Loading...
HomeMy WebLinkAbout2021-07-20; City Council; Resolution 2021-173RESOLUTION NO. 2021-173 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE A TEN-YEAR GROUND LEASE AGREEMENT WITH CALLAWAY GOLF COMPANY FOR APN: 212-270-08-00, COMMONLY REFERRED TO AS THE CALLAWAY GOLF TESTING FACILITY PROPERTY WHEREAS, on Aug. 1, 2004, the city entered into a 10-year lease agreement that included two five-year extension options, with Rey River Farms, by Resolution No. 2004-260, that expired on July 31, 2014; and WHEREAS, on June 4, 2014, the city executed Amendment No. 1 to the original agreement, extending the agreement five-years, that expired on July 31, 2019; and WHEREAS, the City Council of the City of Carlsbad has determined that it is in the best interest of the city to enter into a new Ground Lease Agreement with the Callaway Golf Company for APN 212- 270-08-00; and WHEREAS, the City Council has further determined that it accepts the terms of the Ground Lease Agreement with Callaway Golf Company; and WHEREAS, the Ground Lease Agreement will generate $31,860 in annual revenue, subject to 4.5% annual increases over the term of the agreement, with two five-year extension options; and WHEREAS, the Ground Lease Agreement is not subject to the Surplus Lands Act because it is excluded from the definition of "lease" and is not considered to be a "disposition" due to the fact that no development or demolition will occur on the property. 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.That the City Manager is hereby authorized to execute the Lease Agreement with Callaway Golf Company, attached hereto as Attachment A, and to act on behalf of the City of Carlsbad in all future decisions and actions necessary to implement the Ground Lease Agreement with Callaway Golf Company for use of city owned property located at APN: 212-270-08-00, including any extension options, and to do so in full compliance with the terms and conditions expressed in the aforementioned Agreement and to the satisfaction of the City Attorney. July 20, 2021 Item #3 Page 4 of 36 CITY OF CARLSBAD GROUND LEASE TO CALLAWAY GOLF COMPANY OF PROPERTY LOCATED ON ACCESSOR PARCEL NUMBER (APN) 212-270-08-00 CARLSBAD, CALIFORNIA, 92008 COMMENCING J toi io, 2021 AND ENDING juAil 11 , 2031 4H91789.6 20251-900 July 20, 2021 Item #3 Page 6 of 36 LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease") is entered into as of jtA 9,6"11,N4 2021, by and between City of Carlsbad, a California municipal corporation ("Lessor") and Callaway Golf Company, a Delaware corporation ("Lessee") (collectively "Parties"), for the property located on Assessor Parcel Number 212-270-08-00, and shall be effective and binding upon the parties hereto as of the date of execution hereof by both parties. RECITALS WHEREAS, Lessor is the owner of certain real property, consisting of approximately .84 acres of Planned Industrial zoned property, and more particularly described and/or depicted on Exhibit A and Exhibit B attached hereto (the "Premises"); WHEREAS, the Parties entered into that certain Ground Lease Agreement, dated August 1, 2004 ("Agreement"), for the Premises, which Lease was amended by First Amendment to Lease Agreement dated August 1, 2014 ("First Amendment"); and WHEREAS, Lessee operates a golf testing facility on the Premises; and WHEREAS, Lessee desires to continue to lease from Lessor the Premises to continue operating their golf testing facility on the Premises; and WHEREAS, Lessee is one of Carlsbad's largest employers and a critical component to the City's action sports manufacturing industry business cluster and benefits Carlsbad and the community at large; and WHEREAS, Lessor is willing to lease the Premises to Lessee for the term and upon the covenants, conditions and provisions hereinafter set forth. 4891789.6 20251-900 - 2 - July 20, 2021 Item #3 Page 7 of 36 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. Callaway Golf Company ("Trade Name"). 1.2 Premises. The Premises (APN: 212-270-08-00) consisting of approximately .843 acres of Planned Industrial zoned property, located in the City of Carlsbad, County of San Diego, State of California, north of Palomar Airport Road and adjacent to The Crossings Golf Course. 1.3 Term and Rent Commencement. The term of this Lease shall be 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"). Lessee shall commence paying rent under this Lease on the date the Parties fully execute this Lease (the "Rent Commencement Date"); provided, however, that concurrently with the execution of this Lease, Lessee shall pay to Lessor the Rent for the first (1st) 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 Rent. Base rent shall be Two Thousand Six Hundred and Fifty-Five dollars ($2,655) per month or Thirty-One Thousand Eight Hundred and Sixty dollars ($31,860) per year, payable on the first day of each month commencing on the Rent Commencement Date. 1.5 Rental Adjustment Rent shall be adjusted annually on each anniversary of the Rent Commencement Date, by four and one-half percent (45%) for the Term of the Lease. Set forth below is a summary of the monthly rent for each year of the initial term. Year 1: $2,655 per month, or $31,860 per year. Year 2: $2,774 per month, or $33,294 per year. Year 3: $2,899 per month, or $34,792 per year. Year 4: $3,030 per month, or $36,358 per year. Year 5: $3,166 per month, or $37,994 per year. Year 6 $3,309 per month, or $39,703 per year. Year 7: $3,458 per month, or $41,490 per year. Year 8: $3,613 per month, or $43,357 per year. Year 9: $3,776 per month, or $45,308 per year. Year 10: $3,946 per month, or $47,347 per year. 4891789.6 20251-900 - 3 - July 20, 2021 Item #3 Page 8 of 36 1.6 Use of Premises. It is expressly agreed that the Premises shall be used by Lessee solely and exclusively for the purpose of a golf test range facility for testing golf clubs and golf balls, for such other related or incidental purposes, and for other uses consistent with the approved zoning and use permits of the Premises ("Permitted Use"). Lessee covenants and agrees to use the Premises for the above specified purposes throughout the term hereof subject to Force Majeure and casualty and temporary, periodic suspension of such use to perform maintenance, repairs or cleaning, to construct improvements, and during holidays. In the event that Lessee fails to continuously use the Premises for said purposes subject to these permitted closures, or uses the Premises for purposes not expressly authorized herein, the Lessee shall be deemed in default under this Lease after any notice and lapse of cure period provided under this Lease. ("Permitted Use"). 1.7 Lessee Improvement Allowance. None. 1.8 Security Deposit. Lessor acknowledges and agrees that Lessor currently holds Lessee's Security Deposit, as defined in the Agreement, in the amount of $4,749.00. 1.9 Guarantor: None. 1.10 Broker(s): None. 1.11 Lessee's Address for Notices: Callaway Golf Company Attn: Deputy General Counsel Email: MartyH@callawaygolf.com Phone: 760-931-1771 2180 Rutherford Road Carlsbad, CA 92008 1.12 Lessor's Address for Notices: City of Carlsbad Attn: Real Estate Manager Email: Curtis.jackson@carlsbadca.gov 1200 Carlsbad Village Drive Carlsbad, CA 92008 4891789.6 20251-900 - 4 - July 20, 2021 Item #3 Page 9 of 36 With a copy to: City of Carlsbad Attn: City Attorney's Office Email: Allegra.FrostcCarlsbadca.gov 1200 Carlsbad Village Drive Carlsbad, CA 92008 1.13 Lessor'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. Lessor leases to Lessee and Lessee leases from Lessor the Premises described in Article 1 for the Term (as defined in Article 3 below) and pursuant to all of the terms, covenants and conditions contained herein. Any statement of square footage set forth in this Lease, or that may have been used in calculating Base Rent, is an approximation which Lessor and Lessee 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. Lessee 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 Lessor. Lessor 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. Lessee hereby acknowledges that it has had an opportunity to investigate and inspect the condition of the Premises and the suitability of same for Lessee's purposes, and Lessee 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 Lessee's purposes and (b) acknowledge that the Premises are in good, clean and sanitary order and repair and by taking possession Lessee accepts the Premises as it exists. Lessee acknowledges that neither Lessor nor any agent nor any employee of Lessor has made any representations or warranty with respect to the Premises or with respect to the suitability of either for the conduct of Lessee's business and Lessee expressly warrants and represents that Lessee has relied solely on its own investigation and inspection of the Premises in its decision to 4891789.6 20251-900 - 5 - July 20, 2021 Item #3 Page 10 of 36 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 Lessor 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 Lessor 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 Lessee by Lessor or any agent of Lessor other than as may be contained herein. 2.3 Delivery of Possession. Paragraph Not Applicable. 2.1 Easements. Lessor reserves to itself the right, from time to time, to grant such easements, rights and dedications affecting all or any part of the Premises as Lessor deems necessary or desirable, and to cause the recordation of parcel and subdivision maps and restrictions affecting all or any part of the Premises, so long as such easements, rights, dedications, maps and restrictions do not increase Lessee's obligations under this Lease, or unreasonably interfere with Lessee's use of the Premises. Lessee shall sign any of the aforementioned documents upon Lessor's reasonable request. Lessee shall cooperate with and not oppose or object to Lessor's construction, development, subdivision and parcelization of all or any part of the Premises and any property adjacent to the Premises so long as there is no material adverse impact to Lessee's use of the Premises, in Lessee's reasonable judgment. 2.2 Existing Equipment. Paragraph Not Applicable. 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. 3.2 Extension Option(s). Upon expiration of this Lease, Lessee shall have two (2) five-year extension options (each an "Extension Term"). 3.3 Surrender of Premises. On the Expiration Date or on the sooner termination or the later expiration of all applicable Extension Term(s) hereof, Lessee shall remove all of Lessee's Property from the Premises and peaceably surrender the Premises in accordance with the terms of this Section free of debris, excepting only ordinary wear and tear, condemnation and any damage or destruction not caused by Lessee or any or any officer, employee, agent or invitee of Lessee. "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, Lessee shall not remove (unless requested to by Lessor, in which case Lessee shall remove) all or any part of Lessee's Work and the Lessee Improvements, or any 4891789.6 20251-900 - 6 - July 20, 2021 Item #3 Page 11 of 36 fixtures or equipment which cannot be removed without material, permanent damage to the Premises. Any permanent damage caused by Lessee shall be repaired at Lessee's sole cost. Unless otherwise elected by Lessor, 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 Lessor. Lessee shall repair, to the reasonable satisfaction of Lessor, any damage to the Premises caused by any removal, or by the use of the Premises or by any failure of Lessee to comply with the terms of this Lease (including, without limitation, provisions relating to Hazardous Substances). Lessee shall promptly surrender all keys for the Premises to Lessor at the place then fixed for notices to Lessor and shall inform Lessor of the combinations on any locks and safes on the Premises. The provisions of this Section shall survive termination of this Lease. 3.4 Holding Over. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or termination of this Lease. The failure of Lessee to timely surrender the Premises in the condition required by Section 3.3 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. In addition to paying Lessor the increased Base Rent, Lessee shall defend, indemnify, protect and hold Lessor harmless from and against all claims, liability, damages, costs and expenses, including reasonable attorneys' fees and actual out-of-pocket costs of defending the same, incurred by Lessor and arising directly or indirectly from Lessee's holding over in the Premises beyond ten (10) days after receipt of Lessor's written notice, without Lessor's express written consent, including (a) any rent payable by or any actual loss, cost or damages, including lost profits and loss of good will suffered by any prospective lessee of the Premises and claimed against Lessor, and (b) Lessor's actual damages as a result of a prospective lessee's rescinding or refusing to enter into the prospective lease of the Premises as a direct or indirect result of Lessee's holding over. No action by Lessor other than Lessor's express written consent shall be construed as consent by Lessor to any holding over by Lessee. This paragraph is subject to Section 27.4 below. 3.5 Waiver of Relocation Benefits: Lessee 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 Lessor's delivery of a Disapproval Notice, if any). ARTICLE 4 RENT 4.1 General Provisions. Unless provided herein to the contrary, Lessee shall pay all rent to Lessor at Lessor's Address for Rent Payments as provided in Article 1 above. All rent shall be paid to Lessor 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. Lessee assumes all risk of loss if payments are made by mail. 4891789.6 20251-900 - 7 - July 20, 2021 Item #3 Page 12 of 36 4.2 Payment of Rent. For each month or partial month of the Term commencing on the Rent Commencement Date (except as otherwise expressly provided herein), Lessee shall pay to Lessor the sum specified in Article 1 as Rent ("Rent") in advance as set forth herein. Lessee shall pay the first installment of Rent to Lessor concurrently with Lessee's execution of this Lease, and all subsequent installments of Rent shall be payable in advance on or before the first day of each calendar month. ARTICLE 5 SECURITY DEPOSIT 5.1 Security Deposit. Section 1.8 of the Agreement is incorporated herein by this reference. ARTICLE 6 TAXES 6.1 Real Estate Taxes. Lessee 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 Lessor's gross receipts or revenues from the Premises, or to the business or other activities of Lessee upon or in connection with the Premises (individually and collectively, "Real Estate Taxes"), only to the extent Lessor is obligated to pay such Real Estate Taxes itself. In particular, Lessee acknowledges that this Lease may result in a taxable possessory interest. Lessee shall be solely responsible for the payment of Real Estate Taxes associated with its occupancy of the Premises, if any apply. Lessee shall also pay any fees imposed by law for licenses or permits for any business or activities of Lessee upon the Premises or under this Lease. 6.2 Personal Property Taxes. Lessee shall pay directly prior to delinquency any and all taxes and assessments levied or assessed during the Term upon or against (i) Lessee'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 Lessee to the Premises that are separately assessed (item "ii", only to the extent Lessor is obligated to pay such taxes and assessments itself). ARTICLE 7 UTILITIES - Article Not Applicable. ARTICLE 8 INSURANCE 4891789.6 20251-900 - 8 - July 20, 2021 Item #3 Page 13 of 36 8.1 General. Lessee shall, at its sole 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 Lessee 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 Lessor) and underwritten by companies reasonably acceptable to Lessor. On or before the Term Commencement Date, Lessee shall furnish Lessor with certificates and endorsements in a form reasonably acceptable to Lessor evidencing that (i) the policies (or a binder thereof) required pursuant to this Article are in effect and (ii) Lessor shall be notified in writing thirty (30) days prior to cancellation, material change, or nonrenewal of such insurance (or if Lessee's insurance carrier will not agree to provide notice of cancellation, material change, or nonrenewal to any additional insured or other entity, then Lessee shall deliver such notice to Lessor thirty (30) days prior to any cancellation, material change, or nonrenewal initiated by Lessee, or twenty (20) days prior to such cancellation, material change or nonrenewal not initiated by Lessee). The policies that Lessee is required to obtain pursuant to this Article shall name Lessor, and any other parties requested by Lessor in accordance with commercially reasonable practices, as additional insureds, or as loss payee (as applicable) for property in which Lessor has an insurable interest and shall be primary policies, and shall not be contributing with and shall be in excess of coverage which Lessor may have and shall be unaffected by any insurance or self-insurance Lessor may have regardless of whether any other insurance names Lessor as an insured or whether such insurance stands primary or secondary. If Lessee 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 Lessee's liability hereunder in any way, nor to fulfill the indemnification provisions and requirements of this Lease. Lessee agrees not to use the Premises in any manner, other than the Permitted Use generally, that will result in the cancellation of any insurance Lessor 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. Lessee 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. Lessee 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. 8.2 Commercial General Liability Insurance. Lessee 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 $2,000,000 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 4891789.6 20251-900 - 9 - July 20, 2021 Item #3 Page 14 of 36 and under the same conditions as Lessee's general liability insurance, if the sale of alcoholic beverages is permitted in the Premises. 8.3 Property and Extended Coverage Insurance. Paragraph Not Applicable. 8.4 Business Interruption. Lessee shall obtain and keep in force loss of income and extra expense insurance in amounts as will reimburse Lessee for at least twelve (12) months' direct and indirect loss of earnings attributable to all perils commonly insured against by prudent Lessees in the business of Lessee or attributable to prevention of access to the Premises as a result of such perils. 8.5 Workers' Compensation Insurance. Lessee shall obtain and keep in force workers' compensation and employer's liability insurance covering all employees of Lessee 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. 8.6 Waiver of Subrogation. Notwithstanding anything to the contrary contained herein, Lessor and Lessee hereby waive any rights each may have against the other on account of any loss or damage occasioned to Lessor or Lessee, 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 Lessor or Lessee against any such loss, waive any right of subrogation that it may have against Lessor or Lessee, 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 Lessor's or Lessee's policy of insurance. 8.7 Coverage Changes. Notwithstanding any of the foregoing, Lessor shall retain the right at any time to review the coverage, form, and amount of the insurance required under this Lease. If, in the reasonable opinion of Lessor, the insurance provisions in this Lease do not provide adequate protection for Lessor and/or for members of the public using the Premises, Lessor may require Lessee to obtain insurance sufficient in coverage, form and amount to provide adequate protection. Lessor's requirements shall be reasonable but shall be designed to assure protection from and against the kind and extent of risk which exists at the time a change in insurance is required. Lessor shall notify Lessee in writing of changes in the insurance requirements, and Lessee shall deposit certificates/endorsements evidencing acceptable insurance policies with Lessor incorporating such changes within thirty (30) days after receipt of such notice. 8.8 No Representation of Adequate Coverage. Lessor makes no representation that the limits or forms of coverage of insurance specified herein are adequate to cover Lessee's property, business operations or obligations under this Lease. 4891789.6 20251-900 - 10 - July 20, 2021 Item #3 Page 15 of 36 ARTICLE 9 USE OF PREMISES 9.1 Permitted Use and Continuous Operation. Lessee shall operate and occupy the Premises solely for the Permitted Use. No other use shall be permitted without the prior express written consent of Lessor. 9.2 Conduct of Business. Lessee shall conduct its business at all times in a professional and businesslike manner consistent with reputable business standards and practices. 9.3 Compliance with Laws; Nuisance. Lessee shall, at its sole expense and at all times, comply fully with (i) all federal, state, county and municipal laws and regulations, including without limitation all applicable County health orders, zoning and land use laws and ordinances, conditional use permit rules and orders and the Liquor Licenses, if any, now in force or which may hereafter apply to the Premises or which impose any duty on Lessor or Lessee 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 Lessee's use of the Premises, or (c) to alter, maintain, repair or restore the portion of the Premises which Lessee is responsible to maintain, repair or restore pursuant to this Lease); (ii) any declaration of covenants, conditions and restrictions and easements encumbering the Premises; (iii) intentionally deleted; 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. Lessee shall not store, use or sell any article in or about the Premises, nor permit any act, which would cause the premiums for insurance to significantly increase or cause a cancellation of any policy upon the Premises or any loss of coverage under any such policy. Lessee 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. Lessee shall not commit, or suffer to be committed, any waste upon the Premises, or any public or private nuisance, or any other act or thing which may disturb the quiet enjoyment of neighbors of the Premises except as expressly set forth herein. Lessee shall not conduct or permit to be conducted any sale by auction in, upon or on the Premises. 9.4 Environmental Compliance. Lessee represents, warrants and covenants to Lessor that: (a) Lessee, any party under its control or its agents, employees, contractors, affiliates, sublessees and invitees (collectively, "Lessee Parties") 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; and (b) the Lessee Parties shall not cause or permit any Hazardous Substance to be used, stored, spilled or released in, on, under or about the Premises (except for supplies typically used in the ordinary course of the Permitted Use in commercially reasonable amounts and in strict compliance with law) and shall promptly, at Lessee's sole expense, take all investigatory and/or remedial action reasonably recommended, whether or not formally ordered or required, for the cleanup of any 4891789.6 20251-900 -11- July 20, 2021 Item #3 Page 16 of 36 contamination of, and for the maintenance, security and/or monitoring of the Premises and neighboring properties, that was caused or materially contributed to by any Lessee Party, or pertaining to or involving any Hazardous Substance brought onto the Premises during the term of this Lease, by or for any Lessee Party. Lessee shall assume sole and full responsibility and cost to remedy any such violations caused by any Lessee Parties and shall protect, indemnify, defend and hold harmless Lessor from all actions (including, without limitation, remedial or enforcement actions of any kind, and administrative or judicial proceedings and orders or judgments), costs, claims, damages (including, without limitation, punitive damages), expenses (including, without limitation, reasonable attorneys', consultants' and experts' fees, court costs) amounts paid in settlement, fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief, liabilities or losses in any way arising or resulting from a breach of this paragraph. Notwithstanding the foregoing, neither Lessee nor Lessee's Parties shall be responsible for the mere discovery of Hazardous Substances not arising from or resulting from Lessee or Lessee Parties' activities on the Premises. Upon expiration or earlier termination of this Lease, Lessee shall cause any Hazardous Substance arising out of or related to the use or occupancy of the Premises by any Lessee Party to be removed from the Premises and the Parcel and properly transported for use, storage or disposal in accordance with all applicable laws, regulations and ordinances. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, or waste whose presence, use, manufacture, disposal, transportation, or release, either by itself or in combination with other materials expected to be on the Premises, is either: (i)potentially injurious to the public health, safety or welfare, the environment or the Premises, (ii)regulated or monitored by any government authority, or (iii) a basis for potential liability of Lessor 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. Hazardous Substances shall not include hazardous materials contained in products used by Lessee in the ordinary course of its business, provided the products are used, stored and maintained in compliance with all applicable federal, state, county and municipal laws and regulations and all other applicable environmental laws. 9.5 Lessor's Right of Entry. Lessor, at reasonable times, may go into the Premises for the purposes of: (i) inspecting the Premises; (ii) inspecting the performance by Lessee of the terms and conditions hereof; (iii) showing the Premises to prospective Lessees, purchasers, partners, or mortgagees; and (iv) posting notices for the protection of Lessor on the Premises. Except in the case of an emergency, Lessor shall give Lessee reasonable notice of any and all intended entries or inspections pursuant to this Section. 9.6 Prohibition Against Discrimination. Lessee 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 Lessee to offer accommodations or services to the public, such accommodations or services shall be offered by Lessee to the public on fair and reasonable terms. 4891789.6 20251-900 -12 - July 20, 2021 Item #3 Page 17 of 36 ARTICLE 10 MAINTENANCE AND REPAIR OF PREMISES 10.1 Lessee's Inspection. Lessee accepts the Premises in its "AS IS" condition as further provided in Section 2.2 above, and Lessee expressly waives all implied warranties including implied warranties of merchantability and fitness, if any. Lessee 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 Lessee to make repairs at the expense of Lessor. Lessee represents and warrants that it is familiar with the condition of the Premises. Lessee 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. Lessor shall have no responsibility or liability with respect to any such occurrence. 10.2 Lessee's Obligations. Except for Lessor's obligations as set forth in Section 10.3 below, from and after the Term Commencement Date and continuously thereafter until the expiration or termination of this Lease, Lessee, at Lessee's sole expense, shall keep the Premises free and clear of trash, garbage and other fire hazards. The obligations set forth in this paragraph are a material part of the consideration for this Lease. 10.3 Lessor's Obligations. Paragraph Not Applicable. 10.4 Lessor's Cure. Lessor 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 Lessor determines that the Premises are not in the condition required by this Lease, then Lessee shall perform the necessary maintenance, repair and/or replacement work within ten (10) days after written notice from Lessor. If Lessee fails to perform the necessary maintenance, repair and/or replacement work within ten (10) days after written notice from Lessor, then Lessor may, but is not obligated to, perform such obligations without liability to Lessee for any loss to Lessee's business that might arise by reason thereof. Lessee shall reimburse Lessor on demand in an amount equal to the cost incurred by Lessor in the performance of such obligations plus an administrative fee equal to ten percent (10%) of the cost incurred by Lessor. Lessor's rights reserved in this section shall not create any obligations or increase any obligations for Lessor elsewhere in this Lease. ARTICLE 11 ALTERATIONS AND ADDITIONS 11.1 Lessee Improvements. Lessee shall not commence 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 (collectively 4891789.6 20251-900 -13 - July 20, 2021 Item #3 Page 18 of 36 "Lessee Improvements") without Lessor's prior written consent, which shall not be unreasonably withheld, conditioned or delayed. If Lessee makes any Lessee Improvements without the prior written approval of Lessor, Lessor shall have the right to require that Lessee remove any or all of such Lessee Improvements, and repair and restore any damage to the Premises caused by such removal at Lessee's sole expense, and if Lessee shall fail to accomplish same within 30 days after notice from Lessor, shall also have the right to declare Lessee in default and to terminate this Lease. Any and all Lessee 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 Lessee shall, at Lessee's sole cost and expense, take all actions now or hereafter necessary to ensure such compliance. 11.2 Construction of Lessee Improvements; Liens. Lessee shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at, on, or for use in the Premises, and shall defend, indemnify, protect and hold harmless the Premises and Lessor against the same (including, without limitation, the costs of defending against such claims, and reasonable attorney's fees incurred therein). Lessee shall keep the Premises and any interest therein, free and clear of all mechanics' liens and all other liens. Lessee shall give Lessor immediate written notice of any lien filed against the Premises or any interest therein related to or arising from work performed by or for Lessee. Lessee shall give Lessor not less than ten (10) days' prior written notice of the commencement of any Lessee Improvements in the Premises, and Lessor 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 Lessee's leasehold interest, then upon Lessor's request, Lessee shall furnish to Lessor a corporate surety bond, satisfactory to Lessor, in an amount equal to one and one-half (1 'A) times the amount of the claims upon which such lien or levy has been filed. Such bond shall be acknowledged by Lessee as principal and by a corporation, licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company, as surety. Lessor shall have the right to declare this Lease in default in the event the bond required by this paragraph has not been deposited with Lessor within ten (10) days after written request has been delivered to Lessee. 11.3 Title to Lessee Improvements. Section Not Applicable 11.4 Signs_. Section Not Applicable. 11.5 Compliance with Prevailing Wage Laws. Lessee acknowledges and agrees that Lessee shall be responsible for determining whether any construction, alteration, demolition, installation or repair work performed by Lessee 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) Lessee 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) Lessee 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 Lessor be responsible for Lessee's failure to comply with any applicable 4891789.6 20251-900 -14- July 20, 2021 Item #3 Page 19 of 36 provisions of the PWL. Lessee's violations of the PWL shall constitute an event of default under this Lease, and Lessee shall defend and indemnify Lessor 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 Lessor), including but not limited to Lessee, performing construction, alteration, demolition, installation, repair and/ or any other type of work contemplated under this Lease to the Premises. ARTICLE 12 LESSEE'S PROPERTY — Article Not Applicable. ARTICLE 13 DAMAGE AND DESTRUCTION 13.1 Repairs by Lessee. If the Premises are totally or partially damaged or destroyed, Lessee shall, within ninety (90) days, commence and diligently pursue to completion the repair, replacement or reconstruction of the Premises, and of all Lessee's Property and Lessee 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 Lessor; provided, however, Lessee 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 Lessee pursuant to this Lease (or would be covered whether or not such required insurance is actually in effect), and except if Lessee is required to indemnify Lessor for such destruction pursuant to Section 15. If Lessee 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 Lessee'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. Lessee hereby waives California Civil Code Sections 1932 and 1933, as amended or recodified from time to time. 13.2 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 ninety (90) days to repair, then Lessee may elect to terminate this Lease provided that: (i) Lessee provides written notice to Lessor of such election to terminate within thirty (30) days after occurrence of the destruction; (ii) at the time of delivery of the termination notice Lessee is not in default under this Lease beyond any applicable notice and cure period; (iii) Lessee did not intentionally cause such destruction; (iv) all insurance required of Lessee under this Lease was in effect as of the date the destruction occurred and Lessee assigns to Lessor all claims rights and proceeds relating to the applicable destruction. ARTICLE 14 EMINENT DOMAIN 4891789.6 20251-900 -15- July 20, 2021 Item #3 Page 20 of 36 14.1 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 Lessee's business, this Lease shall terminate on the date that Lessee 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. 14.2 Partial Taking. If there is a partial taking of the Premises, and after restoration of any building or other improvements, the Premises would be reasonably suitable for Lessee'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) rent shall be equitably reduced; and (iii) Lessor 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, rent shall be equitably abated as set forth above. Notwithstanding the foregoing, Lessor, at its sole option, may elect to terminate this Lease by delivering written notice to Lessee within thirty (30) days after any partial taking by any condemning authority other than Lessor, in lieu of restoring the Premises to useful condition as provided above, unless Lessee agrees to perform all such restoration work at Lessee's sole cost. Lessee hereby waives any statutory rights of termination that may arise by reason of any taking of the Premises under the power of eminent domain. Lessor shall not seek condemnation of any portion of the Premises during the Lease. 14.3 Award. Lessee hereby renounces any interest in, and assigns to Lessor, any award made in any condemnation proceeding for any such taking, provided that Lessor shall have no interest in or be assigned any award made to Lessee for the taking of Lessee's Property or for Lessee's relocation expenses. Lessee hereby specifically waives any right it may have to any compensation award representing the excess of the market value, immediately before the taking, of Lessee's leasehold interest in the portion of the Premises taken over the rent attributable thereto under the terms of this Lease. ARTICLE 15 INDEMNIFICATION Lessee covenants and agrees to indemnify, protect, defend and hold harmless Lessor and its agents, employees, officers, affiliates and representatives (collectively, "Lessor 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 Lessee, its agents, contractors, subcontractors or employees, (b) any material breach of any obligation, covenant, representation or warranty of Lessee under this Lease; or (c) Lessee's 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 4891789.6 20251-900 - 16 - July 20, 2021 Item #3 Page 21 of 36 willful misconduct of any Lessor Party. Lessee's obligations under this section shall survive the expiration or termination of this Lease. ARTICLE 16 DEFAULTS AND REMEDIES 16.1 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 Lessee: A.Abandonment. Lessee's vacation or abandonment of the Premises without providing a commercially reasonable level of security or without providing reasonable assurances to minimize potential vandalism. B.Failure to Make Payment. Lessee'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 Lessor, or Lessee's failure on three (3) occasions during any twelve (12) month period to timely pay rent on or before the due date as provided for herein (even though subsequently cured). C.Non-Permitted Use. Lessee'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 Lessor. 0. Failure to Perform Other Covenants. Lessee's failure to perform any of Lessee's other covenants, agreements or obligations hereunder, where such failure continues for thirty (30) days after written notice of such failure from Lessor (provided, however, if the nature of such default is such that the same cannot be reasonably cured within a thirty (30) day period, Lessee shall not be deemed to be in default if Lessee 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 Lessee, or the filing of a voluntary or involuntary bankruptcy petition by or against Lessee, or the appointment of a receiver to take possession of all or substantially all of Lessee's assets or the Premises, or the attachment, execution or other judicial seizure of substantially all of Lessee's assets or the Premises, or in the event Lessee becomes insolvent or fails to generally pay Lessee's debts as such debts become due. F.Transfer without Consent. The occurrence of any Transfer without Lessor's express prior written consent, to the extent required herein. 16.2 Remedies. Upon the occurrence of an event of default by Lessee as set forth in Section 16.1 above, Lessor shall have the following rights and remedies, in addition to any and all other rights and remedies available to Lessor at law or in equity, including without 4891789.6 20251-900 -17- July 20, 2021 Item #3 Page 22 of 36 limit those provided under California Civil Code Sections 1951.2 and 1951.4, as amended or recodified from time to time: A.Terminate Lease. Lessor shall have the right to terminate this Lease and all rights of Lessee hereunder by giving forty-five days (45) day written notice to Lessee. If this Lease is so terminated, then Lessor may recover from Lessee: (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 Lessee 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 Lessee proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee'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 Lessor 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. Upon termination of the Lease as provided in Section 16.2(A) above, Lessor shall also have the right to reenter the Premises and to remove all persons and Lessee's Property from the Premises and store the Lessee's Property in a public warehouse or elsewhere at the cost of and for the account of Lessee. C.Maintain Lease; Relet Premises. Lessor shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after Lessee's breach and abandonment and recover rent as it becomes due, if Lessee has the right to sublet or assign, subject only to reasonable limitations). Unless Lessor elects to terminate this Lease as provided in Section 16.2(A) above, Lessor 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 Lessor in its sole discretion may deem advisable, with the right to clean and to make alterations and repairs to the Premises at Lessee's sole expense. If Lessor elects to relet as provided herein, then rent received by Lessor from such reletting shall be applied at Lessor's option: first, to the payment of any indebtedness other than rent due hereunder from Lessee to Lessor; second, to the payment of any cost of such reletting (including reasonable attorneys' fees, Lessee improvements customary to make the Premises ready to lease [including the removal of any specialized improvements installed by Lessee], 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 4891789.6 20251-900 - 18 - July 20, 2021 Item #3 Page 23 of 36 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 Lessee hereunder, then Lessee shall pay any such deficiency to Lessor immediately upon demand by Lessor. Such deficiency shall be calculated monthly and Lessee shall pay such deficiency monthly. Lessee shall also pay to Lessor, upon Lessor's demand, the costs and expenses incurred by Lessor in such reletting, including reasonable attorneys' fees, court costs, Lessee improvements customary to make the Premises ready to lease (including the removal of any specialized improvements installed by Lessee) and brokerage commissions and in making any alterations and repairs to the Premises to be. No reentry, acts of maintenance or preservation, efforts to relet, or taking possession of the Premises by Lessor or the appointment of a receiver upon initiative of Lessor to protect Lessor'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 Lessee 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 Lessor, Lessor may at any time after such reletting elect to terminate this Lease, in which case, Lessor shall have all the rights and remedies provided by law or equity or this Lease upon termination. D.Performance by Lessor. If Lessee materially breaches or fails to perform any of Lessee's obligations under this Lease and the material breach or failure continues for thirty (30) days (or such shorter time period as may be specified otherwise in this Lease) after Lessor gives Lessee written notice of the breach or failure, Lessor, 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 Lessee. Lessor also may, but shall not be obligated to, perform any such obligation for the account and at the expense of Lessee without notice in case of an emergency. E.Receiver on Behalf of Lessor. If, at the instance of Lessor 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 Lessee then being carried on in the Premises, and may take possession of any Lessee's Property and other personal property and records used in Lessee's business and use the same in conducting such business, without compensation to Lessee for such use. Neither application for, nor the appointment of a receiver shall be construed as an election by Lessor to terminate this Lease, unless express written notice of such election is given to Lessee. The fees and expenses of such receiver shall be charged to Lessee as Additional Rent. 16.3 Late Charges. Lessor and Lessee agree that the fixing of actual damages for Lessee's breach of any of the provisions of this Lease, including but not limited to the late payment by Lessee to Lessor of rent and other amounts due hereunder, would cause Lessor 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 4891789.6 20251-900 -19 - July 20, 2021 Item #3 Page 24 of 36 upon Lessor by the terms of any Mortgage covering the Premises. Accordingly, if any installment of rent or any other sum due from Lessee hereunder has not been received by Lessor or Lessor's agent within ten (10) days after such amount was due, Lessee shall pay to Lessor a late charge equal to five percent (5%) of any such delinquent installment of rent or any other delinquent sum due from Lessee. Notwithstanding the foregoing, Lessee shall not be liable for a late charge for the first late payment in any calendar year unless and until such payment is not made within five (5) business days after receipt of notice from Lessor of such delinquency. Lessee hereby agrees that said late charge represents a fair and reasonable estimate of the cost Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall not constitute a waiver of Lessee's default with respect to such overdue amount nor prevent Lessor from exercising any other rights and remedies provided for in this Lease, at law or in equity. If a late charge is payable by Lessee 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 Lessor quarterly in advance, notwithstanding any other provision of this Lease to the contrary. 16.4 interest on Past Due Obligations. Any and all amounts not paid to Lessor when due, shall bear interest, compounded monthly from the date due until paid at the rate of four percent (4%) per annum. Payment of such interest shall not excuse or cure any default by Lessee under this Lease and shall not affect any rights and remedies provided to Lessor 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 Lessee for any such delinquency period. 16.5 Waiver of Redemption. Lessee hereby expressly waives any and all rights of redemption granted by or under any present or future laws in the event of Lessee being evicted or dispossessed for any cause, or in the event of Lessor obtaining possession of the Premises by reason of the violation by Lessee of any of the covenants and conditions of this Lease or otherwise. The rights given to Lessor herein are in addition to any rights that may be given to Lessor by any statute or otherwise. 16.6 Lessor's Default. Lessor shall in no event be charged with default in the performance of any of its obligations hereunder unless and until Lessor 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 Lessor's receipt of written notice of such failure from Lessee. ARTICLE 17 SUBORDINATION AND ATTORNMENT 17.1 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 renewals, modifications, consolidations, replacements and extensions thereof (collectively "Mortgage"). Upon the request of Lessor, Lessee shall, from time to time, execute and deliver any documents 4891789.6 20251-900 - 20 - July 20, 2021 Item #3 Page 25 of 36 that may be required by Lessor or the mortgagee, beneficiary, ground lessor or lender (each a "Lessor's Lender") under any such Mortgage, to effectuate any subordination, provided that any such Lessor's Lender agrees not to disturb Lessee's right to quiet possession under this Lease so long as Lessee is not in default (or with notice or passage of time or both would not be in default) under this Lease ("SNDA"). If Lessee fails to execute and deliver such requested SNDA within thirty (30) days after request, Lessee irrevocably constitutes and appoints Lessor as Lessee's special attorney-in-fact, coupled with an interest, to execute and deliver such requested SNDA. Notwithstanding the foregoing, if Lessor's Lender elects to have this Lease prior to the lien of its Mortgage, and gives written notice to Lessee 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. 17.2 Attornment. In the event that Lessor transfers title to the Premises to a Lessor's Lender, or the Premises are acquired by a Lessor's Lender upon the foreclosure or termination of a Mortgage to which this Lease is subordinated, Lessee shall attorn to and recognize the Lessor's Lender as Lessee's Lessor under this Lease and shall promptly execute and deliver any documents that Lessor may reasonably require to evidence such attornment, provided that Lessor's Lender agrees not to disturb Lessee's right to quiet possession under this Lease so long as Lessee is not in default (or with notice or passage of time or both would not be in default) under this Lease. If Lessee fails to execute and deliver the requested SNDA within fifteen (15) days after request, Lessee irrevocably constitutes and appoints Lessor as Lessee's special attorney-in-fact, coupled with an interest, to execute and deliver the requested SNDA. 17.3 Estoppel Certificate. Upon the reasonable request of Lessor, Lessee from time to time shall execute, acknowledge, and deliver to Lessor, no later than ten (10) business days after Lessor's request therefor, an estoppel certificate in any reasonable form requested by Lessor ("Estoppel Certificate"). The Estoppel Certificate may be conclusively relied upon by a prospective lender, purchaser, or encumbrancer of Lessor's interest in the Premises. Failure to deliver the Estoppel Certificate within ten (10) business days of such request shall be conclusive upon Lessee that: (i) this Lease is in full force and effect; (ii) there are no uncured defaults in Lessor's or Lessee'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. Lessee hereby irrevocably appoints Lessor as its attorney-in-fact, which agency is coupled with an interest, to execute any such Estoppel Certificate upon Lessee's failure to do so within such fifteen (15) day period. 17.4 Rights of Lessor's Lender. If any Lessor's Lender requires a modification of this Lease at any time, Lessee shall, at Lessor's reasonable request, promptly execute and deliver to Lessor instruments effecting the modifications that the Lessor's Lender reasonably requires, provided that such modifications do not increase the rent, reduce the size of the Premises or otherwise adversely affect in any material respect any of Lessee's rights under this Lease or increase Lessee's obligations hereunder. If Lessor's Lender has given prior written notice to Lessee that it is the Lessor's Lender and such notice includes the address at which notices to such Lessor's Lender are to be sent, then Lessee shall give Lessor's Lender, as the case may be, written 4891789.6 20251-900 - 21 - July 20, 2021 Item #3 Page 26 of 36 notice simultaneously with any notice given to Lessor to correct any failure of Lessor to perform any of Lessor's obligations. Lessor's Lender 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 Lessor shall be simultaneously given to Lessor's Lender. 17.5 Limitation of Liability. The covenants and agreements of Lessor under this Lease shall not be binding upon any person at any time after the transfer of that person's interest, as Lessor, in the Premises. In the event of such a transfer, the covenants and agreements of Lessor shall thereafter be binding upon the transferee of Lessor's interest. ARTICLE 18 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 Lessee from the prompt payment of any rent or other charge required of Lessee hereunder, except as may be expressly provided elsewhere in this Lease. ARTICLE 19 ASSIGNMENT AND SUBLETTING 19.1 Lessor's Consent. Lessee shall not voluntarily, involuntarily or by operation of law assign, mortgage, sublet, hypothecate or otherwise transfer or encumber all or any part of Lessee's interest in this Lease or in the Premises (collectively "Transfer"), without first obtaining Lessor'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 Lessee 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 Lessor's consent. Lessor and Lessee agree (by way of example and without limitation) that it shall be reasonable for Lessor 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) intentionally deleted; (iii) in Lessor'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; or (iv) Lessee is in default under this Lease beyond applicable notice and cure periods. Any attempted or purported Transfer without Lessor's prior written consent (to the extent required hereunder) shall be void and of no force or effect, and shall not confer any 4891789.6 20251-900 - 22 - July 20, 2021 Item #3 Page 27 of 36 estate or benefit on anyone. A consent to one Transfer by Lessor shall not be deemed to be a consent to any subsequent Transfer to any other party. Notwithstanding anything herein to the contrary, Lessee shall have the right, without the necessity of obtaining Lessor's consent, to Transfer this Lease (1) to an entity controlling, controlled by, or under common control with Lessee or an affiliate of Lessee, or (2) to the surviving entity of a merger or consolidation of Lessee, or (3) to the purchaser of all or substantially all of the stock or assets of Lessee. 19.2 Request for Transfer. Lessee shall give Lessor at least forty-five (45) 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 Lessee 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 Lessor to evaluate the proposed Transfer and the prospective Transferee. Within thirty (30) days after receipt of the Transfer Notice, Lessor shall either approve or disapprove of such Transfer. Lessee shall immediately notify Lessor of any modification to the proposed terms of such Transfer. Lessee shall also provide to Lessor copies of the fully executed documents pertaining to the Transfer after the Transfer has become effective. Whether or not Lessor consents to any proposed Transfer, Lessee shall pay Lessor's review and processing fee in the amount of $500.00 within thirty (30) days after written request by Lessor. 19.3 Lessor's Rights. Upon receipt of a Transfer Notice pursuant to Section 19.2 above, Lessor shall have the right to (i) withhold its consent to such Transfer, as permitted pursuant to Section 19.1 above; (ii) terminate this Lease as it relates to the portion of the Premises described in the Transfer Notice and recapture such portion of the Premises, effective as of the date of dispatch of a notice of termination from Lessor to Lessee, which notice may be sent at any time within thirty (30) days following Lessor's refusal to consent to the Transfer; (iii) sublet or receive an assignment of all or a portion of the Premises from Lessee at the lower of the rental specified in this Lease or in Lessee's Notice (provided, however, that with respect to "ii" and "iii" above, Lessee shall have the right to rescind its Transfer Notice within ten (10) days after receipt of Lessor's notice under "ii" or "iii", and in such event, Lessor's election to terminate this Lease, sublet or receive an assignment of all or a portion of the Premises shall be null and void); or (iv) impose any of the following as conditions to Lessor's consent: (a) that all rents paid by the Transferee to Lessee in excess of the Base Rent be paid to Lessor; or (b) that an acceptable guaranty of this Lease be provided to Lessor; or (c) that either Lessee 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 Lessor's failure to condition its consent upon such cure be deemed to be a waiver of any such default or of Lessor's rights and remedies under this Lease or under law or in equity in regard thereto. If Lessor 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 4891789.6 20251-900 - 23 - July 20, 2021 Item #3 Page 28 of 36 Transfer, then the Transfer shall be voidable at Lessor's option. Lessor shall also have the right to condition Lessor's consent to any Transfer upon Lessee's and the Transferee's executing a written assumption agreement, in a form reasonably approved by Lessor. The assumption agreement shall require the Transferee to expressly assume all obligations of Lessee under this Lease and shall require Lessee and Transferee (but not the Guarantor if a replacement guaranty reasonably acceptable to Lessor 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 Lessee's interest in this Lease. Regardless of Lessor's consent to any Transfer, no Transfer shall release Lessee of Lessee's obligation or alter the primary liability of Lessee to pay rent and to perform all other obligations to be performed by Lessee hereunder. The acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision hereof. These rights are in addition to Lessor's right to withhold its consent to any Transfer, and may be exercised by Lessor in its sole discretion without limiting Lessor in the exercise of any other right or remedy at law or in equity which Lessor may have by reason of such Transfer. In the event of default by any Transferee, Lessor may proceed directly against Lessee without the necessity of exhausting remedies against said Transferee. Lessee 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 20 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 or by electronic mail. 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," (b) on the date of personal delivery or (c) on the date the electronic mail is sent by the applicable party. Either party may change its address for notices by providing written notice as specified herein. ARTICLE 21 AUTHORITY If Lessee 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 Lessee is a corporation, trust, partnership, or limited liability company, Lessee shall, simultaneously with execution of this Lease, deliver to Lessor written evidence of such authority reasonably satisfactory to Lessor. 4891789.6 20251-900 - 24 - July 20, 2021 Item #3 Page 29 of 36 ARTICLE 22 QUIET ENJOYMENT Lessee, 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 23 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 24 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 Lessor from enforcing the full provisions hereof. Lessor's acceptance of any payment which is less than that required to be paid by Lessee 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 Lessee, written on any check or contained in any transmittal letter. The subsequent acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term or covenant hereof, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent. An express waiver must be in writing and signed by a person with the power to contractually bind Lessee or Lessor. An express waiver shall affect only the default specified in the waiver, and only for the time and to the extent expressly stated. ARTICLE 25 LIMITATION ON CLAIMS Any claim, demand, right or defense of any kind by either of the parties, 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 such party commences an action thereon, or 4891789.6 20251-900 - 25 - July 20, 2021 Item #3 Page 30 of 36 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 26 INTERPRETATION AND APPLICATION 26.1 Submission of Lease. Submission of this instrument for examination or signature by Lessee 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 Lessor and Lessee. 26.2 Governing_ Law. This Lease shall be construed in accordance with and governed by the statutes, decisions, and other laws of the State of California. Lessee 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 Lessee hereby consents to the jurisdiction of said court. 26.3 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 unless expressly referenced and incorporated herein. 26.4 Amendment. This Lease may not be amended, altered or modified in any way except in writing signed by the parties hereto. 26.5 No Partnership. It is agreed that nothing contained in this Lease shall be deemed or construed as creating a partnership or joint venture between Lessor and Lessee or between Lessor and any other party, or cause Lessor to be responsible in any way for the debts or obligations of Lessee or any other party. 26.6 No Merger. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work as a merger, but shall, at the option of Lessor, either terminate all or any existing subleases or subtenancies, or operate as an assignment to Lessor of any or all such subleases or sub-tenancies. 26.7 Severabilitv. 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. 4891789.6 20251-900 - 26 - July 20, 2021 Item #3 Page 31 of 36 26.8 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. 26.9 Words. The words "Lessor" and "Lessee", as used herein, shall include the plural as well as the singular. Words used in the neuter gender include the masculine and feminine. 26.10 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. 26.11 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 27 MISCELLANEOUS 27.1 Time is of the Essence. Time is of the essence of each and all of the terms and provisions of this Lease. 27.2 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. 27.3 Recordation; Quitclaim. Lessee shall not record this Lease or any memorandum hereof. Lessor has the right in its absolute discretion to record this Lease or a memorandum hereof, and, upon Lessor's request, Lessee shall execute and have acknowledged the same for recordation. Upon termination of this Lease for any reason, Lessee shall execute, acknowledge and deliver to Lessor within thirty (30) days after receipt of written demand therefor a good and sufficient memorandum of termination indicating that this Lease has been terminated. If Lessee fails to deliver the required memorandum of termination to Lessor, Lessor may prepare and record a notice reciting the failure of Lessee to execute, acknowledge and deliver such memorandum of termination and said notice shall be conclusive evidence of the termination of this Lease and of all right of Lessee or those claiming under Lessee in and to the Premises. 27.4 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 Lessor hereunder (including any successor Lessor) and any recourse by Lessee against Lessor shall be limited solely and exclusively to Lessor's interest in the Premises, including the income and profits from the Premises, and none of its officers, employees, affiliates, managers or agents shall have any personal liability therefor, and Lessee 4891789.6 20251-900 - 27 - July 20, 2021 Item #3 Page 32 of 36 hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Lessee. The limitations of liability provided in this Section are in addition to, and not in limitation of, any limitation on liability applicable to Lessor provided by law or in any other contract, agreement or instrument. Under no circumstances shall Lessor or Lessee be liable for punitive or special damages, indirect damages or other consequential damages, including without limitation, injury to business or for any loss of income or profit therefrom. In the event of any transfer of Lessor's interest in this Lease, the Lessor 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 Lessor contained in this Lease thereafter to be performed; provided, however, that any funds in the hands of Lessor or the then transferor at the time of such transfer, in which Lessee has an interest shall be turned over to the transferee and any amount then due and payable to Lessee by Lessor or the then transferor under any provision of this Lease shall be paid to Lessee; 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 Lessor, it being intended hereby that the covenants and obligations contained in this Lease on the part of Lessor shall be binding on each Lessor, its successors and assigns, only during its period of ownership. 27.5 Broker. Lessor and Lessee each represents and warrants to the other that it has not retained the services of or had any dealings with any broker, finder or real estate licensee and owes no person or entity any finder's or broker's fee, commission or payment of any kind whatsoever. Lessor and Lessee each shall indemnify, protect, defend and hold harmless the other from and against all liability for compensation or charges which may be claimed by any such broker, finder or other similar party by reason of any dealings or actions of the indemnifying party, including (without limitation) any costs, expenses or attorney's fees reasonably incurred with respect thereto. 27.6 Counterparts. This Lease may be executed in any number of counterparts (by original, facsimile, PDF file or other electronic format) 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. [Signatures on Next Pages 4891789.6 20251-900 - 28 - July 20, 2021 Item #3 Page 33 of 36 Title: City Manager By: Name: Scott-Chadwick By: Name: Mark F. Le Title: Executive Vice Presid Global Operations ARTICLE 28 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 Lessee and Lessor. IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date first above written. LESSOR: LESSEE: City of Carlsbad, Callaway Golf Company, a California municipal corporation a Delaware corporation APPROVED AS TO FORM B: Alle rost Deputy City Attorney, for Celia A. Brewer, City Attorney Date: , 2021 4891789.6 20251-900 - 29 - July 20, 2021 Item #3 Page 34 of 36 EXHIBIT A LEGAL DESCRIPTION OF PREMISES APN NO: 212-270-08-00 BEING A PORTION OF LOT 69 OF CARLSBAD TRACT NO. 81-46, UNIT NO. 3, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 11289 FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 16,1985, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT IN THE SOUTHEASTERLY BOUNDARY LINE OF SAID LOT 69, DISTANT THEREON, 65.50 FEET FROM THE MOST NORTHEASTERLY CORNER THEREOF, THENCE SOUTHWESTERLY ALONG SAID SOUTHEASTERLY BOUNDARY LINE, S.32°04'25" W. 374.77 FEET TO THE INTERSECTION WITH THE NORTHEASTERLY SIDELINE OF AN EXISTING EASEMENT, 20.00 FEET IN WIDTH IN FAVOR OF SAN DIEGO GAS AND ELECTRIC COMPANY FOR THE RIGHT AND PRIVILEGE TO TRIM TREES OUTSIDE OF THE 100.00 FOOT WIDE EXISTING EASEMENT FOR ELECTRICAL POWER TRANSMISSION PER DOCUMENT NO. 49242, RECORDED APRIL 15,1954, IN BOOK 5205 AT PAGE 419 OF OFFICIAL RECORDS; THENCE NORTHWESTERLY ALONG SAID NORTHEASTERLY EASEMENT SIDELINE, N.47°28'18" W. 140.00 FEET; THENCE DEPARTING SAID NORTHEASTERLY EASEMENT SIDELINE, N.38°35'43" E. 182.04 FEET TO AN ANGLE POINT; THENCE N.43'231011' E. 86.68 FEET TO AN ANGLE POINT; THENCE S.65°34'011' E. 41.37 FEET TO AN ANGLE POINT; THENCE N.69°10'40" E. 97.80 FEET TO THE POINT OF BEGINNING. CONTAINING AN AREA OF 0.843 ACRE. (36,740 SQUARE FEET) - 4891789.6 20251-900 1 - DOCS 121161-000007/2625579.8 July 20, 2021 Item #3 Page 35 of 36 PLUS T 1jFFr4NNNG---, 14, NOR1NEASTERLY LINE Or 20 %JOE S.D.G.K, EASEMENT EXPIries 6,30666. No_ MN PALMAP JORingtr tt. PALOMAR AIPPOrr (41:4110. )1/1.CI'N.41 T Y MA NO EXHIBIT 18* LEGAL DESCRIP110N PLAT 1 ,MOST NORD-IEASIERLY CORNER LOT 69 PAD COMPt_i_i MINIX lifa, ;mg parw 42R/K Mgr 6W SAW csEt;r4 C.414,00t664 iatemer% 'Arra t —1174 FrAtJo..414td I MC. 11A7A July 20, 2021 Item #3 Page 36 of 36