HomeMy WebLinkAbout2017-02-14; City Council; Resolution 2017-021EXHIBIT 1
RESOLUTION NO. 2017-021
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA AUTHORIZING EXECUTION OF A RETAIL LEASE AGREEMENT
WITH SHOREHOUSE KITCHEN CARLSBAD,LLC FOR THE PROPERTY
LOCATED AT 2833 STATE STREET
WHEREAS, on March 22, 2016, City Council authorized re-issuance of a request for proposals
to lease the property at 2833 State Street ("Property") by Resolution No. 2016-052; and
WHEREAS, on April 15, 2016, staff issued a request for proposals to lease the Property; and
WHEREAS, on May 31, 2016, the city received ten proposals which were evaluated and scored
by an internal selection committee that recommended Shorehouse Kitchen Carlsbad,LLC
("Shorehouse Kitchen")as the prospective tenant; and
WHEREAS, on July 12, 2016, City Council authorized staff to enter into exclusive negotiations
with Shorehouse Kitchen by Resolution No. 2016-141; and
WHEREAS,the city and Shorehouse Kitchen desire to enter into a Retail Lease Agreement for
the use and operation of the Property, for the purpose of operating a restaurant; and
WHERAS,the Retail Lease Agreement is for a term of ten years and provides Shorehouse
Kitchen with two successive five year renewal options, the second of which may be rejected by City
Council if such extension would interfere with the city's future development plans for the Property as
a non-restaurant use; and
WHEREAS, Shorehouse Kitchen will pay an annual minimum rent of $95,000 in year one, to be
raised three percent annually over the term of the Retail Lease Agreement; and
WHEREAS, Shorehouse Kitchen will pay additional rent in the amount of six percent of gross
sales in excess of $1,583,333; and
NOW, THEREFORE,BE IT RESOLVED by the City Council of the City of Carlsbad, California,as
follows:
1.That the above recitations are true and correct.
2.The Mayor is hereby authorized and directed to execute the Retail Lease Agreement,
which is attached hereto as Attachment A.
3.The City Manager, or his designee,is hereby authorized to act on behalf of the City of
Carlsbad in all future decisions and actions necessary to implement the Retail Lease
Agreement with Shorehouse Kitchen for the property located at 2833 State Street, and
to do so in full compliance with the terms and conditions expressed in the
aforementioned Retail Lease Agreement.
PASSED,APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 14th day of February, 2017, by the following vote, to wit:
AYES:M. Hall,K.Blackburn,C.Schumacher, M. Packard.
NOES:None.
ABSENT:M. Schumacher.**a
MATT HALL, Mayor
)tC01.4.
BARBARA ENGLESON, City Clerk
LS 84,0........0
(SEAL).•••.0R ••••
4.4•2%.
1.°.....*4°1•N•‘'s
RETAIL LEASE AGREEMENT
THIS RETAIL LEASE AGREEMENT (this "Lease") is entered into as of January 13, 2017, by
and between CITY OF CARLSBAD,a California municipal corporation ("Landlord")and
SHOREHOUSE KITCHEN,LLC,a California limited liability company ("Tenant")and shall be
effective and binding upon the parties hereto as of the date of execution hereof by both
parties.
RECITALS
WHEREAS,Landlord is the owner of certain real property and improvements thereon,
consisting of approximately .11 acres,designated as Assessor Parcel Numbers 203-294-02-00
and 203-294-03-00,and more particularly described and/or depicted on Exhibit A attached
hereto (the "Premises");
WHEREAS, Tenant desires to lease the Premises, in order to provide a permanent location for a
restaurant and coffee shop; and
WHEREAS,Landlord is willing to lease the Premises to Tenant for the term and upon the
covenants, conditions and provisions hereinafter set forth.
AGREEMENT
NOW THEREFORE,in consideration of the covenants,conditions and provisions
contained herein, the parties hereto do mutually agree as follows:
ARTICLE 1
BASIC LEASE PROVISIONS
1.1 Trade Name.ShoreHouse Kitchen ("Trade Name").
1.2 Premises.The Premises (defined above)are commonly known as 2833
State Street,Carlsbad,California,92008,and consist of a commercial building with
approximately 1,850 square feet of indoor space and related improvements including
approximately 3,291 square feet of outdoor space.
1.3 Term and Rent Commencement.Approximately ten (10)years,
commencing upon the date when this Lease has been executed by both parties (the "Term
Commencement Date"), and expiring, unless sooner terminated in accordance with this Lease,
upon the date that is ten (10) years after the Rent Commencement Date (defined below) (the
"Expiration Date"), subject to the extension options set forth in Section 3.2 below.Tenant shall
commence paying rent under this Lease on the date tenant receives a Certificate of Occupancy
following the completion of Tenant's Work (the "Rent Commencement Date");provided,
however, that concurrently with the execution of this Lease, Tenant shall pay to Landlord the
-1 -
DOCS 121163-000007/2625579 8
Base Rent for the first (15t)full month beginning on the Rent Commencement Date.As used in
this Lease, "Lease Year" means each twelve (12) month period (or portion thereof) during the
Term commencing with the Rent Commencement Date.
1.4 Base Rent.
Lease Year Months*Base Rent Per Month Annual Base Rent
1 1 -12 $7,916.67 $95,000.00
2 13 —24 $8,154.17 $97,850.00
3 25 —36 $8,398.79 $100,785.50
4 37 —48 $8,650.75 $103,809.06
5 49 —60 $8,910.28 $106,923.33
6 61— 72 $9,177.59 $110,131.04
7 73 —84 $9,452.91 $113,434.97
8 85 —96 $9,736.50 $116,838.02
9 97 —108 $10,028.60 $120,343.16
10 109 —120 $10,329.45 $123,953.45
*From the Rent Commencement Date
1.5 Percentage Rent.Commencing on the Rent Commencement Date
and continuing throughout the remainder of the Term, for any Lease Year in which Gross Sales
(defined in Article 5 below)exceed the Rent Breakpoint (defined below),in addition to Base
Rent,Tenant shall pay percentage rent equal to six percent (6%)(the "Percentage")of the
amount by which Gross Sales with respect to such Lease Year exceed the Rent Breakpoint with
respect to such Lease Year (collectively,"Percentage Rent").As used herein,"Rent
Breakpoint" means the amount calculated by dividing the annual Base Rent for the applicable
Lease Year by the Percentage (i.e., the "natural" breakpoint, which is $1,583,333 for the first
Lease Year).Tenant shall pay Percentage Rent on an annual basis and report Gross Sales on a
monthly basis as set forth in Article 5 below.
1.6 Use of Premises.The Premises shall be used only for the operation
of a restaurant under the Trade Name ("Permitted Use"). The Permitted Use includes the sale
of liquor, provided that such sales are for on-site consumption only and provided further that
Tenant has obtained all required permits, approvals and licenses from the Alcoholic Beverage
Commission and all other applicable governmental agencies for the sale of liquor ("Liquor
Licenses") and such sales are otherwise in compliance with all applicable laws and such Liquor
Licenses.The Premises shall be open for breakfast and lunch,seven (7)days per week
("Tenant's Business Hours").Tenant shall have the option, but not the obligation, to be open
for dinner at the Premises on such days and during such hours as Tenant determines,in its sole
discretion.
1.7 Tenant Improvement Allowance.None.
-2 -
DOCS 121163-000007/2625579.8
1.8 Security Deposit.$8,000
1.9 Guarantor:John Freis
1.10 Broker(s):Michael Spilky, Location Matters,L.P.("Landlord's Broker")
1.11 Tenant's Address for Notices:
ShoreHouse Kitchen
Attn: John Freis
249 South Highway 101, Suite 514
Solana Beach, CA 92075
1.12 Landlord's Address for Notices:
City of Carlsbad
Real Estate Manager
1200 Carlsbad Village Drive
Carlsbad, CA 92008
With a copy to:
Procopio, Cory, Hargreaves & Savitch LLP
Attn: Michael E.Lyon
12544 High Bluff Drive, Suite 300
San Diego, CA 92130
Email: michael.lyon@procopio.com
1.13 Landlord's Address for Rent Payments:
Finance Department
City of Carlsbad
1635 Faraday Avenue
Carlsbad, CA 92008
This Article 1 is intended to supplement and/or summarize the provisions set forth in the
balance of this Lease.If there is any conflict between any provisions contained in this Article 1
and the balance of this Lease,the balance of this Lease shall control.
ARTICLE 2
PREMISES
2.1 Lease of Premises.Landlord leases to Tenant and Tenant hires from
Landlord the Premises described in Article 1 for the Term (as defined in Article 3 below) and
-3 -
DOCS 121163-000007/2625579.8
pursuant to all of the terms,covenants and conditions contained herein.Any statement of
square footage set forth in this Lease,or that may have been used in calculating Base Rent,is
an approximation which Landlord and Tenant agree is reasonable and the Base Rent based
thereon is not subject to revision whether or not the actual square footage is more or less.
2.2 Condition of the Premises.Tenant acknowledges that except as
otherwise expressly provided herein it shall accept the Premises in its "AS IS" condition, without
representation,warranty or any improvements by Landlord.Landlord makes no
representations or warranties with respect to this Lease,the Premises or any property therein
or with respect to any matter related thereto, other than as expressly set forth in this Lease.
Tenant hereby acknowledges that it has had an opportunity to investigate and inspect the
condition of the Premises and the suitability of same for Tenant's purposes, and Tenant does
hereby (a) waive and disclaim any objection to, cause of action based upon, or claim that its
obligations hereunder should be reduced or limited because of the condition of the Premises or
the suitability of same for Tenant's purposes and (b)acknowledge that the Premises are in
good, clean and sanitary order and repair and by taking possession Tenant accepts the Premises
as it exists. Tenant acknowledges that neither Landlord nor any agent nor any employee of
Landlord has made any representations or warranty with respect to the Premises or with
respect to the suitability of either for the conduct of Tenant's business and Tenant expressly
warrants and represents that Tenant has relied solely on its own investigation and inspection of
the Premises in its decision to enter into this Lease and let the Premises in an "AS IS"condition
and is not relying on any statements,representations or warranties whatsoever made by or
enforceable directly or indirectly against Landlord relating to the condition,operations,
dimensions, descriptions, soil condition, suitability, compliance or lack of compliance with any
state, federal, county or local law, ordinance, order, permit or regulation, or any other attribute
or matter of or relating to the Premises.No promise of Landlord to alter, remodel, repair or
improve the Premises,and no representation,express or implied,respecting any matter
relating to the Premises or this Lease (including,without limitation,the condition of the
Premises) has been made to Tenant by Landlord or any agent of Landlord other than as may be
contained herein.
2.3 Delivery of Possession.Tenant shall accept possession of the Premises
from Landlord on the Term Commencement Date; provided, however, that Tenant shall not be
entitled to possession of the Premises until Landlord has received from Tenant all of the
following:(i)the Security Deposit, the first monthly installment of Base Rent for the first (15t)
full month after the Rent Commencement Date; and (ii) executed copies of policies of insurance
or certificates or binders thereof as required under Article 9 below.Tenant shall pay to
Landlord,upon its execution of this Lease,the sums specified in clause (i)above.If Tenant is
unable to obtain possession of the Premises because one (1)or more of the above items are
not received by Landlord, the Opening Date (as hereinafter defined), the Term Commencement
Date,Tenant's Completion Date (as hereinafter defined) and the Rent Commencement Date
shall not be affected or delayed thereby.
-4 -
DOCS 121163-000007/2625579 8
2.4 Easements.Landlord reserves to itself the right, from time to time, to
cause the recordation of parcel and subdivision maps and restrictions affecting all or any part of
the Premises,so long as such maps and restrictions do not increase Tenant's obligations, or
decrease Tenant's rights, under this Lease,or adversely impact Tenant's use of the Premises.
Tenant shall sign any of the aforementioned documents upon Landlord's request and Tenant's
failure to do so or breach of this Section shall constitute a material default under this Lease.
Tenant shall cooperate with and not oppose or object to Landlord's construction, development,
subdivision and parcelization of all or any part of the Premises and any property adjacent to the
Premises.
2.5 Existing Equipment.Landlord hereby grants Tenant the right to use any
and all existing furniture and equipment ("Existing Equipment"), if any, used by the prior tenant
of the Premises and located within the Premises on the Term Commencement Date.Tenant
acknowledges that it shall accept the Existing Equipment in its "AS IS"condition,without
representation or warranty by Landlord.Said right shall be coterminous with this Lease and
upon such termination,the Existing Equipment shall be deemed to constitute part of the
Premises and surrendered by Tenant to Landlord in good condition and repair, ordinary wear
and tear and damage from casualty excepted.
ARTICLE 3
TERM
3.1 Term.The Term of this Lease ("Term")shall commence on the Term
Commencement Date and shall expire, unless sooner terminated in accordance with this Lease,
on the Expiration Date.After the Rent Commencement Date, upon Landlord's request, Tenant
shall promptly execute a Memorandum of Term Commencement in the form attached hereto
as Exhibit B,which shall specify the Term Commencement Date,Rent Commencement Date
and the Expiration Date.If Tenant fails to execute a Memorandum of Term Commencement,
such failure shall not affect Tenant's obligation to commence paying rent upon the occurrence
of the Rent Commencement Date.
3.2 Extension Option.Landlord hereby grants to Tenant two (2)options to
extend the Term for a period of five (5) years each (each an "Extension Term"), commencing
upon the expiration of the Term or prior Extension Term,as applicable.Each such option shall
be exercisable only if Tenant is not then in default under this Lease beyond any applicable
notice and cure period.Each such option shall be exercisable by Tenant by delivery of written
notice to Landlord ("Tenant's Extension Notice") at least one hundred eighty (180) days prior
to the commencement of the applicable Extension Term,but not more than two hundred
seventy (270)days prior to the commencement of the applicable Extension Term.
Notwithstanding the foregoing,as to Tenant's second (2nd)option to extend only, Landlord shall
have the right to disapprove such extension if such extension would interfere with Landlord's
future development plans involving the Premises for a non-restaurant use,provided that
Landlord delivers notice of such disapproval ("Disapproval Notice") to Tenant within thirty (30)
days after receipt of the applicable Tenant's Extension Notice. If Tenant fails to deliver Tenant's
-5 -
DOCS 121163-000007/2625579 8
Extension Notice as provided above or if Landlord delivers a Disapproval Notice as provided
above,then Tenant's options to extend as to the applicable Extension Term and any future
Extension Term shall forever terminate and be of no further force or effect.In the event
Tenant exercises an option to extend and Landlord does not deliver a Disapproval Notice, the
Term and all of the terms and conditions of this Lease shall continue in full force and effect to
the end of the applicable Extension Term,except that the Base Rent shall be adjusted as
follows:
(a)Base Rent for the first twelve (12) months of each Extension Term
shall be the greater of (a)the Fair Market Rental Value (defined below),or (b) one hundred
three percent (103%)of the monthly Base Rent applicable immediately prior to the
commencement of such Extension Term,and Base Rent shall increase every twelve (12)full
calendar months thereafter by three percent (3%).As used herein, "Fair Market Rental Value"
means the prevailing rent for premises comparable in size and use to the Premises, in a similar
location in Carlsbad, taking into consideration all allowances for tenant improvements, moving
expenses,landlord expenses,rent abatement,brokerage expenses,tenant benefits or any
other market concessions which may be commonly available at the commencement of such
Extension Term.
(b)Within sixty (60)days after receipt of Tenant's Extension Notice,
Landlord shall deliver notice to Tenant of Landlord's determination of the Fair Market Rental
Value for the applicable Extension Term.Tenant shall have forty-five (45) days to either agree
with Landlord's determination,or notify Landlord that Tenant disagrees with Landlord's
determination of the Fair Market Rental Value ("Objection Notice").If Tenant delivers an
Objection Notice, Landlord and Tenant shall work together in good faith to agree upon the Fair
Market Rental Value for the Extension Term.When Landlord and Tenant have agreed upon the
Fair Market Rental Value for the Premises,such agreement shall be reflected in a Lease
amendment reflecting the renewal and new Base Rent,with all of the other terms and
conditions remaining as provided in this Lease.Notwithstanding the foregoing, if Landlord and
Tenant are unable to agree upon the Fair Market Rental Value for the Extension Term within
thirty (30)days after the date of Tenant's Objection Notice (the "Agreement Deadline"), the
dispute resolution provisions below shall apply.
(c)Dispute Resolution Procedure:
(I)If Landlord and Tenant are unable to agree upon the Fair
Market Rental Value for the Extension Term by the Agreement Deadline, then within 5 days
thereafter Landlord and Tenant shall each simultaneously submit to the other,in a sealed
envelope,its good faith estimate of the Fair Market Rental Value for the Extension Term
(collectively, the "Estimates").If the higher of such Estimates is not more than 105%of the
lower of such Estimates, the Fair Market Rental Value shall be deemed to be the average of the
two Estimates.Otherwise, within 7 days after the exchange of Estimates, Landlord and Tenant
shall each select an appraiser to determine which of the two Estimates most closely reflects the
Fair Market Rental Value for the Extension Term.As used herein, the term "appraiser" shall be
-6 -
DOCS 121163-000007/2625579.8
mean a real estate broker licensed with the State of California who has had at least 10 years'
experience as a real estate broker working in San Diego County,with working knowledge of
current rental rates and leasing practices relating to premises similar to and within the location
of the Premises.
(ii)If each party selects an appraiser in accordance with
subsection (i)above,the parties shall cause their respective appraisers to work together in
good faith to agree upon which of the two Estimates most closely reflects the Fair Market
Rental Value for the Extension Term.The Estimate, if any,so agreed upon by such appraisers
shall be final and binding on both parties as the Fair Market Rental Value for the Extension
Term and may be entered in a court of competent jurisdiction.If the appraisers fail to reach
such agreement within 20 days after their selection, then, within 10 days after the expiration of
such 20-day period, the parties shall instruct the appraisers to select a third appraiser meeting
the above criteria (the "Final Appraiser") (and if the appraisers fail to agree upon such third
appraiser within 10 days after being so instructed,either party may request a court of
competent jurisdiction to select such third appraiser).Notwithstanding the foregoing,if only
one of the parties had selected an appraiser within the 7-day period described above, then such
appraiser shall be the Final Appraiser.Promptly upon determination of the Final Appraiser, the
parties shall instruct the Final Appraiser to determine,as soon as practicable but in any case
within 14 days after determination of the Final Appraiser,which of the two Estimates most
closely reflects the Fair Market Rental Value.Such determination by the Final Appraiser shall
be final and binding on both parties as the Fair Market Rental Value for the Extension Term.If
the Final Appraiser believes that expert advice would materially assist him or her,he or she may
retain one or more qualified persons to provide such expert advice.The parties shall share
equally in the costs of the Final Appraiser and of any experts retained by the Final Appraiser.
Any fees of any other appraiser, counsel or expert engaged by Landlord or Tenant shall be
borne by the party retaining such appraiser, counsel or expert.
(iii)If the Fair Market Rental Value has not been determined
by the commencement date of the Extension Term,Tenant shall pay Base Rent for the
Extension Term upon the terms and conditions in effect during the last month ending
immediately prior to the commencement of the Extension Term until such time as the Fair
Market Rental Value has been determined.Upon such determination, the Base Rent for the
Extension Term shall be retroactively adjusted.If such adjustment results in an underpayment
of Base Rent by Tenant, Tenant shall pay Landlord the amount of such underpayment with or
against the next Base Rent due under this Lease.
3.3 Right of First Refusal to Lease.If (i)Landlord delivers a Disapproval
Notice to Tenant pursuant to Section 3.2 above and as a result the Term of this Lease expires at
the end of the first Extension Term, and (ii) at the time of delivery of the Disapproval Notice and
at the expiration of the Term Tenant was not in default under this Lease beyond any applicable
notice and cure period, and (iii) the City of Carlsbad will continue to be the owner and lessor of
the Premises and other property included in its development plans involving the Premises (the
"Future Development") after it is developed, then Tenant shall have a right of first refusal to
-7 -
DOCS 121163-000007/2625579.8
lease any retail space that will be included in the Future Development, on the terms set forth
below.For the purposes of this Section,a parking lot or parking structure shall not be deemed
to be retail space.Such right of first refusal, if it applies, shall be exercisable as follows:
(a)Landlord shall notify Tenant (the "First Refusal Notice")when
Landlord receives a bona -fide proposal that Landlord would be willing to accept or to which
Landlord would deliver a counterproposal it would be willing to accept (such proposal or
acceptable counterproposal to be referred to herein as the "Third Party Proposal") for all or
any portion of the retail space in the Future Development.The First Refusal Notice shall
describe the space which is the subject of the Third Party Proposal (the "First Refusal Space")
and shall set forth the proposed economic terms and conditions applicable to Tenant's lease of
such space (the "First Refusal Economic Terms"). Tenant's right of first refusal hereunder shall
not apply in the event that the Third Party Proposal includes space that is not retail space.
(b)If Tenant wishes to exercise Tenant's right of first refusal with
respect to the First Refusal Space, then within ten (10) business days after delivery of the First
Refusal Notice to Tenant, Tenant shall deliver notice to Landlord of Tenant's exercise of its right
of first refusal with respect to the entire First Refusal Space and on the applicable First Refusal
Economic Terms.If Tenant does not exercise its right of first refusal within the ten (10)
business day period (on all of the First Refusal Economic Terms), then Landlord shall be free to
lease the First Refusal Space to anyone to whom Landlord desires on terms not materially more
favorable to such third party tenant than the terms contained in the First Refusal Notice and
Tenant's right of first refusal shall thereupon automatically terminate as to such First Refusal
Space.Notwithstanding anything to the contrary contained herein,Tenant must elect to
exercise its right of first refusal,if at all,with respect to all of the First Refusal Space (as
described in the First Refusal Notice), and Tenant may not elect to lease only a portion thereof
or object to any of the First Refusal Economic Terms.
(c)If Tenant timely exercises Tenant's right to lease the First Refusal
Space,Landlord and Tenant shall execute a new lease for such First Refusal Space upon the
applicable First Refusal Economic Terms and otherwise on terms to be negotiated between
Landlord and Tenant.
3.4 Surrender of Premises.On the Expiration Date or on the sooner
termination hereof,Tenant shall remove all of Tenant's Property from the Premises and
peaceably surrender the Premises in accordance with the terms of this Section and in good
order, condition and repair, excepting any condemnation and any damage or destruction not
caused by Tenant or any or any officer, employee, agent or invitee of Tenant. "Ordinary wear
and tear" shall not include any damage or deterioration that would have been prevented by
good maintenance practice.Notwithstanding any other provision hereof,Tenant shall not
remove all or any part of Tenant's Work and the Tenant Improvements,or any fixtures or
equipment which cannot be removed without material damage to the Premises.Such items
shall remain upon and be surrendered with the Premises as a part thereof, without charge, at
the expiration or termination of this Lease and shall then become the property of Landlord.
-8 -
DOCS 121163-000007/2625579 8
Tenant shall repair,to the reasonable satisfaction of Landlord,any damage to the Premises
caused by any removal, or by the use of the Premises or by any failure of Tenant to comply with
the terms of this Lease (including,without limitation,provisions relating to Hazardous
Substances).Tenant shall promptly surrender all keys for the Premises to Landlord at the place
then fixed for notices to Landlord and shall inform Landlord of the combinations on any locks
and safes on the Premises. The provisions of this Section shall survive termination of this Lease.
3.5 Holding Over.Tenant has no right to retain possession of the Premises
or any part thereof beyond the expiration or termination of this Lease.The failure of Tenant to
timely surrender the Premises in the condition required by Section 3.4 above shall constitute a
holdover and shall not be considered a renewal of this Lease or an extension of the Term.In
the event of any such holdover Base Rent shall immediately be increased to an amount equal to
150%of the Base Rent applicable during the month immediately preceding the expiration or
termination.No action by Landlord other than Landlord's express written consent shall be
construed as consent by Landlord to any holding over by Tenant.
3.6 Waiver of Relocation Benefits:Tenant waives any and all relocation
benefits defined in the California Relocation Assistance Law (Government Code, Section 7260,
et. seq.) in connection with this Lease (including, without limitation, any termination as a result
of Landlord's delivery of a Disapproval Notice).
ARTICLE 4
CONSTRUCTION AND OPENING DATE
4.1 Construction.Tenant,at its sole cost and expense,shall commence
construction of Tenant's Work as described in Exhibit C and more particularly described in the
Final Plans for such work that have been approved by Landlord,promptly upon receipt of all
necessary permits required for commencement of Tenant's Work (collectively, the "Building
Permits"), and shall diligently prosecute the same in order to achieve completion of Tenant's
Work on or before the Opening Date,in accordance with all deadlines and requirements stated
in Exhibit C and in accordance with Article 12 below.
4.2 Opening Date.Tenant shall open for business to the public in the
Premises within one hundred twenty (120) days after Tenant receives the Building Permits (the
"Opening Date")and shall continuously operate Tenant's business in accordance with this
Lease.
4.3 Certificates.Within ten (10) days after Tenant initially opens for business
to the public in the Premises, Tenant shall:(i) execute and deliver to Landlord a valid notice of
completion of Tenant's Work in accordance with Section 3093 of the California Civil Code,as
amended or recodified from time to time ("Tenant's Certificate of Completion")in recordable
form and (ii) deliver to Landlord a valid certificate of occupancy for the Premises issued by the
appropriate governmental agency (the "Certificate of Occupancy").Landlord shall have the
-9 -
DOCS 121163-000007/2625579 8
right to record or cause Tenant to record Tenant's Certificate of Completion in the official
records of the County Recorder's Office of San Diego County.
ARTICLE 5
RENT
5.1 General Provisions.As used herein,"rent"shall mean Base Rent,
Percentage Rent and Additional Rent (defined below).Unless provided herein to the contrary,
Tenant shall pay all rent to Landlord at Landlord's Address for Rent Payments provided in
Article 1 above.All rent shall be paid to Landlord in lawful money of the United States of
America without demand therefor, and without deduction, offset or abatement of any kind,
except as may be expressly provided for in this Lease.Rent for any partial month shall be
prorated on the basis of a thirty (30) day month.
5.2 Payment of Base Rent.For each month or partial month of the Term
commencing on the Rent Commencement Date (except as otherwise expressly provided
herein), Tenant shall pay to Landlord the sum specified in Article 1 as Base Rent ("Base Rent")
in advance as set forth herein.Tenant shall pay the first installment of Base Rent to Landlord
concurrently with Tenant's execution of this Lease,and all subsequent installments of Base
Rent shall be payable in advance on or before the first day of each calendar month.
5.3 Payment of Percentage Rent.Within thirty (30)days after the end of
each Lease Year, Tenant shall: (i) pay to Landlord the Percentage Rent computed for such Lease
Year by multiplying the Gross Sales for such Lease Year in excess of the Rent Breakpoint by the
Percentage (subject to any applicable credit for possessory interest tax paid by Tenant as
provided in Section 7.1 below); and (ii) furnish to Landlord a Gross Sales Report (defined below)
together with a copy of the state sales tax returns for such Lease Year. Tenant shall require its
licensees and concessionaires,if any,to furnish similar statements.During any Lease Year in
which Tenant occupies the Leased Premises for less than twelve (12)months,the Rent
Breakpoint will be adjusted on a proportionate basis. All obligations hereunder shall survive the
termination of the Lease.
5.4 Gross Sales Reports.Within thirty (30) days after the end of each month
of each Lease Year, Tenant shall provide to Landlord a written statement of Gross Sales for the
applicable month certified as correct by Tenant (a "Gross Sales Report").The term "Gross
Sales"as used in this Lease shall mean the aggregate selling price of all food, beverages, goods,
merchandise and services sold or delivered from any part of the Premises by Tenant and
Tenant's occupants and shall include, without limitation, the following:(a)the entire amount of
the actual sales price,whether for cash,credit,charge or otherwise,charged or received by
Tenant from the sale of food, goods, beverages, services and other merchandise (including gift
and merchandise certificates)in and from the Premises,whether the order for food,goods,
beverages, services and other merchandise is placed at the Premises and whether filled at the
Premises or at another location; (b) the entire amount of fees received for services; and (c)all
other receipts, cash, credits and property of any kind or nature, any amount for which credit is
-10 -
DOCS 121163-000007/2625579 8
allowed by the seller to the purchaser (without any deduction therefrom on account of the cost
of the property sold, the cost of materials used, labor or service costs, interest paid or payable,
losses or any other expenses whatsoever),including,without limitation (1)sales through
vending machines or other devices including coin telephones, and audio and video games,(2)
sales to employees,(3)deposits not refunded to purchasers,(4)sales from solicitations,
regardless of where conducted, by personnel operating from, or reporting to any person at the
Premises, and (5) sales by any sublessee, concessionaire or licensee or otherwise in or from the
Premises.Gross Sales shall not include: (i) the amount of any tax imposed on or with respect to
retail sales whether imposed upon the retailer or upon the consumer and regardless of whether
or not the amount of tax is stated to customers as a separate charge, or any state, or local sales
or use tax required by law to be included in or added to the purchase price and collected from
the consumer or purchaser, or such part of the sales price of any property previously sold and
returned by the purchaser to the seller which is refunded by the seller by way of cash or credit
allowances given or taken as part of payment on any property so accepted for resale;(ii)
receipts from the sale or the trade-in value of any furniture, trade fixtures or equipment used
on the Premises,and owned by Tenant;(iii)the value of any merchandise,supplies or
equipment exchanged or transferred from or to other business locations of Tenant where such
exchanges or transfers are not made for the purpose of avoiding a sale by Tenant which would
otherwise be made from or at the Premises;(iv)receipts in the form of refunds from or the
value of merchandise, supplies, or equipment returned to shippers, suppliers or manufacturers;
(v)the amount of any cash or quantity discounts received from sellers,suppliers,or
manufactures;(vi)the amounts of any discounts given to Tenant's employees or free meals
given to Tenant's manager;(vii)reasonable and verifiable purchases by employees or their
immediate family members of supplies and equipment for personal use; (viii) sums and credits,
condemnation proceeds and/or insurance proceeds received in the settlement of claims for loss
of or damage to merchandise or for merchandise returned to sources or transferred to another
store or warehouse owned by or affiliated with Tenant, where such transfer or exchange is
made solely for the convenient operation of Tenant's business and not for the purpose of
depriving Landlord of the benefit of a sale that would otherwise be made from the Premises;
(ix) interest, service or sales carrying charges or other charges, however denominated, paid by
customers for extension of credit on sales and where not included in the merchandise sales
price;(x)receipts from vending machines installed solely for use by Tenant's employees;(xi)
receipts from the sale of gift certificates, promotional discounts or like vouchers, until such time
as the same shall have been converted into a sale by redemption; sales to Tenant's employees
or employees of Tenant's affiliated companies at discount provided such sales do not in the
aggregate exceed one percent (1%) of Gross Sales per Lease Year;(xii) fees charged by credit
card companies,issuers and processors,including so-called "merchants fees"and/or"Bank
discounts"; (xiii) delivery charges and similar minor auxiliary services not usually or customarily
considered as merchandise provided such services are rendered by Tenant without profit; (xiv)
to the extent that the amount thereof was previously included in Gross Sales,bad debts and
uncollectible accounts not exceeding in the aggregate one percent (1%)of Gross Sales per
Lease Year;(xv) tips or gratuities passed on to employees; (xvi) discounts given for birthdays,
anniversaries, etc.; or (xvii) unpaid walkouts.
-11 -
DOCS 121163-000007/2625579 8
5.5 Additional Rent.Except for Base Rent and Percentage Rent, all amounts
that Tenant is required to pay to Landlord under this Lease shall be treated as "Additional
Rent", and shall be paid when due as provided in this Lease.
ARTICLE 6
SECURITY DEPOSIT
6.1 Security Deposit.Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the security deposit specified in Article 1 ("Security
Deposit"). Landlord shall hold the Security Deposit as security for Tenant's faithful performance
of all the terms, covenants, and conditions of this Lease.Landlord shall not be required to keep
the Security Deposit separate from Landlord's general funds.Landlord shall have the right to
commingle the Security Deposit with Landlord's general funds and to retain any and all interest
and earnings on the Security Deposit.Tenant shall not be entitled to any interest on the
Security Deposit.Subject to Landlord's right hereunder to apply the Security Deposit in
accordance with this Section, the parties acknowledge that the Security Deposit does not cover
any rent hereunder.In the event of a sale of the Premises or assignment of this Lease by
Landlord to any person other than a mortgagee,Landlord shall have the right to transfer the
Security Deposit to its vendee or assignee,subject to Tenant's aforesaid rights upon
termination, and if Landlord transfers the Security Deposit to the vendee or assignee for the
benefit of Tenant,or if such vendee or assignee assumes all liability with respect to such
Security Deposit,Landlord shall be considered released by Tenant from all liability for the
return of such Security Deposit, and Tenant agrees to look solely to the new landlord for the
return of the Security Deposit, and it is agreed that this Section 6.1 shall apply to every transfer
or assignment to a new Landlord.
6.2 Use of Security Deposit.If Tenant breaches or fails to perform any of
Tenant's obligations under this Lease,Landlord shall have the right, but not the obligation, to
use or retain all or any part of the Security Deposit to cure the breach or failure of performance,
and to compensate Landlord for any damages sustained by Landlord, including but not limited
to payment of:(i)delinquent rent;(ii) interest on delinquent rent;(iii) late charges on
delinquent rent; (iv) the cost of performing any of Tenant's obligations under this Lease; (v) the
cost of repairing damages to the Premises;(vi) the cost of cleaning,maintaining,repairing,
restoring or reletting the Premises;(vii)attorneys'and accountants' fees and disbursements
and court costs; (viii) brokerage commissions and finders' fees; and (ix) interest on any and all
of the above at the maximum lawful rate ("Remedy Rate")from the date due until paid;
provided,however,that retention of all or any part of the Security Deposit shall not affect
Tenant's obligations under this Lease or Landlord's other rights and remedies provided at law,
in equity, or under this Lease;and provided, further, that in the event that Landlord elects to
apply the Security Deposit or any portion thereof as herein provided, such application and the
amounts applied to particular items of cure and/or compensation shall be determined by
Landlord in Landlord's sole and absolute discretion.If any portion of the Security Deposit is
used as provided for in this Section, then within 10 days after written demand by Landlord,
-12 -
DOCS 121163-000007/2625579 8
Tenant shall deposit with Landlord sufficient cash to restore the Security Deposit to its original
amount.Tenant's failure to make this deposit shall be a default under this Lease.
6.3 Refund and Transfer; Waiver of Statutes.If Tenant shall have fully and
faithfully performed all of Tenant's obligations under this Lease (or upon the earlier termination
without Tenant's fault),has cleaned and repaired any damage,and has received invoices for
such repair or cleaning costs,if any,and after Landlord has inspected the Premises,then
Landlord shall return the Security Deposit or any balance thereof to Tenant.Tenant hereby
waives (i)California Civil Code Section 1950.7,as amended or recodified from time to time.
Notwithstanding anything to the contrary contained herein,the Security Deposit may be
retained and applied by Landlord (a)to offset rent which is unpaid either before or after the
termination of this Lease, and (b) subject to the provisions of Section 9.7 of this Lease, against
other damages suffered by Landlord before or after the termination of this Lease,whether
foreseeable or unforeseeable,caused by the act or omission of Tenant or any officer,
employee, agent or invitee of Tenant.
ARTICLE 7
TAXES
7.1 Real Estate Taxes.Tenant shall pay directly prior to delinquency any and
all real estate taxes,assessments (whether general,special,ordinary or extraordinary),
possessory interest taxes,improvement bonds,license fees,commercial rental taxes,sewer
and water rents and other levies,fees and charges of every kind imposed by any authority
having the direct or indirect power to so tax,levy or assess,to the extent relating to the
Premises,to Landlord's gross receipts or revenues from the Premises,or to the business or
other activities of Tenant upon or in connection with the Premises (individually and collectively,
"Real Estate Taxes").In particular, Tenant acknowledges that this Lease may result in a taxable
possessory interest. Tenant shall be solely responsible for the payment of Real Estate Taxes
associated with its occupancy of the Premises,if any apply.Tenant shall also pay any fees
imposed by law for licenses or permits for any business or activities of Tenant upon the
Premises or under this Lease.Notwithstanding the foregoing,as to any Lease Year in which
Tenant's Gross Sales exceed the Rent Breakpoint,the amount of Percentage Rent payable
under this Lease for such Lease Year shall be reduced by the amount of possessory interest tax
paid by Tenant for the calendar year ending in such Lease Year.
7.2 Personal Property Taxes.Tenant shall pay directly prior to delinquency
any and all taxes and assessments levied or assessed during the Term upon or against
(i) Tenant's Property (as hereinafter defined),furniture,equipment,and any other personal
property installed or located in the Premises and (ii) all above-standard alterations, additions,
betterments,or improvements of whatever kind or nature made by Tenant to the Premises
that are separately assessed.
-13 -
DOCS 121163-000007/2625579.8
ARTICLE 8
UTILITIES
8.1 Payment of Utilities.Tenant shall pay, before delinquency, for all utilities
and services serving the Premises, including (without limitation) trash collection, water,gas and
electricity,and any and all utility hook-up fees,connection fees,including sewer connection
fees,and service and other charges for the availability of any such utilities and services,
supplied to or consumed in or upon the Premises from and after the Term Commencement
Date and continuously thereafter throughout the Term, directly to the supplier of such utilities
and services.Upon Landlord's request, Tenant shall deliver to Landlord copies of all bills for
utilities supplied to the Premises for the past twelve (12)month period within thirty (30) days
after Landlord's request.
8.2 Interruption of Utilities.Landlord shall have the right (but not the
obligation),with reasonable prior notice to Tenant,or without notice in the case of an
emergency, to shut off water,gas,electricity and any all other utilities and services whenever
such discontinuance is necessary to make repairs or alterations or to protect the Premises.In
no event shall Landlord be liable for the quality, quantity, failure or interruption of any such
utilities or services to the Premises.In addition, any such failure,interruption or impairment
shall not be construed as an eviction of Tenant or a disturbance of Tenant's possession, and
Tenant shall not be entitled to any abatement of rent.Notwithstanding the foregoing or any
language in this Lease to the contrary, except in the event of an act of Force Majeure, if any
utility service to the Premises is interrupted more than three (3) consecutive days solely due to
the negligent or intentional act of Landlord or Landlord's employees, and as a result, Tenant
discontinues all business operations in the Premises, Tenant shall have the right to abate all
Base Rent payable hereunder for the period for which such interruption and discontinuation
exist.In the event of any such interruption of any utility service to the Premises, Landlord shall
use due diligence to restore promptly such service
ARTICLE 9
INSURANCE
9.1 General.Tenant shall, at its expense, maintain in effect from and after
the Term Commencement Date and continuously thereafter until the termination or expiration
of this Lease,the policies of insurance required under this Article.All policies that Tenant is
required to obtain under this Article shall be issued by companies licensed to do business in
California with a general policyholder's rating of not less than "A-"and a financing rating of not
less than Class "VIII",as rated by the most current available "Best's"Insurance Reports and
shall be in a form (without any additions or deletions unless approved in writing by Landlord)
and underwritten by companies acceptable to Landlord.On or before the Term
Commencement Date, Tenant shall furnish Landlord with certificates and endorsements in a
form acceptable to Landlord evidencing that (i)the policies (or a binder thereof)required
pursuant to this Article are in effect and (ii) Landlord shall be notified in writing thirty (30) days
prior to cancellation,material change,or nonrenewal of such insurance (or if Tenant's
-14 -
DOCS 121163-000007/2625579 8
insurance carrier will not agree to provide notice of cancellation,material change,or
nonrenewal to any additional insured or other entity, then Tenant shall deliver such notice to
Landlord thirty (30) days prior to any cancellation, material change, or nonrenewal initiated by
Tenant,or twenty (20)days prior to such cancellation,material change or nonrenewal not
initiated by Tenant).The policies that Tenant is required to obtain pursuant to this Article shall
name Landlord, and any other parties requested by Landlord in accordance with commercially
reasonable practices,as additional insureds,or as loss payee (as applicable)for property in
which Landlord has an insurable interest and shall be primary policies,and shall not be
contributing with and shall be in excess of coverage which Landlord may have and shall be
unaffected by any insurance or self-insurance Landlord may have regardless of whether any
other insurance names Landlord as an insured or whether such insurance stands primary or
secondary.If Tenant carries any of the insurance required hereunder in the form of a blanket
policy,any certificate required hereunder shall make specific reference to the Premises. The
procuring of policies of insurance shall not be construed to limit Tenant's liability hereunder in
any way,nor to fulfill the indemnification provisions and requirements of this Lease.Tenant
agrees not to use the Premises in any manner, other than the Permitted Use generally, that will
result in the cancellation of any insurance Landlord may have on the Premises, or on adjacent
premises, or that will cause cancellation of any other insurance coverage for the Premises, or
adjoining premises.Tenant further agrees not to keep on the Premises or permit to be kept,
used,or sold thereon,anything prohibited by any fire or other insurance policy covering the
Premises. Tenant shall, at its sole cost and expense, comply with any and all requirements, in
regard to Premises,of any insurance organization necessary for maintaining fire and other
insurance coverage at reasonable cost.
9.2 Commercial General Liability Insurance.Tenant shall obtain and keep in
force a policy or policies of commercial general liability insurance covering the Premises and the
business operations thereon,including contractual liability,personal injury and property
liability coverage in amounts not less than a combined single limit of $1,000,000 per occurrence
for bodily injury, personal injury, death and property damage liability.If the submitted policies
contain aggregate limits, general aggregate limits will apply separately under this Lease or the
general aggregate will be twice the required per occurrence limits.Liability coverage for the
required limits may be obtained with a combination of commercial general liability insurance
and an umbrella policy. Such policy or policies shall include liquor liability coverage in the same
limits and under the same conditions as Tenant's general liability insurance,if the sale of
alcoholic beverages is permitted in the Premises.
9.3 Property and Extended Coverage Insurance.Tenant shall obtain and
keep in force a Causes of Loss -Special Form property insurance policy (formerly known as "all
risks"),including vandalism,malicious mischief,earthquake and sprinkler leakage coverage,
covering one hundred percent (100%)of the replacement cost of the Premises,all Tenant's
Property and any and all Tenant's Work and Tenant Improvements made in or upon the
Premises,with an inflation rider or endorsement attached thereto and twelve (12)months'
business income (business interruption)insurance rider or endorsement attached thereto.
Tenant shall keep in force a policy of plate glass insurance covering all plate glass in the
-15 -
DOCS 121163-000007/2625579 8
Premises in an amount equal to the full replacement cost thereof; alternatively, Tenant may
self-insure against this risk.The deductibles on such policies shall not exceed $10,000.00 per
occurrence.The proceeds from any such insurance shall be used by Tenant for the
replacement of the Premises,personal property and trade fixtures as well as alterations and
utility installations.
9.4 Business Interruption.Tenant shall obtain and keep in force loss of
income and extra expense insurance in amounts as will reimburse Tenant for at least twelve
(12)months'direct and indirect loss of earnings attributable to all perils commonly insured
against by prudent tenants in the business of Tenant or attributable to prevention of access to
the Premises as a result of such perils.
9.5 Workers'Compensation Insurance.Tenant shall obtain and keep in
force workers'compensation and employer's liability insurance covering all employees of
Tenant engaged on or with respect to the Premises,affording applicable statutory limits for
workers'compensation coverage and at least $1,000,000.00 in limits for employer's liability
coverage.
9.6 Automobile Insurance.Tenant shall obtain and keep in force
comprehensive automobile liability insurance with a combined single limit of at least
$1,000,000 per occurrence for claims arising out of any owned,non-owned or hired
automobiles.
9.7 Waiver of Subrogation.Notwithstanding anything to the contrary
contained herein,Landlord and Tenant hereby waive any rights each may have against the
other on account of any loss or damage occasioned to Landlord or Tenant, their respective
property,the Premises or its contents,arising from any risk to the extent covered by the
insurance required hereunder. The foregoing waiver shall also apply to any deductible,as if the
same were a part of the insurance recovery.The parties each,on behalf of their respective
insurance companies insuring the property of either Landlord or Tenant against any such loss,
waive any right of subrogation that it may have against Landlord or Tenant,as the case may be.
Each party shall obtain any special endorsements, if required by its insurer, whereby the insurer
waives its rights of subrogation against the other party.The foregoing waivers of subrogation
shall be operative only so long as available without invalidating either Landlord's or Tenant's
policy of insurance.
9.8 Coverage Changes.Notwithstanding any of the foregoing, Landlord shall
retain the right at any time to review the coverage, form, and amount of the insurance required
under this Lease.If,in the opinion of Landlord, the insurance provisions in this Lease do not
provide adequate protection for Landlord and/or for members of the public using the Premises,
Landlord may require Tenant to obtain insurance sufficient in coverage, form and amount to
provide adequate protection.Landlord's requirements shall be reasonable but shall be
designed to assure protection from and against the kind and extent of risk which exists at the
time a change in insurance is required.Landlord shall notify Tenant in writing of changes in the
-16 -
DOCS 121163-000007/2625579 8
insurance requirements,and Tenant shall deposit certificates/endorsements evidencing
acceptable insurance policies with Landlord incorporating such changes within thirty (30) days
after receipt of such notice.
ARTICLE 10
USE OF PREMISES
10.1 Permitted Use and Continuous Operation.Tenant shall actively and
continuously use, operate and occupy the Premises solely for the Permitted Use,and shall be
open to the public during Tenant's Business Hours.No other use shall be permitted without the
prior express written consent of Landlord. Tenant shall identify itself to the public in connection
with such business under Tenant's Trade Name specified in Article 1 above and under no other
name without Landlord's prior express written consent,which shall not be unreasonably
withheld.Notwithstanding anything to the contrary contained in this Lease,with prior written
notice to Landlord (except in emergency situations,when notice shall be given as soon as
reasonably possible), the Premises may be closed to the extent reasonably necessary due to
Force Majeure.
10.2 Conduct of Business.Tenant shall conduct its business at all times in a
professional and businesslike manner consistent with reputable business standards and
practices.
10.3 Compliance with Laws; Nuisance.Tenant shall, at its sole expense and at
all times, comply fully with (i) all federal, state and municipal laws, including without limitation
all zoning and land use laws and ordinances, conditional use permit rules and orders and the
Liquor Licenses,now in force or which may hereafter apply to the Premises or which impose
any duty on Landlord or Tenant relating to the use or occupancy of the Premises (including but
not limited to the obligation (a)to obtain a conditional use permit, (b) to alter, maintain, repair
or restore any portion of the Premises to the extent required as a result of Tenant's use of the
Premises, or (c) to alter, maintain, repair or restore the portion of the Premises which Tenant is
responsible to maintain,repair or restore pursuant to this Lease);(ii)any declaration of
covenants, conditions and restrictions and easements encumbering the Premises on the Term
Commencement Date,or becoming effective after the Term Commencement Date with
Tenant's written consent or as otherwise expressly permitted by this Lease,(iii)any
commercially reasonably rules and regulations prescribed by Landlord for the Premises ("Rules
and Regulations"); and (iv) any and all requirements and recommendations of any insurance
organization or company necessary for the maintenance of reasonable fire and public liability
insurance covering the Premises.Tenant shall not store,use or sell any article in or about the
Premises, nor permit any act, which would cause a cancellation of any policy upon the Premises
or any loss of coverage under any such policy.Tenant shall not occupy, suffer or permit the
Premises or any part thereof to be used for any illegal, immoral or dangerous purpose, or in any
other way contrary to the law or'the rules or regulations of any public authority.Tenant shall
not commit, or suffer to be committed, any waste upon the Premises, or any public or private
nuisance, or any other act or thing which may disturb the quiet enjoyment of neighbors of the
-17 -
DOCS 121163-000007/2625579 8
Premises.Tenant shall not conduct or permit to be conducted any sale by auction in, upon or
on the Premises.
10.4 Restaurant Use.For so long as Tenant's permitted use includes the sale
of and/or preparation of food:(a)Tenant shall at all times maintain a health department rating
of "A" (or such other highest health department or similar rating as is available);and (b)in
connection with Tenant's obligations under this Lease, Tenant shall be responsible for any and
all construction,health,safety,liability and legal regulations and other matters related to
Tenant's grease removal device(s)and/or any recycled oil drum system,including (without
limitation) contracting with a qualified service company for routine cleaning and maintenance
of any grease removal devices and grease lines which serve the Premises.Tenant shall install
grease removal device(s)as part of Tenant's Work and in accordance with the provisions
relating to Tenant's Work. Any recycled oil drum system shall be subject to Landlord's review
and approval of the system and Tenant's operational plan for the use of same. If the governing
agency approving Tenant's plans and specifications does not allow the use of the recycled oil
drum, Tenant shall accommodate within its plans and specifications and at its sole cost and
expense,whatever alternate system is required or permitted by the governing agency, if any.
All maintenance, repair and replacement associated with the grease removal device(s) and any
recycled oil drum or alternative system, and the future replacement costs thereof,as well as all
potential loss associated with such equipment or any liability to persons or property associated
therewith shall be at the sole cost and liability of Tenant.Tenant shall perform any steam
cleaning or pest control services necessary to maintain first class cleanliness, health and safety
standards relating to such equipment and,upon written notice from Landlord,will provide
Landlord with a copy of a contract for such services,which services must be provided by a
company or companies reasonably approved by Landlord.
10.5 Environmental Compliance.Tenant represents, warrants and covenants
to Landlord that Tenant shall at no time use, or permit the Premises to be used, in violation of
any federal, state or local law, ordinance or regulation relating to the environmental conditions
on,under or about the Premises, including, but not limited to, air quality, soil and surface and
subsurface water conditions.Tenant shall assume sole and full responsibility and cost to
remedy any such violations by Tenant.Tenant further represents, warrants and covenants to
Landlord that Tenant shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under or about the Premises (except for supplies typically used in the ordinary
course of operating a restaurant in commercially reasonable amounts and in strict compliance
with law) and shall promptly, at Tenant's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the cleanup of any
contamination of,and for the maintenance,security and/or monitoring of the Premises or
neighboring properties, that was caused or materially contributed to by Tenant, or pertaining to
or involving any Hazardous Substance brought onto the Premises during the term of this Lease,
by or for Tenant, or any third party. The term "Hazardous Substance"as used in this Lease shall
mean any product,substance,or waste whose presence,use,manufacture,disposal,
transportation, or release, either by itself or in combination with other materials expected to be
on the Premises,is either:(i)potentially injurious to the public health, safety or welfare, the
-18 -
DOCS 121163-000007/2625579 8
environment or the Premises, (ii) regulated or monitored by any government authority, or (iii)a
basis for potential liability of Landlord to any governmental agency or third party under any
applicable statute or common law theory.Hazardous Substances shall include,but not be
limited to, asbestos, asbestos containing material, the group of organic compounds known as
polychlorinated biphenyls,as well as substances defined as "hazardous substances"or "toxic
substances"under State,local or federal laws or regulations,as they be enacted or
promulgated from time to time.
10.6 Landlord's Right of Entry.Landlord, at reasonable times, may go into the
Premises without any liability for the purposes of:(i) inspecting the Premises; (ii) inspecting the
performance by Tenant of the terms and conditions hereof;(iii)showing the Premises to
prospective tenants,purchasers,partners,or mortgagees;and (iv) posting notices for the
protection of Landlord on the Premises.Except in the case of an emergency, Landlord shall give
Tenant reasonable notice of any and all intended entries or inspections pursuant to this
Section.
10.7 Prohibition Against Discrimination.Tenant shall not discriminate against
or segregate any person or class of persons by reason of sex,color,race,religion or national
origin. If the use provided for in this Lease allows Tenant to offer accommodations or services
to the public, such accommodations or services shall be offered by Tenant to the public on fair
and reasonable terms.
ARTICLE 11
MAINTENANCE AND REPAIR OF PREMISES
11.1 Tenant's Inspection.Tenant accepts the Premises in its "AS IS"condition
as further provided in Section 2.2 above,and Tenant expressly waives all implied warranties
including implied warranties of merchantability and fitness,if any. Tenant hereby waives all
rights under Sections 1941 and 1942 of the California Civil Code,as amended or recodified from
time to time, or any similar provision,permitting Tenant to make repairs at the expense of
Landlord.Tenant represents and warrants that it has inspected and conducted tests and
studies of the Premises,and that it is familiar with the condition of the Premises.Tenant
understands and acknowledges that the Premises may be subject to earthquake, fire, floods,
erosion,high water table,dangerous underground soil and water conditions and similar
occurrences that may alter its condition or affect its suitability for any proposed use.Landlord
shall have no responsibility or liability with respect to any such occurrence.
11.2 Tenant's Obligations.Except for Landlord's obligations as set forth in
Section 11.3 below, from and after the Term Commencement Date and continuously thereafter
until the expiration or termination of this Lease,Tenant,at Tenant's sole expense,shall
maintain the Premises in a neat,clean and sanitary condition and repair,and make any
necessary repairs and replacements to any portion of the Premises, including full responsibility
for:(a)maintenance,repair and replacement of the interior and exterior of the building
(including, without limitation,(i) any structural portions of the Premises to the extent affected
-19 -
DOCS 121163-000007/2625579 8
by Tenant's Work or any Tenant Improvements,and (i)any painting,plumbing,fixtures,
windows and glass,HVAC systems, custodial, flooring and appliances) throughout the Term to
maintain and preserve the Premises in a good, safe, healthy and sanitary condition satisfactory
to Landlord and in compliance with all applicable laws;and (b)the obligations set forth in
Section 10.4 above relating to grease removal device(s) and any recycled oil drum or alternative
system; and (c)keeping the Premises free and clear of trash, garbage and other fire hazards.
The maintenance, repair and replacement obligations set forth in this paragraph are a material
part of the consideration for this Lease.
11.3 Landlord's Obligations.From and after the Term Commencement Date
and continuously thereafter until the expiration or termination of this Lease,Landlord,at
Landlord's sole expense,shall keep in good order,condition and repair the foundations,
exterior walls and roof of the Premises,except for (a)any damage thereto caused by any
negligent act or omission of Tenant or its agents, contractors, subcontractors, employees or
invitees, (b) any such portions of the Premises to the extent affected by Tenant's Work or any
Tenant Improvements, and (c) any damage or destruction covered by insurance required to be
maintained by Tenant.All repairs to be performed by Landlord shall be commenced and
completed as soon as reasonably necessary after written notice from Tenant to Landlord.In
cases of emergency, Tenant shall endeavor to give as much notice to Landlord as is reasonable
under the circumstances. During the making of any repairs or alterations herein required to be
made by Landlord,Base Rent shall be equitably abated based upon the extent to which the
making of repairs interferes with Tenant's business.
If Landlord has not performed any repairs to the Premises that are its
responsibility under this Lease within thirty (30)days after written notice of the necessity
therefor has been given by Tenant, which period shall be extended by (i)any period during
which Landlord is seeking in good faith to discuss with Tenant the issue of which party should
be responsible for the applicable repair, and (ii) any period during which Landlord is diligently
pursuing such repair, and such failure has a material, adverse effect on Tenant's ability to use,
occupy and conduct business in the Premises, then Tenant may, but shall have no obligation to,
make such repairs at the expense of Landlord provided that Tenant provides and additional
notice to Landlord of its intent to exercise this right and Landlord's failure continues for an
additional ten (10) days thereafter.In the event of an emergency, the notice periods set forth in
this paragraph shall be reduced to the extent reasonable in light of the nature of the
emergency.Upon demand, Landlord shall pay Tenant an amount equal to all reasonable costs,
fees and expenses paid or incurred by Tenant for any repairs it made pursuant to this
paragraph.
11.4 Landlord's Cure.Landlord shall have the right but not the duty, to enter,
view,inspect,determine the condition of and protect its interests in,the Premises.If at any
time Landlord determines that the Premises are not in the condition required by this Lease,
then Tenant shall perform the necessary maintenance, repair and/or replacement work within
ten (10)days after written notice from Landlord.If Tenant fails to perform the necessary
maintenance,repair and/or replacement work within ten (10)days after written notice from
-20 -
DOCS 121163-000007/2625579 8
Landlord, then Landlord may, but is not obligated to, perform such obligations without liability
to Tenant for any loss to Tenant's business that might arise by reason thereof.Tenant shall
reimburse Landlord on demand in an amount equal to the cost incurred by Landlord in the
performance of such obligations plus an administrative fee equal to ten percent (10%)of the
cost incurred by Landlord.Landlord's rights reserved in this section shall not create any
obligations or increase any obligations for Landlord elsewhere in this Lease.
ARTICLE 12
ALTERATIONS AND ADDITIONS
12.1 Tenant Improvements.Tenant shall not commence Tenant's Work or
make (i) any alterations, improvements, additions or utility installations, including without limit,
carpeting,floor or window coverings,locks,air lines,power panels,electrical distribution
systems,lighting fixtures,space heaters,air conditioning and plumbing in,on,or about the
Premises or (ii) any change or alteration to the exterior of the Premises (collectively "Tenant
Improvements")without Landlord's prior written consent,which shall not be unreasonably
withheld, conditioned or delayed.If Tenant makes any Tenant Improvements or commences
Tenant's Work without the prior written approval of Landlord, Landlord shall have the right to
require that Tenant remove any or all of such Tenant Improvements or Tenant's Work and
repair and any restore damage to the Premises caused by such removal at Tenant's sole
expense and shall also have the right to declare Tenant in default and to terminate this Lease.
Tenant's Work and any Tenant Improvements shall at all times comply fully with all applicable
federal,state and municipal laws,ordinances,regulations,codes and other governmental
requirements now or hereafter in force and Tenant shall, at Tenant's sole cost and expense,
take all actions now or hereafter necessary to ensure such compliance.
Tenant shall provide Landlord with a written request for approval of Tenant's
Work or any Tenant Improvements that Tenant would like to make with proposed detailed
plans,if applicable in light of proposed work.Landlord shall have the right to condition
Landlord's prior written consent upon Tenant's:(i)obtaining a building permit (if necessary)
and complying with all building and planning laws and regulations for Tenant's Work or the
Tenant Improvements from appropriate governmental agencies; (ii) furnishing a copy of such
building permit and evidence of such compliance to Landlord prior to the commencement of
such work; (iii) complying with all the conditions of such building permit and such building and
planning laws and regulations; (iv) providing Landlord with plans and specifications for Tenant's
Work or the Tenant Improvements (if reasonable in light of the nature of the proposed work)
for Landlord's prior written approval;(v)providing Landlord with a copy of the construction
contract,construction schedule,trade payment breakdown and list of subcontractors and
suppliers for Landlord's prior written approval;(vi) obtaining a builder's "all risk"insurance
policy in an amount and issued by insurance company acceptable to Landlord, naming Landlord
as an additional insured and otherwise satisfying the requirements of Article 9 above; and/or
(vii) providing Landlord with at least ten (10) days written notice prior to commencing any such
work.In its capacity as a landlord (and not as the approving agency), Landlord's approval of the
plans, specifications and working drawings for Tenant's Work or any Tenant Improvements shall
-21 -
DOCS 121163-000007/2625579 8
create no responsibility or liability on the part of Landlord for their completeness,design
sufficiency,or compliance with all laws,rules and regulations of governmental agencies or
authorities.Landlord shall not be liable for any damage,loss,or prejudice suffered or claimed
by Tenant,its agents or any other person or entity on account of:(a)the approval or
disapproval of any plans, contracts,bonds,contractors, sureties or matters by Landlord in its
capacity as a landlord (and not as the approving agency); (b) the construction or performance
of any work whether or not pursuant to approved plans;(c)the improvement of any portion of
the Premises or alteration or modification to any portion of the Premises;or (d)the
enforcement or failure to enforce any of the covenants, conditions and restrictions contained in
this Lease.Under no circumstances shall Tenant make any roof penetrations without the prior
written consent of Landlord.Any consent of Landlord shall be conditioned upon Landlord's
review and approval of plans satisfactory to Landlord for the repair of the roof.Any roof
penetrations may be inspected by Landlord's roofing contractor,and Tenant shall reimburse
Landlord for the cost of such inspection and any necessary repair work within ten (10)days
after Tenant's receipt of an invoice therefor.
12.2 Construction of Tenant Improvements;Liens.Tenant shall pay when
due all claims for labor or materials furnished or alleged to have been furnished to or for
Tenant at,on,or for use in the Premises,and shall defend,indemnify,protect and hold
harmless the Premises and Landlord against the same (including, without limitation, the costs
of defending against such claims, and reasonable attorney's fees incurred therein). Tenant shall
keep the Premises and any interest therein, free and clear of all mechanics' liens and all other
liens.Tenant shall give Landlord immediate written notice of any lien filed against the Premises
or any interest therein related to or arising from work performed by or for Tenant. Tenant shall
give Landlord not less than ten (10)days'prior written notice of the commencement of
Tenant's Work or any Tenant Improvements in the Premises, and Landlord shall have the right
to post notices of nonresponsibility in or upon the Premises as provided by law.If any lien or
levy of any nature whatsoever is filed against the Premises or Tenant's leasehold interest, then
upon Landlord's request, Tenant shall furnish to Landlord a corporate surety bond, satisfactory
to Landlord, in an amount equal to one and one-half (1 1/2)times the amount of the claims upon
which such lien or levy has been filed.Such bond shall be acknowledged by Tenant as principal
and by a corporation,licensed by the Insurance Commissioner of the State of California to
transact the business of a fidelity and surety insurance company,as surety. Landlord shall have
the right to declare this Lease in default in the event the bond required by this paragraph has
not been deposited with Landlord within ten (10) days after written request has been delivered
to Tenant.
12.3 Title to Tenant Improvements.Subject to Section 13.1 below, upon the
expiration or earlier termination of this Lease,any and all Tenant's Work and Tenant
Improvements which may be made in or upon the Premises shall become the property of
Landlord and remain upon and be surrendered with the Premises at the expiration of the Term
without compensation to Tenant unless Landlord requires that Tenant remove the Tenant's
Work and/or the Tenant Improvements pursuant to Article 13 below.
-22 -
DOCS 121163-000007/2625579 8
12.4 Signs.Tenant shall be responsible for purchasing,installing and
maintaining, at Tenant's sole cost, exterior signage in accordance with the signage regulations
set forth by the City of Carlsbad and any other sign criteria provided by Landlord (collectively,
"Sign Criteria") and which has received Landlord's prior written consent.In accordance with
the Sign Criteria, Tenant shall maintain such signage in good condition and repair during the
entire Term of this Lease.Tenant shall repair, at its sole cost and expense, any damage to the
Premises caused by the erection,maintenance or removal of any sign,marquee,banner,
awning, decoration or other attachment.
12.5 Compliance with Prevailing Wage Laws.Tenant acknowledges and
agrees that Tenant shall be responsible for determining whether any construction, alteration,
demolition,installation or repair work performed by Tenant under this Lease constitutes
"public work"under California Prevailing Wage Law,including Labor Code sections 1720
through 1815, et seq.(the "PWL"), and that if it does then (a)Tenant shall cause such work to
be performed as a "public work,"including,but not limited to,the payment of applicable
prevailing wages to the all persons or entities subject to the PWL;and (b) Tenant shall cause all
persons and/ or entities performing "public work" under this Lease to comply with all applicable
provisions of the PWL.In no event shall Landlord be responsible for Tenant's failure to comply
with any applicable provisions of the PWL. Tenant's alleged or actual violations of the PWL shall
constitute an event of default under this Lease,and Tenant shall defend and indemnify
Landlord and its officers, employees, council members and agents from and against any and all
claims, assessments, back-wages, penalties, change orders, suits, liability, judgments, damages,
proceedings,orders,directives,costs,including reasonable attorneys'fees,arising from or
relating to any actual or alleged violations of the PWL,or other application of laws, ordinances
or regulations,by any person or entity (other than Landlord),including but not limited to
Tenant,performing construction, alteration, demolition, installation,repair and/ or any other
type of work contemplated under this Lease.
ARTICLE 13
TENANT'S PROPERTY
13.1 Tenant's Property.All trade fixtures,goods,inventory,merchandise,
stock,supplies,decorative light fixtures,and movable equipment owned by Tenant and
installed in the Premises at Tenant's sole cost and which may be removed without material
damage to the Premises ("Tenant's Property") shall remain the property of Tenant during the
Term.Except as provided to the contrary in Section 12.3 above, Tenant's Property shall be
removable from time to time and at the expiration of the Term or earlier termination thereof,
provided that:(i) Tenant shall not at such time be in default, or with notice or the passage of
time or both would be in default,under any term,covenant,condition or provision of this
Lease;(ii) Tenant shall repair to the satisfaction of Landlord,any damage to the Premises
caused by the removal of Tenant's Property;and (iii) Tenant immediately replaces any such
Tenant's Property with similar property of comparable or better quality to assure that the
Premises are suitable for conducting business during the Term in accordance with Articles 5 and
10 hereof.
-23 -
DOCS 121163-000007/2625579.8
ARTICLE 14
DAMAGE AND DESTRUCTION
14.1 Repairs by Tenant.If the Premises are totally or partially damaged or
destroyed, Tenant shall, within ninety (90) days, commence and diligently pursue to completion
the repair,replacement or reconstruction of the Premises,and of all Tenant's Property,
Tenant's Work and Tenant Improvements to the extent necessary to permit full use and
occupancy of the Premises for the purposes provided in this Lease.Repair,replacement or
reconstruction of the Premises shall be accomplished in a manner and according to plans
approved by Landlord; provided, however, Tenant shall not be obligated to repair, reconstruct
or replace the improvements following their destruction in whole or substantial part except to
the extent the loss is covered by insurance required to be carried by Tenant pursuant to this
Lease (or would be covered whether or not such required insurance is actually in effect), and
except if Tenant is required to indemnify Landlord for such destruction pursuant to Section 16.
If Tenant is not obligated and elects not to restore, repair or reconstruct as herein provided,
then this Lease shall terminate and neither party shall have any further obligation to the other,
except for Tenant's obligation to pay rent and other charges which are accrued and unpaid as
of the termination date and other provisions that survive the termination of this Lease. Tenant
hereby waives California Civil Code Sections 1932 and 1933,as amended or recodified from
time to time.
14.2 Termination Right.If the destruction to the Premises occurs during the
last twelve (12) months of the Term and such destruction will require more than thirty (30) days
to repair,then Tenant may elect to terminate this Lease provided that:(i)Tenant provides
written notice to Landlord of such election to terminate within thirty (30) days after occurrence
of the destruction; (ii) at the time of delivery of the termination notice Tenant is not in default
under this Lease beyond any applicable notice and cure period; (iii) Tenant did not intentionally
cause such destruction; (iv) all insurance required of Tenant under this Lease was in effect as of
the date the destruction occurred and Tenant assigns to Landlord all claims rights and proceeds
relating to the applicable destruction.
ARTICLE 15
EMINENT DOMAIN
15.1 Total or Substantial Taking.If all of the Premises are taken under the
power of eminent domain or such a substantial portion thereof is so taken that reasonable
restoration will not result in the Premises being reasonably suitable for the conduct of Tenant's
business, this Lease shall terminate on the date that Tenant is required to yield possession to
the condemning authority, or on the date that the possession of the Premises or part thereof is
taken,whichever is later.The term "eminent domain"shall include the exercise of any
governmental power of condemnation and any private sale or other transfer in lieu of or under
threat of condemnation.
-24 -
DOCS 121163-000007/2625579 8
15.2 Partial Taking.If there is a partial taking of the Premises,and after
restoration of any building or other improvements,the Premises would,in Tenant's
commercially reasonable determination,be reasonably suitable for Tenant's continued
occupancy and conduct of its business, then:(i)this Lease shall terminate as to the part taken
as of the date of transfer of possession;(ii) the rental shall be equitably reduced;and
(iii) Landlord shall, at its own cost and expense, make all necessary repairs or alterations to the
Premises required to restore the Premises to useful condition.During such repair or
restoration,rental shall be abated proportionately as set forth above.Notwithstanding the
foregoing, Landlord, at its sole option, may elect to terminate this Lease by delivering written
notice to Tenant within thirty (30)days after any such partial taking,in lieu of restoring the
Premises to useful condition as provided above,unless Tenant agrees to perform all such
restoration work at Tenant's sole cost.Tenant hereby waives any statutory rights of
termination that may arise by reason of any taking of the Premises under the power of eminent
domain.
15.3 Award.Tenant hereby renounces any interest in,and assigns to
Landlord, any award made in any condemnation proceeding for any such taking, provided that
Landlord shall have no interest in or be assigned any award made to Tenant for the taking of
Tenant's Property or for Tenant's relocation expenses. Tenant hereby specifically waives any
right it may have to any compensation award representing the excess of the market value,
immediately before the taking, of Tenant's leasehold interest in the portion of the Premises
taken over the rent attributable thereto under the terms of this Lease.
ARTICLE 16
INDEMNIFICATION
Tenant covenants and agrees to indemnify,protect,defend and hold harmless
Landlord and its agents,employees,officers,affiliates and representatives (collectively,
"Landlord Parties") from and against any and all losses,claims,demands,damages (but not
consequential damages unless awarded in favor of a third party), liabilities, actions, judgments,
costs and expenses (including, without limitation, reasonable attorneys' fees) arising out of or
resulting from (a)the negligent or willful acts or omissions of Tenant, its agents, contractors,
subcontractors or employees,(b) any breach of any obligation,covenant,representation or
warranty of Tenant under this Lease;or (c)the use and operation of the Premises during the
Term.The foregoing shall not apply to any loss, claim, damage, liability, action, judgment, cost
or expense to the extent arising out of or resulting from any negligence or willful misconduct of
any Landlord Party.Tenant's obligations under this section shall survive the expiration or
termination of this Lease.
ARTICLE 17
DEFAULTS AND REMEDIES
17.1 Events of Default.The occurrence of any of the following events shall
constitute an event of default and a material breach of this Lease on the part of Tenant:
-25 -
DOCS 121 ]63-000007/2625579.8
A.Abandonment or Failure to Continuously Operate.Tenant's
vacation or abandonment of the Premises or Tenant's failure to actively and continuously use,
operate and occupy the Premises.
B.Failure to Make Payment.Tenant's failure to pay any rent or
other sum due hereunder on the date when such payment is due, where such failure continues
for five (5) days after written notice of such failure from Landlord.
C.Non-Permitted Use.Tenant's failure to comply with any
provision of this Lease relating to the Permitted Use,where such failure continues for ten (10)
days after written notice of such failure from Landlord.
D.Failure to Perform Other Covenants.Tenant's failure to perform
any of Tenant's other covenants,agreements or obligations hereunder,where such failure
continues for thirty (30)days after written notice of such failure from Landlord (provided,
however, if the nature of such default is such that the same cannot be reasonably cured within
a thirty (30)day period,Tenant shall not be deemed to be in default if Tenant diligently
commences such cure within such period and thereafter diligently proceeds to rectify and cure
said default), except if a different notice or cure period is specified in another provision of this
Lease.
E.Bankruptcy.The making of a general assignment for the benefit
of creditors by Tenant,or the filing of a voluntary or involuntary bankruptcy petition by or
against Tenant, or the appointment of a receiver to take possession of all or substantially all of
Tenant's assets or the Premises,or the attachment,execution or other judicial seizure of
substantially all of Tenant's assets or the Premises, or in the event Tenant becomes insolvent or
fails to generally pay Tenant's debts as such debts become due.
F.Transfer without Consent.The occurrence of any Transfer
without Landlord's express prior written consent.
17.2 Remedies.Upon the occurrence of an event of default by Tenant as set
forth in Section 17.1 above,Landlord shall have the following rights and remedies,in addition
to any and all other rights and remedies available to Landlord at law or in equity,including
without limit those provided under California Civil Code Sections 1951.2 and 1951.4,as
amended or recodified from time to time:
A.Terminate Lease.Landlord shall have the right to terminate this
Lease and all rights of Tenant hereunder by giving written notice to Tenant.If this Lease is so
terminated, then Landlord may recover from Tenant:(i)the worth at the time of award of any
unpaid rent that had been earned at the time of such termination;plus (ii) the worth at the
time of award of the amount by which the unpaid rent which would have been earned from the
time of such termination until the time of award exceeds the amount of such rental loss Tenant
-26 -
DOCS 121163-000007/2625579.8
proves could have been reasonably avoided;plus (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the Term after the time of award exceeds
the amount of such rental loss that Tenant proves could be reasonably avoided; plus (iv)any
other amount necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this Lease or which in the ordinary course of
events would be likely to result therefrom, plus interest thereon at the Remedy Rate from the
date incurred by Landlord until reimbursed in full.As used in Subsections (A)(i) and (ii) above,
the "worth at the time of award"is computed by allowing interest at the Remedy Rate.As used
in Subsection (A)(iii) above, the "worth at the time of award"is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%).All amounts owing under this Subsection which are not paid when due
shall bear interest at the Remedy Rate from the date owing until paid and such interest shall be
compounded monthly.
B.Reenter Premises.Landlord shall also have the right,with or
without terminating this Lease,to reenter the Premises and to remove all persons and Tenant's
Property from the Premises and store the Tenant's Property in a public warehouse or
elsewhere at the cost of and for the account of Tenant.
C.Maintain Lease;Relet Premises.Landlord shall have the remedy
described in California Civil Code Section 1951.4 (lessor may continue lease in effect after
Tenant's breach and abandonment and recover rent as it becomes due, if Tenant has the right
to sublet or assign, subject only to reasonable limitations).Unless Landlord elects to terminate
this Lease as provided in Section 17.2(A)above,Landlord may from time to time,without
terminating this Lease,either recover all rent as it becomes due or relet the Premises or any
part thereof for such term or terms and at such rental or rentals and upon such other terms
and conditions as Landlord in its sole discretion may deem advisable, with the right to clean and
to make alterations and repairs to the Premises at Tenant's sole expense.
If Landlord elects to relet as provided herein,then rent received by Landlord
from such reletting shall be applied at Landlord's option:first,to the payment of any
indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment
of any cost of such reletting (including reasonable attorneys'fees,tenant improvements
customary to make the Premises ready to lease [including the removal of any specialized
improvements installed by Tenant],court costs and brokerage commissions);third,to the
payment of the cost of any cleaning,alterations and repairs to the Premises;fourth, to the
payment of rent due and unpaid hereunder;and the balance,if any,shall be applied in
payment of future rent as the same may become due and payable hereunder.If the portion of
such rentals received from such reletting during any month which is applied to the payment of
rent under the reletting lease is less than the rent payable during that month by Tenant
hereunder, then Tenant shall pay any such deficiency to Landlord immediately upon demand by
Landlord.Such deficiency shall be calculated monthly and Tenant shall pay such deficiency
monthly.Tenant shall also pay to Landlord, upon Landlord's demand, the costs and expenses
incurred by Landlord in such reletting, including reasonable attorneys' fees, court costs, tenant
-27 -
DOCS 121163-000007/2625579.8
improvements customary to make the Premises ready to lease (including the removal of any
specialized improvements installed by Tenant) and brokerage commissions and in making any
alterations and repairs appropriate to cause the Premises to be in leasable condition.
No reentry,acts of maintenance or preservation,efforts to relet,or taking
possession of the Premises by Landlord or the appointment of a receiver upon initiative of
Landlord to protect Landlord's interest under this Lease shall be construed as an election to
terminate this Lease unless an express written notice of such intention is delivered to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
Notwithstanding any reletting of the Premises without termination of this Lease by Landlord,
Landlord may at any time after such reletting elect to terminate this Lease,in which case,
Landlord shall have all the rights and remedies provided by law or equity or this Lease upon
termination.
D.Performance by Landlord.If Tenant breaches or fails to perform
any of Tenant's obligations under this Lease and the breach or failure continues for thirty (30)
days (or such shorter time period as may be specified otherwise in this Lease)after Landlord
gives Tenant written notice of the breach or failure,Landlord,without thereby waiving or
curing such may, but shall not be obligated to, perform any such obligation for the account and
at the expense of Tenant.Landlord also may, but shall not be obligated to, perform any such
obligation for the account and at the expense of Tenant without notice in case of an
emergency.
E.Receiver on Behalf of Landlord.If,at the instance of Landlord in
any action arising under this Lease,a receiver shall be appointed to take possession of the
Premises or to collect the rents derived therefrom,then the receiver may,if it shall be
necessary or convenient in order to collect such rents,conduct the business of Tenant then
being carried on in the Premises, and may take possession of any Tenant's Property and other
personal property and records used in Tenant's business and use the same in conducting such
business,without compensation to Tenant for such use.Neither application for,nor the
appointment of a receiver shall be construed as an election by Landlord to terminate this Lease,
unless express written notice of such election is given to Tenant.The fees and expenses of such
receiver shall be charged to Tenant as Additional Rent.
17.3 Late Charges.Landlord and Tenant agree that the fixing of actual
damages for Tenant's breach of any of the provisions of this Lease, including but not limited to
the late payment by Tenant to Landlord of rent and other amounts due hereunder, would cause
Landlord to incur costs not contemplated by this Lease,the exact amount of which would be
extremely difficult or impracticable to ascertain.Such costs include but are not limited to
accounting, processing, administrative, legal and clerical charges and late charges which may be
imposed upon Landlord by the terms of any Mortgage covering the Premises.Accordingly,if
any installment of rent or any other sum due from Tenant hereunder has not been received by
Landlord or Landlord's agent within ten (10) days after such amount was due, Tenant shall pay
to Landlord a late charge equal to five percent (5%)of any such delinquent installment of rent
-28 -
DOCS 121163-000007/2625579.8
or any other delinquent sum due from Tenant.Tenant hereby agrees that said late charge
represents a fair and reasonable estimate of the cost Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall not constitute a waiver of
Tenant's default with respect to such overdue amount nor prevent Landlord from exercising
any other rights and remedies provided for in this Lease, at law or in equity.If a late charge is
payable by Tenant whether or not collected, for three (3)installments of rent during any twelve
(12) month period, then the Base Rent shall automatically become due and payable to Landlord
quarterly in advance, notwithstanding any other provision of this Lease to the contrary.
17.4 Interest on Past Due Obligations.Any and all amounts not paid to
Landlord when due, shall bear interest, compounded monthly from the date due until paid at
the rate of four percent (4%) per annum over the prime rate of interest announced from time
to time by Ban of America N.A. (or if such bank ceases to announce a prime rate, by the largest
bank headquartered in New York, New York that does then announce a prime rate).Payment
of such interest shall not excuse or cure any default by Tenant under this Lease and shall not
affect any rights and remedies provided to Landlord in this Lease or at law or in equity,all of
which shall be cumulative.Notwithstanding the foregoing, the City Manager of the City of
Carlsbad shall have the right,in its sole discretion,to waive for good cause any interest
payment upon written application of Tenant for any such delinquency period.
17.5 Waiver of Redemption.Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future laws in the event of Tenant
being evicted or dispossessed for any cause, or in the event of Landlord obtaining possession of
the Premises by reason of the violation by Tenant of any of the covenants and conditions of this
Lease or otherwise.The rights given to Landlord herein are in addition to any rights that may
be given to Landlord by any statute or otherwise.
17.6 Guaranty.Landlord's obligations under this Lease are conditioned upon
Landlord's receipt of a guaranty of Tenant's obligations under this Lease in the form attached
hereto as Exhibit D (the "Guaranty") executed by the Guarantor identified in Article 1 above,
and if Guarantor is married, with the "Spousal Consent" executed by Guarantor's spouse.
17.7 Landlord's Default.Landlord shall in no event be charged with default in
the performance of any of its obligations hereunder unless and until Landlord shall have failed
to perform such obligations and such failure continues for more than thirty (30)days (or such
additional time as is reasonably necessary to correct any such failure) after Landlord's receipt of
written notice of such failure from Tenant.
ARTICLE 18
SUBORDINATION AND ATTORNMENT
18.1 Subordination.This Lease is and shall be subordinate to any ground
lease,mortgage,deed of trust and/or any other hypothecation or security document and
advances and obligations thereunder now or hereafter placed upon the Premises,and any
-29 -
DOCS 121163-000007/2625579 8
renewals,modifications,consolidations,replacements and extensions thereof (collectively
"Mortgage").Upon the request of Landlord,Tenant shall,from time to time,execute and
deliver any documents that may be required by Landlord or the mortgagee, beneficiary, ground
lessor or lender (each a "Landlord's Lender")under any such Mortgage,to effectuate any
subordination, provided that any such Landlord's Lender agrees not to disturb Tenant's right to
quiet possession under this Lease so long as Tenant is not in default (or with notice or passage
of time or both would not be in default) under this Lease.If Tenant fails to execute and deliver
any such document within ten (10)days after request,Tenant irrevocably constitutes and
appoints Landlord as Tenant's special attorney-in-fact, coupled with an interest, to execute and
deliver such document.Notwithstanding the foregoing, if Landlord's Lender elects to have this
Lease prior to the lien of its Mortgage, and gives written notice to Tenant of such election, this
Lease shall be deemed prior to such Mortgage regardless of the respective dates of execution,
delivery and recordation of this Lease and any such Mortgage.
18.2 Attornment.In the event that Landlord transfers title to the Premises to
a Landlord's Lender, or the Premises are acquired by a Landlord's Lender upon the foreclosure
or termination of a Mortgage to which this Lease is subordinated, Tenant shall attorn to and
recognize the Landlord's Lender as Tenant's landlord under this Lease and shall promptly
execute and deliver any documents that Landlord may require to evidence such attornment,
provided that Landlord's Lender agrees not to disturb Tenant's right to quiet possession under
this Lease so long as Tenant is not in default (or with notice or passage of time or both would
not be in default) under this Lease.If Tenant fails to execute and deliver any such document
within ten (10)days after request, Tenant irrevocably constitutes and appoints Landlord as
Tenant's special attorney-in-fact,coupled with an interest,to execute and deliver such
document.
18.3 Estoppel Certificate.Upon the request of Landlord, Tenant at any time
and from time to time shall execute, acknowledge, and deliver to Landlord, no later than ten
(10)business days after Landlord's request therefor,an estoppel certificate in any reasonable
form requested by Landlord ("Estoppel Certificate").The Estoppel Certificate may be
conclusively relied upon by a prospective lender,purchaser,or encumbrancer of Landlord's
interest in the Premises.Failure to deliver the Estoppel Certificate within ten (10) days of such
request shall be conclusive upon Tenant that:(i) this Lease is in full force and effect; (ii) there
are no uncured defaults in Landlord's or Tenant's performance; (iii) not more than one month's
Base Rent has been paid in advance; and (iv) the Security Deposit is in an amount equal to that
specified in Article 1 hereof.Tenant hereby irrevocably appoints Landlord as its attorney-in-
fact, which agency is coupled with an interest, to execute any such Estoppel Certificate upon
Tenant's failure to do so within such ten (10) day period.
18.4 Rights of Landlord's Lender and Landlord's Purchaser.If any Landlord's
Lender or any purchaser of Landlord's interest in the Premises ("Landlord's Purchaser")
requires a modification of this Lease at any time, Tenant shall, at Landlord's request, promptly
execute and deliver to Landlord instruments effecting the modifications that the Landlord's
Lender or Landlord's Purchaser reasonably requires,provided that such modifications do not
-30 -
DOCS 121163-000007/2625579.8
increase the rent, reduce the size of the Premises or otherwise adversely affect in any material
respect any of Tenant's rights under this Lease.If Landlord's Lender or Landlord's Purchaser
has given prior written notice to Tenant that it is the Landlord's Lender or Landlord's Purchaser
and such notice includes the address at which notices to such Landlord's Lender or Landlord's
Purchaser are to be sent, then Tenant shall give Landlord's Lender or Landlord's Purchaser,as
the case may be, written notice simultaneously with any notice given to Landlord to correct any
failure of Landlord to perform any of Landlord's obligations.Landlord's Lender and Landlord's
Purchaser shall have the right after receipt of said written notice to correct or remedy such
failure within a reasonable period of time.Any written notice of default given Landlord shall be
null and void unless simultaneous written notice has been given to Landlord's Lender and
Landlord's Purchaser.
18.5 Limitation of Liability.The covenants and agreements of Landlord under
this Lease shall not be binding upon any person at any time after the transfer of that person's
interest,as landlord,in the Premises.In the event of such a transfer,the covenants and
agreements of Landlord shall thereafter be binding upon the transferee of Landlord's interest.
ARTICLE 19
FORCE MAJEURE
If either party hereto shall be delayed in or prevented from the performance of
any act required hereunder by reason of acts of God,labor troubles,inability to procure
materials,restrictive governmental laws or regulations or other causes without fault and
beyond the control of the party obligated (financial inability excepted)(collectively,"Force
Majeure"), performance of such act shall be excused for the period of the delay and the period
for the performance of any such act shall be extended for a period equivalent to the period of
such delay;provided,however,nothing in this Section shall delay the Rent Commencement
Date or excuse Tenant from the prompt payment of any rent or other charge required of
Tenant hereunder, except as may be expressly provided elsewhere in this Lease.
ARTICLE 20
ASSIGNMENT AND SUBLETTING
20.1 Landlord's Consent.Tenant shall not voluntarily,involuntarily or by
operation of law assign, mortgage, sublet, hypothecate or otherwise transfer or encumber all or
any part of Tenant's interest in this Lease or in the Premises, or contract for the management or
operation of the whole or any part of the Premises, or permit the occupancy of any part of the
Premises by any other person or business entity, or permit transfer of this Lease by merger,
consolidation or dissolution (collectively "Transfer"), without first obtaining Landlord's express
written consent,which shall not be unreasonably withheld,conditioned,or delayed.No
consent to any Transfer shall constitute a waiver of the provisions of this Section.If Tenant is a
partnership or limited liability company,a withdrawal or change, voluntary, involuntary, or by
operation of law, of any general partner or managing member or of fifty percent (50%) or more
of the partnership or membership interest,or the dissolution of the partnership or limited
-31 -
DOCS 121163-00000712625579.8
liability company, shall be deemed a Transfer requiring Landlord's consent.If Tenant consists
of more than one person or entity,a purported assignment,voluntary,involuntary,or by
operation of law, from one person to the other shall be deemed a Transfer requiring Landlord's
consent.If Tenant is a corporation,any dissolution,merger,consolidation,or other
reorganization of Tenant, or the sale or other transfer of twenty-five percent (25%) or more of
the capital stock of Tenant or the value of the assets of Tenant,shall be deemed a Transfer
requiring Landlord's consent.Landlord and Tenant agree (by way of example and without
limitation) that it shall be reasonable for Landlord to withhold its consent to a Transfer if any of
the following situations exist or may exist:(i) the proposed Transferee's (as defined below) use
of the Premises conflicts with or is different from the Permitted Use;(ii) the proposed
Transferee or its business is subject to compliance with additional requirements of law beyond
those requirements which are applicable to Tenant;(iii)in Landlord's reasonable business
judgment,the proposed Transferee lacks sufficient business reputation or experience to
operate a successful business of the type and quality permitted under this Lease; (iv) Tenant is
in default under this Lease; or (v)the then present net worth of the proposed Transferee is,in
Landlord's reasonable business judgment,insufficient to operate a successful business of the
type and quality permitted under this Lease.
Any attempted or purported Transfer without Landlord's prior written consent
shall be void and of no force or effect, and shall not confer any estate or benefit on anyone.A
consent to one Transfer by Landlord shall not be deemed to be a consent to any subsequent
Transfer to any other party.
20.2 Request for Transfer.Tenant shall give Landlord at least thirty (30) days'
prior written notice of any requested Transfer and of the proposed terms of such Transfer
("Transfer Notice"),including but not limited to:(i)the name and legal composition of the
proposed assignee,sublessee,encumbrancer or transferee ("Transferee");(ii)a current
financial statement of the proposed Transferee prepared in accordance with generally accepted
accounting principles consistently applied; (iii) the portion of the Premises Tenant proposes to
Transfer (including square footage and location);and (iv) the nature of the proposed
Transferee's business to be carried on in the Premises.The foregoing terms shall be in
sufficient detail to enable Landlord to evaluate the proposed Transfer and the prospective
Transferee.Within twenty (20) days after receipt of the Transfer Notice, Landlord shall either
approve or disapprove of such Transfer.Tenant shall immediately notify Landlord of any
modification to the proposed terms of such Transfer.Tenant shall also provide to Landlord
copies of the fully executed documents pertaining to the Transfer after the Transfer has
become effective.Whether or not Landlord consents to any proposed Transfer, Tenant shall
pay Landlord's review and processing fee in the amount of $500.00,as well as any reasonable
legal fees incurred by Landlord, within thirty (30) days after written request by Landlord.
20.3 Landlord's Rights.Upon receipt of a Transfer Notice pursuant to
Section 20.2 above, Landlord shall have the right to (i)withhold its consent to such Transfer,as
permitted pursuant to Section 20.1 above or (ii) impose any of the following as conditions to
Landlord's consent:(a)that all rents paid by the Transferee to Tenant in excess of the Base
-32 -
DOCS 121163-000007/2625579.8
Rent be paid to Landlord;or (b)that an acceptable guaranty of this Lease be provided to
Landlord; or (c)that either Tenant or the proposed Transferee cure, on or before the proposed
effective date of such Transfer, any and all uncured defaults hereunder; provided, however,in
no event shall Landlord's failure to condition its consent upon such cure be deemed to be a
waiver of any such default or of Landlord's rights and remedies under this Lease or under law or
in equity in regard thereto.If Landlord has elected to impose such a cure as a condition to its
consent and such condition is not satisfied by the effective date of the Transfer,then the
Transfer shall be voidable at Landlord's option.Landlord shall also have the right to condition
Landlord's consent to any Transfer upon Tenant's and the Transferee's executing a written
assumption agreement,in a form approved by Landlord.The assumption agreement shall
require the Transferee to expressly assume all obligations of Tenant under this Lease and shall
require Tenant and Transferee (but not the Guarantor if a replacement guaranty acceptable to
Landlord is obtained) to be and remain jointly and severally liable for the performance of all
conditions, covenants, and obligations under this Lease from the effective date of the Transfer
of Tenant's interest in this Lease.Regardless of Landlord's consent to any Transfer, no Transfer
shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay rent
and to perform all other obligations to be performed by Tenant hereunder.The acceptance of
rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any
provision hereof.These rights are in addition to Landlord's right to withhold its consent to any
Transfer, and may (except with respect to Landlord's obligation not to unreasonably withhold,
delay or conditions its consent,as set forth in Section 20.1 above) be exercised by Landlord in
its sole discretion without limiting Landlord in the exercise of any other right or remedy at law
or in equity which Landlord may have by reason of such Transfer.In the event of default by any
Transferee,Landlord may proceed directly against Tenant without the necessity of exhausting
remedies against said Transferee.Tenant expressly agrees that the provisions of this Article are
not unreasonable standards or conditions for purposes of Section 1951.4(b)(2) of the California
Civil Code, as amended or recodified from time to time.
ARTICLE 21
NOTICES
All notices given under this Lease shall be in writing and shall be given or served
either personally or by depositing the same by United States registered or certified mail
postage prepaid,return receipt requested,or by a nationally-recognized overnight delivery
courier, addressed to the applicable Address for Notices specified in Article 1.Notice shall be
deemed to have been given (a)on the delivery date indicated by the United States Postal
Service on the return receipt or by the courier or on the date such delivery is refused or
deemed "undeliverable," or (b) on the date of personal delivery.Either party may change its
address for notices by providing written notice as specified herein; provided, however, that all
addresses provided must be an actual street address located in the United States of America.
-33 -
DOCS 121163-000007/2625579.8
ARTICLE 22
AUTHORITY
If Tenant is a corporation, trust, general or limited partnership or limited liability
company, each individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of said entity.If
Tenant is a corporation,trust,partnership,or limited liability company,Tenant shall,
simultaneously with execution of this Lease,deliver to Landlord written evidence of such
authority satisfactory to Landlord.
ARTICLE 23
QUIET ENJOYMENT
Tenant,upon keeping,observing and performing all of the covenants and
agreements of this Lease on its part to be kept,observed, and performed, shall lawfully and
quietly hold, occupy and enjoy the Premises during the Term of this Lease.
ARTICLE 24
ATTORNEYS'FEES
Should either party commence an action or arbitration against the other to
enforce any obligation hereunder, the prevailing party shall be entitled to recover the costs
thereof and reasonable attorneys' fees actually incurred by such prevailing party (including the
fees and charges of legal assistants or other non-attorney personnel performing services under
the supervision of an attorney), whether or not such litigation is prosecuted to judgment.
ARTICLE 25
WAIVER
Any waiver by either party of any breach by the other party of any one or more
of the covenants, conditions, or agreements of this Lease shall not be nor be construed to be a
waiver of any subsequent or other breach of the same or any other covenant, condition or
agreement of this Lease,nor shall any failure on the part of either party to require or exact full
and complete compliance by the other party with any of the covenants,conditions,or
agreements of this Lease be construed as in any manner changing the terms hereof or to
prevent Landlord from enforcing the full provisions hereof.Landlord's acceptance of any
payment which is less than that required to be paid by Tenant shall be deemed to have been
received only on account of the obligation for which it is paid and shall not be deemed an
accord and satisfaction,notwithstanding any provisions to the contrary asserted by Tenant,
written on any check or contained in any transmittal letter.The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term or covenant hereof, other than the failure of Tenant to pay the particular rent so
accepted,regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent.An express waiver must be in writing and signed by a person with the
-34 -
DOCS 121163-000007/2625579 8
power to contractually bind Tenant or Landlord.An express waiver shall affect only the default
specified in the waiver, and only for the time and to the extent expressly stated.
ARTICLE 26
LIMITATION ON CLAIMS
Any claim, demand, right or defense of any kind by Tenant, which is based upon,
arising in connection with or in any way related to this Lease or the negotiations prior to its
execution, shall be barred unless Tenant commences an action thereon, or interposes in a legal
proceeding a defense by reason thereof,within twelve (12) months after the date of the
inaction or omission or the date of the occurrence of the event or of the action to which the
claim, demand, right or defense relates, whichever applies.
ARTICLE 27
INTERPRETATION AND APPLICATION
27.1 Submission of Lease.Submission of this instrument for examination or
signature by Tenant does not constitute an offer,a reservation of, option for or option to lease,
and it is not effective as a lease or otherwise until execution and delivery by both Landlord and
Tenant.
27.2 Governing Law.This Lease shall be construed in accordance with and
governed by the statutes, decisions, and other laws of the State of California.Tenant expressly
agrees that any and all disputes arising out of or in connection with this Lease shall be litigated
only in the Superior Court of the State of California for San Diego County, and Tenant hereby
consents to the jurisdiction of said court.
27.3 Complete Agreement.This Lease contains all terms,covenants,
conditions, warranties and agreements of the parties relating in any manner to the rental,use
and occupancy of the Premises.No prior agreements or understanding pertaining to the same
shall be valid or of any force or effect.
27.4 Amendment.This Lease may not be amended, altered or modified in any
way except in writing signed by the parties hereto.
27.5 No Partnership.It is agreed that nothing contained in this Lease shall be
deemed or construed as creating a partnership or joint venture between Landlord and Tenant
or between Landlord and any other party, or cause Landlord to be responsible in any way for
the debts or obligations of Tenant or any other party.
27.6 No Merger.The voluntary or other surrender of this Lease by Tenant, or
a mutual cancellation thereof, shall not work as a merger, but shall, at the option of Landlord,
either terminate all or any existing subleases or subtenancies, or operate as an assignment to
Landlord of any or all such subleases or subtenancies.
-35 -
DOCS ]21163-00000712625579.8
27.7 Severability.If any provision of this Lease or application thereof to any
person or circumstances shall to any extent be invalid, the remainder of this Lease (including
the application of such provision to persons or circumstances other than those to which it is
held invalid) shall not be affected thereby, and each provision of this Lease shall be valid and
enforced to the fullest extent permitted by law.
27.8 Captions.The captions of the Articles and Sections hereof are for
convenience only and are not a part of this Lease and do not in any way limit or amplify the
terms and provisions of this Lease.
27.9 Words.The words "Landlord" and "Tenant",as used herein, shall include
the plural as well as the singular.Words used in the neuter gender include the masculine and
feminine.
27.10 Joint and Several Liability. If either party is comprised of more than one
individual or entity,the obligations imposed upon such party hereunder shall be joint and
several to all parties signing this Lease as such party.
27.11 Exhibits.All exhibits attached to this Lease are incorporated herein by
this reference and made a part hereof, and any reference in the body of this Lease or in the
exhibits to the "Lease" shall mean this Lease together with all exhibits.
ARTICLE 28
MISCELLANEOUS
28.1 Time is of the Essence.Time is of the essence of each and all of the
terms and provisions of this Lease.
28.2 Successors.Subject to the restrictions on Transfers contained in this
Lease,all the terms, covenants and conditions hereof shall be binding upon and inure to the
benefit of the heirs, executors, administrators, successors and assigns of the parties hereto.
28.3 Recordation;Quitclaim.Tenant shall not record this Lease or any
memorandum hereof.Landlord has the right in its absolute discretion to record this Lease or a
memorandum hereof,and,upon Landlord's request,Tenant shall execute and have
acknowledged the same for recordation. Upon termination of this Lease for any reason, Tenant
shall execute,acknowledge and deliver to Landlord within thirty (30)days after receipt of
written demand therefor a good and sufficient deed whereby all right, title and interest of
Tenant in the Premises is quitclaimed to Landlord. If Tenant fails to deliver the required deed to
Landlord,Landlord may prepare and record a notice reciting the failure of Tenant to execute,
acknowledge and deliver such deed and said notice shall be conclusive evidence of the
termination of this Lease and of all right of Tenant or those claiming under Tenant in and to the
Premises.
-36 -
DOCS 121163-000007/2625579 8
28.4 Limitation of Liability.It is expressly understood and agreed that
notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law
to the contrary, the liability of Landlord hereunder (including any successor landlord) and any
recourse by Tenant against Landlord shall be limited solely and exclusively to Landlord's
interest in the Premises,including the income and profits from the Premises,and neither
Landlord,nor any of its officers,employees,affiliates,managers or agents shall have any
personal liability therefor,and Tenant hereby expressly waives and releases such personal
liability on behalf of itself and all persons claiming by, through or under Tenant.The limitations
of liability provided in this Section are in addition to, and not in limitation of, any limitation on
liability applicable to Landlord provided by law or in any other contract,agreement or
instrument.Under no circumstances shall Landlord or Tenant (except to the extent expressly
provided in Section 17.2) be liable for punitive or special damages, indirect damages or other
consequential damages, including without limitation, injury to Tenant's business or for any loss
of income or profit therefrom.In the event of any transfer of Landlord's interest in this Lease,
the Landlord herein named (and in case of any subsequent transfer, the then transferor) shall
be automatically freed and relieved from and after the date of such transfer of all liability for
the performance of any covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed; provided, however, that any funds in the hands of Landlord or the
then transferor at the time of such transfer, in which Tenant has an interest shall be turned
over to the transferee and any amount then due and payable to Tenant by Landlord or the then
transferor under any provision of this Lease shall be paid to Tenant; and provided, further, that
upon any such transfer, the transferee shall expressly assume, subject to the limitations of this
Section, all of the agreements, covenants and conditions in this Lease to be performed on the
part of Landlord, it being intended hereby that the covenants and obligations contained in this
Lease on the part of Landlord shall be binding on each Landlord, its successors and assigns, only
during its period of ownership.
28.5 Broker.Except for Landlord's Broker specified in Article 1 of this Lease,
to whom Landlord shall pay a commission pursuant to a separate written agreement between
Landlord and Landlord's Broker,Landlord and Tenant each represents and warrants to the
other that it has not retained the services of or had any dealings with any other broker, finder
or real estate licensee and owes no other person or entity any finder's or broker's fee,
commission or payment of any kind whatsoever.Landlord and Tenant each shall indemnify,
protect, defend and hold harmless the other from and against all liability for compensation or
charges which may be claimed by any such other broker, finder or other similar party by reason
of any dealings or actions of the indemnifying party, including (without limitation) any costs,
expenses or attorney's fees reasonably incurred with respect thereto.
28.6 Counterparts.This Lease may be executed in any number of
counterparts each of which shall be deemed an original and all of which shall constitute one
and the same Lease with the same effect as if all parties had signed the same signature page.
-37 -
DOCS 121163-000007/2625579 8
ARTICLE 29
Signatures
The individuals executing this Lease represent and warrant that they have the right,
power,legal capacity and authority to enter into and to execute this Lease on behalf of the
respective legal entities of Tenant and Landlord.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first
above written.
LANDLORD:TENANT:
CITY OF CARLSBAD,ShoreHouse Kitchen,LLC
a California municipal corporation a Calif.'a limited liability company
By://j By:
Name:MA _Name:0.n Freis
Title:-Citrittarragef-Title:
Note:Signature of Tenant must be
notarized
APPROVED AS TO FORM
By:
4.1401401"della A. Brewer, City Attorne
Rt94YCL,
Date:-P4 3 ,2017
-38 -
DOCS 121163-000007/2625579 8
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document.
State of California
County of San Diego
Morgen Fry, Notary PublicOn
1?)a.tiv
.1cl t Dr---)C7 before me,
(insert name and title of the officer)
personally appeared J01/1 v-
A 'ffe_t 5
who proved to me on the basis of satisfactory evidence to be the person(whose name(S) IS/Bfe-
subscribed to the within instrument and acknowledged to me that hek.helthe.y executed the same in
his/14er-1their authorized capacity(ies), and that by his/liefAheir signature(s4 on the instrument the
person(), or the entity upon behalf of which the personNacted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
MOWN FRY
WITNESS my hand and official seal.,.Olfirt"Commission 0 2091497
1i Notary Public -California 5
Nr,,,,ri9 San Diego County
Comm.E Tres Dec 24, 2018
Signature ,t .(Seal)
EXHIBIT A
LEGAL DESCRIPTION OF PREMISES
Lots 5 and 6 in Block "J" of Carlsbad, in the City of Carlsbad, County of San Diego, State of
California, according to Map thereof No. 535, filed in the Office of the County Recorder of San
Diego County, May 2, 1888 and Map No. 775 filed in the Office of the County Recorder of San
Diego County.
-1 -
DOCS 121163-000007/2625579 8
EXHIBIT B
MEMORANDUM OF TERM COMMENCEMENT
This Memorandum of Term Commencement is made as of ,20 by the
CITY OF CARLSBAD,a California municipal corporation ("Landlord"), and ShoreHouse Kitchen,
LLC,a California limited liability company ("Tenant").Landlord and Tenant agree to and
acknowledge the following matters:
1.Landlord and Tenant have entered into that certain Retail Lease Agreement
dated as of January 13, 2017 (the "Lease"), covering the Premises located at 2833 State Street,
Carlsbad, California, 92008,as more particularly described in the Lease.All terms defined in the
Lease shall have the same meaning when used in this Memorandum of Term Commencement.
2.The Term Commencement Date occurred on ,20 ,
the Rent Commencement Date occurred on ,20_,and the
Expiration Date of the Lease is ,20_, subject to Tenant's options
to extend under Section 3.2 of the Lease.
4.Base Rent shall be paid by Tenant to Landlord in accordance with the
following schedule:
Lease Year Base Rent Per Month
-//20 $7,916.67
_/_/20 -/20 $8,154.17
//20 -//20 $8,398.79
-//20 $8,650.75
//20 -//20 $8,910.28
//20 -//20 $9,177.59
//20 -//20 $9,452.91
-_//20 $9,736.50
//20 -$10,028.60
//20 -_//20 $10,329.45
5.In addition to Base Rent, Percentage Rent shall be paid by Tenant to Landlord
each Lease Year as provided in the Lease.
[remainder of page intentionally left blank]
-1 -
DOCS 121163-000007/2625579 8
IN WITNESS WHEREOF,Landlord and Tenant have executed this Memorandum of Term
Commencement as of the date first written above.
LANDLORD:TENANT:
CITY OF CARLSBAD,ShoreHouse Kitchen,LLC,
a California municipal corporation a California limited liability company
By:By:
Name:Name:John Freis
Title:Title:
-2 -
DOCS 121163-000007/2625579.8
EXHIBIT C
TENANT'S WORK
The initial improvements to the Premises shall be constructed by Tenant at Tenant's sole cost
and expense and are referred to in this Lease as "Tenant's Work".Tenant's Work shall be
subject to the following requirements:
Schedule:Tenant's Work shall be completed prior to the Opening Date and otherwise
pursuant to the following schedule:
(a)Tenant shall submit its plans and specifications to Landlord for approval on or
before the date that is 60 days after the Term Commencement Date (the
"Submittal Date").
(b)Tenant shall submit its plans and specifications to the City of Carlsbad Building
Department on or before the date that is 30 days after Landlord's approval of the
same.
(c)Tenant shall commence construction promptly upon receipt of the Building Permits
(the "Construction Commencement Date").
(d)Tenant shall obtain the Certificate of Occupancy and open for business to the public
in the Premises within 120 days after Tenant receives the Building Permits
"Opening Date").
Utilities:Tenant has sole obligation for payment of all utility company use fees and
connection charges.
Roof Equipment:Tenant shall not make any roof penetration and/or modifications to
accommodate Tenant provided roof mounted equipment without Landlord's prior
written consent.Any roof-mounted equipment shall be reasonably screened from the
view of the general public; however Tenant shall not be required to raise the level of
any exterior wall or parapet in order to accomplish such screening.Final flashing and
patching of any roof penetrations shall be made at Tenant's sole cost and expense.
Tenant shall deliver a 5-year warranty to Landlord for labor and material for all roof
modifications.
Hazardous Substances:Tenant shall not introduce or cause to be introduced any
asbestos or other toxic or hazardous substances in any construction materials, fixtures
or equipment used in the Premises, except ordinary and customary materials reasonably
required in Tenant's Work so long as such use is in accordance with all applicable laws.
The use of floor finishes containing asbestos is expressly prohibited.
-1 -
DOCS 121163-000007/2625579.8
Grease Removal Device:Tenant shall provide, install, and maintain within the Premises,
a grease interceptor.
Construction Plans:Tenant shall obtain Landlord's prior written approval of Tenant's
plans and specifications,which shall be submitted to Landlord on or before the
Submittal Date.Upon Landlord's approval of Tenant's plans (the "Final Plans"), Tenant
shall submit same to the appropriate governmental agencies for approval.Landlord's
approval of such Tenant plans and specifications, however, shall create no responsibility
or liability on the part of Landlord with respect to the completeness, design sufficiency,
or compliance of such plans and specifications with any applicable laws,rules,
ordinances, directions or regulations.
Documents Delivered to Landlord:Tenant shall deliver to Landlord:(a)a copy of its final
Certificate of Occupancy by the Opening Date; (b) one set of reproducible "as built" or
"marked up" drawings within 45 days after completion of Tenant's Work; and (c) a copy
of the building permit for Tenant's Work within ten (10) days after receipt.
Construction Quality:Tenant's Work shall be performed in a good and workmanlike
manner in accordance with all applicable law, ordinances and codes. Tenant shall only
use new materials in performance of Tenant's Work.
Insurance:At all times after delivery of possession of the Premises to Tenant, Tenant
shall maintain in full for force and effect,in addition to all other insurance required to
be maintained by Tenant under the Lease,builder's risk during construction of Tenant's
Work and casualty insurance with limits of coverage not less than 100%of full
replacement cost of Tenant's leasehold improvements.Tenant shall name Landlord as
an additional insured as appropriate on all insurance policies.Tenant shall furnish
Landlord with certificates evidencing all insurance coverage at least ten (10) days prior
to commencement of Tenant's Work and may not commence construction without
having done so.Subject to the insurer's willingness to do so,the insurance shall contain
a clause providing that the insurer will not cancel such insurance without giving
Landlord ten (10) days prior written notice.If not provided by the insurer, such ten (10)
days prior written notice shall be provided to Landlord by Tenant.
Indemnity:Except to the extent of Landlord's gross negligence or willful misconduct,
Tenant assumes all risks of damages or injuries,including death,to any property or
person used or employed on or in connection with Tenant's Work,and all risks of
damages or injuries,including death,to any property or persons wherever located,
resulting from any action,omission or operation in connection with Tenant's Work.
Except to the extent of Landlord's gross negligence or willful misconduct, Tenant shall
indemnify,hold harmless and defend Landlord,its employees,agents,servants and
representatives from and against any and all losses,damages,expenses,claims,suits
and demands of whatever nature (including without limitations, reasonable attorneys'
fees and expenses incurred in the enforcement of this indemnity),resulting from
-2 -
DOCS 121163-000007/2625579.8
damages or injuries, including death, to any property or person, caused by or arising out
of any action, omission or operation in connection with or in any way related to the
Tenant's Work.
Commencement of Construction:Tenant shall not commence construction of Tenant's
Work until Tenant has:(1)received Landlord's written approval of Tenant's Final Plans;
(2)acquired all necessary governmental approvals;(3)notified Landlord in writing of
Tenant's intent to commence construction activities;(4)delivered to Landlord such
insurance coverages as specified within the Lease and this Exhibit; and (5) delivered to
Landlord CADD drawing files of the tenant improvements (tenant's construction
documents).Tenant shall satisfy such requirements and commence construction of
Tenant's Work on or before the Construction Commencement Date. Landlord shall have
the right to post and maintain and record on the Premises any notice of non-
responsibility provided for by the mechanic's lien laws.
-3 -
DOCS 121163-000007/2625579.8
EXHIBIT D
FORM OF GUARANTY
[ATTACHED]
-1 -
DOCS 121163-000007/2625579 8
GUARANTY OF LEASE
This Guaranty of Lease ("Guaranty")is entered into as of January 13,2017,by JOHN
FREIS ("Guarantor"),as a material inducement to and in consideration of the execution by the
CITY OF CARLSBAD,a California municipal corporation ("Landlord") of that certain Retail Lease
Agreement dated January 13,2017 (the "Lease")between Landlord and ShoreHouse,LLC,a
California limited liability company ("Tenant"),which Lease relates to the improved real
property located at 2833 State Street,Carlsbad,California,92008,as more particularly
described in the Lease (the "Premises").Guarantor hereby agrees as follows:
1.Guarantor hereby unconditionally guarantees the performance of,and
unconditionally promises to perform, all of the obligations of Tenant under the Lease and any
and all extensions and modifications thereof, including, but not limited to, the obligation to pay
rent thereunder.
2.In such manner, upon such terms and at such times as Landlord shall deem best,
and without notice to or the consent of Guarantor, Landlord may alter, compromise, extend or
change the time or manner for the performance of any obligation hereby guaranteed,
substitute or add any one or more guarantors, accept additional or substituted security for the
performance of any such obligation, or release or subordinate any security therefor, any and all
of which may be accomplished without any effect on the obligations of Guarantor hereunder.
No exercise or non-exercise by Landlord of any right hereby given, no dealing by Landlord with
Tenant, any other guarantor or other person, and no change, impairment or suspension of any
right or remedy of Landlord shall in any way affect any of the obligations of Guarantor
hereunder or any security furnished by Guarantor or give Guarantor any recourse against
Landlord.
3.Guarantor hereby waives and agrees not to assert or take advantage of the
following:
3.1 Any right to require Landlord to proceed against Tenant or any other
person or to proceed or exhaust any security held by Landlord at any time or to pursue any
other remedy in Landlord's power before proceeding against Guarantor,including the
provisions of Sections 2845 and 2850 of the Civil Code of California;
3.2 Any defense based on the statute of limitations in any action hereunder
or in any action for the performance of any obligation hereby guaranteed; provided, however,
that nothing in this Section 3.2 shall prevent Guarantor from asserting the statute of limitations
as a defense to the performance of an obligation of Tenant under the Lease to the extent that
Tenant could assert such defense against Landlord;
3.3 Any defense that may arise by reason of the incapacity, lack of authority,
bankruptcy, death or disability of any other person or persons or the failure of Landlord to file
or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of
-1 -
DOCS 121163-000007/2625579.8
any other person or persons,including the provisions of Section 2810 of the Civil Code of
California;
3.4 Any right to receive demands, protests and notices of any kind including,
but not limited to,notice of the existence,creation or incurring of any new or additional
obligation or of any action or non-action on the part of Tenant, Landlord or any other person;
3.5 Any defense based on an election of remedies including, but not limited
to,any action by Landlord which shall destroy or otherwise impair any subrogation right of
Guarantor or the right of Guarantor to proceed against Tenant for reimbursement, or both;
3.6 Any duty on the part of Landlord to disclose to Guarantor any facts
Landlord may now or hereafter know about Tenant, regardless of whether Landlord has reason
to believe that such facts materially increase the risk beyond that which Guarantor intends to
assume or has reason to believe that such facts are unknown to Guarantor or has a reasonable
opportunity to communicate such facts to Guarantor,it being understood and agreed that
Guarantor is fully responsible for being and keeping informed of the financial condition of
Tenant and of all circumstances bearing on the risk of nonperformance of any obligation hereby
guaranteed; and
3.7 Any right to receive notice of or to consent to any amendments that may
hereafter be made to the Lease,including the provisions of Section 2819 of the Civil Code of
California; and
3.8 Any defense based on the fact that Guarantor's obligations hereunder
are larger or more burdensome than that of Tenant's under the Lease,including the provisions
of Section 2809 of the Civil Code of California.
4.Until all obligations hereby guaranteed shall have been fully performed,
Guarantor shall have no right of subrogation and waives any right to enforce any remedy which
Landlord now has or may hereafter have against Tenant and any benefit of, and any right to
participate in,any security now or hereafter held by Landlord,including the provisions of
Sections 2847,2848 and 2849 of the Civil Code of California.Guarantor agrees that nothing
contained herein shall prevent Landlord from suing on the Lease or from exercising any rights
available to Landlord thereunder and that the exercise of any of the aforesaid rights shall not
constitute a legal or equitable discharge of Guarantor.Guarantor expressly waives any and all
benefits under the second sentence of California Civil Code Section 2822(a).In addition,
Guarantor agrees that Landlord (and not Tenant) shall have the right to designate the portion
of Tenant's obligations under the Lease that is satisfied by a partial payment by Tenant.
5.All existing and future obligations of Tenant to Guarantor, or any person owned
in whole or in part by Guarantor, and the right of Guarantor to cause or permit itself or such
person to withdraw any capital invested in Tenant are hereby subordinated to all obligations
hereby guaranteed,and,without the prior written consent of Landlord,such obligations to
-2 -
DOCS 121163-000007/2625579 8
Guarantor shall not be performed, and such capital shall not be withdrawn,in whole or in part,
while Tenant is in default under the Lease.
6.All rights,powers and remedies of Landlord hereunder and under any other
agreement now or at any time hereafter in force between Landlord and Guarantor shall be
cumulative and not alternative, and such rights, powers and remedies shall be in addition to all
rights, powers and remedies given to Landlord at law or in equity.This Guaranty is in addition
to and exclusive of the guarantee of any other guarantor of any obligation of Tenant to
Landlord.
7.The obligations of Guarantor hereunder are independent of the obligations of
Tenant under the Lease,and,in the event of any default hereunder or under the Lease,a
separate action or actions may be brought and prosecuted against Guarantor, whether or not
Tenant is joined therein or a separate action or actions are brought against Tenant.Landlord
may maintain successive actions for other defaults.Landlord's rights hereunder shall not be
exhausted by its exercise of any of its rights or remedies or by any such action or by any
number of successive actions until and unless all obligations hereby guaranteed shall have been
fully performed.
8.Guarantor shall pay to Landlord,without demand,reasonable attorneys'fees
and all costs and other expenses which Landlord shall expend or incur in collecting or
compromising any obligation hereby guaranteed or in enforcing this Guaranty against
Guarantor, whether or not suit is filed including, but not limited to, attorneys' fees, costs and
other expenses incurred by Landlord in connection with any insolvency,bankruptcy,
reorganization, arrangement or other similar proceeding involving Guarantor which in any way
affects the exercise by Landlord of its rights and remedies hereunder.
9.Should any one or more provisions of this Guaranty be determined to be illegal
or unenforceable, all other provisions shall nevertheless be effective.
10.This Guaranty shall inure to the benefit of Landlord and its successors and
assigns,and shall bind the heirs,executors,administrators,successors and assigns of
Guarantor.This Guaranty may be assigned by Landlord concurrently with the transfer of title to
property covered by the Lease,and,when so assigned,Guarantor shall be liable to the
assignees without in any manner affecting the liability of Guarantor hereunder.
11.Upon full performance of all obligations hereby guaranteed, this Guaranty shall
be of no further force or effect.
12.No provision of this Guaranty or right of Landlord hereunder can be waived or
modified, nor can Guarantor be released from Guarantor's obligations hereunder, except by a
writing duly executed by Landlord.
13.When the context and construction so require,all words used in the singular
herein shall be deemed to have been used in the plural and the masculine shall include the
-3 -
DOCS 121163-000007/2625579 8
feminine and neuter and vice versa.The word "person"as used herein shall include any
individual, company, firm,association,partnership, corporation, trust or other legal entity of
any kind whatsoever.
14.If two (2)or more entities or persons are signing this Guaranty as Guarantor,
then all such entities and/or persons shall be jointly and severally liable for the obligations of
Guarantor hereunder.
15.This Guaranty shall be governed by and construed in accordance with the laws of
the State of California, without regard to principles of conflicts of law.In any action brought
under or arising out of this Guaranty,Guarantor hereby consents to the jurisdiction of any
competent court within the County of San Diego,California and hereby consents to service of
process by any means authorized by California law.This Guaranty shall constitute the entire
agreement of Guarantor with respect to the subject matter hereof,and no representation,
understanding,promise or condition concerning the subject matter hereof shall be binding
upon Landlord unless expressed herein.
16.Notwithstanding anything to the contrary herein, provided that (a)Tenant is not
in default of the terms and conditions of the Lease as of the fifth (5th) anniversary of the Rent
Commencement Date (or,as to paragraph (ii) below,as of the tenth (10th)anniversary of the
Rent Commencement Date) and has not been in monetary default of the terms and conditions
of the Lease at any time prior to such date beyond any applicable notice and cure period, (b)
Tenant is open and operating in the Premises under the trade name "Shorehouse Kitchen" or
such other trade name as may have been approved by Landlord,(c)Tenant has not assigned its
interest in the Lease or sublet the Premises,or any part thereof,without the prior written
consent of Landlord,and (d)Guarantor is not in default hereunder beyond any applicable
notice and cure period, then:
(i) commencing on the fifth (5th) anniversary of the Rent Commencement Date
(as defined in the Lease)and continuing until the tenth (10th)anniversary of the Rent
Commencement Date (the "Rolling Guaranty Period"), Guarantor's liability under this Guaranty
as to liabilities incurred during the Rolling Guaranty Period shall be capped at an amount equal
to twenty-four (24) months of rent (as defined in the Lease) in the aggregate; and
(ii) this Guaranty shall expire and be of no further force or effect (except for any
claims, losses, liabilities or any other sums which relate to acts or omissions of Tenant accruing
prior to such termination (which such claims,losses,liabilities or other sums Guarantor shall
remain fully responsible for)upon the tenth (10th)anniversary of the Rent Commencement
Date.
Guarantor:
,..,fry
ior
-
JO .•EIS
-4 -
DOCS 121163-000007/2625579 8
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document.
State of California
County of San Diego
On yl.AIL..161 before me,Morgen Fry, Notary Public
(insert name and title of the officer)
personally appeared J inv.
who proved to me on the basis of satisfactory evidence to be the person() whose name(s.) is/eye
subscribed to the within instrument and acknowledged to me that he/shoithey executed the same in
his/heritheir authorized capacity(4s), and that by his/her-41464 signature(.on the instrument the
person(s,), or the entity upon behalf of which the personN) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.
MORGEN FRYWITNESS my hand and official seal.Commission 2091497
"Setr;::)i NotssraynPouiebigico
-
CCoaulniftoyrnia
M Comm.Ex Tres Dec 24, 2018
Signature kA.AAA.G-6.(A___40 (Seal)