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.]


 

















 


 


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 


 


7

















 


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


 


11






 












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 


 


12

















 


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


 


13

















 


 


(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


 


14

















 


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


 


15

















 


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;


 


16

















 


          (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


 


17

















 


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.


 


18

















 


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.


 


19

















 


(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.


 


20

















 


(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


 


21






 












 


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 


 


22

















 


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 (11⁄2) 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.


 


23

















 


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 


 


24

















 


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

  



 


25

















 


	
   

  	
   

  	
  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.


 


26

















 


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.


 


27

















 


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

  
						



 


 


28






 


 


 












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.


 


 






 












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.


 


1

















 


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


 


2

















 


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.


 


3

















 


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


 


4

















 


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,


 


5

















 


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

  	
   

  
	
   

  	
   

  	
   

  
							



 


  


6






 












 


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:

  	
   

  
			






 






 












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


 


1

















 


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 


 


2

















 


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]

  	
   

  



 


3