EXHIBIT 10.2
LEASE AGREEMENT
This Lease Agreement ("Lease") is made and effective November 15, 2003,
by and between APRO, LLC, a Delaware limited liability company, hereinafter
referred to as "Lessor", whose address is 17311 South Main Street, Gardena,
California 90248, and Smog Centers of California, LLC, hereinafter referred to
as "Lessee", whose address is 3790 Via de la Valle, Suite 103, Del Mar,
California 92014, who agree as follows:
1. Premises. Lessor hereby leases to Lessee, and Lessee leases
from Lessor, that portion of the property located at 555 West Grand Avenue,
Escondido, California 92025, comprised of approximately 1,028 square feet and
described as two automotive bays, herein called "the Premises", as reflected on
Exhibit "A" attached hereto. Lessor agrees to provide to Lessee's smog
technician(s) access to Lessor's bathroom facilities, which are located behind
Lessor's cashier, during business hours. Lessor agrees to provide five (5) paved
parking spaces, located on the southeast corner of Lessor's property, to
Lessee's customers and smog technician(s), as reflected on Exhibit "A". Lessee
agrees to direct its customers and smog technician(s) to these parking spaces.
Lessee agrees to use its reasonable and best efforts to ensure that Lessee's
customers and smog technician(s) do not park in front of Lessor's gas station
pumps or at any parking areas other than the above-referenced five (5) parking
spaces. Lessee further agrees that it shall use its best and reasonable efforts
to insure that none of Lessee's customers' or smog technician(s)' vehicles are
parked overnight on Lessor's property. Lessor agrees that Lessee shall have
access to and may use Lessor's air compressor.
2. Improvements. Lessee may install, at its expense, dynamometers
below-ground at the Premises, and Lessor expressly grants Lessee permission to
cut the concrete and make any necessary alternations for this purpose.
3. Term. The term of this lease shall be for five (5) years
commencing on November 15, 2003, and continuing thereafter until November 14,
2008, subject to Lessee's option to extend the term an additional five (5)
years, as set forth in Paragraph 5 below, unless terminated earlier as provided
in paragraph 5 below.
4. Rent. Lessee agrees to pay to Lessor a monthly rental payment
for the use and occupancy of the Premises, as follows:
4.1 November 15, 2003 - November 14, 2006: $1,500 per month, with
the first month free;
4.2 November 15, 2006 - November 14, 2007: $1,700 per month; and
4.3 November 15, 2007 - November 14, 2008: $1,800 per month.
Rent shall be due upon the first of the month, and payable no later than the
fifth of the month. If received after the fifth of the month, a ten percent
(10%) penalty shall be charged.
Lessee shall be required to deposit $1,500 as a refundable security deposit with
Lessor prior to taking possession of the premises.
5. Early Termination Option by Lessee; Option to Extend Lease
Term.
5.1 Lessor acknowledges and agrees that if Lessee is unable to
obtain licenses from the Bureau of Automotive Repair needed to operate a
smog-test-only station at the Premises within ninety (90) days from the
commencement date of this lease, Lessee shall have the option to terminate this
lease in its entirety by providing written notice to Lessor. The lease shall
terminate in its entirety as of the effective date specified in the notice
("early termination date"), and Lessee shall vacate the Premises as of the early
termination date. Lessee shall restore the Premises to the condition it was at
the commencement of the Lease. Lessee shall owe to Lessor rent through the early
termination date only; no further rent or damages shall be due or owing by
Lessee to Lessor pursuant to this lease, which shall terminate in its entirety,
and the parties shall be released from any further liability thereon.
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5.2 Lessee is hereby granted and shall, if not then in default
under this lease, have the option to extend the term of this lease for an
additional five (5) years, from November 15, 2008, through November 14, 2013
("extended lease term"), on the same terms, covenants and conditions contained
in this lease, except that rent to be paid by Lessee to Lessor for the extended
term from November 15, 2008 - November 14, 2009 shall be $2000. Thereafter the
rent shall increase 5% annually. This option shall be exercised only by Lessee's
delivering to Lessor, at least thirty (30) days before November 14, 2008,
written notice of Lessee's election to renew the term of this lease.
5.3 Notwithstanding Lessee's option to the extend the lease term,
Lessor shall have the right to terminate the extended lease term by providing
Lessee with six months' advance written notice if its election to terminate
same. Lessor agrees that in the event that it terminates the extended lease
term, Lessor shall not relet the Premises to any business which conducts or
performs any smog- testing through the original extended lease term expiration
date of November 14, 2013.
6. Use and Limitations. Lessee shall use the Premises for the
purpose of smog (emissions) testing of vehicles only, and for no other use,
without Lessor's prior written consent. Lessee agrees that it shall not sell
automobiles on the Premises.
7. Maintenance, Alterations, Taxes and Utilities.
7.1 Maintenance by Lessor. Lessor shall, at its own cost and
expense, maintain in good condition and repair the roof, walls, structural
supports, the foundation of said Premises, fences and parking area, and make all
necessary repairs to, or replacements of, the plumbing and electrical systems of
the Premises.
7.2 Repairs by Lessee. Except as provided in paragraph 7.1 of this
lease, Lessee shall, at its own cost and expense, maintain the Premises in a
clean condition, and shall repair any damages to the roof, walls, structural
supports, foundation, fences, parking area, plumbing, heating, air conditioning
and electrical systems on the Premises that are rendered necessary by the
negligence or abuse by Lessee.
7.3 Signs. Lessee may erect and maintain signs, with Lessor's
approval, on the Premises relating to Lessee's business, provided the signs
comply with any law or ordinance of any governmental agency having jurisdiction
over the Premises. Lessor acknowledges and agrees that Lessee may place signs on
the sign pole located on the northwest corner of the property; on the north,
south, west and east walls of the building; and may place movable signs on the
property at its perimeters bordering Quince Street, Grand Avenue and Second.
Upon termination of the Lease, Lessee shall remove, at Lessee's sole cost and
expense, any signs erected by Lessee.
7.4 Real Property Taxes. All real property taxes and assessments
levied or assessed against the Premises by any governmental entity, including
any special assessment imposed on or against the Premises for the construction
or improvement of public works in, on, or about said Premises, shall be paid,
before they become delinquent, by Lessor.
7.5 Payment of Utility Charges. Lessor shall make all necessary
and reasonable efforts to have a separate utility meter installed with an
account in Lessee's name, for gas and electricity for the Premises by the
commencement date of this lease. Lessee shall be responsible for paying all
utility charges for the account in Lessee's name for the use of gas and
electricity to the Premises during the term of this lease, any early
termination, or any extension thereof. If a separate utility meter for gas and
electricity cannot be installed, Lessee shall pay to Lessor the difference
between the current month's utility charge, less the average monthly utility
charge for the property for the preceding twelve months, which Lessor agrees is
a reasonable and fair charge, for the use of gas and electricity to the Premises
during the term of this lease, any early termination, or any extension thereof.
Lessor shall provide Lessee with access to the trash dumpster located on the
southeast corner of the property. Trash removal is to be provided by Lessor, at
Lessor's expense.
7.6 Payment of Telephone Charges. Lessor shall allow Lessee to
make all necessary
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and reasonable efforts to have two telephone lines to the premises installed, at
Lessee's expense, with an account in Lessee's name, by the commencement date of
this lease. Lessee shall be responsible for paying all telephone charges for the
account in Lessee's name for telephone service to the Premises during the term
of this lease, any early termination, or any extension thereof.
7.7 Inspections. If any governmental inspections are required,
Lessor agrees to pay for repairs, improvements or building code compliance
necessary for its existing operations. Lessee agrees to pay for repairs,
improvements or building code compliance necessary for the operation of its smog
test-only facility.
7.8 Personal Property Taxes. Lessee shall pay, before they become
delinquent, all taxes, assessments, or other charges levied or imposed by any
governmental entity on the furniture, trade fixtures, appliances and other
personal property of Lessee on the Premises during the term of this lease, or an
early termination or any extension thereof.
8. Insurance. Lessee agrees to maintain a General Liability and
Garage-keepers Legal Liability insurance policy with coverage limits in the
minimum amount of One Million Dollars ($1,000,000.00). Lessee shall provide
Lessor with a Certificate of Liability Insurance naming Lessor as a certificate
holder on the insurance policy.
9. Destruction. Should the Premises be destroyed in whole or in
part by fire, earthquake or other accident of calamity, to such an extent that
in the opinion of the Lessor it is not feasible to repair them, then this lease
shall terminate and all parties shall be released from any further liability
thereon; however, in any such event of the Lessor shall elect to repair or
replace same, then this Lease shall continue in effect, but the rent shall be
prorated or rebated in proportion to the possible use of the Premises by Lessee
during the time required for such repair.
10. Condemnation. If, during the term of this lease or any
extension thereof, there is any taking of all or any part of the Premises or any
interest in this lease by condemnation, then this lease shall terminate and the
rights and obligations of the parties shall cease.
11. Assignment. Lessee may not assign this lease, or any interest
therein, or sublet the premises without first having obtained the written
consent of the Lessor to such assignment or sublease, which consent shall not be
unreasonably withheld.
12. Default. The occurrence of any of the following shall
constitute a default by Lessee: (a) Failure to pay rent when due, if the failure
continues for five (5) days after written notice has been given by Lessor; (b)
Failure to perform any other provision of this lease if the failure to perform
is not cured within thirty (30) days after written notice has been given to
Lessee. If the default cannot reasonably be cured within thirty (30) days after
written notice to Lessee, Lessee shall not be in default of this lease if Lessee
commences to cure the default within the thirty (30) day period and diligently
and in good faith continues to cure the default. Notices given under this
paragraph shall specify the alleged default and the applicable lease provisions,
and shall demand that Lessee perform the provisions of this lease or pay the
rent which is in arrears, as the case may be, within the applicable period of
time, or quit the Premises. No such notice shall be deemed a forfeiture or a
termination of this lease unless Lessor so elects in the notice. Lessor can
terminate Lessee's right to possession of the Premises if Lessee is in default
of this lease and the applicable time to cure said default has expired, and
shall be able to recover damages as allowed by law.
13. Lessor's Right to Enter Premises. Upon twenty-four (24) hours
advance written notice, Lessor shall have the right to enter the Premises at all
reasonable times to do any necessary maintenance and to make any restoration to
the Premises the Lessor has the right or obligation to perform.
14. Surrender of Premises; Holding Over.
14.1 Surrender of Premises. On termination of this lease, Lessee
shall surrender to Lessor the Premises in good condition (except for ordinary
wear and tear) and shall remove all of
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its personal property from the Premises.
14.2 Holding Over. If Lessee, with Lessor's consent, remains in
possession of the Premises after expiration or termination of the term, or after
the date of any notice given by Lessor to Lessee terminating this lease, such
possession by Lessee shall be deemed to be a month-to-month tenancy terminable
on thirty (30) days' written notice given at any time by either party. The rent
paid shall be equal to the last monthly payment made by Lessee to Lessor. All
provisions of this lease except those pertaining to term shall apply to the
month-to-month tenancy.
15. Miscellaneous Provisions.
15.1 Notices. Any notices which either party desires or is required
to give to the other party or any other person shall be in writing and either
delivered personally, or sent by pre-paid, first-class mail, addressed to the
other party, at the address set forth in the introductory paragraph to this
lease. Either party may change its address by notifying the other party in
writing of the change of address.
15.2 No Waiver. No waiver of any covenant or condition contained in
this lease, or of any breach of any such covenant or condition shall constitute
a waiver of the rights of either party to act upon any subsequent breach of such
covenant or condition, or justify or authorize the non- observance of any other
occasion of the same or any other covenant or condition hereof of either party.
15.3 Independent Advice of Counsel. Each of the parties hereto
represent that in executing this lease they rely solely upon their own judgment,
belief and knowledge, or the advice of their counsel; that they have had an
opportunity to obtain counsel or have declined to do so, and that they have not
been influenced to any extent whatsoever in executing this lease by way of any
representations or statements covering any matters made by the parties hereto
which are not contained herein, or by any person representing any of the parties
hereto.
15.4 Authority. The signatories to this lease warrant and represent
that they have full legal power and authority to enter into this lease on behalf
of the parties hereto.
15.5 Modification. This lease may not be amended, modified, or
supplemented except by a written agreement signed by both parties hereto.
15.6 Time is of the Essence. Time is of the essence of each
provision of this lease.
15.7 Successors. This lease shall be binding on and inure to the
benefit of the parties and their successors.
15.8 Governing Law. This lease shall be governed, construed and
interpreted in accordance with the laws of the State of California.
15.9 Severability. The unenforceability, invalidity, or illegality
of any provision shall not render the other provisions unenforceable, invalid or
illegal.
Executed this 15th day of November, 2003.
LESSEE: LESSOR:
SMOG CENTERS OF CALIFORNIA, LLC APRO, LLC
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BY: STEPHEN D. WILSON, MANAGER BY: JEFF APPEL, MANAGER
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