DRAFT
2023 LEASE AMENDMENT
This LEASE AMENDMENT (“Amendment”) is entered into this ___ day of ______________, 2023, by and between the CITY OF HERCULES, a municipal corporation (“City,”) and Lotus Organic LLC through its authorized representative, Mohammed Azam, (“Tenant”) jointly referred to in this LOU as the “Parties.” WHEREAS, the improved real property known as 1991 Railroad Avenue in Hercules, California (Property) is owned by the City of Hercules; and WHEREAS, the City rehabilitated the existing structure located on the Property and converted it to a full service, sit-down restaurant and bar; and WHEREAS, on or about December 17, 2013, the Hercules City Council authorized execution of a Lease Agreement with Moses and Sam Abu Gosh (“Lease”) to operate Leila’s By The Bay restaurant at the Property (attached hereto and incorporated by reference herein); and WHEREAS, on or about March 24th, 2015, the City Council approved the transfer of the existing Lease from Moses and Sam Abu Gosh to Lotus Organic LLC through its authorized representative, Mohammed Azam (Tenant) for the continued operation of Leila’s By The Bay restaurant; and WHEREAS, the original ten (10) year lease expires April 1, 2024, unless extended pursuant to the provisions of Section 2.2 of the Lease, or pursuant to City Council direction; and WHEREAS, pursuant to Section 3(d) of the Lease, Tenant is required to pay City rent on the 1st day of each month; and WHEREAS, over the past several years Tenant has on multiple occasions been in default of the lease terms by making irregular rent payments, causing the City to issue Demand Letters/Notices of Default demanding payment of back rent and putting Tenant on notice of default of the Lease terms; and WHEREAS, the City Council on November 9th, 2021, authorized the City Manager to enter into a Letter of Understanding (“LOU”) to provide Tenant the opportunity to continue operations at the Property pursuant to a payment plan and conditioned on Tenant meeting all Lease terms and conditions going forward (attached hereto and incorporated by reference herein); and WHEREAS, after the Parties entered into the LOU in December 2021, Tenant continued to make irregular rent payments, resulting in the Parties negotiating at the direction of the City Council a Second Letter of Understanding (“Second LOU”) specifying additional measures required by Tenant in order for City to not pursue a Default or take possession of the Property or otherwise seek to terminate the lease, said Second LOU having been executed by the Parties on or about February 9, 2022 (attached hereto and incorporated by reference herein); and WHEREAS, despite specific requirements for timely payment of rent and other express conditions as contained in the Lease, the LOU and Second LOU, Tenant has continued a pattern of irregular rent payments, requiring City Staff to spend considerable time preparing and sending Notices of Default and Notices of Late Payment; and WHEREAS, the City Council on October 28, 2023, authorized the City Manager to negotiate and enter into an Amendment to the Original Lease (“Amendment”) to provide Tenant the opportunity to continue operations at the Property conditioned on Tenant meeting all Lease, LOU, Second LOU, and Amendment terms and conditions going forward.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF THE MUTUAL PROMISES HEREIN CONTAINED, THE PARTIES AGREE TO AMEND THE LEASE AGREEMENT AS FOLLOWS:
City will not pursue a Default or take possession of the Property or otherwise seek to terminate the Lease for non-payment or late payment of rent as long as Tenant adheres to the following conditions:
Payment of All Past Due Amounts. All past due amounts must be paid in full, including interest and penalties, at the time this Lease Amendment is executed.
Tenant agrees that from the effective date of this Lease Amendment, rent payments shall be made to City via Direct Deposit, said electronic payments to be received by City on or before the date due for rent payments specified in the Lease Agreement.
Tenant shall provide proof of compliance with insurance requirements pursuant to Section 8.1 of the Lease, by no later than November 30, 2023.
If Tenant fails to make timely rent payments pursuant to all applicable terms and conditions while this Amendment is in effect, Tenant shall forfeit the Option to Extend Term provided in Section 2.2 of the Lease Agreement, so that the provisions for Extending the Term of the Lease for two (2) periods of five (5) years each shall be considered automatically terminated and void as a result of such failure to timely pay rent. The City Council may, at its sole discretion, reinstate the Option to Extend Term in part or in whole upon a showing of substantial compliance by Tenant.
If Tenant fails to make timely rent payments pursuant to all applicable terms and conditions while this Amendment is in effect, Tenant shall be subjected to increased Late Payment charges, so that the Late payment specified in Section 3(e) of the Lease Agreement shall be increased from One Hundred Fifty Dollars ($150) to Two Hundred Dollars ($200). Payment of Late Payment charges shall not excuse or cure any default by Tenant.
If Tenant fails to make timely rent payments pursuant to all applicable terms and conditions while this Amendment is in effect, any rent not paid within fifteen (15) days following the due date as specified in Section 3(e) of the Lease Agreement shall bear an increase in the rate of interest charged from the rate of ten percent (10%) to the rate of fifteen percent (15%). Payment of interest shall not excuse or cure any default by Tenant.
Notwithstanding the above requirements, and to avoid Default, Tenant shall remain in substantial compliance with all Lease Agreement and Lease Amendment terms and conditions at all times and for the duration of the remainder of the Lease.
By executing this Lease Amendment, Tenant understands and acknowledges that City reserves the right to terminate the Lease and obtain lawful possession of the Property in the event Tenant is unable or unwilling to adhere to the terms of the Lease Agreement as hereby Amended.
Entire Agreement. This Lease Amendment, together with the documents incorporated by reference herein, constitute the entire understanding of the Parties and supersedes all prior or contemporaneous written or oral agreements with respect thereto.
IN WITNESS WHEREOF, the Parties have caused this Lease Agreement to be executed by their duly authorized representatives the day and year first above written.
Leila’s By The Bay City of Hercules
By: By:
Dante Hall, Hercules City Manager
Date: ________________ Date: _________________
Attachments:
2013 Lease Agreement
2015 Assignment
Letter of Understanding
Second Letter of Understanding
Demand Letters/Notices of Default