Exhibit 10.1

OFFICE LEASE—BUILD-TO-SUIT

BETWEEN

WALTER BROS. CONSTRUCTION CO., INC.

AND

MISSION COMMUNITY BANK

 

THIS OFFICE LEASE— BUILD-TO-SUIT (“Lease”), dated as of October 16, 2007, is
entered into between Walter Bros. Construction Co., Inc., a California
corporation (“Landlord”) and Mission Community Bank, a California corporation
(“Tenant”).

 

NOW THEREFORE, for good and valuable consideration the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:

 

 

Summary of Lease Terms

 

Effective Date: October 16, 2007

 

Landlord: Walter Bros. Construction Co., Inc., a California corporation.

 

Landlord’s Address For Notice (“Landlord’s Address”): 3220 South Higuera Street
Suite 302, San Luis Obispo, CA 93401

 

Tenant: Mission Community Bank, a California corporation

 

Tenant’s Address For Notice (“Tenant’s Address”): 581 Higuera Street, San Luis
Obispo, CA 93401

 

Real Property: The property at South Higuera Street and Prado Road, San Luis
Obispo, California more particularly described as set forth in Exhibit A.

 

Building: A two (2) story building of approximately 14, 000 square feet in size
of which approximately 12,880 square feet could be considered “rentable,”
delivered to Tenant at Landlord’s cost in a shell condition as more particularly
described in Exhibit B.

 

Term: Fifteen (15) years.

 

Extended Term:  Two (2) five (5) year options to run consecutively following
expiration of the initial Term.

 

Estimated Commencement Date (“Estimated Commencement Date”): Within two (2)
years of the Effective Date of this Lease.

 

Initial Base Rent Per Month (“Base Rent”): $2.85 per square foot per month.

 

Security Deposit: There is no Security Deposit required, subject to the
provisions of Section 22.

 

Broker: [None.]

 

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Lease Year: During the Term, each period of approximately 365 days. The first
period will commence on the Commencement Date and end on the day prior to the
first anniversary of that period and each successive period.

 

Permitted Use: Tenant shall use the Premises for banking and banking related
activities.  No other uses are permitted without the Landlord’s prior written
consent, which shall not be unreasonably withheld.

 

The terms and provisions in the Basic Lease Information above and the attached
Exhibits are a part of the following Lease. The definitions in the Basic Lease
Information apply to all references in this Lease to those terms and provisions.
If this Lease and the Basic Lease Information contain conflicting definitions,
the Basic Lease Information definition will control.

 

 

Section 1. Premises

 

Landlord leases to Tenant the Real Property. The Real Property will be improved
with the Building to be constructed by Landlord. The Building is described in
the Work Letter, attached as Exhibit B. The Real Property and the Building are
collectively referred to as the “Premises.”

 

Section 2. Term

(a) Commencement Date. The Term of this Lease will commence (“Commencement
Date”) on the earliest of the following dates:

 

(i) the date on which Tenant takes possession of all or a portion of the
Premises;

 

(ii) the date on which the Premises would have been Ready for Delivery (defined
in Exhibit B) but for Tenant Delays (defined in Exhibit B); or

 

(iii) the date on which the Building is Ready for Delivery.

 

The Term of the Lease will continue for the period of time specified as the Term
or until this Lease is terminated as otherwise provided for in the Lease.

 

(b) Commencement Date Memorandum. On the Commencement Date, Tenant will execute
and deliver to Landlord a memorandum of the Commencement Date in the form of
attached Exhibit C (“Commencement Date Memorandum”). The Commencement Date
Memorandum must acknowledge:

 

(i) the Commencement Date;

 

(ii) the final square footage of the Premises; and

 

(iii) Tenant’s acceptance of the Premises.

 

(c) Delays. If the Premises are not Ready for Delivery on the Estimated
Commencement Date, as it may be extended by any Unavoidable Delays (defined in
Exhibit B) and Tenant Delays, this Lease will not terminate and Landlord will
not be subject to any liability. Notwithstanding the same, in the event the
Premises are not Ready for Delivery within six (6) additional months from the
Estimated Commencement Date for reasons other than Unavoidable Delays (defined
in Exhibit B) or Tenant Delays, at the option of Tenant, this Lease will
terminate, and Landlord will

 

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reimburse Tenant its out of pocket costs for any Tenant Alterations incorporated
into the Premises prior to the Delivery and notice of termination.  In such
event, Tenant will submit to Landlord reasonably sufficient documents of all out
of pocket cost invoices and evidence of payment thereon, which Landlord will
reimburse to Tenant within thirty (30) of receipt.

 

(d) Early Entry. With the prior written consent of Landlord, Tenant may, at
Tenant’s own risk, enter the Building prior to the date that the Building is
Ready for Delivery. The entry may be made solely to install trade fixtures and
equipment and shall be subject to the following terms and conditions:

 

(i) Tenant’s early entry may not interfere with the construction of the Building
or cause labor difficulties;

 

(ii) Tenant’s early entry must be on all the terms and conditions of this Lease,
other than the obligation to pay Base Rent;

 

(iii) Tenant must provide evidence of insurance that is satisfactory to
Landlord;

 

(iv) Tenant must indemnify, defend, and hold harmless Landlord and Landlord’s
agents, employees, and contractors against all claims, liability, and damages
arising from the early entry;

 

(v) Tenant’s early entry does not constitute the commencement of the Lease; and

 

(vi) Tenant must pay utility charges reasonably allocated by Landlord.

 

(e) Extended Term.  Tenant is given the option to extend the Term on all the
provisions contained in this Lease other than Base Rent, for two (2) additional
five-year periods (“Extended Term”) following expiration of the initial Term, by
giving notice of exercise of option (“Option Notice”) to Landlord at least  one
hundred twenty (120) but not more than one hundred and eighty (180) 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.

 

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Section 3. Rent

 

(a) Initial Base Rent. Tenant will pay to Landlord, at any address that Landlord
may designate in writing to Tenant, the Base Rent. The rent must be paid,
without the need for notice, demand, offset, or deduction, on the first day of
each calendar month. Upon the Commencement Date, Tenant will pay to Landlord the
first month’s Base Rent. If the Term commences or ends on a date other than the
first or last day of a month, Tenant must pay on the Commencement Date or the
first day of the last month a Base Rent prorated on a per diem basis with
respect to the portion of the month within the Term. All sums other than Base
Rent that Tenant is obligated to pay under this Lease will be deemed to be
additional rent due, regardless of whether those sums are designated as
“additional rent.” The term “Rent” means the Base Rent and all additional rent
payable under this Lease.

 

(B) ADJUSTMENTS TO BASE RENT.  ON THE FIRST ANNIVERSARY OF THE COMMENCEMENT DATE
AND EACH ANNIVERSARY OF THE COMMENCEMENT DATE DURING THE TERM, AND ANY EXTENDED
TERM, THE BASE RENT SHALL BE INCREASED BASED ON THE INCREASE IN CPI (AS DEFINED
BELOW) SINCE THE COMMENCEMENT DATE; PROVIDED, HOWEVER, IN NO EVENT SHALL SUCH
NEW BASE RENT INCREASE BY LESS THAN THREE PERCENT (3%) AND NO MORE THAN FIVE
PERCENT (5%).  AS USED HEREIN, THE TERM “CPI” SHALL MEAN AND REFER TO THE
CONSUMER PRICE INDEX OF THE BUREAU OF LABOR STATISTICS OF THE DEPARTMENT OF
LABOR FOR ALL URBAN CONSUMERS, (1982-84 = 100), “ALL ITEMS,” FOR LOS
ANGELES/RIVERSIDE/ORANGE COUNTY, CALIFORNIA AREA.  THE BASE FOR COMPUTING THE
ADJUSTMENT SHALL BE THE CPI FOR THE MONTH WHICH IS THREE (3) MONTHS PRIOR TO THE
COMMENCEMENT DATE, AND THE INDEX TO BE USED TO DETERMINE THE ADJUSTMENT SHALL BE
THE INDEX PUBLISHED FOR THE MONTH WHICH IS THREE (3) MONTHS PRIOR TO THE
ADJUSTMENT DATE (“EXTENSION INDEX”).  THE ADJUSTMENT SHALL BE SET BY MULTIPLYING
THE THEN APPLICABLE BASE RENT BY A FRACTION, THE NUMERATOR OF WHICH IS THE
EXTENSION INDEX AND THE DENOMINATOR OF WHICH IS THE BEGINNING INDEX.  IN THE
EVENT THE COMPILATION AND/OR PUBLICATION OF THE CPI SHALL BE TRANSFERRED TO ANY
OTHER GOVERNMENTAL DEPARTMENT OR BUREAU OR AGENCY OR SHALL BE DISCONTINUED, THEN
THE INDEX MOST NEARLY THE SAME AS THE CPI SHALL BE USED TO MAKE SUCH
CALCULATIONS.  ON ADJUSTMENT OF THE MONTHLY RENT PROVIDED IN THIS LEASE,
LANDLORD SHALL SEND NOTICE TO TENANT REGARDING SUCH ADJUSTMENT, BUT FAILURE TO
DO SO SHALL NOT CONSTITUTE A WAIVER OF LANDLORD’S RIGHT TO COLLECT THE INCREASED
AMOUNT.

 

(c) Determination of Base Rent for Extension Option.  In the event that Tenant
chooses to exercise one or more options to extend the Term pursuant to Section
2(e), above, the Base Rent for the Option Periods shall be equal to the
prevailing market rate.  The parties shall have thirty (30) days after Landlord
receives the Option Notice in which to agree on the Base Rent for the first year
of the Extended Term.  If the parties are unable to agree on the Base Rent for
the extended term within that period, then within ten (10) days after the
expiration of that period each party, at its cost and by giving notice to the
other party, shall appoint a real estate appraiser with at least five (5) years’
full-time commercial appraisal experience in the area in which the premises are
located to appraise and set the Base Rent for the extended term.  If a party
does not appoint an appraiser within ten (10) days after the other party has
given notice of the name of its appraiser, the single appraiser appointed shall
be the sole appraiser and shall set the Base Rent

 

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for the extended term.  If the two appraisers are appointed by the parties as
stated in this paragraph, they shall meet promptly and attempt to set the Base
Rent for the Extended Term.  If they are unable to agree within ten (10) days
after the second appraiser has been appointed, they shall attempt to elect a
third appraiser meting the qualifications stated in this paragraph within ten
(10) days after the last day the two appraisers are given to set the Base Rent. 
If they are unable to agree on the third appraiser, either of the parties to
this Lease by giving ten (10) days’ notice to the other party can file a
petition with the American Arbitration Association solely for the purpose of
selecting a third appraiser who meets the qualifications stated in this
paragraph.  Each party shall bear half the cost of the American Arbitration
Association appointing the third appraiser and of paying the third appraiser’s
fee.  The third appraiser, however selected, shall be a person who has not
previously acted in any capacity for either party.  Within thirty (30) days
after the selection of the third appraiser, a majority of the appraisers shall
set the Base Rent for the Extended term.  If a majority of the appraisers are
unable to set the Base Rent within the stipulated period of time, the three
appraisers shall be added together and their total divided by three; the
resulting quotient shall be the Base Rent for the Premises during the Extended
Term.  In setting the Base Rent for the Extended Term, the appraiser or
appraisers shall consider the use to which the Premises are restricted under
this Lease and shall not consider the highest and best use for the Premises
without regard to the restriction on use of the Premises contained in this
Lease.  After the Base Rent for the Extended Term has been set, the appraiser
shall immediately notify the parties, and such determination shall be conclusive
and binding on the parties.

 

Section 4. Right of First Refusal—Freestanding Building

 

(a)       Subject to the rights set forth in Subsection (b) below, in the event
Landlord desires to sell the Premises, or any portion of its interest in the
Premises, and shall either intend to list the Premises for sale, or have
received an acceptable bona fide offer to purchase the Premises or such interest
(the “Offer”), Landlord shall give written notice of its intent to sell (the
“Notice of Intent to Sell”) to Tenant, together with either the terms which
would be acceptable to Landlord for such sale (“Term Sheet”) or an executed copy
of the Offer setting forth all of the terms of the proposed purchase and
identifying the prospective purchaser.  Tenant shall then have an option to
purchase the Premises or such interest on the same terms and conditions as set
forth in the Term Sheet or Offer; provided that if the terms and conditions of
the Offer provide for an exchange of like kind of real property as payment of
all or a portion of the purchase price, Tenant may exercise its option to
purchase by stating in its written notice of exercise its willingness to
participate in an exchange transaction in which Landlord shall identify certain
real property which Tenant, at no additional cost or expense to Tenant, shall
acquire and exchange with Landlord for the Premises on terms and conditions
otherwise consistent with the Offer.  If no exchange is contemplated in the
Offer, Tenant shall have the further option of paying Landlord in cash at
closing the full amount of the purchase price of the Premises or Landlord’s
interest in the Premises, notwithstanding any non-cash terms set forth in the
Offer.  If Tenant elects to exercise its option, it shall give Landlord written
notice of such election within sixty (60) days after receipt of the Notice of
Intent to Sell.  If Tenant fails to exercise its option within such sixty
(60)-day period, (i) Landlord shall be free to accept an offer to sell the
Premises or interest therein on the terms set forth in the Term Sheet or Offer
at any time within ninety (90) days after the expiration of such sixty (60)-day
period and (ii) Tenant shall, upon request, deliver to Landlord an
acknowledgement of Tenant’s failure to exercise the option and Landlord’s right
to sell the Premises or interest therein pursuant to this Section.

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(b)       Notwithstanding the foregoing, Landlord shall be free to convey,
transfer or assign the Premises or any portion of its interest in the Premises
without compliance with Subsection (a) in the event that such conveyance,
transfer or assignment is either (i) made to any mortgagee of Landlord’s fee
estate in the Premises, provided that the lien of any fee mortgage or other
security instrument shall expressly remain subordinate to Tenant’s leasehold
interest herein created or (ii) made to any lineal descendants (natural or
adopted) of Landlord, the spouses of such lineal descendants or any trust the
total beneficial interest of which is held by such lineal descendants or their
spouses.

Section 5. Utilities

 

Landlord shall provide connections for utilities to the perimeter of the shell
of the Building. Tenant will make all arrangements and pay all charges for
water, sewer, telephone, gas, garbage, electricity, and other utilities supplied
to or used on the Premises. This includes, without limitation, paying any
deposits and “hook up charges.” Landlord will not be liable to Tenant for any
interruption in or curtailment of any utility service, nor will any interruption
or curtailment constitute constructive eviction or grounds for abatement of
rent.

 

Section 6. Taxes

 

(a) Real Property Taxes. Landlord will pay to the proper taxing authorities, as
they become due, all Real Property Taxes applicable to the Premises after the
Commencement Date (but excluding any fees or assessments which specifically
relate to Landlord’s development process prior to the Commencement Date), and
Tenant will reimburse Landlord for those taxes as provided in clause (b) below.
The term “Real Property Taxes” includes, but is not limited to, the following:

 

(i) real property taxes;

(ii) possessory interest taxes;

(iii) business, license, or use fees,

(iv) excises;

(v) transit charges;

(vi) housing fund assessments;

(vii) open space charges;

(viii) childcare fees;

(ix) school fees;

(x) any other assessments, levies, fees, or charges, general and special,
ordinary and extraordinary, unforeseen and foreseen (including fees “in- lieu”
of any tax or assessment) that are assessed, levied, charged, confirmed, or
imposed by any public authority upon the Premises (or any real property
comprising any portion of the Premises) or its operations; but excluding, and
notwithstanding any other provision herein, , any assessments relating to public
improvements on Prado Road and the Prado Road Highway 101 interchange, which
shall be the sole responsibility of the Landlord;

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(xi) all taxes, assessments, or other fees imposed by any public authority on or
measured by any Rent or other charges payable under this Lease, including any
gross income tax or excise tax levied by the local government authority, the
federal government, or any other governmental body with respect to receipt of
rent, or upon, with respect to, or by reason of, the development, possession,
leasing, operation, management, maintenance, alteration, repair, use, or
occupancy by Tenant of the Premises or any portion of the Premises, or on this
transaction or any document to which Tenant is a party creating or transferring
an interest in the Premises; and

(xii) any tax imposed in substitution, partially or totally, of any tax
previously included within the definition or any additional tax, the nature of
which was previously included within the definition, together with the costs and
expenses (including attorney fees) of changing any taxes or seeking the
reduction in or abatement, redemption, or return of any taxes, but only to the
extent of any reduction, abatement, redemption, or return.

 

Nothing contained in this Lease will require Tenant to pay any franchise,
corporate, estate, or inheritance tax of Landlord, or any income, profits, or
revenue tax or charge on the net income of Landlord.

 

(b) Tax Reimbursements. Tenant will pay to Landlord an amount equal to the Real
Property Taxes then due within fifteen (15) days after delivery to Tenant by
Landlord of an invoice. Landlord may, at Landlord’s option, deliver statements
from different taxing authorities at different times or deliver all statements
at one time. In addition, Landlord may elect to collect Real Property Taxes from
Tenant in advance, on a monthly or quarterly basis, based upon Landlord’s
reasonable estimate of the Real Property Taxes. If the amount of monthly or
quarterly payments for estimated Real Property Taxes received by Landlord from
Tenant are more or less than the actual Real Property Taxes due, an appropriate
adjustment will be made by Landlord and Tenant. Real Property Taxes for partial
tax fiscal years, if any, falling within the Term, will be prorated. Tenant’s
obligations for Real Property Taxes for the last full or partial year of the
Term will survive the expiration or earlier termination of this Lease.

 

(c) Personal Property Taxes. Prior to delinquency, Tenant will pay all taxes and
assessments levied on trade fixtures, alterations, additions, improvements,
inventories, and other personal property located or installed on the Premises by
Tenant. Tenant will also provide Landlord copies of receipts for payment of all
those taxes and assessments. To the extent any taxes are not separately assessed
or billed to Tenant, Tenant will pay the amount as invoiced by Landlord.

 

(d) 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.

 

(e) 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, assessment, or charge, Tenant may withhold or
defer payment or pay under protest but shall protect

 

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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 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).

 

(f) 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.

 

 

Section 7. Triple Net Lease

 

This is a “triple net lease” and the Rent will be paid by Tenant and be received
by Landlord without any deduction or offset whatsoever by Tenant, foreseeable or
unforeseeable. Except as expressly provided to the contrary in this Lease,
Landlord will not be required to make any expenditure, incur any obligation, or
incur any liability of any kind in connection with this Lease or the ownership,
construction, maintenance, operation, or repair of the Premises.

 

Section 8. Insurance

 

(a) Tenant’s Obligations. Tenant will, at Tenant’s expense, obtain and keep in
force at all times the following insurance:

 

(i) Casualty Insurance. Casualty insurance insuring the Building against fire,
and extended coverage (including “all risk” coverage, earthquake and volcanic
action, and flood and surface water insurance, if applicable) for the full
replacement cost of the Building, with deductibles and the form and endorsements
of the coverage as acceptable to Landlord, together with, at Landlord’s option,
rental value insurance against loss of Rent in an amount equal to the amount of
Rent for a period of at least twelve (12) months commencing on the date of loss.

 

(ii) General Liability Insurance. A policy of commercial general liability
insurance (occurrence form) having a combined single limit of not less than Two
Million Dollars ($2,000,000) per occurrence and Four Million Dollars
($4,000,000) aggregate per location if Tenant has multiple locations, providing
coverage for, among other things, blanket contractual liability, premises,
products and completed operations, and personal and advertising injury coverage.

 

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(iii) Workers’ Compensation and Employer’s Liability Insurance. Workers’
compensation insurance having limits not less than those required by state
statute and federal statute, if applicable, and covering all persons employed by
Tenant in the conduct of Tenant’s operations on the Premises. This must include
the all states endorsement and, if applicable, the volunteer’s endorsement,
together with employer’s liability insurance coverage in the amount of at least
One Million Dollars ($1,000,000).

 

(iv) Personal Property Insurance. “All risk” property insurance, including
boiler and machinery comprehensive form, if applicable, covering damage to or
loss of any equipment of Tenant and coverage for the full replacement cost,
including electronic data processing equipment, and coverage for the full
replacement cost of the equipment, including business interruption of Tenant
(“Tenant’s Property”). If the property of Tenant’s invitees is to be kept in the
Premises, the insurance should include warehouser’s legal liability or bailee
customers’ insurance for the full replacement cost of the property belonging to
invitees and located in the Premises.

 

(b) Additional Insurance. Landlord may also carry any other insurance that
Landlord deems prudent or advisable, including, without limitation, liability
insurance in any amounts and on any terms acceptable to Landlord but not in
excess to that which is commercially reasonable and standard in the community
for a similar building. Tenant will pay to Landlord an amount equal to the
premiums due on that insurance within fifteen (15) days after delivery to Tenant
by Landlord of an invoice for any premiums. Landlord may, at Landlord’s option,
elect to collect the premiums from Tenant in advance, on a monthly or quarterly
basis, based on Landlord’s reasonable estimate of the premiums. If the amount of
monthly or quarterly payments for estimated premiums received by Landlord from
Tenant are more or less than the actual premiums due, an appropriate adjustment
will be made by Landlord and Tenant.

 

(c) General Insurance Provisions.

 

(i) Insurance Companies. Insurance required to be maintained by Tenant will be
written by companies licensed to do business in the state in which the Premises
are located and having a “General Policyholders Rating” of at least A, or a
higher rating if required by a lender having a lien on the Premises, as set
forth in the most current issue of “Best’s Insurance Guide.”

 

(ii) Certificates of Insurance. Tenant will deliver to Landlord certificates of
insurance for all insurance required to be maintained by Tenant in the form
acceptable to Landlord no later than seven (7) days prior to the date of
possession of the Premises. Tenant will, at least ten (10) days prior to
expiration of the policy, furnish Landlord with certificates of renewal or
“binders.” Each certificate will expressly provide that the policies are not
cancelable or otherwise subject to modification except after thirty (30) days’
prior written notice to the parties named as additional insureds in this Lease.
However, in the case of cancellation for nonpayment of premium, the cancellation
will not take effect until at least (10) days’ notice has been given to
Landlord. If Tenant fails to maintain any insurance required in this Lease,
Tenant will be liable for all losses and costs resulting from that failure;
Landlord will have the right, but not the obligation, to obtain insurance on
behalf of Tenant, and Tenant will immediately on demand pay Landlord the
premiums on the insurance; and Landlord may declare a default under this Lease.

 

(iii) Additional Insureds. Landlord and any property management company of
Landlord for the Premises must be named as additional insureds under all of the
policies required by

 

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Section 8(a). The policies required under Section 8(a)(ii) must provide for
severability of interest.

 

(iv) Primary Coverage. All insurance to be maintained by Tenant must, except for
workers’ compensation and employer’s liability insurance, be primary, without
right of contribution from insurance of Landlord. Any umbrella liability policy
or excess liability policy must provide primary insurance. The limits of
insurance maintained by Tenant will not limit Tenant’s liability under this
Lease.

 

(v) Waiver of Subrogation. Tenant waives any right to recover against Landlord
for damages to Tenant’s Property covered by insurance. This fully waives, for
the benefit of Landlord, any rights and claims that might give rise to a right
of subrogation in favor of any insurance carrier. The coverage obtained by
Tenant pursuant to this Lease must include, without limitation and that which is
reasonably  available to Tenant, a waiver of subrogation endorsement attached to
the certificate of insurance.

 

(d) Indemnification. Landlord will not be liable for any loss or damage to
person or property caused by theft, fire, acts of God, acts of a public enemy,
riot, strike, insurrection, war, court order, requisition, or order of
government body or authority, or for any damage or inconvenience that may arise
through repair or alteration of any part of the Premises or failure to make any
repair. Tenant will indemnify and defend Landlord, by counsel acceptable to
Landlord, against any liabilities, including reasonable attorney fees and court
costs, arising out of or relating to the following:

 

(i) claims of injury to or death of persons or damage to property occurring or
resulting directly or indirectly from the use or occupancy of the Premises, or
from activities of Tenant, Tenant’s invitees, or anyone about the Premises, or
from any other cause, except to the extent caused by Landlord’s negligence or
willful misconduct;

 

(ii) claims for work or labor performed, or for materials or supplies furnished
to or at the request of Tenant in connection with performance of any work done
for the account of Tenant within the Premises; and

 

(iii) claims arising from any breach or default on the part of Tenant in the
performance of any covenant contained in this Lease. The provisions of this
Section 8(d) will survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to the expiration or
termination.

 

Section 9. Repairs and Maintenance

 

(a) Landlord’s Obligations. Subject to the terms of this Section, Landlord shall
maintain the interior and exterior structural portions of the roof, foundation,
and load-bearing portions of walls of the Building, excluding wall coverings,
painting, glass, and doors. Landlord will not be required to make any repair
resulting from:

 

(i) any alteration or modification to the Building or to mechanical equipment
within the Building performed by, for, or because of Tenant or to special
equipment or systems installed by, for, or because of Tenant;

 

(ii) the installation, use, or operation of Tenant’s property, fixtures, and
equipment;

 

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(iii) the moving of Tenant’s property in or out of the Building or in and about
the Premises;

 

(iv) Tenant’s use or occupancy of the Premises in violation of Section 11 of
this Lease or in the manner not contemplated by the parties at the time of the
execution of this Lease;

 

(v) the acts or omissions of Tenant and Tenant’s employees, agents, invitees,
subtenant’s, licensees, or contractors;

 

(vi) fire and other casualty, except as provided by Section 13 of this Lease; or

 

(vii) condemnation, except as provided in Section 14 of this Lease.

 

Landlord shall have no obligation to make repairs under this Section until a
reasonable time after receipt of written notice from Tenant of the need for
repairs. Tenant waives any right to repair at the expense of Landlord under any
applicable governmental laws, ordinances, statutes, orders, or regulations now
or later in effect.

 

(b) Tenant’s Obligations. Except for the portions of the Premises expressly
required to be maintained by Landlord under Section 9(a), Tenant, at Tenant’s
expense, will maintain the Premises in good order including, without limitation,
subfloors and floor coverings, walls and wall coverings, mechanical, electrical,
and plumbing systems, doors, windows, parking lots, and truck aprons, gutters,
and downspouts, landscaping, and any signage. Tenant will enter into preventive
maintenance and service contracts with maintenance contractors for regularly
scheduled maintenance that are reasonably acceptable to Landlord for servicing
all mechanical systems, including but not limited to elevator, fire sprinklers,
fire extinguishers, backflow, hot water, heating, and air-conditioning systems
and equipment in the Premises, and Tenant further agrees to provide Landlord
with annual reports of such maintenance.  Tenant agrees to enter into a
maintenance contract with a reputable landscape contractor for the provision of
ground maintenance and landscaping, on no less than a weekly basis, and for
parking lot maintenance and light maintenance on no less than a bi-weekly basis,
and as needed, for the entire term of the Lease, and acknowledges that a failure
to fulfill its obligations under this Section shall constitute a default under
the 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 pro rata share.  If Tenant fails, in the
reasonable judgment of Landlord, to maintain the Premises in good order,
Landlord may perform the maintenance, repairs, refurnishing, or repairing at
Tenant’s expense.

 

Section 10. Alterations

 

(a) Trade Fixtures and Alterations. Tenant will not make or allow any additions,
alterations, installations, or improvements in or to the Premises (collectively,
“Alterations”) without the prior written consent of Landlord, which will not be
unreasonably withheld. Unless Landlord has waived this requirement in writing,
together with Tenant’s request for approval of any Alteration, Tenant must also
submit details about design concept, plans and specifications, names of proposed
contractors, and financial and other pertinent information about any contractors
(including, without limitation, the labor organization affiliation or lack of
affiliation of any contractors), certificates of insurance to be maintained by
Tenant’s contractors, hours of construction, proposed construction methods,
details about the quality of the proposed work and, if reasonably required by
Landlord, evidence of security (such as payment and performance bonds) to assure
timely completion of the work by the contractor and payment by the contractor of
all costs of the work. For any Alteration that is visible from outside the
Building, the proposed

 

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Alteration must, in the opinion of Landlord, also be architecturally and
aesthetically harmonious with the remainder of the Premises. If a Notice of
Completion is required for the work, Tenant must file it and provide Landlord
with a copy. Tenant must provide Landlord with a set of “as-built” drawings for
any work.

 

(b) Complex Alterations. If the nature, volume, or complexity of any proposed
Alteration causes Landlord to consult with an independent architect, engineer,
or other consultant, Tenant will reimburse Landlord for the reasonable fees and
expenses incurred by the Landlord. Before incurring consultant costs, Landlord
will deliver to Tenant an estimate for those costs.  If any Alteration will
affect the basic mechanical, electrical, or plumbing systems of the Building,
Landlord may require that the work be designed by consultants designated by
Landlord.

 

(c) Standard of Work. All work to be performed by or for Tenant pursuant to the
Lease will be performed diligently, in a first-class manner, and in compliance
with all applicable laws, ordinances, regulations, and rules of any public
authority having jurisdiction over the Premises and Tenant and Landlord’s
insurance carriers. Landlord will have the right, but not the obligation, to
periodically inspect the work on the Premises and may require changes in the
method or quality of the work.

 

(d) Damage and Removal. Tenant assumes the risk of damage to any of Tenant’s
Alterations. Tenant will repair all damage to the Premises caused by the
installation or removal of these items. All Tenant Alterations 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 42, below.

 

          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.

 

(e) Liens. Tenant will promptly pay and discharge all claims for labor
performed, supplies furnished, and services rendered at the request of Tenant
and will keep the Premises free from all mechanics’ and materialmen’s liens.
Tenant will provide at least ten (10) days’ prior written notice to Landlord
before any labor is performed, supplies are furnished, or services are rendered
at the Premises, and Landlord will have the right to post notices of
nonresponsibility on the Premises. If any lien is filed, Landlord may take any
necessary action to remove the lien, and Tenant will pay Landlord any amounts
expended by Landlord, together with interest at the Applicable Interest Rate
from the date of expenditure.

 

 

Section 11. Use

 

The Premises will be used only for the Permitted Use and for no other uses. The
use will be otherwise consistent with any applicable governmental laws,
ordinances, statutes, orders, and

 

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regulations and any declaration of covenants, conditions, and restrictions
(“CC&Rs”) or any supplement to these that has been or will be recorded in any
official or public records concerning the Premises or any portion of it,
including, but not limited to, all provisions of the Americans with Disabilities
Act [42 U.S.C.A §§12101 et seq.]; except to the extent that the use results from
(a) any work to be done by Landlord pursuant to this Lease, and (b) any work
necessitated by defects in the construction of the Building. The judgment of any
court of competent jurisdiction, or the admission of Tenant in any action or
proceeding against Tenant, regardless of whether the Landlord is a party, that
Tenant has violated any legal requirement in the condition, use, or occupancy of
the Premises, will be conclusive of that fact as between Landlord and Tenant.
Tenant will not commit waste, overload the floors or structure of the Premises,
subject the Premises to any use that would cause damage or raise or violate any
insurance coverage, permit any unreasonable odors, smoke, dust, gas, substances,
noise, or vibrations to emanate from the Premises, take any action that would
constitute a nuisance or would disturb, obstruct, or endanger any other person,
take any action that would abrogate any warranties, or use or allow the Premises
to be used for any unlawful purpose. Landlord will not be liable to Tenant nor
will this Lease be affected if any parking is impaired by moratorium,
initiative, referendum, or regulation. Tenant will promptly comply with the
reasonable requirements of any board of fire insurance underwriters or other
similar body now or later constituted.

 

Section 12. Environmental Provisions.

 

(a) Environmental Compliance. Tenant shall, at its sole cost and expense, comply
with all federal, state and local laws and regulations relating to the storage,
use, handling and disposal of hazardous, toxic or radioactive matter
(collectively, “Hazardous Materials”).  Tenant represents and warrants that,
except for materials falling within the definition of Hazardous Materials which
are normally used and properly disposed of in the ordinary course of Tenant’s
business, neither Tenant, nor its agents, servants, employees, contractors, nor
anyone else acting on Tenant’s behalf will store, dispose of, produce, use,
transport or manufacture any Hazardous Materials on the Premises.  Tenant shall
notify Landlord and provide to Landlord a copy or copies of any environmental
entitlements or inquiries related to the Premises.

 

(b) Remediation. The clean-up and disposal of any Hazardous Materials located or
released onto or about the Premises by Tenant or its agents, contractors or
employees shall be performed by Tenant at Tenant’s sole cost and expense and
shall be performed in accordance with all applicable laws, rules, regulations
and ordinances, pursuant to a site assessment and removal/remediation plan
prepared by a licensed and qualified geotechnical engineer and submitted to and
approved in writing by Landlord prior to the commencement of any work.  The
foregoing notwithstanding, Landlord in Landlord’s sole and absolute discretion
may elect, by written notice to Tenant, to perform the clean-up and disposal of
such Hazardous Materials from the Premises.  In such event, Tenant shall pay to
Landlord the actual cost of same upon receipt from Landlord of Landlord’s
written invoice therefore.

 

(c) Landlord’s Right of Entry. Notwithstanding any other term or provision of
this Lease, but subject to the provisions of Section 45, “Regulator
Requirements”, Tenant shall permit Landlord or Landlord’s agents or employees to
enter the Premises at any time, upon reasonable notice, to inspect, monitor
and/or take emergency or long-term remedial action with respect to Hazardous
Materials on or affecting the Premises or to discharge Tenant’s obligations
hereunder with respect to such Hazardous Materials when Tenant has failed, after
demand by Landlord, to do so.  All costs and expenses incurred by Landlord in
connection with performing Tenant’s obligations hereunder shall be reimbursed by
Tenant to Landlord within ten (10) days of Tenant’s receipt of written request
therefore

 

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(d) Expiration and Termination Procedures. Upon expiration or termination of
this Lease and upon the request of Landlord, Tenant will perform all of the
following activities at Tenant’s sole expense:

(i) all remedial or other work identified in the environmental assessment in
accordance with Section 12(b) and all applicable environmental laws; and

(ii) all corrective, remedial, repair, or other work necessary to correct any
alleged violations, deficiencies, or hazards noted by any environmental
governmental agency; and

 

(e) Tenant’s Indemnification of Landlord. Tenant will indemnify, protect,
defend, and hold harmless Landlord and Landlord’s partners, directors, officers,
employees, shareholders, lenders, agents, contractors, and each of their
respective successors and assigns (individually and collectively “Landlord
Indemnitees”) from all claims, judgments, causes of action, damages, penalties,
fines, taxes, costs, liabilities, losses, and expenses arising (directly or
indirectly) as a result of or in connection with Tenant’s or Tenant’s employees,
agents, customers, visitors, invitees, licensees, contractors, designees, or
subtenant’s Tenant’s employees, agents, customers, visitors, invitees,
licensees, contractors, designees, or subtenant’s (“Tenant’s Parties) breach of
any prohibition or provision of Section 12, or the presence of any Hazardous
Materials on or under the Premises during the Term or any Hazardous Materials
that migrate from the Premises to other properties, as a result (directly or
indirectly) of Tenant’s or Tenant’s Parties’ activities, or failure to act where
Tenant had a duty to act, on or in connection with the Premises.

 

This obligation by Tenant to indemnify, protect, defend, and hold harmless
Landlord Indemnities includes, without limitation, costs and expenses incurred
for or in connection with any investigation, cleanup, remediation, monitoring,
removal, restoration, or closure work required by the Agencies because of any
Hazardous Materials present on, under, or about the Premises; the costs and
expenses of restoring, replacing, or acquiring the equivalent of damaged natural
resources if required under any environmental law; all foreseeable consequential
damages; all reasonable damages for the loss or restriction on use of rentable
or usable space or of any amenity of the Premises; all reasonable sums paid in
settlement of claims; reasonable attorney fees; litigation, arbitration, and
administrative proceeding costs; and reasonable expert, consultant, and
laboratory fees. Neither the written consent of Landlord to the presence of
Hazardous Materials on or under the Premises, nor the strict compliance by
Tenant with all environmental laws, will excuse Tenant from the indemnification
obligation. This indemnity will survive the expiration or termination of this
Lease.

 

(f) Landlord’s Indemnification of Tenant. Landlord will indemnify, protect,
defend, and hold harmless Tenant and Tenant’s partners, directors, officers,
employees, shareholders, lenders, agents, contractors, and each of their
respective successors and assigns (individually and collectively “Tenant
Indemnitees”) against all claims, judgments, causes of action, damages,
penalties, fines, taxes, costs, liabilities, losses, and expenses arising as a
result (directly or indirectly) of or in connection with any existing
environmental condition, or the presence of any Hazardous Materials on the
Premises during the Term or any Hazardous Materials that migrate from the
Premises to other properties, as a result (directly or indirectly) of Landlord’s
or Landlord’s Parties’ activities, or failure to act where Landlord had a duty
to act, on or in connection with the Premises.

 

This obligation by Landlord to indemnify, protect, defend, and hold harmless
Tenant Indemnitees includes, without limitation, costs and expenses incurred for
or in connection with any investigation, cleanup, remediation, monitoring,
removal, restoration, or closure work

 

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required by the Agencies because of any Hazardous Materials present on the
premises; the costs and expenses of restoring, replacing, or acquiring the
equivalent of damaged natural resources if required under any environmental law;
all foreseeable consequential damages; all reasonable damages for the loss or
restriction on use of rentable or usable space or of any amenity of the
Premises; all reasonable sums paid in settlement of claims; reasonable attorney
fees; litigation, arbitration, and administrative proceeding costs; and
reasonable expert, consultant, and laboratory fees. The strict compliance by
Landlord with all environmental laws will not excuse Landlord from the
indemnification obligation. This indemnity will survive the expiration or
termination of this Lease.

 

 

Section 13. Damage and Destruction

 

(a) Casualty. If the Premises is damaged or destroyed by fire or other casualty,
Tenant will give immediate written notice to Landlord. Within thirty (30) days
after receipt, Landlord will notify Tenant whether repairs can reasonably be
made (1) within ninety (90) days, (2) in more than ninety (90) days, but in less
than one hundred eighty (180) days; or (3) in more than one hundred eighty (180)
days from the date of notice.

 

(i) Less Than 90 Days. If the Premises is damaged only to the extent that
rebuilding or repairs can be reasonably completed within ninety (90) days, this
Lease will not terminate and, provided that insurance proceeds are available to
fully repair the damage, Landlord will repair the Premises. However, Landlord
will not be required to rebuild, repair, or replace any Alterations that may
have been placed on the Premises for Tenant. The Rent will be abated
proportionately from the date Tenant vacates the Premises only to the extent the
Premises are unfit for occupancy.

 

(ii) Greater Than 90 Days. If the Premises is damaged only to the extent that
rebuilding or repairs can be reasonably completed in more than ninety (90) days,
but in less than one hundred eighty (180) days, Landlord will have the option of
(1) terminating the Lease effective upon the occurrence of the damage, in which
event the Rent will be abated from the date Tenant vacates the Premises; or (2)
electing to repair the Premises, provided insurance proceeds are available to
fully repair the damage. However, Landlord will not be required to rebuild,
repair, or replace any part of the Alterations that may have been placed on the
Premises for the Tenant. The Rent will be abated proportionately from the date
Tenant vacates the Premises only to the extent the Premises are unfit for
occupancy. If Landlord fails to complete repairs within one hundred eighty (180)
days after the date on which Landlord is notified by Tenant (that period to be
extended for delays caused by Tenant or because of any items of Force Majeure,
as defined in attached Exhibit B), Tenant may, within ten (10) days after the
expiration of the one hundred eighty (180) day period, terminate this Lease by
delivering written notice to Landlord as Tenant’s exclusive remedy. All rights
under this Lease will cease and terminate thirty (30) days after Landlord’s
receipt of notice.

 

(iii) Greater Than 180 Days. If the Premise is so damaged that rebuilding or
repairs cannot be completed within one hundred eighty (180) days, either
Landlord or Tenant may terminate by giving written notice within ten (10) days
after notice from Landlord regarding the time period of repair. This Lease and
the Rent will be abated from the date Tenant vacates the Premises. If neither
party elects to terminate this Lease, Landlord will promptly commence and
diligently prosecute to completion the repairs to the Premises, provided
insurance proceeds are available to fully repair the damage. However, Landlord
will not be required to rebuild, repair, or replace any Alterations that may
have been placed on the Premises for the

 

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Tenant. During the time when Landlord is prosecuting repairs to completion, the
Rent will be abated proportionately from the date Tenant vacates the Premises
only to the extent and only during the period that the Premises are unfit for
occupancy.

 

(b) Tenant’s Fault. If any portion of the Premises is damaged resulting from the
fault or breach of this Lease by Tenant or Tenant’s Parties, the Rent will be
diminished during the repair of the damage only to the extent the Premises are
unfit for occupancy and Tenant will be liable to Landlord for the cost of the
repair to the extent the cost is not covered by insurance proceeds.

 

(c) Uninsured Casualty. Tenant is responsible for and will pay to Landlord any
deductible amount under the property insurance for the Premises. If any portion
of the Premises is damaged and is not fully covered by insurance proceeds
received by Landlord for any reason (and Tenant elects not to pay any
difference) or if the holder of any indebtedness secured by the Premises
requires that the insurance proceeds be applied to the indebtedness, Landlord
will have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Tenant. All rights and obligations will then cease and terminate under this
Lease.

 

(d) Waiver. With respect to any damage or destruction that Landlord is obligated
to repair or may elect to repair, Tenant waives all rights to terminate this
Lease pursuant to rights otherwise presently or later accorded by law.

 

Section 14. Eminent Domain

 

(a) Definitions. The following definitions apply in construing provisions of
this Lease relating to a taking of or damage to all or any part of the Premises
or improvements or any interest in them by eminent domain or inverse
condemnation:

          (i)            Taking means the taking or damaging, including
severance damage, by eminent domain or by inverse condemnation for any public or
quasi-public use under any statute. The transfer of title may be either a
transfer resulting from the recording of a final order in condemnation or a
voluntary transfer or conveyance to the condemning agency or entity under threat
of condemnation, in avoidance of an exercise of eminent domain, or while
condemnation proceedings are pending. The taking shall be considered to take
place as of the later of (i) the date actual physical possession is taken by the
condemnor or (ii) the date on which the right to compensation and damages
accrues under the law applicable to the Premises.

          (ii)           Total taking means the taking of the fee title to all
the Premises and the improvements on the Premises, which shall be considered to
include any off-site improvements effected by Tenant to serve the Premises or
the improvements on the Premises.

          (iii)          Substantial taking means the taking of the fee interest
in so much of the Premises or improvements or both that thirty percent (30%) in
area of the Premises shall be taken or damaged or twenty-five percent (25%) of
the floor area contained within the improvements constructed on the Premises
shall be taken or damaged, and the conduct of Tenant’s business on the Premises
would be substantially prevented or impaired as the result of such taking.

          (iv)          Partial taking means any taking of the fee title that is
not either a total or a substantial taking.

 

(b) Notice to Other Party. The party receiving any notice of the kinds specified
below shall promptly give the other party notice of the receipt, contents, and
date of the notice received:

          (i)            Notice of intended taking;

 

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          (ii)           Service of any legal process relating to condemnation
of the Premises or improvements;

 

          (iii)          Notice in connection with any proceedings or
negotiations with respect to such a condemnation; or

 

          (iv)          Notice of intent or willingness to make or negotiate a
private purchase, sale or transfer in lieu of condemnation.

 

(c) Effect on Rent and Term: Total Taking or Substantial Taking.

          (i)            On a total taking, Tenant’s obligation to pay rent
shall terminate on, and Tenant’s interest in the leasehold shall continue until,
the date of taking.

          (ii)           If the taking is substantial under the definition
appearing above, Tenant may, by notice to Landlord given within ten (10) days
after Tenant receives notice of the intended taking, elect to treat the taking
as a substantial taking. If Tenant does not so notify Landlord, the taking shall
be deemed a partial taking. If Tenant gives such notice and Landlord gives
Tenant notice disputing Tenant’s contention within five (5) days following
receipt of Tenant’s notice, the dispute shall be promptly determined by
arbitration. If Landlord gives no such notice, the taking shall be treated as a
total taking if (l) Tenant delivers possession to Landlord within thirty (30)
days after determination that the taking was a substantial taking, and (2)
Tenant is not in default under the lease and has complied with all lease
provisions concerning apportionment of the award. If these conditions are not
met, the taking shall be treated as a partial taking.

          (iii) Tenant may continue to occupy the Premises and improvements
until the condemnor takes physical possession. However, at any time following
notice of intended total taking, or within the time limit specified for
delivering possession in the provision for substantial taking, Tenant may elect
to deliver possession of the Premises to Landlord before the actual taking. The
election shall be made by notice declaring the election and covenanting to pay
all rents required under this lease to the date of taking. Tenant’s right to
apportionment of or compensation from the award shall then accrue as of the date
that Tenant goes out of possession.

 

(d) Apportionment; Distribution of Award for Total Taking. On a total taking,
all sums, including damages and interest, awarded for the fee or the leasehold
or both shall be deposited promptly with an escrow agent acceptable to both
parties (acceptance not to be unreasonably withheld) and shall be distributed
and disbursed in the following order of priority:

          First, to Landlord and Tenant, as herein provided, reimbursement of
all costs and expenses of collection of the award, including fees and expenses
incurred in the condemnation proceeding.

          Second, the remainder shall be divided between Landlord and Tenant in
the ratio, as nearly as practicable, which (i) the then value of Landlord’s
interest in the Premises including its interest under this Lease as determined
by appraisal as provided below bears to (ii) the then value of Tenant’s interest
in the Tenant’s Alterations constructed on the Premises and under this Lease for
the remainder of the Lease term determined by appraisal as provided below.  If
appraisal becomes necessary under this section, the parties shall promptly agree
upon a competent appraiser, and neither party shall unreasonably refuse to reach
an agreement. If the parties are unable to agree on an appraiser, then, upon
written notice to the other party, either party may apply for such appointment
to the Superior Court of the State of California, or to any other court having
jurisdiction and exercising functions similar to those now exercised by the
Superior Court of the State of California.

 

(e)     Partial Taking. On a partial taking, this Lease shall remain in full
force and effect, covering the remaining property, except that the net rent
shall be reduced in the same ratio as the

 

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dollar amount of the award, excluding interest and severance damages, bears to
the total fair market value of the Premises before the taking, as determined by
the most recent appraisal made for the property. Both parties waive their rights
to petition for termination of the lease under section 1265.130 of the
California Code of Civil Procedure.

 

          (i) Promptly after a partial taking, at Tenant’s expense and in the
manner specified in provisions of this Lease relating to maintenance, repairs,
and alterations, Tenant shall repair, alter, modify, or reconstruct the
improvements (hereafter referred to as restoring) so as to make them reasonably
suitable for Tenant’s continued occupancy for the uses and purposes for which
the Premises are leased.

 

          (ii) If the reasonably estimated cost of the work represents more than
twenty-five percent (25%) of the then fair market value of the leasehold
improvements before the taking, Tenant may, in the manner provided for a
substantial taking, elect to treat the taking as substantial.

 

          (iii) On a partial taking, all sums, including damages and interest,
awarded for the fee title or the leasehold or both, shall be deposited promptly
with an escrow agent acceptable to both parties (acceptance not to be
unreasonably withheld) and shall be distributed and disbursed in the following
order to priority:

 

                          First, to Landlord and Tenant, as herein provided,
reimbursement of all costs and expenses of collection of the award, including
fees and expenses incurred in the condemnation proceeding.

 

                          Second, to Tenant, reimbursement of the costs and
expenses of restoration of the improvements, as such costs and expenses are
reasonably incurred by Tenant, plus any amount awarded for detriment to
business.

 

                          Third, the remainder shall be divided between Landlord
and Tenant in the ratio, as nearly as practicable, which (i) the then value of
Landlord’s interest in the Premises including its interest under this Lease as
determined by appraisal as provided below bears to (ii) the then value of
Tenant’s interest in the improvements constructed on the Premises and under this
Lease for the remainder of the Lease term determined by appraisal as provided
below.

 

(f) Limited Taking. On the taking, other than a temporary taking, of less than a
fee title interest in the Premises or improvements or both, the question whether
the taking is total, substantial, or partial, and the effects on term, rent, and
apportionment of award shall be determined by arbitration.

 

          On any taking of the temporary use of all or any part of parts of the
Premises or improvements or both for a period, or of any estate less than a fee,
ending on or before the expiration date of the term, neither the term nor the
rent shall be reduced or affected in any way, and Tenant shall be entitled to
any award for the use or estate taken. If a result of the taking is to
necessitate expenditures for changes, repairs, alterations, modification, or
reconstruction of the improvements to make them economically viable and a
practical whole, Tenant shall receive, hold, and disburse the award in trust for
such work. At the completion of the work and the discharge of the Premises and
improvements from all liens and claims, Tenant shall be entitled to any surplus
and shall be liable for any deficit.

 

          If any such taking is for a period extending beyond the expiration
date of the term, the taking shall be treated under the foregoing provisions for
total, substantial, and partial takings.

 

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Section 15. Default

 

(a) Events of Default. The occurrence of any of the following events will, at
Landlord’s option, constitute an event of default (“Event of Default”):

 

(i) failure to pay Rent on the date when due, the failure continuing for a
period of five (5) days after payment is due;

 

(ii) vacation or abandonment of the Premises for a period of thirty (30)
consecutive days;

 

(iii) failure to perform Tenant’s covenants under this Lease (except default in
the payment of Rent); provided that if this default is susceptible of cure and
Tenant has promptly commenced the cure of this default and is diligently
prosecuting the cure to completion, then the default must remain uncured for
thirty (30) days after written notice from Landlord;

 

(iv) the making of a general assignment by Tenant for the benefit of creditors,
the filing of a voluntary petition by Tenant, or the filing of an involuntary
petition by any of Tenant’s creditors seeking the rehabilitation, liquidation,
or reorganization of Tenant under any law relating to bankruptcy, insolvency, or
other relief of debtors and, in the case of an involuntary action, the failure
to remove or discharge the petition within sixty (60) days of the filing, the
appointment of a receiver or other custodian to take possession of substantially
all of Tenant’s assets or this leasehold, Tenant’s insolvency or inability to
pay Tenant’s debts or failure generally to pay Tenant’s debts when due, any
court entering a decree or order directing the winding up or liquidation of
Tenant’s debts when due, any court entering a decree or order directing the
winding up or liquidation of Tenant or substantially all of Tenant’s assets,
Tenant taking any action toward the dissolution or winding up of Tenant’s
affairs, the cessation or suspension of Tenant’s use of the Premises, or the
attachment, execution, or other judicial seizure of substantially all of
Tenant’s assets or this leasehold; or

 

(v) the making of any material misrepresentation or omission by Tenant in any
materials delivered by or on behalf of Tenant to Landlord pursuant to this
Lease.

 

(b) Remedies.

 

(i) Termination. In the event of the occurrence of any Event of Default,
Landlord will have the right to give a written termination notice to Tenant and,
on the date specified in that notice, this Lease will terminate unless on or
before that date all arrears of Rent and all other sums payable by Tenant under
this Lease and all costs and expenses incurred by or on behalf of Landlord have
been paid by Tenant and all other Events of Default at the time existing have
been fully cured to the satisfaction of Landlord.

 

(A) Repossession. Following termination, without prejudice to other remedies
Landlord may have, Landlord may (1) peaceably re-enter the Premises on voluntary
surrender by Tenant; (2) remove Tenant and any other persons occupying the
Premises, using any legal proceedings that may be available; (3) repossess the
Premises or relet the Premises or any part of them for any term (which may be
for a term extending beyond the Term), at any rental and on any other terms and
conditions that Landlord in Landlord’s sole discretion may determine, with the
right to make reasonable alterations and repairs to the Premises; and (4) remove
all personal property.

 

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(B) Unpaid Rent. Landlord will have all the rights and remedies of a landlord
provided by applicable law, including the right to recover from Tenant (1) the
worth, at the time of award of the unpaid Rent that had been earned at the time
of termination; (2) the worth, at the time of award, of the amount by which the
unpaid Rent that would have been earned after the date of termination until the
time of award exceeds the amount of loss of rent that Tenant proves could have
been reasonably avoided; (3) 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 the loss of rent that Tenant proves could have been
reasonably avoided; and (4) any other amount, and court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant’s default.
The phrase “worth, at the time of award,” as used in clauses (1) and (2) above,
will be computed at the greater of ten percent (10%) per annum or five percent
(5%) per annum plus the federal discount rate on advances to member banks in
effect at the Federal Reserve Bank of San Francisco on the 25th day of the month
preceding the date of the Lease, and as used in clause (3) above, will be
computed by discounting that amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

 

(ii) Continuation. Even though an Event of Default may have occurred, this Lease
will continue in effect for so long as Landlord does not terminate Tenant’s
right to possession. Also, Landlord may enforce all of Landlord’s rights and
remedies under this Lease, including the right to recover Rent as it becomes
due, and Landlord, without terminating this Lease, may, during the period Tenant
is in default, enter the Premises and relet them, or any portion of them, to
third parties for Tenant’s account. Tenant will be liable to Landlord for all
costs Landlord incurs in reletting the Premises, including, without limitation,
brokers’ commissions, expenses of remodeling the Premises, and similar costs.
Reletting may be for a period shorter or longer than the remaining Term. Tenant
will continue to pay the Rent on the date that it is due. No act by Landlord
under this Lease, including acts of maintenance, preservation, or efforts to
lease the Premises or the appointment of a receiver on application of Landlord
to protect Landlord’s interest under this Lease, will terminate this Lease
unless Landlord notifies Tenant that Landlord elects to terminate this Lease. In
the event that landlord elects to relet the Premises, the rent that Landlord
receives from reletting will be applied to pay the following in the order
listed:

 

(A) any indebtedness from Tenant to Landlord other than Base Rent, Real Property
Taxes, and other amounts owing to Landlord under this Lease;

 

(B) all costs, including maintenance, incurred by Landlord in reletting; and

 

(C) Base Rent, Real Property Taxes, and other amounts owing to Landlord under
this Lease.  After deducting the payments referred to above, any sum remaining
from the rental Landlord receives from reletting will be held by Landlord and
applied in payment of future Rent as Rent becomes due under this Lease. In no
event will Tenant be entitled to any excess rent received by Landlord. If, on
the date Rent is due under this Lease, the rent received from the reletting is
less than the Rent due on that date, Tenant will pay to Landlord, in addition to
the remaining Rent due, all costs, including maintenance, that Landlord incurred
in reletting that remain after applying the rent received from reletting. So
long as this Lease is not terminated, Landlord will have the right to remedy any
default of Tenant, to maintain or improve the Premises, to cause a receiver to
be appointed to administer the Premises and new or existing subleases, and to
add to the Rent all of Landlord’s reasonable costs in so doing, with interest at
the Applicable Interest Rate from the date of the expenditure.

 

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(c) Cumulative. Each right and remedy of Landlord provided for in this Lease or
now or later existing at law, in equity, by statute, or otherwise, will be
cumulative and will not preclude Landlord from exercising any other rights or
remedies provided for in this Lease or now or later existing at law or in
equity, by statute, or otherwise. No payment by Tenant of a lesser amount than
the Rent, or any endorsement on any check or letter accompanying any check or
payment as Rent, will be deemed an accord and satisfaction of full payment of
Rent. However, Landlord may accept this payment without prejudice to Landlord’s
right to recover the balance of Rent or to pursue other remedies.

 

Section 16. Assignment and Subletting

 

          Tenant will not assign or sublet, whether voluntarily or involuntarily
or by operation of law, the Premises or any part of the Premises without
Landlord’s prior written approval, which will not be unreasonably withheld. The
merger of Tenant with any other entity or the transfer of any controlling or
managing ownership or beneficial interest in Tenant constitutes an assignment
under this Lease. If Tenant desires to assign this Lease or sublet any or all of
the Premises, Tenant must give Landlord written notice sixty (60) days prior to
the anticipated effective date of the assignment or sublease. Landlord will then
have a period of forty-five (45) days following receipt of notice and all
related documents and agreements associated with the assignment or sublease,
including, without limitation, the financial statements of any proposed assignee
or subtenant, to notify Tenant in writing that Landlord elects (a) to permit
Tenant to assign this Lease or sublet space, subject however to Landlord’s prior
written approval of the proposed assignee or subtenant and of any related
documents or agreements associated with the assignment or sublease received by
Landlord or reasonably requested by Landlord; or (b) to disapprove the proposed
assignment or subletting. If Landlord fails to notify Tenant in writing of the
election, Landlord will be deemed to have elected option (b). This Lease may not
be assigned by operation of law. Any purported assignment or subletting contrary
to the provisions of this Lease will be void. If Tenant receives rent or other
consideration for any transfer in excess of the Rent, or in case of the sublease
of a portion of the Premises, in excess of the Rent that is fairly allocable to
that portion, after appropriate adjustments to assure that all other required
payments are appropriately taken into account, Tenant will pay Landlord fifty
percent (50%) of the difference between each payment of rent or other
consideration and the required Rent. Landlord may, without waiving any rights or
remedies, collect rent from the assignee, subtenant, or occupant, and apply the
net amount collected to the Rent reserved here and apportion any excess rent
collected in accordance with the terms of the preceding sentence. Tenant will
continue to be liable as a principal and not as a guarantor or surety to the
same extent as though no assignment or subletting had been made. Landlord may
consent to subsequent assignments or subletting of this Lease or amendments or
modifications to the Lease by assignees of Tenant without notifying Tenant or
any successor of Tenant and without obtaining their consent. No permitted
transfer will be effective until there has been delivered to Landlord a
counterpart of the transfer instrument in which the transferee agrees to be and
remain jointly and severally liable with Tenant for the payment of Rent
pertaining to the space and for the performance of all the terms and provisions
of this Lease arising on or after the date of the transfer. Tenant will not do
any act that will in any way encumber the title of Landlord to the Premises or
the Building.

 

Section 17. Estoppel

 

                Within ten (10) days after request by Landlord, Tenant will
deliver an estoppel certificate duly execcuted (and acknowledged, if required by
any lender) in the form of attached Exhibit D, to any

 

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proposed mortgagee, purchaser, or Landlord. Tenant’s failure to deliver this
statement in that time period will be an Event of Default under this Lease and
it will be conclusive on Tenant that (a) this Lease is in full force and effect,
without modification except as may be represented by Landlord; (b) there are no
uncured defaults in Landlord’s performance and Tenant has no right of offset,
counterclaim, or deduction against Rent; and (c) no more than one period’s Base
Rent has been paid in advance. Landlord reserves the right to substitute a
different form of estoppel certificate requiring substantially the same
information from Tenant on the request of any proposed mortgagee or purchaser.
If any financier should require that this Lease be amended (other than in the
description of the Premises, the Term, the Permitted Use, the Rent, or as will
substantially, materially, and adversely affect the rights of Tenant), Landlord
will give written notice of that to Tenant. The notice will be accompanied by a
Lease supplement embodying the amendments. Tenant must, within ten (10) days
after the receipt of Landlord’s notice, execute the tendered Lease supplement.

 

Section 18. Attornment

 

In the event of a foreclosure proceeding, the exercise of the power of sale
under any mortgage or deed of trust or the termination of a ground lease, Tenant
will, if requested, attorn to the purchaser and recognize that purchaser as
Landlord under this Lease. However, Tenant’s obligation to attorn to the
purchaser will be conditioned on Tenant’s receipt of a nondisturbance agreement.

Concurrent with the execution of this Lease, Landlord, Tenant and all
mortgagee’s of record shall execute and record an Estoppel, Non-Disturbance,
Attornment Agreement(s), in the form attached hereto as Exhibit “*F*.

 

Section 19. Subordination

 

This Lease is subject and subordinate to all ground leases and the lien of all
mortgages and deeds of trust that now or later affect the Premises or Landlord’s
interest, or on or against all ground leases, and to all subdivision maps of the
Premises and all CC&Rs on the Premises that are now or may become of record, and
all amendments, all without the necessity of Tenant’s executing further
instruments to effect the subordination. If requested, Tenant will execute
whatever documentation may be required to further effect the provision of this
section.

 

Section 20. Entry

 

Landlord reserves the right to enter the Premises upon reasonable notice to
Tenant (except in case of an emergency, in which case no notice would be
required) to inspect the Premises or the performance by Tenant of the terms and
conditions of this Lease, and, during the last nine (9) months of the Term, show
the Premises to prospective tenant’s.

 

Section 21. Late Charges and Interest

 

The late payment of any Rent will cause Landlord to incur additional costs,
including administration and collection costs, processing and accounting
expenses, and increased debt service. If Landlord has not received any
installment of Rent within ten (10) days after that amount is due, Tenant must
pay ten percent (10%) of the delinquent amount, which is agreed to represent a
reasonable estimate of the cost incurred by Landlord. In addition, all
delinquent amounts will bear interest from the date the amount was due until
paid in full at a rate per annum (“Applicable Interest Rate”) equal to the
greater of (a) five percent (5%) per annum plus the then federal discount rate
on advances to member banks in effect at the Federal Reserve Bank of San

 

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Francisco on the 25th day of the month preceding the date of this Lease or (b)
ten percent (10%). However, in no event will the Applicable Interest Rate exceed
the maximum interest rate permitted by law that may be charged under the
circumstances. Landlord and Tenant recognize that the damage that Landlord will
suffer in the event of Tenant’s failure to pay these amounts is difficult to
ascertain and the late charge and interest are the best estimate of the damage
that Landlord will suffer in the event of late payment. If a late charge becomes
payable for any three (3) installments or Rent within any twelve (12)-month
period, the Rent will automatically become due quarterly in advance.

 

Section 22. Security Deposit

 

There is no Security Deposit required from Tenant at the inception of this
Lease.  However, in the event that Tenant is permitted to assign or sublet the
Premises, Landlord shall be entitled to require a Security Deposit from the
sublessee or assignee, in an amount equal to one and one-half (1½) times the
then-current Base Rent for the Premises.  The Security Deposit will secure the
full and faithful performance of each provision of this Lease to be performed by
Tenant. Landlord may use and commingle the Security Deposit with other funds of
Landlord. If Tenant fails to perform any of Tenant’s obligations under this
Lease, Landlord may apply all or any portion of the Security Deposit toward
fulfillment of Tenant’s unperformed obligations. If Landlord does apply the
Security Deposit, Tenant must immediately pay Landlord sufficient cash to
restore the Security Deposit to the full original amount. The Security Deposit
will not bear interest.

 

Section 23. Entire Agreement

 

This Lease sets forth all the agreements between Landlord and Tenant concerning
the Premises, and there are no other agreements, either oral or written, other
than as set forth in this Lease.

 

Section 24. Time of Essence

 

Time is of the essence in this Lease.

 

Section 25. Attorney Fees

 

In any action that either party brings to enforce rights under this Lease, the
unsuccessful party will pay all costs incurred by the prevailing party,
including reasonable attorney fees, to be fixed by the court. Those costs and
attorney fees will be considered a part of the judgment in that action.

 

Section 26. Severable

 

If any provision of this Lease or the application of any provision is held by a
court of competent jurisdiction to be invalid, void, or unenforceable to any
extent, the remaining provisions of this Lease and the application of it will
remain in full force and will not be affected, impaired, or invalidated.

 

Section 27. Governing Law

 

This Lease will be construed and enforced in accordance with the laws of the
state Of California.

 

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Section 28. No Option

 

Submission of this Lease to Tenant for examination or negotiation does not
constitute an option to lease, offer to lease, or a reservation of, or option
for, the Premises. This document will become effective and binding only upon the
execution and delivery of the document by Landlord and Tenant.

 

Section 29. Successors and Assigns

 

This Lease will be binding on and inure to the benefit of the successors and
assigns of Landlord and, to the extent assignment is approved by Landlord,
Tenant.

 

Section 30. No Third-Party Beneficiaries

 

Nothing in this Lease is intended to create any third-party benefit.

 

Section 31. Memorandum of Lease

 

Tenant may record a short form memorandum of this Lease in a form to be mutually
agreed by the parties hereto.

 

Section 32. No Agency, Partnership, or Joint Venture

 

Nothing contained in this Lease will be deemed or construed by the parties, or
by any third party, as creating the relationship of principal and agent,
partnership, or joint venture by the parties. It is understood and agreed that
no provision contained in this Lease or any acts of the parties will be deemed
to create any relationship other than the relationship of landlord and tenant.

 

Section 33. No Merger

 

The voluntary or other surrender of this Lease by Tenant or a mutual
cancellation of the Lease or a termination by Landlord will not work a merger
and will, at the option of Landlord, terminate all of any existing subtenancies
or may, at the option of Landlord, operate as an assignment to Landlord of any
subtenancies.

 

Section 34. Signs

 

All signs and graphics of every kind visible from public view, corridors, or the
exterior of the Premises will be subject to Landlord’s prior written approval
and will be subject to any applicable governmental laws, ordinances, and
regulations and in compliance with Landlord’s signage program. Tenant must
remove all signs and graphics prior to the termination of this Lease.
Installations and removals must be made in a manner so as to avoid injury or
defacement of the Premises. Tenant must repair any injury or defacement,
including, without limitation, discoloration caused by installation or removal.

 

Section 35. No Waiver

 

No waiver of any default or breach under this Lease will be implied from any
omission to take action on account of this Lease, regardless of any custom and
practice or course of dealing. No waiver will affect any default other than the
default specified in the waiver, and then the waiver

 

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will be operative only for the time and to the extent stated in the Lease.
Waivers of any covenant will not be construed as a waiver of any subsequent
breach of the same covenant. No waiver by either party of any provision under
this Lease will be effective unless in writing and signed by that party.

 

Section 36. Financial Statements

 

Except for publicly traded entity Tenants, Tenant will provide to any lender,
purchaser, or Landlord, within ten (10) days after request, a current, accurate,
certified financial statement for Tenant and Tenant’s business prepared under
generally accepted accounting principles consistently applied and any other
certified financial information or tax returns as may be reasonably required by
Landlord, purchaser, or any lender of either.

 

Section 37. Limitation of Liability

 

The obligations of Landlord under this Lease are not personal obligations of the
individual partners, directors, officers, shareholders, agents, or employees of
Landlord. Tenant may look solely to the Premises for satisfaction of any
liability and may not look to other assets of Landlord or seek recourse against
the assets of the individual partners, directors, officers, shareholders,
agents, or employees of Landlord. Whenever Landlord transfers Landlord’s
interest, Landlord will be automatically released from further performance under
this Lease and from all further liabilities and expenses under this Lease and
the transferee of Landlord’s interest will assume all liabilities and
obligations of Landlord under this Lease from the date of the transfer.

 

Section 38. Notices

 

        Any notice, demand, request, consent, approval, or communication that
either party desires or is required to give to the other party or any other
person shall be in writing and either served personally or sent by prepaid,
first class mail.  Any notice, demand, request, consent, approval, or
communication that either party desires or is required to give to the other
party shall be addressed to the other party at the address set forth below.
Either party may change its address by notifying the other party of the change
of address. Notice shall be deemed communicated within forty-eight (48) hours
from the time of mailing if mailed as provided in this section.

 

 

Landlord:

Walter Bros. Construction Co., Inc.

 

 

 

P.O. Box 809

 

 

 

San Luis Obispo, CA 93406

 

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with a copy to:

Diehl & Rodewald

 

 

 

1043 Pacific Street

 

 

 

San Luis Obispo, CA 93401

 

 

 

Telephone: (805) 541-1000

 

 

 

FAX/541-6870

 

 

 

E-Mail: rar@diehlrodewald.com

 

 

 

 

 

 

Tenant:

Mission Community Bank

 

 

 

581 Higuera Street

 

 

 

San Luis Obispo, CA 93401

 

 

 

 

 

 

with a copy to:

Matthew S. Kennedy, Esq.

 

 

 

MATTHEW S. KENNEDY, APLC

 

 

 

P.O. Box 1031

 

 

 

San Luis Obispo, California 93406-1031

 

 

 

(805) 544-5002

 

 

 

FAX/544-5003

 

 

 

E-Mail: msk@KennedyLawRealty.com

 

Section 39. Brokerage Commission

 

Tenant warrants to Landlord that Tenant’s sole contact with Landlord or with the
Premises in connection with this transaction has been directly with Landlord,
and that no broker or finder can properly claim a right to a commission or a
finder’s fee based on contacts between the claimant and Tenant. Tenant and
Landlord, respectively, will each indemnify, defend by counsel acceptable to the
other, protect, and hold each other harmless from any loss, cost, or expense,
including, but not limited to, attorney fees and cost, resulting from any claim
for a fee or commission by any broker or finder in connection with the Premises
and this Lease.

 

Section 40. Authorization

 

Tenant will furnish to Landlord, within ten (10) days after written request,
evidence satisfactory to Landlord that the person who executed this Lease on
behalf of Tenant was duly authorized to do so. Each individual executing this
Lease on behalf of Tenant represents and warrants that she or he is duly
authorized to execute and deliver this Lease on behalf of Tenant and that the
execution is binding upon Tenant.

 

Section 41. Holding Over

 

If Tenant holds over the Premises or any part of the Premises after expiration
of the Term, the holding over will constitute a month-to-month tenancy, at a
rent equal to the Base Rent in effect immediately prior to the holding over plus
twenty-five percent (25%) of the Rent. This section will not be construed as
Landlord’s permission for Tenant to hold over. Acceptance of Rent by Landlord
following expiration or termination would not constitute a renewal of this
Lease.

 

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Section 42. Surrender

 

Upon the termination of this Lease or Tenant’s right to possession of the
Premises, Tenant will surrender the Premises, together with all keys, in good
condition and repair, reasonable wear and tear excepted. Conditions existing
because of Tenant’s failure to perform maintenance, repairs, or replacements
will not be deemed “reasonable wear and tear.”

 

Section 43. Joint and Several

 

If Tenant consists of more than one person, the obligation of all those persons
will be joint and several.

 

Section 44. Covenants and Conditions

 

Each provision to be performed by Tenant under this Lease will be deemed to be
both a covenant and a condition.

 

Section 45. Regulator Requirements

 

a.                           Notwithstanding any other provision of this Lease,
Landlord shall not have the right to take possession of any of Tenant’s business
records or personal property located on the Premises, of any customer of Tenant,
or of any other third party. Furthermore, any rights and remedies of Landlord
under this Lease are subject to the power of the State of California Department
of Financial Institutions (“DFI”), the Federal Deposit Insurance Corporation
(“F.D.I.C.”), and other bank regulatory agencies, to enter upon and/or assume
control of the Premises and of any personal property therein as permitted under
applicable laws.

b.                          Also, notwithstanding any other provisions contained
in this Lease, in the event (a) Tenant or its successors or assigns shall become
insolvent or bankrupt, or, if their interests under this Lease shall be levied
upon or sold under execution or other legal process; or, (b) the depository
institution then operating on the Premises is closed or is taken over by any
depository institution supervisory authority (“Authority”), Landlord may, but
shall not be required to, in either such event, terminate this Lease only with
the concurrence of any receiver or liquidator, to the extent required by
applicable law.

 

Section 46. Exhibits

 

The attached Exhibits, identified with this Lease and initialed by the parties,
are incorporated by this reference.

 

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IN WITNESS WHEREOF, the parties have executed this Lease as of the date set
forth above.

 

 

LANDLORD:

TENANT:

 

 

WALTER BROS.

MISSION COMMUNITY BANK,

CONSTRUCTION CO., INC., a

a California corporation

California corporation

 

 

 

 

 

By:

 

 

By:

 

 

 

Donald C. Walter

 

Anita M. Robinson

 

President

 

President and CEO

 

 

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EXHIBIT A

 

LEGAL DESCRIPTION OF THE REAL PROPERTY

 

 

 

Parcel 1 of Parcel Map SL-05-0428 in the City of San Luis Obispo, County of San
Luis Obispo, State of California, according to Map recorded March 26, 2007, in
Book 68, Pages 66-68 of Parcel Maps.

 

 

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EXHIBIT B

 

WORK LETTER

 

THIS WORK LETTER (“Work Letter”) constitutes part of the Office
Lease—Build-to-Suit Lease (“Lease”) dated as of [date], between Mission
Community Bank, a California corporation, (“Tenant”), and Walter Bros.
Construction Co., Inc., (“Landlord”),. The terms of this Work Letter are
incorporated in the Lease for all purposes.

 

Section 1. Defined Terms

 

As used in this Work Letter, the following capitalized terms have the following
meanings:

 

General Contractor:  Walter Bros. Construction Co., Inc. or such other general
contractor which may be designated by Landlord.

 

Improvements: The Building, parking areas, landscaping, and other improvements,
more particularly shown on the conceptual plans (as modified) prepared by RRM
Design Group, and approved by Tenant,  that Landlord is to construct on the Real
Property pursuant to the Lease and this Work Letter.  The Landlord shall deliver
the Building in a shell condition, but with off-site improvements, HVAC,
sprinkler systems, elevator and inside drywall completed.

 

Landlord’s Representative: Donald C. Walter

 

Punch List Work: Minor details of construction or decoration or mechanical
adjustments that do not materially interfere with Landlord’s delivery of the
Premises in its agreed upon shell condition.

 

Ready for Delivery:  When Landlord’s architect has furnished Landlord with a
certificate that the work to be done by Landlord has been substantially
completed except for Punch List Work.

 

Tenant Delay: Any of the following:

 

(a) any delay resulting from Tenant’s failure to approve any matters requiring
approval in a timely manner;

 

(b) any delay resulting from Change Orders, including any delay resulting from
the need to revise any drawings as a result of any Change Order; or

 

(c) any delay of any other kind or nature in the completion of the Improvements
caused by Tenant (or Tenant’s agents or employees) or resulting from the
performance of Tenant’s Work by anyone other than Landlord or Landlord’s General
Contractor.

 

Tenant’s Representative: Anita M. Robinson.

 

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Unavoidable Delays: Delays due to acts of God, acts of public agencies, labor
disputes, strikes, fires, freight embargoes, rainy and stormy weather, inability
to obtain supplies, materials, fuels, or permits, delays of contractors or
subcontractors, or other causes or contingencies beyond the reasonable control
of Landlord.

 

Work Schedule: Parties agree that upon execution of this Lease, Landlord shall
authorize the completion of working drawings for the construction of the
Improvements, and shall diligently apply for and obtain necessary permits and
approvals and construct and complete the Improvements, as defined herein,
utilizing its best efforts to deliver the Improvements to Tenant by
               , 20   , as may be extended by any Tenant delay.  Landlord shall
consult with Tenant from time to time concerning the scheduling and progress of
each portion of Landlord’s Work, so as to keep Tenant informed of the progress
and estimated completion date for any such portion of Landlord’s Work.  Tenant’s
Representative shall have the right at all reasonable times to enter upon the
Premises for the purpose of inspecting the Improvements to verify conformity to
the Working Plans.

 

Capitalized terms not otherwise defined in this Work Letter will have the
definitions set forth in the Lease.

 

Section 2. Representatives

 

Tenant has designated the Tenant’s Representative as the sole representative
with respect to the matters set forth in this Work Letter with full authority
and responsibility to act on behalf of the Tenant as required in this Work
Letter. Landlord has designated the Landlord’s Representative as the sole
representative with respect to the matters set forth in this Work Letter with
full authority and responsibility to act on behalf of Landlord as required in
this Work Letter. Either party may change the representative under this Work
Letter at any time by giving ten (10) days written notice to the other party.

 

Section 3. Procedure and Costs

 

Landlord and Tenant will comply with the procedure outlined in this Section in
preparing, delivering, and approving matters relating to the Improvements to be
constructed by Landlord.

 

(a) Working Drawings. Attached to this Work Letter as Schedule 1 are conceptual
plans and specifications (collectively, “Conceptual Plans”) for the construction
of the Improvements. These Conceptual Plans have previously been approved by
Landlord and Tenant. Landlord will cause to be prepared and delivered to Tenant
final plans and specifications and working drawings for the construction of the
Improvements that will include structural, sprinkler systems, elevator,
mechanical and electrical working drawings, and final architectural drawings for
the Improvements and the tenant improvements which are the responsibility of
Tenant under Section 6, below (collectively, “Final Working Drawings”). The
Final Working Drawings will substantially conform to the Conceptual Plans, and
Landlord shall deliver to Tenant along with the Final Working Drawings an
estimated cost breakdown (“Cost Estimates”) outlining the anticipated costs of
the Improvements (“Landlord’s Work”), and the tenant improvement work for which
Tenant is responsible as set forth in Section 6, below (“Tenant’s Work”). 
Landlord

 

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shall also deliver an estimated work schedule (“Work Schedule”) for the
completion of both the Improvements and such portions of Tenant’s work as may be
completed by Landlord or Landlord’s general contractor.  No later than ten (10)
days after receipt thereof, Tenant must either approve the Final Working
Drawings, Cost Estimates and Work Schedule, or set forth in writing with
particularity any changes necessary to bring the Final Working Drawings into
substantial conformity with the Conceptual Plans or to modify the Cost Estimates
for Tenant’s Work or the Work Schedule. However, Tenant will not unreasonably
withhold approval, or object to any logical development or refinement of the
Conceptual Plans or any changes necessitated by applicable law. Failure of
Tenant to deliver to Landlord written notice of disapproval and the required
changes on or before the ten (10)-day timeline will constitute and be deemed
approval of the Final Working Drawings, Cost Estimate and Work Schedule. Upon
approval, actual or deemed, of the Final Working Drawings by Landlord and
Tenant, the Final Working Drawings will be referred to as the “Approved Working
Drawings.”

 

(b) General Contractor. Landlord intends to execute a construction contract with
General Contractor relating to construction of the Improvements.

 

(c) Construction of Improvements. Promptly following finalization and approval
of the Approved Working Drawings, Landlord will apply for and use reasonable
efforts to obtain the necessary permits and approvals to allow construction of
the Improvements. Landlord will construct and complete the Improvements
substantially in accordance with the Approved Working Drawings.

 

(d) Changes. If Tenant desires any changes, alterations, or additions to the
Approved Working Drawings, Tenant must submit a detailed written request to
Landlord (“Change Order”). If construction of the portion of the Improvements
Tenant seeks to change has not commenced and if the requested changes are
reasonable and practical and generally consistent with the Approved Working
Drawings, Landlord will seek to comply with the Change Order. However, Tenant is
obligated to reimburse Landlord for all increases, costs incurred by Landlord as
a result of changes in accordance with the procedure set forth below, and
additional expenses incurred by Landlord as a result of Tenant Delays,
including, without limitation, loss of rents, architecture fees, increases in
construction costs, and other proper charges caused by delay. Under no
circumstance will Landlord be required to undertake any change, alteration, or
addition to the Approved Working Drawings prior to the execution of a Change
Order by Tenant’s Representative. If any additional plans, drawings of
specifications, or modifications of those items are required as a result of a
Change Order, they will be prepared and approved in the manner set forth in
Section 3(a).

 

Section 4. Payment

 

All amounts payable by Tenant to Landlord pursuant to this Work Letter will be
paid by Tenant within ten (10) calendar days after the rendering to Tenant of a
bill by Landlord. Tenant’s failure to pay in the ten (10) day time period will
constitute an Event of Default under the Lease, and all amounts will then bear
interest from the date due until paid at the Applicable Interest Rate.

 

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Section 5. Ready for Delivery

 

When the Improvements are Ready for Delivery, Landlord will prepare and deliver
in duplicate to Tenant a certificate in the form of attached Exhibit E
(“Completion Certificate”) certifying that the Improvements are substantially
complete in accordance with the Approved Working Drawings and the date of that
completion. The Completion Certificate must be certified by Landlord’s
architect. Upon receipt by Tenant of the Completion Certificate, the
Improvements will be deemed delivered to Tenant for all purposes of the Lease,
including, without limitation, commencement of Rent and other obligations.
However, if Landlord is delayed in substantially completing any of the work for
which Landlord is responsible as a result of any Tenant Delay, the Term and
Tenant’s obligation to pay Rent will be accelerated by the number of days of the
Tenant Delays, and Tenant must reimburse Landlord for any additional costs and
expenses incurred by Landlord as a result of the Tenant Delays. Landlord will
diligently complete any Punch List Work. In the event of any dispute as to
substantial completion of work performed or required to be performed by
Landlord, the certificate of Landlord’s architect will be conclusive.
Substantial completion will have occurred notwithstanding Tenant’s submission of
a punch list to Landlord, which Tenant must submit, within thirty (30) days
after the Commencement Date.

 

Section 6. Tenant’s Work

 

Upon (or before) receipt of the Completion Certificate, Tenant will diligently
proceed to construct and install in the Improvements the materials and
improvements that are more particularly described on the Approved Working
Drawings as being the responsibility of Tenant (the work to be completed by
Tenant is referred to as “Tenant’s Work”), substantially in accordance with the
Approved Working Drawings. Tenant will utilize Landlord’s Contractor to perform
the Tenant’s Work, up to the extent of the Work Allowance set forth in Section
6(c), below.  If the Tenant’s Work exceeds the allowance, Tenant shall either
continue to utilize Landlord or Landlord’s Contractor to  provide the Tenant’s
Work, or to hire its own general contractor, but Landlord shall have the right
to approve the general contractor.  All of Tenant’s Work will be performed and
in all respects be subject to the terms and conditions of the Lease (to the
extent not inconsistent with this Work Letter), and will also be subject to the
following conditions:

 

(a) Architect Requirements. The parties acknowledge that the Architect employed
by Landlord for site planning and other architectural services relating to the
design of the Improvements (including the building in a shell condition), shall
either be RRM Design Group or Fraser-Seiple in San Luis Obispo (at the sole
option of Landlord), and that some of said services (i.e., Tenant Improvement
work in the slab) may include certain aspects of Tenant’s Work.  Tenant may hire
its own Architect for site planning and other architectural services related to
Tenant’s Work, provided that the  Architect shall be duly licensed in California
and shall be subject to Landlord’s prior written approval, which shall not be
unreasonably withheld.

 

(b) Tenant’s Work Allowance.  Landlord agrees to contribute up to, but not to
exceed, $300,000.00 of Tenant’s actual costs incurred in performing Tenant’s
Work (the “Construction Allowance”), which shall be deducted from the first
$300,000.00 in invoices from Landlord’s

 

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Contractor.  Landlord shall provide copies of said invoices for Tenant’s review
and reasonable approval, and shall further obtain a breakdown of any invoices
which include both aspects of the improvements to be constructed by Landlord per
Section 3, above, and the Tenant’s Work to be constructed under this Section 6,
including any plans, architectural services or permit fees, which relate to the
Tenant’s Work. At such time as these invoices reach $300,000.00, Tenant shall be
responsible to pay any invoices in excess of that amount thereafter, within ten
(10) days of receipt from Landlord or Landlord’s Contractor.

 

(c) Costs and Expenses of Tenant’s Work. Subject to the provisions of Section
6(b), above, Tenant will promptly pay all costs and expenses arising out of the
performance of Tenant’s Work (including the costs of permits) and will furnish
Landlord with evidence of payment on request. Tenant will provide Landlord with
ten (10) days prior written notice before commencing any Tenant Work by any
contractor other than Landlord or Landlord’s contractor.  In the event any of
Tenant’s Work is performed by other contractors, then on completion of Tenant’s
Work, Tenant will deliver to Landlord a release and waiver of lien executed by
each contractor, subcontractor, and material supplier concerned with Tenant’s
Work. If any lien is filed against the Premises or against Tenant’s leasehold
interest, Tenant will obtain, within ten (10) days after the filing, the release
or discharge of that lien. If Tenant fails to do so, Landlord may obtain the
release or discharge of the lien and Tenant must indemnify Landlord for the
costs, including reasonable attorney fees, together with interest at the
Applicable Interest Rate from the date of demand.

 

(d) Indemnification. Tenant will indemnify, defend (with counsel satisfactory to
Landlord), and hold Landlord harmless from all suits, claims, actions, loss,
cost, or expense (including claims for workers’ compensation, attorney fees, and
costs) based on personal injury or property damaged or contract claims
(including, but not limited to, claims for breach of warranty) arising from the
performance of Tenant’s Work by anyone other than Landlord or Landlord’s
contractor. Tenant will repair or replace (or, at Landlord’s election, reimburse
Landlord for the cost of repairing or replacing) any portion of the Improvements
or item of Landlord’s equipment or any of Landlord’s real or personal property
damaged, lost, or destroyed in the performance of Tenant’s Work  by anyone other
than Landlord or Landlord’s contractor.

 

(e) Insurance. Tenant’s contractors will obtain and provide Landlord with
certificates evidencing Worker’s Compensation, public liability, and property
damage insurance in amounts and forms and with companies satisfactory to
Landlord.

 

(f) Rules and Regulations. Tenant and Tenant’s contractors will comply with any
other rules, regulations, or reasonable requirements that Landlord or General
Contractor may impose. Tenant’s agreement with Tenant’s contractors will require
each contractor to provide daily cleanup of the construction area to the extent
that cleanup is necessitated by the performance of the Tenant’s Work.

 

(g) Condition of Tenant’s Work. All work performed by Tenant’s contractors will
be performed in a professional and workmanlike manner, using new high quality
materials, all in accordance with construction industry standards.  Such work
will be free from defects in design,

 

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materials, and workmanship, and will be completed in strict compliance with the
Approved Working Drawings.

 

Section 7. Effect of Delays

 

Any delay in any deadlines established by Landlord for the completion of the
work (“Work Deadlines”), including any item that must be redone due to Tenant’s
disapproval, will automatically delay all subsequent deadlines by the same
amount of time. To the extent that any delay has been caused by Tenant, the
Commencement Date for all purposes under the Lease will be the date the
Improvements would have been Ready for Delivery absent the Tenant Delays.

 

Section 8. No Agency

 

Nothing contained in this Letter will make or constitute Tenant as the agent of
Landlord.

 

Section 9. Miscellaneous

 

All references in this Letter to a “number of days” means to calendar days. In
all instances where Tenant’s approval is required, if no written notice of
disapproval is given within the applicable time period, at the end of that
period Tenant will be deemed to have given approval and the next succeeding time
period will commence. If any item requiring approval is disapproved by Tenant in
a timely manner, the procedure for preparation of that item and approval will be
repeated.

 

IN WITNESS WHEREOF, the parties have executed this Work Letter as of the date of
the Lease.

 

 

 

 

LANDLORD:

TENANT:

 

 

 

 

WALTER BROS.

MISSION COMMUNITY BANK,

 

CONSTRUCTION CO., INC.,

a California corporation

 

a California corporation

 

 

 

 

 

By:

 

 

By:

 

 

 

 

Donald C. Walter
President

 

Anita M. Robinson
President and CEO

 

 

 

 

 

 

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EXHIBIT C

 

COMMENCEMENT DATE MEMORANDUM

 

 

[Address of landlord]

 

Dear [name],

 

With respect to the lease (“Lease”) between Mission Community Bank, a California
corporation, (“Tenant”), and Walter Bros. Construction Co., Inc., (“Landlord”),
by which Landlord leased to Tenant and Tenant leased from Landlord approximately
__________ [rentable] square feet of the building located at [address of
premises] (“Premises”) in accordance with a Lease dated [date of lease], Tenant
acknowledges and certifies to Landlord as follows:

 

(1) The Lease commenced on [date of commencement] (“Commencement Date”);

(2) The Premises contain [number] square feet of space; and

(3) Tenant has accepted and is currently in possession of the Premises.

 

IN WITNESS WHEREOF, this Commencement Date Memorandum is executed on [date].

 

 

TENANT:

 

[Name and capacity of tenant]

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

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EXHIBIT D

 

ESTOPPEL CERTIFICATE

 

TO:                      

                              

                              

                              

        Attn:                  

 

 

                          (“Tenant”) hereby certifies as follows:

 

 

1.             The undersigned is the Tenant under that certain Lease dated
           , 20  , and amended on             , 20   (collectively herein, the
“Lease”), executed by                                          (“Landlord”), as
Landlord, and the undersigned, as Tenant, regarding all of the  real property
located at                     
                                                                            (the
“Property”) and the Building (collectively referred to as the “Premises”).

 

2.             The term of the Lease commenced on            , 20   and the
initial expiration date of the Lease is           , 20  .  Tenant has accepted
possession and taken occupancy of the entire Premises; the term of the Lease has
commenced; Tenant has commenced payment of Base Rent and additional rent for all
spaces subject to the Lease.

 

3.             The current monthly Base Rent (not including any additional rent)
payable under the Lease is                                      Dollars
($           ).  Tenant has paid Base Rent through                , 20  ; the
next payment of Base Rent is due on               , 20  .

 

4.             The current amount of additional rent payable by Tenant is
                                Dollars ($           ).  Tenant has paid its
additional rent through                  , 20  ; the next payment of Additional
Rent is due on               , 20  .

 

5.             The Lease provides for           option(s) to extend the term of
the Lease, each for               year(s).  The Base Rent for each such
extension term is as follows (if none, state “NONE”):
                                             .  Except as expressly provided in
the Lease for the above option(s), Tenant has no right or option to renew or
extend the term of the Lease.

 

6.             A true, correct and complete copy of the Lease (including all
amendments, modifications and supplements thereto) is attached hereto and the
Lease is in full force and effect, and represents the entire agreement between
Tenant and Landlord with respect to the Premises.  There are no other
agreements, amendments, modifications or supplements to the Lease, whether oral
or written, between Tenant and Landlord, or any other party, with respect to

 

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the Premises except as follows (include the date of any such agreement,
amendment, modification or supplement; if none, state “NONE”):
                                   .

 

7.             To Tenant’s actual present knowledge, as of the date hereof (a)
Landlord is not in any respect in default in the performance of the terms and
provisions of the Lease and no event has occurred which with the giving of
notice or the passage of time or both would constitute a default by Landlord
under the Lease, except as follows (if none, state “NONE”):
                                                              , and (b) Tenant
is not in any respect in default in the performance of the terms and provisions
of the Lease and no event has occurred which with the giving of notice or the
passage of time or both would constitute a default by Tenant under the Lease,
except as follows (if none, state “NONE”):
                                                              .

 

8.             Tenant’s interest in the Lease has not been assigned, sublet,
licensed, and hypothecated (and Tenant has not agreed to do any of the
foregoing), except as follows (if none, state
“NONE”):                                                 .  Tenant has not
received notice and is not aware of any prior transfer, assignment,
hypothecation or pledge by Landlord of any of Landlord’s leasehold interest in
the Project or in the Lease.

 

9.             To Tenant’s actual present knowledge, as of the date hereof,
there are no defenses, offsets, claims, counterclaims or credits against Base
Rent or additional rent payable under the Lease and no free periods or rental
concessions have been granted to Tenant, except as follows (if none, state
“NONE”):                                                               .

 

10.           To Tenant’s actual present knowledge, as of the date hereof, there
are no actions, voluntary or otherwise, pending or threatened against Tenant
under the bankruptcy, reorganization, moratorium or similar laws of the United
States, any state thereof or any other jurisdiction.

 

11.           Tenant is not aware of any work to be performed by or on behalf of
Landlord under the Lease that has not been completed in accordance with the
Lease except as follows (if none, state “NONE”):
                                                                     , and all
reimbursements and allowances due to Tenant under the Lease in connection with
any work have been paid in full except as follows (if none, state “NONE”):
                                                        .

 

12.           The Security Deposit being held by Landlord under the Lease is
$              .

 

13.           This Certificate is given to                                  with
the understanding that                            will rely hereon in connection
with the conveyance and/or encumbrance of the Project of which the Premises
constitute a part to                            .  Following any such conveyance
and/or encumbrance, Tenant

 

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agrees that the Lease shall remain in full force and effect and shall bind and
inure to the benefit of                                             and its
successor in interest as if no purchase or encumbrance had occurred.

 

14.           Any initially capitalized term not otherwise defined herein shall
have the same meaning as set forth in the Lease.

 

 

DATED:            , 20                               “TENANT”

 

 

 

 

By:

 

 

 

 

 

[Print Name]

 

 

 

 

 

[Print Title]

 

 

 

 

 

[ATTACH LEASE AND AMENDMENTS TO THIS CERTIFICATE]

 

 

EXHIBIT E

 

LANDLORD’S COMPLETION CERTIFICATE

 

 

                                                          [Tenant’s name and
address]

                                                         

                                                         

 

Re:                                                    [Description of Leased
Premises] (“Project”)

 

 

Dear                                   :

 

                Pursuant to Section 5 of the Work Letter attached as Exhibit B
to the Lease (“Lease”) dated as of                      [date], between the
undersigned, as Landlord, and                                  [Tenant’s name
and capacity], as Tenant, the Landlord notifies you that as of
                              [date], the Improvements (as defined in the Lease)
became Ready for Delivery (as defined in the Lease).

 

                The Landlord certifies that the Improvements are substantially
complete in accordance with the Approved Working Drawings (as defined in the
Lease).

 

 

 

 

 

 

 

Landlord’s signature

 

 

[name and capacity]

 

 

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