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HomeMy WebLinkAbout2010-07-13; Housing & Redevelopment Commission; Resolution 4891 RESOLUTION NO. 489 2 A RESOLUTION OF THE HOUSING AND REDEVELOPMENT COMMISSION OF THE CITY OF CARLSBAD, CALIFORNIA AUTHORIZING EXECUTION 3 OF A LEASE AGREEMENT BETWEEN NEW VILLAGE ARTS AND THE CARLSBAD REDEVELOPMENT AGENCY TO LEASE AGENCY-OWNED PROPERTY LOCATED AT 2787 STATE STREET FOR THE PURPOSES OF 5 OPERATING A PERFORMING ARTS THEATER AND ARTS INCUBATOR PROGRAM IN THE VILLAGE REDEVELOPMENT AREA 6 7 WHEREAS, the Carlsbad Redevelopment Agency purchased the State Street Building 8 and related property located at 2787 State Street, originally known as the Bauer Lumber Building, 9 on November 20, 1997; and, WHEREAS, the subject site was acquired by the Redevelopment Agency with the intent of facilitating redevelopment of the site as well as other properties at the corner of Grand Avenue 12 and State Street at a future date; and, 13 WHEREAS, it is unknown as to when the Agency will be able to initiate redevelopment 14 activities related to the subject site due to a poor economy and other extenuating circumstances; 16 WHEREAS, there is a need within the community to make continued use of the subject 18 building/property for retail and/or entertainment purposes until such time at which a 19 redevelopment project may occur at the site to eliminate blight and/or blighting influences within 20 the Village Redevelopment Area; and 2 J WHEREAS, there is a continuing need to test the consumer market for demand and 22 benefit as well encourage a successful performing arts theater and arts incubator program in an 23 affordable manner within the Village Redevelopment Area, and the subject building has the 24 ability to accommodate said theater and arts incubator space; and 25 " 26 27 28 •a, 1 WHEREAS, the Agency has determined that it is appropriate and necessary to enter into 2 the subject lease and to extend the use of the subject building for entertainment purposes and ^ expansion of the arts incubator programs until such time as a redevelopment project may be 4 implemented at said site; and WHEREAS, California Health and Safety Code Section 33400(b) permits the Agency to 6 rent, maintain, manage, operate, repair and clear property purchased for the purposes of 7 redevelopment; and 8 WHEREAS, the Redevelopment Agency has exclusively negotiated with New Village Arts to lease a portion of the subject building and operate a performing arts theater and arts i j incubator program within the building; and 12 WHEREAS, based on the substantial nature of the tenant improvements completed to 13 date by New Village Arts that were required for the building to accommodate a theater venue and 14 arts incubator space and the short term lease period for use of the subject property, the Agency 15 determines that the property shall continue to be leased to New Village Arts for one dollar ($ 1) per year which is consideration that is not less than the fair reuse value with the covenants and 17 conditions authorized by the subject lease for the initial term; and 18 WHEREAS, upon completion of exterior improvements by the Carlsbad Redevelopment 19 Agency, New Village Arts shall be required to increase its rental payment for said building 20 premises; and21 WHEREAS, the Housing and Redevelopment Commission of the City of Carlsbad, on 23 the date of this resolution, held a duly noticed public hearing to consider the recommendations 24 and heard all persons interested in or opposed to the lease agreement between the Carlsbad 25 Redevelopment Agency and New Village Arts for use of the subject building for a performing 26 arts theater and arts incubator program; and 27 //// 28 WHEREAS, the Housing and Redevelopment Commission of the City of Carlsbad, on the date of this resolution, considered the report on the lease as required per Section 33433 of the California Health and Safey Code. 4 NOW, THEREFORE, BE IT RESOLVED by the Housing and Redevelopment Commission of the City of Carlsbad, California, as follows: 6 1. That the above recitations are true and correct. 7 2. The Commission has reviewed the report required by Section 33433 of the California Health and Safety Code and hereby determines that the building located at 2787 State Street, and owned by the Carlsbad Redevelopment Agency, shall continue to benefit the redevelopment area through its continued use for entertainment purposes and to 10 grow arts programs within the Village Area through a lease with the New Village Arts for an initial three year period according to the terms set forth in the attached lease 11 agreement, provided as Exhibit 3, until such time as construction is completed on exterior improvements to said building by the Agency at which time the lease will be 12 extended for a five year period subject to the terms set forth in said agreement. 0 That the subject lease will assist in the elimination of blight within the Village Redevelopment Area by providing occupancy of a key building within the Village, which otherwise would remain vacant, and a use that will add desired entertainment 15 and grow art programs in the area, and is consistent with the Village Redevelopment Plan and Five Year Implementation Plan. 16 4. That the consideration is not less than the fair reuse value of the building space with the covenants and conditions and tenant improvements costs previously authorized and/or required by the Agency to allow for use of the building according to the lease.18 5. That the Finance Director is hereby authorized to appropriate $1.5 million in Village Tax Increment Funds for the design, permitting and construction (including costs for 20 construction management and contingency) of the exterior facade/storefront renovations to said building premises as provided with the execution of the attached 21 lease. 6. That, upon execution of the attached lease, the Executive Director of the Redevelopment Agency, or her designee, is hereby authorized to enter into or recommend contracts for the design and construction of the exterior improvements. 24 7. The Commission hereby approves said lease agreement and authorizes the Chairman 25 of the Housing and Redevelopment Commission to execute the approved lease agreement between the Carlsbad Redevelopment Agency and New Village Arts for 26 lease of the Agency-owned property located at 2787 State Street, in substantially the form presented to the Commission and subject to approval of the City Attorney, who 7 serves as legal Counsel to the Carlsbad Redevelopment Agency. 28 1 2 3 4 5 6 7 8 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Housing and Redevelopment Commission of the City of Carlsbad and the City Council of the City of Carlsbad on the 13th day of July, 2010, by the following vote to wit: AYES: Council Members Lewis, Kulchin and Blackburn. NOES: Council Member Packard. ABSENT: Council Member Hall. , Chairman ATTEST: LISA HILDABRAND, Secretary (SEAL) r o: r al: z • :»- *\\ itw jjj\J;-,. s// 2787 State Street New Village Arts Theatre/Arts Incubator and Carlsbad Redevelopment Agency LEASE AGREEMENT THIS LEASE AGREEMENT ("Agreement") is made and entered into this day of July 1, 2010, by and between the Carlsbad Redevelopment Agency, hereinafter called "Lessor," and New Village Arts, a California non-profit corporation, hereinafter called "Lessee," for property located at 2787 State Street, Carlsbad, California, 92008. RECITALS WHEREAS, the Carlsbad Redevelopment Agency is the owner and Lessor of the real property improved with an approximately 9400 square foot commercial building located at 2787 State Street, Carlsbad, California, 92008, hereinafter "Building Premises"; and WHEREAS, the Carlsbad Housing and Redevelopment Commission is supportive of arts programs in the Carlsbad Village; and WHEREAS, Lessee desires to continue to lease from Lessor a total of 6,300 square feet in the rear of the Building Premises for the purposes of live theater performances, and 3,100 square feet in the front of said Building Premises for the operation of an arts incubator for visual and performing cultural arts; and WHEREAS, Lessor and Lessee desire to have Exterior Improvements constructed or installed at the Building Premises to update its appearance, to ensure a quality arts facility for the public, and to assist in the growth of the New Village Arts theater and incubator programs within said facility; and WHEREAS, Lessor has agreed to provide funding in an amount not to exceed $1.5 million to design, manage and construct Exterior Improvements to said Building Premises; and WHEREAS, Lessee may improve and will maintain the interior of the Building Premises, including all interior improvements and installations; and WHEREAS, Lessee's rental payment will increase according to this Agreement upon completion of Exterior Improvements to be made by Lessor. NOW, THEREFORE, it is understood and agreed by and between Lessor and Lessee as follows: 1) INITIAL LEASE TERM: The initial term of the lease ("Initial Lease Term") shall be for a period of three (3) years commencing on July 1, 2010 and ending on June 30, 2013, or until New Village Arts/Agency Lease July 2010 Page 2 such time as the agreed upon Exterior Improvements to the Building Premises as defined in Section 11 hereof are completed, whichever occurs first. At Lessor's sole discretion, Lessee may extend the Initial Lease Term for one (1) additional two (2) year period, upon the same terms and conditions stated herein. Lessor will only consider a request for extension if Lessee has complied with all terms and conditions of this Agreement and Lessee submits a written request for the extension at least ninety (90) days prior to expiration of the Initial Lease Term. 2) INITIAL LEASE TERM RENT: Lessee agrees to pay to Lessor the sum of one dollar ($ 1.00) per year for the Initial Lease Term and for the two (2) year extension of the Initial Lease Term, if granted by Lessor ("Rent"). Rent shall be paid in advance, commencing upon execution of this Agreement by both parties. Rent shall be delivered to the Finance Department of the City of Carlsbad at 1635 Faraday Avenue, Carlsbad, California 92008. The designated place of payment and filing may be changed at any time by Lessor upon ten (10) days written notice to Lessee. Lessee assumes all risk of loss if payments are made by mail. There shall be no increase in the annual Rent until such time as the Exterior Improvements provided for in Section 11 of this Agreement are completed, as evidenced by the filing of a Notice of Completion for the project ("Completion Date"). On the Completion Date for the Exterior Improvements, the rent shall be increased as set forth in Paragraph 4 below. 3) POST EXTERIOR IMPROVEMENTS LEASE TERM: Upon completion the Exterior Improvements provided for in Section 11 of this Agreement and receipt by Lessor of the first annual rent payment for a New Lease Term, the term of the lease, if not yet expired, will extend to a period of five (5) years, commencing on the Completion Date of said Exterior Improvements ("New Lease Term"). At Lessor's sole discretion, Lessee may extend the New Lease Term for one (1) additional five (5) year period, which extension request will only be considered by Lessor if Lessee has complied with all terms and conditions of this Agreement. 4) POST EXTERIOR IMPROVEMENTS RENT: Upon completion of the Exterior Improvements provided for in Section 11 of this Agreement, Lessee agrees to pay the sum of forty-eight thousand dollars ($48,000) per year for each year of the New Lease Term, due in advance, on the anniversary of the Completion Date ("Rent"). The initial payment for the New Lease Term shall be due no later than ten (10) days following the Completion Date and on the anniversary of the Completion Date every year thereafter. If any annual Rent payment is not received by Lessor when due, Lessee shall pay as additional rent to Lessor a late charge equal to ten percent (10%) of such overdue amount, compounded annually, plus any attorney fees incurred by Lessor by reason of Lessee's failure to pay rent and/or other charges when due hereunder. Rent payments shall be delivered in accordance with section two of this Agreement. 5) SECURITY DEPOSIT: Lessee agrees to maintain the Security Deposit in the amount of two thousand dollars ($2,000) currently in place for the existing lease term expiring June 30, 2010, during the Initial Lease Term and the New Lease Term and any extensions of either New Village Arts/Agency Lease July 2010 Page 3 lease term. The Security Deposit shall continue to be held by Lessor in an interest bearing account (at the same rate the Carlsbad Redevelopment Agency earns on its money). Upon expiration of this Agreement, Lessee shall be entitled to all interest accrued over the lease term(s). Lessor shall not be required to keep the Security Deposit separate from its general accounts. If Lessee fails to pay Rent, or otherwise defaults under this lease, Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor and/or may reimburse or compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefore, deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Agreement. 6) USE: Lessee agrees that the rear 6,300 square feet of the Building Premises shall be used exclusively for the operation of the New Village Arts Theater live theater, and that the front 3,100 square feet of the Building Premises shall be used exclusively for operation by the New Village Arts Theatre of an arts incubator for visual and performing cultural arts, including rehearsal, gallery, educational and other arts related programs, and for no other purpose whatsoever without the written consent of Lessor. Lessee shall not, and is expressly prohibited from, using the Building Premises for any other purpose or use whatsoever, whether it is purported to be in addition to or in lieu of the particular exclusive use. Lessee shall actively and continuously use and operate the premises for the limited particular exclusive use as expressly provided for herein, except for failure to do so caused by acts of God. 7) ANNUAL REPORTING: In the final month of any lease term, Lessee shall submit an annual financial statement declaring all expense reimbursement and revenue of any kind received from the participants in the incubator arts programs or from the public attending those programs, an annual incubator arts program goals statement, and an annual report summarizing the prior year's incubator arts program accomplishments and its economic impact on the Carlsbad Village area. 8) EARLY TERMINATION: Lessor or Lessee shall each have a right to terminate this Agreement by first giving two (2 years) written notice to the other party. Upon termination by either party, Lessee shall remain responsible for all Rent and other charges owing on the date of termination as well as any late payment charges accruing thereafter. Upon early termination the annual Rent for the New Lease Term and any extension thereof may be prorated for any portion of a year. Such prorated Rent for any unused portion of the lease term shall be refunded to Lessee unless Lessee is in default of this Agreement, in which case any Rent or other charges owing by Lessee may first be deducted and applied to the unpaid debt by Lessor. 9) INTERIOR IMPROVEMENTS: Lessee shall be responsible for all required interior improvements to the Building Premises, including but not limited to electrical, plumbing, partition walls, restroom facilities, and any entries or exits necessary to comply with applicable building and fire code requirements. Subject to Lessor approval, Lessee may, at New Village Arts/Agency Lease July 2010 Page 4 its own expense, also make additional interior modifications or additional improvements to the Building Premises, including the addition of structures, machines, appliances, utilities, or other improvements necessary or desirable for the use of said Building Premises; provided, however, that no modifications or additional improvements shall be made added, and no major repairs to any building improvements shall be made except upon obtaining all necessary prior approvals from Lessor and proper permits from the City of Carlsbad. 10) SIGNAGE: Lessee shall be responsible for manufacturing and installation of signage in accordance with the sign regulations set forth within the Carlsbad Village Master Plan and Design Manual and the City of Carlsbad Municipal Code. Lessee agrees that no banners, pennants, flags, or other advertising devices, nor any temporary signs shall be permitted to be flown, installed, placed, or erected on the premises except in accordance with the City of Carlsbad Village Master Plan and Design Manual and the City of Carlsbad Municipal Code. 11) EXTERIOR IMPROVEMENTS: a) Lessor shall be responsible for design, permitting, and construction costs, including construction management and contingency funds, for the exterior facade/storefront renovation improvements to the Building Premises and any related Exterior Improvements such as a new roof, or air conditioning equipment. ("Exterior Improvements") up to a maximum payment of one million five hundred thousand dollars ($1.5 million). The Exterior Improvements to be made will be determined by Lessor after consultation with Lessee. b) The design and permitting process for said Exterior Improvements will be initiated by Lessor upon execution of this Agreement. Construction of all approved Exterior Improvements will be initiated once the design and permitting process is completed, but in no event sooner than thirty (30) days following receipt by Lessor of a letter of commitment from Lessee documenting that a minimum of two hundred thousand dollars ($200,000) is held by Lessee in an account earmarked for operational reserve for the purpose of making the required Rent payments set forth in Paragraph 4 hereof. 12) OWNERSHIP; REMOVAL; SURRENDER/RESTORATION: Unless otherwise instructed, all Lessee owned modifications and utility installations shall, at the expiration or termination of this Agreement, become the property of Lessor and be surrendered by Lessee with the Building Premises, except for trade fixtures which shall be owned and removed by Lessee. Lessor may, for any reason, require removal of said modifications and utility installations, in which case Lessor shall provide Lessee with a written notice requiring that any or all Lessee constructed modifications or utility installations be removed by the expiration or termination of this Agreement not later than sixty (60) days prior to the end of the lease term. Lessor may require the immediate removal at any time of all or any part of any modifications or utility installations made without the required consent. Lessee shall surrender the premises by the expiration date or any earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and free of debris, and in good operating order, condition and state of repair, ordinary wear and tear excepted. "Ordinary wear and tear" shall not New Village Arts/Agency Lease July 2010 Page 5 include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair any damage occasioned by the installation, maintenance or removal of trade fixtures, modifications and/or utility installations, furnishings, and equipment installed by or for Lessee and the removal, replacement, or remediation of any soil, material or groundwater contaminated with hazardous substance (as defined in Paragraph 29) by Lessee. The failure by Lessee to timely vacate the Building Premises pursuant to this paragraph without the express written consent of Lessor shall constitute a holdover under the provisions of Paragraph 37 below. 13) NAMING RIGHTS FOR BUILDING: Lessee shall retain all naming rights for the Building Premises for the term of the lease, subject to final name approval by Lessor. Upon expiration of the lease or early termination of said lease according to Paragraph 8, the authority granted to Lessee for naming rights shall also expire. Lessor is under no obligation to retain the Building Premises name(s) upon expiration or early termination of said Agreement. 14) PARKING: Lessee understands there is no on-site parking available on the Building Premises. Lessee further understands that execution of this Agreement in no way constitutes the granting of exclusive use of public parking adjacent to the Building Premises. 15) RIGHT TO ENTER PROPERTY: Upon execution of this Agreement, Lessee shall be granted continued access to the Building Premises for operation of the New Village Arts Theatre and arts incubator and to initiate, construct and complete any desired interior building improvements as outlined in Paragraph 9 of this Agreement. 16) REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS: Lessor and Lessee each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder in connection with this Agreement, and that no person, firm, broker or finder is entitled to any commission or finder's fee in connection herewith. Lessor and Lessee do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the Lessor or Lessee, including any costs, expenses, or attorneys' fees reasonably incurred with respect thereto. 17) WAIVER OF RELOCATION BENEFITS: Lessee understands this Agreement is entered into in order to provide an interim use of the Building Premises, until such time as Lessor chooses to develop the property in accordance with the Carlsbad Village Master Plan. Lessee therefore agrees to waive any and all relocation benefits defined in the California Relocation Assistance Law (Government Code, Section 7260, et seq.) after having had the opportunity to consult with legal counsel about potential entitlements. Lessee agrees that it will at all times hold Lessor and the City of Carlsbad free and harmless and indemnify it against all claims for relocation benefits arising from this Agreement or any use of the Building Premises, including the costs of defending against such claims, and attorneys' fees incurred therein. New Village Arts/Agency Lease July 2010 Page 6 18) LIENS: Lessee agrees that it will at all times hold Lessor and the City of Carlsbad free and harmless and indemnify them against all claims for labor or materials in connection with interior improvements, repairs, or alterations on the Building Premises, including the costs of defending against such claims, and reasonable attorney fees incurred therein. In the event that any lien or levy of any nature whatsoever is filed against the Building Premises or the leasehold interest of the Lessee, the Lessee shall, upon written request of Lessor, deposit with Lessor a bond conditioned for the payment in full of all claims upon which said lien or levy has been filed, Such bond shall be acknowledged by Lessee as principal and by a corporation, licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company, as surety, and in accordance with the City of Carlsbad's bonding requirements. Lessor shall have the right to declare this Agreement in default in the event the bond required by this paragraph has not been deposited with the Lessor within ten (10) days after written request has been delivered to Lessee. 19) LEASE ENCUMBRANCE: Lessee understands and agrees that it cannot encumber the Agreement, leasehold estate or the improvements thereon by a deed of trust, mortgage or any other security instrument. In the event of such encumbrance by Lessee, Lessor shall have the right to declare this Agreement in default. 20) ASSIGNMENT-SUBLEASE: Lessee shall not assign or transfer the whole or any part of this Agreement or any interest therein, by merger, consolidation, dissolution or otherwise, nor sublease the whole or any part of the Building Premises, nor contract for the management or operation of the whole or any part of the Building Premises, nor permit the occupancy of any part thereof by any other person or business entity, nor permit transfer of the lease by merger, consolidation or dissolution, without the prior written consent of Lessor, in each instance. 21) DEFAULT: It is mutually understood and agreed that if any default be made in the payment of Rent herein provided or in the performance of the covenants, conditions, or agreements herein (any covenant or agreement shall be construed and considered as a condition), or should Lessee fail to fulfill in any manner the uses and purposes for which said Building Premises are leased as above stated, and such default shall not be cured within thirty (30) days after written notice thereof if default is in the performance of the use or maintenance obligation provisions pursuant to Paragraphs 6 and 23 of this Agreement respectively, or ten (10) days after written notice thereof, if default is in the payment of Rent, or in the performance of any other covenant, condition or agreement, Lessor shall have the right to immediately terminate this Agreement; and that in the event of such termination, Lessee shall have no further rights hereunder, the Lessee shall thereupon forthwith remove all personal property and trade fixtures from said Building Premises and shall have no further right or claim thereto, and Lessor shall immediately thereupon, without recourse to the courts, have the right to reenter and take possession of the Building Premises. Lessor shall further have all other rights and remedies as provided by law, including without limitation the right to recover damages from Lessee in the amount necessary to compensate the Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under the Agreement. In the event of the termination of this Agreement pursuant to the provisions of New Village Arts/Agency Lease July 2010 Page? this paragraph, Lessor shall have any rights to which it would be entitled in the event of the expiration or early termination of this Agreement. 22) BANKRUPTCY: In the event Lessee becomes insolvent, makes an assignment for the benefit of creditors, files a petition in bankruptcy or becomes the subject of a bankruptcy proceeding, reorganization, arrangement, insolvency, receivership, liquidation, or dissolution proceeding, or in the event of any judicial sale of Lessee's interest under this Agreement, Lessor shall have the right to declare Lessee in default of this Agreement. 23) MAINTENANCE AND REPAIR: As part of the consideration for this Agreement, Lessee agrees to assume full responsibility for the interior operation and maintenance of the Building Premises throughout the lease term and, without expense to the Lessor. Lessee will perform all interior maintenance repairs and replacements, including painting, plumbing and electrical, glass repair, and maintenance of air conditioning equipment, necessary to preserve the premises in a good, safe, healthy and sanitary condition satisfactory to Lessor and in compliance with all applicable laws. Lessee further agrees to provide approved containers for trash and garbage and to keep the Building Premises free and clear of rubbish and litter, or any other fire hazards. Lessor shall be responsible for exterior maintenance excepting for the upkeep of air conditioning equipment, but including roof repairs. For the purpose of keeping the premises in a good, safe, healthy and sanitary condition Lessor shall have the right but not the duty, to enter, view, and inspect to determine the condition of and protect its interests in the Building Premises. If inspection discloses that the Building Premises are not in satisfactory condition, Lessee must perform the necessary maintenance work within thirty (30) days after written notice from Lessor. Further, if at any time during the term of the Agreement Lessor determines that the Building Premises are not in satisfactory condition, Lessor may require Lessee to file and pay for a faithful performance bond to assure prompt correction without additional notice. The amount of this bond shall be adequate, in Lessor's opinion, to correct the unsatisfactory condition. The rights reserved in this section shall not create any obligations or increase any obligations of Lessor elsewhere in this Agreement. 24) TAXES AND UTILITIES: This Agreement may result in a taxable possessory interest. Lessee shall be solely responsible for payment of said taxes associated with its occupancy of the Building Premises, if any. Lessee agrees to and shall pay before delinquency all possessory taxes and assessments of any kind assessed or levied upon Lessee or the Building Premises by reason of this Agreement or of any structures, machines, or other improvements of any nature whatsoever erected, installed or maintained by Lessee, or by reason of the business or other activities of Lessee upon or in connection with the Building Premises. Lessee shall also pay any fees imposed by law for licenses or permits for any business or activities of Lessee upon the Building Premises or under this Agreement, and shall pay before delinquency any and all charges for utilities at or on the Building Premises. If Lessee fails to pay said possessory taxes or assessments, Lessor may declare Lessee in default in • accordance with Paragraph 21 of this Agreement. Lessee shall be responsible for payment of all utilities, including but not limited to security alarm, trash, water, gas and electricity. New Village Arts/Agency Lease July 2010 PageS 25) CONFORMANCE WITH RULES AND REGULATIONS: Lessee agrees that in all activities on or in connection with the Building Premises and in all uses thereof, including the making of any modifications or changes and the installation of any machines or other improvements, it will abide by and conform to all ordinances, rules and regulations prescribed by the Lessor and the City of Carlsbad, including, but not limited to, sign regulations and requirements for outdoor display set forth within the Carlsbad Village Master Plan and Design Manual and the City of Carlsbad Municipal Code, and any applicable laws, including those of the County Health Department, the State of California and the Federal Government, as any of the same now exist or may hereafter be adopted or amended. 26) NON-DISCRIMINATION: Lessee agrees not to discriminate against any person or class of persons by reason of sex, color, race, religion, or national origin in the use provided for in this Agreement allows the Lessee. Any such accommodations or services shall be offered to the public by Lessee on fair and reasonable terms. 27) PARTIAL INVALIDITY: If any term, covenant, condition, or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired, or invalidated thereby. 28) HOLD HARMLESS: Lessee shall defend, indemnify, and hold harmless Lessor, the City of Carlsbad, and their officers, officials, and employees from liability, damage, and expense of any kind, including reasonable attorneys' fees, arising from all claims or causes of action of any kind including but not limited to injury to or death of any person or persons, including Lessee, its employees, and invitees resulting directly or indirectly from the granting and performance of this Agreement or arising from the use and operation of the Building Premises or any defect in any part thereof. 29) HAZARDOUS SUBSTANCES: The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the premises, (ii) regulated or monitored by any government authority, or (iii) a basis for potential liability of Lessor or the City of Carlsbad to any governmental agency or third party under any applicable statue or common law theory. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Building Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, take all investigatory and/or remedial action reasonably recommended by Lessor, the City of Carlsbad or any other regulatory authority, whether or not formally ordered or required, for the cleanup of any contamination of, and for the maintenance, security and/or monitoring of the Building Premises or neighboring properties, that was caused or contributed to by Lessee, or pertaining to or involving any Hazardous Substance brought onto the premises during the term of this Agreement, by or for Lessee, or any third party. New Village Arts/Agency Lease July 2010 Page 9 C\ 30) EASEMENTS: This Agreement and all rights given hereunder shall be subject to all easements and rights-of-way now existing or heretofore granted or reserved by Lessor or the City of Carlsbad in, to or over the Building Premises for any purpose whatsoever, and shall be subject to such rights-of-way for reasonable access, sewers, pipelines, conduits and such telephone, cable television, telegraph, light, heat or power lines as may from time to time be determined by Lessor to be necessary. Lessor agrees that such easements and rights-of-way shall be so located and installed as to produce a minimum amount of interference to the operations of Lessee. 31) INSURANCE: Lessee shall obtain and maintain for the duration of this Agreement and any and all amendments, insurance against claims for injuries to persons or damage to property which may arise out of or in connection with use of the Building Premises and provision of services by Lessee. The insurance will be obtained from an insurance carrier admitted and authorized to do business in the State of California. The insurance carrier is required to have a current Best's Key Rating of not less than "A-V". The policies for said insurance shall, as a minimum, provide the following forms of coverage: i) Comprehensive General Liability - Covering premises and operations in the amount of not less than One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, personal injury and property damage. If the submitted policies contain aggregate limits, general aggregate limits will apply separately under this Agreement or the general aggregate will be twice the required per occurrence limits. ii) Property Insurance - Lessee shall obtain and maintain insurance coverage on all of Lessee's personal property, trade fixtures, modifications and utility installations. Such insurance shall be full replacement cost coverage with a deductible of not to exceed one thousand dollars ($ 1,000.00) per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property and trade fixtures as well as modifications and utility installations. Lessor will be responsible for providing coverage for the structure itself, exclusive of the items required to be covered by Lessee's insurance policy. iii) Evidence of Insurance - Certificates and endorsements in a form acceptable to Lessor evidencing the existence of the necessary insurance policies shall be kept on file with Lessor during the entire term of this Agreement. All insurance policies shall be primary coverage, and will name Lessor and the City of Carlsbad as an additional insured, protect Lessor and the City of Carlsbad against any legal costs in defending claims and will not terminate without thirty (30) days' written notice to Lessor. iv) Lessor shall retain the right at any time to review the coverage, form, and amount of the insurance required hereby. If, in the opinion of Lessor, the insurance provisions in this Agreement do not provide adequate protection for Lessor and the City of Carlsbad, and/or for members of the public on the Building Premises, Lessor may require Lessee to obtain an insurance policy sufficient in coverage, form and amount New Village Arts/Agency Lease July 2010 Page 10 to provide adequate protection. Lessor's requirements shall be reasonable but shall be designed to assure protection from and against the kind and extent of risk, which exist at the time a change in insurance is required. v) Lessor shall notify Lessee in writing of changes in the insurance requirements and, if Lessee does not deposit certificates and endorsements evidencing acceptable insurance policies in a form acceptable to Lessor incorporating such changes within thirty (30) days of receipt of such notice, Lessee shall be in default of this Agreement, without further notice to Lessee, and Lessor shall be entitled to all legal remedies. vi) The procuring of such required policies of insurance shall not be construed to limit Lessee's liability hereunder nor to fulfill the indemnification provisions and requirements of this Agreement. Notwithstanding said policies of insurance, Lessee shall be obligated for the full and total amount of any damage, injury, or loss caused by negligence or neglect connected with this Agreement or with the use or occupancy of the Building Premises. vii) Lessee agrees not to use the Building Premises in any manner, even if use is for purposes stated herein, that will result in the cancellation of any insurance Lessor may have on the Building Premises or on adjacent premises, or that will cause cancellation of any other insurance coverage for the Building Premises or adjoining premises. Lessee further agrees not to keep on the Building Premises or permit to be kept, used, or sold thereon, anything prohibited by any fire or other insurance policy covering the Building Premises. Lessee shall, at its sole cost and expense, comply with any and all requirements, in regard to the Building Premises, of any insurance organization necessary for maintaining fire and other insurance coverage at reasonable cost. 32) WARRANTIES-GUARANTEES-COVENANTS: Lessor makes no warranty, guarantee, or covenant, including but not limited to covenants of title and quiet enjoyment, or declaration of any nature whatsoever, concerning the condition of the Building Premises, including the physical condition thereof, or any condition which may affect the Building Premises, and it is agreed that Lessor will not be responsible for any loss, damage or costs which may be incurred by Lessee by reason of any such condition or conditions. 33) DAMAGE TO OR DESTRUCTION OF PREMISES: In the event of damage or destruction by fire, the elements, acts of God, or any other cause, to twenty five percent (25%) or less of the improvements located within the Building Premises, Lessee shall, within ninety (90) days, commence and diligently pursue to completion the repair, replacement, or reconstruction of improvements necessary to permit full use and occupancy of the demised Building Premises for the purposes required by this Agreement. Repair, replacement or reconstruction of improvements within the Building Premises shall be accomplished in a manner and according to plans approved by Lessor; provided, however, Lessee shall not be obligated to repair, reconstruct or replace the improvements following their destruction in whole or substantial part (more than 25% of improvements) except to the extent the loss is covered by insurance required to be carried by Lessee pursuant to Paragraph 31 of this New Village Arts/Agency Lease July 2010 Page 11 Agreement (or would be covered whether or not such required insurance is actually in effect). If Lessee elects not to restore, repair or reconstruct as herein provided, then the Agreement shall terminate. Rent shall not be abated during the repair period, except to the extent that Lessor is compensated by Lessee's insurance for rental loss. Lessor shall be entitled to any insurance proceeds and other compensation for the loss. 34) QUITCLAIM OF LESSEE'S INTEREST UPON TERMINATION: Upon termination of this Agreement for any reason, including but not limited to termination because of default by Lessee, Lessee shall execute, acknowledge and deliver to Lessor within thirty (30) days after receipt of written demand thereof, a good and sufficient deed whereby all right, title and interest of Lessee in the demised Building Premises is quitclaimed to Lessor. Should Lessee fail or refuse to deliver the required deed to Lessor, Lessor may prepare and record a notice reciting the failure of Lessee to execute, acknowledge and deliver such deed and said notice shall be conclusive evidence of the termination of this Agreement and of all right of Lessee or those claiming under Lessee in and to the demised Building Premises. 35) PEACEABLE SURRENDER: Upon the expiration of this Agreement or sooner termination or cancellation thereof, as herein provided, Lessee will peaceably surrender said Building Premises to Lessor in as good a condition as said Building Premises were in at the date of this Agreement, or the Completion Date of any Exterior Improvements if made, ordinary wear and tear excepted. If the Lessee fails to surrender the Building Premises at the expiration of this Agreement or the earlier termination or cancellation thereof, Lessee shall defend and indemnify Lessor from all liability and expense resulting from the delay or failure to surrender, including, without limitation, any succeeding Lessee's claims based on Lessee's failure to surrender. 36) WAIVER: Any waiver by Lessor of any breach by Lessee of any one or more of the covenants, conditions, or agreements of this Agreement shall not be, nor be construed to be, a waiver of any subsequent or other breach of the same or any other covenant, condition or agreement of this Agreement, nor shall any failure on the part of Lessor to require or exact full and complete compliance by Lessee with any of the covenants, conditions, or agreements of this Agreement be construed in any manner changing the terms hereof or so as to prevent Lessor from enforcing the full provisions hereof. The subsequent acceptance of Rent hereunder by Lessor shall not be deemed to be waiver of any preceding breach by Lessee of any term, covenant, or condition of this lease, other than the failure of Lessee to pay the particular rental so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such Rent. 37) NO RIGHT TO HOLD OVER: Lessee has no right to retain possession of the Building Premises or any part thereof beyond the expiration or termination of this Agreement. In the event that Lessee holds over, then the Rent shall be increased to two and one-half (2 Vi) times the applicable rent amount immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. New Village Arts/Agency Lease July 2010 Page 12 38) ACCEPTANCE OF PREMISES: Lessee acknowledges that the Building Premises are in an acceptable condition, and that Lessee does not hold Lessor responsible for any defects in the Building Premises. 39) QUIET POSSESSION: Lessee shall at all times during the term of this Agreement occupy the Building Premises quietly and not commit any act, waste or nuisance which disturbs the public peace or the quiet enjoyment of any neighboring tenant or property owner. 40) SUCCESSORS IN INTEREST: Unless as otherwise provided in this Agreement, the terms, covenants and conditions herein shall apply to and bind the heirs, successors, executors, administrators, and assigns of all the parties hereto, all of whom shall be jointly and severally liable hereunder. 41) ENTIRE UNDERSTANDING: This Agreement contains the entire and only understanding and agreement of the parties, and Lessee, by accepting the same, acknowledges that there is no other written or oral understanding or agreement between the parties with respect to the demised Building Premises and that this Agreement supersedes all prior negotiations, discussions, obligations and rights of the parties hereto. No waiver, modification, or amendment of this Agreement shall be valid unless it is expressly in writing and signed by authorized representatives of the Lessor and Lessee. Each of the parties to this lease acknowledges that no other party, nor any agent or attorney of any other party, has made any promise, representations, waiver or warranty whatsoever, express or implied, which is not expressly contained in writing in this Agreement, and each party further acknowledges that it has not executed this Agreement in reliance upon any collateral promise, representation, waiver or warranty, or in reliance upon any belief as to any fact not expressly recited in this Agreement. 42) TIME IS OF THE ESSENCE: Time is of the essence for each and all of the terms and provisions of this Agreement. 43) NOTICES: Notices given or to be given by Lessor or Lessee to the other may be personally serviced upon Lessor or Lessee or any person hereafter authorized by either in writing to receive such notice or may be served by certified letter addressed to the appropriate address hereinafter set forth or to such other address as Lessor and Lessee may hereafter designate by written notice. If served by certified mail forty-eight (48) hours after deposit in the U.S. Mail, service will be considered completed and binding on the party served. TO LESSEE: TO LESSOR: President or Managing Director Housing & Neighborhood Services Director New Village Arts Theatre & P.O Box 2565 Property Manager, City of Carlsbad Carlsbad, California 92008 2965 Roosevelt Street, Suite B Carlsbad, California 92008 New Village Arts/Agency Lease July 2010 Page 13 Carlsbad, California 92008 LESSEE: BY: Stephen L'Heureux, President New Village Arts Theatre DATE: Note: Signature of Lessee must be Notarized and Authority to Bind attached APPROVED AS TO FORM: LESS, RONALWl. BALL, GENERAL COUNSEL DATE: ")j*ll». New Village Arts/Agency Lease My 2010 Page 14