HomeMy WebLinkAbout2004-08-03; City Council; Resolution 2004-2601
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RESOLUTION NO. 2004-260
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING A TEN YEAR LEASE
AGREEMENT AND AUTHORIZING THE MAYOR TO
EXECUTE THE LEASE DOCUMENT
WHEREAS, the City Council of the City of Carlsbad has determined that it is in the best
interest of the City to enter into a ground lease for approximately .84 acres over a portion of APN
2 12-082-04, 05, & 06, with the Callaway Golf Company; and
WHEREAS, the City Council is satisfied that the long-term lease arrangement
will not negatiL ely impact the City’s plans for construction of the municipal golf course project;
and
WHEREAS, Callaway Golf Company has agreed to the terms and conditions of the
ground lease.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad,
California as follows:
1.
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That the above recitations are true and correct.
That the attached lease agreement, Exhibit 2, between the City of Carlsbad
and Cal laway Go1 f Company is approved.
That the Mayor is authorized to execute all documents related to leasing of a
portion of APN 21 2-082-04, 05, & 06.
3.
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PASSED. APPROVED. ANI1 AIIOPTED at a regular meeting of the City Council on the 3rd
day Of Auaust 2004. by the following vote to wit:
AYES: Council Members Lewis, Finnila, Kulchin, Hall
NOES: None
ABSENT: None
City Clerk
(SEAL)
-2-
0 R I GINkI
CITY OF CARLSBAD
GROUND LEASE TO
CALLAWAY GOLF COMPANY
OF PROPERTY LOCATED ON A PORTION OF
LOTS 68 & 69 OF CT NO. 81-46, UNIT NO. 3
CARLSBAD, CALIFORNIA, 92008
FOR TEN (IO) YEARS, ZERO (0) MONTHS
COMMENCING AUGUST 1,2004
AND ENDING JULY 31, 2014
LEASE
I, Basic Provisions (“Basic Provisions”)
Parties: This Lease (“Lease”), dated for reference purposes only August 1, 2004 is
made by and between The Citv of Carlsbad (“Lessor”) and Callaway Golf Company (“Lessee”),
(collectively the “Parties”, or individually a “Party”).
1 .I
1.2 Premises: That certain real property, consisting of approximatelv .84 acres of
Planned Industrial zoned property, located in the Citv of Carlsbad, County of San Dieqo. State of
California, and qenerallv described as “ a portion of lots 68 and 69 of Carlsbad Tract No. 81-46,
Unit 3.“ A leqal description of the premises, includinq any appurtenances, is included in Exhibit “A”
attached to this lease.
1.3 Provision for Survey: Callaway Golf Company shall promptly cause a
licensed surveyor or civil engineer to conduct an on-the-ground survey of the premises, to prepare
from the survey a legal description satisfactory to the Lessor and any title company insuring the
Lessor’s title, and to prepare a plot plan showing the location of any streets, easements, and rights
of way over or in favor of the premises, and shall then promptly submit the plot plan and legal
description to Lessor, to be attached to this lease as Exhibit B.
1.4 Term: Ten (IO) years and 0 months (“Original Term”) commencing Ausust
1, 2004 (“Commencement Date”) and ending Julv 31, 2014 (“Expiration Date”).
1.5 Option to Extend: Lessee and Lessor, if mutually agreed, may extend the original
term of this lease for two (2) additional periods of five (5) years, subject to all provisions of this
lease, including the provisions for adjustments to and variations in rent. Failure to exercise the
option for any period shall nullify the option for all subsequent periods. Lessee shall be required to
give Lessor written notice of its intent to extend the lease a not less than 180 days prior to the
Expiration Date of the Term. After the exercise of any option to extend, all references in this lease
shall be considered to mean the term as extended, and all references to termination or to the end
of the term shall be considered to mean the termination or end of the term as extended. Lessee’s
right to the option is subject to:
1. The following conditions precedent:
a. The lease shall be in effect at the time notice of exercise is given and on the
last day of the term.
b. Lessee shall not be in default under any provision of this lease at the time
notice of exercise is given or on the last day of the term or at anytime during
the term.
2. Compliance with the following procedure for exercising the option:
a. At least 180 days before the last day of the term, Lessee shall give Lessor
written notice of irrevocably exercising the option.
b. At least 90 days before the last day of the term, after receiving a notice from
Lessee to exercise the option, Lessor shall approve or disapprove exercising
of the option in writing to Lessee.
c. In lieu of executing a new lease, each party shall, at the request of the other,
execute a memorandum, in recordable form, acknowledging the fact that the option has been exercised and otherwise complying with the requirements of
law for an effective memorandum or abstract of lease.
InitiatsW PAGE 1
1.6 Base Rent: $1583.00 per month (“Base Rent”), payable on the first day of each
month commencing August 1,2004
1.7 Adjustment to Base Rent: Base rent shall be adjusted annually on each
anniversary of the Commencement date, by three and one-half percent (3.5%) for the Term of the
lease.
1.8 Security Deposit: $ 4749.00 (“Security Deposit”). (See also Paragraph 5)
1.9 Agreed Use: Golf Test Ranae Facitlv use for testina of Golf Clubs and Golf m. (See also Paragraph 6)
1.10 Insuring Party. Lessor is the ”Insuring Party” unless otherwise stated herein.
1 .I 1 Addenda and Exhibits. Attached hereto are Exhibits A, B , all
(See also Paragraph 8)
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 that 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.
Improvements. Prior to commencement of any construction, Leasee shall comply
with the Conditions of Major construction below and shall commence the construction of
improvements consisting of those as specified in PIP No. 9302-D
Grading Permit No. TBD (Exhibit B).
New Improvements. Except as otherwise expressly provided in this lease, Lessee
shall not, without Lessor’s prior written consent, enlarge, remove, demolish, replace, or
substantially alter any substantial improvement now or here after in place on the premises.
Before any work of construction, alteration, or
repair is commenced on the premises, and before any building materials have been delivered to the
premises by Lessee or under Lessee’s authority, Lessee shall comply with all the following
conditions:
a. Deliver to Lessor for Lessor‘s approval 2 sets of preliminary construction plans
and specifications prepared by an architect or engineer licensed to practice as
such in the State of California, including but not limited to preliminary grading
and drainage plans, soil tests, utilities, sewer and service connections, locations
of ingress and egress to and from public thoroughfares, curbs, gutters,
parkways, street lighting, design and locations for outdoor storage areas, and
landscaping, all sufficient to enable Lessor to make an informed judgment about
the design and quality of construction and about any effect on the reversion. All
improvements shall be constructed within the exterior property lines of the
premises; provided that required work beyond the premises on utilities, access,
and conditional use requirements do not violate this provision. With the plans,
Lessee shall deliver to Lessor the certificate of the person or persons who
prepared the plans and specifications certifying that the Lessee has fully paid for
them or waiving payment and waiving any right to a lien for preparing them and
permitting Lessor to use the plans without payment for purposes relevant to and
consistent with this lease.
2.2
, HDP No. 0400
2.3
2.4 Conditions of Construction.
Initialsp
PAGE 2
b. Construction of improvements to the Premises shall not commence until after the
City of Carlsbad has obtained its Grading Permit for the Carlsbad Municipal Golf
Course project, and has begun its construction activity.
c. Procure and deliver to Lessor evidence of compliance with all then applicable
codes, ordinances, regulations, and requirements for permits and approvals,
including but not restricted to a grading permit, building permits, zoning and
planning requirements, and approvals from various governmental agencies and
bodies having jurisdiction.
d. Construction shall be completed and ready for use within one (1) year or
whatever is required by code, whichever is shorter, after commencement of
construction, provided that the time for completion shall be extended for as long
as Lessee shall be prevented from completing the construction by delays beyond
Lessee’s control; but failure regardless of cause, to complete construction within
two (2) years following the commencement date of this lease shall, at Lessor‘s
election exercised by notice, terminate this lease.
e. All work shall be performed in a good and workmanlike manner, shall
substantially comply with plans and specifications submitted to Lessor as
required by this lease, and shall comply with all applicable governmental permits,
laws, ordinances and regulations.
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 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 or Lessor’s agents have made any oral or
written representation or warranties with respect to said matters other than as set forth in this
Lease. Lessor makes no covenants or warranties respecting the condition of soil or subsoil or any
condition of the premises.
Notice of Changes in Plans. On completion of any work of improvement, Lessee
shall give Lessor notice of all changes in plans or specifications made during the course of work
and shall at the same time and in the same manner, supply Lessor with “as built” drawings
accurately reflecting such changes. Lessor acknowledges that it is common practice in the
construction industry to make changes during the course of construction on substantial projects.
Changes that do not substantially alter plans and specifications previously approved by Lessor do
not constitute a breach of Lessee’s obligations.
3. Term
3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease
are as specified in Paragraph 1.4.
3.2 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 8.4). Pending delivery of such evidence, Lessee shall be required to perform all of its
obligations under this Lease from and after the Start Date, Including the payment of Rent,
notwithstanding Lessor’s election to withhold possession pending receipt of such evidence of
insurance. Further, if Lessee is required 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.
Lease (except for the Security Deposit) are deemed to be rent (“Rent”).
2.5
2.6
4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this
InitialsV,#V
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4.2 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 (1) 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.
4.3 Rental Adjustment. The Base Rent payable pursuant to this Lease shall be
increased by the sum of 3.5%, on each anniversary of the Commencement Date. Set forth below
is a summary of the monthly Base Rent for each year of the Initial Term. The total amount of
leased acreage per year is .84 acres.
Year 1 :
Year 2:
Year 3:
Year 4:
Year 5:
Year 6
Year 7
Year 8
Year 9
Year 10
$1583 per month, or $18,996 per year.
$1638.40 per month, or $19,614 per year.
$1695.74 per month, or $20,348.88 per year.
$1755.09 per month, or $21,061.09 per year.
$1816.52 per month, or $21,798.22 per year.
$1 880.09 per month, or $22,561.18 per year.
$1945.89 per month or $23,350.72 per year.
$2014 per month or $24,168 per year.
$2084.49 per month or $2501 3.88 per year.
$2157.45 per month or $25,889.40 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 (IO) 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 Lessor. No part of the Security Deposit shall be considered to be held in
trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this Lease.
PAGE 4 Initials@
6. Use.
Lessee shall use and occupy the Premises only for the Agreed
Use, or any other legal use that 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.
6.1 Agreed 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.
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 Hazardous Substance brought on the Premises during the term of this
Lease, by or for Lessee, or any 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
(c) Lessee Remediation.
PAGE 5
with respect to underground migration of any Hazardous Substance under the Premises from
adjacent properties or hazardous condition that preexists the commencement of this lease).
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.
Lessee shall cooperate fully in any
investigations or remediation measures 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.
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 underwriter or rating bureau, and the recommendations of Lessor’s 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 Commencement Date. Lessee shall,
within ten (IO) 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.
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, in such a manner as to not unreasonably interfere
with business of Lessee. 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 (Improvements), 2.3
(New Improvements), 2.4 (Conditions of Construction), 6.3 (Lessee’s Compliance with Applicable
Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 15 (Condemnation),
throughout the term, Lessee shall, at Lessee’s sole cost and expense, maintain the premises and
all improvements in good condition and repair, ordinary wear and tear excepted, orders and
regulations of (1) federal, state, county, municipal and other governmental agencies and bodies
having or claiming jurisdiction and all their respective departments, bureaus, and officials; (2) the
insurance underwriting board or insurance inspection bureau having or claiming jurisdiction; and (3) all insurance companies insuring all or any part of the premises or improvements or both.
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.
(e) Investigations and Remediations.
6.4
PAGE 6
(b) Senrice 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 installed 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.
Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Improvements),
2.3 (New Improvements), 2.4 (Conditions of Construction), 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.
7.2
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.
(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 $10,000 or more. 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 (IO) 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 attorneys fees and costs.
PAGE 7
Initials @’
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor‘s right to require removal or elect ownership as
hereinafter provided, all Alterations and Utility Installations made by Lessee shall be the property of
Lessee, but considered a part of the Premises. 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 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 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 $2,000,000 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 may maintain liability, 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.
Property Insurance - Building, Improvements and Rental Value.
(a) Building and Improvements. Lessee shall obtain and keep in force a policy or
policies in the name of Lessor, with loss payable to Lessor, 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 the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake), including coverage for debris removal and the
enforcement of any Applicable Requirements requiring 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 any coinsurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual property insurance
8.2
PAGE 8 Initialsw
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 $1,000
per occurrence, and Lessee shall be liable for such deductible amount in the event of an insured
Loss.
(b) Rental Value. The Lessee shall obtain and keep in force a policy or policies in
the name of Lessor with loss payable to Lessor, insuring the loss of the full Rent for one (1) 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 parcel of land, or of a group
of parcels 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 parcels and any buildings thereon, if
said increase is caused by Lessee’s acts, omissions, use or occupancy of the Premises.
8.3 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 $25,000 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.
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 original endorsements and 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 Lessee shall fail to procure and maintain the insurance required to be
carried by it, the Lessor may, but shall not be required to, procure and maintain the same.
Waiver of Subrogation. Without affecting any other rights or remedies, Lessee
hereby releases and relieves Lessor, and waives any right to recover damages against Lessor, for loss of or damage to its property arising out of or incident to the perils required to be insured
8.4
8.5
PAGE 9 initials
against herein. The effect of such release and waiver is not limited by the amount of insurance
carried or required, or by any deductibles applicable hereto. Lessee agrees to have its respective
property damage insurance carrier waive any right to subrogation that such company may have
against Lessor.
8.6 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.
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, 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 parcel 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.
8.7
(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.
(c) “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 8.2(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.
(e) “Hazardous Substance Condition” shall mean 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.
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
9.2
PAGE 10 Initials
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
election, 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. 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.
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 (IO) 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.
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.
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 adequate assurance thereof) needed to make the repairs on or before the
earlier 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.
9.3
9.4
9.5
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.
PAGE 11
(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 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.
IO. 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.
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 possessory interest subject to the
payment of Real Property Taxes. The term “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 ownership of the Premises.
11 .I
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 (1 0) 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
PAGE 12
initials
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: (i) 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.
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 (IO) 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.
13. Assignment and Subletting.
11.3
13.1 Lessor’s Consent Required.
(a) 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) 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 -. -
PAGE 13 InitialsW -
was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its
consent. “Net Worth of Lessee” shall mean the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles.
(c) An assignment or subletting without consent shall, at Lessor’s option, be a
Default curable after notice per Paragraph 14.1(d), 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 (1 10%) 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 (110%) 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 (1 10%) of the scheduled adjusted rent.
Terms and Conditions Applicable to Assignment and Subletting.
(a) 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.
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 operational
responsibility and appropriateness of the proposed assignee or sublessee, 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.
(9 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.
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
13.2
(b) Pending approval or disapproval of an assignment.
13.3
PAGE 14 Initials -
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.
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 property
insurance described in Paragraph 8.2 is jeopardized as a result thereof, or without providing
reasonable assurances to minimize potential vandalism.
(b) The failure of Lessee to make any payment of Rent 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 fulfill 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 compliance
with Applicable Requirements, (ii) the service contracts, (iii) the rescission of an unauthorized
assignment or subletting, (iv) Estoppel Certificate, (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 (1 0) 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
14.1
PAGE 15
Initials*
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 possession 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.
(9) 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.
Remedies. If Lessee fails to perform any of its affirmative duties or obligations,
within ten (1 0) 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 time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which 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 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 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 failure 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,
14.2
PAGE 16 Initials v@ -
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 greater 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. 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.
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%) of each such overdue amount. The parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by
reason of 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.
14.4 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 14.3.
14.3
14.5 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, 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.
PAGE 17
initials @
15. 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 (IO) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (IO) 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 Premises
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. Lessee and Lessor each
represent and warrant to the other that it has had no dealings with any person, firm, or broker in
connection with this Lease, and that no one 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 compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party, including any costs, expenses, or attorneys’ fees reasonably
incurred with respect thereto.
17. Estoppel Certificates.
(a) Lessee shall within ten (IO) days after written notice from Lessor, execute,
acknowledge and deliver to Lessor 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
Lessor.
(b) If the Lessee shall fail to execute or deliver the Estoppel Certificate within such
ten day period, the Lessor 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 Lessor, (ii) there
are no uncured defaults in the Lessors performance, and (iii) not more than one month’s rent has
been paid in advance. Prospective purchasers and encumbrancers may rely upon the Lessor’s
Estoppel Certificate, and the Lessee 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
Condemnation.
Representations and Indemnities of Broker Relationships.
PAGE 18
Initials@
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 6.2 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.
23. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all agreements
between the Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.
24. Notices.
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 US. 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. 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
24.1
PAGE 19 Initials@
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. Lessee shall execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes.
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 and Lessor 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.
30. This Lease shall be binding upon the parties, their
personal representatives, successors and assigns and be governed by the laws of California. Any
litigation between the Parties hereto concerning this Lease shall be initiated in North San Diego
County Superior Court.
31. Subordination; Attornment; Non-Disturbance.
Subordination. This Lease and any Option granted hereby shall be subject and
subordinate to any ground lease, mortgage, deed of trust, bond indebtedness, 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.
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.
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 non-disturbance 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
Binding Effect; Choice of Law.
31.1
31.2
31.3
PAGE 20
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 pre-existing 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.
31.4 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. Signs. Lessee shall not place any sign upon the Premises without Lessor‘s prior written
consent. All signs must comply with all Applicable Carlsbad Municipal Code Requirements.
33. 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 (IO) 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.
34. 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 (1 0) business days following such request.
35. 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.
36. Options.
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.
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
36.1
36.2
Initials j4 PAGE 21
and, if requested by Lessor, with Lessee certifying that Lessee has no intention of thereafter
assigning or subletting.
Number and Term. Lessee may, at Lessee’s option, extend the Initial Term of this
Lease for Two (2) periods of five (5) consecutive years, subject to all of the provisions of this
Lease. Each Extension Term shall commence at the expiration of the Initial Term and or
subsequent terms, and shall terminate on the last day 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.
Method of Exercise of Option: Subject to the provisions of Paragraph 1.5 (Option
to Extend), 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.
Calculation of Rent at Beginning of Option Period. The initial monthly Base Rent
for the Extension Term shall be 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 4.3
(Rental Adjustment).
36.6
36.3
36.4
36.5
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 notices of separate Default, whether or not the Defaults are cured,
during the twelve (I 2) month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee’s inability to exercise an Option because of the
provisions of Paragraph 36.6(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.
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.
37. 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.
38. 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.
39. 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
36.7
Security Measures.
PAGE 22 Initials
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 to recover such sum or so much thereof as it was not legally required to pay.
40. 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.
41. 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.
42. Offer. This Lease is not intended to be binding until executed and delivered by all Parties
hereto.
43. 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 financing or refinancing
of the Premises.
44. 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.
45. Construction. All 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.
46 Abstract of Lease. This is the final Paragraph and Abstract of Lease dated
WV_S”S+ 4 2004, between the CITY OF CARLSBAD, Lessor and Callaway Golf
Company, Lessee, concerning the Leased Premises described in Exhibits “A and “B”, and
referenced more specifically in Exhibit “C” ABSTRACT OF LEASE.
PAGE 23 Initials
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM 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.
Executedat: Carlsbad, California Executedat: Carlsbad, California J~A, ~-t,aood on: August 4, 2004
By LESSOR:
W on:
EE: Callaway Golf Company
OL- City of Carlsbad
’Ronald A. Drapeau, CEO
By:
Name Printed: A.
Title: Title: Mayor, Citv of Carlsbad
By: Carlsbad, CA 92008
Name Printed:
Lewis
Address: 1200 Carlsbad Villaqe Drive
Telephone: (760 ) 434-2821
Title: Facsimile: f7601720-9461
Address:
Telephone: ( )
Facsimile: ( )
Federal ID No.
Approved as to form and legality:
By: i ,
MNALD R. BALL --
CITY ATTORNEY
PAGE 25 Initials P
PLEASE COMPLETE THIS INFORMATION.
RECORDING REQUESTED BY:
tr.h_lOr CA~~
AND WHEN RECORDED MAIL TO:
THE ORIGINAL OF THIS DOCUMENT
WAS RECORDED ON NOV 23,2004
GREGORY J SMITH, COUNTY RECORDER
SAN DIEGO COUNTY RECORDER’S OFFICE
TIME: 913 AM
DOCUMENT NUMBER 2004-1 109048
I THISSPACE FORRECQBDERS UB ONLY
(Please fill in document title(s) on this line)
h&d&
THIS PAGE ADDED TO PROVIDE ADEQUATE SPACE FOR RECORDING INFORMATION
(Additional recording fee applies)
9/95 Ra.Fonn #R25
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Carlsbad City Clerks Office
1200 Carlsbad Village Drive
Carlsbad, CA 92008
ABSTRACTOFLEASE
This Abstract of Lease , hereinafter “Abstract”, dated Auqust 4 2004,
between the CITY OF CARLSBAD, Lessor and CALLAWAY GOLF COMPANY, Lessee,
concerning the Leased Premises described in Exhibits “A and “B”, attached hereto and by this
reference made a part herof.
For good and adequate consideration, Lessor leases the Leased Premises to Lessee, and
2004, the Abstract of which is recored by the San Diego County Recorder’s
Lessee hires for them from Lessor, for the term and on the provisions contained in the Lease dated
Office as Document No. Sgtz A pC: c/C
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.
Auqust 4 , including without limitation provisions
The term of this lease is ten (1 0) years plus two (2) options of five (5) years, beginning
August 1, 2004, and ending July 31, 2014.
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.
IN WITNESS WHEREOF, each of the undersigned has executed this Abstract as of the
dates set forth in the respective notary acknowledgements attached hereto.
Executed at: Carlsbad, Califoria Executed at: Carlsbad, California
on: Auqust 4, 2004
By LESSOR:
City of Carlsbad
Ronald A. DraDeau, CEO
By:
Name Printed: Name Printed: Claude A. Lewis
Title: Title: Mayor. Citv of Carlsbad
Address: 1200 Carlsbad Villaae Drive
By: Carlsbad. CA 92008
Name Printed:
Title: Facsimile: 1760) 720-9461
Address:
Telephone: 1760 \ 434-2821
Telephone: ( )
Facsimile: ( )
Federal ID No.
Initials b@
PAGE 24
STATE OF CALIFORNIA)
COUNTY OF SAN DIEGO)
mom Grlam I fE$Fe;b. fit'rl?DDAlk , personally known to me personally appeared
(or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) idare
subscribed to the within instrument and acknowledged to me that he/she/they executed the same in
hislherltheir authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
On ;I \LiOY
WITNESS mv hand and official seal.
Signature %U&A Qwc
Initials j@ PAGE 26
-...
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
d c @ 4 before me, %Id hlA 5CK
Name and Title of Offlcer (e g , "Jane Doe, Notary Public")
personally appeared
executed the instrument.
WITNESS my hand and official seal.
Signature of Notary Public
Though the information below is not required by law, it may prove valuable to persons relying on the document and could prevent
fraudulent removal and reattachment of this form to another document.
Description of Attached Document
Title or Type of Document: fi b%-h?LCd- 6-F ' Cb35K
Number of Pages: a
Capacity(ies) Claimed by Signer(s)
Signer's Name: hD A.awk%\
0 Individual
RCorporate Officer
0 Partner - 0 Limited 0 General
0 Atto m e y- i n-Fac t
0 Guardian or Conservator
Signer Is Representing:
Signer's Name:
0 Individual
0 Corporate Officer
Title(s):
0 Partner - Limited General
0 Attorney-in-Fact
0 Trustee
Guardian or Conservator
0 Other: mb here
I I I Signer Is Representing:
0 1994 National Notary Associaion 8236 Remrnet Ave., P.O. Box 7184 - Cancga Park, CA 91309-7184 Prod. No. 5907 Reorder: Call Toll-Free 1-800-876-6627
LEGAL DLt4CRIPTION #OR rJM PARCIa
- .. __ CONTAlMNGAN AREA OF 0.$43 ACRE. (36,740 SQbARE FEET)
C
.. .
LEGAL DESCRIPTION PUT
.--
I LEASE PARCEL
I (36'740 =' ,, '4'0,
NORTHEASTERLY LINE ,/ OF 20' WIDE S.D.G.dcE, EASEMENT
MOST NORTHEASTEI?LY
'CORNER LOT 69
VICINITY MAP
,
,
Wednesday, mzch 10 2004
'7:32 &+I PAGE 3.
msmm SETUP 1 Indkrlinteat point: 4 10009,9216 a0205.1,7sg 2111~ ~im9
Backsight point: 4 10009.92~6 20205.5749 Z"IP slsias Backaight Bearing: El 00~00'00.0~ El Dieltmcc: 0.0000 Remarks: CrSgCK TRAWW3 IrllASE PA~CELI
RROM
4
44
30
40
41
42
43
44
....--.I
DI.S~AIX!E
----c"----
65.5000 374,7639
Id0.0000 10a. 0397 Bb. 6033
42.3673
97.000s
65.5000