cause the direction of
the management and policies of such corporation or other entity, whether through the
ownership of voting securities or by contract or otherwise);
(b) a "Subsidiary" shall mean any corporation or other entity not less than twenty-
five percent (25%) of whose outstanding stock shall, at the time, be owned directly or
indirectly by Tenant and which is at least as creditworthy as Tenant; and
M a "Successor" shall mean a corporation or other entity in which or with which
Tenant is merged or consolidated, in accordance with applicable statutory provisions for
merger or consolidation of corporations or a corporation or other entity acquiring a
substantial portion of the property and assets of Tenant.
(d) A "Franchisee" shall mean a franchisee who shall operate the Premises pursuant
to the business purposes set forth in Section 5.1, who shall meet all of Tenant's franchising
Balboa Pier Concession Lease -- June 20, 2000 29
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program requirements, and who shall have executed Tenant's standard franchise
agreement.
13.3 Continuing Effect. City's consent to any assignment, encumbrance, or
sublease shall not relieve Tenant from its obligations or liabilities under this Lease nor act
as a waiver of the requirement that such consent be obtained to any subsequent
assignment, encumbrance or sublease.
14. DEFAULT
14.1 Default by Tenant. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Tenant:
(a) The vacating or abandonment of the Premises by Tenant.
(b) The failure by Tenant two (2) times in any six (6) month period to make any
payment of Rent or any other payment required by this Lease, as and when due, when
such failure shall continue for a period of ten (10) days after written notice of default from
City to Tenant.
(c) Except as specified in Subsection 14.1(b), the failure of Tenant to observe or
perform any of the material covenants, conditions or provisions of this Lease to be
observed or performed by Tenant where such failure shall continue for a period of thirty
(30) days after written notice thereof from City to Tenant; provided, however, that if the
nature of Tenant's default is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant commences such
cure within said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(d) The making by Tenant of any general arrangement or assignment for the
benefit of creditors.
Balboa Pier Concession Lease -- June 20, 2000 30
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(e) Tenant becomes a "debtor' as defined in 11 U.S.C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed against Tenant, the same is
dismissed within sixty (60) days).
(f) The appointment of a trustee or receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where
such appointment is not discharged within sixty (60) days.
(g) The attachment, execution or the judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within sixty (60) days.
14.2 Remedies.
(a) Cumulative_ Nature of Remedies. If any default by Tenant shall continue
without cure and after notice as required by this Lease, City shall have the remedies
described in this Subsection in addition to all other rights and remedies provided by law or
equity, to which City may resort cumulatively or in the alternative.
(1) Reentry without Termination. City may reenter the Premises, and, without
terminating this Lease, re -let all or a portion of the Premises. City may execute any leases
made under this provision in City's name and shall be entitled to all rents from the use,
operation, or occupancy of the Premises. Tenant shall nevertheless pay to City on the
dates specified in this Lease the equivalent of all sums required of Tenant under this
Lease, plus City's expenses in conjunction with re -letting, less the proceeds of any re -
letting or attornment. No act by or on behalf of City under this provision shall constitute a
Termination of this Lease unless City gives Tenant specific notice of Termination.
(2) Termination. City may terminate this Lease by giving Tenant notice of
Termination. In the event City terminates this Lease, City may recover possession of the
Premises (which Tenant shall surrender and vacate upon demand) and remove all Persons
and property. City shall be entitled to recover the following as damages:
Balboa Pier Concession tease — June 20, 2000 31
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(A) The value of any unpaid Rent or other charges that are unpaid at the time of
Termination;
(B) The value of the Rent and other charges that would have accrued after
Termination less the amount of Rent and charges the City received or could have received
through the exercise of reasonable diligence as of the date of the award;
(C) Any other amount necessary to reasonably compensate City for the detriment
proximately caused by Tenant's failure to perform its obligations under this Lease; and
(D) At City's election, such other amounts in addition to or in lieu of the foregoing
as may be permitted from time -to -time by applicable California law.
City shall be entitled to interest at the rate of ten percent (10%) per annum on all Rent and
other charges from the date due or the slate they would have accrued. City shall also be
entitled to an award of the costs and expenses incurred by City in maintaining or
preserving the Premises after default, preparing the Premises for re -letting, or repairing any
damage caused by the act or omission of Tenant.
(3) Use of Tenant's Personal Property-. City may use Tenant's personal property
and trade fixtures located on the Premises or any of such property and fixtures without
compensation or liability to tenant for use or damage. In the alternative City may store the
property and fixtures at the cost of Tenant. City shall not operate the Restaurant in any
manner tending to indicate that the Restaurant is affiliated with, part of or operated in
conjunction with Tenant's business.
(c) City's Right to Cure Tenant's Default. Upon continuance of any material
default beyond applicable notice and cure periods, City may, but is not obligated to, cure
the default at Tenant's cost. If City pays any money or performs any act required of, but
not paid or performed by, Tenant after notice, the payment and/or the reasonable cost of
performance shall be due as additional Rent not later than five (5) days after service of a
written demand accompanied by supporting documentation. No such payment or act shall
Balboa Pier Concession Lease — June 20, 2000 32
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1
constitute a waiver of default or of any remedy for default or render City liable for any foss
or damage resulting from performance.
(d) Waiver o Rights. Tenant waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 or 1179, or under any
other present or future law, in the event Tenant is evicted or City takes possession of the
Premises by reason of any default by Tenant.
Balboa Pier Concession Lease — June 20, 2000 33
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15. CONDEMNATION
15.1 Eminent. Domain Proceedings. Tenant shall have the right to terminate this
Lease as of the date a public agency with lawful authority to condemn obtains possession
or title to ten percent (10%) or more of the floor area within the Premises, the
condemnation materially affects the conduct of Tenant's business in the Premises, or the
Premises will no longer be suitable for the conduct of Tenant's business. In the event of
Termination pursuant to this Subsection, Base Rent shall be prorated to the date of
Termination, any unearned Rent shall be refunded to Tenant and Tenant shall have no
further obligations under this Lease. Tenant shall not grant a right of entry to any
condemnor without the written consent of City.
15.2 Proportionate Termination of Lease. Should Tenant not elect to terminate
this Lease or should any taking not be sufficient to permit termination, this Lease shall
terminate as to the portion of the Premises taken upon the date which possession of said
portion is taken, but this Lease shall continue in force and effect as to the remainder of the
Premises. Tenant shall, in the event of a taking of any portion of the Premises, be entitled
to a reduction in the Base Rent in proportion to the percentage reduction in the area of the
Premises attributable to the taking.
15.3 Allocation of Award. In the event that an award is made for an entire or
partial taking or for damage to the Premises or any interest therein in any action in direct or
inverse condemnation or in the event of a taking under the power of eminent domain, the
parties hereto agree that their respective rights to the award or compensation paid shall be
as follows:
(a) City shall be entitled to that Portion of the award received for the taking of the
real property within the Premises, including all buildings and other improvements to which
City is entitled on Expiration or Termination of this Lease, and for severance damages.
(b) Tenant shall be entitled to any award that may be made for the taking of or
injury to Tenant's business and profits, including any amount attributable to Tenant's
Balboa Pier Concession Lease — June 20. 2000 34
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personal property, fixtures, installations, or improvements in or an the Premises, Tenant's
relocation expenses, but excluding any "bonus value" attributable to this Lease.
(c) Any interest payable on the total award shall be divided between City and
Tenant in the same ratio as are the awards granted to them pursuant to the other
provisions of this Section.
16. SUBJECT TO STATE LANDS COMMISSION GRANT
The Premises are located on property that is the subject of a grant from the State of
California to the City that is administered by the State Lands Commission. Tenant shall not
take any action that would cause the City to be in violation of any provisions of that grant.
If the State Lands Commission terminates this grant, this Lease terminates as a result and
the Parties shall be released from all liabilities and obligations under this Lease
17. WASTE OR NUISANCE
Tenant shall not commit or permit the commission of any waste on the Premises.
Tenant shall not maintain, commit, or permit any nuisance as defined in Section 3479 of
the California Civil Code on the Premises. Tenant shall not use or permit the use of the
Premises for any unlawful purpose.
18. NO CONFLICTS OF USE HAZARDOUS MATERIALS.
The Parties acknowledge that Tenant has been in possession of the Premises
pursuant to the provisions of a Lease dated March 8, 1982. City represents and warrants
that, to the best of City's knowledge, (i) Tenant's continued use of the Premises does not
conflict with applicable Laws, and City knows of no reason why Tenant would be unable to
retain all required permits, licenses and approvals from the appropriate governmental
authorities; {ii} the Pier is not in violation of any environmental laws, rules or regulations
and Tenant's contemplated uses will not cause any such violation; and (iii) the Pier is free
Balboa Pier Concession Lease — June 20, 2000 35
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of any and all Hazardous Materials as of the date of this Lease.. In the event that the
presence of any Hazardous Material not caused by Tenant is detected on the Pier (i) prior
to the Effective Date, or (ii) at any time during the Term of this Lease and any Option Term
all remedial work shall be performed by City at City's expense. Tenant's obligation to open
shall be delayed until the remedial work is completed if the remedial work is performed
prior to Tenant opening for business. Tenant's obligation to pay Rent shall be abated in
direct proportion to the extent Tenant is unable to conduct its business upon the Premises
as a result of any remedial work that is performed subsequent to Tenant opening for
business. Tenant shall have the right (but not the obligation) to terminate this Lease, upon
thirty (30) days advance written notice to City in the event that Hazardous Materials are
detected on the Pier and the presence or the remediation materially affects Tenant's ability
to conduct its business in the Premises. City and Tenant shall indemnify, defend and hold
harmless Tenant, the other (and their directors, officers, employees and agents - the
"Indemnitees") from and against any and all liability, including all costs of defense and the
cost of any required or necessary repair, disposal or remediation, arising out of the use,
generation, transportation, storage, release or disposal of Hazardous Materials on or about
the Pier and/or the Premises. "Hazardous Materials" shall mean any oil, flammable
explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other
hazardous, toxic, contaminated or polluting materials, substances or wastes, including,
without limitation, any "hazardous substances", "hazardous wastes", "hazardous materials"
or "toxic substances" under applicable federal, state and local laws, ordinances and
regulations.
19. CITY'S DEFAULTS/TENANT'S REMEDIES.
City shall be in default if it fails to perform, or commence performance if the
obligation requires more than ten (1 D) days to complete, any material obligation within ten
(10) days after receipt of written notice by Tenant to City specifying the nature of such
Balboa Pier Concession Lease — June 20, 2000 36
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default. City shall also be in default if it commences performance within ten (10) days but
fails to diligently complete performance. In the event of City's default, Tenant may:
(a) Upon five (5) days notice to City cure any such default by City and City shall
reimburse Tenant the amount of all costs and expenses incurred by Tenant in curing the
default, together with interest and expenses at the maximum rate then allowed by law;
(b) Terminate this Lease if City's default materially interferes with Tenant's use of
the Premises for their intended purpose and City fails to cure such default within ten (10)
days after a second demand by Tenant in which case Tenant shall have no further or
continuing obligations; or
(c) Commence an action for specific performance and recover costs and expense,
including reasonable attorney fees if Tenant is the prevailing party.
20. NOTICES
Any notice, demand, request, consent, approval or communication that either Party
desires or is required to give shall be in writing and shall be deemed given three (3) days
after deposit into the United States registered mail, postage prepaid, by registered or
certified mail, return receipt requested. Unless notice of a different address has been
given in accordance with this Section, all notices shall be addressed as follows.
If to City, to: CITY OF NEWPORT BEACH
Attention: City Manager
3300 Newport Boulevard
Newport Beach, CA 92663
If to Tenant, to: RUBY'S DINER, INC.
110 Newport Center Drive, Suite 110
Newport Beach, CA 92660
Attention: Douglas Cavanaugh
and Ralph Kosmides
Balboa Pier Concession Lease — June 20, 2000 37
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21. SURRENDER GE PREMISES
At the Expiration or earlier Termination of this Lease, Tenant shall surrender to City
the possession of the Premises. Tenant shall leave the surrendered Premises, required
personal property and fixtures in good and broom -clean condition, reasonable wear and
tear excepted. All property that Tenant is not required to surrender, but that Tenant does
abandon shall, at City's election, become City's property at Expiration or Termination.
22. WAIVER
The waiver by City or Tenant of any breach of this Lease by the other shall not be
deemed to be a waiver of any term, covenant, or condition or any subsequent breach. The
acceptance of Rent by City shall not be deemed a waiver of any breach by Tenant other
than the failure to pay the particular rent accepted.
23. PARTIAL INVALIDITY
If any term or Provision of this Lease is declared invalid or unenforceable, the
remainder of this Lease shall not be affected.
24. GOVERNING LAW
This Lease shall be governed by the laws of the State of California. Neither City's
execution of this Lease nor any consent or approval given by City in its capacity as
landlord shall affect City's powers and duties as a governmental body. Any consent or
approval Tenant is required to obtain from City pursuant to this Lease is in addition to any
permits or approvals Tenant is required to obtain pursuant to law or ordinance. However,
City shall attempt to coordinate its procedures for giving contractual and governmental
approvals so that Tenant's requests and applications are not unreasonably denied or
delayed.
Balboa Pier Concession Lease — June 20, 2000 38
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25. ENTIRE AGREEMENT;_ MODIFICATION
This Lease contains the entire agreement between the Parties. No verbal
agreement or implied covenant shall be held to vary the provisions of this Lease. Each
Party has relied on its own inspection of the Premises and examination of this Lease, the
counsel of its own advisors, and the warranties, representations, and covenants in this
Lease. The failure or refusal of either Party to inspect the Premises, to read this Lease or
other documents, or to ❑btain legal or other advice relevant to this .transaction constitutes a
waiver of any objection, contention, or claim that might have been based on such reading,
inspection, or advice. No provision of this Lease may be amended or varied except by an
agreement in writing signed by the Parties or their respective Successors.
26. TIME OF ESSENCE
Time is of the essence with respect to the performance of every Provision of this
Lease in which time of performance is a factor.
27. SUCCESSORS
Subject to the Provisions of this Lease on assignment and subletting, each and all of
the covenants and conditions of this Lease shall be binding on and shall inure to the
benefit of the heirs, successors, executors, administrators, assigns, and personal
representatives of the respective parties.
28. BROKERS
Each party warrants to and for the benefit of the other than it has had no dealings
with any real estate broker or other agent (attorneys excepted) in connection with the
negotiation or making of this Lease.
Balboa Pier Concession Lease — June 20, 2000 39
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29. TABLE OF CONTENTS; HEADINGS
The table of contents of this Lease and the captions of the various sections of this
Lease are for convenience and ease of reference only and do not define, limit, augment, or
describe the scope, content, or intent of this Lease.
30. GENDER; NUMBER
The neuter gender includes the feminine and masculine, the masculine includes the
feminine and neuter, and the feminine includes the neuter, and each includes corporation,
partnership, or other legal entity whenever the context requires. The singular number
includes the plural whenever the context so requires.
31. EXHIBITS
All exhibits to which reference is made in this Lease are incorporated by reference.
Any reference to "this Lease" includes matters incorporated by reference.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first
written above.
CITY OF NEWPORT BEACH ("City"),
a Municipal Corporation
By;
John yes, Vor of Newport Beach
ATTEST:
r
LaVonne Harkless
City Clerk
BaEboa Pier Concession Lease — June 20, 2000 40
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RUBY'S RESTAURANT GROUP
A California Corporation ("Tenant")
By: Zazl,�2L�
Douglas Cavanau , resident
APPROVED AS TO FORM:
Aobert Burnham
City Attorney
Balboa Pier Concession Lease — June 20, 2000 41
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A
Exhibit A
Depiction of Premises
Balboa Pier Concession Lease — April 1$, 2000 42
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Exhibit B
Vicinity Map
Balboa Pier Concession Lease — April 1. - -000 43
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Exhibit C
Building Improvements funded via Rent Credit
(to be added)
Balboa Pier Concession Lease — June 20. 2Q7a
14-67
Attachment C
Letter from Ruby's Hospitality Group
RUBY5
MOSPIiAIITY GROUP
February 18, 2025
To whom it may concern:
I am writing this note to all of those who are involved in the future direction of the Balboa Pier.
Ruby's Hospitality Group is the franchisor for Ruby's Diners. We are working closely with John
Fisher and his team to ensure that Ruby's remains as a historic character at the end of the Balboa
Pier. The Balboa Pier Ruby's is the birthplace of the concept and has been a fixture in Newport
Beach and California culture for the past 40 years. We intend to maintain and better that
presence over the next 40. Our goal is to support John and the team through the extension
process, build a plan with the city to visualize the new and improved building and secure another
long-term lease. We are so excited to get the next phase of the process rolling. Should you have
any questions, comments, or concerns, please feel free to reach out to John or myself directly.
Thank you and have a great day,
Joe Micatrotto
Ruby's Hospitality Group
(310) 699-1424
ioemicatrotto Q.ruby s. com
10795 West Twain Ave., Suite 100, Las Vegas, NV 89135
14-69
Attachment D
City Council Policy F-7 — Income and Other Property
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F- 7
INCOME AND OTHER PROPERTY
The City owns and manages an extensive and valuable assortment of property including streets, parks,
beaches, public buildings and service facilities. The City also owns or ground leases and/or operates a yacht
basin, resort hotel and apartment property, a luxury residential development and various other income -
producing properties. Much of the income property is tidelands, filled tidelands or waterfront.
Unencumbered fee value of income property is substantial.
As owner/manager of property, the City is the steward of a public trust, and state law requires the City to
maximize its returns on state -managed property or be subject to a charge of making a gift of public funds.
Nevertheless, the City Council recognizes the importance of this property not only as a revenue generator,
but also as a means to provide otherwise financially less feasible uses and facilities that benefit the
community.
In managing its property, the City will continually evaluate the potential of all City owned property to
produce revenue. This may include leasing or licensing unused land, renting vacant space, and establishing
concessions in recreation areas or other similar techniques. The City Council will evaluate the
appropriateness of establishing new income generating opportunities on City controlled areas using sound
business principles and after receiving input from neighbors, users and the public.
The policy of the City Council is that income and other property be held and managed in accordance with
the following:
A. Whenever a lease, license, management contract, concession or similar action regarding income
property is considered by the City, an analysis shall be conducted to determine the maximum or
open market value of the property. This analysis shall be conducted using appraisals or other
techniques to determine the highest and best use of the property and the highest income generating
use of the property.
B. All negotiations regarding the lease, license, management contract, concession, or similar action
regarding income property shall include review of an appraisal or analysis of the use being
considered for the property conducted by a reputable and independent professional appraiser, real
estate consultant, or business consultant.
C. The City shall seek, whenever practical and financially advantageous, both in the short and long
term, to operate or manage all property and facilities directly with City staff or contractors, provided
staff have the expertise needed to competently do so, or to oversee the work of contractors.
D. In most negotiations regarding the lease, license, management contract, concession, or similar action
regarding an income or other property, the City shall seek revenue equivalent to the open market
value of the highest and best use; and, whenever practicable the City shall conduct an open bid or
proposal process to ensure the highest financial return.
1 14-71
F- 7
E. However, in some circumstances the City may determine that use of a property by the public for
recreational, charitable or other nonprofit purpose is preferred and has considerable public support,
in which case the City may determine that non -financial benefits justify not maximizing revenue
from such property. In such circumstances, the City has a vested interest in ensuring that the lessee
of such property operates the activities conducted on or from the property in the manner that has
been represented to the City throughout the duration of any lease or contract with the City.
F. Whenever less than the open market or appraised value is received or when an open bid process is
not conducted, the City shall make specific findings setting forth the reasons thereof. Such findings
may include but need not be limited to the following:
The City is prevented by tideland grants, Coastal Commission guidelines or other restrictions
from converting the property to another use.
2. Redevelopment of the property would require excessive time, resources, expertise and costs,
which would outweigh other financial benefits.
3. Converting the property to another use or changing the operator, manager, concessionaire,
licensee, or lessee of the property would result in excessive vacancy, relocation or severance
costs, real estate commissions, tenant improvement allowances, expenses or rent
concessions which would outweigh other financial benefits.
4. Converting residential property to another use or opening residential leases to competitive
bid would create recompensable liabilities and other inequities for long-term residents.
5. The property provides an essential or unique service to the community or a clearly preferred
use that enjoys substantial support in the community that might not otherwise be provided
were full market value of the property be required.
6. The property serves to promote other goals of the City such as affordable housing,
preservation of open space, uses available to the public or marine related services.
G. Generally, lengths of licenses, leases, management contracts, concessions, or similar agreements
will be limited to the minimum necessary to meet market standards or encourage high quality
improvements and will contain appropriate reappraisal and inflation protection provisions. Also, all
agreements shall contain provisions to assure complete audits periodically through their terms.
H. All negotiations regarding the license, lease, management contract, concession or similar action
regarding income property shall be conducted by the City Manager or his/her designee under the
direction of any appropriate City committees.
I. To provide an accurate accounting of actual net revenues generated by the City's income property,
all costs directly attributable or allocable to the management of a specific income property shall be
charged against the gross revenues collected on that property in the fiscal year the costs are incurred.
Costs so chargeable include, but are not limited to, property repairs and maintenance, property
appraisals, and consultant fees, as authorized by the City Council, City Manager, or by this Income
Property Policy.
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F- 7
J. The City Manager or his/her designee is authorized to sign a license, lease, management contract,
concession, or similar agreement or any amendment thereto, on behalf of the City. Notwithstanding
the foregoing, the City Manager or his/her designee, or a City Council member, may refer any
license, lease, management contract, concession or similar agreement or any amendment thereto, to
the City Council for its consideration and/or action.
K. The City's portfolio of quality income producing properties adds an element of diversification to a
portfolio otherwise invested primarily in financial assets. Certain of those income properties are
restricted from sale by their terms of grant, state agency regulations or rules, other federal and state
guidelines, private covenant or agreement or otherwise. For those properties not so restricted from
sale, an analysis shall be prepared to determine the following prior to such income producing
property being offered for sale:
1. The maximum open market value of the City's interest in the property in its as is condition.
2. If the property is in an important location, a determination of the possible future
consequences of the City no longer controlling that property.
3. If the current rent is contractually low and significant rent increases are likely within a finite
period.
4. The likelihood of significant increases in the ability of the property to generate income after
the expiration of any current lease of the property.
5. The likelihood of a lease extension being requested by the tenant and the ability to
substantially increase rents or require significant improvements to enhance the utility and
the value of the property as consideration for granting such an extension.
6. The value of the revenue stream from (i) lease income over the life of an existing lease and/or
(ii) likely lease revenue if an existing lease were to be renewed or the property re -let to a
different tenant; and/or (iii) lease income from the property if it were to be converted to its
highest and best use, compared with the financial benefits of the use of the proceeds of a sale
and if, considering the totality of the circumstances, such use of the proceeds of a sale is
preferable to retaining the property in question.
History
Adopted F-24 —
7-27-1992
Amended F-24
— 1-24-1994
Amended F-7 —
2-27-1995
Amended F-7 —
2-24-1997
Amended F-7 —
5-26-1998
Amended F-7 —
8-11-2009
Amended F-7 —
5-14-2013
Amended F-7 —
2-12-2019
Amended F-7 —
11-14-2023
3 14-73