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HomeMy WebLinkAbout2015-11-17; City Council; 22142; Lease Agreement Terracare Associates Maintenance Building Aviara Park 6440 Ambrosia LaneAviara Community Park Lease Agreement November 17, 2015 Poge2 of2 ENVIRONMENTAL IMPACT: The proposed action is exempt from the California Environmental Quality Act (CEQA) per State CEQA guidelines 15301 -Existing Facilities -leasing of existing public structures and facilities involving negligible or no expansion of use. EXHIBITS: 1. Resolution No. 2015-285 authorizing the City Manager to execute a Lease Agreement with Terracare Associates, Inc. for a park maintenance building located within Aviara Community Park. 2. Location site map identifying portion of premises to be leased. 3. Lease Agreement between the City of Carlsbad and Terracare Associates, Inc. 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2015-285 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE A LEASE AGREEMENT WITH TERRACARE ASSOCIATES, INC. FOR A PARK MAINTENANCE BUILDING LOCATED WITHIN AVIARA PARK (6440 AMBROSIA LANE) EXHIBIT I WHEREAS, Terracare Associates, Inc. was awarded a contract for parks maintenance services for the City of Carlsbad; and WHEREAS, the facility within Aviara Community Park was vacated by city staff in July 2014;and WHEREAS, Terracare Associates, Inc. expressed interest in leasing the facility within Aviara Community Park; and WHEREAS, city staff negotiated a lease for said property for one year with four additional one-year options; and WHEREAS, the Lease Agreement will generate $1,500 per month in revenue for the city plus an additional $150 per month to cover utilities; and WHEREAS, the council authorizes the City Manager to execute the Lease Agreement on behalf of the city for a term of one year. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California as follows: 1. That the above recitations are true and correct. 2. The City Manager is hereby authorized to execute the Lease Agreement with Terracare Associates, Inc. for a term of one year. /) 1.7 Tenant's Address For Notices: Terracare Associates, Inc. Attn: Ty Wilson 9722 Kent Street, Suite B Elk Grove, CA 95624 1.8 Landlord's Address For Notices: City of Carlsbad Municipal Property Manager 405 Oak Avenue Carlsbad, CA 92008 1.9 Landlord's Address for Rent Payments: Finance Department City of Carlsbad 1635 Faraday Avenue Carlsbad, California, 92008 This Article 1 is intended to supplement and/or summarize the provisions set forth in the balance of this Lease. If there is any conflict between any provisions contained in this Article 1 and the balance of this Lease, the balance of this Lease shall control. ARTICLE 2 PREMISES 2.1 Lease of Premises. Landlord leases to Tenant and Tenant hires from Landlord the Premises described in Article 1 for the Term (as defined in Article 3 below) and pursuant to all of the terms, covenants and conditions contained herein. Any statement of square footage set forth in this Lease, or that may have been used in calculating Rent, is an approximation which Landlord and Tenant agree is reasonable and the Rent based thereon is not subject to revision whether or not the actual square footage is more or less. 2.2 Condition of the Premises. Tenant acknowledges that except as otherwise expressly provided herein it shall accept the Premises in its "AS IS" condition, without representation, warranty or any improvements by Landlord. Landlord makes no representations or warranties with respect to this Lease, the Premises or any property therein or with respect to any matter related thereto, other than as expressly set forth in this Lease. Tenant hereby acknowledges that it has had an opportunity to investigate and inspect the condition of the Premises and the suitability of same for Tenant's purposes, and Tenant does hereby (a) waive and disclaim any objection to, cause of action based upon, or claim that its obligations hereunder should be reduced or limited because of the condition of the Premises or the suitability of same for Tenant's purposes and (b) acknowledge that the Premises are in good, clean and sanitary order and repair and by taking possession Tenant accepts the Premises as it exists. Tenant acknowledges that neither Landlord nor any agent nor any employee of Landlord has made any representations or warranty with respect to the Premises or with respect to the suitability of either for the conduct of Tenant's business and Tenant expressly warrants and represents that Tenant has relied solely on its own investigation and inspection of the Premises in its decision to enter into this Lease and let the Premises in an "AS IS" condition and is not relying on any statements, representations or warranties whatsoever made by or enforceable directly or indirectly against Landlord relating to the condition, operations, dimensions, descriptions, soil condition, suitability, compliance or lack of compliance with any state, federal, county or local law, ordinance, order, permit or regulation, or any other -2- attribute or matter of or relating to the Premises. No promise of Landlord to alter, remodel, repair or improve the Premises, and no representation, express or implied, respecting any matter relating to the Premises or this Lease (including, without limitation, the condition of the Premises) has been made to Tenant by Landlord or any agent of Landlord other than as may be contained herein. 2.3 Delivery of Possession. Tenant shall accept possession of the Premises from Landlord on the Commencement Date; provided, however, that Tenant shall not be entitled to possession of the Premises until Landlord has received from Tenant all of the following: (i) the Security Deposit, the first monthly installment of Rent for the first (1 51) full month after the Rent Commencement Date; and (ii) executed copies of policies of insurance or certificates or binders thereof as required under Article 9 below. Tenant shall pay to Landlord, upon its execution of this Lease, the sums specified in clause (i) above. If Tenant is unable to obtain possession of the Premises because one (1) or more of the above items are not received by Landlord, the Opening Date (as hereinafter defined), the Term Commencement Date, Tenant's Completion Date (as hereinafter defined) and the Rent Commencement Date shall not be affected or delayed thereby. 2.4 Easements. Landlord reserves to itself the right, from time to time, to grant such easements, rights and dedications affecting all or any part of the Premises as Landlord deems necessary or desirable, and to cause the recordation of parcel and subdivision maps and restrictions affecting all or any part of the Premises, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with Tenant's use of the Premises. Tenant shall sign any of the aforementioned documents upon Landlord's request and Tenant's failure to do so or breach of this Section shall constitute a material default under this Lease. Tenant shall cooperate with and not oppose or object to Landlord's construction, development, subdivision and parcelization of all or any part of the Premises and any property adjacent to the Premises. ARTICLE 3 TERM 3.1 Term. The Term of the Lease ("Term") shall commence on the Term Commencement Date and shall expire, unless sooner terminated in accordance with this Lease, on the Expiration Date. 3.2 Extension Option. At its sole discretion, Landlord may grant to the Tenant originally named in this Lease ("Original Tenant") four (4) options to extend the Term for a period of one (1) year each (each an "Extension Term"), commencing upon the expiration of the Term or prior Extension Term, as applicable. Each such option shall be exercisable only if Tenant is not then in default under this Lease and no event has occurred which, with notice or the passage of time or both, would constitute a default by Tenant under this Lease. Each such option shall be exercisable by Original Tenant by delivery of written notice to Landlord ("Tenant's Extension Notice") at least sixty (60) days prior to the commencement of the applicable Extension Term, but not more than ninety (90) days prior to the commencement of the applicable Extension Term. The option is personal to the Original Tenant and may only be exercised by the Original Tenant if it then occupies all of the Premises. If Tenant fails to deliver Tenant's Extension Notice as provided above, then Tenant's options to extend as to the applicable Extension Term and any future Extension Term shall forever terminate and be of no further force or effect. In the event Tenant exercises an option to extend, the Term and all of the terms and conditions of this Lease shall continue in full force and effect to the end of the applicable Extension Term, except that the Rent shall be adjusted as follows: (a) Rent for the first twelve (12) months of the Extension Term shall be one hundred three percent (1 03%) of the monthly Rent applicable immediately prior to the commencement of the Extension Term, and Rent shall increase every twelve (12) full calendar months thereafter by three percent (3%). -3- 3.3 Early Termination. Tenant shall have the right to terminate the Lease by first giving thirty (30) days written notice to the Landlord. 3.4 Surrender of Premises. On the Expiration Date or on the sooner termination hereof, Tenant shall remove all of Tenant's Property from the Premises and peaceably surrender the Premises in accordance with the terms of this Section and in good order, condition and repair, broom clean and free of debris, excepting only ordinary wear and tear. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Notwithstanding any other provision hereof, Tenant shall not remove (unless requested to by Landlord, in which case Tenant shall remove) all the Tenant Improvements, or any fixtures or equipment which cannot be removed without material damage to the Premises. If Landlord so elects, such items shall remain upon and be surrendered with the Premises as a part thereof, without charge, at the expiration or termination of this Lease and shall then become the property of Landlord. Tenant shall repair, to the satisfaction of Landlord, any damage to the Premises caused by any removal, or by the use of the Premises or by any failure of Tenant to comply with the terms of this Lease (including, without limitation, provisions relating to Hazardous Substances). Tenant shall promptly surrender all keys for the Premises to Landlord at the place then fixed for notices to Landlord and shall inform Landlord of the combinations on any locks and safes on the Premises. The provisions of this Section shall survive termination of this Lease. 3.5 Holding Over. Tenant has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. The failure of Tenant to timely surrender the Premises in the condition required by Section 3.4 above shall constitute a holdover shall not be considered a renewal of this Lease or an extension of the Term. In the event of any such holdover Base Rent shall immediately be increased to an amount equal to 150% of the Base Rent applicable during the month immediately preceding the expiration or termination. In addition to paying Landlord the increased Base Rent, Tenant shall defend, indemnify, protect and hold Landlord harmless from and against all claims, liability, damages, costs and expenses, including attorneys' fees and costs of defending the same, incurred by Landlord and arising directly or indirectly from Tenant's holding over in the Premises without Landlord's express written consent, including (a) any rent payable by or any loss, cost or damages, including lost profits and loss of good will claimed by any prospective tenant of the Premises, and (b) Landlord's damages as a result of such prospective tenant's rescinding or refusing to enter into the prospective lease of the Premises as a direct or indirect result of Tenant's holding over. No action by Landlord other than Landlord's express written consent shall be construed as consent by Landlord to any holding over by Tenant. 3.6 Waiver of Relocation Benefits: Tenant understands this Lease is entered into for a specified period of time. Tenant therefore waives any and all relocation benefits defined in the California Relocation Assistance Law (Government Code, Section 7260, et. seq.). ARTICLE 4 SECURITY DEPOSIT 4.1 Security Deposit. Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord the security deposit specified in Article 1 ("Security Deposit"). Landlord shall hold the Security Deposit as security for Tenant's faithful performance of all the terms, covenants, and conditions of this Lease. Landlord shall not be required to keep the Security Deposit separate from Landlord's general funds. Landlord shall have the right to commingle the Security Deposit with Landlord's general funds and to retain any and all interest and earnings on the Security Deposit. Tenant shall not be entitled to any interest on the Security Deposit. Subject to Landlord's right hereunder to apply the Security Deposit in accordance with this Section, the parties acknowledge that the Security Deposit does not cover any rent hereunder. In the event of a sale of the Premises or assignment of this Lease by Landlord to any person other than a mortgagee, Landlord shall have the right to transfer the Security Deposit to its vendee or assignee, subject to Tenant's aforesaid rights upon termination, and thereupon Landlord shall be released and relieved from any liability with respect to the return of such Security Deposit to Tenant, such vendee or assignee to be solely responsible to Tenant therefor. -4- 4.2 Use of Security Deposit. If Tenant breaches or fails to perform any of Tenant's obligations under this Lease, Landlord shall have the right, but not the obligation, to use or retain all or any part of the Security Deposit to cure the breach or failure of performance, and to compensate Landlord for any damages sustained by Landlord, including but not limited to payment of: (i) delinquent rent; (ii) interest on delinquent rent; (iii) late charges on delinquent rent; (iv) the cost of performing any of Tenant's obligations under this Lease; (v) the cost of repairing damages to the Premises; (vi) the cost of cleaning, maintaining, repairing, restoring or reletting the Premises; (vii) attorneys' and accountants' fees and disbursements and court costs; (viii) brokerage commissions and finders' fees; and (ix) interest on any and all of the above at the maximum lawful rate ("Remedy Rate") from the date due until paid; provided, however, that retention of all or any part of the Security Deposit shall not affect Tenant's obligations under this Lease or Landlord's other rights and remedies provided at law, in equity, or under this Lease; and provided, further, that in the event that Landlord elects to apply the Security Deposit or any portion thereof as herein provided, such application and the amounts applied to particular items of cure and/or compensation shall be determined by Landlord in Landlord's sole and absolute discretion. If any portion of the Security Deposit is used as provided for in this Section, then within 10 days after written demand by Landlord, Tenant shall deposit with Landlord sufficient cash to restore the Security Deposit to its original amount. Tenant's failure to make this deposit shall be a default under this Lease. 4.3 Refund and Transfer; Waiver of Statutes. If Tenant shall have fully and faithfully performed all of Tenant's obligations under this Lease (or upon the earlier termination without Tenant's fault), has cleaned and repaired any damage, and has received invoices for such repair or cleaning costs, if any, and after Landlord has inspected the Premises, then Landlord shall return the Security Deposit or any balance thereof to Tenant. Landlord may transfer the Security Deposit, or that portion remaining after any deduction, to Landlord's successor-in-interest and shall upon such transfer be discharged from any further liability with respect to such Security Deposit. Tenant hereby waives (i) California Civil Code Section 1950.7, as amended or recodified from time to time, and any and all other laws, rules and regulations, now or hereafter in force, applicable to security deposits in the commercial context ("Security Deposit Laws"), and (ii) any and all rights, duties and obligations Landlord may now or, in the future, will have relating to or arising from the Security Deposit Laws. Notwithstanding anything to the contrary contained herein, the Security Deposit may be retained and applied by Landlord (a) to offset rent which is unpaid either before or after the termination of this Lease, and (b) against other damages suffered by Landlord before or after the termination of this Lease, whether foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant. ARTICLE 5 TAXES 5.1 Real Estate Taxes. Tenant shall pay directly prior to delinquency any and all real estate taxes, assessments (whether general, special, ordinary or extraordinary), possessory interest taxes, improvement bonds, license fees, commercial rental taxes, sewer and water rents and other levies, fees and charges of every kind imposed by any authority having the direct or indirect power to so tax, levy or assess, to the extent relating to the Premises, to Landlord's gross receipts or revenues from the Premises, or to the business or other activities of Tenant upon or in connection with the Premises. In particular, Tenant acknowledges that this Lease may result in a taxable possessory interest. Tenant shall be solely responsible for payment of property taxes associated with its occupancy of the Premises, if any apply. Tenant shall also pay any fees imposed by law for licenses or permits for any business or activities of Tenant upon the Premises or under this Lease. 5.2 Personal Property Taxes. Tenant shall pay directly prior to delinquency any and all taxes and assessments levied or assessed during the Term upon or against (i) Tenant's Property (as hereinafter defined), furniture, equipment, and any other personal property installed or located in the Premises and (ii) all above-standard alterations, additions, betterments, or improvements of whatever kind or nature made by Tenant to the Premises that are separately assessed. Whenever possible. -5- ARTICLE 6 UTILITIES 6.1 Payment of Utilities. Landlord shall pay for all utilities serving the Premises, including (without limitation) water, gas and electricity, and any and all utility hook-up fees, connection fees, including sewer connection fees, and service and other charges for the availability of any such utilities and services, supplied to or consumed in or upon the Premises from and after the Term Commencement Date and continuously thereafter throughout the Term, directly to the supplier of such utilities and services. Tenant shall pay landlord $150 per month for use of alarm services, electric and water utilities. 6.2 Interruption of Utilities. Landlord shall have the right (but not the obligation), with notice to Tenant, or without notice in the case of an emergency, to shut off water, gas, electricity and any all other utilities and services whenever such discontinuance is necessary to make repairs or alterations or to protect the Premises. In no event shall Landlord be liable for the quality, quantity, failure or interruption of any such utilities or services to the Premises. In addition, any such failure, interruption or impairment shall not be construed as an eviction of Tenant or a disturbance of Tenant's possession, and Tenant shall not be entitled to any abatement of rent. ARTICLE 7 INSURANCE 7.1 General. Tenant shall, at its expense, maintain in effect from and after the Term Commencement Date and continuously thereafter until the termination or expiration of this Lease, the policies of insurance required under this Article. All policies that Tenant is required to obtain under this Article shall be issued by companies licensed to do business in California with a general policyholder's rating of not less than "A-" and a financing rating of not less than Class "VIII", as rated by the most current available "Best's" Insurance Reports and shall be in a form (without any additions or deletions unless approved in writing by Landlord) and underwritten by companies acceptable to Landlord. On or before the Term Commencement Date, Tenant shall furnish Landlord with certificates and endorsements in a form acceptable to Landlord evidencing that (i) the policies (or a binder thereof) required pursuant to this Article are in effect and (ii) Landlord shall be notified in writing thirty (30) days prior to cancellation, material change, or nonrenewal of such insurance. The policies that Tenant is required to obtain pursuant to this Article shall name Landlord, and any other parties requested by Landlord, as additional insureds, or as loss payee (as applicable) for property which Landlord has an insurable interest and shall be primary policies, and shall not be contributing with and shall be in excess of coverage which Landlord may have and shall be unaffected by any insurance or self-insurance Landlord may have regardless of whether any other insurance names Landlord as an insured or whether such insurance stands primary or secondary. If Tenant carries any of the insurance required hereunder in the form of a blanket policy, any certificate required hereunder shall make specific reference to the Premises. The procuring of policies of insurance shall not be construed to limit Tenant's liability hereunder in any way, nor to fulfill the indemnification provisions and requirements of this Lease. Tenant agrees not to use the Premises in any manner, even if use is for purposes stated herein, that will result in the cancellation of any insurance Landlord may have on the Premises, or on adjacent premises, or that will cause cancellation of any other insurance coverage for the Premises, or adjoining premises. Tenant further agrees not to keep on the Premises or permit to be kept, used, or sold thereon, anything prohibited by any fire or other insurance policy covering the Premises. Tenant shall, at its sole cost and expense, comply with any and all requirements, in regard to Premises, of any insurance organization necessary for maintaining fire and other insurance coverage at reasonable cost. 7.2 Commercial General Liability Insurance. Tenant shall obtain and keep in force a policy or policies of commercial general liability insurance covering the Premises and the business operations thereon, including contractual liability, personal injury and property liability coverage in -6- amounts not less than a combined single limit of $1,000,000 per occurrence for bodily injury, personal injury, death and property damage liability. If the submitted policies contain aggregate limits, general aggregate limits will apply separately under this Lease or the general aggregate will be twice the required per occurrence limits. Liability coverage for the required limits may be obtained with a combination of commercial general liability insurance and an umbrella policy. 7.3 Property and Extended Coverage Insurance. Tenant shall obtain and keep in force a Causes of Loss -Special Form property insurance policy (formerly known as "all risks"), including vandalism, malicious mischief, earthquake and sprinkler leakage coverage, covering one hundred percent (100%) of the replacement cost of all Tenant's Property, with an inflation rider or endorsement attached thereto and twelve (12) months' business income (business interruption) insurance rider or endorsement attached thereto. Tenant shall keep in force a policy of plate glass insurance covering all plate glass in the Premises in an amount equal to the full replacement cost thereof. The deductibles on such policies shall not exceed $1,000.00 per occurrence. The proceeds from any such insurance shall be used by Tenant for the replacement of personal property and trade fixtures as well as alterations and utility installations. 7.4 Workers' Compensation Insurance. Tenant shall obtain and keep in force workers' compensation and employer's liability insurance covering all employees of Tenant engaged on or with respect to the Premises, affording applicable statutory limits for workers' compensation coverage and at least $1,000,000.00 in limits for employer's liability coverage. 7.5 Automobile Insurance. Tenant shall obtain and keep in force comprehensive automobile liability insurance with a combined single limit of at least $1,000,000 per occurrence for claims arising out of any owned, non-owned or hired automobiles. 7.6 Waiver of Subrogation. Notwithstanding anything to the contrary contained herein, Landlord and Tenant hereby waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, their respective property, the Premises or its contents, arising from any risk to the extent covered by the insurance required hereunder. The parties each, on behalf of their respective insurance companies insuring the property of either Landlord or Tenant against any such loss, waive any right of subrogation that it may have against Landlord or Tenant, as the case may be. Each party shall obtain any special endorsements, if required by its insurer, whereby the insurer waives its rights of subrogation against the other party. The foregoing waivers of subrogation shall be operative only so long as available without invalidating either Landlord's or Tenant's policy of insurance. 7.7 Coverage Changes. Notwithstanding any of the foregoing, Landlord shall retain the right at any time to review the coverage, form, and amount of the insurance required under this Lease. If, in the opinion of Landlord, the insurance provisions in this Lease do not provide adequate protection for Landlord and/or for members of the public using the Premises, Landlord may require Tenant to obtain insurance sufficient in coverage, form and amount to provide adequate protection. Landlord's requirements shall be reasonable but shall be designed to assure protection from and against the kind and extent of risk, which exist at the time a change in insurance is required. Landlord shall notify Tenant in writing of changes in the insurance requirements and, if Tenant does not deposit certificates/endorsements evidencing acceptable insurance policies with Landlord incorporating such changes within thirty (30) days of receipt of such notice, this Lease shall be in default without further notice to Tenant, and Landlord shall be entitled to all legal remedies. ARTICLE 8 USE OF PREMISES 8.1 Permitted Use and Continuous Operation. Tenant shall actively and continuously use, operate and occupy the Premises solely for the Permitted Use, and shall be open to the public during Tenant's Business Hours. No other use shall be permitted without the prior express written consent of Landlord. -7- 8.2 Conduct of Business. Tenant shall conduct its business at all times in a first- class, professional and businesslike manner consistent with reputable business standards and practices. 8.3 Compliance with Laws; Nuisance. Tenant shall, at its sole expense and at all times, comply fully with (i) all federal, state and municipal laws, including without limitation all zoning and land use laws and ordinances, conditional use permit rules and orders, now in force or which may hereafter apply to the Premises or which impose any duty on Landlord or Tenant relating to the use or occupancy of the Premises, including but not limited to the obligation to obtain a conditional use permit, alter, maintain, repair or restore the Premises in compliance and conformity with all such laws, rules and orders, (ii) any declaration of covenants, conditions and restrictions and easements encumbering the Premises, (iii) any rules and regulations prescribed by Landlord for the Premises ("Rules and Regulations"); and (iv) any and all requirements and recommendations of any insurance organization or company necessary for the maintenance of reasonable fire and public liability insurance covering the Premises. Tenant shall neither store, use or sell any article in or about the Premises, nor permit any act, that would cause the premiums for insurance to increase or cause a cancellation of any policy upon the Premises. Tenant shall not occupy, suffer or permit the Premises or any part thereof to be used for any illegal, immoral or dangerous purpose, or in any other way contrary to the law or the rules or regulations of any public authority. Tenant shall not commit, or suffer to be committed, any waste upon the Premises, or any public or private nuisance, or any other act or thing which may disturb the quiet enjoyment of neighbors of the Premises. Tenant shall not conduct or permit to be conducted any sale by auction in, upon or on the Premises. 8.4 Environmental Compliance. Tenant represents, warrants and covenants to Landlord that Tenant shall at no time use, or permit the Premises to be used, in violation of any federal, state or local law, ordinance or regulation relating to the environmental conditions on, under or about the Premises, including, but not limited to, air quality, soil and surface and subsurface water conditions. Tenant shall assume sole and full responsibility and cost to remedy any such violations. Tenant further represents, warrants and covenants to Landlord that Tenant shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (except for supplies typically used in the ordinary course of operating a restaurant in commercially reasonable amounts and in strict compliance with law) and shall promptly, at Tenant'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 Tenant, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for Tenant, or any third party. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii) regulated or monitored by any government authority, or (iii) a basis for potential liability of Landlord to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substances shall include, but not be limited to, asbestos, asbestos containing material, the group of organic compounds known as polychlorinated biphenyls, as well as substances defined as "hazardous substances" or "toxic substances" under State, local or federal laws or regulations, as they be enacted or promulgated from time to time. 8.5 Landlord's Right of Entry. Landlord, at reasonable times, may go into the Premises without any liability for the purposes of: (i) inspecting the Premises; (ii) inspecting the performance by Tenant of the terms and conditions hereof; (iii) showing the Premises to prospective tenants, purchasers, partners, or mortgagees; and (iv) posting notices for the protection of Landlord on the Premises. Except in the case of an emergency, Landlord shall give Tenant reasonable notice of any and all intended entries or inspections pursuant to this Section. 8.6 Prohibition Against Discrimination. Tenant shall not discriminate against or segregate any person or class of persons by reason of sex, color, race, religion or national origin. If the -8- use provided for in this Lease allows Tenant to offer accommodations or services to the public, such accommodations or services shall be offered by Tenant to the public on fair and reasonable terms. ARTICLE 9 MAINTENANCE AND REPAIR OF PREMISES 9.1 Tenant's Inspection. Tenant accepts the Premises in its "AS IS" condition as further provided in Section 2.2 above, and Tenant expressly waives all implied warranties including implied warranties of merchantability and fitness, if any. Tenant hereby waives all rights under Sections 1941 and 1942 of the California Civil Code, as amended or recodified from time to time, or any similar provision, permitting Tenant to make repairs at the expense of Landlord. Tenant represents and warrants that it has inspected and conducted tests and studies of the Premises, and that it is familiar with the condition of the Premises. Tenant understands and acknowledges that the Premises may be subject to earthquake, fire, floods, erosion, high water table, dangerous underground soil and water conditions and similar occurrences that may alter its condition or affect its suitability for any proposed use. Landlord shall have no responsibility or liability with respect to any such occurrence. 9.2 Tenant's Obligations. From and after the Term Commencement Date and continuously thereafter until the expiration or termination of this Lease, Tenant, at Tenant's sole expense, shall maintain the Premises in a first-class order and neat, clean and sanitary condition and repair, and make any necessary repairs and replacements to any portion of the Premises, including full responsibility for: (a) maintenance, repair and replacement of the interior and exterior of the building including (without limitation) the roof, foundation and structural portions of the Premises, painting, plumbing, fixtures, windows and glass, HVAC systems, custodial, flooring, and appliances throughout the Term to maintain and preserve the Premises in a good, safe, healthy and sanitary condition satisfactory to Landlord and in compliance with all applicable laws; and (s)(b) keeping the Premises free and clear of trash, garbage and other fire hazards. The maintenance, repair and replacement obligations set forth in this paragraph are a material part of the consideration for this Lease. 9.3 Landlord's Obligations. Landlord shall have no obligation at any time to maintain, repair or replace any portion of the Premises or to make any improvements, repairs or replacements whatsoever on or for the benefit of the Premises. 9.4 Landlord's Cure. Landlord shall have the right but not the duty, to enter, view, inspect, determine the condition of and protect its interests in, the Premises. If at any time Landlord determines that the Premises are not in the condition required by this Lease, then (a) Tenant shall perform the necessary maintenance, repair and/or replacement work within ten (1 0) days after written notice from Landlord, and (b) Landlord may require Tenant to file and pay for a faithful performance bond, to assure prompt correction without additional notice, in an amount that is adequate, in Landlord's opinion, to correct the unsatisfactory condition. If Tenant fails to perform the necessary maintenance, repair and/or replacement work within ten (1 0) days after written notice from Landlord, then Landlord may, but is not obligated to, perform such obligations without liability to Tenant for any loss to Tenant's business that might arise by reason thereof. Tenant shall reimburse Landlord on demand in an amount equal to the cost incurred by Landlord in the performance of such obligations plus an administrative fee equal to ten percent (10%) of the cost incurred by Landlord. Landlord's rights reserved in this section shall not create any obligations or increase any obligations for Landlord elsewhere in this Lease. ARTICLE 10 ALTERATIONS AND ADDITIONS 10.1 Tenant Improvements. Tenant shall not make (i) any alterations, improvements, additions or utility instc;~llations, including without limit, carpeting, floor or window coverings, locks, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning and plumbing in, on, or about the Premises or (ii) any change or alteration to the exterior of the Premises -9- (collectively "Tenant Improvements") without Landlord's prior written consent. If Tenant makes any Tenant Improvements without the prior written approval of Landlord, Landlord shall have the right to require that Tenant remove any or all of such Tenant Improvements and repair and any restore damage to the Premises caused by such removal at Tenant's sole expense and shall also have the right to declare Tenant in default and to terminate this Lease. Tenant Improvements shall at all times comply fully with all applicable federal, state and municipal laws, ordinances, regulations, codes and other governmental requirements now or hereafter in force and Tenant shall, at Tenant's sole cost and expense, take all actions now or hereafter necessary to ensure such compliance. Tenant shall provide Landlord with a written request for approval any Tenant Improvements that Tenant would like to make with proposed detailed plans. Landlord shall have the right to condition Landlord's prior written consent upon Tenant's: (i) obtaining a building permit and complying with all building and planning laws and regulations for the Tenant Improvements from appropriate governmental agencies; (ii) furnishing a copy of such building permit and evidence of such compliance to Landlord prior to the commencement of such work; (iii) complying with all the conditions of such building permit and such building and planning laws and regulations; (iv) providing Landlord with plans and specifications for the Tenant Improvements for Landlord's prior written approval or the consent of any other tenant, if required by such other tenant's lease; (v) providing Landlord with a copy of the construction contract, construction schedule, trade payment breakdown and list of subcontractors and suppliers for Landlord's prior written approval; (vi) obtaining a builder's "all risk" insurance policy in an amount and issued by insurance company acceptable to Landlord, naming Landlord as an additional insured and otherwise satisfying the requirements of Article 7 above; and/or (vii) providing Landlord with ten (1 0) days written notice prior to commencing any such work. Landlord's approval of the plans, specifications and working drawings for any Tenant Improvements shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. Landlord shall not be liable for any damage, loss, or prejudice suffered or claimed by Tenant, its agents or any other person or entity on account of: (a) the approval or disapproval of any plans, contracts, bonds, contractors, sureties or matters; (b) the construction or performance of any work whether or not pursuant to approved plans; (c) the improvement of any portion of the Premises or alteration or modification to any portion of the Premises; or (d) the enforcement or failure to enforce any of the covenants, conditions and restrictions contained in this Lease. Under no circumstances shall Tenant make any roof penetrations without the prior written consent of Landlord. Any consent of Landlord shall be conditioned upon Landlord's review and approval of plans satisfactory to Landlord for the repair of the roof. Any roof penetrations may be inspected by Landlord's roofing contractor, and Tenant shall reimburse Landlord for the cost of such inspection and any necessary repair work within ten (1 0) days after Tenant's receipt of an invoice therefor. 10.2 Construction of Tenant Improvements; Liens. Tenant shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Tenant at, on, or for use in the Premises, and shall defend, indemnify, protect and hold harmless the Premises and Landlord against the same (including, without limitation, the costs of defending against such claims, and reasonable attorney's fees incurred therein). Tenant shall keep the Premises and any interest therein, free and clear of all mechanics' liens and all other liens. Tenant shall give Landlord immediate written notice of any lien filed against the Premises or any interest therein related to or arising from work performed by or for Tenant. Tenant shall give Landlord not less than ten (1 0) days' prior written notice of the commencement of any Tenant Improvements in the Premises, and Landlord shall have the right to post notices of nonresponsibility in or upon the Premises as provided by law. If any lien or levy of any nature whatsoever is filed against the Premises or Tenant's leasehold interest, then upon Landlord's request, Tenant shall furnish to Landlord a corporate surety bond, satisfactory to Landlord, in an amount equal to one and one-half (1 ~) times the amount of the claims upon which such lien or levy has been filed. Such bond shall be acknowledged by Tenant as principal and by a corporation, licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company, as surety. Landlord shall have the right to declare this Lease in default in the event the bond required by this paragraph has not been deposited with Landlord within ten (1 0) days after written request has been delivered to Tenant. -10- 10.3 Title to Tenant Improvements. Subject to Section 11.1 below, any and all Tenant Improvements which may be made in or upon the Premises shall become the property of Landlord and remain upon and be surrendered with the Premises at the expiration of the Term without compensation to Tenant unless Landlord requires that Tenant remove the Tenant Improvements pursuant to Article 11 below. ARTICLE 11 TENANT'S PROPERTY 11.1 Tenant's Property. All trade fixtures, goods, inventory, merchandise, stock, supplies, decorative light fixtures, and movable equipment owned by Tenant and installed in the Premises at Tenant's sole cost and which may be removed without material damage to the Premises ("Tenant's Property") shall remain the property of Tenant during the Term. Except as provided to the contrary in Section 10.3 above, Tenant's Property shall be removable from time to time and at the expiration of the Term or earlier termination thereof, provided that: (i) Tenant shall not at such time be in default, or with notice or the passage of time or both would be in default, under any term, covenant, condition or provision of this Lease; (ii) Tenant shall repair to the satisfaction of Landlord, any damage to the Premises caused by the removal of Tenant's Property; and (iii) Tenant immediately replaces any such Tenant's Property with similar property of comparable or better quality to assure that the Premises are suitable for conducting business in accordance with Articles 5 and 10 hereof. 11.2 Landlord's Lien. Subject to the rights of Tenant, if any, under Section 91 02(4) of the California Uniform Commercial Code, as amended or recodified from time to time, Tenant hereby grants to Landlord a security interest in and lien upon Tenant's Property and the proceeds thereof as security for Tenant's performance of all the terms, covenants, conditions, provisions and obligations under this Lease. Upon Landlord's request, Tenant shall execute a security agreement, UCC-1 financing statement, continuation statement and such other documents as Landlord may reasonably require to evidence, create, protect, perfect and preserve the validity and priority of Landlord's lien upon and security interest in Tenant's Property. ARTICLE 12 DAMAGE AND DESTRUCTION In the event of damage or destruction to the Premises by fire, the elements or any other cause, Tenant shall, within ninety (90) days, commence and diligently pursue to completion the repair, replacement or reconstruction of improvements necessary to permit full use and occupancy of the Premises for the purposes provided in this Lease. Repair, replacement or reconstruction of the Premises shall be accomplished in a manner and according to plans approved by Landlord; provided, however, Tenant shall not be obligated to repair, reconstruct or replace the improvements following their destruction in whole or substantial part except to the extent the loss is covered by insurance required to be carried by Tenant pursuant to this Lease (or would be covered whether or not such required insurance is actually in effect). If Tenant is not obligated and elects not to restore, repair or reconstruct as herein provided, then the Lease shall terminate and neither party shall have any further obligation to the other, except for Tenant's obligation to pay rent and other charges which are accrued and unpaid as of the termination date and other provisions that survive the termination of this Lease. Tenant hereby waives California Civil Code Sections 1932 and 1933, as amended or recodified from time to time. -11 - ARTICLE 13 EMINENT DOMAIN 13.1 Total or Substantial Taking. If all of the Premises are taken under the power of eminent domain or such a substantial portion thereof is so taken that reasonable restoration will not result in the Premises being reasonably suitable for the conduct of Tenant's business, this Lease shall terminate on the date that Tenant is required to yield possession to the condemning authority, or on the date that the possession of the Premises or part thereof is taken, whichever is later. The term "eminent domain" shall include the exercise of any governmental power of condemnation and any private sale or other transfer in lieu of or under threat of condemnation. 13.2 Partial Taking. If there is a partial taking of the Premises, and after restoration of any building or other improvements, the Premises would be reasonably suitable for Tenant's continued occupancy and conduct of its business, Landlord, at its sole option, may elect to terminate this Lease or affirm the Lease by delivering written notice to Tenant within fifteen (15) days after any such partial taking. If Landlord fails to send any such written notice, this Lease shall terminate on the later of the dates that possession is so taken or that Tenant or Landlord is required to yield possession to the condemning authority. If Landlord elects to affirm the Lease, then: (i) the Lease shall terminate as to the part taken as of the date of transfer of possession; (ii) the rental shall be reduced in the same proportion as the square footage of the portion of the Premises taken bears to the original square footage of the Premises; and (iii) Landlord shall, at its own cost and expense, make all necessary repairs or alterations to the Premises required to restore the Premises to useful condition. During such repair or restoration, rental shall be abated proportionately as set forth above. Tenant hereby waives any statutory rights of termination which may arise by reason of any taking of the Premises under the power of eminent domain. 13.3 Award. Tenant hereby renounces any interest in, and assigns to Landlord, any award made in any condemnation proceeding for any such taking, provided that Landlord shall have no interest in or be assigned any award made to Tenant for the taking of Tenant's Property or for Tenant's relocation expenses. Tenant hereby specifically waives any right it may have to any compensation award representing the excess of the market value, immediately before the taking, of Tenant's leasehold interest in the portion of the Premises taken over the rent attributable thereto under the terms of this Lease. ARTICLE 14 INDEMNIFICATION Tenant shall indemnify, protect, defend and hold harmless Landlord and its agents, employees, officers, affiliates and representatives (collectively, "Landlord Parties") from and against any and all losses, damages, liabilities, actions, causes of action (whether legal, equitable or administrative), claims, judgments, costs, and expenses (including, without limitation, reasonable attorneys' fees) arising as a direct or indirect consequence of any of the following (except to the extent caused by the gross negligence or willful misconduct of Landlord or any of Landlord Parties): (i) Tenant's failure to perform any of Tenant's obligations as and when required by this Lease, or the failure at any time of any representation or warranty of Tenant to be true and correct; (ii) the use and operation of the Premises during the Term; or (iii) any act or omission by Tenant or any of Tenant's contractors, subcontractors or material suppliers, engineers, architects, agents, employees, customers or invitees with respect to the Premises. Tenant shall employ counsel satisfactory to Landlord, or at Landlord's option, Landlord may retain its own counsel, at the expense of Tenant, to prosecute, negotiate and defend any such claim, action or cause of action. Landlord shall have the right to compromise or settle any such claim, action, or cause of action without admitting actual liability and without Tenant's consent. Tenant shall pay any indebtedness arising under said indemnity to Landlord immediately upon demand by Landlord together with interest thereon, at the Remedy Rate, from the date such indebtedness arises until paid. Tenant's obligations under this section shall survive the expiration or termination of this Lease. -12- ARTICLE 15 DEFAULTS AND REMEDIES 15.1 Events of Default. The occurrence of any of the following events shall constitute an event of default and a material breach of this Lease on the part of Tenant: A Abandonment. Tenant's vacation or abandonment of the Premises. B. Failure to Make Payment. Tenant's failure to pay any rent or other sum due hereunder on the date when such payment is due, where such failure continues for five (5) days after written notice of such failure from Landlord, or Tenant's failure on three (3) occasions during any twelve (12) month period to timely pay rent on or before the due date as provided for herein (even though subsequently cured). C. Non-Permitted Use. Tenant's failure to comply with any provision of this Lease relating to the Permitted Use, where such failure continues for ten ( 1 0) days after written notice of such failure from Landlord. D. Failure to Perform Other Covenants. Tenant's failure to perform any of Tenant's other covenants, agreements or obligations hereunder, where such failure continues for thirty (30) days after written notice of such failure from Landlord (provided, however, if the nature of such default is such that the same cannot be reasonably cured within a thirty (30) day period, Tenant shall not be deemed to be in default if Tenant diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default), except if a different notice or cure period is specified in another provision of this Lease. E. Bankruptcy. The making of a general assignment for the benefit of creditors by Tenant, or the filing of a voluntary or involuntary bankruptcy petition by or against Tenant, or the appointment of a receiver to take possession of all or substantially all of Tenant's assets or the Premises, or the attachment, execution or other judicial seizure of substantially all of Tenant's assets or the Premises, or in the event Tenant becomes insolvent or fails to generally pay Tenant's debts as such debts become due. F. Transfer without Consent. The occurrence of any Transfer without Landlord's express prior written consent. 15.2 Remedies. Upon the occurrence of an event of default by Tenant as set forth in Section 17.1 above, Landlord shall have the following rights and remedies, in addition to any and all other rights and remedies available to Landlord at law or in equity, including without limit those provided under California Civil Code Sections 1951.2 and 1951.4, as amended or recodified from time to time: A Terminate Lease. Landlord shall have the right to terminate this Lease and all rights of Tenant hereunder by giving written notice to Tenant. If the Lease is so terminated, then Landlord may recover from Tenant: (i) the worth at the time of award of any unpaid rent that had been earned at the time of such termination; Q.ill§ (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned from the time of such termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of 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 Tenant proves could be reasonably avoided; Q.ill§ (iv) any other amount necessary to compensate Landlord for all the actual and consequential damages proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom; and (v) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable California law. As used in Subsections (A)(i) and (ii) above, the "worth at the time of award" is computed by allowing interest at the Remedy Rate. As used in Subsection (A) (iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). All amounts owing under this -13- Subsection which are not paid when due shall bear interest at the Remedy Rate from the date owing until paid and such interest shall be compounded monthly. B. Reenter Premises. Landlord shall also have the right, with or without terminating this Lease, to reenter the Premises and to remove all persons and Tenant's Property from the Premises and store the Tenant's Property in a public warehouse or elsewhere at the cost of and for the account of Tenant. C. Maintain Lease; Relet Premises. Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Unless Landlord elects to terminate this Lease as provided in Section 17.2(A) above, Landlord may from time to time, without terminating this Lease, either recover all rent as it becomes due or relet the Premises or any part thereof for such term or terms and at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable, with the right to clean and to make alterations and repairs to the Premises at Tenant's sole expense. If Landlord elects to relet as provided herein, then rent received by Landlord from such reletting shall be applied at Landlord's option: first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any cost of such reletting (including reasonable attorneys' fees, tenant improvements customary to make the Premises ready to lease [including the removal of any specialized improvements installed by Tenant], court costs and brokerage commissions); third, to the payment of the cost of any cleaning, alterations and repairs to the Premises; fourth, to the payment of rent due and unpaid hereunder; and the balance, if any, shall be applied in payment of future rent as the same may become due and payable hereunder. If the portion of such rentals received from such reletting during any month which is applied to the payment of rent under the reletting lease is less than the rent payable during that month by Tenant hereunder, then Tenant shall pay any such deficiency to Landlord immediately upon demand by Landlord. Such deficiency shall be calculated monthly and Tenant shall pay such deficiency monthly. Tenant shall also pay to Landlord, upon Landlord's demand, the costs and expenses incurred by Landlord in such reletting, including attorneys' fees, court costs, tenant improvements customary to make the Premises ready to lease (including the removal of any specialized improvements installed by Tenant) and brokerage commissions and in making any alterations and repairs to the Premises. No reentry, acts of maintenance or preservation, efforts to relet, or taking possession of the Premises by Landlord or the appointment of a receiver upon initiative of Landlord to protect Landlord's interest under the Lease shall be construed as an election to terminate this Lease unless an express written notice of such intention is delivered to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any reletting of the Premises without termination of this Lease by Landlord, Landlord may at any time after such reletting elect to terminate this Lease, in which case, Landlord shall have all the rights and remedies provided by law or equity or this Lease upon termination. D. Performance by Landlord. If Tenant breaches or fails to perform any of Tenant's obligations under this Lease and the breach or failure continues for thirty (30) days (or such shorter time period as may be specified otherwise in this Lease) after Landlord gives Tenant written notice of the breach or failure, Landlord, without thereby waiving or curing such may, but shall not be obligated to, perform any such obligation for the account and at the expense of Tenant. Landlord may also so perform any such obligation without notice in case of an emergency. E. Receiver on Behalf of Landlord. If, at the instance of Landlord in any action arising under this Lease, a receiver shall be appointed to take possession of the Premises or to collect the rents derived therefrom, then the receiver may, if it shall be necessary or convenient in order to collect such rents, conduct the business of Tenant then being carried on in the Premises, and may take possession of any Tenant's Property and other personal property and records used in Tenant's business -14- and use the same in conducting such business, without compensation to Tenant for such use. Neither application for, nor the appointment of a receiver shall be construed as an election by Landlord to terminate this Lease, unless express written notice of such election is given to Tenant. The fees and expenses of such receiver shall be charged to Tenant as Additional Rent. 15.3 Late Charges. Landlord and Tenant agree that the fixing of actual damages for Tenant's breach of any of the provisions of this Lease, including but not limited to the late payment by Tenant to Landlord of rent and other amounts due hereunder, would cause Landlord to incur costs not contemplated by this Lease, the exact amount of which would be extremely difficult or impracticable to ascertain. Such costs include but are not limited to accounting, processing, administrative, legal and clerical charges and late charges which may be imposed upon Landlord by the terms of any Deed of Trust covering the Premises. Accordingly, if any installment of rent or any other sum due from Tenant hereunder has not been received by Landlord or Landlord's agent within ten (1 0) days after such amount was due, Tenant shall pay to Landlord a late charge equal to ten percent (1 0%) of any such delinquent installment of rent or any other delinquent sum due from Tenant. Tenant hereby agrees that said late charge represents a fair and reasonable estimate of the cost Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall not constitute a waiver of Tenant's default with respect to such overdue amount nor prevent Landlord from exercising any other rights and remedies provided for in this Lease, at law or in equity. If a late charge is payable by Tenant whether or not collected, for three (3) installments of rent during any twelve (12) month period, then the Base Rent shall automatically become due and payable to Landlord quarterly in advance, notwithstanding any other provision of this Lease to the contrary. 15.4 Interest on Past Due Obligations. Any and all amounts not paid to Landlord when due, shall bear interest, compounded monthly from the date due until paid at the rate of ten percent (10%). Payment of such interest shall not excuse or cure any default by Tenant under this Lease and shall not affect any rights and remedies provided to Landlord in this Lease or at law or in equity, all of which shall be cumulative. Notwithstanding the foregoing, the City Manager of the City of Carlsbad shall have the right, in its sole discretion, to waive for good cause any interest payment upon written application of Tenant for any such delinquency period. 15.5 Waiver of Redemption. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Tenant being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of the Premises by reason of the violation by Tenant of any of the covenants and conditions of this Lease or otherwise. The rights given to Landlord herein are in addition to any rights that may be given to Landlord by any statute or otherwise. 15.6 Guaranty. Landlord's obligations under this Lease are conditioned upon Landlord's receipt of a guaranty of Tenant's obligations under this Lease in the form attached hereto as Exhibit D (the "Guaranty") executed by the Guarantor identified in Article 1 above, and if Guarantor is married, with the "Spousal Consent" executed by Guarantor's spouse. 15.7 Landlord's Default. Landlord shall in no event be charged with default in the performance of any of its obligations hereunder unless and until Landlord shall have failed to perform such obligations and such failure continues for more than thirty (30) days (or such additional time as is reasonably necessary to correct any such failure) after Landlord's receipt of written notice of such failure from Tenant. ARTICLE 16 SUBORDINATION AND ATTORNMENT 16.1 Subordination. At Landlord's option, this Lease is and shall be subordinate to any ground lease, mortgage, deed of trust and/or any other hypothecation or security document and advances and obligations thereunder now or hereafter placed upon the Premises, and any renewals, modifications, consolidations, replacements, and extensions thereof (collectively "Deed of Trust"). Such -15- subordination shall be effective upon notice from Landlord to Tenant without any further act of Tenant. Upon the request of Landlord, Tenant shall, from time to time, execute and deliver any documents or instruments that may be required by Landlord or the mortgagee, beneficiary, ground lessor or lender ("Landlord's Lender") under any such Deed of Trust, to effectuate any subordination, provided that any such Landlord's Lender agrees not to disturb Tenant's right to quiet possession under this Lease so long as Tenant is not in default, or with notice or passage of time or both would not be in default, under the terms, covenants, conditions and provisions of this Lease. If Tenant fails to execute and deliver any such documents or instruments, Tenant irrevocably constitutes and appoints Landlord as Tenant's special attorney-in-fact, coupled with an interest, to execute and deliver any such documents or instruments. If Landlord's Lender elects to have this Lease prior to the lien of its Deed of Trust, and gives written notice to Tenant of such election, this Lease shall be deemed prior to such Deed of Trust regardless of the respective dates of execution, delivery and recordation of this Lease and any such Deed of Trust. 16.2 Attornment. Tenant hereby attorns to and shall recognize the Landlord's Lender as Tenant's landlord under this Lease and shall promptly execute and deliver any instrument that Landlord may require to evidence such attornment. Tenant hereby irrevocably appoints Landlord as Tenant's attorney-in-fact, coupled with an interest, to execute, acknowledge and deliver the instrument of attornment on behalf of Tenant. 16.3 Estoppel Certificate. Upon the request of Landlord, Tenant at any time and from time to time shall execute, acknowledge, and deliver to Landlord, no later than ten (1 0) business days after Landlord's request therefor, an estoppel certificate in any reasonable form requested by Landlord ("Estoppel Certificate"). The Estoppel Certificate may be conclusively relied upon by a prospective lender, purchaser, or encumbrancer of Landlord's interest in the Premises. Failure to deliver the Estoppel Certificate within ten (1 0) days of such request shall be conclusive upon Tenant that: (i) this Lease is in full force and effect; (ii) there are no uncured defaults in Landlord's or Tenant's performance; (iii) not more than one month's Base Rent has been paid in advance; and (iv) the Security Deposit is in an amount equal to that specified in Article 1 hereof. Tenant hereby irrevocably appoints Landlord as its attorney-in- fact, which agency is coupled with an interest, to execute any such Estoppel Certificate upon Tenant's failure to do so within such ten (1 0) day period. 16.4 Rights of Landlord's Lender and Landlord's Purchaser. If any Landlord's Lender or any purchaser of Landlord's interest in the Premises ("Landlord's Purchaser") requires a modification of this Lease at any time, Tenant shall, at Landlord's request, promptly execute and deliver to Landlord instruments effecting the modifications that the Landlord's Lender or Landlord's Purchaser reasonably requires, provided that such modifications do not increase the rent, reduce the size of the Premises or otherwise adversely affect in any material respect any of Tenant's rights under this Lease. If Landlord's Lender or Landlord's Purchaser has given prior written notice to Tenant that it is the Landlord's Lender or Landlord's Purchaser and such notice includes the address at which notices to such Landlord's Lender or Landlord's Purchaser are to be sent, then Tenant shall give Landlord's Lender or Landlord's Purchaser, as the case may be, written notice simultaneously with any notice given to Landlord to correct any failure of Landlord to perform any of Landlord's obligations. Landlord's Lender and Landlord's Purchaser shall have the right after receipt of said written notice to correct or remedy such failure within a reasonable period of time. Any written notice of default given Landlord shall be null and void unless simultaneous written notice has been given to Landlord's Lender and Landlord's Purchaser. 16.5 Limitation of Liability. The covenants and agreements of Landlord under this Lease shall not be binding upon any person at any time after the transfer of that person's interest, as landlord, in the Premises. In the event of such a transfer, the covenants and agreements of Landlord shall thereafter be binding upon the transferee of Landlord's interest. ARTICLE 17 FORCE MAJEURE If either party hereto shall be delayed in or prevented from the performance of any act required hereunder by reason of acts of God, labor troubles, inability to procure materials, restrictive -16- governmental laws or regulations or other causes without fault and beyond the control of the party obligated (financial inability excepted) (collectively, "Force Majeure"), performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, nothing in this Section shall delay the Rent Commencement Date or excuse Tenant from the prompt payment of any rent or other charge required of Tenant hereunder, except as may be expressly provided elsewhere in this Lease. ARTICLE 18 ASSIGNMENT AND SUBLETTING 18.1 Landlord's Consent. Tenant shall not voluntarily, involuntarily or by operation of law assign, mortgage, sublet, hypothecate or otherwise transfer or encumber all or any part of Tenant's interest in this Lease or in the Premises, or contract for the management or operation of the whole or any part of the Premises, or permit the occupancy of any part of the Premises by any other person or business entity, or permit transfer of the Lease by merger, consolidation or dissolution (collectively 'Transfer"), without first obtaining Landlord's express written consent No consent to any Transfer shall constitute a waiver of the provisions of this Section. If Tenant is a partnership or limited liability company, a withdrawal or change, voluntary, involuntary, or by operation of law, of any partner or member, or the dissolution of the partnership or limited liability company, shall be deemed a Transfer requiring Landlord's consent If Tenant consists of more than one person or entity, a purported assignment, voluntary, involuntary, or by operation of law, from one person to the other shall be deemed a Transfer requiring Landlord's consent If Tenant is a corporation, any dissolution, merger, consolidation, or other reorganization of Tenant, or the sale or other transfer of twenty-five percent (25%) or more of the capital stock of Tenant or the value of the assets of Tenant, shall be deemed a Transfer requiring Landlord's consent Landlord and Tenant agree (by way of example and without limitation) that it shall be reasonable for Landlord to withhold its consent to a Transfer if any of the following situations exist or may exist: (i) the proposed Transferee's (as defined below) use of the Premises conflicts with or is different from the Permitted Use; (ii) the proposed Transferee or its business is subject to compliance with additional requirements of law beyond those requirements which are applicable to Tenant; (iii) in Landlord's reasonable business judgment, the proposed Transferee lacks sufficient business reputation or experience to operate a successful business of the type and quality permitted under this Lease; (iv) Tenant is in default under this Lease; or (v) the present net worth of the proposed Transferee is less than the greater of Tenant's net worth as of the date of this Lease or Tenant's net worth at the date of Tenant's request for consent Any attempted or purported Transfer without Landlord's prior written consent shall be void and of no force or effect, and shall not confer any estate or benefit on anyone. A consent to one Transfer by Landlord shall not be deemed to be a consent to any subsequent Transfer to any other party. 18.2 Request for Transfer. Tenant shall give Landlord at least sixty (60) days' prior written notice of any requested Transfer and of the proposed terms of such Transfer ("Transfer Notice"), including but not limited to: (i) the name and legal composition of the proposed assignee, sublessee, encumbrancer or transferee ("Transferee"); (ii) a current financial statement of the proposed Transferee prepared in accordance with generally accepted accounting principles consistently applied; (iii) the portion of the Premises Tenant proposes to Transfer (including square footage and location); and (iv) the nature of the proposed Transferee's business to be carried on in the Premises. The foregoing terms shall be in sufficient detail to enable Landlord to evaluate the proposed Transfer and the prospective Transferee. Within thirty (30) days after receipt of the Transfer Notice, Landlord shall either approve or disapprove of such Transfer; provided, however, that Landlord shall be deemed to have disapproved the Transfer Notice if Landlord has not sent Tenant written notice of Landlord's approval within such thirty (30) day period. Tenant shall immediately notify Landlord of any modification to the proposed terms of such Transfer. Tenant shall also provide to Landlord copies of the fully executed documents pertaining to the Transfer after the Transfer has become effective. Whether or not Landlord consents to any proposed Transfer, Tenant shall pay Landlord's review and processing fee in the amount of $500.00, as well as any reasonable legal fees incurred by Landlord, within thirty (30) days after written request by Landlord. -17- 18.3 Landlord's Rights. Upon receipt of a Transfer Notice pursuant to Section 20.2 above, Landlord shall have the right to: (i) withhold its consent to such Transfer, as permitted pursuant to Section 20.1 above; (ii) terminate the Lease as it relates to the portion of the Premises described in the Transfer Notice and recapture such portion of the Premises, effective automatically as of the date of dispatch of a notice of termination from Landlord to Tenant, which notice may be sent at any time within thirty (30) days following Landlord's refusal to consent to the Transfer; (iii) sublet or receive an assignment of all or a portion of the Premises from Tenant at the lower of the rental specified in this Lease or in Tenant's Notice; or (iv) impose any of the following as conditions to Landlord's consent: (a) that all rents paid by the Transferee to Tenant in excess of the Base Rent be paid to Landlord; or (b) that any Guarantor of this Lease reaffirms its guaranty; or (c) that either Tenant or the proposed Transferee cure, on or before the proposed effective date of such Transfer, any and all uncured defaults hereunder; provided, however, in no event shall Landlord's failure to condition its consent upon such cure be deemed to be a waiver of any such default or of Landlord's rights and remedies under this Lease or under law or in equity in regard thereto. If Landlord has elected to impose such a cure as a condition to its consent and such condition is not satisfied by the effective date of the Transfer, then the Transfer shall be voidable at Landlord's option. Landlord st:lall also have the right to condition Landlord's consent to any Transfer upon Tenant's and the Transferee's executing a written assumption agreement, in a form approved by Landlord. The assumption agreement shall require the Transferee to expressly assume all obligations of Tenant under this Lease and shall require Tenant and Transferee to be and remain jointly and severally liable for the performance of all conditions, covenants, and obligations under this Lease from the effective date of the Transfer of Tenant's interest in this Lease. Regardless of Landlord's consent to any Transfer, no Transfer shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. These rights are in addition to Landlord's right to withhold its consent to any Transfer, and may be exercised by Landlord in its sole discretion without limiting Landlord in the exercise of any other right or remedy at law or in equity which Landlord may have by reason of such Transfer. In the event of default by any Transferee, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against said Transferee. Tenant expressly agrees that the provisions of this Article are not unreasonable standards or conditions for purposes of Section 1951.4(b)(2) of the California Civil Code, as amended or recodified from time to time. ARTICLE 19 NOTICES All notices given under this Lease shall be in writing and shall be given or served either personally or by depositing the same by United States registered or certified mail postage prepaid, return receipt requested, or by a nationally-recognized overnight delivery courier, addressed to the applicable Address for Notices specified in Article 1. Notice shall be deemed to have been given (a) on the delivery date indicated by the United States Postal Service on the return receipt or by the courier or on the date such delivery is refused or deemed "undeliverable," or (b) on the date of personal delivery. Either party may change its address for notices by providing written notice as specified herein; provided, however, that all addresses provided must be an actual street address located in the United States of America. ARTICLE 20 AUTHORITY If Tenant is a corporation, trust, general or limited partnership or limited liability company, 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 behalf of said entity. If Tenant is a corporation, trust, partnership, or limited liability company, Tenant shall, simultaneously with execution of this Lease, deliver to Landlord written evidence of such authority satisfactory to Landlord. ARTICLE 21 QUIET ENJOYMENT -18- Tenant, upon keeping, observing and performing all of the covenants and agreements of this Lease on its part to be kept, observed, and performed, shall lawfully and quietly hold, occupy and enjoy the Premises during the Term of this Lease. ARTICLE 22 ATTORNEYS' FEES Should either party commence an action or arbitration against the other to enforce any obligation hereunder, the prevailing party shall be entitled to recover the costs thereof and reasonable attorneys' fees actually incurred by such prevailing party (including the fees and charges of legal assistants or other non-attorney personnel performing services under the supervision of an attorney), whether or not such litigation is prosecuted to judgment. ARTICLE 23 WAIVER Any waiver by Landlord of any breach by Tenant of any one or more of the covenants, conditions, or agreements of this Lease shall not be nor be construed to be a waiver of any subsequent or other breach of the same or any other covenant, condition or agreement of this Lease, nor shall any failure on the part of Landlord to require or exact full and complete compliance by Tenant with any of the covenants, conditions, or agreements of this Lease be construed as in any manner changing the terms hereof or to prevent Landlord from enforcing the full provisions hereof. Landlord's acceptance of any payment which is less than that required to be paid by Tenant shall be deemed to have been received only on account of the obligation for which it is paid and shall not be deemed an accord and satisfaction, notwithstanding any provisions to the contrary asserted by Tenant, written on any check or contained in any transmittal letter. The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term or covenant hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. An express waiver must be in writing and signed by a person with the power to contractually bind Tenant or Landlord. An express waiver shall affect only the default specified in the waiver, and only for the time and to the extent expressly stated. ARTICLE 24 LIMITATION ON CLAIMS Any claim, demand, right or defense of any kind by Tenant, which is based upon, arising in connection with or in any way related to this Lease or the negotiations prior to its execution, shall be barred unless Tenant commences an action thereon, or interposes in a legal proceeding a defense by reason thereof, within twelve (12) months after the date of the inaction or omission or the date of the occurrence of the event or of the action to which the claim, demand, right or defense relates, whichever applies. ARTICLE 25 INTERPRETATION AND APPLICATION 25.1 Submission of Lease. Submission of this instrument for examination or signature by Tenant does not constitute an offer, a reservation of, option for or option to lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant. 25.2 Governing Law. This Lease shall be construed in accordance with and governed by the statutes, decisions, and other laws of the State of California. Tenant expressly agrees that any and all disputes arising out of or in connection with this Lease shall be litigated only in the Superior Court of the State of California for San Diego County, and Tenant hereby consents to the jurisdiction of said court. -19- 25.3 Complete Agreement. This Lease contains all terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the rental, use and occupancy of the Premises. No prior agreements or understanding pertaining to the same shall be valid or of any force or effect. 25.4 Amendment. This Lease may not be amended, altered or modified in any way except in writing signed by the parties hereto. 25.5 No Partnership. It is agreed that nothing contained in this Lease shall be deemed or construed as creating a partnership or joint venture between Landlord and Tenant or between Landlord and any other party, or cause Landlord to be responsible in any way for the debts or obligations of Tenant or any other party. 25.6 No Merger. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work as a merger, but shall, at the option of Landlord, either terminate all or any existing subleases or subtenancies, or operate as an assignment to Landlord of any or all such subleases or subtenancies. 25.7 Severability. If any provision of this Lease or application thereof to any person or circumstances shall to any extent be invalid, the remainder of this Lease (including the application of such provision to persons or circumstances other than those to which it is held invalid) shall not be affected thereby, and each provision of this Lease shall be valid and enforced to the fullest extent permitted by law. 25.8 Captions. The captions of the Articles and Sections hereof are for convenience only and are not a part of this Lease and do not in any way limit or amplify the terms and provisions of this Lease. 25.9 Words. The words "Landlord" and "Tenant", as used herein, shall include the plural as well as the singular. Words used in the neuter gender include the masculine and feminine. 25.10 Joint and Several Liability. If either party is comprised of more than one individual or entity, the obligations imposed upon such party hereunder shall be joint and several to all parties signing this Lease as such party. 25.11 Exhibits. All exhibits attached to this Lease are incorporated herein by this reference and made a part hereof, and any reference in the body of this Lease or in the exhibits to the "Lease" shall mean this Lease together with all exhibits. ARTICLE 26 MISCELLANEOUS 26.1 Time is of the Essence. Time is of the essence of each and all of the terms and provisions of this Lease. 26.2 Successors. Subject to the restrictions on Transfers contained in this Lease, all the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the parties hereto. 26.3 Recordation; Quitclaim. Tenant shall not record this Lease or any memorandum hereof. Landlord has the right in its absolute discretion to record this Lease or a memorandum hereof, and, upon Landlord's request, Tenant shall execute and have acknowledged the same for recordation. Upon termination of this Lease for any reason, Tenant shall execute, acknowledge and deliver to Landlord within thirty (30) days after receipt of written demand therefor a good and sufficient deed whereby all right, title and interest of Tenant in the Premises is quitclaimed to Landlord. If Tenant fails to deliver the required deed to Landlord, Landlord may prepare and record a notice reciting the failure of -20- Tenant 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 Tenant or those claiming under Tenant in and to the Premises. 26.4 Limitation of Liability. It is expressly understood and agreed that notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord hereunder (including any successor landlord) and any recourse by Tenant against Landlord shall be limited solely and exclusively to Landlord's interest in the Premises, including the income and profits from the Premises, and neither Landlord, nor any of its officers, employees, affiliates, managers or agents shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The limitations of liability provided in this Section are in addition to, and not in limitation of, any limitation on liability applicable to Landlord provided by law or in any other contract, agreement or instrument. Under no circumstances shall Landlord be liable for punitive or special damages, indirect damages or other consequential damages, including without limitation, injury to Tenant's business or for any loss of income or profit therefrom. In the event of any transfer of Landlord's interest in this Lease, the Landlord herein named (and in case of any subsequent transfer, the then transferor) shall be automatically freed and relieved from and after the date of such transfer of all liability for the performance of any covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed; provided, however, that any funds in the hands of Landlord or the then transferor at the time of such transfer, in which Tenant has an interest shall be turned over to the transferee and any amount then due and payable to Tenant by Landlord or the then transferor under any provision of this Lease shall be paid to Tenant; and provided, further, that upon any such transfer, the transferee shall expressly assume, subject to the limitations of this Section, all of the agreements, covenants and conditions in this Lease to be performed on the part of Landlord, it being intended hereby that the covenants and obligations contained in this Lease on the part of Landlord shall be binding on each Landlord, its successors and assigns, only during its period of ownership. 26.5 Broker. Except for any Broker(s) specified in Article 1 of this Lease, Landlord and Tenant each represents and warrants to the other that it has not retained the services of or had any dealings with any other broker, finder or real estate licensee and owes no other person or entity any finder's or broker's fee, commission or payment of any kind whatsoever. Landlord and Tenant each shall indemnify, protect, defend and hold harmless the other from and against all liability for compensation or charges which may be claimed by any such broker, finder or other similar party by reason of any dealings or actions of the indemnifying party, including (without limitation) any costs, expenses or attorney's fees reasonably incurred with respect thereto. 26.6 Counterparts. This Lease may be executed in any number of counterparts each of which shall be deemed an original and all of which shall constitute one and the same Lease with the same effect as if all parties had signed the same signature page. Ill Ill Ill Ill Ill Ill Ill Ill -21 - EXHIBIT A DESCRIPTION OF PREMISES Legal Description -Leased Parcel A portion of Lot 5 of Carlsbad Tract No. 99-03-La Costa Greens, according to Map No. 14543, filed in the Office of the County Recorder of the County of San Diego on February 12, 2003 in the City of Carlsbad, County of San Diego, State of California.