Exhibit 10.1
GROUND LEASE
This ground lease is made as of
Sept. 15, 2006, between WALTER BROS. CONSTRUCTION CO., INC., a
California corporation (“Landlord”), and MISSION
COMMUNITY BANK, a California corporation (“Tenant”).
Landlord leases to Tenant and Tenant hires from Landlord the
Premises hereafter described.
1.
Premises . The Premises consist of approximately 32,500
square feet of real property located at the corner of South Higuera
and Prado Road, in the City of San Luis Obispo, County of San Luis
Obispo, State of California (“Premises”).
The legal description of the
Premises, including any appurtenances, is included in Exhibit
“A,” attached to this lease and incorporated herein.
The Premises are currently located within a larger parcel and it is
the intent of Landlord and Tenant that Landlord will obtain a lot
line adjustment from the City of San Luis Obispo, whereby a
separate parcel will be created (the “Lot Line
Adjustment”) which new parcel shall be the Premises. The
legal description of the Premises, the size of the Premises, and
the allowable size of the building and parking lot to be
constructed on the Premises are contingent upon the Lot Line
Adjustment. Exhibit “A” shall be finalized and attached
hereto after the Lot Line Adjustment is complete, and the parties
acknowledge that the property may be reduced or increased in size
through the Lot Line Adjustment process, but that the rent to be
paid by Tenant pursuant to Paragraph 3, below, shall not be
adjusted as a result of such modifications in the size of the
parcel.
2.
Term / Early Termination / Option
to Extend .
(a)
The term of this lease is fifty (50)
years, beginning October 1, 2006 (“Commencement Date”),
and ending at midnight on September 30, 2056, unless sooner
terminated as provided for in this lease.
(b)
In consideration of the payment by
Tenant to Landlord of the sum of Twenty-Five Thousand and No/100
Dollars ($25,000.00) upon execution of this Lease as a non-
refundable lease premium (“Lease Premium”), during the
first twelve (12) months after the Commencement Date, Tenant shall
have the option, on notice to Landlord (“Termination
Notice”), to terminate this Lease, effective ten (10) days
after delivery of the Notice to Landlord (“Lease Termination
Date”). Tenant shall not be entitled to any refund of the
Lease Premium or rent paid to the Lease Termination Date, and as of
the Lease Termination Date, Tenant shall deliver to Landlord any
development plans, soils reports, maps and other investigative
reports which may have been generated by Tenant for use in
developing the Premises prior to the Lease Termination Date. In
addition, Tenant agrees to provide Landlord with quarterly status
reports on the progress of Tenant’s development of the
Premises until any such Lease Termination Date, but no such reports
shall be required after September 30, 2007, on which date
Tenant’s right to an early termination of the Lease shall
expire.
(c)
Tenant is given the option to extend
the term on all the provisions contained in this Lease, except for
minimum monthly rent, for two (2) additional five-year
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periods (“Extended
Term”) following expiration of the initial term, by giving
notice of exercise of option (“Option Notice”) to
Landlord at least sixty (60) but not more than ninety (90) days
before the expiration of the term; provided that, if Tenant is in
default on the date of giving the Option Notice, the Option Notice
shall be totally ineffective, or if the Tenant is in default on the
date the Extended Term is to commence, the Extended Term shall not
commence and this Lease shall expire at the end of the then-current
term.
3.
Minimum Rent
. Tenant shall pay without
abatement, deduction, or offset, as minimum net rent, payable in
advance, equal monthly installments of Seven Thousand and No/100
Dollars ($7,000.00) per month (“Base Rent”), which
amount is subject to adjustment as provided in Section 5., below.
Notwithstanding the foregoing, if Landlord is the successful bidder
for the construction of the Improvements referenced in Section 9,
below, the parties agree that the Base Rent shall be modified to
Five Thousand Three Hundred Eighty-Eight and 33/100 Dollars
($5,388.33) per month, and upon execution of a construction
contract between Landlord and Tenant, Tenant shall be entitled to a
credit against future rents in an amount equal to the difference in
the amount paid by Tenant to Landlord as Base Rent to that date,
and the amount which would have been paid if the Base Rent had been
Five Thousand Three Hundred Eighty-Eight and 33/100 Dollars
($5,388.33) per month from the Commencement Date.
4.
Late Payment Charge
. For each monthly rent
installment that is received by Landlord more than ten (10) days
after its due date, Tenant agrees to pay as additional rent a
charge equal to ten percent (10%) of the delinquent installment.
Payment of this charge does not waive any default, nor does this
provision extend the due date of the monthly rent
installments.
5.
Adjustments to Minimum
Rent . During the term of
the lease, the minimum monthly rental described in section 3 shall
be adjusted upward as of the fifth anniversary of the commencement
date and continuing thereafter every five years.
On the first (1 st )
adjustment date referred to above, and each five (5) years
thereafter during the term and any extended or renewal terms of
this lease, each of which dates is hereafter referred to as an
“adjustment date,” the rent provided for in this lease
shall be adjusted upward according to any rise in the Consumer
Price Index as that term is hereafter defined. At each adjustment
date, the minimum rent shall be adjusted to an amount equal to the
greater of:
(a).
the minimum rent in effect
immediately prior to that adjustment date (without regard to any
temporary abatement of rent then, or previously in effect, pursuant
to the provisions of this lease), or
(b).
the product obtained by multiplying
the minimum rent in effect immediately prior to the commencement of
that adjustment date (without to regard to any temporary abatement
of rent then, or previously in effect, pursuant to the provisions
of this lease) by a fraction, the numerator of which is the
Consumer Price Index published nearest but prior to the
commencement date of that adjustment period and the denominator of
which is the Consumer Price Index published nearest but prior to
the commencement of the immediately proceeding adjustment date. For
the purposes of the first adjustment date, the denominator shall be
the
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Consumer Price Index published
nearest but prior to the original commencement date of this
lease.
The term “Consumer Price
Index” as used herein shall refer to the Consumer Price Index
for All Urban Consumers for the San Francisco / Oakland /
San Jose, California area, based on the period 1982-1984=100
as published by the Bureau of Labor Statistics of the U.S.
Department of Labor.
The index for the adjustment date
shall be the one reported in the U. S. Department of Labor’s
newest comprehensive official index then in use and most nearly
answering the foregoing description of the index to be used. If it
is calculated from a base different from the base year 1982-1984
= 100 used for the base figure above, the base figures used for
calculating the adjustment percentage shall first be converted
under a formula supplied by the Bureau.
If the described index shall no
longer be published, another generally recognized as authoritative
shall be substituted by agreement of the parties. If they are
unable to agree within fourteen (14) days after demand by either
party, the substitute index shall, on application of either party,
be selected by the chief officer of the San Francisco regional
office of the Bureau of Labor Statistics or its
successor.
6.
Taxes; Assessments
.
A.
Real and Personal
Property . Tenant shall
pay any and all real and personal property taxes, general and
special assessments, and other charges of every description levied
on or assessed against the Premises, improvements located on the
Premises, personal property located on or in the land or
improvements, the leasehold estate, or any subleasehold estate, to
the full extent of installments falling due during the term,
whether belonging to or chargeable against Landlord or Tenant,
including, but not limited to any assessments relating to public
improvements on Prado Road. Tenant shall make all such payments
direct to the charging authority before delinquency and before any
fine, interest, or penalty shall become due or be imposed by
operation of law for their nonpayment. If, however, the law
expressly permits the payment of any or all of the above items in
installments (whether or not interest accrues on the unpaid
balance), Tenant may, at Tenant’s election, utilize the
permitted installment method, but shall pay each installment with
any interest before delinquency.
B.
Prorations
. All payments of taxes or
assessments, or both, except permitted installment payments, shall
be prorated for the initial lease year and for the year in which
the lease terminates. For permitted installment payments of which
at least the first installment fell due before commencement of the
term, Tenant shall pay all installments falling due after
commencement of the term. For permitted installment payments
extending beyond the expiration of the term, Tenant shall pay those
installment(s) falling due before expiration of the
term.
C.
Tenant’s Right to
Contest . Tenant may
contest the legal validity or amount of any taxes, assessments, or
charges for which Tenant is responsible under this lease, and may
institute such proceedings as Tenant considers necessary. If Tenant
contests any such tax,
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assessment, or charge, Tenant may
withhold or defer payment or pay under protest but shall protect
Landlord and the Premises from any lien by adequate surety bond or
other appropriate security.
Landlord appoints Tenant as
Landlord’s attorney-in-fact for the purpose of making all
payments to any taxing authorities and for the purpose of
contesting any taxes, assessments, or charges, conditioned on
Tenant’s preventing any liens from being levied on the
Premises or on Landlord (other than the statutory lien of Revenue
and Taxation Code Section 2187).
D.
Exemptions
. Tenant’s obligation to pay
taxes or assessments levied or charged against the Premises or
improvements or against specified personal property shall not
include the following, whatever they may be called: income or
profits taxes levied or assessed against Landlord by federal,
state, or other governmental agency; estate, succession,
inheritance, or transfer taxes of Landlord; or corporation,
franchise, or profits taxes imposed on the corporate owner of the
fee title of the Premises. If, however, during the term, taxes are
imposed, assessed, or levied on the rents derived from the Premises
in lieu of all or any part of real property taxes, personal
property taxes, or real and personal property that Tenant would
have been obligated to pay under the foregoing provisions, and the
purpose of the new taxes is more closely akin to that of an ad
valorem or use tax than to an income or franchise tax on
Landlord’s income, Tenant shall pay the taxes as provided
above for property taxes and assessments.
Tenant shall also defend and
indemnify Landlord and the Premises against liability for taxes and
other impositions in the nature of a tax on the right to do
business when Landlord’s collection of rent under this lease
is defined as doing business.
E.
Proof of Compliance
. Tenant shall furnish to Landlord,
within ten (10) days after the date when any tax, assessment, or
charge would become delinquent, receipts or other appropriate
evidence establishing their payment. Tenant may comply with this
requirement by retaining a tax service to notify Landlord whether
the taxes have been paid.
7.
Uses; Purposes
. Tenant shall use and permit the
use of the Premises primarily for the construction, maintenance and
operation of a bank / office complex, provided that Tenant may at
any time use the existing or subsequent improvements or permit them
to be used, for any lawful purpose with the prior written consent
of Landlord which shall not be unreasonably withheld or delayed, or
alter, modify, remove, or demolish the improvements, as provided in
section 10 hereof.
8.
Land Use Restrictions
. Except as provided in section 13
hereof, Tenant may only enter into agreements restricting use of or
granting easements over the Premises, or obtain zoning changes or
conditional use permits, that are expressly limited to the term of
this lease. Tenant must obtain Landlord’s prior written
consent to any restrictions on the land, its use, or its
alienation, for periods extending beyond the term. Landlord shall,
at Tenant’s notice of request, and subject to the above
limitations, join with Tenant in applications and proceedings to
obtain necessary use or zoning changes, but without cost or expense
to Landlord. All oil, gas, and mineral rights are expressly
reserved from this lease.
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9.
Tenant’s Duty to Construct
New Improvements . At
such time as Tenant is prepared to construct Improvements on the
Property, Tenant shall comply with the Conditions of Major
Construction below and shall commence construction consisting of an
approximately 14,000 square foot bank/office complex, including a
parking lot with approximately 45 parking spaces (“Bank /
Office Complex”).
10.
Construction
. In addition to Tenant’s duty
to construct the Bank / Office Complex pursuant to Section 9
hereof, Tenant may construct or otherwise make new improvements on
any part or all of the Premises and demolish, remove, replace,
alter, relocate, reconstruct, or add to any existing improvements
in whole or in part, and modify or change the contour or grade, or
both, of the land, provided Tenant is not then in default under any
condition or provision of this lease, and provided the improvements
following the work are at least equal in value to any improvements
as they were before being demolished, removed, replaced, altered,
reconstructed, modified, or changed. All salvage shall belong to
Tenant.
11.
Conditions of Major
Construction . Before any
major work of construction, alteration, or repair (as defined in
section 15D) is commenced on the Premises, and before any building
materials have been delivered to the Premises by Tenant or under
Tenant’s authority, Tenant shall comply with all the
following conditions or procure Landlord’s written waiver of
the condition or conditions specified in the waiver:
A.
Plans, Specifications
. Tenant shall deliver to Landlord
for Landlord’s approval one (1) set of preliminary
construction plans and specifications prepared by an architect or
engineer licensed to practice as such in California, including, but
not limited to, preliminary grading and drainage plans, soil tests,
utilities, sewer and service connections, locations of ingress and
egress to and from public thoroughfares, curbs, gutters, parkways,
street lighting, designs and locations for outdoor signs, storage
areas, and landscaping, all sufficient to enable subcontractors to
make reasonably accurate bid estimates and to enable Landlord to
make an informed judgment about the design and quality of
construction and about any effect on the reversion.
Landlord shall not unreasonably
disapprove preliminary plans and specifications. Approval or
disapproval shall be communicated in the manner provided for
notices, and disapproval shall be accompanied by specification of
the grounds for disapproval; provided that Landlord’s failure
to disapprove within five (5) days after delivery to Landlord shall
be conclusively considered to be approval. Tenant shall not deliver
working drawings to any governmental body for a building permit
until preliminary plans are approved as in this section 11 A.
Following Landlord’s first or any subsequent disapproval,
Tenant may elect (1) to submit revised plans and specifications or
(2) to give notice contesting the reasonableness of
Landlord’s disapproval. A contest of reasonableness shall be
determined by arbitration, as provided in section 26. If the
reasonableness of Landlord’s disapproval is sustained, Tenant
shall perform as in (1) above; if it is not sustained, the plans
and specifications shall be considered approved.
B.
Final Plans.
Specifications . Tenant
shall prepare final working plans and specifications substantially
conforming to preliminary plans previously approved by
Landlord,
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submit them to the appropriate
governmental agencies for approval, and deliver to Landlord one
complete set as approved by the governmental agencies. Changes from
the preliminary plans shall be considered to be within the scope of
the preliminary plans if they are not substantial or if they are
made to comply with suggestions, requests, or requirements of a
governmental agency or official in connection with the application
for permit or approval.
C.
Notice of Intent to
Construct . Tenant shall
notify Landlord in writing of Tenant’s intention to commence
a work of improvement at least ten (10) business days before
commencement of any such work or delivery of any materials. The
notice shall specify the approximate location and nature of the
intended improvements. Landlord shall have the right to post and
maintain on the Premises any notices of non-responsibility provided
for under applicable law, and to inspect the Premises in relation
to the construction at all reasonable times.
D.
Landlord’s Approval of
General Contractor .
Tenant shall furnish Landlord with a true copy of Tenant’s
contract with the general contractor and with evidence of the
general contractor’s qualifications for Landlord’s
approval which shall not be unreasonably withheld. The contract
shall give Landlord the right but not the obligation to assume
Tenant’s obligations and rights under that contract if Tenant
should default. The parties acknowledge that Landlord is a general
contractor, and may (but is not required to) bid upon the
construction project for the construction of the Bank / Office
Complex. In the event that Landlord is the successful bidder, the
parties acknowledge that the Base Rent shall be adjusted pursuant
to Section 3, above. Landlord’s failure to be awarded the
contract for the construction of the Bank / Office Complex shall
not be deemed a reasonable basis upon which to disapprove another
general contractor for the Project.
Landlord may disapprove by notice
given within five (5) days following delivery of a copy of the
contract. The notice shall specify the grounds for disapproval.
Landlord shall not unreasonably disapprove and shall be considered
to have approved in the absence of notice of disapproval given
within five (5) days after Tenant furnishes the contract and
evidence specified above.
E.
Required Governmental
Permits . Tenant shall
procure and deliver to Landlord at Tenant’s expense evidence
of compliance with all then applicable codes, ordinances,
regulations, and requirements for permits and approvals, including
but not restricted to a grading permit, building permits, zoning
and planning requirements, and approvals from various governmental
agencies and bodies having jurisdiction.
F.
Builder’s Risk and Other
Insurance . Upon
Landlord’s request, Tenant shall deliver to Landlord (i)
certificates of insurance evidencing coverage for
“builder’s risk,” (ii) evidence of
workmen’s compensation insurance covering all persons
employed in connection with the work and with respect to whom death
or bodily injury claims could be asserted against Landlord or the
Premises, and (iii) evidence that Tenant has paid or caused to be
paid all premiums for the coverage described above in this section
11F and any increase in premiums on insurance provided for in the
sections on insurance, sufficient to assure maintenance of all
insurance required by this lease during the anticipated course of
the work. Tenant shall maintain,
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keep in force, and pay all premiums
required to maintain and keep in force all required insurance at
all times during which such work is in progress.
G.
Landlord’s Approval of
Initial Financing . Prior
to commencing any construction on the Premises, Tenant shall
deliver to Landlord for Landlord’s approval evidence of the
existence and conditions of Tenant’s construction financing
for the construction of the Bank / Office Complex intended to be
constructed by Tenant. Landlord shall not unreasonably disapprove
of said financing, but shall be entitled to adequate assurance of
Tenant’s ability to ensure financing for the completion of
such Bank / Office Complex prior to demolition of the existing
structures.
12.
Soil Conditions
. Landlord makes no covenants or
warranties respecting the condition of the soil or subsoil or any
other condition of the Premises, except that Landlord is unaware of
the current or prior existence of any underground storage tanks on
the property, or of the prior release of any hazardous substances
on the property, as defined under the California Health and Safety
Code. Landlord has provided Tenant with a Phase I Environmental
Report for the Premises, but Tenant shall be responsible to perform
any other investigations which Tenant may require to determine the
soil and environmental condition of the property, and the
feasibility of Tenant’s project. Tenant may enter onto the
land before commencement of the term to make soil and structural
engineering tests and any other tests that Tenant considers
necessary. All such tests made by or on behalf of Tenant shall be
at Tenant’s sole expense and shall be evidenced by a separate
contract. A copy of any such reports shall be delivered to Landlord
on commencement of the term.
13.
Tenant’s Right To Grant
Easements . Landlord
grants to Tenant the right to grant to public entities or public
service corporations, for the purpose of serving only the Premises,
rights of way or easements on or over the Premises for poles or
conduits or both for telephone, electricity, water, sanitary or
storm sewers or both, and for other utilities and municipal or
special district services.
14.
Completion
.
A.
Diligent Prosecution to
Completion . Once any
construction work is begun, Tenant shall with reasonable diligence
prosecute to completion all construction of improvements,
additions, or alterations. All work shall be performed in a good
and workmanlike manner, shall substantially comply with plans and
specifications submitted to Landlord as required by this lease, and
shall comply with all applicable governmental permits, laws,
ordinances, and regulations.
B.
Protection of Landlord Against
Cost or Claim . Tenant
shall pay or cause to be paid the total cost and expense of all
works of improvement, as that phrase is defined in the California
statutes regulating mechanics’ liens. No such payment shall
be construed as rent. Tenant shall not suffer or permit to be
enforced against the Premises or any part thereof any
mechanic’s, materialman’s, contractor’s, or
subcontractor’s lien arising from any work of improvement,
however it may arise. Nevertheless, Tenant may in good faith and at
Tenant’s own expense contest the validity of any such
asserted lien, claim, or demand, provided Tenant has
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furnished the bond required in
California Civil Code Section 3143 (or any comparable statute
hereafter enacted for providing a bond freeing the Premises from
the effect of such a lien claim).
Tenant shall defend (with counsel
approved by Landlord, which approval shall not be unreasonably
withheld) and indemnify Landlord against all liability and loss of
any type arising out of work performed on the Premises by Tenant,
together with reasonable attorney’s fees and all costs and
expenses incurred by Landlord in negotiating, settling, defending,
or otherwise protecting against such claims.
C.
Landlord’s Right to
Discharge Lien . If
Tenant does not cause to be recorded the bond described in
California Civil Code Section 3143 or otherwise protect the
property under any alternative or successor statute, and a final
judgment has been rendered against Tenant by a court of competent
jurisdiction for the foreclosure of a mechanic’s,
materialman’s, contractor’s or subcontractor’s
lien claim, and if Tenant fails to stay the execution of the
judgment by lawful means or to pay the judgment, Landlord shall
have the right, but not the duty, to pay or otherwise discharge,
stay, or prevent the execution of any such judgment or lien or
both. Tenant shall reimburse Landlord for all sums paid by Landlord
under this paragraph, together with all Landlord’s reasonable
attorneys’ fees and costs, plus interest on those sums, fees,
and costs at the lesser of ten percent (10%) per annum or the
highest rate allowed by law from the date of payment until the date
of reimbursement.
D.
Notice of Completion
. On completion of any substantial
work of improvement during the term, Tenant shall file or cause to
be filed a notice of completion. Tenant hereby appoints Landlord as
Tenant’s attorney-in-fact to file the notice of completion on
Tenant’s failure to do so after the work of improvement has
been substantially completed.
E.
Notice of Changes in
Plans . On completion of
any work of improvement, Tenant shall give Landlord notice of all
changes in plans or specifications made during the course of the
work, and shall, at the time and in the same manner, supply
Landlord with “as built” drawings reflecting all such
changes. Landlord acknowledges that it is common practice in the
construction industry to make numerous changes during the course of
construction on substantial projects. Changes that do not
substantially alter plans and specifications previously approved by
Landlord do not constitute a breach of Tenant’s
obligations.
15.
Maintenance; Repairs;
Alterations; Reconstruction .
A.
Tenant Required to Maintain
Premises . Throughout the
term, Tenant shall, at Tenant’s sole cost and expense,
maintain the Premises and all improvements in good condition and
repair, ordinary wear and tear excepted, and in accordance with all
applicable laws, rules, ordinances, orders and regulations of (1)
federal, state, county, municipal, and other governmental agencies
and bodies having or claiming jurisdiction and all their respective
departments, bureaus, and officials; (2) the insurance underwriting
board or insurance inspection bureau having or claiming
jurisdiction; and (3) all insurance companies insuring all or any
part of the Premises or improvements or both.
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Except as provided below, Tenant
shall promptly and diligently repair, restore and replace all
improvements on the Premises which are damaged or destroyed from
any cause. However, if the damage requiring the repair or
restoration is caused by a peril which is not covered by the
insurance policies required by this lease, and the cost of such
repair or restoration exceeds ten percent (10%) of the replacement
value of all the improvements, Tenant shall (i) repair, restore,
and replace the improvements, or (ii) after giving written notice
to Landlord, raze the improvements damaged or destroyed. Within
fourteen (14) days after such notice, Landlord may by notice elect
to repair, restore and replace as above, and Tenant shall not raze
until the expiration of the time for Landlord’s notice of
election. Razing means the removal from the Premises of all
fixtures and improvements, including demolition and removal of all
basements and foundations, filling all excavations, and compacting
the soil sufficient for the construction of buildings in the
future, returning the surface to grade, and leaving the Premises
safe and free from debris and hazards.
All available insurance proceeds may
be used by the party responsible for or electing to repair and
restore or raze the improvements, as necessary to accomplish full
restoration or to complete demolition, as the case may
be.
The completed work of maintenance,
compliance, repair, restoration or replacement shall be equal in
value, quality and use to the condition of the improvements before
the event giving rise to the work, except as expressly provided to
the contrary in this lease. Landlord shall not be required to
furnish any services or facilities or to make any repairs or
alterations of any kind in or on the Premises. Landlord’s
election to perform any obligation of Tenant under this provision
on Tenant’s failure or refusal to do so shall not constitute
a waiver of any right or remedy for Tenant’s default, and
Tenant shall promptly reimburse, defend, and indemnify Landlord
against all liability, loss, cost and expense arising from
it.
Nothing in this provision defining
the duty of maintenance shall be construed as limiting any right
given elsewhere in this lease to alter, modify, demolish, remove or
replace any improvements, or as limiting provisions relating to
condemnation or to damage or destruction during the final year or
years of the term. No deprivation, impairment, or limitation of use
resulting from any event or work contemplated by this section 15A
shall entitle Tenant to any offset, abatement, or reduction in rent
nor to any termination or extension of the term.
B.
Maintenance of Landscaping and
Parking Areas . The
parties acknowledge that the Premises are located adjacent to an
office complex operated by Landlord, and that Landlord’s
willingness to enter into this Ground Lease is based upon
assurances by Tenant that the Landscaping and Parking Areas of the
Premises shall be maintained in clean, safe and sightly condition.
Tenant agrees to enter into a maintenance contract with a reputable
landscape contractor for the provision of ground maintenance and
landscaping, parking lot maintenance and light maintenance on no
less than a weekly basis for the entire term of the Lease, and
acknowledges that a failure to fulfill its obligations under this
Section shall constitute a default under this Lease. Tenant further
agrees that Landlord may seal coat the parking lot for the entire
center in which the Premises are located on a scheduled basis, for
which Tenant shall pay its prorata share.
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C.
Right to Contest Governmental
Order . Tenant has the
right to contest by appropriate judicial or administrative
proceedings, without cost or expense to Landlord, the validity or
application of any law, ordinance, order, rule, regulation, or
requirement (hereafter called “law”) that Tenant
repair, maintain, alter, or replace the improvements in whole or in
part, and Tenant shall not be in default for failing to do such
work until a reasonable time following determination of
Tenant’s contest. If Landlord gives notice of request, Tenant
shall first furnish Landlord a bond, satisfactory to Landlord in
form, amount, and insurer, guaranteeing compliance by Tenant with
the contested law and indemnifying Landlord against all liability
that Landlord may sustain by reason of Tenant’s failure or
delay in complying with the law. Landlord may, but is not required
to, contest any such law independently of Tenant. Landlord may, and
on Tenant’s notice of request shall, join in Tenant’s
contest.
D.
Major and Minor Repairs,
Reconstructions, Alterations . Landlord’s approval is not required for
Tenant’s minor repairs, alterations, or additions.
“Minor” means a construction cost not exceeding five
percent (5%) of the value of the improvements, none of which is
derived from funds advanced on the security of any encumbrance on
the leasehold or the property. “Construction cost”
includes the cost of labor, materials, and reasonable profit to
general contractor and subcontractors for any demolition and any
removal of existing improvements or parts of improvements as well
as for preparation, construction, and completion of all new
improvements or parts of improvements. “Value of
improvements” means the latest available appraisal of
“full insurable value” of the improvements as defined
in provisions of this lease relating to fire and extended coverage
insurance. “Major” repairs, alterations, or additions
are those not defined as minor above. For major repairs,
alterations, or additions, Tenant shall comply with all conditions
of major construction contained in section 11 of this
lease.
Notwithstanding the foregoing,
Tenant is relieved of the obligation to, but may, repair, restore,
or reconstruct improvements damaged or destroyed during the final
10 years of the term if (1) the cost of repairing or restoring the
damage exceeds 10% of the full replacement value of all
improvements on the Premises; and (2) the damage or destruction is
uninsured and is not required to be insured under any provision of
this lease; and (3) Tenant furnishes adequate security to assure
that Tenant will continue to make all payments when due as required
by the provisions of this lease. If the Tenant elects not to
repair, restore and reconstruct the Premises Tenant shall, upon
receipt of written notice from Landlord, raze the improvements on
the properties as set forth in Article 10 and Article 15A of this
lease.
E.
Ownership of
Improvements . All
improvements constructed on the Premises by Tenant as permitted by
this lease shall be owned by Tenant until expiration of the term or
sooner termination of this lease. Tenant shall not, however, remove
any improvements from the Premises nor waste, destroy, or modify
any improvements on the Premises, except as permitted by this
lease. The parties covenant for themselves and all persons claiming
under them that the improvements are real property. The foregoing
language shall not be deemed to apply to any of Tenant’s
trade fixtures, which may be removed by Tenant at the expiration of
the Lease, provided that such removal shall not cause any damage to
the structures on the Premises, which structures shall be
surrendered to Landlord pursuant to Section 43, below.
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All improvements on the Premises at
the expiration of the term or sooner termination of this lease
shall, without compensation to Tenant, then become Landlord’s
property free and clear of all claims to or against them by Tenant
or any third person, and Tenant shall defend and indemnify Landlord
against all liability and loss arising from such claims or from
Landlord’s exercise of the rights conferred by this
section.
F.
Hazardous Materials
. Tenant at all times shall keep the
Premises free of Hazardous Materials (as hereinafter defined).
Tenant shall not use, generate, manufacture, store, release, or
dispose of Hazardous Materials in, on, or about the Premises.
“Hazardous Materials” shall include, but not be limited
to, substances defined as “hazardous substances”,
“hazardous materials”, or “toxic
substances” in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.A
Sec.9601, et seq.; the Hazardous Materials Transportation Act, 49
U.S.C.A 1801, et seq.; the Resource Conservation and Recovery Act,
42 U.S.C.A Sec. 6901, et seq.; and those substances defined as
“hazardous wastes” in Section 25117 of the California
Health & Safety Code or as “hazardous substances”
in Section 25316 of the California Health & Safety Code; and in
the regulations adopted and publications promulgated pursuant to
said laws.
16.
Encumbrance of Leasehold
Estate .
A.
Tenant’s Right to
Encumber . Tenant may at
any time and from time to time, with Landlord’s consent,
approval or authorization, hypothecate, mortgage, pledge or
encumber Tenant’s leasehold estate created by this lease,
and/or Tenant’s rights hereunder, by mortgage, deed of trust
or other security agreement or instrument; provided,
however, that no such encumbrance shall attach to or constitute
a lien on the fee estate of Landlord in the leased land, and shall
expressly acknowledge that all improvements constructed on the
Premises shall become the property of Landlord, free and clear of
all encumbrances, upon expiration of the term or sooner termination
of this lease as set forth in section 15E. above. Landlord shall
subordinate its fee interest provided that Landlord is granted in
the encumbrance a right to adequate notice of default, adequate
opportunity to cure such default without the obligation to pay late
charges or penalties, the right and sufficient time to terminate
the lease without acceleration of the leasehold mortgage, and the
opportunity to assume such leasehold mortgage, without the
obligation to pay assumption fees, the leasehold mortgagee’s
attorneys’ fees, trustee’s fees, penalties or late
charges, in the event of a default under the leasehold mortgage and
the exercise by the lender of its right to foreclose on the
leasehold mortgage.
Any such lien, mortgage, deed of
trust or security instrument shall be referred to hereafter as a
“mortgage”, and the holder or beneficiary of such
mortgage shall be referred to hereafter as the
“mortgagee.” No mortgagee shall be deemed an assignee
of this lease so as to require such mortgagee to assume the
performance of any of the terms, covenants or conditions of this
lease except upon such mortgage-obtaining title to or
Tenant’s right of possession of the leased land as
hereinafter provided.
In no event shall the leasehold
estate created hereunder secure any loan or obligation where the
loan proceeds are utilized for any purpose other than the
improvement, financing or refinancing of the Premises.
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B.
Acquisition and Sale by
Mortgagee . A mortgagee
or its assigns may enforce such mortgage and acquire title to
Tenant’s leasehold estate created hereby or Tenant’s
right of possession of the leased land pursuant to this lease, or
any part thereof, in any lawful way and, pending foreclosure of
such mortgage, the mortgagee may take possession of and operate the
leased land, or any portion thereof, and perform all obligations of
Tenant, and upon foreclosure by power of sale, judicial
foreclosure, or acquisition of the leasehold estate of Landlord by
deed in lieu of foreclosure, the mortgagee may, upon notice to
Landlord, sell and assign the leasehold estate, or any part
thereof, hereby created. Any such assignee of the leasehold estate
shall be liable to perform all the obligations imposed upon Tenant
by this lease only during the period such assignee has ownership of
said leasehold estate or possession of the leased land, or any part
thereof.
C.
Notice to and Rights of
Mortgagees .
(a)
When giving notice to Tenant with
respect to any default hereunder, Landlord shall also serve a copy
of each such notice upon any mortgagee who shall have given
Landlord a written notice specifying its name and address. In the
event Tenant shall default in the performance of any of the terms,
covenants, agreements and conditions of this lease on
Tenant’s part to be performed, any mortgagee shall have the
right, within the grace period available to Tenant for curing such
default or as set forth below, to cure such default, whether the
same consists of the failure to pay rent or the failure to perform
any other obligation, and Landlord shall accept any such
performance by any mortgagee as though the same had been done or
performed by Tenant, and for such purpose, Landlord and Tenant
hereby authorize any such mortgagee to enter upon the leased land
and to exercise any of its rights and powers under this lease and,
subject to the provisions of this lease, under the
mortgage.
(b)
In case of a monetary default by
Tenant under this lease, Landlord will take no action to effect a
termination of this lease by reason thereof unless such default has
continued beyond forty-five (45) days after Landlord shall have
served a copy of such notice upon Tenant and any mortgagee, it
being the intent hereof and the understanding of the parties that
any mortgagee shall be allowed up to, but not in excess of,
forty-five (45) days in addition to any time granted to Tenant to
cure any monetary default of Tenant under the terms of this lease.
In the case of any non-monetary default by Tenant under this lease,
Landlord will take no action to effect a termination of the term of
this lease by reason thereof unless such non-monetary default has
continued beyond the grace period available to Tenant for curing
said default, and then only after Landlord shall have given to all
mortgagees thirty (30) days after the expiration of Tenant’s
grace period for curing such default within which
either:
(i)
to commence and diligently proceed
to cure such default, if such default can be cured by the mortgagee
without the mortgagee obtaining possession of the leased
land;
(ii)
to obtain possession of the leased
land (including possession by a receiver) and to cure such default
diligently, but in no event later than one year after the default
occurred, in the case of a default which can be cured when the
mortgagee has obtained possession thereof; or
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