Operations Board of Directors
Wednesday, November 9, 2022
10:30 AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
IMPORTANT NOTICE REGARDING COVID-19 MEETING REQUIREMENTS The special procedures in place to minimize the spread of the COVID-19 virus may supersede general meeting procedures and delay distribution of materials to members, although every effort will be made to ensure comments and materials received prior to the meeting end will be made part of the record.
Based on guidance from the California Department of Public Health and the California Governor’s Office, in order to minimize the spread of the COVID-19 virus, please do the following:
1. You are strongly encouraged to observe the live stream of the CCCE Operations Board of Directors meeting at: https://3cenergy.hylandcloud.com/203agendaonline/Meetings/Search?dropid=4
2. The CCCE Board Room remains open. If you attend the CCCE Operations Board of Directors meeting in person:
a. You will be required to (i) wear a mask during the meeting and (ii) maintain appropriate social distancing, i.e., maintain a 6-foot distance between yourself and other individuals. b. Additional seating with audio of the CCCE Operations Board of Directors meeting will be available in the CCCE Main Conference Room, located at 70 Garden Court, Suite 300, Monterey, CA 93940. Meetings are accessible to people with disabilities. Individuals who need special assistance or a disability-related modification or accommodation to participate in this meeting, or who have a disability and wish to request an alternative format for the meeting materials, should contact Heather Vowell, Board Clerk, at 831-641-7216 or [email protected]. Requests should be made as soon as possible but at least 72 hours prior to the scheduled meeting.
3. If you choose not to attend the CCCE Operations Board of Directors meeting but wish to make a comment on a specific agenda item, you may please submit your comment as set out below. The timing of public comment shall be at the discretion of the Chair. Options for public comment are as follows:
a. To have your comments distributed to the Board prior to the meeting submit your comment via email by 5:00 p.m. on the Tuesday before the meeting. All comments received after 5:00pm on the Tuesday before the meeting will be retained as part of the record and distributed to the Board after the meeting. Please submit your comment to the Clerk of the Board at [email protected]. To assist the Clerk in identifying the agenda item relating to your public comment please indicate in the Subject Line, the meeting body (i.e., Policy Board Agenda) and item number (i.e., Item No. 3)
You may participate through ZOOM. For ZOOM participation please join by computer audio at:
https://us02web.zoom.us/s/82380649701
Or join by phone:
Dial for higher quality, dial a number based on your current location):
US: +1 669 900 6833 or +1 669 219 2599
Enter this Webinar ID Number: 823 8064 9701 when prompted. Please note there is no Participant Code, you will just hit # again after the recording prompts you.
You will be placed in the meeting as an attendee; when you are ready to make a public comment if joined by computer audio please Raise your Hand; and by phone please push *9 on your keypad.
If you have anything that you wish to be distributed to the Board please provide 15 copies and hand them to a member of CCCE staff or Heather Vowell, Board Clerk, who will distribute the information to the Board members and other staff.
The public may comment on a specific item listed on this agenda when the Board considers that item. In addition, the members of the public may request and receive copies without undue delay of any documents that are distributed to the Board, unless there is a specific exemption under the Public Records Act that prevents the disclosure of the record. (Cal. Gov’t Code Section 54957.5) In compliance with Government Code Section 54957.5, non-exempt writings that are distributed to a majority or all of the Board in advance of a meeting and that relate to an agenda item will be made available at CCCE’s offices located at 70 Garden Court, Suite 300, Monterey, CA 93940 during normal business hours and are also available on the CCCE website located at:
https://3cenergy.hylandcloud.com/203agendaonline
AGENDA
. Welcome & Roll Call
. Corrections and Additions
The Board Clerk will announce agenda corrections and proposed additions of emergency, urgency, or continued items, which will be acted on by the Board as provided in Sections 54954.2 of the California Government Code.
. Public Comment on the Consent Agenda and Matters Not Listed on the Agenda The public may provide comments on the Consent Agenda or any item within the Board's jurisdiction but not on the Agenda. The Board may not take action at this meeting on any item not listed on the Agenda other than to refer the matter to staff or set it for a future meeting. Speakers are limited to 3 minutes each.
CONSENT AGENDA
1. Approve Minutes from the October 12, 2022 Meeting of the Operations Board (Action Item)
2. Consider Finding, Pursuant to AB 361 and in order for the Operations Board of Directors to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Operations Board of Directors has Reconsidered the Circumstances of the State of Emergency; and the Monterey County Health Officer Continues to Recommend Social Distancing Measures for Meetings of Legislative Bodies (Action Item)
3. Ratify CEO's Execution of Addendum No. 1 to the Lease for Expanded Premises at 70 Garden Court, Monterey, California between Central Coast Community Energy (successor in-interest to Monterey Bay Community Power) and AG Davi Ltd., Agent for Owner, 70 Garden Court Monterey LLC (Action Item)
4. Treasurer's Report (Information Only)
REGULAR AGENDA
5. Community Advisory Council's Report (Discussion Item)
6. CEO Report (Discussion Item)
a) Staffing Update
b) Central Procurement Entity Failure Impacts On Resource Adequacy c) CCCE Financial Infrastructure & Processes
7. Update Regarding Suspension of Governor's Declaration of Emergency and AB 2449 (Discussion Item)
8. Receive a Market and Transaction Update on a Prepay Financing Transaction and Recommend the Policy Board Approve the Transaction When Presented (Action Item) Adjournment
MINUTES
The meeting was called to order at 10:30AM with 9 members attending via teleconference in compliance with AB361 and a quorum established.
Directors Present: Johnson, Miller, Miyasato, Pia, Rerig, Slama, Stilwell, Vice Chair Goldstein, Chair Palacios Directors Absent: Espinosa (arrived at 10:31am), Huffaker, Imhof (arrived at 10:32am), Lewis (arrived at 10:34am), McKee (arrived at 10:35am), McCloud (arrived at 10:35am), Norgaard (arrived at 10:35am), Vidro The Chair opened the public comment period for items not on listed on the agenda.
No Public Comments Received.
The Chair closed public comment period.
Clerk announced that there were no corrections or additions to the agenda
CONSENT AGENDA
The Chair opened the public comment period on the consent agenda.
No Public Comments Received.
The Chair closed public comment period.
MOTION: Moved by Director Pia seconded by Director Miyasato to approve the Consent Agenda.
ACTION: The Motion Carried with a roll call vote: 13/0/4 Operations Board of Directors
Wednesday, October 12, 2022
10:30 AM
Central Coast Community Energy
70 Garden Court, Suite 300
Monterey, CA 93940
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AYES: Espinosa, Imhof, Johnson, McCloud, McKee, Miller, Miyasato, Pia, Rerig, Slama, Stilwell, Vice Chair Goldstein, Chair Palacios
NOES: None
ABSENT: Huffaker, Lewis, Norgaard, Vidro
1. Approved Minutes of the September 21, 2022 Meeting of the Operations Board as submitted.
2. Found, Pursuant to AB 361 and in order for the Operations Board of Directors to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Operations Board of Directors has Reconsidered the Circumstances of the State of Emergency; and the Monterey County Health Officer Continues to Recommend Social Distancing Measures for Meetings of Legislative Bodies
3. Adopted Resolution No. OB-2022-03 Delegating the Operations Board’s Approval of CCCE’s Integrated Resources Plan to the Chief Executive Officer
4. Treasurer's Report
REGULAR AGENDA
5. CEO Report
a. Pacific Gas & Electric Plan to Transfer Non-Nuclear Generation Assets b. Front of the Meter Energy Storage Update
c. Liquidity and Reserves Management Update
d. Resource Adequacy Central Procurement Entity Update
The Chair opened the public comment period.
No Public Comments Received.
The Chair closed public comment period.
ACTION: Discussion Item; no action required
6. Receive Update on FY 22-23 Reach Code Program
The Chair opened the public comment period.
The following individual(s) addressed the Board.
Michael Brown
The Chair closed public comment period.
ACTION: Discussion Item; no action required
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7. Approved Resolution No. OB-2022-04 Adopting Procedures for the Selection and Terms of the Operations Board Chair and Vice-Chair and Recommending Corresponding Amendments be made by the Policy Board to the Central Coast Community Energy Operating Rules and Regulations The Chair opened the public comment period.
No Public Comments Received.
The Chair closed public comment period.
MOTION: Moved by Director Johnson seconded by Director Lewis to approve ACTION: The Motion Carried with a voice vote: 15/0/2
AYES: Espinosa, Imhof, Johnson, Lewis, McKee, McCloud, Miller, Miyasato, Norgaard, Pia, Rerig, Slama, Stilwell, Vice Chair Goldstein, Chair Palacios
NOES: None
ABSENT: Huffaker, Vidro
The Chair opened the public comment period on the consent agenda.
No Public Comments Received.
The Chair closed public comment period.
Recessed into Closed Session at 11:16am.
Counsel Confirmed that no reportable action will be taken.
CLOSED SESSION
8. Closed session under Government Code 54950 relating to the following item:
a. Pursuant to Government Code section 54956.9(d)(4), the Board will confer with legal counsel regarding one item of potential initiation of litigation Adjourned at 11:53 AM
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Staff Report Item 4
TO: CCCE Operations Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Consider Finding, Pursuant to AB 361 and in order for the Operations Board of Directors to Continue Meeting Remotely, that the COVID-19 Pandemic State of Emergency Declared by Governor Newsom is Still In Effect; The Operations Board of Directors has Reconsidered the Circumstances of the State of Emergency; and the Monterey County Health Officer Continues to Recommend Social Distancing Measures for Meetings of Legislative Bodies (Action Item) DATE: January 12, 2022
RECOMMENDATION:
This recommends the Operations Board (“Board”) find, pursuant to AB 361 and for the Board to continue meeting remotely, that the COVID-19 pandemic State of Emergency declared by Governor Newsom is still in effect; the Board has considered the circumstances of the State of Emergency; and the Monterey County Health Officer continues to recommend social distancing measures for meetings of legislative bodies.
BACKGROUND:
On September 16, 2021, Governor Newsom signed AB 361. This legislation amends the Brown Act to allow Brown Act bodies to meet via teleconference during a proclaimed state of emergency in accordance with teleconference procedures established by AB 361 rather than under the Brown Act's more narrow standard rules for teleconference meetings.
DISCUSSION/ANALYSIS:
AB 361 provides that if a state or local health official recommends social distancing, a legislative body may meet remotely after September 30, 2021, provided that the legislative body finds 1) the Governor's proclaimed state of emergency is still in effect; 2) the legislative body has 4 of 82
reconsidered the circumstances of the state of emergency, and 3) either the Monterey County Health Officer continues to recommend social distancing measures for meetings of legislative bodies or the state of emergency continues to directly impact the ability of the members to meet in person.
The Monterey County Health Officer has recommended social distancing measures for meetings of legislative bodies, so the Board were able to meet remotely the first time after September 30, 2021. To continue meeting remotely, the Boards must make the findings outlined above.
Accordingly, staff recommends making the appropriate findings. This action will be required every 30 days to keep meeting remotely. A special meeting may be necessary for that purpose.
FISCAL IMPACT:
There is no fiscal impact associated with this action.
CONCLUSION:
The Board’s consideration and finding that the COVID-19 pandemic State of Emergency declared by Governor Newsom is still in effect; the Board has reconsidered the circumstances of the State of Emergency; and the Monterey County Health Officer continues to recommend social distancing measures for meetings of legislative bodies will allow the Board to continue meeting remotely under the procedures established by AB 361. 5 of 82
Staff Report Item 3
TO: CCCE Operations Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Ratify CEO's Execution of Addendum No. 1 to the Lease for the Premises at 70 Garden Court, Monterey, California between Central Coast Community Energy (successor in-interest to Monterey Bay Community Power) and AG Davi Ltd., Agent for Owner, 70 Garden Court Monterey LLC (Action Item)
DATE: November 9, 2022
RECOMMENDATION:
This recommends that the Operations Board ratify the CEO’s execution of Addendum No. 1 to the lease for the premises at 70 Garden Court, Monterey, California between Central Coast Community Energy (successor in-interest to Monterey Bay Community Power) and AG Davi Ltd., Agent for Owner, 70 Garden Court Monterey LLC (the “Lease”) for an additional three-year term and two additional one-year options.
BACKGROUND:
Following Operations Board approval, CCCE (as MBCP) entered the Lease for a term of 5 years beginning December 22, 2017 and ending December 31, 2022. The Lease was for up to 35 parking spaces and 11,831 square feet at a rental rate of $1.75/sq ft with annual increases tied to the consumer price index.
The rental rate in 2022 is $1.95/sq ft.
DISCUSSION/ANALYSIS:
CCCE, represented by a local Cushman & Wakefield broker, has reviewed a number of properties for purchase or lease beginning in 2019. Following an extensive search, CCCE determined that an extension of the existing premises, with a 3,367 square foot expansion into the second floor of the same building, provides the best opportunity for CCCE to continue operations now that its workforce has largely returned to in-person work.
After remeasuring the existing space using Building Owners and Managers Association best practices, the existing space of 11,628 shall be extended for a term of 3 years beginning January 1, 2023 at a rate 6 of 82
of $1.99/sq ft. The expansion space shall be 3,367 of interconnected office space at a rate $1.85/sq ft for a term of 3 years also beginning on January 1, 2023.
Both the 3rd and 2nd floor premises (together the Expansion Premises) shall be subject to a 3% annual adjustment. CCCE holds two one-year options for the Expansion Premises.
CCCE is entitled to take possession of the 2nd floor space as soon as tenant improvements are completed.
FISCAL IMPACT:
The cost of the lease with the Addendum is approximately $360,000 per year. The cost has been included in and will be paid out of the FY 22/23 budget.
CONCLUSION:
Staff recommends that the Operations Board ratify the CEO’s extension and expansion of CCCE’s lease at 70 Garden Court while the agency continues to consider opportunities to purchase or lease a permanent headquarters.
ATTACHMENT(S):
1. Lease
2. Addendum No. 1
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Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
TABLE OF CONTENTS
1. DEFINITIONS:
Lease Year:
Common Area (if any):
Open Parking Area (if any):
Controlled Parking Area (if any):
Floor Area:
MRWPCA:
MPWMD:
Center:
2. PREMISES:
3. TERM OF LEASE:
4. RENTAL:
5. CHRONIC DELINQUENCY
6. ADJUSTMENT OF FIXED RENT:
7. SECURITY DEPOSIT:
8. GOVERNMENTAL INTERVENTION:
9. DESIGNATIONS, MAINTENANCE, REPAIR AND OPERATIONAL COST OF THE CENTER INCLUDING COMMON AREAS:
10. PARKING IN OPEN PARKING AREA:
11. BUSINESS PURPOSE:
12. COMPLIANCE WITH LAW:
13. USES AND CLEANLINESS:
14. ASSIGNMENT AND SUBLETTING:
15. ACCEPTANCE “AS IS CONDITION” AND MAINTENANCE OF PREMISES:
16. LIENS:
17. ACCESSION:
18. WASTE:
19. HOLD-OVER TENANCY:
20. INSURANCE:
21. TAXES:
22. DAMAGE OR DESTRUCTION OF DEMISED PREMISES:
23. DUTIES AND PROHIBITED CONDUCT:
24. INSPECTION and LESSOR’S SIGNS:
25. BANKRUPTCY OR INSOLVENCY:
26. DEFAULT AND REENTRY
27. LESSOR-LESSEE LIABILITY; INDEMNITY:
28. INTEREST ON DELINQUENCIES:
29. ATTORNEY'S FEES:
30. NON-WAIVER OF BREACH:
31. CONDEMNATION:
32. UTILITIES AND ANCILLARY SERVICES
33. HEIRS AND ASSIGNS:
34. NOTICES:
35. CONSTRUCTION:
36. LESSOR ACCESS, LAYOUT OF THE DEMISED PREMISES AND SURROUNDING AREA OWNED BY LESSOR:
37. NUMBER AND GENDER:
38. MARGINAL TITLES:
39. MODIFICATION AND VOIDANCE OF PRIOR AGREEMENTS:
40. TIME OF ESSENCE:
41. PAYMENTS NOT IN SUBSTITUTION:
42. CONVEYANCE BY LESSOR:
43. SIGNS AND ADVERTISING:
44. STATEMENT OF LESSEE:
45. JANITORIAL SERVICE:
46. SUBORDINATION:
47. COMPETITION (reserved)
48. GOVERNMENT FEES:
49. GARBAGE, REFUSE, TRASH, COLLECTION & REIMBURSEMENT:
50. SPRINKLER SYSTEM (IF ANY):
51. MERCHANT'S ASSOCIATION:
52. RIGHT OF FIRST REFUSAL:
53. TRANSFER FEE:
54. NO PARTNERSHIP:
55. HAZARDOUS MATERIALS:
56. WATER USE/SHORTAGE DISCLOSURE, ASSESSMENTS AND FINES:
57. SURRENDER OF PREMISES:
58. SERVICE CHARGE:
59. LIMITATION TO LANDLORD'S PERSONAL LIABILITY:
60. ALTERATIONS/IMPROVEMENTS:
61. AMERICANS WITH DISABILITIES ACT:
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Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
62. REAL ESTATE BROKERAGE FEE:
63. LESSOR LOAN OR SALE:
64. ATTORMENT:
65. MUTUAL WAIVER OF RIGHT OF SUBROGATION:
66. MISCELLANEOUS PROVISION:
67. SECURITY GUARDS;INDEMNITY:
68. MUTUALLY DELETED
69. USA PATRIOT ACT COMPLIANCE:
70. CONFIDENTALITY:
71. ENERGY CONSUMPTION:
72. JURISDICTION:
73. INVALIDITY; JURY TRIAL WAIVER
74. PRELIMINARY NEGOTIATIONS
75. COUNTERPARTS; FAXED OR ELECTRONIC SIGNATURES:
76. STATE OF CALIFORNIA STORM WATER CONTROL REQUIREMENTS:
77. QUITCLAIM:
78. NOTICE OF SURRENDER:
79. DISPUTE RESOLUTION
80. TERMINATION MERGER:
LEASE EXHIBITS “A”, “B”, and “C”
COMMERCIAL LEASE RULES AND REGULATIONS
SUPPLEMENTS & ADDENDUMS:
LEASE ADDENDUM “1”, “ ”, “ ”
PERSONAL GUARANTEE:
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Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
LEASE EXHIBIT "A"
In consideration of rent and the mutual covenants hereinafter set forth Lessor leases and Lessee rents from Lessor, the following described premises on the terms and conditions set forth in the Lease.
Lease particulars of Demised premises, located at 70 GARDEN COURT, SUITE 300 (ENTIRE THIRD FLOOR), MONTEREY, CALIFORNIA, 93940.
Lessor: A. G. DAVI LTD., AGENT FOR OWNER, 70 GARDEN COURT MONTEREY LLC;
GREGORY WOOD, MANAGING MEMBER
Lessee: MONTEREY BAY COMMUNITY POWER AUTHORITY; TOM HABASHI, INTERIM CEO
Demised Premises : Suite 300 (entire third floor), 70 Garden Ct Floor Area : 11,190 +/- sq. ft.
Parking : 3 spaces per 1,000 sq. ft
Term of Lease : Five (5) Years and One-Half (1/2) Month Date of Commencement : December 15, 2017
Date of Expiration : December 31, 2022
Rental cost : $1.75 sq ft./mo. GROSS <$227.50/mo.>
less tenant credit Based on 11,190 sq feet (3rd Fl + loads) Security Deposit : $19,355
Initial Payment : $19,355
Due upon Execution of Lease : $38,710
Business Purpose : Offices
Days/Hours of Operation : 6:00 AM to 7:00 PM Monday to Friday Additional Insured(s) : 70 Garden Court Monterey LLC and A. G. Davi Ltd.
Address for Notices
Lessor : C/O A.G. Davi Ltd.
P.O. Box 2350
Monterey, CA 93942
Lessee : 70 Garden Court, Suite 3
Monterey, CA 93940
****Initial Lessee Fees charged in the initial 90 Days:
additional 3rd Fl electrical & water charges during the initial 90 days of occupancy*** Upon Lessee's - Tenant Occupancy & Physical Possession of Premises on December 15, 2017, the first month's rent & security deposit (equaling a month's rent), is due and payable to Lessor at that time ($38,710).
Lessee is receiving the initial three months, rent-free, excepting for additional utilities' costs for 3rd floor occupancy. Lessee rental payments shall commence March 15, 2018, and with the initial first month's rental payment having been paid (in advance by Lessee at initial Physical Possession of Premises on December 15, 2017), the next rental payment (covering last ½ of April 2018 rent is due & payable on April 15, 2018 by Lessee), and a full month’s rental due the 1st of each month thereafter.
Date ______________________________ Date ____________________________________ Lessor ____________________________ Lessee __________________________________ Lessee Int.Gen Counsel:_____________________
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Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
LEASE
This Lease, made and entered into on the date appearing in the signature block hereof, by and between A.G. Davi, Ltd., agent for owner 70 Garden Court Monterey LLC (hereinafter referred to as Lessor), and Monterey Bay Community Power , jointly and severally, (hereinafter referred to as Lessee), without regard to number or gender.
In consideration of the mutual covenants and agreements contained herein, the parties agree as follows:
Lessor hereby leases the Premises (as described in Exhibit “A” and below) to Lessee, and Lessee hereby rents the Premises from Lessor, for the term, at the rental, and upon the terms, covenants and conditions contained in this Lease.
WITNESSETH:
1. DEFINITIONS:
Lease Year: For the purpose of this Lease, a "lease year" is a period during the lease term commencing on the first day of the lease term (except that if the lease term commences on a day other than the first day of a calendar month, then the "lease year" shall commence on the first day of the next succeeding calendar month) and ending at midnight twelve (12) full calendar months thereafter; provided, however, that the last lease year shall end at the end of the lease term, except that if such period includes less than the whole of a calendar month, that portion of the calendar month, included within the period is a "month." Common Area (if any): As used in this Lease, the term "common area" shall include all areas and facilities in, upon or about the Center and the adjoining parking areas (if any, excluding any Controlled Parking Areas) owned by Lessor for the non-exclusive use of Lessee in common with other authorized users. It is understood and agreed that the common area is not a portion of the premises demised to Lessee hereunder.
Open Parking Area (if any): The term "open parking area" shall include vehicle parking spaces, driveways, access ways, ingress and egress, streets and any other areas owned by Lessor and adjacent to the demised premises and improved in order that automobiles and other vehicles can be driven and parked thereon, but excluding "Controlled Parking Areas".
Parking areas may be designed for co-exclusive use of the Lessee and Lessor or for common use of Lessee and others as provided for herein.
Controlled Parking Area (if any): The term "Controlled Parking Area" shall mean an area for parking automobiles that is separate from the open parking area defined above by and including, but not limited to, gates, signs, barriers, exhibits to lease, markings upon the land or pavement, or as otherwise indicated by Lessor or his agent from time to time, and is not part of the common area or the open parking areas.
Floor Area: The term "floor area" means that actual number of square feet of floor space within the exterior faces of the exterior walls (except party and interior walls, in which case the center thereof instead of exterior faces shall be used) of the buildings, including vacant space therein. However, the term "floor area" shall not include any basement space or subterranean areas, parking facility, or employer's parking area. The term "floor area" refers to gross leasable floor area, and no deductions shall be made from the "floor area" by reason of columns, stairs, hallways, escalators, elevators, conveyers, or other interior construction or equipment. The total "floor area" of the demised premises and the total "floor area" of the buildings, including the "floor area" of the demised premises is hereby defined, fixed, determined and agreed by Lessee and Lessor as set forth above and on Exhibit "A," attached hereto, and shall be conclusive upon the parties hereto.
MRWPCA: The term "MRWPCA" shall mean Monterey Regional Water Pollution Control Agency.
MPWMD: The term “MPWMD” shall mean Monterey Peninsula Water Management District.
Center: The term "Center" is defined as: shopping center, professional office building, mixed-use properties, single and multi-tenant properties, industrial, retail, warehouse, and other general commercial properties, all of which may be improved or unimproved, owned by Lessor.
Lessor: The term “Lessor” shall mean and include Owner, Landlord and Lessor.
Lessee: The term “Lessee” shall mean and include Tenant and/or Lessee. 11 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
2. PREMISES: In consideration of the terms, covenants, conditions and obligations herein contained, to be kept, performed and complied with by Lessee, and upon the condition that Lessee keeps, performs and complies with said terms, covenants, conditions and obligations, Lessor does hereby demise certain premises described in Exhibit "B", attached hereto, (hereinafter demised premises), located at, as specified in Exhibit "A," "Demised Premises." Square footage is an approximate figure and not the sole basis for the monthly value. Lessee should measure the premises to verify square footage prior to signing the Lease, and must communicate any discrepancy to the Lessor and Lessor’s Agent prior to signing the Lease. If Lessee elects not to measure the premises and or not to communicate any discrepancy to Lessor or Lessor’s Agent and signs the Lease, Lessee will have no recourse if during the term of this Lease, or later, a discovery of inaccurate square footage is communicated to the Lessor or Lessor’s Agent. The Lessee hereby acknowledges that they physically viewed the premises, are satisfied with the space and the rental amount and acknowledges that regardless of square footage, they are accepting and renting the premises. Upon mutual execution of this Lease Agreement by Lessor and Lessee, Lessee agrees not to thereafter challenge or seek legal recourse with respect to the square footage, the determination of the square footage and the rental amount as contained in this Lease Agreement, during the term, any extension thereof and after the expiration of the Lease.
3. TERM OF LEASE: The term of this Lease shall be for the approximate number of years appearing as the Term on Exhibit "A," attached hereto, and shall commence on the Date of Commencement of Lease as it appears in said Exhibit "A." If Lessor, for any reason whatsoever, cannot deliver possession of said premises to Lessee at the commencement of the term hereof, this Lease shall not be void or voidable, nor shall Lessor be liable to Lessee for any loss or damage resulting therefrom, but in that event there shall be a proportionate reduction of rent covering the period between the commencement of the said term and the time when Lessor can deliver possession.
4. RENTAL: Lessee hereby covenants to pay to Lessor, at the time and place and computed in the manner hereinafter set forth, as rental for the demised premises for each month, as hereinafter defined during the term of this Lease, no less than the Initial Fixed Rent appearing in Exhibit "A" as adjusted from time to time in accordance with the provisions of Paragraph 6, below. Initial Fixed Rent as so adjusted shall be called the Then Fixed Rent and shall be paid monthly in advance on the first day of each month during the lease term. Rental payments received after the tenth day of the month shall be subject to a late fee equal to 5% (10% after a 3rd monthly delinquent rental payment, for the remainder of the lease term), of the amount then due and shall be paid along with the rent. Lessee further agrees to pay $50.00 for each dishonored bank check. Rental payments shall not be reduced by any claims, demands, or offsets against Lessor of any kind whatsoever. Notwithstanding anything in this Lease to the contrary, all amounts payable by Lessee to or on behalf of Lessor under this Lease, whether or not expressly denominated as rent, shall constitute rent for the purposes of the Bankruptcy Code, 11 U.S.C. Section 502(b)(6). No payment by Lessee or receipt by Lessor of a lesser amount than the rental shall be deemed to be other than on account of the rental, nor shall any endorsement or statement on any check or any letter accompanying any check payment as rent be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor’s right to recover the balance of the rental or pursue any other remedy provided for in this lease.
Rent Payable To: A.G. Davi, Ltd. Rent can be delivered to 484 Washington Street Suite D Monterey, CA or Mailed to P.O. Box 2350 Monterey, CA 93942.
5. CHRONIC DELINQUENCY: Chronic delinquency by Lessee in the payment of rent or any other monthly amounts required to be paid by Lessee under this Lease shall constitute a material breach of this Lease. “Chronic delinquency” shall mean the occurrence of any of the following for any three (3) months (consecutive or nonconsecutive) during any twelve (12) month period: failure by Lessee to pay or submit within five (5) days of the due date Base Monthly Rent and all other monthly charges. This paragraph shall not limit in any way, nor be construed as a waiver of the rights and remedies of Lessor provided hereunder or by law in the event of even one instance of delinquency. In the event of chronic delinquency, at Lessor’s option, Lessor shall have the right, in addition to all other rights under this Lease and at law, to require that all rent be paid by Lessee quarterly, in advance.
6. ADJUSTMENTS OF FIXED RENT: The first annual rental adjustment commences January 1, 2019. Notwithstanding the provisions of paragraph 4, the initial fixed rent shall be adjusted on the first day of the second lease year (2019) and thereafter at twelve-month intervals for so long as this Lease or any extension thereof shall be in effect, unless otherwise agreed in writing by Lessor and Lessee, as follows: on the first day of the second lease year (2019) and on the first day of each lease year thereafter (the adjustment dates), the Then Fixed Rent shall become the product of multiplying the Then Fixed Rent by the annual percentage increase as 12 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
reflected in the Consumer Price Index for All Urban Consumers in the San Francisco-Oakland-San Jose area as published by the Bureau of Labor Statistics, United States Department of Labor or any successor index, for the calendar month preceding the adjustment dates. Lessor delay in notifying Lessee of the adjustment shall not be a waiver of Lessor’s rights to enforce the adjustment hereunder. If the Index is changed so that the base year differs from that in effect when the tern commences, the Index shall be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics. If the Index is discontinued or revised during the term such other governmental index or computation with which it is replaced shall be used in order to obtain substantially the same as would be obtained if the Index had not been discontinued or revised.
7. SECURITY DEPOSIT: On or before the date of execution of this Lease, Lessee has delivered to Lessor, receipt of which is hereby acknowledged by Lessor, the Initial Payment as such payment appears in Exhibit "A," attached hereto. That portion of the Initial Payment that equals the Initial Fixed Rent shall represent advance payment of the monthly rent and charges for the first month of the term of this Lease and the balance thereof shall represent a security deposit for the full and faithful performance by Lessee of all of the terms, covenants, conditions and obligations of this Lease to be performed and kept by Lessee. If Lessee shall have fully and faithfully complied with all of the terms, covenants, conditions and obligations of this Lease, the security deposit shall be returned to Lessee within twenty-one (21) days after Lessee has vacated the demised premises. If Lessee defaults with respect to any of the terms, covenants, conditions and obligations of this Lease including, but not limited to, nonpayment of rent, failure to properly repair damage to the premises caused by Lessee, or failure to clean the premises upon termination of tenancy, and for the full and faithful performance by Lessee of all of the terms, covenants, conditions and obligations of this Lease to be performed and kept by Lessee. Lessor may use, apply or retain the whole or any part of the security deposit for the payment of any rent in default or for reimbursement of Lessor for any sums which Lessor may spend or be required to spend by reason of Lessee's default. The application by Lessor of all or any part of said security deposit shall not preclude Lessor from thereafter exercising each and all of Lessor's other rights and remedies upon such default of Lessee. Should Lessor resort to the security deposit during the lease term, Lessee shall restore the security deposit to the original sum required hereunder within ten (10) days after written demand for same by Lessor. Lessee will not be entitled to interest on any portion of the security deposit. Lessor’s obligations with respect to the deposit are those of a debtor and not of a trustee, and Lessor can commingle the security deposit with Lessor’s general funds. Lessor shall not be required to pay Lessee interest on the deposit. Lessor shall be entitled to immediately endorse and cash Lessee’s payment.
8. GOVERNMENTAL INTERVENTION: In the event that Lessee's occupancy of the demised premises shall be prohibited, restricted, modified or interfered with in any respect by or as a result of any action of any governmental authority or agency then, and in that event, Lessee shall comply with any and all lawful orders made by any such governmental agency having jurisdiction in the premises, and in the event that Lessee's occupancy shall be prohibited by reason of the intervention of such governmental agency and in that event, Lessee’s sole remedy hereunder shall be an option to cancel this Lease and from, and after the giving of sixty (60) days advance written notice of the exercise of such option to cancel this Lease, neither party hereto shall thereafter have any further obligations whatsoever by reason of this Lease. Lessee shall obtain any and all governmental approvals authorizations, and permits necessary or desirable to enable Lessee to operate Lessee's business in the premises and shall comply with any and all conditions and requirements imposed thereon, all at Lessee's sole cost and expense. Lessor shall have no obligation whatsoever for obtaining any such approvals, authorizations or permits nor shall Lessor have any obligations or responsibility whatsoever by reason of any governmental intervention, prohibition, condition or qualification with respect to Lessee's occupancy of the demised premises or Lessee's business conducted therein regardless of whether any such governmental action be based upon action or inaction of Lessor or action or inaction of Lessee.
Lessor makes no warranties or representations whatsoever with respect to the status or need for any governmental approvals, authorizations or permits by either Lessor or Lessee, and Lessee assumes full and complete responsibility for determining what permits, approvals and authorizations, if any, are required, necessary or desirable.
8.1 RENT CONTROL: The Rent and other terms of this Lease are the result of extensive negotiations between Lessor and Lessee, both of whom have professional legal advice. Said terms represent what both Lessor and Lessee have agreed are fair and reasonable rent. In the event that any governmental authority should at any time enact any regulation, ordinance or law which would reduce the Rent or Additional rent herein provided, or the adjustments thereto herein provided, and unless Lessee lawfully waives in writing (in form and content acceptable to Lessor) the benefits of such regulation, ordinance or law and pays the full rent and additional rent as provided in this Lease, the Lessor may upon SIXTY (60) days written notice to Lessee terminate this Lease and take possession of the Leased Premises for Lessors use or such other use as Lessor may wish to make of the property. Nothing herein, however, shall require Lessee to violate any statute or regulation that will subject Lessee to a fine or penalty. 13 of 82
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9. DESIGNATION, MAINTENANCE, REPAIR AND OPERATIONAL COST OF THE CENTER INCLUDING COMMON AREAS, (IF ANY): Within and about the Center, Lessor will from time to time provide and designate for the general use and convenience (among others) of Lessee and other Lessees of all or any part of the Center, and their respective employees, patients, clients, customers, and invitees, certain common areas. These shall include but are not limited to, sidewalks, landscaped areas, parking areas (if any being provided), driveways, entrances, exits, lighting standards, exterior lighting fixtures, water fountains, exterior stairways, comfort stations, corridors, restrooms not located within Lessee’s space, arcades, interior halls, patios, electrical, plumbing, other building systems, and similar improvements, loading and delivery areas, refuse disposal areas, elevators, if any, and other areas and facilities that may be provided and designated by Lessor from time to time for the general use and convenience of Lessor, Lessee and other lessees of the Center. Lessor may (if parking is being provided), from time to time, provide certain hard-surfaced, marked and lighted parking areas within or in the immediate vicinity of the Center. Lessor reserves the right from time to time to install kiosk or other free standing semi-permanent structures within the common areas, to make changes in the shape, size, location, number and extent of improvements, buildings, accommodation areas, loading and delivery areas, driveways, entrances, exits, traffic flow and any other improvements from time to time constituting common area to eliminate or add any improvements or buildings to any portion of the Center and surrounding land owned by Lessor; furthermore, Lessor may, in the manner provided by law, reduce the parking area below the minimum for the Center specified by the zoning authority having jurisdiction over the Center. During the term of this Lease, Lessor shall operate, manage, maintain, all of the above and other areas and facilities from time to time provided and designated by Lessor for the general use and convenience of Lessee and other Lessees of the described common areas. The manner in which such areas and facilities shall be maintained and protected by guards or otherwise and the expenditures for maintenance and security by guards or otherwise, shall be at the sole discretion of Lessor, and the use of such areas and facilities shall be subject to reasonable regulations and changes as Lessor shall make from time to time, including, without limitation, the right to close, if necessary, all or any portion of such areas, roads, or facilities, to such extent as may be legally sufficient in the opinion of the Lessor's counsel, to prevent a dedication thereof or the accrual of rights of any person or of the public therein, or to close temporarily for safety, maintenance, construction or other purpose, all or any portion of such areas or facilities.
9.1 Subject to the limitations as set forth in this Lease, Lessor hereby grants to Lessee, Lessee's employees, patients, clients, customers, patrons, sub-tenants, licensees, agents and service suppliers, a non-exclusive license to use the common area, as it is designated by Lessor from time to time, during the term of this Lease, while being treated, conducting or receiving consultations, shopping or having business in the Center, said license being a license in common with other lessees from Lessor now or hereafter located in the Center, and said use is to be in accordance with such Common Area Rules and Regulations as may be promulgated by Lessor from time to time and by which Lessee hereby agrees to abide. It is agreed that Lessor at all times during the term of this Lease shall have sole and exclusive control of the common area and may exclude or restrain any person from use or occupancy thereof, excepting, however, those persons to whom such non-exclusive license has been granted as hereinabove provided for and who makes use of the common areas in accordance with said Common Area Rules and Regulations. Lessee shall cooperate with Lessor and all other lessees of Lessor herein to cause the common area to be maintained in the uniform, clean and efficient manner, and to be kept free and clear of any obstructions created by Lessee or its employees, patients, clients, agents, sub-tenants, licensees, service suppliers, customers and patrons or otherwise resulting from Lessee's operations. It shall be the duty of Lessee to see that the common area is used only by the persons, in the manner, and for the purposes specified herein, and in accordance with the aforementioned Common Area Rules and Regulations made by Lessor from time to time. If, in the opinion of the Lessor, unauthorized persons are using any portion of the common area, or such area is being used in an unauthorized manner by reason of the presence of Lessee in the demised premises, Lessee shall, promptly upon demand of Lessor, take appropriate steps to remove or restrain all such unauthorized persons or to prevent the common area from being used in an unauthorized manner. If parking is provided, Lessor shall specifically have, without limitation, the right to require Lessee and the agents, servants, and employees of Lessee to park solely in Lessee's parking spaces which are co-exclusively licensed under the provisions of Paragraph 10, herein, or if such spaces are unavailable, inadequate or filled, upon the public streets or in other public parking areas. PDF OF SITE PLAN TO BE INCLUDED IN LEASE AGREEMENT.
9.2 Subject to Lessee's compliance with subparagraph 9.3) below, Lessor shall exercise reasonable care to maintain the common area in a neat, clean and orderly condition and state of repair.
9.3 In addition to the other rights herein reserved, Lessor shall have the right, in its sole discretion:
a. To determine the nature and extent of the common area, whether the same shall contain surface, underground or multi-decked parking, and at any time to make such changes in 14 of 82
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the physical character, size, location, design, number, layout and operating of the common area as Lessor may deem advisable, including, but not limited to the locating or relocating of driveways, entrances, exits, the direction and flow of traffic, vehicle parking spaces, the installation of restricted use area, common area restroom (if provided), lighting, rest areas, planted areas, fountains, signage, directories, telephones, and other changes to the common area in general; for altering the common areas to comply with the Americans with Disabilities Act of 1990, as the same may be amended from time to time, OSHA, and California Building code, Title 24, and all regulations thereunder.
b. To establish and at any time change, alter, amend and to enforce against Lessee and other users of the common area such reasonable rules and regulations, of which Lessor shall give Lessee written notice, as may be deemed necessary and advisable for the proper and efficient operation and maintenance of the common area and Center. Lessee agrees to conform to and abide by all such rules and regulations in its use of the common area; c. To designate or prescribe upon written notice to Lessee, certain parts of sections within the common area in close proximity to the buildings, in which Lessee's employees, agents, sub-tenants, and concessionaires shall be forbidden to park their automobiles and, in the event that Lessor makes such a designation, Lessor may require such persons to use only space in the common area or available public space outside thereof as is not so restricted. Upon written request of Lessor, Lessee shall, within thirty (30) days thereafter, furnish to Lessor the automobile license numbers of the automobiles customarily used by the above-specified persons.
10. PARKING IN OPEN PARKING AREA (if any): Lessee and Lessor agree that the Open Parking Area, if any, shall be used solely for the purpose of the daily parking of passenger automobiles owned, leased, controlled or authorized by Lessee, Lessor or other tenants. Lessee agrees to use such parking area solely for said purpose and in accordance with the provisions of this agreement and releases Lessor from any and all obligation or responsibility to prevent the use of said area by persons and vehicles not conforming to such purpose, not licensed by Lessor or not authorized by Lessee or other tenants. Lessee further releases and indemnifies Lessor against any claims for loss or damage to vehicles, their occupants or contents that are parked in the Open Parking Area by Lessee or in connection with the business or practice of Lessee. If there is no parking, Lessee acknowledges that Lessor has made no provision for parking on the Premises and Lessee shall be responsible for all parking associated with the use of the Premises for their employees and patrons.
11. BUSINESS PURPOSE: Lessee covenants that during Lessee's occupancy of the demised premises, Lessee will use the demised premises solely for the purpose of operating the practice or business appearing as Business Purpose, and for the number of days per week and for the hours of operation as set forth in Exhibit "A", if stipulated attached hereto. Lessee further covenants that Lessee will not at any time during Lessee's occupancy, use the premises for any residential use, and will not rent the premises for any other purpose or purposes without the written consent of Lessor first had and obtained.
12. COMPLIANCE WITH LAW: Lessee covenants that during Lessee's occupancy of the demised premises, Lessee shall at Lessee's own cost and expense, promptly and properly observe, comply with and execute, all present and future orders, regulations, directions, rules, laws, ordinances and requirements of governmental authorities, including, but not limited to, state, municipal, county and federal governments and their departments, bureaus, boards and officials and the Board of Fire Underwriters, Monterey Peninsula Water Management District, Monterey Regional Water Pollution Control Agency and any other board of organization exercising similar functions arising from the use or occupancy of, or applicable in any manner to the demised premises or privileges appurtenant to or connected with the enjoyment of the demised premises.
13. USE AND CLEANLINESS: Not withstanding paragraph #11 “BUSINESS PURPOSE”, Lessee covenants that during Lessee's occupancy of the demised premises, Lessee will not permit said premises to be used for any improper, illegal or immoral purposes or permit Lessee's business to be carried on in such a manner as to be noisy or offensive to others in the vicinity of the demised premises. Lessee shall not use the Premises in any manner that will constitute a nuisance or unreasonable annoyance to other tenants in the building in which the Premises are located, including, without limitation, the use of loudspeakers, or sound or light apparatus that can be heard or seen outside the Premises, or the living or sleeping in, washing clothes, cooking, or the preparation, manufacture or mixing of anything that might emit any odor or objectionable noises, lights or vibrations. No machinery, apparatus or other appliance shall be used or operated in or on the Premises that will in any manner injure, overload, vibrate or shake the building in which the Premises are located. Lessor may from time to time promulgate rules and regulations for the use of the real property and Tenant agrees to abide by such rules and regulations. Lessee shall not do anything on the premises, which will overload any existing parking, utility service, and refuse or other areas of the Premises. Pets and/or animals of any type shall not be kept on the Premises. Tenant will not perform any act or carry on any practice that may injure the Premises or the Center, or that may be a nuisance or menace to any other 15 of 82
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tenant in the Center. No auctions are permitted. Lessee acknowledges that neither Lessor nor any agent of Lessor has made any representation or warranty with respect to the Premises, concerning the zoning or uses permissible or with respect to the suitability of the Premises for the conduct of Lessee’s business, nor has Lessor agreed to undertake any modification, alternation or improvement to the Premises, except as provided in writing in the Lease. If sound insulation is required to muffle noise produced by Lessee on the Premises, Lessee at its own cost shall provide all necessary insulation.
14. ASSIGNMENT AND SUBLETTING: Lessee shall not sell, transfer, assign, mortgage or hypothecate this Lease or any interest in this Lease nor permit the use of the demised premises by any person or persons other than Lessee, nor sublet the premises or any part thereof without the written consent of Lessor first had and obtained, which said written consent shall not be withheld unreasonably. Consent to any of the aforementioned acts shall not operate as a waiver of the necessity of first obtaining the written consent of Lessor to any such subsequent act and the terms of any such consent shall be binding upon any person holding by, under or through any such written consent. Lessee agrees that the consent of Lessor shall not be deemed or considered withheld by reason of the fact that in the event of the sale of the business operated by Lessee on the demised premises, Lessor requires as a condition of the assignment of the Lease that the terms and conditions of this Lease be modified, including but not limited to those terms and conditions concerning the security deposit or rent. Lessee agrees that the consent of Lessor shall not be deemed or considered unreasonably withheld if Lessor refuses to consent to the assignment of this Lease to any person, firm or corporation other than an entity similar to that operated by Lessee with a financial statement and condition satisfactory to Lessor. In any event, if Lessor shall consent to any sublease, sale, transfer, assignment, mortgage or hypothecation of this Lease or any interest in this Lease, or if the Lessee shall without such consent have subleased, sold, transferred, assigned, mortgaged or hypothecated this Lease or any or all of Lessee's interest therein then, and in that event, without otherwise limiting any other remedies Lessor may have by law or under the provisions of this Lease, Lessor shall be entitled to receive and Lessee shall assign to and promptly pay to Lessor, any and all consideration (including, but not limited to, all rent received by Lessee from any sub lessee that exceeds the amount of Then Fixed Rent owed or paid by Lessee to Lessor and all transfer fees and the like) to be received by Lessee for or in connection with any such sublease, sale, transfer, assignment, mortgage or hypothecation of this Lease or any interest in this Lease. Lessee shall pay Lessor's costs including attorney fees in connection with this paragraph, subject to a $750.00 minimum processing and administrative fee payable in advance. As a further condition to Lessor’s consent, the parties agree that it shall be reasonable for the Lessor’s consent to be predicated upon the proposed assignee’s or sub lessee’s willingness to pay additional rent in an amount then designated by Lessor to be the fair market rental for the premises.
14.1 If this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., any and all monies or other considerations payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Lessor, shall be and remain the exclusive property of Lessor and shall not constitute property of Lessee or of the estate of Lessee within the meaning of said Bankruptcy Code. Any and all monies and/or other considerations constituting Lessor's property under the preceding sentence not paid or delivered to Lessor shall be held in trust for the benefit of Lessor and be promptly paid or delivered to Lessor.
14.2 Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Lessor an instrument confirming such assumption.
14.3 If Lessee is a corporation or an unincorporated associations or a partnership, the transfer, assignment, or hypothecation of any stock or interest in said corporation, association, or partnership in the aggregate in excess of thirty five percent (35%) shall be deemed an assignment within the meaning and provisions of this article.
15. ACCEPTANCE (“AS IS”) CONDITION AND MAINTENANCE OF PREMISES:
The demised premises, including any fixtures and any personal property, is being Leased in its “AS IS”, condition with all faults, without any expressed or implied warranties. Any and all representations and warranties of Lessor set forth elsewhere in this Lease are hereby deleted.
Lessee hereby represents that Lessee or Lessee’s agents have inspected the subject property to the full extent deemed appropriate and that Lessee is satisfied with its condition. Lessee acknowledges that as of the date of this Lease, the subject property and the Premises and improvements are in good order, repair and condition. Lessee has not relied on any acts, including any written or oral statements, by Lessor, or any person acting on behalf of Lessor, in entering into this Lease, but rather has relied on his/her or its own independent investigation of the subject property. The entry by Lessee upon the demised premises shall be conclusive evidence against Lessee as an admission that every part of the demised premises, (interior and exterior), is accepted "AS IS". Lessee hereby agrees that Lessor has no responsibility whatsoever for any 16 of 82
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maintenance, replacements or repair of any part of said demised premises. Lessor shall maintain, excluding doors and windows, the roof, foundations and exterior walls, except doors and windows.
Lessor’s said obligation shall not include however, any damage or repairs necessitated by the acts or omission of the Lessee, Lessees agent, employees and/or customers or invitees.
If the use of the premises includes the preparation of food or beverage in the premises, Lessee will be responsible for maintenance, repairs and replacement of sewer lines, including sewer lines buried in the earth or concrete, provided that the need for maintenance is solely due to the Lessee’s operation on the premises. Sewer lines lying outside the property line shall be Lessor’s responsibility. Lessee in accordance with the local and state governmental fire and health agencies and regulations, shall install automatic fire suppression systems over commercial cooking equipment and shall install non-combustible metal plates between deep fat fryers and open flame units, all at Lessee’s expense and prior to the opening of business. Any sewer back-ups materially caused by tenant's MIS-USE, costs to be reimbursed by Lessee.
Additionally, Lessee shall:
a) Service and wash said equipment on a regular basis including the washing or exchanging of filters in the hood systems and flues are to be cleaned on a quarterly basis by a licensed flue-cleaning contractor and provide Lessor with copies of invoice or contract confirming the cleaning
15.1 Lessee shall through the term of the Lease, continue to operate a fully licensed professional business that does not disturb others, nor their quiet right to enjoyment of their leased premises in the three office building (business park) of 60, 70, & 80 Garden Court.
15.2 MOISTURE AND MOLD: Due to coastal, atmospheric and other coastal conditions in this area moisture resulting in mildew and mold may develop. Lessee acknowledges that this risk exists and assumes responsibility for proper ventilation and cleaning of Premises, and, Lessee assumes all liability for any, injuries and or property damages caused by moisture, including but not limited to, mildew and/or mold to Lessee or Lessee’s clients or invitees.
15.3 TENANTS FINANCIAL STATEMENTS: At any time during the Lease Term, Landlord may require Tenant to provide Landlord with a current financial statement and financial statements for the two (2) years prior to the current financial years (the “Financial Statements”).
Such Financial Statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Lessee, shall be audited by an independent certified public accountant. Lessor shall keep the Financial Statements confidential and shall not disclose the Financial Statements to third parties, except (a) Lessor’s partners, employees, current and potential partners, legal counsel, directors, agents, consultants, prospective purchasers of the Project, and current and potential lenders, (b) for purposes of defending or maintaining any legal action related to this Lease, (c) in response to inquiries from applicable regulatory agencies having jurisdiction over Lessor, (d) as otherwise required by law or legal process. Any such third parties shall be informed of the confidential nature of the Financial Statements and instructed not to disclose such Financial Statements.
16. LIENS: Lessee covenants to keep the demised premises and any alterations, improvements and changes thereof, free and clear of liens of every kind and character whatsoever during Lessee's occupancy thereof, no matter what the source thereof, or the reason thereof, which may arise from the use of occupancy of said premises by Lessee, or from any work, labor or materials furnished to or performed upon said premises. Lessee further covenants to indemnify and hold Lessor free and harmless of and from any and all loss or damage howsoever arising by virtue of any such liens or claims of lien including any expense reasonably incurred by Lessor in defense against such claims. Lessor shall have the right to post and maintain on the demised premises such notices of non-responsibility or non-liability as Lessor may deem appropriate to avoid any liability for liens.
16.1 LESSEE’S COVENANTS: Lessee agrees that it will pay, or cause to be paid, all costs of labor, services and/or materials supplied in the prosecution of any work done, or caused to be done, on the premises, and tenant will keep the premises free and the commencement of any work, including the supply of any labor, services and /or materials for improvements on, or construction of, the premises, Lessee shall provide Lessor with a “ labor and materials payment bond” in an amount equal to one hundred percent (100%) of the aggregate price of all contracts for such work, conditioned on Lessee’s payment in full of all claims of mechanics’ lien claimants for such labor, services and/or materials supplied in the prosecution of such work. Said payment bond shall name Lessor as a primary oblige, shall be given by a sufficient surety which is satisfactory to Lessor, and shall be in such form as Lessor shall approve in its sole discretion.
16.2 CONTEST OF LIEN: If Lessee desires to contest any claim of such mechanics lien, it shall either (a) post a mechanics lien release bond issued by a responsible corporate surety in an amount sufficient to satisfy statutory requirements therefor in the State of California, or (b) furnish Lessor with adequate security for the amount of the claim plus estimated costs and interest, and (c) promptly pay or cause to be paid all sums awarded to the claimant on its suit. 17 of 82
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16.3 LESSOR’S RIGHT TO CURE: If Lessor shall be in default of any of its covenants in this paragraph, by failing to provide security for or satisfaction of any mechanic’s lien, then Lessor, in addition to any other rights or remedies it may have, may (but shall not be obligated to) discharge said lien by (a) paying the claimant an amount sufficient to settle and discharge the claim (b) posting a mechanics lien release bond, or (c) taking such action as Lessor shall deem appropriate, and, in which event, Lessee shall pay as additional rent in Lessor’s demand, all costs (including reasonable attorney fees) incurred by Lessor in settling and discharging said lien together with interest thereon at 3% over the Wall Street Prime Rate from the date of Lessor’s payment of said costs. Lessor’s payment of said costs shall not waive any default of Lessee under paragraph 16.
16.4 NOTICE OF LIEN: Lessee shall forthwith notify Lessor in writing of any claim of lien filed against the premises or the commencement of any action affecting the title thereto.
16.5 NOTICE OF NON-RESPONSIBILTY: Lessor or its representatives shall have the right to go upon and inspect the premises at all reasonable times and shall have the right to post and keep posted thereon notices of Non-Responsibility or such other notices which Lessor may deem to be proper for the protection of Lessor’s Interest in the premises. Before the commencement of any work which might result in any such lien, Lessee shall give to Lessor ten (10) days advanced written notice of its intention to do so in sufficient time to enable Lessor to post such notices.
17. ACCESSION: All alterations, improvements, additions or fixtures, that may be made, constructed or installed upon the demised premises by either Lessee or Lessor and that in any manner are attached to the floors, walls, ceilings, or roof shall become and be the property of Lessor without cost at the termination of this Lease, and be surrendered with the premises as a part thereof without disturbance, molestation or damage thereto; included but not limited to, any floor covering that may be cemented, nailed, tacked or otherwise affixed to the floor, any light fixture that may be installed by Lessee in, upon or about the demised premises shall become and be the property of Lessor whether such fixture be affixed by screws, bolts, nails or otherwise, without cost at the termination of this Lease. All water, sewer, utility, and other governmental use allocations, and all governmental permits shall remain with Lessor, without cost to Lessor at the termination of this Lease.
18. WASTE: Lessee shall not commit nor suffer to be committed any waste, legal, equitable, or otherwise, to or upon the demised premises or any part thereof and covenants that at the expiration of the term hereof or any sooner termination thereof, Lessee will quit and surrender up said premises to Lessor peaceably and quietly and in as clean and good condition as said premises now are or may be put into, reasonable use and wear excepted.
19. HOLD-OVER TENANCY: Lessor and Lessee agree that there shall be no renewal of this Lease, except upon execution of a written agreement, and that the fact that the Lessee may continue in possession of the premises without the written consent of Lessor shall not operate to renew this Lease. In the event Lessee or any party claiming under Lessor remains in possession of the premises or any part thereof after the expiration of this Lease without Lessor’s consent, no tenancy or interest on the premises will result, and such action shall result in unlawful detainer and that party shall be subject to immediate eviction and removal. In the event Lessee remains in possession of the premises after the expiration of this Lease with Lessor’s written consent but without the execution of a new lease, it shall be deemed to be occupying the premises as a Lessee from month to month at a rental equal to two hundred fifty percent (200%) of the minimum annual rental and percentage rental herein provided and otherwise subject to all the conditions, provisions and obligations of this Lease. The foregoing shall not constitute Lessor’s consent for Lessee to holdover. In the event Lessee remains in possession of the premises after the expiration of this Lease without Lessor’s consent, Lessee shall also pay to Lessor all damages sustained by Lessor resulting from retention of possession by Lessee, including without limitation the loss of any proposed subsequent tenant for any portion of the premises. This provision for holdover tenancy is not to be construed as limiting the rights or remedies otherwise available to Lessor to remove Lessee, or, to limit the rights of Lessor or Lessee to resolve any dispute.
20. INSURANCE: During the term hereof, Lessee shall maintain in full force and effect upon all of Lessee's trade fixtures, “tenant's betterment’s” and improvements, equipment, inventory and stock in trade in the demised premises a policy or policies of fire insurance issued by an approved California insurance company rated A+ XIV with all risk coverage endorsement to the extent of at least ninety percent (90%) replacement cost of such items. As long as this Lease is in effect, the proceeds of any such policy shall be used for the repair or replacement of the fixtures, “tenant's betterment” and improvements and equipment so insured. Lessor shall have no interest in the insurance upon Lessee's fixtures and equipment and Lessor will cooperate with Lessee in the settlement of any claim or loss by Lessee, provided that Lessee gives to Lessor 18 of 82
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satisfactory assurance that the proceeds of such insurance will be used in compliance with the requirement hereinabove contained respecting repair or replacement of said fixtures and equipment. During the term hereof, Lessee may maintain in full force and effect, at Lessee's expense, a policy or policies of glass insurance, insuring Lessor's and Lessee's interests, as they may appear, covering exterior and interior glass of the Demised Premises; provided, however, that Lessee shall be financially responsible to repair and/or restore any exterior or interior glass damaged as a result of any action of Lessee, its employees and/or agents and guests. Lessee may also maintain, at Lessee's cost, insurance for any water damage resulting from any sprinkler leakage in the Demised Premises during the term of this Lease or any extension hereof. In the event that Lessee fails to carry said insurance, Lessee understands and acknowledges that Lessee shall be solely responsible for repairing any damage resulting from any sprinkler leakage, and that Lessor shall not be financially responsible, on any basis, for any resulting damages.
Lessor is to be named as its interest may appear as regards Lessee's “tenant's betterment’s” and improvements on the fire insurance policy for the Lessee, and Lessee is to provide sufficient amount of coverage to at least ninety percent (90%) co-insurance with a replacement value cost endorsement and inflation guard endorsement of not less than a ten percent (10%) annual increase or cost-of-construction average increase as published by F.W.
Dodge Systems, McGraw Hill, in the Daily Pacific Builder, or other index agreed upon by the Lessor and Lessee, whichever is higher.
20.1 INSURANCE USE RESTRICTIONS: Lessee agrees that it will not carry any stock or goods or do anything in or about the premises which will in any way tend to increase the insurance rates upon the building of which the premises are a part. Lessee agrees to pay to Lessor forthwith upon demand the amount of any increase in premiums charged to Lessor for insurance carried by Lessor, which increases results from Lessee’s violation of the foregoing restrictions, irrespective of whether Lessor shall have consented to Lessee’s act. If Lessee installs any electrical equipment which overloads the electrical lines, Lessee shall at its own expense make all changes to its premises and install any fire extinguishing equipment and/or other safeguards that Lessor’s insurance underwrites or applicable fire, safety and building codes and regulations may require. Nothing herein contained shall be deemed to constitute Lessor’s consent to such overloading.
20.2 INSURANCE: Lessee shall procure, at Lessee's own expense, on or before the date of the commencement of the term of this Lease and shall maintain continuously during the entire term hereof Workers' Compensation as required by law, and Public Liability and Personal Injury liability insurance in the amount of at least two million dollars ($2,000,000.00) for the injury or death of any one person and four million dollars ($4,000,000.00) for the injury or death of any number of persons in any one accident and property damage liability insurance in the amount of one million dollars ($1,000,000.00). All of said policies of insurance shall provide that among the additional insured thereunder shall be included Lessor, Lessor's agents herein, Lessor's Property Manager, and all other persons whom Lessor may elect to keep insured, including, but not limited to, those named in Exhibit "A", "Named Insured". All of said policies of insurance shall be obtained from companies satisfactory to Lessor and shall contain an endorsement that such insurance shall not be canceled except after thirty-(30) days written notification to Lessor. Lessee shall deliver to Lessor certificates evidencing the insurance coverage herein provided for. Lessee shall pay the insurance premiums on all insurance coverage herein provided for when due. If Lessee shall fail to pay the premiums on any policy required to be kept and maintained by Lessee, Lessor may, but need not, advance and pay said premiums, and the amount of any such advance or advances, together with interest thereon at the rate of ten percent (10%) per annum, shall become additional rent hereunder and one-sixth (1/6) of any total advance shall be payable by Lessee to Lessor with each monthly installment of rent to become due thereafter until such advance is paid in full.
21. TAXES: Lessee shall pay before delinquency any and all taxes, including a rental tax if any now or in the future, assessment, license fees and public charges levied, assessed, or imposed upon Lessee's fixtures, or about the demised premises, or personal property located in, upon, or about the demised premises, or on account of or by reason of any business or other activity conducted by Lessee in, upon or about the demised premises.
22. DAMAGE OR DESTRUCTION OF DEMISED PREMISES: If the demised premises or the building in which they are situated are totally destroyed or damaged more than thirty percent (30%) in value by fire or the elements during the term of this Lease, Lessor shall thereupon have an election to terminate this Lease. In the event that a government agency by ordinance, regulation, interference or refusal to permit the restoration of the premises and/or the building to substantially the same condition prior to such loss, or restrict the extent of the reconstruction so as to make the property not economically feasible, in the sole discretion of the Lessor, then the Lessor shall thereupon have the option to terminate this Lease, and in the event 19 of 82
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that Lessor should exercise such election to terminate this Lease, all rights and obligations herein shall cease and terminate, except for rent and other sums accrued and unpaid to date of such destruction or damage. Written notice terminating this Lease pursuant to Lessor's election aforesaid shall be given to Lessee not later than ninety (90) days after such damage or destruction. If the demised premises or the building in which they are situated are so damaged by fire, or the elements, and Lessor does not exercise Lessor's election to terminate said Lease as hereinabove provided, and Lessor restores said demised premises at its own expense then, and in that event, this Lease shall remain in full force and effect. In the event that repairs are to be made pursuant to this paragraph, Lessor shall be entitled to and shall have possession of the necessary parts of said premises for such purpose, and if there is any substantial interference with Lessee's business on account of such repairs, Lessee shall be entitled to a proportionate reduction of rent during the time that said repairs are being made.
If Lessor should elect to repair or rebuild because of any damage or destruction, as hereinabove provided, Lessor's obligation shall be limited to restoration of the demised premises or the building in which they are situate similar to the condition that Lessor provided at the commencement of the term hereof, or any reasonable substitute therefore so long as such substitute meets applicable code requirements, and Lessee shall fully repair or replace all exterior signs, trade fixtures, equipment, display cases, and other installations originally installed by Lessee at its own expense, including, but not limited to, all of Lessee's betterment’s and leasehold improvements.
23. DUTIES AND PROHIBITED CONDUCT: Lessee covenants not to do and not permit to be done, anything in, on or about the premises, and not to bring, nor keep anything therein which will in any way affect fire or other insurance upon the entire property, building, or any of its contents other than as shall be specifically allowed elsewhere in the Lease, nor which will violate any law or regulation which now may be or which may hereafter be enacted or promulgated by any public authority, or which in any way may obstruct or interfere with the rights of others, or injure, or annoy them. Lessee further covenants that should there be an increase in fire or other insurance rates on any insurance held by Lessor on the demised premises which increase is caused by or is attributable to the equipment, installations, alterations, or the business conducted, or us of occupancy by Lessee, the monthly rental to be paid by Lessee shall be increased correspondingly to cover the full increase in such insurance rates.
Lessee shall not use or permit any person or persons to use, the premises for the sale or display of pornography, nudity, graphic violence, drug paraphernalia, or any goods and/or services which, in the sole discretion of Lessor, are inconsistent with the image of a community or family-oriented center. Lessee shall not use, or suffer or permit any person or persons to use, the premises or any part thereof as a massage parlor, adult book store or second hand store or to conduct an auction, distress, fire, bankruptcy or going out of business sale. Tenant shall not use, suffer, or permit any person to use the Leased Premises or any part thereof for any of the following listed uses:
1) Operation of any pinball machine, coin-operated music machine, or other amusement device of any kind or character, or use thereof for entertainment (other than as incidental to the use and for which no charge is made to customers) or recreational purposes, such as (but not limited to) a bowling alley, skating rink, health studio or gym, billiard room, game arcade or amusement center, gambling establishment, movie theater, night club, dance hall, bar or tavern (except of incidental to the operation of a restaurant or delicatessen, if said Leased Premises are hereby Leased for such purpose or purposes).
2) Operation of a pawnshop.
3) Operation of a training or education facility, a beauty school or barber college, reading room, place of instruction or any other operation catering primarily to students or trainees rather than to customers.
4) Sale or display of motor vehicles, boats, trailers, motor homes and other motorized vehicles.
Lessee shall not use the premises for any purpose that violates the laws of the United States of America, or the laws, ordinances, regulations and requirements of the State, County, and City where the Center is located, or of other lawful authorities. Lessee shall not cause or permit waste to occur in the premises and, without limitation to the foregoing, shall not overload any floor or abuse the plumbing in the premises. Lessee shall not burn trash or rubbish in or about the premises and shall deposit its trash and rubbish only in those receptacles provided by Lessor.
Lessor shall cause such receptacles to be emptied and trash removed. Lessee shall keep the premises, and every part thereof, in a clean and wholesome condition, free from any objectionable noises, music volumes, odors or nuisances, and shall comply with all health and police regulations in all respects. Unless otherwise permitted by the Lease, Lessee shall keep no live animals of any kind on the premises. Lessee shall not display or sell merchandise, or place carts, portable signs, devices or any other objects, outside the defined exterior walls or roof and permanent doorways of the premises or in corridors. Lessee shall not solicit or distribute materials in any manner in any of the automobile parking and common area of the center.
Lessee shall not place any trash or rubbish receptacles outside the premises. 20 of 82
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Lessee shall not, without first obtaining the written consent of Lessor, which Lessor may give or withhold at the Lessor’s sole discretion, sell merchandise from vending machines or allow any coin or token operated vending, video, pinball or gaming machines on the premises. Lessee shall not erect any such aerial or antenna on the roof or exterior walls of the premises and Lessee agrees that Lessor may remove any such aerial or antenna installed without Lessor’s prior written consent without notice to Lessee, at any time at lessee’s expense.
23.1 GROSS SALES REPORTING: Lessee shall furnish or cause to be furnished to Lessor a statement of the “Gross Sales” of the annual Gross Sales of Lessee within sixty (60) days after the close of each calendar year. Such statements shall be in a form that is consistent with the form used in substantially all of Lessee’s other stores. Such annual statements shall be certified as an accurate accounting of Lessee’s Gross Sales by an authorized representative of Lessee.
24. INSPECTION AND LESSOR’S SIGNS: Lessor and Lessor's agents shall have the right to enter into and upon the demised premises at all reasonable times, and in emergencies at all times, for the purposes of inspecting the same, protecting Lessor's reversion, making repairs, additions, or alterations to the premises or to any property owned or controlled by Lessor, or, for any lawful purposes. At any time within ninety (90) days prior to the expiration of the term hereof, Lessor shall have access to the premises for the purpose of exhibiting them to prospective tenants for their inspection and for posting "for lease" or "for rent" signs upon the premises.
Additionally, the Lessor may place a “Building for Sale” sign on the center at any time.
25. BANKRUPTCY OR INSOLVENCY: If Lessee should execute a voluntary assignment hereof without the written consent of Lessor first had and obtained, or, if there should occur any assignment hereof by operation of law on account of any act of Lessee, or, if Lessee, or any member of Lessee if Lessee be a partnership of joint venture, should file any petition in bankruptcy or any petition for extension or composition of creditors, or become insolvent, or make any assignment of any of Lessee's property for the benefit of Lessee's creditors, or, if any involuntary bankruptcy proceedings should be initiated against Lessee (and Lessee fails to obtain the dismissal of such proceedings within thirty (30) days after same are filed) or, if any receiver be appointed of the business or of the assets of Lessee, this Lease, at the election of Lessor, shall thereupon immediately terminate, and said Lease or any interest in said leasehold, shall not be assignable by any process of law, or treated as an asset of Lessee thereafter, nor shall it pass under the control of any trustee or assignee of Lessee by virtue of any control of any such proceeding or act of Lessee. If any such act or proceeding shall occur, Lessor may terminate this Lease by the mailing of written notice to the Lessee's Address For Notice as shown in Exhibit "A", attached hereto, stating Lessor's election to so terminate, and all rights of Lessee hereunder shall thereupon terminate, and Lessor may promptly reenter upon said premises.
26. DEFAULT AND REENTRY: If Lessee defaults in the payment of any rent as required hereby to be paid or, if Lessee defaults in the performance of any term, covenant, condition, or obligation required hereby to be performed by Lessee and such default continues for a period of ten (10) days after written notice of such default is mailed to or personally served upon Lessee, then, in addition to any other remedy Lessor may have by operation of law, Lessor shall have the right, without any other or further notice or demand, to enter upon the premises, and eject all persons from the premises and remove all property therefrom, using such lawful force as may be necessary to so do, in which case Lessor shall not be responsible for the care or safety of persons or property so removed and Lessee hereby waives any and all claims for loss or damage to property or persons so removed from the demised premises by Lessor pursuant hereto, and Lessor, in the case of any such default by Lessee in the payment of rent or in the performance of any one of the terms, covenants, conditions or obligations herein contained, may declare this Lease terminated, take possession as above provided, and retain all prepaid rentals and other prepaid expenses or deposits as Lessor's damages or Lessor may, without terminating this Lease or declaring a forfeiture of Lessee's rights hereunder, retain all prepaid rentals and other prepaid expenses or deposits, re-let the premises or any part thereof, as the agent and for the account of Lessee upon such terms and conditions as Lessor may deem advisable, either with or without equipment or fixtures left remaining in the demised premises by Lessee, in which event the rents received on such re-letting and retained prepayments or deposits shall be applied first to the expenses of such re-letting and collection of rent, including any necessary renovation and alteration of the premises, and reasonable attorney's fees, and any actual real estate commissions paid, and thereafter the balance of any such rents, retained prepayments or deposits shall be applied to the payment of all sums due or to become due to Lessor hereunder and, if a sufficient sum shall not be thus realized to pay such sums and other charges, Lessee shall pay to Lessor any deficiency monthly, notwithstanding Lessor may have received rental in excess of the rental stipulated in this Lease in previous or subsequent months, and Lessor may bring an action therefore as such monthly deficiency shall arise, in which event Lessor shall be entitled to recover reasonable attorney's fees for commencing and prosecuting such suit. Lessor shall be entitled to each and all of Lessor's remedies, and the election to proceed with one may not be construed as excluding the subsequent use of any other. The remedies herein granted to 21 of 82
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Lessor shall not be construed to be any limitation of any rights, or remedies otherwise available to Lessor, but shall be construed to be in addition thereto. Lessee shall allow any reentry by Lessor as aforesaid without hindrance and Lessor shall not be liable in damages for any such reentry, or be guilty of trespass or forcible entry.
27. LESSOR-LESSEE LIABILITY; INDEMNITY: Lessor shall not be liable for any loss or damage that may result to any property belonging to Lessee or others, located in, on, or about said demised premises from any cause whatsoever, nor shall Lessor be liable for any damage or injury to any person including personal injury or damage to any property occurring or arising in, on, or about the demised premises from any cause whatsoever, including, but, not limited to injury or damage to goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors, invitees, customers or any other person in or about the premise, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, construction or other defects of pipes, fire sprinklers, wires, appliance or plumbing, HVAC or lighting fixtures or from any other case, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Center, or any other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of Lessor nor from the failure of Lessor to enforce the provision of any other Lease in the Center. Lessee hereby covenants to save and hold Lessor, Lessor’s agent and manager, harmless from and to defend and indemnify Lessor, Lessor’s agent and manager against any suit or claim or demand for damage or injury to any person or property sustained in, on, or about the demised premises from any cause whatsoever during the term, unless caused by negligent acts of Lessor or its agents.
27.1 INDEMNITY: Lessor shall not be liable for, and Lessee shall defend (with counsel satisfactory to Lessor), indemnify and protect Lessor from any claim, demand, liability, judgment, award, fine, mechanics’ lien or other lien, loss, damage, expense, charge or cost of any kind or character (including actual attorney fees and court costs) arising directly or indirectly from (a) any labor dispute involving Lessee or is contractors and agents, or (b) the construction, repair, alteration, improvement, use occupancy or enjoyment of the demised premises (hereinafter referred to as “claims”), including without limitation, claims caused by concurrent negligent act or omission, whether active or passive, of Lessor or its agents; provided, however, Lessee shall have no obligation to defend, indemnify or protect Lessor from claims made by Lessee caused by the sole gross negligent acts of Lessor or its agents.
28. INTEREST ON DELINQUENCIES: Lessor shall be entitled to interest on any amounts owing from time to time from Lessee to Lessor at the maximum rate permitted by law.
The foregoing shall apply to any and all payments that Lessor may from time to time be entitled to receive from Lessee including, but not limited to, rents, real property taxes and assessments, fire insurance premiums, common area maintenance and repair costs, common area capital improvement costs, and any and all other amounts that Lessor may from time to time be entitled to receive from Lessee.
29. ATTORNEY'S FEES: If either party hereto should bring any suit against the other party hereto for the breach of any term, covenant, condition or obligation herein contained to be kept by such other party, for the recovery of any sum due hereunder, or to recover possession of the premises, or for any summary action for forfeiture of this Lease, or to prevent further violations of any of the terms, covenants, conditions or obligations, or, for any other relief then, and in that event, the prevailing party in such suit shall be entitled to a reasonable attorney's fee to be fixed by the court.
30. NON-WAIVER OF BREACH: Lessor's failure to take advantage of any default or breach of covenant on the part of Lessee shall not be construed to be a waiver thereof; nor shall any custom or practice which may grow up between the parties hereto in the course of administering this Lease be construed to waive or to lessen the right of Lessor to insist upon the performance of any and all terms, covenants, conditions, and obligations hereof, or to exercise any right given Lessor on account of any default. A waiver of a particular breach or default shall not be deemed to be waiver of the same or any other subsequent breach of default. Lessor's consent to or the approval of any act by Lessee requiring Lessor's consent or approval shall not be deemed to waive or render unnecessary Lessor's consent to or approval of any subsequent or similar act by Lessee.
31. CONDEMNATION: If title to all of the premises is taken for any public or quasi-public use under any statute, or by right of eminent domain, or by private purchase in lieu of eminent domain, or if title to so much of the premises is so taken that, in the sole opinion of Lessor, a reasonable amount of reconstruction of the premises will not result in the premises being a practical improvement, or reasonably suitable for Lessee's continued occupancy for the uses and purposes for which the premises are leased, then, in either event, this Lease shall terminate on the date that possession of the premises, or part of the premises, is taken, unless Lessor elects 22 of 82
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that said Lease continue.
31.1 If this Lease continues under provisions of Paragraph 3, above, the Then Fixed Rent shall be reduced in the same proportion that the floor area of the portion of the premises so taken (less any additions to the premises by reconstruction) bears to the original floor area of the premises. Lessor shall, at Lessor's own cost and expense, make all necessary repairs or alterations to the building in which the premises are located so as to constitute the portion of the building not taken as a useable unit. There shall be an equitable abatement of rent during such restoration period.
31.2 All compensation awarded or paid upon a total or partial taking of the fee title of the premises shall belong to Lessor, whether such compensation be awarded or paid as compensation for diminution in value of the leasehold or of the fee provided, however, that Lessor shall not be entitled to any award made to Lessee for depreciation or damage to, or cost of removal of stock and fixtures, if any.
31.3 Each party agrees to execute and deliver to the other all instruments that may be required to effectuate the provisions of this paragraph, and Lessee shall assign to Lessor and appoint Lessor to act for Lessee in all matters of condemnation except for Lessee’s specific rights to damages as set forth in Paragraph 31.2, above.
32. UTILITIES AND ANCILLARY SERVICES: Lessor or his agent makes no representation or warranty whatsoever as to the availability of water, gas, electricity, or any other utility and ancillary services for Lessee's intended use and Lessee acknowledges that Lessee has made Lessee's own investigation with respect to the availability of any and all utility and ancillary services required by Lessee and that Lessee is satisfied with respect to such availability, and that Lessor had no obligation whatsoever with respect thereto. Lessee shall obtain, install, and pay for, an individual meter for each of the utility services required by Lessee upon Lessee’s demised premises; except that Lessor shall provide a gas meter and an electric meter for the premises.
In good faith, should the 3rd floor gas & electrical monthly billings run at an exceedingly high cost, ie due to Lessee’s continual running of air conditioning and/or LED lighting being left on 24/7, Lessor has legal right to remedy in good faith with Lessee, to have costs in line with normal charges on a monthly basis, for office space of that size. The expectation is normal hvac & electrical costs will continue upon normal use of Lessee occupancy, at the cost of the Lessor.
Landlord shall not be liable in damages or otherwise for any discontinuance, failure or interruption of service to the premises of utilities. No such discontinuance, failure or interruption shall be deemed a constructive eviction of Lessee or entitle Lessee to terminate this Lease or withhold payment of any rental due under this Lease.
33. HEIRS AND ASSIGNS: Except as herein otherwise provided, all terms, conditions, covenants and obligations contained in this Lease shall be binding upon and inure to the benefit of the heirs, successors, legal representatives and assigns of the parties hereto.
34. NOTICES: All notices, statements, demands, requests, approvals, authorizations, offers, agreements, appointments or designations under this Lease by either party to the other shall be in writing and shall be served personally upon the other party or deposited in the United States mail, postage prepaid, and addressed to Lessee at Lessee's Address For Notice as it appears on Exhibit "A", attached hereto, or to such other address as Lessee may from time to time designate to Lessor in writing, and addressed to Lessor as it appears on Exhibit "A", or at such other address as Lessor or his agent may from time to time designate, to Lessee in writing.
35. CONSTRUCTION: Each term, covenant, condition and obligation of this Lease to be performed by Lessee shall be construed to be both a covenant and condition.
36. LESSOR ACCESS, LAYOUT OF THE DEMISED PREMISES AND
SURROUNDING AREA OWNED BY LESSOR: Lessor does not guarantee a continuance of the passage of light and air over the demised premises or over any of the real property adjoining the demised premises and Lessor expressly reserves all air space over the demised premises. Any reference in this Lease with respect to the location of reference in this Lease with respect to the location of buildings, parking areas, if any, and other improvements shall not be deemed to be a warranty or representation. Lessor hereby reserves the right at any time to make any alterations or additions to or to build additional stories on any presently existing building owned by Lessor.
Lessor also reserves the right to construct other buildings or improvements upon the surrounding real property which may be owned by Lessor from time to time, and to make alterations or additions thereto and to build additional stories on any such buildings and to modify and reallocate space within the center. Lessor further reserves rights-of-ways and easements in, over, under, and through Lessee's demised premises for the building operating systems including but not limited to sprinkler and fire-detection system purposes, power and telephone lines, plumbing lines, air conditioning, heating and ventilation systems, alarms, computer systems and conduits for all utilities, along with access through tenant spaces to access building equipment operating systems together with the right to locate, relocate, access and maintain the same at any and all times and 23 of 82
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from time to time in, upon, over, or under Lessee's demised premises without any rebate of rent or liability for any interruption or disturbance caused by Lessor, its agents, servants or employees, or by any utility company employee or representative; provided, however, that Lessor shall use reasonable discretion in exercising its rights pursuant to this sentence.
37. NUMBER AND GENDER: Whenever the singular number is used in this Lease and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders, and the word "person" shall include corporation, firm, partnership, or association. If there be more than one Lessee, the obligations imposed herein upon Lessee shall be joint and several.
38. MARGINAL TITLES: The marginal headings or titles to the paragraphs of this Lease are not a part of this Lease and shall have no effect upon the construction and interpretation of any part of this Lease.
39. MODIFICATION AND VOIDANCE OF PRIOR AGREEMENTS: This instrument contains all the agreements and conditions made between the parties to this Lease and may not be modified orally or in any other manner than by an agreement in writing signed by all of the parties to this Lease or their respective successor or successors in interest. This Lease supersedes any and all prior written and oral agreements between Lessor and Lessee, which such agreements, if any, are void and of no further effect. Except as contained herein, no person purporting to hold the authority to bind Landlord to any statement, covenant, warranty, or representation shall be deemed to have such authority, and Tenant agrees that it is not reasonable for Tenant to have assumed that any person had or has such authority.
40. TIME OF ESSENCE: Time is of the essence of each term, covenant, condition and obligation of this Lease.
41. PAYMENTS NOT IN SUBSTITUTION: Except as otherwise expressly stated, each payment required to be made by Lessee shall be in addition to and not in substitution for other payments to be made by Lessee.
42. CONVEYANCE BY LESSOR: If, during the term of this Lease, Lessor shall sell Lessor's interest in the demised premises, then from and after the effective date of such sale, Lessor shall be released and discharged from any and all obligations and responsibilities under this Lease, except those already accrued; provided, however, that any such purchaser shall assume all of Lessor's obligations to be performed hereunder, including the obligation to refund the security deposit at the expiration of this term.
43. SIGNS AND ADVERTISING: No sign, advertisement, or notice shall be inscribed, painted or otherwise displayed, or screens, awnings, shades, decorations, symbols, fixtures or any other thing affixed on any part of the outside of the demised premises (or inside of the demised premises where such may be seen through windows or otherwise by passersby) except of such color, size, or style, and in such place on or in said premises as shall first be fixed, designated and approved by Lessor in writing. Lessor may at his option provide one directory at a location and of a design to be determined by Lessor. Such directory shall display Lessee's practice or business name as agreed by Lessee and Lessor. Lessee agrees to pay for the cost of such directory identification.
Lessee further acknowledges and agrees as a condition of this lease, to comply with all Lessor’s existing building signage criteria, and/or to any new signage criteria that the Lessor, any governmental agency or business or trade association may require from time to time. Lessee covenants to Lessor and agrees to install all initial signage within 45 days from taking possession of the premises, and for new signage within 60 days from written notice from Lessor that a new sign is required, all of which is subject to the terms and conditions of this paragraph.
44. STATEMENT OF LESSEE: Lessee shall at any time and from time to time upon not less than ten (10) days prior written request by Lessor, execute, acknowledge and deliver to Lessor an Estoppel statement in writing certifying that this Lease is unmodified and in full force and effect if such is the fact (or if there has been any modification thereof that the same is in full force and effect as modified and stating the modifications) and the dates to which rentals and other charges have been paid in advance, if any. It is expressly understood and agreed that any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser of the complex or estate of Lessor or by the mortgagee or assignee of any mortgages of any mortgage or the trustee or beneficiary of any deed of trust constituting a lien upon the leased premises or upon property including the lease premises or any part thereof.
45. JANITORIAL SERVICE: Lessor shall have no responsibility whatsoever for the furnishing of any janitorial service to the demised premises. Janitorial service within the demised premises shall be the sole responsibility and at the sole cost of Lessee. Lessee covenants and 24 of 82
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agrees to obtain sufficient janitorial service to maintain the demised premises in a clean and orderly condition at all times. Lessee further agrees to deposit Lessee's refuse and garbage only in those areas designated in writing by Lessor from time to time.
46. SUBORDINATION: This Lease is and shall be subordinate to any encumbrance now of record or recorded after the date of this Lease affecting the building, other improvement, and land of which the premises are a part. Such subordination is effective without any further act of Lessee. Lessee shall from time to time upon request from Lessor execute and deliver any documents or instruments that may be required by a lender to effect any subordination. If Lessee fails to execute and deliver any such documents or instruments, within ten (30) days, Lessee irrevocably constitutes and appoints Lessor as Lessee's special attorney in fact to execute and deliver any such documents or instruments.
47. RESERVED
48. GOVERNMENT FEES: All governmental fees, charges, district assessment fees or charges, including but limited to, fire, police, sanitary service, water, utilities, parking, parking adjustments or parking assessments for the Lessee use or occupancy of the premises shall be the responsibility of the Lessee, and payable to Lessor along with the rent or paid direct to the appropriate agency as required. THIS PARAGRAPH CONTEMPLATES CHARGES & FEES NOT CURRENTLY BEING ENFORCED BY THE GOVERNMENT AGENCIES AT THIS TIME.
49. GARBAGE, REFUSE, TRASH, COLLECTION & REIMBURSEMENT: Lessee acknowledges that the removal of garbage, refuse and trash from the demised premises is the sole responsibility of Lessee, and Lessee agrees to make such arrangements and pay for such services as from time to time may be required to dispose of said garbage, refuse and trash.
Lessee further acknowledges that it is Lessor's concern that all portions of the premises and the building and adjoining lands within and upon which the premises are located are at all times clean and sanitary, and Lessee therefore agrees to abide by Lessor's judgment as to whether Lessee's garbage, refuse and trash removal services are adequate. In the event that Lessor deems that more frequent or more effective service is desirable, Lessee agrees to follow the directions of Lessor with respect to improvements of said services under penalty of default and further agrees to reimburse Lessor for all costs and expenses incurred by Lessor in removing Lessee's garbage, refuse and trash should Lessor, in his sole judgment, determine that said action is desirable.
Lessee further agrees to abide by Lessor's noticed rules and regulations relating to use of refuse containers and storerooms that from time to time may be available to tenants to deposit Lessee refuse only within Lessee’s demised premises or in those areas designated by Lessor in writing from time to time. Lessor may arrange for the collection and removal of Lessee's and other Lessee's garbage and refuse which is so deposited, and shall advance on behalf of Lessee and other Lessee's for their respective prorata shares of such costs. Lessee agrees to reimburse Lessor for such advances within five (5) days of receipt of said bill.
49.1 DISPOSAL OF WASTE
A) Refuse Disposal. Lessee shall not keep any trash, garbage, waste or other refuse on the Premises except in sanitary containers and, except for normal trash removal by Lessee, shall regularly and frequently remove extraordinary trash from the Premises. Lessee shall keep all incinerators, containers or other equipment used for storage or disposal of such materials in a clean and sanitary condition.
B) Sewage Disposal. Lessee shall properly dispose of all sanitary sewage and shall not use the sewage disposal system (a) for the disposal of anything except sanitary sewage or (b) excess of the lesser amount (i) reasonably contemplated by the uses permitted under this Lease or (ii) permitted by any governmental entity. Tenant shall keep the sewage disposal system free of all obstructions and in good operating condition.
C) Disposal of Other Waste. Lessee shall properly dispose of all of the waste or other matter delivered to, stored upon, located upon or within, used on, or removed from, the Premises in such a manner that it does not, and will not, adversely affect the (a) health or safety of person, wherever located, whether on the Premises or elsewhere (b) condition, use or enjoyment of the Premises or any other real or personal property, wherever located, whether on the Premises or anywhere else, or (c) Premises or any of the improvements thereto or thereon including buildings, foundation, pipes, utility lines, landscaping or parking areas.
D) Compliance with Law. Notwithstanding any other provision in this Lease to the contrary, Lessee shall comply with all current and future laws, statues, ordinances, regulations, rules and other governmental requirements in complying with its obligations under this lease, and in particular, relating to the storage, use and disposal of waste, hazardous or any toxic matter.
50. SPRINKLER SYSTEM (IF ANY): Lessee acknowledges that if the premises are currently provided with an automatic sprinkler system it is ISO rated. Should Lessee's occupancy, use, improvements or remodeling within, upon or about the Demised Premises cause any reduction in the rating of said system anywhere in the building, at any time, in which the Demised 25 of 82
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Premises are located, or result in the requirement by insurance carrier or a governmental agency that a sprinkler system be installed, Lessee shall immediately undertake all such automatic sprinkler work, all at Lessee's sole cost and expense. Except in the above described circumstance, Lessor shall at all times be responsible for and shall pay for any and all modifications as are necessary to maintain the ISO rating on said system within the Demised Premises. Lessor shall, during the term of this Lease and any extension thereof, at Lessor's sole cost and expense, maintain and service said sprinkler system, detection and monitoring system, keeping all in good working order, including but not limited to, periodic service and inspection charges, periodic testing, water users’ fees, assessments and assessment district charges, and all other governmental fees and charges thereto.
51. MERCHANT'S ASSOCIATION IF ANY: Lessee shall at all times during the term of this Lease maintain membership in any businessmen's merchant association that may exist for substantially all retail businesses located in the Center area. Lessee shall abide by the rules and regulations of any such organization and shall make such contribution to such joint advertising program sponsored by such organization and shall make such contribution to such joint advertising program as shall be determined in accordance with the bylaws or other regulations of such association.
52. RIGHT OF FIRST REFUSAL: If at any time during the term of this Lease, Lessee shall desire to sell Lessee's interest in this Lease or to the business conducted by Lessee upon the demised premises to a bonafide buyer then, and in that event, Lessee shall first give written notice to Lessor by personal service upon the Lessor of the terms and conditions of the proposed bonafide sale, and Lessor shall have the right for a period of fifteen (15) working days after personal service of a copy of such proposed bonafide sale upon Lessor to purchase the interest that is proposed to be sold for the same price and upon the same terms and conditions as stated in the notice. If Lessor fails to exercise the same within such fifteen (15) day period, Lessee shall have the right, for a period of sixty (60) days following the date on which notice was given and subject to the terms and conditions hereinabove set forth in Paragraph 14 with respect to assignment and subletting, to sell such interest to the proposed bonafide buyer designated in such notice upon the terms and conditions specified therein. If such interest is not so sold during such sixty (60) day period, it may not be sold after without Lessor again having the right of first refusal herein provided for.
53. TRANSFER FEE: Notwithstanding anything hereinabove contained to the contrary in the event that Lessee should desire to sell, transfer, assign, mortgage or hypothecate this Lease, or any interest in this Lease, or permit the use of said premises by any person or persons other than said Lessee, or sublet the premises then, and in that event, Lessor shall be entitled to and Lessee shall pay to Lessor, concurrently with the delivery or Lessor's written consent to such transaction, by cash, an amount equal to five percent (5%) of the total consideration to be received by Lessee by reason of such transaction.
54. NO PARTNERSHIP: Lessor does not, in any way or for any purpose become partners of Lessee in the conduct of its business, or otherwise, or joint adventurer or a member of a joint enterprise with Lessee. The provisions of this Lease relating to the percentage rent payable hereunder are included solely for the purpose of providing a method whereby the rent is to be measured and ascertained.
55. HAZARDOUS MATERIALS: Tenant warrants and represents that the premises will not be used in connection with the handling, storage or disposal of Hazardous Materials. To the best of Lessees knowledge, there have been no releases and there are no threatened releases of Hazardous Materials on, onto, from or under the premises. For the purposes of this Lease, the terms “disposal”, “release”, and “threatened release” shall have the definitions assigned thereto by the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended, the Resource Conservation and Recovery Act of 1976, The Hazardous and Solid Waste Amendments of 1984, codified at 42 U.S.C.A. Section 6901, et seq. (Supp. 1987), as amended, and the environmental control laws of the State of California. “Hazardous Materials” means any asbestos, PCB’s, unreaformaldehyde, flammable explosives, radioactive materials or materials defined under federal or California laws and regulations as “hazardous substances”, “hazardous materials” or “toxic substances”. To the best of Lessee’s knowledge, all past and all of Lessee’s uses of the premises comply with all federal, state, and local laws regulating Hazardous Materials. Lessee is not required by any law regulating Hazardous Materials to obtain any permit or license to construct, alter or use the premises. To the best of Lessee’s knowledge, no event has occurred which requires or required Lessee or Lessee’s predecessor in interest to give any public entity notice of any spill, release, threatened release, disposal or existence of Hazardous materials upon the premises.
There has been no litigation brought or threatened against Lessee or, to the best of Lessee’s knowledge, Lessee’s predecessor in interest, nor have any settlements been reached by or with any party or parties alleging the presence, disposal, release or threatened release of 26 of 82
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any Hazardous Materials on, onto, from or under the premises.
Lessee agrees unconditionally and absolutely to defend, indemnify and hold Lessor, Lessor’s directors, officers, employees, agents and attorneys from and against any and all damages, diminution in value, penalties, fines, losses, liabilities, causes of action, suits, claims, demands, costs and expenses (including all out of pocket litigation costs and the reasonable fees and expenses of counsel) of any nature, directly or indirectly, arising out of or in connection with:
(a) The inaccuracy or incompleteness of any representation or warranty provided in this article.
(b) The existence, use, generation, migration, storage, release, threatened release or disposal of Hazardous Materials on, onto, from or under the premises; and (c) Any failure by Lessee to comply with the terms of any order of any federal, state or municipal authority having regulatory authority over environmental matters. Lessee’s obligations shall survive the termination of the Lease and any subsequent conveyance of the property. The terms of this paragraph shall extend to Lessor and to Lessor’s successor in interest.
If any claim is made or brought against Lessor which is subject to the indemnifications set forth in this article Lessee shall defend the same, if necessary in Lessor’s name, by attorneys approved by Lessor.
Lessee’s obligations under this paragraph shall survive the termination of the Lease and any subsequent conveyance of the property. The terms of this article shall extend to Lessor and to Lessor’s successor in interest.
56. WATER USE / SHORTAGE DISCLOSURE / ASSESSMENTS AND FINES: All parties to this lease acknowledge the following: In Monterey County water is a scarce resource, due to recent drought years, limitations on water use and consumption have been implemented to water users in the past and will continue into the future. These limitations include, but are not limited to: water rationing; limitation/restriction of new fixtures; limitation/restriction to businesses due to potential increase in water use; implementation of fines for overages of water use; implementation of fees resulting from new fixtures or water hookups or increased water use.
Lessee hereby agrees to comply and abide by all rules, regulations and policies adopted by the Monterey Water Management District or its successors, including but not limited to the payment of fines, fees and assessments, cost of compliance with conservation policies including but not limited to retrofitting fixtures, as a result of the occupancy and use of the premises by Lessee.
Lessee shall pay said amounts of pro-rata, or 100% if resulting from Lessee use of premise promptly so as to avoid a lien being placed upon Lessor's property by the district. Lessee may appeal the decision of the district, provided Lessee's action does not create a lien upon Lessor's property. Lessee is hereby informed that if for any reason assessments, fees or fines are imposed upon the property, Lessor may pay such assessments, fees or fines and deduct them from the prepaid rents and/or the security deposit and Lessee shall within thirty (30) days from notice, restore the prepaid rents and/or the security deposit, as provided for in this lease. In the event Lessee's actions or lack of actions results in a lien being placed upon Lessor's property, Lessor may, in his sole discretion, declare Lessee in default and terminate this lease upon ten (10) days advance written notice. Lessor further acknowledges that no representation has been made by Lessor, and A.G. Davi, Ltd. and/or its agents and representatives about the Lessee's right to water use, increase use or installation of additional water fixtures. Lessee agrees to hold harmless and indemnify Lessor, and A.G. Davi, Ltd. and/or its agents or representatives from any liability and costs relating to this issue, including but not limited to assessments, fines, fees, attorney fees and court costs.
57. SURRENDER OF PREMISES: Upon expiration or termination of this Lease, Lessee shall surrender possession of the premises in the condition required by this Lease, and Lessee shall, at Lessee’s expense, a) remove all signage from the exterior and interior of the premises and or building and or common areas, and (b) remove all Lessees trade fixtures and personal property and those claiming under Lessee from the premises and the property, subject to the limitation, of this Lease agreement, and (c) clean the premises including, but not limited to windows, carpets professionally cleaned, floors, walls, ceilings, (d) paint the interior of the premise a color acceptable to Lessor, and (e) quit and deliver up the premises peaceable and quietly and in as good order and conditions as the same were in on the date the term of this Lease commenced, ordinary wear and tear excepted. Additionally, all Lessee alterations of the premises, at the election of the Lessor, will be removed and the premises will be returned to the conditions as at the time of the commencement of this Lease, at the expense of the Lessee,(e) surrender all keys, any key cards, and any parking stickers or cards, to Landlord, and advise Landlord as to the combination of any locks or vaults then remaining in the Premises.
58. SERVICE CHARGE: Lessee acknowledges that Lessor shall incur additional administrative costs and expenses due to Lessee’s failure to furnish Lessor in a timely manner any Estoppel Certificate or Non-disturbance Agreement, insurance policy or certificate, or any other document, report, or statement in the time period as agreed in this Lease, and, therefore, 27 of 82
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Lessee shall pay to Lessor, as additional rental, a service charge in the amount of Fifty Dollars ($50.00) for each week or portion thereof that said failure continues.
59. LIMITATION TO LESSOR’S PERSONAL LIABILITY: Lessee shall look solely to Lessor’s interest in the building and the land of which the premises form a part for the recovery of any claims, damages or judgment against Lessor, and if Lessor is (i) a partnership, its partners whether general or limited, or (ii) a corporation, its directors, officers or shareholders, or (iii) a limited liability company, its members or (iv) a trust its beneficiaries, shall never be personally liable for any such claims, damages or judgment. Lessee agrees not to seek recourse against Lessor’s partners, members, directors, officers or shareholders or any of their personal assets for such satisfaction.
60. ALTERATIONS/IMPROVEMENTS: Lessee shall not make any improvements on the property without Lessor's consent. In making any alterations that Lessee has a right to make, Lessee shall comply with the following:
a. NOTICE TO LESSOR: The alterations or improvements shall not commence until ten (10) days after Lessor has received notice from Lessee stating the date the construction is to commence so that Lessor can post and record an appropriate notice of non-responsibility b. The proposed improvements shall be approved by all the appropriate government agencies, and all applicable permits and authorizations shall be obtained before commencement of the alterations. All approved improvements shall be completed in the standard workmanship quality.
c. Before commencing the alterations and at all times during construction, Lessee shall maintain insurance as provided for in paragraph 20. In addition, contractor shall be licensed and insured and a Certificate of Insurance with liability insurance in the amount of $1,000,000.00 and Worker's Compensation Insurance shall be provided by Lessee's contractor to Lessor within 10 days prior to commencement of any work and said certificate shall name Lessor as additionally insured.
d. Lessee shall pay all costs for construction done by it or caused to be done by it on the premises as permitted by this Lease. Lessee shall keep the improvements and land free and clear of all mechanics' liens resulting from construction done by or for Lessee.
60.1 CONSTRUCTION IMPROVEMENTS: All improvements to be made to the premises which require the approval of Lessor shall be made under the supervision of a competent architect or licensed structural engineer and made in accordance with plans and specifications prepared in conformity with the structural, mechanical, electrical, design and quality standards, submitted to Lessor for its approval prior to commencement of the work. In accordance with such procedures as Lessor shall reasonably specify. Insofar as the space demised to Lessee within said building is concerned, Lessee's obligation shall be to complete those items necessary for Lessee's intended use of the demised premises. Construction shall be diligently prosecuted to completion by Lessee. The acceptance of said premises for the purpose of performing Lessee's work in the premises, as hereinabove defined, shall constitute an acknowledgment by Lessee that the premises are in the condition called for by this Lease and that Lessor has performed all its work with respect to the premises. At Lessee’s sole cost, Lessor shall have the right, but not the obligation, to construct any improvements which Lessee shall have failed to construct after ten (10) calendar days’ notice from Lessor. In the event that Lessee retains a contractor to construct its improvements, said contractor shall be duly licensed in the State of California. All work with respect to any improvements must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the premises shall at all times be a complete unit except during the period of work. Upon completion of such work, Lessee shall have recorded in the office of the County Recorder where the center is located a Notice of Completion, as required or permitted by law, and Lessee shall deliver to Lessor, within ten (10) calendar days after completion of said work, a copy of the building permit with respect thereto and the Certificate of Occupancy or other such documents issued by the governing entities. Any such improvements shall be performed and done strictly in accordance with the laws and ordinances relating thereto, including without limitation, the Americans with Disabilities Act of 1990, as the same may be amended from time to time, OSHA, and California Building Code, Title 24, and all regulations issued thereunder. In performing the work of any such improvements, Lessee shall have the work performed in such improvements, Lessee shall have the work performed in such a manner as not to obstruct access to the premises of any other lessee in the Center. Lessor’s consent to any such alterations, additions, or improvements, or Lessor’s approval of plans, specifications, and working drawings for such alterations, additions, or improvements, or Lessor’s approval of plans, specifications, and working drawings for such alterations, additions, or improvements shall create no responsibility or liability on the part of Lessor for their completeness, design, sufficiency, or compliance with all laws, rules, and regulations of governmental and quasi-governmental agencies including, without limitation, the Americans Disabilities Act of 1990, as the same may be amended from time to time, OSHA, and California Building Code, Title 24, and all regulations issued thereunder. All of Lessee's work shall be done on a lien-free basis and shall be completed free and clear of all liens recorded or recordable pursuant to the provisions of the Civil Code of the State of California relating to mechanic's liens (Section 3109 et. seq.). 28 of 82
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61. AMERICANS WITH DISABILITIES ACT: On July 26, 1990 the Americans with Disabilities Act of 1990 (ADA) was signed into law. This federal Civil rights legislation prohibits discrimination against individuals with disabilities. The ADA affects almost all commercial facilities and public accommodations. Residential properties are not typically covered by the ADA but may be governed by its provisions if used for certain purposes. The ADA can require, among other things, buildings to be made readily accessible to the disabled. Different Lessee requirements apply to new construction, alterations to existing buildings, and removal of barriers in existing buildings. Compliance with the ADA may require significant costs. Monetary and injunctive remedies may be incurred if the property is not in compliance. Neither Lessor nor a real estate broker does have the technical expertise to either determine whether a building is in compliance with ADA requirements or to advise a Lessee on the requirements of the ADA. Any Lessee who is a party to the above referenced agreement is advised to contact an attorney, contractor, architect, engineer or other qualified professional of his/her own choosing to determine to what degree, if at all, the ADA impacts upon that principal or this transaction.
61.1 DISABILITY ACCESS INSPECTION: Disclosure: Neither the Leased Premises nor the Common Areas have undergone inspection by a Certified Access Specialist (CASP) within the meaning of California Civil Code Sections 1938, and Landlord is not providing any representations or warranties regarding whether the Leased Premises or the Common Areas (or any portion thereof) meets all applicable construction-related accessibility standards.
This paragraph is solely a disclosure.
62. REAL ESTATE BROKERAGE FEE: Lessee warrants to Lessor that there are no Real Estate brokerage fees offered or required in conjunction with this lease due from the Lessor which may arise as a result of the execution of this lease and agrees to pay said fees, and hold harmless and indemnify Lessor from any claims for brokerage fees for failure to pay said fee. In the event of any claims for fees by any agent for the Lessee for the Lease then the Lessee shall promptly pay said agent.
63. LESSOR LOAN OR SALE: Lessee agrees within ten (10) business days of receipt of written request by Lessor, to execute and deliver to Lessor any reasonably necessary documents, including estoppel certificates, in a form reasonably acceptable to Lessee, presented to Lessee by Lessor. Lessee’s failure to deliver an estoppel certificate within ten (10) days following such request shall constitute a default under this Lease and shall be conclusive upon Lessee that this Lease is in full force and effect and has not been modified except as may be represented by Lessor and that there are no uncured defaults in Lessor’s performance. In addition, if requested by Lessor, Lessee shall deliver to Lessor, on a reasonable basis but nor more frequent than annually, or to any prospective lender or purchaser of the Property, financial statements of Lessee covering the two (2) fiscal years immediately preceding the request.
64. ATTORNMENT: If Lessor conveys in a Sale all of its rights and duties in and to the Lease and/or Premises and the realty underlying the Premises, or if an interest in Lessor or Lessor’s equity of redemption or other interest in the Lease and the Premises under a mortgage, deed of trust, pledge or security agreement is foreclosed judicially or non-judicially, upon the request of Lessor’s lawful successor, Lessee shall attorn to said successor, provided said successor accepts the Premises subject to this Lease. The foregoing notwithstanding, in accepting the Premises subject to this Lease, said successor shall not be bound by (i) any prepayment of more than one month’s rental (except for payments under paragraph 7, “Security Deposit”) or (ii) any material amendment of this Lease made after the later of the Effective Date or such date as the successor’s lien or interest first arose, unless said successor shall have consented to such amendment.
65. MUTUAL WAIVER OF RIGHT OF SUBROGATION: Except as may be provided herein, Lessor and Lessee each hereby waives any and all rights of recovery against the other and their respective authorized representatives for damage to any person or to the Premises, and the Building and other improvements in which the Premises are located, and to fixtures, personal property, Lessee’s improvements, and alterations of either Lessor or Lessee in or on the Premises and the Building and other improvements in which the Premises are located, arising from any cause insured against under any insurance policies carried by the parties and in force at the time of any such damage, to the extent of such insurance. Each party shall cause insurance policy obtained by it to provide that the insurance company waives all right to recover by way of subrogation against either party in connection with damage covered by any policy. The foregoing waivers shall be operative only so long as available in the State of California, and so long as no policy is invalidated thereby.
66. MISCELLANEOUS PROVISION
66.1 TIME OF ESSENCE. Time is of the essence of each provision of this Lease. 29 of 82
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66.2 LESSORS CONSENT. Except as may otherwise be expressly stated in their Lease, any consent required by Lessor under this Lease must be granted in writing and must be withheld or conditioned by Lessor in its reasonable discretion.
66.3 SEVERABILITY. It is agreed that, if any provision of this Lease shall be determined to be void by any court of competent jurisdiction, then such determination shall not affect any other provision of this Lease and all such other provisions shall remain in full force and effect. It is the intention of the parties hereto that, if any provision of this Lease is capable of two (2) constructions, one of which would render the provision void and the other of which would render the provision valid, then the provision shall have the meaning which renders it valid.
66.4 WARRANTY OF AUTHORITY. If Lessee is a corporation, the person or persons executing this Lease on behalf of Lessee hereby covenant and warrant as of the Effective Date that: (a) Lessee is a duly constituted corporation, qualified to do business in the State where the Center is located; (b) Lessee has paid all applicable franchise and corporate taxes; and (c) Lessee will file when due all future forms, reports, fees and other documents necessary to comply with applicable laws.
66.5 RIGHT OF LEASE. Lessor reserves the absolute right to affect such other tenancies in the Center as Landlord, in the exercise of its sole business judgment, shall determine to best promote the interest of the Center. Lessee does not rely on the fact, nor does Lessor represent, that there shall be any specific occupants or number of occupants of space in the Center after the Effective Date.
66.6 WAIVER OF RIGHTS OF REDEMPTION. Lessee hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event Lessee is evicted or dispossessed for any cause or in the event Lessor obtains possession of the Premises by reason of the violation by Lessee of any of the terms, covenants and conditions of this Lease or otherwise. The rights given to Lessor herein are in addition to any rights that may be given to Lessor by any statute or otherwise.
66.7 FLOOD/FLOOD DISASTER DISCLOSURE. Lessee is hereby advised that the subject property may be located with a Flood Area and that the Lessor or possible previous Lessor may have received Federal Flood Assistance in the past. Lessee hereby agrees to investigate the matter, including the availability of Flood Insurance and agrees to accept the premises with this understanding. Additionally, lessee agrees to hold harmless and free from any liability, and to indemnify the Lessor, Lessor agent and Lessor property manager from any loss or liability resulting therefrom.
66.8 EARTHQUAKE AND SEISMIC HAZARD AREA. Lessee is hereby advised that the subject property is located within a Earthquake and Seismic Hazard Area and that Lessor does not maintain Earthquake Insurance on the building. Lessee accepts the premises with this knowledge and understands that it is the lessee responsibility to investigate this matter, and to obtain insurance coverage on lessee personal property. Lessee acknowledges that if the building is of masonry construction that it may be a non-reinforced masonry building. Lessee holds harmless and free of any liability, and will indemnify, the Lessor, Lessor agents and property manager, for any loss or liability resulting therefrom.
66.9 AGENCY DISCLOSURE and CONFIRMATION: Lessee acknowledges and agrees that A.G. Davi Ltd. is the Lessor agent and or property manager and is only representing “the Lessor exclusively”, and recommends that Lessee obtain professional advice and to engage legal counsel for lessee own representation.
The above agency relationships are hereby confirmed by Lessor and Lessee for this transaction:
67. SECURITY GUARDS; AND LESSORS INDEMNITY: Lessee hereby acknowledges that the Rent payable to Lessor hereunder does not include the cost of guard services or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.
69. USA PATRIOT ACT COMPLIANCE: Lessee represents to Lessor that Lessee is not (and is not engaged in this transaction on behalf of) a person or entity with which Lessor is prohibited from doing business pursuant to any law, regulation or executive order pertaining to national security (“Anti-Terrorism Laws”). “Anti-Terrorism” Laws, as referenced above, shall specifically include, but shall not be limited to, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L.
No. 107-56 (aka, the USA Patriot Act); Executive Order 13224; the Bank Secrecy Act, 31 U.S.C.
Section 5311 et. Seq.; the Trading with the Enemy Act, 50 U.S.C. App. Section 1 et. Seq.; the International Emergency Economic Powers Act, 50 U.S.C. Section 1 et. Seq.; sanctions and regulations promulgated pursuant thereto by the Office of Foreign Assets Control (“OFAC”), as well as laws related to the prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957.
70. CONFIDENTIALITY: The parties hereto will maintain all Confidential Information, including discussions and negotiations, in confidence and will not disclose such 30 of 82
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information to any other party without written consent of the other party. “Confidential Information” includes the terms of this Lease, and any and all information whether in oral, written or other form, which is communicated by Lessee or Lessor to Lessee relating to Lessee’s proposed development of the premises, including but not limited to architectural plans, specifications, site plans and drawings (regardless of whether such information is labeled as confidential.) Confidential Information may be released to the parties’ employees, partners, consultants and lenders who have a reasonable need for such Confidential Information, provided that such individuals agree to maintain the confidential nature of the information, or as required by law.
71. ENERGY CONSUMPTION DISCLOSURE: If Tenant (or any other party claiming by, through or under Tenant) pays directly to the provider for any energy consumed at the Leased Premises, Tenant shall, promptly upon request deliver to Landlord (or, at Landlord’s option, execute and deliver to Landlord an instrument enabling Landlord to obtain from such provider) any data about such consumption that Landlord, in its reasonable judgment, is required to disclose to a prospective buyer, tenant or mortgagee or prospective mortgagee under California Public Resources Code 2542.10 or any similar law.
72. JURISDICTION: Tenant hereby consents and agrees that the courts of the County of Monterey, State of California shall have jurisdiction over its person in actions arising under or relating to this Lease and Lessee agrees that any action brought by it arising out of or relating to this Lease shall be filed in said County. Landlord and Lessee agree that said City and County shall for all purposes be considered the place of jurisdiction, notwithstanding the order in which, or the location or locations at which, it may have been executed or delivered. 73.
INVALIDITY: In the event that any term, provision, condition or covenant contained in this Lease, or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, or be held to be invalid or unenforceable by any court of competent jurisdiction, the remainder of this Lease, or the application of such term, provision, condition or covenant to persons or circumstances other than those to which it is held invalid or unenforceable, shall not be affected thereby and all such remaining terms, provisions, conditions and covenants in this Lease shall be deemed to be valid and enforceable.
73. JURY TRIAL WAIVER: The undersigned acknowledge that the right to trial is a constitutional one, but that it may be waived under certain circumstances. To the extent permitted by law, Lessee, after consulting (or having had the opportunity to consult) with counsel of its, his or her choice, knowingly and voluntarily waives any right to trial by jury in the event of litigation arising out of or related to this Lease or any other document (including the related documents) or agreement between the undersigned Lessee and Lessor.
74. PRELIMINARY NEGOTIATIONS: The submission of this lease form by Lessor for examination does not constitute an offer to lease or a reservation of an option to lease. In addition, Landlord and Tenant acknowledge that neither of them shall be bound by the representations, promises or preliminary negotiations with respect to the Premises made by their respective employees or agents. It is their intention that neither party be legally bound in any way until this Lease has been fully executed by both Landlord and Tenant.
75. COUNTERPARTS; FAXED OR ELECTRONIC SIGNATURES: This Lease may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. In order to expedite the transaction contemplated herein, faxed signatures or signatures transmitted by electronic mail in so-called “pdf” format may be used in place of original signatures on this Lease. Lessor and Lessee intend to be bound by the signatures on the faxes or e-mailed document, are aware that the other party will rely on the faxed or e-mailed signatures, and hereby waive any defenses to enforcement of the terms of this Lease based on such faxed or e-mailed signatures.
76. STATE OF CALIFORNIA STORM WATER CONTROL REQUIREMENTS:
The city of Monterey’s storm water control and pollution prevention requirements, state in part that: “Lessee shall not allow anyone to discharge anything to storm drains or to store or deposit materials so as to create a potential discharge to storm drains”. Lessee hereby acknowledges the storm drain requirements, and agrees to comply with and to inform, all employees of this requirement. Lessee further acknowledges that storm water control is mandated by the State of California and is applicable throughout the State, that some cities and or counties many have similar requirements. Lessee also acknowledges that failure to comply with this storm drain requirements may result in monetary fines or other actions by the city of Monterey, or other governmental agencies, to either the Lessee or the Landlord. Lessee hereby agrees to pay immediately, any and all fines imposed by any governmental agency for violation of said requirements and become immediately in compliance. Lessee further agrees to indemnify, and hold harmless and defend the Lessor and its agents or representatives from any and all actions from any governmental agency against the Lessor and or the property, result from Lessee’s or its 31 of 82
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employees failure to comply with the storm water requirements. Lessee further agrees to comply with the future storm water control requirements as it may be modified from time to time.
77. QUITCLAIM: Where requested by Lessor, at the expiration or earlier termination of this Lease, Lessee shall execute, acknowledge and deliver to Lessor, within (30) days after written request from Lessor to Lessee, any quitclaim deed or other document required by any reputable title company to remove the cloud of this Lease from the real property subject to this Lease.
78. NOTICE OF SURRENDER: Lessee shall, at least thirty (30) days before the date of expiration of this lease, give Lessor a written notice of intention to surrender the leased premises on that date. If such notice is not given, the Lessee shall be liable for rent of one additional month.
79. DISPUTE RESOLUTION:
A: MEDIATION: Lessee and Lessor agree to mediate any dispute or claim arising between them out of this agreement, or any resulting transaction, before resorting to arbitration or court action, subject to paragraph 79B(2) below. Paragraphs 79B(2) and (3) apply whether or not the arbitration provision is initialed. Mediation fees, if any, shall be divided equally among the parties involved. If for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action. THIS MEDIATION PROVISION APPLIES WHETHER OR NOT THE ARBITRATION PROVISIONS IS INITIALED.
B: ARBITRATION OF DISPUTES: (1) Lessee and Lessor agree that any dispute or claim in Law or equity arising between them out of this agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration, including and subject to paragraphs 79B(2) and (3) below. The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of real estate transactional law experience, unless the parties mutually agree to a different arbitrator, who shall render an award in accordance with substantive California Law. In all other respects, the arbitration shall be conducted in accordance with Part III, Title 9 of the California Code of Civil Procedure. Judgment upon the award of the arbitrator(s) may be entered in any court having jurisdiction. The parties shall have the right to discovery in accordance with Code of Civil Procedures1283.05. (2) EXCLUSIONS FROM MEDIATION AND ARBITRATION: The following matters are excluded from Mediation and Arbitration hereunder:
(i) a judicial or non-judicial foreclosure or other action or proceeding to enforce, rent, a deed of trust, mortgage, or installment land sale contract as defined in Civil Code 2985; (ii) an unlawful detainer action; (iii) the filing or enforcement of a mechanic’s lien; (iv) any matter that is within the jurisdiction of a probate, small claims, or bankruptcy court; and (v) an action for bodily injury or wrongful death, or for latent or patent defects to which Code of Civil Procedure 337.1 or 337.15 applies. The filing of court action to enable the recording of a notice of pending action, for order of attachment, receivership, injunction, or provisional remedies, shall not constitute a violation or the mediation and arbitration provisions.(3) BROKERS: Tenant and Landlord agree to mediate and arbitrate disputes or claims involving either or both Brokers, provided either or both Brokers shall have agreed to such mediation or arbitration, prior to, or within a reasonable time after the dispute or claim is presented to Brokers. Any election by either or both Brokers to participate in mediation or arbitration shall not result in Brokers being deemed parties to the agreement. “NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED OM THE ‘ARBITRATION OF DISPUTES’ PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.”
“WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ‘ARBITRATION OF DISPUTES’ PROVISION TO NEUTRAL ARBITRATION.”
Lessor Initials: _____/_____ Lessee Initials: _____/_____ 32 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
80. TERMINATION; MERGER: Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, that Lessor may elect to continue any one or all existing sub tenancies. Lessor’s failure within 10 days following any such event to elect to the contrary by written notice to the holder of any such Lessor interest shall constitute Lessor’s election to have such event constitute the termination of such interest.
EXHIBITS, SUPPLEMENTS AND ADDENDUM’S
The attached Exhibits and Addendum’s are incorporated herein:
LEASE EXHIBIT “A” LEASE EXHIBIT “B & C” PERSONAL GUARANTEE ADDENDUM’(S) 1 PERCENTAGE RENTAL AGREEMENT
RULES AND REGULATIONS ___X___
IN WITNESS WHEREOF, the above named parties hereto have: A) set their hands the date first hereinabove written, B) acknowledge receipt of a copy hereof, and C) have read, understand and agree to all of the above.
LESSOR: LESSEE:
Signature Signature
Signature Signature
Date Date
Approved as to form:
__________________________
MBCP Interim General Counsel
33 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
Commercial Lease Rules and Regulations
1. Tenant shall not suffer or permit the obstruction of any interior or common areas, including but not limited to driveways, walkways and stairways.
2. Landlord reserves the right to refuse access to any persons whom Landlord, in good faith, judges to be a threat to the safety, reputation, or building in which the premises are located.
3. Tenant shall not make or permit any noise or odors that annoy or interfere with other Tenants or persons in any manner, having business within the building in which the premises are located.
4. Tenant shall not keep or feed animals or birds within the building or on or about the premises, and shall not bring bicycles, motorcycles or other vehicles into areas not designated as authorized for same.
5. Tenant shall not make, suffer or permit litter except in appropriate receptacles for the purpose.
6. Tenant shall not allow the inappropriate use of any toilet rooms, plumbing or other utilities. No foreign substances of any kind are to be inserted therein.
7. Tenant shall not deface the walls, partitions or other surfaces of the premises of the building in which the premises are located.
8. Tenant shall not suffer or permit anything in or around the premises or building that causes excessive vibration or floor loading in any part of the building.
9. Furniture, significant freight and equipment shall be moved into or out of the building only with Landlord’s knowledge and consent, and subject to such reasonable limitations, techniques and timing, as may be designated by Landlord. Tenant shall be responsible for any damage to Landlord’s property arising from any such activity.
10. Landlord reserves the right to close and lock the building common area’s if any on selected days, and on other days between the hours of 12:00 midnight to 8:00 AM of the following day. If a Tenant uses the premises during such periods, Tenant shall be responsible for securely locking any doors it may open for entry. Minimum hours during which the Tenant shall be open for business is 10:00 AM to 5 PM daily.
11. Tenant shall return all keys at the termination of its tenancy and shall be responsible for the cost of replacing any keys that are lost.
12. No window coverings, shades or awnings shall be installed or used by tenant, nor shall tenant place anything near the glass of any window, door, partition or wall, which the landlord determines appears unsightly form the outside.
13. Tenant and Tenant’s employees or invitees shall not be allowed upon the roof of the building at any time.
14. Tenant shall not suffer or permit smoking or carrying lighted cigars or cigarettes in areas reasonably designated by Landlord or by applicable governmental agencies as non-smoking areas.
15. Tenant shall not use any method of heating or air conditioning other than as approved in writing.
16. Tenant shall not install, maintain or operating any vending machines upon the premises without Owner’s written consent.
17. The premises shall not be used for lodging or manufacturing, cooking or food preparation. (approved food establishments excluded). No pets or automotive repair permitted on premises.
18. Tenant shall comply with all safety, fire protection and evacuation regulations established by Landlord or any applicable governmental agency.
19. Landlord reserves the right to waive any one of these rules or regulations, and/or as to any particular tenant, and any such waiver shall not constitute a waiver of any other rule or regulation or any subsequent application thereof to such tenant.
20. Tenant assumes all risks from theft or vandalism and agrees to keep its premises locked as may be required.
21. Landlord reserves the right to make such other reasonable rules and regulations as it may from time to time deem necessary for the appropriate operation and safety of Landlord’s property and the occupants thereof. Tenant agrees to abide by these and such other rules and regulations.
22. Tenant shall transport all refuse generated from Tenant’s operations to the designated garbage areas.
Under no circumstances shall any garbage or refuse be stored outside Tenant’s premises at any time 34 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
LEASE EXHIBIT "B”
Demised Premises Location: 70 Garden Court, Suite 300, Monterey, CA Schematic Location of Demised Premises
(Not to Scale)
..@
35 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
Schematic Location of Demised Premises
(Not to Scale)
36 of 82
Commercial Long Form Gross Lease Modified November 2017
Initials ____________/______________/_______________________ Lessor Lessee Lessee Interim G.C.
LEASE EXHIBIT "C”
70 Garden Court, Suite 300, Monterey, CA
1. Tenant shall, for the life of the 5 year ½ mo lease agreement, receive a monthly rent credit of $227.50. The first year’s monthly rental shall be $19,355. This monthly rental figure is arrived at 11,190 sq ft (entire 3rd fl including loads) X $1.75/mo per sq ft, less the $227.50 monthly rental credit, equaling $19,355 per month.
2. Paragraph #6 - Commencing January 1, 2019, Adjustment of Annual Rent shall be based upon the prior 12 months’ adjusted rental figure of $19,355. (year 1) tied to the Western Region’s Bay Area CPI. Thereafter, all annual rent adjustments will be at twelve-month intervals (based on the preceding 12 months’ rental payment figures for that previous year), for the life of the lease.
3. First Year’s Breakdown of Initial Rental Payments & Security Deposit:
Dec. 15, 2017: $19,355 security deposit due
Dec. 15, 2017: $19,355 1-month rental payment
TOTAL AMOUNT DUE: $38,710. DECEMBER 15, 2017 Upon Lessee’s possession Dec. 15, 2017 to March 15, 2018: 3 month rental credit to Lessee ($0. Due) March 15 to April 15, 2018: 1 month pre-paid by Lessee on Dec. 15, 2017 ($0 Due) April 15 to April 30, 2018: ½ month rent by Lessee $9,677.50 Due Remaining 8 months of calendar year 2018:
Commencing - May 1, 2018: $19,335 per month due by Lessee, paid monthly 37 of 82
Authentisign Authentisign ID: 22190044 ID: 22190044--CC9B-41A9A9--9C27 9C27--9D26837EDC18 9D26837EDC18 Addendum No. 1
This Addendum entered into - OCTOBER 27, 2022, by and between A G DAVI LTD., AGENT FOR OWNER, 70 GARDEN COURT MONTEREY LLC; GREGORY J. WOOD, MANAGING MEMBER (hereinafter referred to as Lessor), and
Central Coast Community Energy, successor in-interest to Monterey Bay Community Power Authority (“Lessee”), jointly and severally, (hereinafter referred to as Lessee),
is made on the date appearing above, by and between the Lessor and Lessee.
WHEREAS Lessor and Lessee have entered into a Lease with a commencement date of December 15, 2017, and an expiration date of December 31, 2022 for the premises located at 70 GARDEN COURT, SUITE 300 (ENTIRE THIRD FLOOR), MONTEREY, CALIFORNIA, 93940, hereinafter the Lease, and, WHEREAS, Lessor and Lessee wish to amend, extend, & expand the above mentioned Lease,
NOW THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree to amend the Lease as follows:
1. Premises: *Existing Premises: A total of 11,628 rentable sq. ft. of office space.
*Expansion Premises: A total of 3,367 rentable sq. ft. of office space on the 2nd floor of the Property. The use of the 2nd Floor secured deck/balcony area is included, with exclusive use granted via 24 hour written notice by Lessee to Lessor.
Collectively, the Existing Premises and Expansion
Premises shall be called the “Premises”
• Measurements have been provided by: WRD
Architects & agreed upon between the parties
2. Extension Term: The Extension Term of the Lease would be for three (3) years, commencing upon Lessee taking occupancy of the
Expansion Premises. Adjusted Rental Payments for both
Existing & Expansion Premises shall commence the
later of (i) January 1, 2023 or (ii) delivery of the Expansion Premises to Lessee with the improvements completed in
accordance to paragraph #6 below.
DocuSign Envelope ID: 40BC048B-CD5E-4266-A26E-3038CCB0C31B 38 of 82
Authentisign Authentisign ID: 22190044 ID: 22190044--CC9B-41A9A9--9C27 9C27--9D26837EDC18 9D26837EDC18
3. Base Rent: Existing Premises: $1.99 p.s.f Gross; adjusted annually by 3.0%.
Expansion Premises: $1.85 p.s.f. Gross; adjusted
annually by 3.0%.Lessee shall be
allowed early occupancy of the
Expansion Premises upon
completion of the improvement per
paragraph 6 below at no Base Rent
cost to Lessee.
4. Options to Renew:
5. Free Rent:
Lessor shall provide Lessee with two (2) one (1) year
options to renew the Extension Term upon Lessee shall
providing Lessor with at least sixty (60) days advance
written notice to exercise the option periods. Base Rent for the option periods would continue to be adjusted 3.0%
annually. Otherwise, all other terms and condition of the Lease shall remain the same.
None (excepting for Expansion Premises early
completion of Lessor’s TI work, which should that occur in last Quarter of 2022), & early occupancy allowed Lessee, pre- January 1, 2023, rental payment commencement.
6. Delivery Conditions: Existing Premises – Lessor, at Lessor’s cost, shall provide the following improvements :
• Add blinds or window glazing to the large windows in
the reception area to help prevent the excessive heat
and cooling affects in the summer/winter.
Expansion Premises – Lessor, at Lessor’s cost, shall
provide the following improvements:
• New building standard carpet and paint the Premises
(there are 4 different carpet types within the Premises) • Replace all stained & broken ceiling tiles
• Demo the wall between the two suites and one office in the smaller suite
• Recalibrate the HVAC systems/thermostats to allow
proper airflow throughout the Expansion Premises.
• For code reasons, a direct access to the common area
hallway or the stairwell area may need to be added
(please have WRD assess if this is needed).
∙ Full-height wall in the conference room (see attached).
DocuSign Envelope ID: 40BC048B-CD5E-4266-A26E-3038CCB0C31B 39 of 82
Authentisign Authentisign ID: 22190044 ID: 22190044--CC9B-41A9A9--9C27 9C27--9D26837EDC18 9D26837EDC18
7. Operating Expenses:
8. Hold-Over Tenancy:
Both Premises - Lessee would continue to pay no
increases in Operating Expenses throughout the
Extension Term and the Option to Renew periods in
accordance with the current Lease.
Both Premises - Paragraph 19 of the Original Lease shall be changes to 150%.
10. Americans Disabilities Act: Both Premises - Pursuant to paragraph 61 of the Lease.
11. Broker Acknowledgment:
12. Real Property Disclosures:
13. CASp Disclosure:
Lessor shall recognize Cushman & Wakefield, U.S., Inc.
(“C&W”) as the broker for Lessee and J.H. Tarman
Company & A G Davi, as the broker for the Lessor in this transaction. Lessor shall pay C&W a 2.5% commission
based on the Base Rent paid by Lessee to Lessor for the Expansion Premises and 2.0% for the Existing Premises,
throughout the Term. Said commission shall be paid within thirty (30) days after execution of the Amendment.
Lessor and Lessee acknowledge receipt of the attached
BRE Mandated Agency Disclosures and C&W’s Real
Property Disclosure Forms. The Agency disclosures are
informational documents generally explaining real estate agency laws. As of January 1, 2015, the California
legislature requires that real estate agents provide this form to all real estate buyers, sellers, lessors and lessees.
You will see at the bottom that we are asking you to sign the form. Your signature on this form is requested only to acknowledge your receipt and does not impose any legal
obligations upon you.
For purposes of Section 1938 of the California Civil Code, Lessor hereby discloses to Lessee, and Lessee hereby
acknowledges, that the Premises has not undergone
inspection by a Certified Access Specialist (“CASp”).
A CASp can inspect the Premises and determine whether the Premises complies with all the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of a premises, a
commercial property owner/lessor may not prohibit a
lessee/Lessee from obtaining a CASp inspection of a
premises for its occupancy/potential occupancy of a
premises, if requested by the lessee/tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection if required by Lessee, which would be paid for by Lessee. Any related repairs necessary to correct violations of construction-related accessibility standards within the Premises would be at Lessee’s sole cost and
expense.
DocuSign Envelope ID: 40BC048B-CD5E-4266-A26E-3038CCB0C31B 40 of 82
Authentisign Authentisign ID: 22190044 ID: 22190044--CC9B-41A9A9--9C27 9C27--9D26837EDC18 9D26837EDC18 No Existing Claims. Lessee acknowledges that Lessee has no existing claims, defenses (personal or otherwise), or right of set-off whatsoever with respect to the Lease and Lessee further acknowledges and represents that to the best of Lessee’s knowledge, no event has occurred, and no condition exists which would constitute a default by Lessor under the Lease, or this Amendment, either with or without notice or lapse of time, or both.
All of the terms and conditions of said original lease except as herein modified are to remain in full force and effect and are made a part of this agreement.
IN WITNESS WHEREOF, the above named parties hereto have:
A) Set their hands the date first hereinabove written,
B) Acknowledged receipt of a copy hereof, and
C) Have read, understood and agreed to all of the above.
LESSOR: LESSEE:
70 Garden Court Monterey LLC Central Coast Community Energy Tom Habashi, Chief Executive Officer
Gregory J Wood, Managing Member Date
70 Garden Court Monterey LLC
Date
A G Davi, LTD by A G Davi Jr
DocuSign Envelope ID: 40BC048B-CD5E-4266-A26E-3038CCB0C31B 10/31/2022
41 of 82
Authentisign ID: 22190044 Authentisign ID: 22190044--CC9B CC9B--41A9 41A9--9C27 9C27--9D26837EDC18 9D26837EDC18 ,-
1 Wall HERE
177 sf
.I
®--
--,
/ I i /
/
/
/ 5,278 sf
/
DocuSign Envelope ID: 40BC048B-CD5E-4266-A26E-3038CCB0C31B 42 of 82
Compiled Financial Statements 1
Compiled Budgetary Comparison Schedule 6
Budget Variance Commentary 9
Financial Dashboard 10
Investment Summary 11
Accounts Receivable Summary 12
Personnel Report 13
Table of Contents
TREASURER REPORT
Fiscal Year to Date
As of August 31, 2022
43 of 82
1 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying financial statements of Central Coast Community Energy (a California Joint Powers Authority) which comprise the statement of net position as of August 31, 2022, and the related statement of revenues, expenses, and changes in net position, and the statement of cash flows for the period then ended in accordance with accounting principles generally accepted in the United States of America. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, conclusion, nor provide any assurance on these financial statements.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
Central Coast Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
September 26, 2022
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com 44 of 82
Current assets
Cash and cash equivalents
Held for working capital 40,100,000 $
Held for operating reserve 105,900,000
Other cash and cash equivalents 32,594,264
Cash and cash equivalents 178,594,264
Accounts receivable, net of allowance 42,908,305
Accrued revenue 29,534,243
Loan receivable 292,002
Other receivables 141,198
Prepaid expenses 3,436,105
Deposits 2,942,750
Restricted cash 294,000
Investments 11,190,491
Total current assets 269,333,358
Noncurrent assets
Deposits 23,432
Loan receivable 1,707,998
Capital assets, net of depreciation 226,383
Total noncurrent assets 1,957,813
Total assets 271,291,171
Current liabilities
Accrued cost of electricity 40,966,234
Accounts payable 889,937
Other accrued liabilities 1,149,868
Customer rebate liabilities 158,706
User taxes and energy surcharges due to other governments 1,763,010 Total current liabilities 44,927,755
Noncurrent liabilities
Security deposits - energy suppliers 9,131,250
Total noncurrent liabilities 9,131,250
Total liabilities 54,059,005
Investment in capital assets 226,383
Restricted for security collateral 294,000
Unrestricted 216,711,783
Total net position $ 217,232,166
NET POSITION
As of August 31, 2022
STATEMENT OF NET POSITION
CENTRAL COAST COMMUNITY ENERGY
ASSETS
LIABILITIES
See accountants' compilation report. 2
45 of 82
OPERATING REVENUES
Electricity sales, net 364,266,062 $
Grant revenue 2,759,460
Liquidated damages 2,401,875
Total operating revenues 369,427,397
OPERATING EXPENSES
Cost of electricity 324,120,006
Contract services 8,009,565
Staff compensation 5,552,480
General and administration 5,147,867
Depreciation 81,616
Total operating expenses 342,911,534
Operating income (loss) 26,515,863
NONOPERATING REVENUES (EXPENSES)
Interest and investment income 727,844
CHANGE IN NET POSITION 27,243,707
Net position at beginning of period 189,988,459
Net position at end of period $ 217,232,166
Eleven Months Ended August 31, 2022
AND CHANGES IN NET POSITION
STATEMENT OF REVENUES, EXPENSES
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. 3
46 of 82
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 355,550,712
Receipts from grantor 2,759,460
Receipts from liquidated damages 2,401,875
Receipts from suppliers 11,032,677
Payments to suppliers for electricity (312,891,914)
Payments for other goods and services (15,289,780)
Payments for staff compensation (5,663,240)
Payments of taxes and energy surcharges to other governments (6,183,011) Net cash provided by operating activities 31,716,779
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Payments to acquire capital assets (1,113)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 594,327
Purchase of investments (11,160,352)
Loan issued (2,000,000)
Net cash provided (used) by investing activities (12,566,025) Net change in cash and cash equivalents 19,149,641
Cash and cash equivalents at beginning of year 159,738,623 Cash and cash equivalents at end of period $ 178,888,264 Reconciliation to the Statement of Net Position
Cash and cash equivalents (unrestricted) $ 178,594,264
Restricted cash 294,000
Cash and cash equivalents $ 178,888,264
Eleven Months Ended August 31, 2022
STATEMENT OF CASH FLOWS
CENTRAL COAST COMMUNITY ENERGY
See accountants' compilation report. 4
47 of 82
Operating income (loss) $ 26,515,863
Adjustments to reconcile operating income (loss) to net cash provided by operating activities
Depreciation expense 81,616
Provision for uncollectible accounts 1,776,927
(Increase) decrease in:
Accounts receivable (7,308,934)
Accrued revenue (9,523,146)
Energy settlements receivable 7,856,108
Other receivables 881,509
Prepaid expenses (1,875,856)
Deposits (1,224,219)
Increase (decrease) in:
Accrued cost of electricity 12,316,810
Accounts payable (341,781)
Other accrued liabilities 305,091
Customer rebate liabilities (147,585)
User taxes and energy surcharges due to other governments 304,376 Security deposits - energy suppliers 2,100,000
Net cash provided by operating activities 31,716,779 $
CENTRAL COAST COMMUNITY ENERGY
STATEMENT OF CASH FLOWS (continued)
Eleven Months Ended August 31, 2022
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
See accountants' compilation report. 5
48 of 82
6 ACCOUNTANTS’ COMPILATION REPORT
Board of Directors
Central Coast Community Energy
Management is responsible for the accompanying special purpose statement of Central Coast Community Energy (a California Joint Powers Authority) which comprise the budgetary comparison schedule for the period ended August 31, 2022, and for determining that the budgetary basis of accounting is an acceptable financial reporting framework. We have performed a compilation engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the accompanying statement nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any assurance on this special purpose budgetary comparison statement.
The special purpose statement is prepared in accordance with the budgetary basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. This report is intended for the information of the Board of Directors of the Authority.
Management has elected to omit substantially all of the note disclosures required by accounting principles generally accepted in the United States of America in these interim financial statements.
Central Coast Community Energy’s annual audited financial statements include the note disclosures omitted from these interim statements. If the omitted disclosures were included in these financial statements, they might influence the user’s conclusions about the Authority’s financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
We are not independent with respect to the Authority because we performed certain accounting services that impaired our independence.
Maher Accountancy
San Rafael, CA
September 26, 2022
1101 Fifth Avenue, Suite 200 San Rafael, CA 94901 415 459 1249 mahercpa.com 49 of 82
2021/22 YTD
Budget
2021/22 YTD
Actual
2021/22 YTD
Budget Variance
(Under) Over
2021/22 YTD
Actual / Budget %
2021/22 Annual
Budget
2021/22 Budget
Less Actual
2021/22 Budget
Remaining /
Budget %
REVENUES AND OTHER SOURCES
Electricity sales $ 323,019,000 $ 372,571,921 $ 49,552,921 115% 359,103,000 $ $ (13,468,921) -4% Less bill credit - - - 0% (3,085,000) (3,085,000) 100% Less uncollectible accounts (4,038,000) (5,546,399) (1,508,399) 137% (4,489,000) 1,057,399 -24% Revenue from damages - 2,401,875 2,401,875 n/a - (2,401,875) n/a Investment and miscellaneous income 473,000 727,844 254,844 154% 516,000 (211,844) -41% Total revenues and other sources 319,454,000 370,155,241 50,701,241 116% 352,045,000 (18,110,241) -5% EXPENDITURES AND OTHER USESCurrent Expenditures
Cost of energy 324,390,939 292,167,000 32,223,939 111% 326,335,000 1,944,061 1% Energy programs (incentives and grants) 11,859,000 3,526,576 (8,332,424) 30% 12,270,000 8,743,424 71% Data manager 3,366,385 3,459,000 (92,615) 97% 3,774,000 407,615 11% Utility service fees 1,739,000 1,595,498 (143,502) 92% 1,893,000 297,502 16% Staffing 8,474,000 5,552,480 (2,921,520) 66% 9,244,000 3,691,520 40% Professional services 1,292,000 1,183,544 (108,456) 92% 1,393,000 209,456 15% Legal services 951,000 993,071 42,071 104% 1,037,000 43,929 4% Marketing and customer enrollment 869,000 600,134 (268,866) 69% 943,000 342,866 36% Other general & administration 1,492,000 1,621,291 129,291 109% 1,625,000 3,709 0% Total current expenditures 322,302,000 342,829,918 20,527,918 106% 358,514,000 15,684,082 4%Other Uses Capital outlay 103,000 1,113 (101,887) 1% 114,000 112,887 99% Uninterruptible Power Supply expenditures 2,567,000 2,000,000 (567,000) 78% 2,800,000 800,000 29% Total other uses 2,670,000 2,001,113 (668,887) 75% 2,914,000 912,887 Total Expenditures and Other Uses 324,972,000 344,831,031 19,859,031 106% 361,428,000 16,596,969 5% Surplus (Deficit) $ (5,518,000) $ 25,324,210 $ 30,842,210 $ (9,383,000) $ (34,707,210) 370% Reserves at end of reporting period: Working Capital Reserve 40,100,000 $ Operating Reserve 105,900,000 Total 146,000,000 $
CENTRAL COAST COMMUNITY ENERGY
BUDGETARY COMPARISON SCHEDULE
Eleven Months Ended August 31, 2022
See accountants' compilation report. 7
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CCA Program Surplus/(Deficit)
per budgetary comparison schedule: 25,324,210 $
Adjustments needed to reconcile to the
changes in net position in the
Statement of Revenues, Expenses
and Changes in Net Position:
Subtract depreciation expense (81,616)
Add back capital asset acquisitions 1,113
Add back loans issued 2,000,000
Change in Net Position 27,243,707 $
REVENUES, EXPENSES AND CHANGES IN NET POSITION
CENTRAL COAST COMMUNITY ENERGY
BUDGET RECONCILIATION TO STATEMENT OF
Eleven Months Ended August 31, 2022
See accountants' compilation report. 8
51 of 82
Budget Item YTD Variance Comment
Electric Sales Revenue 15.3% Sales revenue includes revenues actually billed to customers as well as estimated customer usage during the reporting period that is not yet billed.
Cost of Energy 11.0% Variances in this category are typically due to (1) timing difference between projected and actual REC deliveries, (2) variance from actual to anticipated market prices, and (3) variance from actual to expected volume used by customers.
Staffing (34.5%) Staffing expenses are under budget due to the timing of new hires.
Professional Services (8.4%) This category includes accounting, IT, technical and other consultants.
Legal Costs 4.4% This category includes outside legal costs for regulatory and energy procurement needs.
Marketing and customer enrollment (30.9%) Variance is mostly due to the lower than anticipated costs of recent customer enrollments.
Data Management Services (2.7%) These fees non-discretionary and are charged on a per customer basis.
Utility Service Fees (8.3%) These are PG&E and SCE fees charged on a per customer basis.
Other General & Administrative 8.7% This category includes occupancy costs, industry membership dues, and other general and administrative costs.
Energy and Related Programs (70.3%) Programs expenses have generally been delayed until future periods Budget Commentary for significant items
CENTRAL COAST COMMUNITY ENERGY
October 1, 2021 through August 31, 2022
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$6.6
$4.2
Act
Bud
$42.6
$26.8
$28.3
‐$20.0
‐$10.0
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual
Budget
$367.0
$319.0
$354.6
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
$400.0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual
Budget
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
Actual (T48/T8) 410 407 442 418 376 406 399 415 441 445 464 Budget 428 421 432 431 379 406 395 421 425 448 478 454
0 100
200
300
400
500
600
CUSTOMERS
SALES VOLUME
464 GWh
STD MARGIN
$4.6M (14%)
Δ in NET ASSETS
$4.6M
REVENUE
$47.9M
Cumulative YTD Electricity Sales Cumulative YTD Direct Margin Fiscal Year Electricity Sales are $48.0M ahead of budget, Margin dollars are $15.8M above budget.
Data Definitions:
CUSTOMERS: From GridX invoice + Calpine.
REPORTED / SALES VOLUME: Best available estimate of actual meter volume. Currently based on GridX T+8 SQMD Report and T+48 when available.
REVENUE: Total Operating Revenue, net of uncollectible, (excludes Miscellaneous and Interest income).
NON‐OP REV: Other uses, primarily Interest Income
ELECTRICITY SALES: Sales from electricity (net of uncollectible).
STD MARGIN: Electricity Sales less cost of energy (Forecasting & scheduling included in Cost of Energy to match budget) ACTUAL: Same as sales volume above
BUDGET: Volumes from FY21/22 budget
Monthly Sales Volume (GWh)
Financial Dashboard: August 2022
Margin %
CUSTOMERS
447,500
ACTIVE
August revenue of $47.9M accounts for 464
GWh in net retail consumption. This comes
in 14Gwh below budgeted volume.
YTD Revenue is $48M ahead of budget, and
margin exceeds budget by $15.8M for the
year.
30%
47%
23%
35%
48%
17%
Res
Com
Ag
YTD Month
30%
48%
22%
36%
47%
16%
Res
Com
Ag
YTD Month
Revenue $47.9
C.O.E. $41.2
OpEx $2.0
Net Income $4.6 13.9%
11.3%
Act
Bud
Margin $
10 Return of Investments YTD Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep CASH AND CASH EQUIVALENTSRiver City Bank - Money Market and other Interest Earning AccountsFunds Invested - Average Balance $ 178,000,000 171,000,000 $ 172,000,000 $ 165,000,000 $ 168,000,000 $ 164,000,000 $ 160,000,000 $ 160,000,000 $ 152,000,000 $ 159,000,000 $ 71,000,000 $ Gains/Losses/Interest $ 579,552 $ 34,009 $ 33,104 $ 32,526 $ 31,581 $ 31,077 $ 38,817 $ 47,244 $ 62,490 $ 77,791 $ 109,682 $ 81,231 Average APY 0.24% 0.22% 0.23% 0.23% 0.22% 0.28% 0.35% 0.47% 0.61% 0.83% 1.37%INVESTMENTSRiver City Bank - Treasury-indexed productsFunds Invested - Average Balance - - - - - - - - - - 15,000,000 $ Gains/Losses/Interest $ 36,986 - - - - - - - - - - $ 36,986 Average APY 2.96%RBC GAM / Principal Financal Funds Invested - Average Balance - - - - - - - - - - 75,000,000 $ Gains/Losses/Interest $ 111,307 - - - - - - - - - - 111,307 $ Average APY 1.78%
CENTRAL COAST COMMUNITY ENERGY
Investment Summary
October 1, 2021 through August 31, 2022
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Total 0-30 31-60 61-90 90-120 Over 120
Accounts Receivable, net 42,908,000 22,137,000 12,256,000 2,883,000 1,486,000 4,146,000 Period % 100% 52% 29% 7% 3% 10%
As of August 31, 2022
Accounts Receivable Aging Report
CENTRAL COAST COMMUNITY ENERGY
DAYS
12 55 of 82
Staff Report Item 4
TO: CCCE Operations Board of Directors
FROM: Seth Capron, Community Advisory Council Chair
SUBJECT: Community Advisory Council's Report (Discussion Item) DATE: November 9, 2022
CAC Chair’s Report to Operations Board – 11/9/2022
The Community Advisory Council (CAC) met on Wednesday, October 5th with the focus on presentations on the CAC]’s work with staff to create a CCCE Regional Transportation Electrification Action Plan. Staff will be presenting outside speakers on various topics related to this plan over the next fiscal year.
First, the CAC received the COO’s report, ably presented by Director of Energy Programs Jon Griesser in COO Robert Shaw’s absence. A highlight from Jon’s report of particular interest was the CSUMB neighborhood electrification project, a pilot by PG&E with strong support from CCCE staff. Instead of replacing aging Fort Ord legacy natural gas piping in a part of the CSUMB campus, the project will upgrade the electrical distribution grid, upgrade building electrical services, and provide funding for replacement of existing gas appliances with energy efficient heat pump and conduction cooking units.
This shows great promise as a promising pathway to address the major challenge of retrofit electrification in existing buildings.
The CAC meetings during this fiscal year will focus on presentations on creation of a CCCE Regional Transportation Electrification Action Plan. Staff will be inviting outside speakers on various topics related to this plan. The first presentation was provided by Chris Reed, the City of San Luis Obispo Sustainability Manager, and Andy Shatney, City of Santa Cruz Energy Project Coordinator. These two jurisdictions have been setting the bar for ambitious, forward looking Climate Action Plans. Mr. Reed shared an overview of SLO’s comprehensive plan, with a goal of community-wide carbon neutrality by 2035. This includes a goal of 40% of vehicle miles traveled community wide being carbon neutral by 2030. Leading by example, their goal is carbon neutral municipal operations by 2030, with a focus on electrifying the municipal fleet. Detailed benchmarks were provided. Mr. Shatney’s presentation was focused on SLO’s planning for electrification of medium duty and heavy-duty city vehicles, and installation of required charging infrastructure. The city is using funds from the PG&E Fleet Ready Program to help finance MD/HD charging infrastructure, incorporating expansion planning to enable eventual electrification of their entire fleet. A number of technical lessons learned were included in the presentation. The City of Santa Cruz is an early adopter in this space, paving the way for other jurisdictions in the five-county area.
The program staff provided a report on the FY 21/22 portfolio of programs. With Mr. Griesser acting as lead staff for the CAC meeting, it was an opportunity for Dan Bertoldi and Kevin Miller to step up and 56 of 82
lead the energy program presentations. Information was provided on the uptake on each of the programs, along with financial breakdowns of the incentive uptake by county and by income group, and information on amounts of GHG emission reductions. Information was also provided on which parts of each program received the most community response and uptake. Analysis of last year’s member agency programs was also provided. This detailed report provides excellent information that CCCE will use in the coming year in refining our programs and targeting funds to where they will have the most impact. Due to staff’s diligent efforts, almost all FY 21/22 budgeted funds have been either expended or reserved. Kudos to the Energy Program staff!
The energy program staff also brought us a staff report and presentation on their recommendation for the FY 22/23 Energy Program Portfolio. Most of the programs for the current fiscal year are building off the work of the previous year, with the addition of the Broadband Access Initiative. Staff used extensive analysis of the previous year’s program implementation, as well as input from the community, the CAC, and the Boards, to make program improvements and to target funds where they will be most effective.
This item was brought as an action item, and the CAC recommends adoption.
Staff brought a report on the recommended changes in the Reach Code Program. Whereas last year’s program was focused on cash incentives for jurisdictions that passed reach codes, this year’s takes a more proactive approach. TRC Engineers has been hired to work with jurisdictions in crafting Reach Code language, assistance in preparation of staff reports, and guidance on the adoption process. This support for jurisdictional staff should lead to the adoption of more reach codes in our service area. A strategy being recommended is the use of health and safety ordinances instead of local amendments to the California Building Code. This takes passage of the Reach Codes out of the code amendment approval cycle and allows for timely adoption. This was brought as an action item, and the CAC recommends adoption.
The next meeting of the CAC will be on December 7th.
Submitted by Seth Capron
Chair, CCCE Community Advisory Council
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Staff Report Item 5
TO: CCCE Operations Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: CEO Report (Discussion Item)
DATE: November 09, 2022
STAFFING UPDATE
Deanna Fernandez joins CCCE’s Power Supply Resources Department as a Contract Compliance Manager. Deanna previously worked as a Sr. Contracts Manager for California Commercial Solar where she was focused on utility-scale energy generation projects serving California’s Agriculture communities.
CENTRAL PROCUREMENT ENTITY FAILURE IMPACTS ON RESOURCE ADEQUACY The Resource Adequacy (RA) market continues to see increased regulatory involvement, the consequence of which has been higher market uncertainty and increased prices year over year. The latest example creating regulatory risk is the California Public Utilities Commission’s (the Commission) introduction and subsequent failure of the Central Procurement Entity (CPE) for Local RA.
The Commission created the CPE function in 2020 and made PG&E and Southern California Edison the CPEs in their respective service areas. As CPEs they were required to procure Local RA on behalf of all the load-serving entities (LSEs), including CCAs, in their service areas. As part of the Commission’s CPE decision, CAISO is identified as responsible for backstop procurement – responsible for purchasing RA for any CPE shortfall.
SCE’s CPE met its obligations, but PG&E’s CPE was short 26% of the Local RA it was supposed to procure for 2023.
Despite CAISO being responsible for the CPE shortfall, the Commission attributed the shortfall to CCCE (and other Load Serving Entities) in its year-ahead System RA obligations. CCCE sought clarification of CCCE’s RA requirements through several meetings with Energy Division staff, a letter to the CPUC President, and a formal Motion for Clarification that received support from three other CCAs and a coalition of Direct Access stakeholders. CalCCA separately filed a Motion for Reconsideration seeking 58 of 82
changes to the original Decision that would offer some of the same clarifications. None of these efforts has received a response.
The CPE deficiency, and the Commission’s subsequent misallocation of that deficiency, was announced only two months before year-ahead compliance filings – and coincided with a roughly 52% increase in RA prices.
On the eve of the Year Ahead Compliance filing, the CPUC staff has indicated that all load-serving entities (LSEs), including CCAs, will have two extra months, i.e., until the end of the year, to procure year-ahead RA for 2023. CCCE will continue to seek clarification from the Commission, work to minimize risk and costs to CCCE and its customers, and assert any rights or defenses with respect to the broken CPE mechanism. Longer term, CCCE staff are working with other stakeholders to suggest changes to the CPE structure that could help avoid similar outcomes in the future. 7/2021 11/2021 5/2022 7/2022 9/2022
Percentage
increase from
previous 2023
forecast
4% 0% 23% 11%
CPE
deficiency
revealed in
August
52%
Table 1: Percent increase in forecast average cost of 2023 Resource Adequacy between each forecast starting from September 2020
CCCE FINANCIAL INFRASTRUCTURE & PROCESSES
CCCE has evolved considerably from its startup days, with increasingly complex operations on a significantly larger scale. Staff is actively engaged in upgrading core financial processes and systems to match the broader organizational evolution. Currently, CCCE’s Controller function is outsourced at significant cost while its Budgeting, Reporting & Variance Analysis, Purchasing, and Accounts Payable functions use manual and time-intensive processes. Staff is actively considering procuring and deploying an Enterprise Resource Planning (ERP) system to automate processes, improve reporting and budgeting, increase efficiencies, reduce staff loading, and position CCCE to bring the Controller function in-house if it chooses to do so. CCCE has signed a contract with SoftResources LLC, an ERP consultant, to conduct a needs assessment, develop functional and technical requirements for an ERP, and, if applicable, conduct an RFP for an ERP system. The RFP would be conducted in Q1 2023, with staff bringing the final candidate to the Operations Board for approval that same quarter. Staff target a Q2 implementation for an ERP.
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ATTACHMENT(S):
1. Customer Enrollment And Engagement Report
2. Update On CCCE Member Agency Services
3. Update On FY 21/22 CCCE Community Energy Programs
4. Regulatory & Legislative Impact Update
5. CCCE Contracts < $100k
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CUSTOMER ENROLLMENT AND ENGAGEMENT REPORT
Communications and Outreach
October 2022
I. Member Agency Services meetings:
The Quarterly Member Agency Staff Meeting was held on September 13th, with 25 staff from 17 member agencies in attendance.
The Building Electrification Working Group met on September 15th.
II. Enrollment/Opt-Outs:
Total Opt-Out request for September:
PG&E Service Area- 147
SCE Service Area- 8
The reasons given by customers for opting out were as follows:
Rate of cost concerns – 34%
Decline to provide – 31%
Dislikes being automatically enrolled – 12%
Other – 12%
Service or billing concerns – 8%
Concerns about a government-run agency 3%
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97.34%
98.37%
96.67%
98.30%
98.11%
98.82%
97.70%
98.55%
99.95%
95.68%
98.28%
96.57%
95.58%
97.32%
97.99%
96.96%
98.75%
98.55%
97.23%
98.37%
97.75%
96.15%
98.98%
98.14%
96.89%
96.26%
95.42%
98.31%
94.46%
99.16%
98.25%
98.59%
97.72%
WATSONVILLE INC
SOLVANG INC
SOLEDAD INC
SEASIDE INC
SCOTTS VALLEY
SANTA MARIA
SANTA CRUZ CO
SANTA CRUZ
SANTA BARBARA CO
SAND CITY
SAN LUIS OBISPO
SAN JUAN BAUTISTA
SAN BENITO CO
SALINAS
PISMO BEACH
PASO ROBLES
PACIFIC GROVE
MORRO BAY
MONTEREY CO
MONTEREY
MARINA
HOLLISTER
GUADALUPE
GROVER BEACH
GREENFIELD
GONZALES
GOLETA
DEL REY OAKS
CARPINTERIA
CARMEL
CAPITOLA
BUELLTON
ARROYO GRANDE
92.00% 93.00% 94.00% 95.00% 96.00% 97.00% 98.00% 99.00% 100.00% 101.00% Percentage of Eligible Accounts served by Member Agency 62 of 82
91.91%
93.93%
87.50%
96.81%
96.22%
93.80%
94.38%
95.83%
80.53%
86.90%
96.88%
95.75%
97.50%
95.33%
98.73%
96.18%
98.68%
97.55%
94.29%
94.10%
93.50%
96.34%
99.54%
98.49%
97.59%
98.75%
86.83%
98.56%
95.86%
98.13%
97.40%
99.52%
98.07%
WATSONVILLE
SOLVANG
SOLEDAD
SEASIDE
SCOTTS VALLEY
SANTA MARIA
SANTA CRUZ COUNTY
SANTA CRUZ
SANTA BARBARA COUNTY
SAND CITY
SAN LUIS OBISPO
SAN JUAN BAUTISTA
SAN BENITO COUNTY
SALINAS
PISMO BEACH
PASO ROBLES
PACIFIC GROVE
MORRO BAY
MONTEREY COUNTY
MONTEREY
MARINA
HOLLISTER
GUADALUPE
GROVER BEACH
GREENFIELD
GONZALES
GOLETA
DEL REY OAKS
CARPINTERIA
CARMEL
CAPITOLA
BUELLTON
ARROYO GRANDE
0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00%
Percent of eligible load served as of September 1, 2022 63 of 82
III. Media Outreach
Social media engagement by platform:
Facebook
Followers: 1,858
Post Reach: 1,131
Post Engagement: 361
New Page Followers: 10
Link Clicks: 38
Top Performing Content: Riverview Estates—New
Construction Electrification
Facebook En Espanol
Followers: 182
Post Reach: 55
Post Engagement: 11
New Page Followers: 1
Link Clicks: 3
Top Performing Content: Riverview Estates —New
Construction Electrification
Instagram
Followers: 826
Top Performing Content: Riverview Estates—New
Construction Electrification
Twitter
Followers: 1,085
Top Performing Content: CEO Search survey
LinkedIn
Followers: 1,408
Top Performing Content: Riverview Estates—New Construction Electrification Earned media:
New Construction Electrification Program: Open House at Riverview Self-Housing lets families see their new homes | BenitoLink
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UPDATE ON CCCE MEMBER AGENCY SERVICES
Energy Programs
October 2022
Provided in this memorandum is an update on Member Agency Services implementation activities.
Reach Code Program
On October 3, 2022, CCCE staff launched the Reach Code Program with program implementation support from a consultant, TRC Engineers. This redesigned program provides no-cost technical assistance to help Member Agencies adopt and implement reach codes and offers stakeholder outreach support. Support includes presenting to key stakeholders, answering technical questions, attending meetings, developing customized ordinances, reviewing staff presentations and reports, and developing implementation tools to help Member Agencies enforce their reach codes.
Since launch, three Member Agencies have already engaged in the program. Please visit CentralCoastReachCodes.org if you are interested in adopting a reach code and to see recommended model codes for new construction, electric vehicle charging infrastructure, and existing buildings.
Member Agency Building and Transportation Electrification Working Groups CCCE has established and is facilitating working groups focused on building and transportation electrification to drive participation in existing programs and inform future program design; identify common needs, barriers, and scalable solutions for regional electrification; and identify and share resources between Member Agencies and CCCE.
The Building Electrification Working Group (BEWG) most recently met on October 27, 2022. Energy Programs staff presented an overview of FY 22/23 building electrification programs including the Reach Code, Electrify Your Home, and New Construction Electrification Programs. Staff from the City of Watsonville and County of Monterey provided updates on their CCCE grant-funded building electrification projects. The group meets next on November 17, 2022.
The Transportation Electrification Working Group (TEWG) meets next on December 1, 2022. 65 of 82
FY 22/23 Member Agency Services and Initiatives Launch Schedule Member Agency Services and Initiatives Proposed Launch
Reach Code Program Early Q1
Electrify Your Fleet Program Late Q1
Charge Your Fleet Program Late Q1
Plan Your Fleet Program Q2
Broadband Access Initiatives Q2
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UPDATE ON FY 21/22 CCCE COMMUNITY ENERGY PROGRAMS
Energy Programs
October 2022
Electrify Your Home Program
On October 3, 2022, CCCE staff launched the Electrify Your Home Program (EYH) with program implementation support from a consultant, Energy Solutions. This residential electrification program provides incentives to enrolled contractors who recommend and switch out gas-powered appliances in existing single and multi-family buildings with all-electric heat pump technologies. These incentives directly reduce the upfront cost for CCCE customers who make the switch to all-electric heat pump technology. Contractors enrolled in the statewide TECH Clean California program also have access to no-cost workforce education and training focused on electrification design and specification, heat pump installation, building science, and soft skills in sales and marketing. In FY 22/23, CCCE has budgeted $1.6 million for EYH.
As of October 28, 2022, there are approximately 72 licensed contractors enrolled in the TECH Clean California program that serves part of CCCE’s service area, allowing them to be eligible to apply for CCCE incentives. Since the program launched in October, CCCE has received $16,000 in eligible incentive requests from contractors serving CCCE customers.
New Construction Electrification Program
On October 3, 2022, CCCE staff launched the New Construction Electrification Program (NCEP). This year’s iteration of this longstanding program provides affordable and farmworker housing developers, and homeowners building Accessory Dwelling Units, with incentives to build all-electric housing.
Housing projects must be built to all-electric standards for all energy utility needs including but not limited to water heating, space heating, and cooking appliances. Incentives will be provided on a per-unit basis and will be provided “downstream” to developers and homeowners upon successful completion of the project. In FY 22/23, CCCE has budgeted $1.5 million for NCEP.
No applications have yet been received for this program.
Electrify Your Ride Program
On November 1, 2022, CCCE staff launched the third iteration of the Electrify Your Ride Program.
Building off last year’s program, the Electrify Your Ride Program provides rebates to CCCE customers who purchase or lease an electric vehicle (EV). This program also incorporates rebates for Level 2 EV Chargers, as well as related home electrical upgrades - such as panel upgrades and wiring – to support “EV Readiness”. The EYR program will improve upon previous years’ programs with several design and 67 of 82
implementation modifications that will be phased in and include the following new services and measures, and implementation changes:
Phase 1:
Accept 1040 tax forms for income-qualified verification; eliminate all other forms of and processes for income qualification other than CARE/FERA. Provide DCFC rebates for publicly accessible commercial customer sites. Launch technical assistance “concierge” service for multifamily property owners and publicly accessible commercial customers.
Improve and add new automated customer notification emails. Remove rebates for e-bikes
Phase 2:
Procure and contract third-party program implementation services. Integrate workforce development incentives to train or certify local contracts to install EVSE throughout the CCCE service area.
Residential, commercial/agricultural, and public agency customers are welcome to apply. Higher incentive amounts are available through this program for income-qualified customers to promote greater adoption of transportation electrification in disadvantaged and low-income communities. In FY 21/22, CCCE budgeted a total of $4.63 million with $2 million allocated for EV, Level 2 EV chargers, and EV Readiness incentives, as well as $2 million for Level 3/DC Fast Charger incentives.
FY 22/23 Community Energy Programs Launch Schedule
Community Energy Programs Proposed Launch
Agriculture Electrification Program Mid Q1
Electrify Your Ride Program Mid Q1
Electric Bus Program Q2
Electrify Your Home Program Early Q1
New Construction Electrification Program Early Q1
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REGULATORY & LEGISLATIVE IMPACT UPDATE
Regulatory & Legislative
October 2022
Regulatory
Integrated Resource Planning (IRP; Rulemaking.20-05-003) Issue
Integrated Resource Planning (IRP) is the CPUC’s greenhouse gas (GHG) reduction planning process.
Every two years, CCAs, investor-owned utilities (IOUs) and Direct Access providers must submit Integrated Resource Plans documenting the resources they plan to procure through 2035 and the estimated attendant GHG emissions. The CPUC aggregates the plans to determine whether the electricity sector is on track to hit its portion of California’s 2030 GHG reduction goals while maintaining a reliable grid. The most recent IRPs were due on November 1, 2022.
Additionally, on September 8, 2022, the CPUC issued a Ruling proposing changes to the 11,500-MW Mid-Term Reliability (MTR) mandate that could have significant impacts on CCCE procurement. The Ruling acknowledges the difficulty of meeting the current MTR requirements caused by both global supply chain conditions and the original structure of the MTR itself. CPUC staff then propose two potential changes to the MTR requirements:
1) Expanding the pool of resources eligible to count towards MTR compliance to include any resource that has come online since January 1, 2020, and 2) Increasing the 2025 procurement requirement commensurate with the amount of capacity that the first change makes newly eligible, functionally equating to a partial extension of the deadlines for 2023 and 2024 procurement out to 2025.
This is the first structural acknowledgment from the Commission of 1) the delays the market and supply chain disruptions of the past few years have caused for new resource development, and 2) the perverse incentive against proactive new resource development created by the original MTR structure, which penalizes the load-serving entities who have most proactively pursued new clean resources by including their resources in the “baseline” inventory that does not count toward MTR compliance.
CCCE staff have held multiple meetings with CPUC staff and state legislators this year to discuss both issues.
Impacts
The CPUC does not have direct jurisdiction over CCA procurement the way it does for IOUs. However, the CPUC has used its responsibility for achieving GHG reductions to justify ordering all load-serving entities participating in the IRP process (including CCAs) to procure extra resources if it finds the predicted system-wide trajectory lacking in GHG reductions and/or grid reliability. The first IRP cycle in 2017-2018 resulted in a CPUC mandate for 3,300 MW of extra procurement, with an additional 11,500 MW ordered in June 2021 to protect mid-term (2023-2026) grid reliability. CCCE’s assigned slice of those mandates was 57.4 MW and 291 MW respectively, and future IRP cycles could bring additional procurement mandates.
Status
CCCE submitted its 2022 IRP on November 1, 2022. The materials are now posted on CCCE’s website for public access as required. CCCE staff now wait for CPUC certification of the IRP, which could take over a year based on past IRP cycles.
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There has been no further CPUC action on the proposals in the September 8, 2022 Ruling that CCCE supported (see Issue section above). The changes proposed in the Ruling are still several steps from becoming official Commission policy, and the most likely next step is a Proposed Decision if the CPUC decides to move forward with the proposals. CCCE will work further with Commission staff and other stakeholders to support a version of the proposals.
Provider of Last Resort (POLR; Rulemaking.21-03-011)
Issue
The Provider of Last Resort is the entity responsible for taking over a load-serving entity’s (LSE’s) customers if that LSE fails and can no longer provide electric service. Historically in California, the investor-owned utilities (IOUs) have served as the POLRs in their respective service areas, tasked with taking back customers if a CCA or direct access provider fails. Phase 1 of this proceeding focuses on fleshing out and formalizing the IOUs’ responsibilities as POLR. Phase 2 will create a process for allowing LSEs other than the IOUs (such as CCAs) to serve as POLR in their service areas. The proceeding is the implementation vehicle for SB 520 (Hertzberg, 2019) and has become especially urgent since CCA Western Community Energy’s bankruptcy in June 2021.
The three biggest issues on the table for CCAs are 1) the extent of responsibility the POLR should have for preemptively procuring resources before any customers are returned to POLR service, 2) how the Financial Security Requirement (FSR) should be calculated, and 3) what the POLR’s relationship with compliance requirements such as the Renewable Portfolio Standard and Resource Adequacy programs should be.
Impacts
In addition to the rules for POLR, Phase 1 of the proceeding will examine a framework for recovery of POLR costs and consider whether the Financial Security Requirement (FSR) and re-entry fees need to be modified and/or changes made to the CCA registration and de-registration processes. The FSR is a fee that each CCA must pay upfront to the IOU(s) in its service area to cover the costs of transferring its customers back to the IOU in the event of the CCA’s failure. The re-examination of the FSR could result in a significant increase in the amount of FSR that CCAs are required to post.
Status
There have been no major updates in this proceeding since the Commission rejected Southern California Edison’s request to raise CCCE’s FSR from $147,000 to $2.9 million in late June. Stakeholders are awaiting an Energy Division staff proposal on POLR Phase 1 issues that was scheduled for release in August. In the meantime, CCCE has continued to help develop FSR reform proposals that will both reduce the volatility in the amounts asked for and allow CCAs that have demonstrated financial health through obtaining an investment-grade credit rating to post smaller FSR amounts overall. This month CCCE staff met with the IOUs and Energy Division staff to discuss FSR-related issues.
Resource Adequacy Reform (Rulemaking.21-10-002)
Issue
Resource Adequacy (RA) is the primary vehicle by which the CPUC carries out grid reliability planning to prevent blackouts and ensure continuous electric service in California. It currently requires all LSEs to demonstrate on an annual and monthly basis that they have purchased enough generating capacity to cover their share of the peak demand. In addition to the ongoing administration of the RA program, this proceeding is carrying out structural reform to make the RA program more effective at maintaining reliability of service as the grid moves away from fossil fuels to a renewables and storage-based fleet.
Decision 21-07-014 in July 2021, selected a broad structure called “slice-of-day” for the reformed RA process while acknowledging that many details still needed to be fleshed out. To do this, the Decision 70 of 82
ordered a six-month series of stakeholder workshops to try to build consensus around a more detailed version of the slice-of-day model. These culminated in Decision 22-06-050 in June 2022, selecting a version of slice-of-day developed by Southern California Edison as the next iteration of the RA program, followed by a second series of workshops in July – October 2022 to refine further implementation details. The third and final Decision before the slice-of-day model launches for test-year use in 2023 and is expected in Q1 2023.
Concurrently, CCCE and other load-serving entities have continued to work through the significant uncertainty introduced into RA procurement by the introduction of a Central Procurement Entity (CPE) for Local RA. In 2020 the CPUC created the CPE function and awarded it to PG&E and Southern California Edison (SCE) in their respective service areas in an attempt to address increased Local RA market prices. The CPEs (PG&E and SCE) were charged with procuring Local RA on behalf of all load-serving entities in their service areas and recovering the cost of the procurement from ratepayers through the existing Cost Allocation Mechanism (CAM) charge.
The first round of CPE procurement has encountered significant obstacles requiring iteration on the process and ultimately PG&E was only able to procure 74% of the Local RA it was tasked with finding.
This outcome highlighted ambiguities around how the CPE function interacts with the System RA requirements that all LSEs are still individually responsible for procuring, creating uncertainty around the amount of System RA CCCE and other CCAs must procure before the Year-Ahead RA compliance deadline on October 31, 2022.
CCCE staff pursued all avenues in order to clarify this uncertainty in a timely manner. Staff held multiple meetings with CPUC staff and submitted a letter to CPUC President Alice Reynolds on August 11, 2022. Staff then submitted a formal Motion for Clarification jointly with Peninsula Clean Energy on September 16, 2022, that was subsequently supported by two other CCAs and a coalition of Direct Access stakeholders. On September 30, CalCCA submitted a Petition of Modification to modify the Resource Adequacy (RA) procurement timeline and waiver process in light of the CPE outcome.
Impacts
RA procurement has taken up an increasing amount of budget and CCCE staff time in recent years, and the type of RA products CCAs must buy is a direct product of the RA program structure. Spiking RA prices combined with new noncompliance penalties imposed by the CPUC suggest the potential for further cost increases in the future, though this outcome will depend on the outcome of the reform process.
Status
The series of Commission slice-of-day workshops have come to an end, and a summary report of the workshops’ findings will be provided in November. The CPUC has not responded to CCCE’s Motion for Clarification or CalCCA’s Petition for Modification as of this writing. CCCE staff submitted the year-ahead Resource Adequacy compliance filing on October 31, 2022.
California Energy Commission’s Updated Load Management Standards (LMS) Issue
The California Energy Commission (CEC) is the other state regulatory agency apart from the CPUC that is involved in energy policy and planning. CA’s Public Resources Code authorizes the CEC to adopt rules and regulations to reduce uneconomic and wasteful consumption of energy. Originally established in 1979, the Load Management Standards (LMS) have resulted in industrial time-of-use rates, commercial audits, and residential load control programs.
That CEC is now undertaking its latest round of updates to the LMS regulations. The draft revisions to the LMS regulations would impose ratemaking requirements on all “utilities” – IOUs, POUs, and CCAs. In order to facilitate demand response and load flexibility, utilities must develop hourly marginal cost rates based on California Independent System Operator (CAISO) marginal cost prices. These rates 71 of 82
would be optional for customers to adopt, but development of this option for each customer class would be mandatory.
CCCE has supported CalCCA in pushing back on the proposed regulations in meetings with CEC staff and three rounds of comments. CalCCA’s opposition has been on both jurisdictional and practical grounds, as implementation of real-time rates would not be feasible for CCAs under the existing data access systems maintained by the IOUs. The CEC has not changed the draft regulations to address CCA concerns.
Impacts
Hourly marginal cost rates are complex to design and implement. Research thus far suggests that the current IOU data management framework will not support implementation of CCA real-time rates. The proposed LMS updates thus require development of rate options the CCAs may not be technically able to carry out.
The proposed LMS updates also pose a substantive threat to CCAs’ right to set their own rates. The revised regulations require each utility to develop a rate that complies with its requirements and present the rate to the ratemaking authority (e.g., CCA governing boards). The utilities must provide copies of their proposed rate for “informational purposes” to the CEC. Despite the seeming deference to the local ratemaking authority, failure to comply with the regulations can result in the Executive Director of the CEC filing a Complaint at the CEC or seeking injunctive relief.
Status
On October 12, 2022, the California Energy Commission adopted the final updated Load Management Standard Regulations. They require CCAs with loads greater than 700 GWh/year to consider and present to their governing bodies, for approval by the CEC, marginal cost-based rates by 2025. CCCE is undertaking internal planning for how to achieve compliance while continuing to explore potential avenues for challenging the standards on jurisdictional grounds.
Energy Resource Recovery Account (ERRA)
Issue
Energy Resource Recovery Account (ERRA) Forecast Applications are filed annually by IOUs to forecast energy procurement-related revenue requirements, which includes forecast allocation of costs across PCIA vintages. The proceedings conclude in December with the setting of IOU generation rates and PCIA rates for the subsequent calendar year.
Impacts
CCCE actively participates in the ERRA proceedings to gain visibility into future PCIA and IOU rates and ensure that these are set accurately and without creating cost shifts onto CCA customers. This is accomplished through ensuring that qualifying facilities and IOU contracts are prudently administered and managed; that entries in balancing and memorandum accounts are recorded appropriately, correctly, and in compliance with Commission decisions; and that costs requested for recovery are reasonable.
Status
Both PG&E and SCE have filed their October update, which is the last iteration where significant alterations to the ERRA accounting can be addressed before the CPUC adopts the final 2023 rates.
Throughout the proceeding, CCCE has worked with Keyes & Fox to manage the case and New Gen Data Analytics to review the accounting made by the IOUs in their applications. Thus far, the analyses done by the contracted teams have resulted in millions of dollars of ratepayer savings from accounting errors. For the first time, select vintages in both SCE & PG&E’s service areas are projected to have negative PCIAs. SCE has not negated this fact, but in their testimony, PG&E is arguing that the PCIA should not be negative. CCCE is continuing to press that all ratepayers should be treated equitably and that PG&E should honor the negative PCIA. 72 of 82
Bioenergy Market Adjustment Tariff (BioMAT) (Rulemaking.22-10-001) Issue
BioMAT is a procurement program for small bioenergy projects that uses a standard contract and market-based mechanism to arrive at a contract price and allows load-serving entities contracting with these projects to recover the costs from all ratepayers through the Public Purpose Programs charge. When BioMAT was created by SB 1122 in 2014, CCAs were not eligible to participate. CCCE and other CCAs successfully lobbied legislators to reverse this exclusion with the passage of AB 843 in 2021. This month the CPUC officially began implementation of AB 843 with the opening of a new proceeding to work through CCA induction into the program.
Impacts
CCAs have not previously had access to the cost recovery mechanism used in BioMAT, so AB 843 set a valuable policy precedent in addition to making small bioenergy projects a more viable option for CCAs. This proceeding will determine the approval process for CCA BioMAT standard contract terms, the BioMAT cost recovery process, and management of the BioMAT contract queue to track procurement progress.
Status
In the OIR, CCAs were named as respondents granting party status in the proceeding and requiring each to write either an individual or joint opening comment by November 28th. After opening comments and replies, a proposed Scoping Ruling will be provided by the Commission outlining the proceeding phases and schedule.
Demand Flexibility (Rulemaking.22-07-005)
Issue
The Commission issued an Order Instituting Rulemaking on July 22, 2022, to advance customer demand flexibility through electric rates to support reliability, decarbonization, and affordability.
Impacts
This proceeding will explore solutions to data access between CCAs and IOUs and pilots for future rate changes including fixed charges. CCCE will participate in this proceeding alongside CalCCA to ensure CCA rate autonomy is preserved, monitor changes to IOU transmission and distribution rate components, work to limit fixed charges to the transmission and distribution portion of billing, and advocate for equitable outcomes for both bundled and unbundled customers through rate structures.
CCCE anticipates overlap in this proceeding with the Disconnections (R.18-07-005) proceeding as the CPUC advocated for exploration of fixed charges as a mechanism for effective arrearage management during a Disconnections webinar held on October 17th.
Status
This proceeding is in the very earliest stages, still focused on setting its scope and schedule. On September 27, 2022, CCCE filed joint comments with Valley Clean Energy encouraging the CPUC to devote an expedited track of the proceeding to demand flexibility in the agricultural sector.
Stakeholders now await a Scoping Ruling that will finalize the scope and schedule for Phase 1 of the proceeding.
Legislative
With the legislature in recess and many legislators focused on November elections, the past month has been quiet on the legislative side. Staff continue to focus on identifying opportunities created by this year’s new legislation and preparing for the 2023 session. Key activities through the end of the recess will include:
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1) Following the rollout of the new funding programs created in the FY 2022-2023 state budget and applying for those that are relevant to CCCE’s activities 2) Hiring a professional lobbyist to represent CCCE in Sacramento starting in 2023 3) Scheduling meetings with the district offices of legislators representing CCCE communities to share information about CCCE programs available to their constituents 4) After the November elections, identifying any newly elected legislators representing CCCE communities and reaching out to educate them about CCCE 5) Identifying legislative priorities for the 2023 session 6) Working with other stakeholders to develop potential bill ideas for the 2023 session 74 of 82
CCCE Contracts < $100k
Vendor Total Engagement Amount From To Service Scope Remarks 1 MRW & Associates LLC $9,000 10/5/2022 12/31/2022 Services provided in support of development of CCCE's 2022 Integated Resource Plan 2 75 of 82
Staff Report Item 6
TO: CCCE Policy Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Receive an Update Regarding Suspension of Governor’s Declaration of Emergency and AB 2449 (Discussion Item)
DATE: October 31, 2022
RECOMMENDATION:
This recommends that the Operations Board of Directors receive an update regarding the suspension of Governor Newsom’s declaration of emergency for COVID-19 and the effect of Assembly Bill (“AB”) 2449 on Board meeting operations.
BACKGROUND:
The Brown Act has specific requirements to hold meetings by teleconference; notice must be provided to the public of the location of each member participating remotely and must also be allowed to access and address the body from such locations.
During the COVID-19 pandemic, Governor Newsom issued several executive orders suspending the Brown Act’s teleconferencing requirements and allowing legislative bodies to meet virtually.
On September 16, 2021, the Governor signed AB 361, amending the Brown Act to allow legislative bodies to meet virtually under specific conditions during a declared state of emergency. One such condition would be that the legislative body determine and continue to find that meeting in person would present imminent risks to the health or safety of attendees as a result of the emergency. This option was set to expire on January 1, 2024.
Central Coast Community Energy’s (“CCCE”) boards and committees have complied with AB 361 to meet virtually and allow the public to participate virtually while the state of emergency has persisted. 76 of 82
DISCUSSION:
On October 17, 2022, Governor Newsom announced that the COVID-19 state of emergency would end on February 28, 2023.
Accordingly, after that time CCCE boards and committees will need to return to pre-pandemic Brown Act teleconferencing practices:
1. Agendas posted at all teleconference locations
2. Each teleconference location identified in the meeting notices and agendas
3. Each teleconference location accessible to the public
4. Each teleconference location equipped to allow the public to address the legislative body
5. A quorum of the legislative body participating from locations within the boundaries of the agency’s jurisdiction
AB 2449
On September 16, 2022, Governor Newsom signed AB 2449, amending the Brown Act effective January 1, 2023, to add certain additional teleconferencing changes.
Under AB 2449, in circumstances where a quorum of the legislative body is present together physically at a location within the agency’s jurisdiction, a member who notifies the body, at the earliest opportunity possible, of “just cause” or an “emergency circumstance”, may teleconference without providing notice of the remote location, making the remote location accessible to the public, or allowing the public to address the body from the remote location. “Just cause” is limited to two occasions in a calendar year and is defined as:
A childcare or caregiving need
A contagious illness
A physical or mental disability-related need
Travel on official business of CCCE or another agency “Emergency circumstance” is limited to no more than three consecutive months or 20% of the regular meetings within a calendar year and is defined as a physical or family medical emergency that prevents a member from attending in person. In requesting to participate remotely, the member must provide a general description of the circumstances and the body must take action to approve the request.
A member participating remotely under AB 2449 must publicly disclose whether any other individuals 18 years of age or older are present at the remote location and the nature of the member’s relationship to such individuals. Additionally, the member must participate through both audio and video technology. 77 of 82
The AB 2449 options are scheduled to expire at the end of 2025.
FISCAL IMPACT:
There is no fiscal impact at this time. When the state of emergency concludes, staff time and equipment expenses may be associated with supporting various remote teleconferencing locations.
CONCLUSION:
The end of the COVID-19 state of emergency will generally result in CCCE reverting to pre-pandemic Brown Act teleconferencing support for board and committee meetings. Individual board members may choose to avail themselves of the new remote attendance options made available by AB 2449. 78 of 82
Staff Report Item 7
TO: CCCE Policy Board of Directors
FROM: Tom Habashi, Chief Executive Officer
SUBJECT: Receive a Market and Transaction Update on a Prepay Financing Transaction and Recommend the Policy Board Approve the Transaction When Presented (Action Item) DATE: October 26, 2022
RECOMMENDATION:
This recommends that the Operations Board of Directors support a Power Purchase Agreement (PPA) prepay transaction and recommend that the Policy Board of Directors approve such a transaction at a future meeting.
BACKGROUND:
CCCE’s financial strength and growing finance capability give it additional levers to deliver savings for customers. One such lever is the PPA prepay, a transaction structure in which a PPA holder facilitates the prepayment of energy – effectively receiving a discount to the contracted PPA price in the process.
Historically, discounts have been 7% to 12% to the contracted price. Three Community Choice Aggregators (“CCAs”) – Marin Clean Energy, East Bay Community Energy, and Silicon Valley Clean Energy – executed prepay transactions in 2021. East Bay Community Energy just closed a second prepay transaction in July 2022. CCCE is exploring prepays for five operating PPAs, representing approximately 1,000 GWh/year of production and a notional value of over $600 million over the life of the PPAs.
DISCUSSION:
Prepays have existed in the power and natural gas business for over three decades, with over $55 billion in nominal value transacted across the country. PFM Financial Advisors LLC (“PFM”), CCCE’s Financial Advisor, has advised on almost $5 billion of prepays in California alone including the EBCE/SVCE energy prepayment last year. Gas prepays have been transacted as far back as the 1990s. They have stood the test of time, across economic and market conditions.
A simplified basic prepay transaction graphic is provided in this staff note. In essence, CCCE partially assigns a PPA to a counterparty. The counterparty signs a power supply agreement with California Community Choice Financing Authority (CCCFA). CCCFA signs a power supply agreement with CCCE. 79 of 82
CCCFA issues non-recourse tax-exempt bonds, which are less expensive than taxable bonds, and uses the bond proceeds to prepay for the power it is receiving from the counterparty. The counterparty receives power from the PPA that CCCE assigned. It supplies that power to CCCFA, which passes that power on to CCCE. So CCCE is still receiving the power it contracted when it signed the original PPA.
The power has simply been routed through the counterparty and CCCFA. The counterparty values this agreement because it is able to raise capital – through the CCCFA prepayment, which was funded by a tax-exempt bond issue – at a lower cost than if it issued taxable bonds itself. Many counterparties also value the fact that the prepayment is a diversified and stable form of funding, less subject to short-term market volatility. CCCE pays CCCFA the contract price, less a discount. CCCFA uses CCCE’s payments to service the debt. CCCFA functions as a conduit, enabling the transaction (CCCE is a founding member of CCCFA). The bonds have a “put” structure in which they effectively balloon at the 5-, 7-, or 10-year mark (CCCE’s choice). At that point, CCCE has the option to ask its bankers to remarket the bonds to see what discount it gets or walk away from the transaction altogether. If it chooses to walk away, the bondholders are repaid, and all the associated agreements terminate – returning everyone to their original roles. The chart below illustrates the core transaction mechanics.
Source: PFM
The number of counterparties and transactions naturally raises questions about risks. E.g., what if the counterparty fails? What if the PPA produces less than expected? The transaction is structured and contracted to ensure that, in a worst-case scenario, the transaction legs terminate and CCCE effectively returns to where it started – holding a PPA. Short-term issues such as under/overproduction are 80 of 82
handled through conservative modeling and settlement processes to ensure actual production is accounted for in the same way as CCCE experiencing that over/under production today without a prepayment.
For example, CCCE may designate only 80% of the expected output of a PPA towards a prepay transaction. If actual production is below that conservative estimate, CCCE would still receive the discount on the notional amount designated for the transaction. It would have to show it procured the missing production elsewhere – either from other PPAs or from market transactions. This procurement for the missing energy would occur whether there was a prepay transaction or not; if a PPA underperforms, CCCE has to procure replacement power. The existence of the prepay means CCCE has to demonstrate it performed that step through a certification process. But there is no incremental risk from underproduction solely due to the prepay.
Key structural risks in transaction execution include the choices of PPAs and counterparties.
PPAs with volatile production and hard-to-price locations, make the calculation of a stable valid prepayment amount difficult. CCCE is mitigating this risk by prepaying five PPAs with a mix of technologies whose output is stable and carefully modeled – geothermal, solar, and wind. The notional value of the prepayment is expected to be over $600 million.
There are two sets of counterparties. The first counterparty is the investment bank managing the key elements of the transaction – power purchases from the original PPA, power sales to CCCFA, bond marketing, and underwriting, etc. The second counterparty is the entity holding the prepayment funds, i.e., the entity whom CCCFA has prepaid. In some transactions, these are the same entity, i.e., one investment bank markets and underwrites the CCCFA bonds, services the transaction, and utilizes the prepayment funds for its ongoing treasury operations. CCCE is pursuing a structure that maximizes its optionality. The prepayment funds would be bid on by a variety of counterparties, of which the investment bank managing the transaction may be one. This competitive process could yield higher discounts for CCCE than simply guaranteeing the prepaid funds go to the investment bank managing the transaction and underwriting the bonds.
CCCE mitigated the investment bank counterparty risk by conducting a Request For Information (RFI) process in summer of 2022 that evaluated investment banks on the following criteria:
Long-term corporate commitment to commodities and energy Potential savings delivered to CCCE
Transparency in pricing, fees, and savings
Energy market capabilities, including scheduling and settlements 81 of 82
Modeling, valuation, and risk management expertise
Experience with municipal and public power debt, particularly in California Prepay transaction experience
Ability to deliver additional value to CCCE through other transactions Goldman Sachs was selected as the investment bank based on its extensive energy market platform, longstanding experience with prepays, experience with California municipal and public power debt, and long-term corporate commitment to commodities & energy.
The second counterparty is the treasury holding the prepay funds. Should that treasury experience strain, such as challenges at its corporate parent, concerns about the integrity and availability of the prepay funds represent a source of uncertainty and risk. While this is of greatest concern to the investors who bought CCCFA-issued bonds, Staff intends to review potential counterparties bidding on prepay funding. This will not replace the due diligence investors considering purchasing the bonds should conduct. Its purpose is solely to provide CCCE with an additional layer of review in a long-term relationship. The bondholders will not have recourse to CCCE in the event of defaults. Further, the Joint Powers Agreement (JPA) forming CCCE insulates CCCE members from recourse in the event of default.
The discounts realized in the prepay are driven by interest rates and investor demand for tax-exempt bonds (which helps drive the taxable/tax-exempt yield spread). Historically, prepays have seen discounts of 7% + of the PPA contracted prices. The volatility of the taxable/tax-exempt yield spread and volatility of market liquidity - especially for large issues in the $500+ MM range - means discounts can vary significantly based on timing. Staff are independently tracking the taxable/tax-exempt yield spread, in addition to reviewing the data provided by Goldman Sachs. Staff are also independently analyzing and tracking measures of municipal bond market liquidity. Finally, Staff will be working with PFM to review transaction pricing. Staff believe a minimum discount of 10% to PPA prices – a savings of approximately $5 MM/Year for the first 5 years - is appropriate and achievable. Tactically, it may require waiting till market conditions are right. Staff currently target a Q1 2023 transaction.
FISCAL IMPACT:
There is no fiscal impact at this time. Once executed, the savings would be reflected in CCCE’s monthly financial reports and would be net accretive since a prepay transaction was not included in the FY 22/23 budget.
CONCLUSION:
PPA prepay transactions have the potential to deliver significant savings to customers through discounts to contracted PPA prices. The Board’s support is key to unlocking that value. 82 of 82