HomeMy WebLinkAbout2000-10-03; City Council; 15922; Lease Agreement For 2075 Las Palmas Drive--
L CITY OF CARLSBAD -AGENDA BILL
ACCEPTANCE OF LEASE AGREEMENT BETWEEN THE
MTG. 100 3 60 CITY OF CARLSBAD AND MODETEK INC. FOR 2075 LAS C1J-y ATTy.
PALMAS DRIVE AND ALLOCATION OF TENANT
DEPT. ED IMPROVEMENT FUNDS CITY ..Rg -
RECOMMENDED ACTION:
ADOPT Resolution No. d&0-,7 \ & accepting a five year lease agreement for the term January
1,200l to December 3 1, 2005, with Modetek Inc., appropriate $90,508 from the Public Facilities Fee
Fund available balance for a Tenant Improvement Allowance, appropriate $50,738 from the Public
Facilities Fee Fund balance for payment of real estate broker fees to Business Real Estate Brokerage
Company, and authorize the future appropriation of $226,270, from the General Fund balance for a
Supplemental Tenant Improvement Allowance, in the event the tenant elects to use such allowance.
ITEM EXPLANATION:
The City of Carlsbad is the owner of real property located at 2075 Las Palmas Drive in Carlsbad,
California, formally known as the Community Development Building. On March 14, 2000, the City
Council authorized staff to offer for lease the 22,627 square foot building, at a market lease rate. On
August 8,2000, staff presented the City Council with an offer to lease the premises from Modetek Inc.
Subsequent to presentation of the offer, the City Council authorized staff to prepare a lease agreement
to be executed on their behalf by the City Manager.
The term of the lease is five (5) years with an additional 5 year option to renew. The base lease rate is
$26,021 per month or $3 12, 252.60 per year. The base rate will be adjusted upward annually by 4%.
The total value of the five (5) year lease payments is $1,691,260. In addition, the tenant will receive a
$4.00 per square foot Tenant Improvement Allowance ($90,508), and will be granted an option to
receive up to an additional $10.00 per square foot Supplemental Tenant Improvement Allowance
($226,270) to be repaid to the City at a rate of 10% interest. Per the agreement, the tenants broker
will receive a fee of 3%.
FISCAL IMPACT:
The lease agreement with Modetek Inc. will generate $1,691,260 in revenues over the five (5) year
term. Expenditures for the Tenant Improvement Allowance will total $90,508, and will be allocated
from Public Facilities Fee Fund. Expenditures associated with the payment of broker fees related to
this lease transaction will total $50,738 and will be allocated from the Public Facilities Fee Fund
balance. As a part of the agreement, the City will make available to Modetek Inc, an additional
$226,270 from the General Fund balance, as a Supplemental Tenant Improvement Allowance. If the
tenant elects to utilize all or any portion of the Supplemental Tenant Improvement Allowance the
amount utilized by the tenant will be repaid to the City within the 5 year term, at a rate of 10%
interest. Should the entire amount of the Supplemental Tenant Improvement Allowance be utilized
by Modetek Inc. ($226,270), the interest revenue generated would total $62,184.
PAGE 2 OF AGENDA BILL NO. 6,q d ;$-
EXHIBITS:
1. Resolution No.maf the City Council of the City of Carlsbad, California, accepting a five
year lease agreement for the term January 1,2001 to December 31, 2005, with Modetek Inc.,
appropriating $90,508 from the Public Facilities Fee Fund available balance for a tenant improvement
allowance, appropriating $50,738 from the Public Facilities Fee Fund balance for payment of real
estate broker fees to Business Real Estate Brokerage Company, and authorizing the future
appropriation of $226,270, from the General Fund balance for a Supplemental Tenant Improvement
Allowance, in the event the tenant exercises its option for use of such allowance.
2. Lease Agreement between the City of Carlsbad and Modetek Inc.
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RESOLUTION NO. 2ooo-312
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, ACCEPTING A FIVE YEAR
LEASE AGREEMENT BETWEEN THE CITY OF CARLSBAD
AND MODETEK INC. FOR 2075 LAS PALMAS DRIVE.
WHEREAS, the City Council of the City of Carlsbad has determined that it is in the best
interest of the City to lease the property it owns located at 2075 Las Palmas Drive, Carlsbad, CA
92009; and
WHEREAS, the City Council has further determined that it accepts the terms of a five
year lease agreement with Modetek Inc. for lease of the property; and
WHEREAS, Modetek Inc. has provide the City with all required documentation, security
and deposits under the terms and conditions of the agreement attached hereto.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad,
California as follows:
Ill
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1. That the above recitations are true and correct.
2. That the attached lease agreement, Exhibit 2, between the City of Carlsbad
and Modetek Inc. is accepted.
3. That an appropriation of $90,508 for Tenant Improvement Allowance is
authorized from the Public Facilities Fee Fund balance.
4. That an appropriation of $50,738 for Broker Fees is authorized from the
Public Facilities Fee Fund balance.
5. That an appropriation of $226,270 for a Supplemental Tenant Improvement
Allowance is authorized from the General Fund balance.
6. That the City Clerk is directed to record the Abstract of the Lease Agreement
with the San Diego County Recorder.
PASSED, APPROVED, AND ADOPTED at a regular meeting of the City Council on the
3rd day of October 2000, by the following vote to wit:
AYES: Council Members Lewis, Finnila, Nygaard and Kulchin
NOES: None
ABSENT: Council Member Hall
Mayor
ATTEST:
City Cl ff rk
(SEW
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CITY OF CARLSBAD
LEASE TO
MODETEK INC.
OF PROPERTY LOCATED AT 2075 LAS PALMAS DRIVE ’
CARLSBAD, CALIFORNIA, 92009
FOR FIVE (5) YEARS, ZERO (0) MONTHS
COMMENCING JANUARY 1,200l
AND ENDING DECEMBER 31,2005
LEASE
1. Basic Provisions (“Basic Provisions”)
1.1 Parties: This Lease (“Lease”), dated for reference purposes only August 25, 2000 IS
made by and between The City of Carlsbad (“Lessor”‘I and ModeTek Inc. (“Lessee’?, (collectrvely the
“Parties”, or individually a “Party”).
1.2 Premises: That certain real property, including all improvements therein or to be
provided by Lessor under the terms of this Lease, and commonly known as 2075 Las Palmas Drive,
Carlsbad, CA 92009, located in the County of San Diego, State of California, and generally described as
” An industrial building consisting of approximately 22,627 square feet and surrounding real property.
” A legal description of the real property is attached hereto as Exhibit “A”. The Building is depicted on
Exhibit “B” (“Premises’). (See also Paragraph 2)
1.3 Term: Five (5) years and Q months (“Original Term’3 commencing January 2001 1,
(“Commencement Date”) and ending December 31, 2005 (“Expiration Date”). (See also Paragraph 3)
1.4
and 3.3)
Early Possession: October 1, 2000 (“Early Possession Date’?. (See also Paragraphs 3.2
1.5 Base Rent: $26,021.05 per month (“Base Rent’?, payable on the first day of each
month commencing January 1,200l (See also Paragraph 4)
Cl If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted.
1.6 Base Rent Paid Upon Execution: 2309 square feet of space at $1.15 per square foot
(Exhibit C) for a total of $2748.50 per month, payable on the first day of each month commencing
October 1, 2000 and ending December 31,200O. (See also Paragraph 1.5)
1.7 Security Deposit: $ 78,063.15 (“Security Deposit?. (See also Paragraph 5)
Amount of Security Deposit may be reduced to $52,042.10 at the end of the 1” year of the lease term,
provided Lessee requests such reduction in writing to Lessor, and can provide Lessor with evidence thaF
additional venture capital funding, in an amount not less than $20 million dollars, has been deposited
with Lessee.
1.8 Agreed Use: Research and Development of Integrated Optical Modulators
and all Optical Switches for Telecommunication Application . (See also Paragraph 6)
1.9 Insuring Party. Lessor is the “Insuring Party” unless otherwise stated herein. (See also
Paragraph 8)
1.10 Real Estate Brokers: (See also Paragraph 16)
(a) Representation: In this transaction (check applicable boxes):
Christopher L. Hobson
not represented by a Broker
represents Lessee exclusively (“Lessee’s Broker”; and Lessor is
(b) Payment to Brokers: Upon execution and delivery of this Lease by both Parties,
Lessor shall pay to Lessee’s Broker the sum of 3% of the total Base Rent for the five (5) year term for
brokerage services rendered by said Broker.
1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by _
Not Applicable (“Guarantor”). (See also Paragraph 37)
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Initials 5, *
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1.12 Adden- and Exhibits. Attached hereto are Ext. .s A, B, C, and D, all of which
constitute a part of the Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the
Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this
Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating rental, is an approximation which the Parties agree is reasonable and the
rental based thereon is not subject to revision whether or not the actual size is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee broom clean and free of debris
on the Commencement Date or the Early Possession Date, whichever first occurs (“Start Date”), and,
so long as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee
within thirty (30) days following the Start Date, warrants that the existing electrical, plumbing, fire
sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”), loading doors, if any,
and all other such elements in the Premises, other than those constructed by Lessee, shall be in good
operating condition on said date and that the structural elements of the roof, bearing walls and
foundation of any buildings on the Premises (the “Building”) shall be free of material defects. If a non-
compliance with said warranty exists as of the Start Date, Lessor shall, as Lessor’s sole obligation with
respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify
same as Lessor’s expense. If, after the Start Date, Lessee does not give Lessor written notice of any non-
compliance with this warranty within: (i) one year as to the surface of the roof and the structural
portions of the roof, foundations and bearing walls, (ii) six (6) months as to the HVAC systems, (iii) thirty
(30) days as to the remaining systems and other elements of the Building, correction of such non-
compliance shall be the obligation of Lessee at Lessee’s sole cost and expense.
2.3 Compliance. Lessor warrants that the improvements on the Premises comply with all
applicable laws, covenants or restrictions of record, building codes, regulations and ordinances
(“Applicable Requirements”) in effect on the Start Date. Said warranty does not apply to the use to
which Lessee will put the Premises or to any Alterations or Utility Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the
zoning is appropriate for Lessee’s intended use, and acknowledges that past uses of the Premises may
no longer be allowed. If the Premises do not comply with said warranty, Lessor shall, except as-
otherwise provided, promptly after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify the same at Lessor’s expense. If Lessee does not give
Lessor written notice of non-compliance with this warranty within six (6) months following the Start
Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and
expense. if the Applicable Requirements are hereafter changed (as opposed to being in existence at the
Start Date, which is addressed in Paragraph 6.2(e) below) so as to require during the term of this Lease
the construction of an addition to or an alteration of the Building, the remediation of any Hazardous
Substance, or the reinforcement or other physical modification of the Building (“Capital Expenditure”),
Lessor and Lessee shall allocate the cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required as a
result of the specific and unique use of the Premises by Lessee as compared with uses by tenants in
general, Lessee shall be fully responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last two (2) years of this Lease and the cost thereof exceeds six (6)
months’ Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing,
within ten (10) days after receipt of Lessee’s termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6) months’ Base Rent. If Lessee
elects termination, Lessee shall immediately cease the use of the Premises which requires such Capital
Expenditure and deliver to Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than the last day that Lessee
could legally utilize the Premises without commencing such Capital Expenditure.
PAGE 2
(b) If !- 1 Capital Expenditure is not the resul the specific and unique use of the
Premises by Lessee (such as, governmentally mandated seismic modifications), then Lessor and Lessee
shall allocate the obligation to pay for such costs pursuant to the provisions of Paragraph 7.1(c);
provided, however, that if such Capital Expenditure is required during the last two years of this Lease or
if Lessor reasonably determines that it is not economically feasible to pay its share thereof, Lessor shall
have the option to terminate this Lease upon ninety (90) days prior written notice to Lessee unless
Lessee notifies Lessor, in writing, within ten (10) days after receipt of Lessor’s termination nottce that
Lessee will pay for such Capital Expenditure. If Lessor does not elect to terminate, and fails to tender its
share of any such Capital Expenditure, Lessee may advance such funds and deduct same, with interest,
from Rent until Lessor’s share of such costs have been fully paid. If Lessee is unable to finance Lessor’s
share, or if the balance of the Rent due and payable for the remainder of this Lease is not sufficient to
fully reimburse Lessee on an offset basis, Lessee shall have the right to terminate this Lease upon thirty
(30) days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital Expenditure are
intended to apply only to non-voluntary, unexpected, and new Applicable Requirements. If the Capital
Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use, change
in intensity of use, or modification to the Premises then, and in that event, Lessee shall be fully
responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.
2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by Lessor and/or
Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee’s intended use, (b) Lessee has made such
investigation as it deems necessary with reference to such matters and assumes all responsibility
therefore as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor’s agents, nor
any Broker has made any oral or written representation or warranties with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that: (a) Broker has made no
representations, promises or warranties concerning Lessee’s ability to honor the Lease or suitability to
occupy the Premises, and (b) it is Lessor’s sole responsibility to investigate the financial capability
and/or suitability of all proposed tenants.
2.5 lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall
be of no force or effect if immediately prior to Start Date Lessee was the owner or occupant of the
Premises. In such event, Lessee shall be responsible for any necessary corrective work.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are
as specified in Paragraph 1.3.
3.2 Early Possession. Early possession by Lessee, as well as commencement of this lease, is
contingent upon receipt by Lessor of satisfactory documentation that Lessee has received its second
round of venture capital funding from Adams Capital in the approximate amount of $8 million dollars.
If Lessee totally or partially occupies the Premises prior to the Commencement Date, the obligation to
pay Base Rent on the unoccupied portion of the Premises shall be abated until Jaunuaty 1, 2001. All
other terms of this Lease (including but not limited to the obligations to Deposits, Real Property Taxes
and Insurance premiums and to maintain the Premises) shall, however, be in effect during such period.
Any such early possession shall not affect the Expiration Date.
3.3 Delay in Commencement. Lessee shall be obligated to pay Rent and perform its other
obligations on that portion of the Premises as identified in Paragraph 1.6, and Exhibit “C” until January
1, 2001, at which time the full amount of Rent for the entire Premises shall become due and payable to
Lessor.
3.4 lessee Compliance. Lessor shall not be required to tender possession of the Premises to
Lessee until Lessee complies with its obligation to provide evidence of Insurance (Paragraph 8.5).
Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this
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Lease from and after t, jtart Date, Including the payment of Rc , notwithstanding Lessor’s election to
withhold possession pending receipt of such evidence of insurance. Further, if Lessee IS requrred to
perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but
Lessor may elect to withhold possession until such conditions are satisfied.
4. Rent.
1 I .4 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease
(except for the Security Deposit) are deemed to be rent (“Rent”).
I I .5 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money
of the United States, without offset or deduction (except as specifically permitted in this Lease), on or
before the day on which it is due. Rent for any period during the term hereof which is for less than one
(I) full calendar month shall be prorated based upon the actual number of days of said month.
Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or place as
Lessor may from time to time designate in writing. Acceptance of a payment which is less than the
amount then due shall not be a waiver of. Lessor’s rights to the balance of such Rent, regardless of
Lessor’s endorsement of any check so stating.
11.6 Rental Adjustment. The Base Rent payable pursuant to this Lease shall be increased by
the sum of 4% per rentable square foot per year, on each anniversary of the Commencement Date. Set
forth below is a summary of the monthly per square foot rental rates for the initial term and the total
monthly Base Rent for each year of the Initial Term. The total amount of rentable space per year is
22,627 square feet.
Year 1: @$l .15 per square foot, equal to $26,021.05 per month, or $312,252.60 per year
Year 2: 1.04% of $312,252.60, equal to $27,061.89 per month, or $324,742.70 per year
Year 3: 1.04% of $324,742.70, equal to $28,144.36 per month, or $337,732.41 per year
Year 4: 1.04% of $337,732.41, equal to $29,270.14 per month, or $351,241.71 per year
Year 5: 1.04% of $351,241.71, equal to $30,440.94 per month, or $365,291.38 per year
5. Security Deposit. Lessee shall deposit with Lessor upon.execution hereof the Security Deposit
as security for Lessee’s faithful performance of its obligations under this Lease. 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 or to 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 Lease. If the Base Rent increases during the term of this Lease, Lessee shall,
upon written request from Lessor, deposit additional moneys with Lessor so that the total amount of the
Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial
Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a
material change in the business of Lessee or to accommodate a sublease or assignee, Lessor shall have
the right to increase the Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in
control of Lessee occurs during this Lease or if a comprehensive annual financial report to be provided
to Lessor by Lessee reveals a change in the financial condition of Lessee, and following such change
the financial condition of Lessee is, in Lessor’s reasonable judgment, significantly reduced, Lessee shall
deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition. Lessor shall not be
required to keep the Security Deposit .separate from its general accounts. Within fourteen (14) days
after the expiration or termination of this Lease, if Lessor elects to apply the Security Deposit only to
unpaid Rent, and otherwise within thirty (30) days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit not used or applied by
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Lessor. No part of tht jcurity Deposit shall be considered to L .leld in trust, to bear interest or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use.
6.1 Agreed Use. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall
not use or permit the use of the Premises in a manner that is unlawful, creates damage, waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to neighboring properties.
Lessor shall not unreasonably withhold or delay its consent to any written request for a modification of
the Agreed Use, so long as the same will not impair the structural integrity of the improvements on the
Premises or the mechanical or electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5) business days after such
request give written notification of same which notice shall include an explanation of Lessor’s
objections to the change in use.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. 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 governmental authority, or (iii) a basis for potential
liability of Lessor to any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions thereof. Lessee shall not engage in
any activity in or on the Premises which constitutes a Reportable Use of Hazardous Substances without
the express prior written consent of Lessor and timely compliance (at Lessee’s expense) with all
Applicable Requirements. “Reportable Use” shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration
or business plan is required to be filed with, any governmental authority, and/or (iii) the presence at the
Premises of a Hazardous Substance with respect to which any Applicable Requirements require that a
notice be given to persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Lessee may use any ordinary and customary materials reasonably-
required to be used in the normal course of the Agreed Use, so long as such use is in compliance with
all Applicable Requirements, is not a Reportable Use, and does not expose the Premises or neighboring
property to any meaningful risk of contamination or damage or expose Lessor to any liability therefore.
In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional
assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the
environment against damage, contamination, injury and/or liability, including, but not limited to , the
installation (and removal on or before Lease expiration or termination) of protective modifications (such
as concrete encasements) and/or increasing the Security Deposit.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a
Hazardous Substance has come to be located in, on, under, or about the Premises, other than as
previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor,
and provide Lessor with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.
(c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to
be spilled or released in, on, under, or about the 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, whether or not formally ordered or required, for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or pertaining to or involving any
PAGE 5
Hazardous Substanct ought on the Premises during the ten ,f this Lease, by or for Lessee, or an>’
third party.
(d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its officers,
officials, employees and agents, harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, claims, expenses, penalties, and attorneys’ and consultants’ fees arising out of or
involving any Hazardous Substance brought onto the Premises by or for Lessee, or any third party
(provided, however, that Lessee shall have no liability under this Lease with respect to underground
migration of any Hazardous Substance under the Premises from adjacent properties). Lessee’s
obligations shall include, but not be limited to, the effects of any contamination or injury to person,
property or the environment created or suffered by Lessee, and the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.
No termination, cancellation or release agreement entered into by Lessor and Lessee shall release
Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
(e) Lessor Indemnification. Lessor and its successors and assigns shall indemnify,
defend, reimburse and hold Lessee, its employees and lenders, harmless from and against any and all
environmental damages, including the cost of remediation, which existed as a result of Hazardous
Substances on the Premises prior to the Start Date or which are caused by the negligence or willful
misconduct of Lessor, its agents or employees. Lessor’s obligations, .as and when required by the
Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.
(0 Investigations and Remediations. Lessor shall retain the responsibility and pay for
any Investigations or remediation measures required by governmental entities having jurisdiction with
respect to the existence of Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee’s use (including “Alterations”, as defined in
Paragraph 7.3(a) below) of the Premises, in which event Lessee shall be responsible for such payment.
Lessee shall cooperate fully in any such activities at the request of Lessor, including allowing Lessor and
Lessor’s agents to have reasonable access to the Premises at reasonable times in order to carry out
Lessor’s investigative and remedial responsibilities.
(g) Lessor Termination Option. If a Hazardous Substance Condition occurs during the
term of this Lease, unless Lessee is legally responsible therefore (in which case Lessee shall make thr
investigation and remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Lessor’s rights under Paragraph 6.2(d) and Paragraph
141, Lessor may, at Lessor’s option, either 0) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor’s expense, in which event this Lease
shall continue in full force and effect, or (ii) if the estimated cost to remediate such condition exceeds
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater, give written notice to
Lessee, within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date sixty (60) days
following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may,
within ten (10) days thereafter, give written notice to Lessor of Lessee’s commitment to pay the amount
by which the cost of the remediation of such Hazardous Substance Condition exceeds an amount equal
to twelve (12) times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory assurance thereof within thirty (30) days following such
commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed
to make such remediation as soon as reasonably possible after the required funds are available. If
Lessee does not give such notice and provide the required funds or assurance thereof within the time
provided, this Lease shall terminate as of the date specified in Lessor’s notice of termination.
6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise provided In
this Lease, Lessee shall, at Lessee’s sole expense, fully, diligently and in a timely manner, materially
comply with all Applicable Requirements, the requirements of any .applicable fire insurance
PAGE 6
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underwriter or rating eau, and the recommendations of Less J engineers and/or consultants which
relate in any manner to the Premises, without regard to whether said requirements are now in effect or
become effective after the Start Date. Lessee shall, within ten (10) days after receipt of Lessor’s written
request, provide Lessor with copies of all permits and other documents, and other information
evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the
failure of Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance. Lessor and Lessor’s consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable times and upon
reasonable notice, for the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any such inspections shall be paid by the Lessor,
unless a violation of Applicable Requirements, or a contamination is found to exist or be imminent, or
the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon
request reimburse Lessor for the cost of such inspections, so long as such inspection is reasonably
related to the violation or contamination.
7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.
7.1 Lessee’s Obligations.
(a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9
(Damage or Destruction), and 15 (Condemnation), Lessee shall, at Lessee’s sole expense, keep the
Premises, Utility Installations, and Alterations in good order, condition and repair (whether or not the
portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any
prior use, the elements or the age of such portion of the Premises), including, but not limited to, all
equipment or facilities, walls (interior and exterior), foundations, ceilings, roofs, floors, windows, doors,
plate glass, skylights, landscaping, driveways, parking lots, fences, retaining walls, signs, sidewalks and
parkways located in, on, or adjacent to the Premises. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices, specifically including the
procurement and maintenance of the service contracts require by Paragraph 7.1(b) below. Lessee’s
obligations shall include restorations, replacements, or renewals when necessary to keep the Premises-
and all improvements thereon or a part thereof in good order, condition and state of repair. Lessee
shall, during the term of this Lease, keep the exterior appearance of the Building in a first-class
condition consistent with the exterior appearance of other similar facilities of comparable age and size
in the vicinity, including, when necessary, the exterior repainting of the Building.
(b) Service Contracts. Lessee shall, at Lessee’s sole expense, procure and maintain
contracts, with copies to Lessor, in customary form and substance for, and with contractors specializing
and experienced in the maintenance of the following equipment and improvements, if any, when
ihstalled on the Premises: (i) HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing
systems, including fire alarm and/or smoke detection, (iv) landscaping and irrigation systems, (v) roof
covering and drains, (vi) driveways and parking lots, (vii) clarifiers, (viii) basic utility feed to the
perimeter of the Building, and (ix) any other equipment, if reasonably required by Lessor.
(c) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in Paragraph
8.7 below, and without relieving Lessee of liability resulting from Lessee’s failure to exercise and
perform good maintenance practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 33% of the cost of replacing such Basic Elements,
then such Basic Elements shall be replaced by Lessor, and the cost thereof shall be prorated between
the Parties and Lessee shall only be obligated to pay, each month during the remainder of the term of
this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying the
cost of such replacement by a fraction, the numerator of which is one, and the denominator of which is
the number of months of the useful life of such replacement as such useful life is specified pursua
PAGE 7
Federal Income tax ,ulations or guidelines for depreciati, thereof (including interest on the
unamortized balance as is then commercially reasonable in the judgment of Lessor’s accountants), with
Lessee reserving the right to prepay its obligation at any time.
7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance), 9 (Damage or Destruction) and 15 (Condemnation), it is intended by the Parties hereto
that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the
equipment therein, all of which obligations are intended to be that of the Lessee. It is the intention of
the Parties that the terms of this Lease govern the respective obligations of the Parties as to maintenance
and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect
to the extent it is inconsistent with the terms of this Lease.
7.3 Utility Installation; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term “Utility Installations” refers to all floor and
window coverings, air lines, power panels, electrical distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the
Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment that can be
removed without doing material damage to the Premises. The term “Alterations” shall mean any
modification of the improvements, other than Utility installations or Trade Fixtures, whether by addition
or deletion. “Lessee Owned Alteration and/or Utility Installations” are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor’s prior
written consent, which shall not be unreasonably withheld or delayed. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding the roof) without such
consent but upon notice to Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof, floor, foundation or any existing walls.
(b) Consent. Any Alterations or Utility Installations that Lessee shall desire to make and
which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans.
Consent shall be deemed conditioned upon Lessee’s: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said permits and other
Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations
shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly-
upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount
equal to the greater of one month’s Base Rent, or $10,000. Lessor may condition its consent upon
Lessee providing a’ lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee’s posting, an additional
Security Deposit with Lessor.
(c) Indemnification. Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims
are or may be secured by any mechanic’s or material men’s lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days’ notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post notices of non-responsibility.
If Lessee shall contest the validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy
any such adverse judgment that may be rendered thereon before the enforcement thereof. If Lessor
shall require, Lessee shall furnish a surety bond in an amount equal to one and one-half times the
amount of such contested lien, claim or demand, indemnifying Lessor against liability for the same. If
Lessor elects to participate in any such action, Lessee shall pay Lessor’s attorney’s fees and costs.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject
hereinafter provided, all Alterations and
to Lessor’s right to require removal or elect ownership as
Utility Installations made by Lessee shall be the
PAGE 0
Lessee, but considerec part of the Premises. Lessor may, at al _ iime elect in writing to be the owner
of all or any specified part of the Lessee Owned Alterations and Utility Installations. Unless otherwise
instructed per Paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at
the expiration or termination of this Lease, become the property of Lessor and be surrendered by Lessee
with the Premises.
(b) Removal. Lessor may require the removal at any time of all or any part of any
Lessee Owned Alterations or Utility Installations made without the required consent.
(c) Surrender/Restoration. 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 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, Lessee Owned Alterations and/or Utility
Installations, furnishings, and equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or groundwater
contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee. The failure by Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without
the express consent of Lessor shall constitute a holdover under the provisions of Paragraph 27 below.
8. Insurance; Indemnity.
8.1 Payment For Insurance. Lessee shall pay for all insurance required under Paragraph 8
except to the extent of the cost attributable to liability insurance carried by Lessor under Paragraph
8.2(b) in excess of $2,000,000 per occurrence. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease term. Payment shall be
made by Lessee to Lessor within ten (10) days following receipt of an invoice.
8.2 liability Insurance.
(a) Carried by lessee. Lessee shall obtain and keep in force a Commercial General
Liability Policy of Insurance protecting Lessee and Lessor against claims for bodily injury, personal
injury and property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than $2,OOO,OOO per occurrence’
with an “Additional Insured-Managers or lessors or Premises Endorsement” and contain the
“Amendment of the Pollution Exclusion Endorsement” for damage caused by heat, smoke or fumes
from a hostile fire. The Policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed under this Lease as an
“insured contract” for the performance of Lessee’s indemnity obligations under this Lease. The limits of
said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess insurance only.
(b) Carried by Lessor. Lessor shall maintain liability insurance as described in
Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee.
Lessee shall not be named as an additional insured therein.
8.3 Property Insurance - Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain and keep in force a
policy or policies in the name of Lessor, with loss payable to Lessor, any ground Lessor, and to any
Lender(s) insuring loss or damage to the Premises. The amount of such insurance shall be equal to the
full replacement cost of the Premises, as the same shall exist from time to time. If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee’s
personal property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor. If the coverage
is available and commercially appropriate, such policy or policies shall insure against all risks of direct
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physical loss or dam; (except the perils of flood and/or ea. quake unless required by a Lender),
including coverage for debris removal and the enforcement of any Applicable Requirements requmng
the upgrading, demolition, reconstruction or replacement of any portion of the Premises as the result of
a covered loss. Said policy or policies shall also contain an agreed valuation provision in lieu of an)
coninsurance clause, waiver of subrogation, and inflation guard protection causing an increase In the
annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department
of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are
located. If such insurance coverage has a deductible clause, the deductible amount shall not exceed
$I ,000 per occurrence, and Lessee shall be liable. for such deductible amount in the event of an
insured Loss.
(b) Rental Value. The Insuring Party shall obtain and keep in force a policy or policies
in the name of Lessor with loss payable to Lessor and any Lender, insuring the loss of the full Rent for
one (I) year. Said insurance shall provide that in the event the Lease is terminated by reason of an
insured loss, the period of indemnity for such coverage shall be extended beyond the date of the
completion of repairs or replacement of the Premises, to provide for one full year’s loss of rent from the
date of any such loss. Said insurance shall contain an agreed valuation provision In lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to reflect the projected Rent
otherwise payable by Lessee, for the next twelve (12) month period. Lessee shall be liable for any
deductible amount in the event of such loss.
(c) Adjacent Premises. If the Premises are part of a larger building, or of a group of
buildings owned by Lessor which are adjacent to the Premises, the Lessee shall pay for any increase in
the premiums for the property insurance of such building or buildings if said increase is caused by
Lessee’s acts, omissions, use or occupancy of the Premises.
8.4 lessee’s Property/Business Interruption Insurance.
(a) Property Damage. Lessee shall obtain and maintain insurance coverage on all of
Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and Utility Installations.
Such insurance shall be full replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee shall
provide Lessor with written evidence that such insurance is in force. - (b) Business Interruption. Lessee shall obtain and maintain loss of income and extra
expense insurance in amounts as will reimburse Lessee for direct or indirect loss of earnings attributable
to all perils commonly insured against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) No Representation of Adequate Coverage. Lessor makes no representation that the
limits or forms of coverage of insurance specified herein are adequate to cover Lessee’s property,
business operations or obligations under this Lease.
8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or
admitted to transact business in the State of California, and maintaining during the policy term a
“General Policyholders Rating” of at least A-: V, as set forth in the most current issue of “Best’s
Insurance Guide”, or such other rating as shall be required by the Carlsbad City Council Policy existing
at the time, or such other rating as may be required by a Lender. Lessee shall not do or permit to be
done, anything that invalidates the required insurance policies. Lessee shall, prior to the Start Date,
deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence
and amounts of the required insurance. No such policy shall be cancelable or subject to modification
except after thirty (30) days prior written notice to Lessor, Lessee shall, at least thirty (30) days prior to
the expiration of such policies, furnish Lessor with evidence of renewals or “insurance binders”
evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee,
which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of
at least one year, or the length of the remaining term of this Lease, whichever is less. If either Party
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shall fail to procure a maintain the insurance required to be rried by it, the other Party may, but
shall not be required to, procure and maintain the same.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and
Lessor each hereby release and relieve the other, and waive their entire right to recover damages
against the other, for loss of or damage to its property arising out of or incident to the perils required to
be insured against herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The Parties agree to have their
respective property damage insurance carriers waive any right to subrogation that such companies may
have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.
8.7 Indemnity. Except for negligence of Lessor, its agents, employees, and contractors, or
willful misconduct, Lessee shall.indemnify, protect, defend and hold harmless the Premises, Lessor its
officers, officials employees and agents, from and against any and all claims, loss of rents and/or
damages, liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the Premises by Lessee. If any
action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee shall
upon notice defend the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in
order to be defended or indemnified.
8.8 Exemption of lessor from Liability. Lessor shall not be .liable for injury or damage to
the person or goods, wares, merchandise or other property of Lessee, Lessee’s employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting
fixtures, or from any other cause, whether the said injury or damage results from conditions arising
upon the Premises or upon other portions of the Building of which the Premises are a part, or from
other sources or places. Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall
under no circumstances be liable for injury to Lessee’s business or for any loss of income or profit there
from.
9. Damage or Destruction. - 9.1 Definitions.
(a) “Premises Partial Damage” shall mean damage or destruction to the improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations, which can reasonably
be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or destruction as to whether or not
the damage is Partial or Total.
(b) “Premises Total Destruction” shall mean damage or destruction to the Premises,
other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which cannot
reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall
notify Lessee in writing within thirty (30) days from the date of the damage or destruction as to whether
or not the damage is Partial or Total.
03 “Insured loss” shall mean damage or destruction to improvements on the Premises,
other than Lessee Owned Alterations and Utility Installations and Trade Fixtures, which was caused by
an event required to be covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements
owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto,
including demolition, debris removal and upgrading required by the operation of Applicable
Requirements, and without deduction for depreciation.
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(e) “I - ardous Substance Condition” shall r. n the occurrence or discovery of a
condition involving the presence of, or a contamination by, a Hazardous Substance as defined in
Paragraph 6.2(a), in, on, or under the Premises.
9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an insured Loss
occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or
Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at Lessor’s electron, make the
repair of any damage or destruction the total cost to repair of which is $10,000 or less, and, in such
event, Lessor shall make any applicable insurance proceeds available to Lessee on a reasonable basis
for that purpose. Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party shall promptly contribute
the shortage in proceeds (except as to the deductible which is Lessee’s responsibility) as and when
required to complete said repairs. In the event, however, such shortage was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in
insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor
with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of
written notice as such shortage and request therefore. If Lessor receives said funds or ‘adequate
assurance thereof within said ten (10) day period, the party responsible for making the repairs shall
complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If
such funds or assurance are not received, Lessor may nevertheless elect by written notice to Lessee
within ten (10) days thereafter to: (i) make such restoration and repair as is commercially reasonable
with Lessor paying any shortage in proceeds, in which case this Lease shall remain in full force and
effect, or have this Lease terminate thirty (30) days thereafter. Lessee shall not be entitled to
reimbursement of any funds contributed by Lessee to repair any such damage or destruction. Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there
may be some insurance coverage, but the net proceeds of any such insurance shall be made available
for the repairs if made by either Party.
9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage that is not an insured
Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee’s expense), Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this-
Lease by giving written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such damage. Such termination shall be effective sixty (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within ten
(10) days after receipt of the termination notice to give written notice to Lessor of Lessee’s commitment
to pay for the repair of such damage without reimbursement from Lessor. Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within thirty (30) days after making such commitment.
In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such
repairs as soon as reasonably possible after the required funds are available. If Lessee does not make
the required commitment, this Lease shall terminate as of the date specified in the termination notice,
9.4 Total Destruction. Notwithstanding any other provision hereof, if Total Destruction of a
Premises occurs, this Lease shall terminate sixty (60) days following such Destruction. If the damage or
destruction was caused by the gross negligence or willful misconduct of Lessee, Lessor shall have the
right to recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six (6) months of this Lease
there is damage for which the cost to repair exceeds one (1) month’s Base Rent, whether or not an
Insured Loss, Lessor may terminate this Lease effective sixty (60) days following the date of occurrence
of such damage by giving a written termination notice to Lessee within thirty (30) days after the date of
occurrence of such damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by, (a)
exercising such option and (b) providing Lessor with any shortage in insurance proceeds (or ade
PAGE 12
assurance thereof) net-j to make the repairs on or before the Iier of (i) the date which is ten days
after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to
the date upon which such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds,
Lessor shall, at Lessor’s commercially reasonable expense, repair such damage as soon as reasonably
possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall terminate on the date
specified in the termination notice and Lessee’s option shall be extinguished.
9.6 Abatement of Rent; Lessee’s Remedies.
(a) Abatement. In the event of Premises Partial Damage or Premises Total Destruction
or a Hazardous Substance Condition for which Lessee is not responsible under this Lease, the Rent
payable by Lessee for the period required for the repair, remediation or restoration of such damage
shall be abated in proportion to the degree to which Lessee’s use of the Premises is impaired, but not to
exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee
hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage,
destruction, remediation, repair or restoration except as provided herein.
(b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not
commence, in a substantial and meaningful way, such repair or restoration within sixty (60) days after
such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of
Lessee’s election to terminate this Lease on a date not less than sixty (60) days following the giving of
such notice. If Lessee gives such notice and such repair or restoration is not commenced within thirty
(30) days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or
restoration is commenced within said thirty (30) days, this Lease shall continue in full force and effect.
“Commence” shall mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first occurs.
(c) Termination-Advance Payments. Upon termination of this Lease pursuant to
Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent
and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee
so much of Lessee’s Security Deposit as has not been, or is not then required to be, used by Lessor. - (d) Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the
effect of any damage to or destruction of the Premises with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent inconsistent herewith.
10. Quit Claim of lessee’s Interest Upon Termination. Upon termination of this Lease 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 therefore a
good and sufficient deed whereby all right, title and interest of Lessee in the demised 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 Lease and of all right of
Lessee or those claiming under Lessee in and to the demised premises.
11. Real Property Taxes.
11.1 Definition of “Real Property Taxes.” As used herein, the term “Real Property Taxes”
shall include any form of assessment; real estate, general, special, ordinary or extraordinary, or rental
levy or tax (other than inheritance, personal income or estate taxes); improvement bond; and/or-license
fee imposed upon or levied against any legal or equitable interest of Lessor in the Premises, Lessor’s
right to other income therefrom, and /or Lessor’s business of leasing, by any authority having the direct
or indirect power to tax and where the funds are generated with reference to the Building address and
where the proceeds so generated are to be applied by the city, county or other local taxing authority of
the jurisdiction within which the Premises are located. This Lease may result in a taxable posseszv
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interest subject to the _ryment of Real Property Taxes. The t ,I “Real Property Taxes” shall also
include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events
occurring during the term of this Lease, including but not limited to, a change in the ownershtp of the
Premises.
11.2 Taxes.
(a) Payment of Taxes. Lessee shall pay the Real Property Taxes applicable to the
Premises during the term of this Lease. Subject to Paragraph 11.2(b), all such payments shall be made
at least ten (10) days prior to any delinquency date. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes shall cover any period of time
prior to or after the expiration or termination of this Lease, Lessee’s share of such taxes shall be prorated
to cover only that portion of the tax bill applicable to the period that this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment. Lessee shall pay before delinquency all taxes and
assessments of any kind assessed or levied upon Lessee or the Leased Premises by reason of this Lease
or of any buildings, machines, or other improvements of any nature whatsoever erected, installed or
maintained by the Lessee or by reason of the business or other activities of Lessee upon or in
connection with the Leased Premises. Lessee shall also pay any fees imposed by law for licenses or
permits for any business or activities of Lessee upon the Leased Premises or under this Lease. If Lessee
shall fail to pay any required Real Property Taxes, Lessor shall have the right to pay the same, and
Lessee shall reimburse Lessor therefore upon demand.
(b) Advance Payment. In the event Lessee incurs a late charge on any Rent payment,
Lessor may, at Lessor’s option, estimate the current Real Property Taxes, and require that such taxes be
paid in advance to Lessor by Lessee, either: 0) in a lump sum amount equal to the installment due, at
least twenty (20) days prior to the applicable delinquency date, or (ii) monthly in advance with the
payment of the Base Rent. If Lessor elects to require payment monthly in advance, the monthly
payment shall be an amount equal to the amount of the estimated installment of taxes divided by the
number of months remaining before the month in which said installment becomes delinquent. When
the actual amount of the applicable tax bill is known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the applicable taxes. If the
amount collected by Lessor is insufficient to pay such Real Property Taxes when due, Lessee shall pay
Lessor, upon demand, such additional sums as are necessary to pay such obligations. All moneys paid
to Lessor under this Paragraph may be intermingled with other moneys of Lessor and shall not bear-
interest. In the event of a Breach by Lessee in the performance of its obligations under this Lease, then
any balance of funds paid to Lessor under the provisions of this Paragraph may at the option of Lessor,
be treated as an additional Security Deposit.
11.3 Joint Assessment. If the Premises are not separately assessed, Lessee’s liability shall be
an equitable proportion of the Real Property Taxes for all of the land and improvements included
within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the
respective valuations assigned in the assessor’s work sheets or such other information as may be
reasonably available.
11.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed
against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings,
equipment and all personal property of Lessee. When possible, Lessee shall cause such property to be
assessed and billed separately from the real property of Lessor. If any of Lessee’s said personal property
shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee’s
property within ten (10) days after receipt of a written statement.
12. Utilities. Lessee shall pay for all water, gas, heat, light, power, telephone, trash disposal and
other utilities and services supplied to the Premises, together with any taxes thereon. If any such
services are not separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered. Lessee shall pay before delinquency any and all
charges for utilities at or on the Leased Premises.
PAGE 14
13. Assignment ar. ,ubletting.
13.1 Lessor’s Consent Required.
(a) Except for an assignment or sublease to a company with which Lessee merges, or
which Lessee controls, is controlling, or is under common control with, for which Lessor’s consent shall
not required, Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber
(collectively, “assign or assignment”) or sublet all or any part of Lessee’s interest in this Lease or in the
Premises without Lessor’s prior written consent, which shall not be unreasonably withheld or delayed.
(b) A change in the control of Lessee shall constitute an assignment requiring consent.
The transfer, on a cumulative basis, of fifty percent (50%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of transactions (by
way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee’s assets occurs, which results or will result
in a reduction of the Net Worth of Lessee by an amount greater than twenty-five percent (25%) of such
Net Worth as it was represented at the time of the execution of this Lease or at the time of the most
recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, whichever was or is greater, shall be considered an assignment
of this Lease to which Lessor may withhold its consent, notwithstanding Paragraph 13.1 (a) above.
“Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles.
(d) An assignment or subletting without consent shall, at Lessor’s option, be a Default
curable after notice per Paragraph 14.1(c), or a noncurable Breach without the necessity of any notice
and grace period. If Lessor elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30) days written notice, increase
the monthly Base Rent to one hundred ten percent (110%) of the Base Rent then in effect. Further, in
the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the
Premises held by Lessee shall be subject to similar adjustment to one hundred ten percent (I 10%) of
the price previously in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased to One Hundred Ten Percent (110%) of the scheduled
adjusted rent. -
(e) Lessee’s remedy for any breach of Paragraph 13.1 by Lessor shall be limited to
compensatory damages and/or injunctive relief.
13.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor’s consent, any assignment or subletting shall not: (i) be effective
without the express written assumption by such assignee or sublessee of the obligations of Lessee under
this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be performed by Lessee.
(b Pending approval or disapproval of an assignment. Neither a delay in the approval or
disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or
estoppel of Lessor’s right to exercise its remedies for Lessee’s Default or Breach.
(c) Lessor’s consent to any assignment or subletting shall not constitute a consent to any
subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against
Lessee, any Guarantors or anyone else responsible for the performance of Lessee’s obligations under
this Lease, including any assignee or sublessee, without first exhausting Lessor’s remedies against any
other person or entity responsible therefore to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Lessor’s determination as to the financial and ooerational
PAGE 15
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responsibility and apF riateness of the proposed assignee or jlessee, including but not limited to
the intended use and/or required modification of the Premises, together with reasonable attorney’s fees
incurred by Lessor in the review of said application, as consideration for Lessor’s considering and
processing said request. Lessee agrees to provide Lessor with such other or additional information
and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such
assignment or entering into such sublease, be deemed to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than such obligations as are
contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically
consented to in writing.
13.3 Additional Terms and Conditions Applicable to Subletting. The following terms and
conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be
deemed included in all subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all Rent
payable on any sublease, and Lessor may collect such Rent and apply same toward Lessee’s obligations
under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or any
assignment of such sublease, nor by reason of the collection of Rent, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee.
Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice
from Lessor stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to
pay to Lessor all Rent due and to become due under the sublease. Sublessee shall rely upon any such
notice from Lessor and shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option, require sublessee to
attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to
such sublessor or for any prior Defaults or Breaches of such sublessor.
(c) Any matter requiring the consent of the sublessor under a sublease shall also require:
the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of the Premises without
Lessor’s prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the
sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any,
specified in such notice. The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
14. Default; Breach; Remedies.
14.1 Default; Breach. A “Default” is defined as a failure by the Lessee to comply with or
perform any of the terms, covenants, conditions or rules under this Lease. A “Breach” is defined as the
occurrence of one or more of the following Defaults, and the failure of Lessee to cure such Default
within any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises without providing
a commercially reasonable level of security, or where the coverage of the properly insurance described
in Paragraph 8.3 is jeopardized as a result thereof, or without providing reasonable assurances to
minimize potential vandalism.
PAGE 16
(b) The - ’ /lure of Lessee to make any payment c ent or any Security Deposit required
to be made by Lessee hereunder, whether to Lessor or to a third party, when due, to provide
reasonable evidence of insurance or surety bond, or to fulfil1 any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a period of three (3) business
days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence of complrance with
Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized assignment or
subletting, (iv) a Tenancy Statement, (v) a requested subordination, (vi) evidence concerning any
guaranty and/or Guarantor, or (vii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, where any such failure continues for a
period of ten (10) days following written notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease
other than those described in subparagraphs 14.1 (a), (b) or (c), above, where such Default continues for
a period of thirty (30) days after written notice; provided, however, that if the nature of Lessee’s Default
is such that more than thirty (30) days are reasonably required for its cure, then it shall not be deemed
to be a Breach if Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of any general
arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C.
5 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days; (iii) the appointment of a trustee or receiver to take possessron of
substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where
possession is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this
Lease, where such seizure is not discharged within thirty (30) days; provided, however, in the event
that any provision of this subparagraph (e) is contrary to any applicable law, such provision shall be of
no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee or of any Guarantor given to
Lessor was materially false.
(g) If the performance of Lessee’s obligations under this Lease is guaranteed: (i) the death,
of a Guarantor, (ii) the termination of a Guarantor’s liability with respect to this Lease other than in
accordance with the terms of such guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its
guaranty obligation on an anticipatory basis, and Lessee’s failure, within sixty (60) days following
written notice of any such event, to provide written alternative assurance or security, which, when
coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources
of Lessee and the Guarantors that existed at the time of execution of this Lease.
14.2 Remedies. If Lessee fails to perform any of its affirmative duties or obligations, within
ten (10) days after written notice (or in case of an emergency, without notice), Lessor may, at its option,
perform such duty or obligation on Lessee’s behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The
costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt
of invoice therefore. If any check given to Lessor by Lessee shall not be honored by the bank upon
which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by
cashier’s check. In the event of a Breach, Lessor may, with or without further notice or demand, and
without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such
Breach:
(a) Terminate Lessee’s right to possession of the Premises by any lawful means, in which
case this Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the
PAGE 17
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time of termination; (i. re worth at the time of award of the al Jnt by which the unpaid rent whrch
would have been earned after termination until the time of award exceeds the amount of such rental
loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award oi
the amount by which the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other
amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s iailure
to perform its obligations under this Lease or which in the ordinary course of things would be likely to
result there from, including but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the Premises, reasonable
attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred
to in provision (iii) of the immediately preceding sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are
located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee’s Breach of this Lease shall not waive Lessor’s right to recover damages under Paragraph 13. If
termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall
have the right to recover in such proceeding any unpaid Rent and damages as are recoverable therein,
or Lessor may reserve the right to recover all or any part thereof in a separate suit. If a notice and grace
period required under Paragraph 14.1 was not previously given, a notice to pay rent or quit, or to
perform or quit given to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 14.1. In such case, the applicable grace period required by Paragraph 14.1 and
the unlawful detainer statute shall run concurrently, and the failure of Lessee to cure the Default within
the greate.r of the two such grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee’s right to possession and recover the Rent as it
becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations. Acts
of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor’s interests,
shall not constitute a termination of the Lessee’s right to possession.
(c) Pursue any other remedy now or hereafter available under the laws or judicial
decisions of the state wherein the Premises are located. The expiration or termination of this Lease
and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by’
reason of Lessee’s occupancy of the Premises.
14.3 Inducement Recapture. Any agreement for free or abated rent or other charges, or for
the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration
for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement
Provisions,” shall be deemed conditioned upon Lessee’s full and faithful performance of all of the
terms, covenants and conditions of this Lease. Upon Breach of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or
paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to
Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of
rent or the cure of the Breach which initiated the operation of this paragraph shall not be deemed a
waiver by Lessor of the provisions of this paragraph unless specifically so stated in writing by Lessor at
the time of such acceptance.
14.4 late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will
cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to ten percent
(10”/0) of each such overdue amount. The parties hereby agree that such late charge represents ir
PAGE 18
and reasonable estim; of the costs Lessor will incur by reasob ,’ such late payment. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with
respect to such overdue amount, nor prevent the exercise of any consecutive installments of Base Rent,
then notwithstanding any provision of this Lease to the contrary, Base Rent shall, at Lessor’s option,
become due and payable quarterly in advance.
14.5 Interest. Any monetary payment due Lessor hereunder, other than late charges, not
received by Lessor, when due as to scheduled payments (such as Base Rent) or within thirty (30) days
following the date on which it was due for non-scheduled payment, shall bear interest from the date
when due, as to scheduled payments, or the thirty-first (31”) day after it was due as to non-scheduled
payments. The interest (“Interest”) charged shall be equal to the prime rate reported in the Wall Street
Journal as published closest prior to the date when due plus four percent (4%), but shall not exceed the
maximum rate allowed by law. Interest is payable in addition to the potential late’charge provided for
in Paragraph 14.4.
14.6 Breach by lessor.
(a) Notice of Breach. Lessor shall not be deemed in breach of this Lease unless Lessor
fails within a reasonable time to perform an obligation required to be performed by Lessor. For
purposes of this Paragraph, a reasonable time shall in no event be less than thirty (30) days after receipt
by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has not been performed;
provided, however, that if the nature of Lessor’s obligation is such that more than thirty (30) days are
reasonably required for its performance, then Lessor shall not be in breach if performance is
commenced within such thirty (30) day period and thereafter diligently pursued to completion.
(b) Performance by Lessee on Behalf of lessor. In the event that Lessor does not cure
said breach within thirty (30) days after receipt of said notice, or if having commenced said cure Lessee
does not diligently pursue it to completion, then Lessee may elect to cure said breach at Lessee’s
expense and offset from Rent an amount equal to the greater of one month’s Base Rent or the Security
Deposit, and to pay an excess of such expense under protest, reserving Lessee’s right to reimbursement
from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.
15. Condemnation. If the Premises or any portion thereof are taken under the power of eminent
domain or sold under the threat of the exercise of said power (collectively “Condemnation”), this Lease
shall terminate as to the part taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any building portion of the premises, or more
than twenty-five percent (25%) of the land area portion of the premises not occupied by any building, is
taken by Condemnation, Lessee may, at Lessee’s option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice,
within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as
of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the
Piemises remaining, except that the Base Rent shall be reduced in proportion to the reduction in utility
of the Premises caused by such Condemnation. Condemnation awards and/or payments shall be the
property of Lessor, whether such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided, however, that Lessee shall
be entitled to any compensation for Lessee’s relocation expenses, loss of business goodwill and/or
Trade Fixtures, without regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee shall be entitled to any
and all compensation which is payable therefore, in the event that this Lease is not terminated by
reason of the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
16. Representations and Indemnities of Broker Relationships. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm, broker or finder (other
PAGE 19
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Lessee’s Broker) in cc &on with this Lease, and that no one .er than said named Broker IS entitled
to any commission or finder’s fee in connection herewith. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against liability for compensatron or
charges which may be claimed by any such unnamed broker, finder or other similar party by reason oi
any dealings or actions of the indemnifying Party, including any costs, expenses, or attorneys’ fees
reasonably incurred with respect thereto.
17. Estoppel Certificates.
(a) Each Party (as “Responding Party”) shall within ten (10) days after written notice
from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the Requesting Party
a statement in writing in form similar to the then most current “Estoppel Certificate” form published by
the American Industrial Real Estate Association, plus such additional information, confirmation and/or
statements as may be reasonably requested by the Requesting Party.
(b) If the Responding Party shall fail to execute or deliver the Estoppel Certificate within
such ten day period, the Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease
is in full force and effect without modification except as may be represented by the Requesting Party,
(ii) there are no uncured defaults in the Requesting Party’s performance, and (iii) if Lessor is the
Requesting Party, not more than one month’s rent has been paid in advance. Prospective purchasers
and encumbrancers may rely upon the Requesting Party’s Estoppel Certificate, and the Responding
Party shall be estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any part thereof, Lessee
and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial
statements as may be reasonably required by such lender or purchaser, including but not limited to
Lessee’s financial statements for the past three (3) years. All such financial statements shall be received
by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein
set forth.
18. Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the
time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s interest in the
prior lease. In the event of a transfer of Lessor’s title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by
Lessor. Upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior,
Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined.
Notwithstanding the above, and subject to the provisions of Paragraph 21 below, the original Lessor
under this Lease, and all subsequent holders of the Lessor’s interest in this Lease shall remain liable and
responsible with. regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.
19. Severability. The invalidity of any provision of this Lease, as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other provision thereof.
20. Days. Unless otherwise specifically indicated to the contrary, the word “days” as used in this
Lease shall mean and refer to calendar days.
21. limitation on Liability. Subject to the provisions of Paragraph 18 above, the obligations of
Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of
Lessor or its or their individual partners, directors, officers, or shareholders, and Lessee shall look to the
Premises, and to no other assets of Lessor, for the satisfaction of any liability of Lessor with respect to
this Lease, and shall not seek recourse against the individual partners of Lessor, or its or their individual
partners, directors, officers or shareholders, or any of their personal assets for such satisfaction.
22. Time of Essence. Time is of the essence with respect to the performance of all obligations to be
performed or observed by the Parties under this Lease.
PAGE 20
23. No Prior or her Agreements; Broker Disclaimer. ihis Lease contains all agreements
between the Parties with respect to any matter mentioned herein, and no other pnor or
contemporaneous agreement or understanding shall be effective.
24. Notices.
24.1 Notice Requirements. All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by courier) or may be sent by regular, certified or
registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission,
and shall be deemed sufficiently given if served in a manner specified in this Paragraph 24. The
addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or
mailing of notices. Either Party may by written notice to the other specify a different address for notice,
except that upon Lessee’s taking possession of the .Premises, the Premises shall constitute Lessee’s
address for notice. A copy of all notices to Lessor shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate in writing.
24.2 Date of Notice. Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery
date is shown, the postmark thereon. If sent by regular mail the notice shall be deemed given three (3)
business days after the same is addressed as required herein and mailed with postage prepaid. Notices
delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be
deemed given twenty-four (24) hours after delivery of the same to the Postal Service or courier. Notices
transmitted by facsimile transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt, provided a copy is also delivered via delivery or mail. If notice is received on a
Saturday, Sunday or legal holiday, it shall be deemed received on the next business day.
25. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition
hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any
subsequent Default or Breach by Lessee of the same or of any other term, covenant or condition
thereof, Lessor’s consent to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be
construed as the basis of an Estoppel to enforce the provision or provisions of this Lease requiring such
consent. The acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by Lessee.
Any payment by Lessee may be accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in connection therewith,-
which such statements and/or conditions shall be of no force or effect whatsoever unless specifically
agreed to in writing by Lessor at or before the time of deposit of such payment.
26. Recording. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and
deliver to the other a short form memorandum of this Lease for recording purposes. The Party
requesting recordation shall be responsible for payment of any fees applicable thereto.
27. No Right To Holdover. Lessee has no right to retain possession of the Premises or any part
thereof beyond the expiration or termination of this Lease. In the event that Lessee holds over, then the
Base Rent shall be increased to one hundred fifty percent (150%) of the Base Rent applicable during the
month immediately preceding the expiration or termination. Nothing contained herein shall be
construed as consent by Lessor to any holding over by Lessee.
28. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
29. Covenants and Conditions; Construction of Agreement. All provisions of this Lease to be
observed or performed by Lessee are both covenants and conditions. In construing this Lease, all
headings and titles are for the convenience of the parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural and vice versa. This
Lease shall not be construed as if prepared by one of the parties, but rather according to its fair meaning
as a whole, as if both parties had prepared it.
PAGE 21
30. Binding Effec Choice of Law. This Lease shall be t .ing upon the parties, their personal
representatives, successors and assigns and be governed by the laws of California. Any lrtrgatron
between the Parties hereto concerning this Lease shall be initiated in North San Diego County.
31. Subordination; Attornment; Non-Disturbance.
31 .l Subordination. This Lease and any Option granted hereby shall be subject and
subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device
(collectively, “Security Device”), now or hereafter placed upon the Premises, to any and all advances
made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees
that the holders of any such Security Devices (in this Lease together referred to as “Lessor’s Lender”)
shall have no liability or obligation to perform any of the obligations of Lessor under this Lease. Any
Lender may elect to have this Lease and/or any Option granted hereby superior to the lien of Its
Security Device by giving written notice thereof to Lessee, whereupon this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the relative dates of the
documentations or recordation thereof.
31.2 Attornment. Subject to the non-disturbance provisions of Paragraph 31.3, Lessee agrees
to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a
foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act or omission of any prior Lessor or with respect to events occurring prior to
acquisition of ownership; (ii) be subject to any offsets or defenses which Lessee might have against any
prior Lessor, or (iii) be bound by prepayment of more than one (1) month’s rent.
31.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the
execution of this Lease, Lessee’s subordination of this Lease shall be subject to receiving a
commercially reasonable nondisturbance agreement (a “Non-Disturbance Agreement”) from the
Lender which Non-Disturbance Agreement provides that Lessee’s possession of the Premises, and this
Lease, including any options to extend the term hereof, will not be disturbed so long as Lessee is not in
Breach hereof and attorns to the record owner of the Premises. Further, within sixty (60) days after the
execution of this Lease, Lessor shall use its commercially reasonable efforts to obtain a Non-
Disturbance Agreement from the holder of any preexisting Security Device which is secured by the
Premises. In the event that Lessor is unable to provide the Non-Disturbance Agreement within said
sixty (60) days, then Lessee may, at Lessee’s option, directly contact Lessor’s lender and attempt to
negotiate for the execution and delivery of a Non-Disturbance Agreement. -
3 1.4 Self-Executing. The agreements contained in this Paragraph 31 shall be effective
without the execution of any further documents; provided, however, that, upon written request from
Lessor or a Lender in connection. with a sale, financing or refinancing of the Premises, Lessee and
Lessor shall execute such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to
enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times and
upon reasonable notice, for the purpose of showing the same to prospective purchasers, lenders, or
lessees, and making such alterations, repairs, improvements or additions to the Premises as Lessor may
deem necessary. All such activities shall be without abatement of rent or liability to Lessee. Lessor
may at any time place on the Premises “For Sale” signs and Lessor may during the last six (6) months
of the term hereof place on the Premises “For lease” signs. Lessee may at any time place on or about
the Premises “For Sublease” sign that is in compliance with the provisions of the Carlsbad Municipal
Code Title 2 1.41.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the
Premises without Lessor’s prior written consent. Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to permit an auction.
PAGE 22
34. Signs. Excep jr Carlsbad Municipal Code complian :or Sublease” signs, Lessee shall not
place any sign upon the Premises without Lessor’s prior written consent. All signs must comply with all
Applicable Requirements.
35. 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 subtenancies.
Lessor’s failure within ten (10) days following any such event to elect to the contrary by written notice
to the holder of any such lesser interest, shall constitute Lessor’s election to have such event constitute
the termination of such interest.
36. Consents. Except as otherwise provided herein, wherever in this Lease the consent of a Party IS
required to an act by or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor’s actual reasonable costs and expenses (including but not limited to architects’,
attorneys’, engineers’ and other consultants’ fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt of an
invoice and supporting documentation therefore. Lessor’s consent to any act, assignment or subletting
shall not constitute an acknowledgement that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent. The failure to specify
herein any particular condition to Lessor’s consent shall not preclude the imposition by Lessor at the
time of such consent of such further or other conditions as are then reasonable with reference to the
particular matter for which consent is being given. In the event that either Party disagrees with any
determination made by the other hereunder and reasonably requests the reasons for such
determination, the determining party shall furnish its reasons in writing and in reasonable detail within
ten (10) business days following such request.
37. Guarantor.
37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most
recently published by the American Industrial Real Estate Association, and each such Guarantor shall
have the same obligations as Lessee under this Lease.
37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon-
request to provide: (a) evidence of the execution of the guaranty, including the authority of the party
signing on Guarantor’s behalf to obligate Guarantor, and in the case of a corporate Guarantor, a
certified copy of a resolution of its board of directors authorizing the making of such guaranty, (b)
current financial statements, (c) a Tenancy Statement, or (d) written confirmation that the guaranty is
still in effect.
38. Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the
covenants, conditions, and provisions on Lessee’s part to be observed and performed under this Lease,
Lessee shall have quiet possession and quiet enjoyment of the Premises during the term hereof.
39. Options.
39.1 Definition. “Option” shall mean: (a) the right to extend the term of or renew this Lease
or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal
or first offer to lease either the Premises or other property of Lessor; (c) the right to purchase or the right
of first refusal to purchase the Premises or other property of Lessor.
39.2 Options Personal To Original lessee. Each Option granted to Lessee in this Lease is
personal to the original Lessee, and cannot be assigned or exercised by anyone other than said original
Lessee and only while the original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter assigning or subletting.
PAGE 23
InitialsS.
e
39.3 Numb - And Term. Lessee may, at Lessee’s opt. ,, extend the Initial Term of this Lease
for one (1) period of five (5) consecutive years, subject to all of the provisions of this Lease. The
Extension Term shall commence at the expiration of the Initial Term, and shall terminate on the last da!
of the Extension Term. After the exercise of an option to extend, all references in this lease to the
“Term” shall be considered to mean the Term as extended, and all references to termination or to the
end shall be considered to mean the termination of the Extension Term.
39.4 Method of Exercise of Option: Lessee may exercise Lessee’s Option by giving Lessor
written notice by certified mail, return receipt requested. Written notice shall be given not less than
one hundred and eighty (180) days prior to the expiration of the Term. If such notification is not given
as stated above, this Option shall automatically expire.
39.5 Calculation of Rent at Beginning of Option Period. The initial monthly Base Rent for
the Extension Term shall be the Fair Market Rent as of the date notice of exercise of the Option is given,
but in no event shall the Base Rent be less than the Base Monthly Rent being paid during the last month
of the prior Lease Term. The Base Rent shall be increased annually in accordance with Paragraph 1.5.
(a) The Term “Fair Market Rent”, as used in this paragraph 39.5, is defined to mean the fair
market rent of the Premises according to comparable properties in the Carlsbad, CA area. In
determining fair market monthly rent it shall be assumed that:
0)
(ii)
The Premises are in good condition and repair;
The Premises would be leased for the period of the option being exercised by a
lessee with the credit standing of Lessee’ s the same exists at that time;
(iii) The Premises would be leased on the same terms as this Lease with respect to
the obligations for repairs, maintenance, insurance and real estate taxes; and
(iv) The Premises would be used for a comparable use.
(b) Using the aforementioned assumptions, Lessee shall submit Lessee’s calculation of the Fair
Market Rent (“Lessee’s Calculation”) when Lessee exercises Lessee’s option. If Lessor disagrees with
the Lessee’s Calculation, Lessor shall within thirty (30) days after receipt of Lessee’s Calculation, submit
to Lessee in writing, Lessor’s judgment as to the Fair Market Rent (“Lessor’s Calculation”). If after
consultation with one another, Lessor and Lessee are unable to reach an agreement as to Fair Market
Rent within sixty (60) days following Lessor’s submission of Lessor’s Calculation to Lessee, then in thar
event, Lessor and Lessee shall appoint a qualified real estate appraiser in the area (the “Appraiser”) to
determine the Fair Market Rent. If Lessor and Lessee cannot jointly agree on the Appraiser within
fifteen (15) days, then in that event Lessor and Lessee shall each designate an Appraiser and the two
Appraisers shall designate a neutral Appraiser to determine Fair Market Rent. For purposes of this
Lease, the term “qualified real estate appraiser” shall mean an appraiser holding a professional
designation of either M.A.I. or S.R.P.A. with at least five (5) years full-time appraisal experience with
respect to commercial and office rental properties in the area where the Premises are located.
(c) The Appraiser shall determine the Fair Market Rent and submit same to Lessor and Lessee
within twenty (20) days after the appointment. If the Fair Market Rent determined by the Appraiser is
less than the Lessee’s Calculation (which shall not be less than the Base Rent payable during the last
year of the current Lease Term), then’ the Lessee’s Calculation shall be used for the Fair Market Rent. In
the event the Fair Market Rent determined by the Appraiser is greater that the Lessor’s Calculation, then
the Lessor’s Calculation shall be used for the Fair Market Rent.
39.6 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option: (i) during the period commencing
with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period
of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given three (3) or more
PAGE 24
lnitialsS*
notices of separate DI Jlt, whether or not the Defaults are cur during the twelve (12) month period
immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exgrcised shall not be extended
or eplarged by reason of Lessee’s inability to exercise an Option because of the provisions of Paragraph
39.6(a).
(c) An Option shall terminate and be of no further force or effect, notwithstanding
Lessee’s due and timely exercise of the Option, if, after such exercise and prior to the commencement
of the extended term, (i) Lessee fails to pay Rent for a period of thirty (30) days after such Rent becomes
due (without any necessity or Lessor to give notice thereof), (ii) Lessor gives to Lessee three (3) or more
notices of separate Default during any twelve (12) month period, whether or not the Defaults are cured,
or (iii) if Lessee commits a Breach of this Lease.
39.7 Broker Fees on Options. In the event Lessee exercises an Option to extend or renew
this lease, no broker fees will be owed by Lessor, pursuant to Paragraph 39.
40. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder
does not include the cost of guard service 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.
41. Reservations. Lessor reserves to itself the right, from time to time, to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps
and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication,
map or restrictions.
42. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of
money to be paid by one Party to the other under the provisions hereof, the Party against whom the
obligation to pay the money is asserted shall have the right to make payment “under protest” and such
payment shall not be regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled tQ
recover such sum or so much thereof as it was not legally required to pay.
43. Authority. If either Party hereto is a corporation, trust, limited liability company, partnership, or
similar entity, each individual executing this Lease on behalf of such entity represents and warrants that
he or she is duly authorized to execute and deliver this Lease on its behalf. Each party shall upon
request, deliver to the other party satisfactory evidence of such authority.
44. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or
handwritten provisions shall be controlled by the typewritten or handwritten provisions.
45. Offer. Preparation of this Lease by either Party or their agent and submission of same to the
other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be
binding until executed and delivered by all Parties hereto.
46. Amendments. This Lease may be modified only in writing, signed by the Parties in interest at
the time of the modification. As long as they do not materially change Lessee’s obligations hereunder,
Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or refinancing of the
Premises.
47. Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee,
such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease.
48. Tenant Improvements.
PAGE 25
InitialsS-
9
48.1 lessor .Jproval. Lessor shall have the right review and approve the plans and
specifications for tenant improvements prior to the commencement of any construction at the Premises.
Furthermore, Lessor shall have the right to review all bids received by Lessee for the constructlon of
Lessee’s tenant improvements and approve Lessee’s selection of the contractor or contractors for the
construction of said improvements. Finally, Lessor shall have the right to review and approve all
invoices submitted by such contractor for payment prior to Lessor’s release of payments for same.
Lessor’s approval pursuant to this paragraph shall not be unreasonable withheld.
48.2 Construction. Lessee shall competitively bid construction of Lessee’s tenant
improvements. All tenant improvements shall be constructed by a duly licensed contractor or
contractors and shall be completed in an expeditious and workmanlike manner, with good and
sufficient materials.
48.3 Financing. Lessor shall provide the Lessee with a “Tenant Improvement
Allowance” of $4.00 per square foot for Lessee to design and construct Lessor approved tenant
improvements. In addition to the foregoing, Lessor shall provide Lessee with a “Supplemental
Allowance” of $226,270.00 for such tenant improvements. Utiiization of the Supplemental Tenant
Improvement by the Lessee shall be reimbursed to Lessor. Further, said amount shall be fully amortized
over the initial term of this lease, with an interest factor of 10% per annum and shall be in addition to
the Base Rent due to Lessor pursuant to this Lease (see Exhibit D, Amottization Schedule). The
foregoing Tenant Improvement Allowance and Supplemental Allowance shall only be used for
permanent improvements to the Premises and shall not be used for Tenant’s equipment, trade fixtures,
or personal property. Lessor shall not impose any charge for profit, overhead or supervision on Lessee
in connection with the construction of tenant improvements. Lessee shall be responsible for the
payment of any and all amounts in excess of the Tenant Improvement Allowance and Supplemental
Allowance.
48.4 Security. Lessee shall deposit with Lessor a Cash Security, or establish an
Unconditional Irrevocable Letter of Credit from a reputable financial instituti.on in a form approved by
Lessor’s Attorney, in favor of the City of Carlsbad, in the amount of $226,270 to secure the
Supplemental Allowance. At each anniversary of the Commencement Date of the Lease, and upon
written request from Lessee, the amount of the Cash Security or Unconditional Irrevocable Letter of
Credit may be reduced by an amount equal to the annual amortized amount paid by Lessor for the
prior twelve (12) months for the Supplemental Allowance. Should this Lease terminate prematurely for,
any reason, including Lessee’s breach, all remaining sums due and owing for the balance of the lease
term, including interest owed to date for the Supplemental Allowance for tenant improvements, shall
become immediately due and payable.
48.5 Payment Requests. Lessee shall submit written progress payment requests to Lessor
for proper design, permit and/or construction expenses. Said requests for payment shall be submitted
on a monthly basis, on or before the 20th of each month after the execution of this Lease. Each request
for payment shall be accompanied by: (i) copies of the invoices from Lessee’s contractor and
contractor’s subcontractors and major material suppliers; (ii) a certificate from Lessee that the work
described on said invoices has been completed in accordance with the plans and specifications; and
(iii) releases in accordance with Civil Code 3 3262.
PAGE 26
Initial -
9
llll~lll~~lllllwllll~~~l~ll
2001-0295049
RECORDING REQUESTED BY:
Carlsbad City Clerk’s Office
WHEN RECORDED MAIL TO:
City Clerk
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
DOC # 2001-0295049
Mar 101 2001 10: 42 AM
SW DIE@ CWTY REORDER’S OFFICE GREGORY J. t3nIliL CDMTY RECORDER
ITI:
SPACE ABOVE THIS LINE FOR RECORDER’S USE
Abstract of Lease
4525
ABSTRACT OF LEASE
49. ABSTRACT OF LEASE: This is the final Paragraph and Abstract of Lease, hereinafter “‘Abstract,”
dated September 25, 2000, between CITY OF CARLSBAD, Lessor, and ModeTek Inc., Lessee,
concerning the Leased Premises described in Exhibits “A” and “B,” attached hereto and by this
reference made a part hereof.
For good and adequate consideration, Lessor leases the Leased Premises to Lessee, and Lessee hires
them from Lessor, for the term and on the provisions contained in’the Lease dated September 25,
2000, the Abstract of which is recorded by the San Diego County Recorder’s Office as Document No.
, including without limitation provisions prohibiting assignment, subleasing, and
encumbering said leasehold without the express written consent of Lessor in each instance, all as more
specifically set forth in said Lease, which said Lease is incorporated in this Abstract by this reference.
The term of the Lease is hve (5) years, beginning january 1, 2001, and ending December 31, 2005.
This Abstract is not a complete summary of the Lease. Provisions in this Abstract shall not be used in
interpreting the Lease provisions. In the event of conflict between this Abstract and other parts of the
Lease, the other parts shall control. Execution hereof constitutes execution of the Lease itself.
Dated: ,200o s//5/
CITY OF CARLSBAD, CALIFORNIA
Title: EksidmT
ModeTek Incorporated
Five (5) Year lease Term Plus one (1) option of 5 Years
Commencing January 1,200l
Terminating December 3 1, 2005
PAGE 27
Initials 3 -
a
STATE OF CALIFORNIA, 4526
COUNTY OF iii%%%!<@& *
On ,~e/f?227Q$kZ /-r/ .S&~ before me, QW&ZW R. S~I~n&lo, #otq Publio . 4 personally appeared
27&lcsw~~~ - +’ , -proved to me
on the basis of satisfactory evidence) to be the person@ whose name& is/m subscribed to the within
instrument and acknowledged to me that he/she&hey executed the same in his/h&&e+ authorized
capacity$W, and that by his/h&&&r signatureb on. the instrument the person&J, or the entity upon
behalf of which the person (z ) acted, executed the instrument.
PAGE 28
4527 STATE OF CALIFORNIA)
COUNTY OF SAN DIEGO)
before m
WITNESS my hand and official se
Signature EUUDARGUZMhN
g
catmwoni 1126619 t
I
Nakry--- _ --ePcanly b
PAGE 29
Initial6 diz
. +5s3
LESSOR AND LtSSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND AS&h/( AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
The parties hereto have executed this Lease at the place and on the dates specified above their
respective signatures.
Executed at: XPS Ab?+?ks, e4
on: 1 2coo
By LESSEE:
Executed at:
on:
Py LESSOR:
Title:
BY: s,
Name Printed:
Title:
Telephone: cd&) <3//j.,7<;3 c
Facsimile: ( )
Federal ID No.
Name Prked: Raymond R. Patchett
Title: City Manager, Citv of Carlsbad
Address: 1200 Carlsbad Village Drive
Carlsbad, CA 92008
Telephone: (760 ) 434-282 1
Facsimile: (760) 720-9461
PAGE 30
InitialS 7 e
’ . .
Exhibit A
PARCEL 6
THAT PORTION OF LOTS 4 AND 5 OF CARLSBAD TRACT NO. 80-33 IN THE CITY OF CARLSBAD,
CoUNN OF SAN DIEGO. STATE OF CALIFORNIA ACCORDING TO MAP THEREOF No. 10061 As
RECORDED IN THE OFFICE OF THE RECORDER OF SAN DIEGO COUNTY ON APRIL 15, 1981, As
FILE NO. 81-115129 BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE MOST NORTHERLY CORNER OF SAID LOT 5, SAID NORTHERLY CORNER
BEING A POINT ON THE WESTERLY RIGHT OF WAY OF LAS PALMAS DRIVE AND ALSO BEING
THE SOUTHEASTERLY CORNER OF LOT 4 OF SAID MAP NO 10061; THENCE S36°12’50W ALONG
THE NORTHWESTERLY LINE OF SAID LOT 3, ALSO BEING IHE SOUT;-lEASTEHLY LINE OF SAID
LOT 4, 273.13 FEET TO THE TRUE POINT OF BEGINNING; THENCE DEPARTING SAID
NORTHWESTERLY LINE OF SAID LOT 5. N53O55’12W. 106.81 FEET: THENCE S36°22’01W. 184.96
FEET TO A POINT ON THE SOUTHWESTERLY LINE OF SAID LOT 4: THENCE S57O55’55”E ALONG
THE SOUTHWESTERLY BOUNDARY OF SAID LOT 4, 107.59 FEET TO THE MOST SOUTHERLY
CORNER OF SAID LOT 4, ALSO BEING THE MOST WESTERLY CORNER OF SAID LOT 5; THENCE
ALONG THE BOUNDARY OF SAID LOT 5 THE ‘FOLLOWING COURSES AND DISTANCES;
S89”25’58”E, 382.72 FEET; THENCE N15°00’00”E, 292.53 FEET TO A POINT ON A CURVE CONCAVE
NORTHEASTERLY HAVING A RADIUS OF 331.00 FEET, A RADIAL TO WHICH BEARS S15O46’03”w
ALSO BEING A POINT ON THE WESTERLV’ RIGHT-K ik PALMAS DRIVE; THENCE
WESTERLY ALONG THE ARC OF SAID CURVE THROUGH AN ANGLE OF 7033’43”, A DISTANCE OF
43.69 FEET; THENCE N66’40’14W, 126.08 FEET TO THE BEGINNING OF A TANGENT CURVE
CONCAVE NORTHEASTERLY HAVING A RADIUS OF 181.00 FEET; THENCE NORTHWESTERLY
ALONG THE ARC OF SAID CURVE THROUGH AN ANGLE OF 12O54’23”, A DISTANCE OF 40.77 FEET
TO THE MOST NORTHERLY CORNER OF SAID LOT 5; THENCE LEAVING SAID RIGHT OF WAY
S36°12’50”W ALONG THE NORTHWESTERLY LINE OF SAID LOT 5, 273.13 FEET TO THE TRUE
POINT OF BEGINNING.
SAID PARCEL CONTAINING 119,148 SQUARE FEET (2.74 ACRES), MORE OR LESS.
SCALE: I” = 100’
FOUND M-10 MDN
STAMPED RCE 1667 PER MAP 10061
FOUND 2. IP W/ DISC STAMPED RCE 16673 PER MAP 10081
PROPERTY LINE
5
PER UAP loo61 . -- -.-- _---. - 6
NUM!?m 8EaP!W DISTN’I
Ll N62’28’05-E 1 a20’ 1 \
i I3 \ -&I .\\ \
NUMBER DELTA RADIUS 1 LENGTH
cl 90=02*2l n 25.OD’ 1 39.29’
c2 1254’23- 181.00’ 40.71
c3 733.45 331-w 43.69’
\
1 \
I ADJUSNENT PLAT--CITY UF CARLSBAD 1
ADDlican t: Preoared By:
City of Co&bad FMEB
1635 Faraday Avenue ENGIJKE~BINQ,IHC
Carlsbad CA 92008 2M~-RK- ck mm (m)m-ss3 fAx (700)7z2-34so
Amro ved B K A. P-N.;
213-061-19
LION Hubbs City Engineer
RCE 23889 213-061-20
Expired 12/31/2001 Dote
\Jr?O\lS\XREFS\PL-COR.DVG 6-15-00 JJ.GJJ7 on EST
Exhibit B
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Exhibit C
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Amortization Schedule
Exhibit D
Loan Amount: $226,270.00 Interest Rate: 10.00% NumberofPaymenk60 Payment Amount: $4,807.57
Payment Number Principal Interest Principal Paid To Date Interest Paid To Date Extra Principal BALANCE
1
2
3
4
5
6
7
6
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
2921.99
2946.34
2970.89
2995.65
3020.61
3045.76
3071.16
30Q6.76
3122.56
3148.58
3174.82
3201.28
3227.96
3254.86
3281.98
3309.33
3336.91
3364.72
3392.75
3421.03
3449.54
3476.28
3507.27
3536.50
3565.97
3595.68
3625.65
3655.86
3686.33
3717.05
3748.02
3779.25
3810.75
3842.50
3874.53
3906.81
3939.37
3972.20
4005.30
4038.68
4072.33
4106.27
4140.49
1885.58 2921.99
1861.23 5868.33
1836.68 8839.22
1811.92 11834.87
1786.96 14855.48
1761.79 17901.26
1736.41 20972.42
1710.81. 24069.18
1685.01 27191.74
1658.99 30340.32
1632.75 33515.14
1606.29 36716.42
1579.61 39944.38
1552.71 43199.24
1525.59 46481.22
1498.24 49790.55
1470.66 53127.46
1442.85 56492.18
1414.82 59864.93
1386.54 63305.96
1358.03 66755.50
1329.29 70233.78
1300.30 73741.05
1271.07 77277.55
1241.60 60643.52
1211.89 84439.20
1181.92 88064.85
1151.71 91720.71
1121.24 95407.04
1090.52 99124.09
1059.55 102872.11
1028.32 106651.36
996.82 110462.11
965.07 114304.61
933.04 118179.14
900.76 122085.95
868.20 126025.32
835.37 129997.52
802.27 134002.82
768.89 138041.50
735.24 142113.83
701.30 146220.10
667.08 150360.59
1885.58 0.00 223348.01
3746.81 0.00 220401.67
5583.49 0.00 217430.78
7395.41 0.00 214435.13
9182.37 0.00 211414.52
10944.16 0.00 208368.74
12680.57 0.00 205297.58
14391.38 0.00 202200.82
18076.39 0.00 199076.26
17735.38 0.00 195929.68
19368.13 0.00 192754.86
20974.42 0.00 189553.58
22554.03 0.00 186325.62
24106.74 0.00 183070.76
25632.33 0.00 179788.78
27130.57 0.00 176479.45
28601.23 0.00 173142.54
30044.08 0.00 169777.82
31458.90 0.00 166385.07
32845.44 0.00 162964.04
34203.47 0.00 159514.50
35532.76 0.00 156036.22
36833.06 0.00 152528.95
38104.13 0.00 146992.45 -
39345.73 0.00 145426.48
40557.62 0.00 141830.80
41739.54 0.00 138205.15
42891.25 0.00 134549.29
44012.49 0.00 130862.96
45103.01 0.00 127145.91
46162.56 0.00 123397.89
47190.88 0.00 119618.64
48187.70 0.00 115607.89
49152.77 0.00 111965.39
50085.61 0.00 108090.86
50966.57 0.00 104164.05
51854.77 0.00 100244.68
52690.14 0.00 96272.48
53492.41 0.00 92267.18
54261.30 0.00 88228.50
54996.54 0.00 64156.17
55697.84 0.00 80049.90
56364.92 0.00 75909.41
Printed at8l1512000
.A
Page1
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LoanAmount: $226,270.00 Interest Rate: 10.00% Number of Payments:60 Payment Amount: $4,807.57
Payment Number Principal Interest Principal Paid To Date Interest Paid To Date Extra Principal BALANCE
44 4174.99 632.58 154535.58 56997.50 0.00 71734.42
45 4209.78 597.79 158745.36 57595.29 0.00 67524.64
46 4244.86 562.71 162990.22 58158.00 0.00 63279.78
47 4280.24 527.33 167270.46 58685.33 0.00 58999.54
48 4315.91 491.66 171586.37 59176.99 0.00 54683.63
49 4351.87 455.70 175938.24 59632.69 0.00 50331.76
50 4388.14 419.43 180326.38 60052.12 0.00 45943.62
51 4424.71 382.86 184751.09 60434.98 0.00 41518.91
52 4461.58 345.99 189212.67 . 60780.97 0.00 37057.33
53 4498.76 308.81 193711.43 61089.78 0.00 32558.57
54 4536.25 271.32 198247.68 61361.10 0.00 28022.32
55 4574.05 233.52 202821.73 61594.62 0.00 23448.27
56 4612.17 195.40 : 207433.90 61790.02 0.00 18836.10
57 4650.60 156.97 212084.50 61946.99 0.00 14185.50
58 4689.36 118.21 216773.86 62065.20 0.00 9496.14
59 4728.44 79.13 221502.30 62144.33 0.00 4767.70
60 4787.70 39.73 228270.00 62184.06 0.00 0.00
Printed at 8/l 512000 Page 2
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