Document:

Exhibit 10.1

GROUND LEASE

This ground lease is made as
of Sept. 15, 2006, between WALTER
BROS. CONSTRUCTION CO., INC., a California corporation (“Landlord”), and
MISSION COMMUNITY BANK, a California corporation (“Tenant”). Landlord leases to
Tenant and Tenant hires from Landlord the Premises hereafter described.

1.                                       Premises. The Premises consist of approximately 32,500 square feet of real property
located at the corner of South Higuera and Prado Road, in the City of San Luis
Obispo, County of San Luis Obispo, State of California (“Premises”).

The legal description of the
Premises, including any appurtenances, is included in Exhibit “A,” attached to
this lease and incorporated herein. The Premises are currently located within a
larger parcel and it is the intent of Landlord and Tenant that Landlord will
obtain a lot line adjustment from the City of San Luis Obispo, whereby a
separate parcel will be created (the “Lot Line Adjustment”) which new parcel
shall be the Premises. The legal description of the Premises, the size of the
Premises, and the allowable size of the building and parking lot to be
constructed on the Premises are contingent upon the Lot Line Adjustment.
Exhibit “A” shall be finalized and attached hereto after the Lot Line
Adjustment is complete, and the parties acknowledge that the property may be
reduced or increased in size through the Lot Line Adjustment process, but that
the rent to be paid by Tenant pursuant to Paragraph 3, below, shall not be
adjusted as a result of such modifications in the size of the parcel.

2.                                       Term / Early Termination / Option to Extend.

(a)                                  The term of this lease is fifty (50) years,
beginning October 1, 2006 (“Commencement Date”), and ending at midnight on
September 30, 2056, unless sooner terminated as provided for in this lease.

(b)                                 In consideration of the payment by Tenant to
Landlord of the sum of Twenty-Five Thousand and No/100 Dollars ($25,000.00)
upon execution of this Lease as a non- refundable lease premium (“Lease Premium”),
during the first twelve (12) months after the Commencement Date, Tenant shall
have the option, on notice to Landlord (“Termination Notice”), to terminate
this Lease, effective ten (10) days after delivery of the Notice to Landlord (“Lease
Termination Date”). Tenant shall not be entitled to any refund of the Lease
Premium or rent paid to the Lease Termination Date, and as of the Lease
Termination Date, Tenant shall deliver to Landlord any development plans, soils
reports, maps and other investigative reports which may have been generated by
Tenant for use in developing the Premises prior to the Lease Termination Date.
In addition, Tenant agrees to provide Landlord with quarterly status reports on
the progress of Tenant’s development of the Premises until any such Lease
Termination Date, but no such reports shall be required after September 30,
2007, on which date Tenant’s right to an early termination of the Lease shall
expire.

(c)                                  Tenant is given the option to extend the term
on all the provisions contained in this Lease, except for minimum monthly rent,
for two (2) additional five-year

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periods
(“Extended Term”) following expiration of the initial term, by giving notice of
exercise of option (“Option Notice”) to Landlord at least sixty (60) but not
more than ninety (90) days before the expiration of the term; provided that, if
Tenant is in default on the date of giving the Option Notice, the Option Notice
shall be totally ineffective, or if the Tenant is in default on the date the
Extended Term is to commence, the Extended Term shall not commence and this
Lease shall expire at the end of the then-current term.

3.                                       Minimum Rent. Tenant shall pay without abatement,
deduction, or offset, as minimum net rent, payable in advance, equal monthly
installments of Seven Thousand and No/100 Dollars ($7,000.00) per month (“Base
Rent”), which amount is subject to adjustment as provided in Section 5., below.
Notwithstanding the foregoing, if Landlord is the successful bidder for the
construction of the Improvements referenced in Section 9, below, the parties
agree that the Base Rent shall be modified to Five Thousand Three Hundred
Eighty-Eight and 33/100 Dollars ($5,388.33) per month, and upon execution of a
construction contract between Landlord and Tenant, Tenant shall be entitled to
a credit against future rents in an amount equal to the difference in the
amount paid by Tenant to Landlord as Base Rent to that date, and the amount
which would have been paid if the Base Rent had been Five Thousand Three
Hundred Eighty-Eight and 33/100 Dollars ($5,388.33) per month from the
Commencement Date.

4.                                        Late Payment Charge.  For
each monthly rent installment that is received by Landlord more than ten (10)
days after its due date, Tenant agrees to pay as additional rent a charge equal
to ten percent (10%) of the delinquent installment. Payment of this charge does
not waive any default, nor does this provision extend the due date of the
monthly rent installments.

5.                                        Adjustments to Minimum Rent. During the term of the lease, the minimum monthly
rental described in section 3 shall be adjusted upward as of the fifth
anniversary of the commencement date and continuing thereafter every five
years.

On the first (1st) adjustment date referred to above, and each five (5) years thereafter
during the term and any extended or renewal terms of this lease, each of which
dates is hereafter referred to as an “adjustment date,” the rent provided for
in this lease shall be adjusted upward according to any rise in the Consumer
Price Index as that term is hereafter defined. At each adjustment date, the
minimum rent shall be adjusted to an amount equal to the greater of:

(a).                               the minimum rent in effect immediately prior
to that adjustment date (without regard to any temporary abatement of rent
then, or previously in effect, pursuant to the provisions of this lease), or

(b).                              the product obtained by multiplying the
minimum rent in effect immediately prior to the commencement of that adjustment
date (without to regard to any temporary abatement of rent then, or previously
in effect, pursuant to the provisions of this lease) by a fraction, the
numerator of which is the Consumer Price Index published nearest but prior to
the commencement date of that adjustment period and the denominator of which is
the Consumer Price Index published nearest but prior to the commencement of the
immediately proceeding adjustment date. For the purposes of the first
adjustment date, the denominator shall be the

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Consumer
Price Index published nearest but prior to the original commencement date of
this lease.

The term “Consumer Price
Index” as used herein shall refer to the Consumer Price Index for All Urban
Consumers for the San Francisco / Oakland / San Jose, California area,
based on the period 1982-1984=100 as published by the Bureau of Labor
Statistics of the U.S. Department of Labor.

The index for the adjustment
date shall be the one reported in the U. S. Department of Labor’s newest
comprehensive official index then in use and most nearly answering the
foregoing description of the index to be used. If it is calculated from a base
different from the base year 1982-1984 = 100 used for the base figure
above, the base figures used for calculating the adjustment percentage shall
first be converted under a formula supplied by the Bureau.

If the described index shall
no longer be published, another generally recognized as authoritative shall be
substituted by agreement of the parties. If they are unable to agree within
fourteen (14) days after demand by either party, the substitute index shall, on
application of either party, be selected by the chief officer of the San
Francisco regional office of the Bureau of Labor Statistics or its successor.

6.                                       Taxes; Assessments.

A.                                   Real and Personal Property. Tenant shall pay any and all real and
personal property taxes, general and special assessments, and other charges of
every description levied on or assessed against the Premises, improvements
located on the Premises, personal property located on or in the land or
improvements, the leasehold estate, or any subleasehold estate, to the full extent
of installments falling due during the term, whether belonging to or chargeable
against Landlord or Tenant, including, but not limited to any assessments
relating to public improvements on Prado Road. Tenant shall make all such
payments direct to the charging authority before delinquency and before any
fine, interest, or penalty shall become due or be imposed by operation of law
for their nonpayment. If, however, the law expressly permits the payment of any
or all of the above items in installments (whether or not interest accrues on
the unpaid balance), Tenant may, at Tenant’s election, utilize the permitted
installment method, but shall pay each installment with any interest before
delinquency.

B.                                     Prorations. All payments of taxes or assessments, or both, except permitted
installment payments, shall be prorated for the initial lease year and for the
year in which the lease terminates. For permitted installment payments of which
at least the first installment fell due before commencement of the term, Tenant
shall pay all installments falling due after commencement of the term. For
permitted installment payments extending beyond the expiration of the term,
Tenant shall pay those installment(s) falling due before expiration of the
term.

C.                                     Tenant’s Right to Contest. Tenant may contest the legal validity or
amount of any taxes, assessments, or charges for which Tenant is responsible
under this lease, and may institute such proceedings as Tenant considers
necessary. If Tenant contests any such tax,

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assessment, or charge, Tenant may withhold or defer
payment or pay under protest but shall protect Landlord and the Premises from
any lien by adequate surety bond or other appropriate security.

Landlord appoints Tenant as
Landlord’s attorney-in-fact for the purpose of making all payments to any
taxing authorities and for the purpose of contesting any taxes, assessments, or
charges, conditioned on Tenant’s preventing any liens from being levied on the
Premises or on Landlord (other than the statutory lien of Revenue and Taxation
Code Section 2187).

D.                                    Exemptions. Tenant’s obligation to pay taxes or assessments levied or charged
against the Premises or improvements or against specified personal property
shall not include the following, whatever they may be called: income or profits
taxes levied or assessed against Landlord by federal, state, or other
governmental agency; estate, succession, inheritance, or transfer taxes of
Landlord; or corporation, franchise, or profits taxes imposed on the corporate owner
of the fee title of the Premises. If, however, during the term, taxes are
imposed, assessed, or levied on the rents derived from the Premises in lieu of
all or any part of real property taxes, personal property taxes, or real and
personal property that Tenant would have been obligated to pay under the
foregoing provisions, and the purpose of the new taxes is more closely akin to
that of an ad valorem or use tax than to an income or franchise tax on Landlord’s
income, Tenant shall pay the taxes as provided above for property taxes and
assessments.

Tenant shall also defend and
indemnify Landlord and the Premises against liability for taxes and other
impositions in the nature of a tax on the right to do business when Landlord’s
collection of rent under this lease is defined as doing business.

E.                                      Proof of Compliance. Tenant shall furnish to Landlord, within
ten (10) days after the date when any tax, assessment, or charge would become
delinquent, receipts or other appropriate evidence establishing their payment.
Tenant may comply with this requirement by retaining a tax service to notify
Landlord whether the taxes have been paid.

7.                                         Uses; Purposes. Tenant shall use and permit the use of the
Premises primarily for the construction, maintenance and operation of a bank /
office complex, provided that Tenant may at any time use the existing or
subsequent improvements or permit them to be used, for any lawful purpose with
the prior written consent of Landlord which shall not be unreasonably withheld
or delayed, or alter, modify, remove, or demolish the improvements, as provided
in section 10 hereof.

8.                                         Land Use Restrictions. Except as provided in section 13 hereof,
Tenant may only enter into agreements restricting use of or granting easements
over the Premises, or obtain zoning changes or conditional use permits, that
are expressly limited to the term of this lease. Tenant must obtain Landlord’s
prior written consent to any restrictions on the land, its use, or its alienation,
for periods extending beyond the term. Landlord shall, at Tenant’s notice of
request, and subject to the above limitations, join with Tenant in applications
and proceedings to obtain necessary use or zoning changes, but without cost or
expense to Landlord. All oil, gas, and mineral rights are expressly reserved
from this lease.

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9.                                       Tenant’s Duty to Construct New Improvements. At such time as Tenant is prepared to
construct Improvements on the Property, Tenant shall comply with the Conditions
of Major Construction below and shall commence construction consisting of an
approximately 14,000 square foot bank/office complex, including a parking lot
with approximately 45 parking spaces (“Bank / Office Complex”).

10.                                 Construction. In addition to Tenant’s duty to construct
the Bank / Office Complex pursuant to Section 9 hereof, Tenant may construct or
otherwise make new improvements on any part or all of the Premises and
demolish, remove, replace, alter, relocate, reconstruct, or add to any existing
improvements in whole or in part, and modify or change the contour or grade, or
both, of the land, provided Tenant is not then in default under any condition
or provision of this lease, and provided the improvements following the work
are at least equal in value to any improvements as they were before being
demolished, removed, replaced, altered, reconstructed, modified, or changed.
All salvage shall belong to Tenant.

11.                                 Conditions of Major Construction. Before any major work of construction, alteration,
or repair (as defined in section 15D) is commenced on the Premises, and before
any building materials have been delivered to the Premises by Tenant or under
Tenant’s authority, Tenant shall comply with all the following conditions or
procure Landlord’s written waiver of the condition or conditions specified in
the waiver:

A.                                    Plans, Specifications. Tenant shall deliver to Landlord for
Landlord’s approval one (1) set of preliminary construction plans and
specifications prepared by an architect or engineer licensed to practice as
such in California, including, but not limited to, preliminary grading and
drainage plans, soil tests, utilities, sewer and service connections, locations
of ingress and egress to and from public thoroughfares, curbs, gutters,
parkways, street lighting, designs and locations for outdoor signs, storage
areas, and landscaping, all sufficient to enable subcontractors to make
reasonably accurate bid estimates and to enable Landlord to make an informed
judgment about the design and quality of construction and about any effect on
the reversion.

Landlord shall not unreasonably
disapprove preliminary plans and specifications. Approval or disapproval shall
be communicated in the manner provided for notices, and disapproval shall be
accompanied by specification of the grounds for disapproval; provided that
Landlord’s failure to disapprove within five (5) days after delivery to
Landlord shall be conclusively considered to be approval. Tenant shall not
deliver working drawings to any governmental body for a building permit until
preliminary plans are approved as in this section 11 A. Following Landlord’s
first or any subsequent disapproval, Tenant may elect (1) to submit revised
plans and specifications or (2) to give notice contesting the reasonableness of
Landlord’s disapproval. A contest of reasonableness shall be determined by
arbitration, as provided in section 26. If the reasonableness of Landlord’s
disapproval is sustained, Tenant shall perform as in (1) above; if it is not
sustained, the plans and specifications shall be considered approved.

B.                                      Final Plans. Specifications. Tenant shall prepare final working plans
and specifications substantially conforming to preliminary plans previously
approved by Landlord,

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submit them to the appropriate governmental agencies
for approval, and deliver to Landlord one complete set as approved by the
governmental agencies. Changes from the preliminary plans shall be considered
to be within the scope of the preliminary plans if they are not substantial or
if they are made to comply with suggestions, requests, or requirements of a governmental
agency or official in connection with the application for permit or approval.

C.                                     Notice of Intent to Construct. Tenant shall notify Landlord in writing of Tenant’s
intention to commence a work of improvement at least ten (10) business days
before commencement of any such work or delivery of any materials. The notice
shall specify the approximate location and nature of the intended improvements.
Landlord shall have the right to post and maintain on the Premises any notices
of non-responsibility provided for under applicable law, and to inspect the
Premises in relation to the construction at all reasonable times.

D.                                    Landlord’s Approval of General Contractor. Tenant shall furnish Landlord with a true
copy of Tenant’s contract with the general contractor and with evidence of the
general contractor’s qualifications for Landlord’s approval which shall not be
unreasonably withheld. The contract shall give Landlord the right but not the
obligation to assume Tenant’s obligations and rights under that contract if
Tenant should default. The parties acknowledge that Landlord is a general
contractor, and may (but is not required to) bid upon the construction project
for the construction of the Bank / Office Complex. In the event that Landlord
is the successful bidder, the parties acknowledge that the Base Rent shall be
adjusted pursuant to Section 3, above. Landlord’s failure to be awarded the
contract for the construction of the Bank / Office Complex shall not be deemed
a reasonable basis upon which to disapprove another general contractor for the
Project.

Landlord may disapprove by
notice given within five (5) days following delivery of a copy of the contract.
The notice shall specify the grounds for disapproval. Landlord shall not
unreasonably disapprove and shall be considered to have approved in the absence
of notice of disapproval given within five (5) days after Tenant furnishes the
contract and evidence specified above.

E.                                      Required Governmental Permits. Tenant shall procure and deliver to Landlord
at Tenant’s expense evidence of compliance with all then applicable codes,
ordinances, regulations, and requirements for permits and approvals, including
but not restricted to a grading permit, building permits, zoning and planning
requirements, and approvals from various governmental agencies and bodies
having jurisdiction.

F.                                      Builder’s Risk and Other Insurance. Upon Landlord’s request, Tenant shall deliver
to Landlord (i) certificates of insurance evidencing coverage for “builder’s
risk,” (ii) evidence of workmen’s compensation insurance covering all persons
employed in connection with the work and with respect to whom death or bodily
injury claims could be asserted against Landlord or the Premises, and (iii)
evidence that Tenant has paid or caused to be paid all premiums for the
coverage described above in this section 11F and any increase in premiums on insurance
provided for in the sections on insurance, sufficient to assure maintenance of
all insurance required by this lease during the anticipated course of the work.
Tenant shall maintain,

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keep
in force, and pay all premiums required to maintain and keep in force all
required insurance at all times during which such work is in progress.

G.                                     Landlord’s Approval of Initial Financing. Prior to commencing any construction on the
Premises, Tenant shall deliver to Landlord for Landlord’s approval evidence of
the existence and conditions of Tenant’s construction financing for the
construction of the Bank / Office Complex intended to be constructed by Tenant.
Landlord shall not unreasonably disapprove of said financing, but shall be
entitled to adequate assurance of Tenant’s ability to ensure financing for the
completion of such Bank / Office Complex prior to demolition of the existing
structures.

12.                                  Soil Conditions. Landlord makes no covenants or warranties
respecting the condition of the soil or subsoil or any other condition of the
Premises, except that Landlord is unaware of the current or prior existence of
any underground storage tanks on the property, or of the prior release of any
hazardous substances on the property, as defined under the California Health
and Safety Code. Landlord has provided Tenant with a Phase I Environmental
Report for the Premises, but Tenant shall be responsible to perform any other
investigations which Tenant may require to determine the soil and environmental
condition of the property, and the feasibility of Tenant’s project. Tenant may
enter onto the land before commencement of the term to make soil and structural
engineering tests and any other tests that Tenant considers necessary. All such
tests made by or on behalf of Tenant shall be at Tenant’s sole expense and
shall be evidenced by a separate contract. A copy of any such reports shall be
delivered to Landlord on commencement of the term.

13.                                  Tenant’s Right To Grant Easements. Landlord grants to Tenant the right to
grant to public entities or public service corporations, for the purpose of
serving only the Premises, rights of way or easements on or over the Premises
for poles or conduits or both for telephone, electricity, water, sanitary or
storm sewers or both, and for other utilities and municipal or special district
services.

14.                                  Completion.

A.                                    Diligent Prosecution to Completion. Once any construction work is begun, Tenant
shall with reasonable diligence prosecute to completion all construction of
improvements, additions, or alterations. All work shall be performed in a good
and workmanlike manner, shall substantially comply with plans and
specifications submitted to Landlord as required by this lease, and shall
comply with all applicable governmental permits, laws, ordinances, and regulations.

B.                                      Protection of Landlord Against Cost or Claim. Tenant shall pay or cause to be paid the
total cost and expense of all works of improvement, as that phrase is defined
in the California statutes regulating mechanics’ liens. No such payment shall
be construed as rent. Tenant shall not suffer or permit to be enforced against
the Premises or any part thereof any mechanic’s, materialman’s, contractor’s, or
subcontractor’s lien arising from any work of improvement, however it may
arise. Nevertheless, Tenant may in good faith and at Tenant’s own expense
contest the validity of any such asserted lien, claim, or demand, provided
Tenant has

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furnished
the bond required in California Civil Code Section 3143 (or any comparable
statute hereafter enacted for providing a bond freeing the Premises from the
effect of such a lien claim).

Tenant shall defend (with
counsel approved by Landlord, which approval shall not be unreasonably
withheld) and indemnify Landlord against all liability and loss of any type
arising out of work performed on the Premises by Tenant, together with
reasonable attorney’s fees and all costs and expenses incurred by Landlord in
negotiating, settling, defending, or otherwise protecting against such claims.

C.                                    Landlord’s Right to Discharge Lien. If Tenant does not cause to be recorded the
bond described in California Civil Code Section 3143 or otherwise protect the property
under any alternative or successor statute, and a final judgment has been
rendered against Tenant by a court of competent jurisdiction for the
foreclosure of a mechanic’s, materialman’s, contractor’s or subcontractor’s
lien claim, and if Tenant fails to stay the execution of the judgment by lawful
means or to pay the judgment, Landlord shall have the right, but not the duty,
to pay or otherwise discharge, stay, or prevent the execution of any such
judgment or lien or both. Tenant shall reimburse Landlord for all sums paid by
Landlord under this paragraph, together with all Landlord’s reasonable
attorneys’ fees and costs, plus interest on those sums, fees, and costs at the
lesser of ten percent (10%) per annum or the highest rate allowed by law from the
date of payment until the date of reimbursement.

D.                                   Notice of Completion. On completion of any substantial work of improvement
during the term, Tenant shall file or cause to be filed a notice of completion.
Tenant hereby appoints Landlord as Tenant’s attorney-in-fact to file the notice
of completion on Tenant’s failure to do so after the work of improvement has
been substantially completed.

E.                                     Notice of Changes in Plans. On completion of any work of improvement, Tenant
shall give Landlord notice of all changes in plans or specifications made
during the course of the work, and shall, at the time and in the same manner,
supply Landlord with “as built” drawings reflecting all such changes. Landlord
acknowledges that it is common practice in the construction industry to make
numerous changes during the course of construction on substantial projects.
Changes that do not substantially alter plans and specifications previously approved
by Landlord do not constitute a breach of Tenant’s obligations.

15.                                 Maintenance; Repairs; Alterations; Reconstruction.

A.                                   Tenant Required to Maintain Premises. Throughout the term, Tenant shall, at
Tenant’s sole cost and expense, maintain the Premises and all improvements in
good condition and repair, ordinary wear and tear excepted, and in accordance
with all applicable laws, rules, ordinances, orders and regulations of (1)
federal, state, county, municipal, and other governmental agencies and bodies
having or claiming jurisdiction and all their respective departments, bureaus,
and officials; (2) the insurance underwriting board or insurance inspection
bureau having or claiming jurisdiction; and (3) all insurance companies
insuring all or any part of the Premises or improvements or both.

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Except as provided below,
Tenant shall promptly and diligently repair, restore and replace all
improvements on the Premises which are damaged or destroyed from any cause.
However, if the damage requiring the repair or restoration is caused by a peril
which is not covered by the insurance policies required by this lease, and the cost
of such repair or restoration exceeds ten percent (10%) of the replacement
value of all the improvements, Tenant shall (i) repair, restore, and replace
the improvements, or (ii) after giving written notice to Landlord, raze the
improvements damaged or destroyed. Within fourteen (14) days after such notice,
Landlord may by notice elect to repair, restore and replace as above, and
Tenant shall not raze until the expiration of the time for Landlord’s notice of
election. Razing means the removal from the Premises of all fixtures and
improvements, including demolition and removal of all basements and
foundations, filling all excavations, and compacting the soil sufficient for
the construction of buildings in the future, returning the surface to grade,
and leaving the Premises safe and free from debris and hazards.

All available insurance
proceeds may be used by the party responsible for or electing to repair and
restore or raze the improvements, as necessary to accomplish full restoration
or to complete demolition, as the case may be.

The completed work of
maintenance, compliance, repair, restoration or replacement shall be equal in
value, quality and use to the condition of the improvements before the event
giving rise to the work, except as expressly provided to the contrary in this
lease. Landlord shall not be required to furnish any services or facilities or
to make any repairs or alterations of any kind in or on the Premises. Landlord’s
election to perform any obligation of Tenant under this provision on Tenant’s
failure or refusal to do so shall not constitute a waiver of any right or
remedy for Tenant’s default, and Tenant shall promptly reimburse, defend, and
indemnify Landlord against all liability, loss, cost and expense arising from
it.

Nothing in this provision
defining the duty of maintenance shall be construed as limiting any right given
elsewhere in this lease to alter, modify, demolish, remove or replace any
improvements, or as limiting provisions relating to condemnation or to damage
or destruction during the final year or years of the term. No deprivation,
impairment, or limitation of use resulting from any event or work contemplated
by this section 15A shall entitle Tenant to any offset, abatement, or reduction
in rent nor to any termination or extension of the term.

B.                                     Maintenance of Landscaping and Parking Areas. The parties acknowledge that the Premises
are located adjacent to an office complex operated by Landlord, and that
Landlord’s willingness to enter into this Ground Lease is based upon assurances
by Tenant that the Landscaping and Parking Areas of the Premises shall be
maintained in clean, safe and sightly condition. Tenant agrees to enter into a
maintenance contract with a reputable landscape contractor for the provision of
ground maintenance and landscaping, parking lot maintenance and light
maintenance on no less than a weekly basis for the entire term of the Lease,
and acknowledges that a failure to fulfill its obligations under this Section
shall constitute a default under this Lease. Tenant further agrees that
Landlord may seal coat the parking lot for the entire center in which the
Premises are located on a scheduled basis, for which Tenant shall pay its
prorata share.

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C.                                     Right to Contest Governmental Order. Tenant has the right to contest by appropriate
judicial or administrative proceedings, without cost or expense to Landlord,
the validity or application of any law, ordinance, order, rule, regulation, or
requirement (hereafter called “law”) that Tenant repair, maintain, alter, or replace
the improvements in whole or in part, and Tenant shall not be in default for
failing to do such work until a reasonable time following determination of
Tenant’s contest. If Landlord gives notice of request, Tenant shall first
furnish Landlord a bond, satisfactory to Landlord in form, amount, and insurer,
guaranteeing compliance by Tenant with the contested law and indemnifying
Landlord against all liability that Landlord may sustain by reason of Tenant’s
failure or delay in complying with the law. Landlord may, but is not required
to, contest any such law independently of Tenant. Landlord may, and on Tenant’s
notice of request shall, join in Tenant’s contest.

D.                                    Major and Minor Repairs, Reconstructions, Alterations. Landlord’s approval is not required for
Tenant’s minor repairs, alterations, or additions. “Minor” means a construction
cost not exceeding five percent (5%) of the value of the improvements, none of which
is derived from funds advanced on the security of any encumbrance on the
leasehold or the property. “Construction cost” includes the cost of labor,
materials, and reasonable profit to general contractor and subcontractors for
any demolition and any removal of existing improvements or parts of
improvements as well as for preparation, construction, and completion of all
new improvements or parts of improvements. “Value of improvements” means the
latest available appraisal of “full insurable value” of the improvements as
defined in provisions of this lease relating to fire and extended coverage
insurance. “Major” repairs, alterations, or additions are those not defined as
minor above. For major repairs, alterations, or additions, Tenant shall comply
with all conditions of major construction contained in section 11 of this
lease.

Notwithstanding the
foregoing, Tenant is relieved of the obligation to, but may, repair, restore,
or reconstruct improvements damaged or destroyed during the final 10 years of
the term if (1) the cost of repairing or restoring the damage exceeds 10% of
the full replacement value of all improvements on the Premises; and (2) the
damage or destruction is uninsured and is not required to be insured under any
provision of this lease; and (3) Tenant furnishes adequate security to assure
that Tenant will continue to make all payments when due as required by the
provisions of this lease. If the Tenant elects not to repair, restore and
reconstruct the Premises Tenant shall, upon receipt of written notice from
Landlord, raze the improvements on the properties as set forth in Article 10
and Article 15A of this lease.

E.                                      Ownership of Improvements. All improvements constructed on the Premises
by Tenant as permitted by this lease shall be owned by Tenant until expiration
of the term or sooner termination of this lease. Tenant shall not, however,
remove any improvements from the Premises nor waste, destroy, or modify any
improvements on the Premises, except as permitted by this lease. The parties
covenant for themselves and all persons claiming under them that the
improvements are real property. The foregoing language shall not be deemed to
apply to any of Tenant’s trade fixtures, which may be removed by Tenant at the
expiration of the Lease, provided that such removal shall not cause any damage
to the structures on the Premises, which structures shall be surrendered to
Landlord pursuant to Section 43, below.

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All improvements on the
Premises at the expiration of the term or sooner termination of this lease
shall, without compensation to Tenant, then become Landlord’s property free and
clear of all claims to or against them by Tenant or any third person, and
Tenant shall defend and indemnify Landlord against all liability and loss
arising from such claims or from Landlord’s exercise of the rights conferred by
this section.

F.                                      Hazardous Materials. Tenant at all times shall keep the Premises
free of Hazardous Materials (as hereinafter defined). Tenant shall not use,
generate, manufacture, store, release, or dispose of Hazardous Materials in,
on, or about the Premises. “Hazardous Materials” shall include, but not be
limited to, substances defined as “hazardous substances”, “hazardous materials”,
or “toxic substances” in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C.A Sec.9601, et
seq.; the Hazardous Materials Transportation Act, 49 U.S.C.A 1801, et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C.A Sec. 6901, et seq.; and
those substances defined as “hazardous wastes” in Section 25117 of the
California Health & Safety Code or as “hazardous substances” in Section
25316 of the California Health & Safety Code; and in the regulations
adopted and publications promulgated pursuant to said laws.

16.                                 Encumbrance of Leasehold Estate.

A.                                   Tenant’s Right to Encumber. Tenant may at any time and from time to
time, with Landlord’s consent, approval or authorization, hypothecate,
mortgage, pledge or encumber Tenant’s leasehold estate created by this lease,
and/or Tenant’s rights hereunder, by mortgage, deed of trust or other security
agreement or instrument; provided, however, that no such encumbrance
shall attach to or constitute a lien on the fee estate of Landlord in the
leased land, and shall expressly acknowledge that all improvements constructed
on the Premises shall become the property of Landlord, free and clear of all
encumbrances, upon expiration of the term or sooner termination of this lease
as set forth in section 15E. above. Landlord shall subordinate its fee interest
provided that Landlord is granted in the encumbrance a right to adequate notice
of default, adequate opportunity to cure such default without the obligation to
pay late charges or penalties, the right and sufficient time to terminate the
lease without acceleration of the leasehold mortgage, and the opportunity to
assume such leasehold mortgage, without the obligation to pay assumption fees,
the leasehold mortgagee’s attorneys’ fees, trustee’s fees, penalties or late
charges, in the event of a default under the leasehold mortgage and the
exercise by the lender of its right to foreclose on the leasehold mortgage.

Any such lien, mortgage,
deed of trust or security instrument shall be referred to hereafter as a “mortgage”,
and the holder or beneficiary of such mortgage shall be referred to hereafter
as the “mortgagee.” No mortgagee shall be deemed an assignee of this lease so
as to require such mortgagee to assume the performance of any of the terms,
covenants or conditions of this lease except upon such mortgage-obtaining title
to or Tenant’s right of possession of the leased land as hereinafter provided.

In no event shall the
leasehold estate created hereunder secure any loan or obligation where the loan
proceeds are utilized for any purpose other than the improvement, financing or
refinancing of the Premises.

 11
 

 

B.                                     Acquisition and Sale by Mortgagee. A mortgagee or its assigns may enforce such
mortgage and acquire title to Tenant’s leasehold estate created hereby or
Tenant’s right of possession of the leased land pursuant to this lease, or any
part thereof, in any lawful way and, pending foreclosure of such mortgage, the
mortgagee may take possession of and operate the leased land, or any portion
thereof, and perform all obligations of Tenant, and upon foreclosure by power
of sale, judicial foreclosure, or acquisition of the leasehold estate of
Landlord by deed in lieu of foreclosure, the mortgagee may, upon notice to
Landlord, sell and assign the leasehold estate, or any part thereof, hereby
created. Any such assignee of the leasehold estate shall be liable to perform
all the obligations imposed upon Tenant by this lease only during the period such
assignee has ownership of said leasehold estate or possession of the leased
land, or any part thereof.

C.                                     Notice to and Rights of Mortgagees.

(a)                                  When giving notice to Tenant with respect to any
default hereunder, Landlord shall also serve a copy of each such notice upon
any mortgagee who shall have given Landlord a written notice specifying its
name and address. In the event Tenant shall default in the performance of any
of the terms, covenants, agreements and conditions of this lease on Tenant’s
part to be performed, any mortgagee shall have the right, within the grace
period available to Tenant for curing such default or as set forth below, to
cure such default, whether the same consists of the failure to pay rent or the
failure to perform any other obligation, and Landlord shall accept any such
performance by any mortgagee as though the same had been done or performed by
Tenant, and for such purpose, Landlord and Tenant hereby authorize any such mortgagee
to enter upon the leased land and to exercise any of its rights and powers
under this lease and, subject to the provisions of this lease, under the
mortgage.

(b)                                 In case of a monetary default by Tenant under
this lease, Landlord will take no action to effect a termination of this lease
by reason thereof unless such default has continued beyond forty-five (45) days
after Landlord shall have served a copy of such notice upon Tenant and any
mortgagee, it being the intent hereof and the understanding of the parties that
any mortgagee shall be allowed up to, but not in excess of, forty-five (45)
days in addition to any time granted to Tenant to cure any monetary default of
Tenant under the terms of this lease. In the case of any non-monetary default
by Tenant under this lease, Landlord will take no action to effect a
termination of the term of this lease by reason thereof unless such
non-monetary default has continued beyond the grace period available to Tenant
for curing said default, and then only after Landlord shall have given to all
mortgagees thirty (30) days after the expiration of Tenant’s grace period for
curing such default within which either:

(i)                                     to commence and diligently proceed to cure
such default, if such default can be cured by the mortgagee without the
mortgagee obtaining possession of the leased land;

(ii)                                  to obtain possession of the leased land
(including possession by a receiver) and to cure such default diligently, but
in no event later than one year after the default occurred, in the case of a
default which can be cured when the mortgagee has obtained possession thereof;
or

 12

 

(iii)                               to
institute foreclosure proceedings and thereafter to complete such foreclosure
proceedings or otherwise acquire Tenant’s interest under this lease with
reasonable and continuous diligence in the case of a default which cannot be
cured in the manners set forth in Subsections (i) and (ii) above. No mortgagee
shall be required to continue such possession or continue such foreclosure
proceedings if the default which prompted the service of such a notice has been
cured.

(c)                                 If
this lease is terminated by Landlord on account of any default not reasonably
susceptible of cure by the mortgagee and if (i) there is no monetary default by
Tenant under this lease, and (ii) the mortgagee shall have arranged to the
reasonable satisfaction of Landlord to cure any default of Tenant reasonably
susceptible of cure by the mortgagee, then Landlord, within thirty (30) days
after receiving a written request therefor, which shall be given within thirty
(30) days after notice to the mortgagee of such termination of transfer and
upon payment to it of all expenses (including reasonable attorneys’ fees)
incident thereto, will execute and deliver a new lease of the leased land to
the mortgagee or its nominee or to the purchaser, assignee or transferee, as
the case may be, for the remainder of the term of this lease, containing the
same covenants, agreements, terms, provisions and limitations as are contained
herein. Any new lease delivered pursuant to this Section 16 shall be prior to
any fee mortgage or other lien, charge or encumbrance on the fee interest in
the leased land which was junior and subordinate to the mortgage held by such
mortgagee prior to the termination of this lease, and the Tenant under such new
lease shall have the same right, title and interest in and to the leased land
as Tenant had under this lease.

(d)                                Neither
the bankruptcy nor the insolvency of Tenant shall operate nor permit Landlord
to terminate this lease as long as all rent specified in Section 3 above and
all other charges of whatsoever nature payable by Tenant continue to be paid in
accordance with the terms of this lease.

(e)                                 In
the event of a default under any mortgage in favor of a mortgagee, the
mortgagee may exercise, with respect to the leased land or any portion thereof,
any right, power or remedy under such mortgage which is not in conflict with
the provisions of this lease. The time available to a mortgagee to initiate
foreclosure proceedings as aforesaid shall be deemed extended by the number of
days of delay occasioned by judicial restriction or operation of law against
any such initiation or occasioned by other circumstances beyond such mortgagee’s
control.

(f)                                         In
the event of a judicial foreclosure sale or a trustee’s sale of a mortgagee’s
security under a mortgage pursuant to applicable laws or an assignment in lieu
of foreclosure, the transferee, be it a mortgagee or others, shall succeed to
all of the right, title and interest of Tenant under this lease. During the
period that a mortgagee, or its successors or assigns, shall be in possession
of the leased land and/or during the pendency of any foreclosure proceedings
instituted by a mortgagee, the mortgagee shall pay or cause to be paid the rent
specified in Section 3 above and all other charges of whatsoever nature payable
by Tenant hereunder which have been accrued and are unpaid and which will
thereafter accrue during said period. Following the acquisition of Tenant’s
leasehold estate by the mortgagee or its designee,

 13
 

 

the
mortgagee or party acquiring title to Tenant’s leasehold estate shall commence
the cure of all defaults hereunder to be cured and thereafter diligently
process such cure to completion, except such defaults which cannot in the
exercise of reasonable diligence be cured or performed by mortgagee or party
acquiring title to Tenant’s leasehold estate, regardless of the amount of money
necessary to effect such cure, in which case Landlord’s right to effect a
termination of this lease based upon the default in question shall be deemed
waived. Any default that cannot be so cured in the exercise of reasonable
diligence by the mortgagee or party acquiring title to Tenant’s leasehold
estate shall be, and shall be deemed to have been, waived by Landlord upon
completion of the foreclosure proceedings or acquisition of Tenant’s interest
in this lease by any purchaser at the foreclosure sale or who otherwise
acquires Tenant’s interest.

(g)                                 Nothing
herein shall preclude Landlord from exercising any of Landlord’s rights or
remedies with respect to any other default by Tenant during any period of any
such forbearance, subject to the rights of any mortgagee as herein provided.

(h)                                 All
notices by Landlord to mortgagees shall be given in the manner specified in
this section 16, addressed to mortgagee at the address last specified to
Landlord by such mortgagee.

(i)                                     In
the event two or more mortgagees exercise their rights hereunder, and there is
a conflict which renders it impossible to comply with all such requests, the
mortgagee whose mortgage would be senior in priority if there were a foreclosure
shall prevail.

(j)                                     There
will be no merger of the leasehold estate created hereby with the fee estate in
the leased land by reason of the fact that the same person or entity may become
the owner of both such estates, unless and until all parties having any
interest in such estates (including all mortgagees) join in a written
instrument effecting such merger and duly record that instrument in the
official Records of San Luis Obispo County.

(k)                                  This
lease and any leasehold mortgage on the leased land shall at all times be
superior to and have priority over any mortgage which may encumber the fee
estate in the leased land and Landlord shall use diligent efforts to cause the
mortgagee under any such mortgages to execute and record in the Official
Records of San Luis Obispo County any instruments which may be necessary to
reflect this priority.

(1)                                  Landlord
and Tenant agree that this lease shall not be modified, amended or surrendered
(except for a surrender upon the expiration of the term of this lease or upon
termination by landlord pursuant to the terms of this lease) without the prior
written consent of any mortgagee, which consent shall not be unreasonably
withheld or delayed.

(m)                               Landlord
hereby consents to a provision in any mortgage or otherwise for an assignment
of rents from subleases of space within improvements on the leased land to the
mortgagee thereunder, effective upon any default by Tenant under such mortgage.

 14
 

 

D.                                    Amendments to Lease. Landlord will, upon request of Tenant,
enter into any reasonable amendment of this lease which may be requested by a
financial institution, governmental agency or other lender providing
construction or permanent financing of improvements on the leased land as a
condition to its willingness to make insure or guarantee a mortgage loan
secured by the leased land, provided that the preparation and execution of such
amendments and legal review thereof by Landlord be at no cost to Landlord, and
shall not prejudice the Landlord’s reversionary and fee interest in the leased land,
or Landlord’s right to receive rent as herein provided, or prejudice any other
right of Landlord under this lease.

17.                                 Assignment/Subletting.

A.                                   Provided that Tenant is not in default under
any covenant or condition of this Lease, Tenant shall have the absolute right
to assign or otherwise transfer Tenant’s interest in this lease and the estate
created by this lease to a permitted assignee, defined as follows:

(1)                                  An assignee whose net worth on the date of
assignment is equal to or greater than $10,000,000.00 increased upward by a
percentage equal to the percentage increase of the Consumer Price Index (as
defined in Section 5) between October 1, 2006 and the date of the proposed
assignment or transfer. Net worth shall mean the amount by which the total of
all assets shall exceed the total of all liabilities as determined by an
independent certified public accountant in accordance with generally accepted
accounting principles. For the purposes of this paragraph, the sale,
assignment, transfer, or other disposition of any of the issued and outstanding
capital stock of Tenant, or of the interest of any general partner or joint
venturer or syndicate member or cotenant if Tenant is a partnership or joint
venture or syndicate or co-tenancy, which shall result in changing the control
of Tenant, shall be construed as an assignment of this lease. Control, in
provisions of this lease relating to assignment, means 50 percent or more of
the voting power of the corporation.

(2)                                  A successor defined as:  (i) any corporation that controls Tenant; (ii)
another corporation in connection with a corporate reorganization, or the
merger of Tenant into, or the consolidation of Tenant with, another corporation
or corporations; (iii) any successor of all or substantially all of Tenant’s
business or assets unless the assignment would otherwise be prohibited by
provisions of this lease pertaining to bankruptcy.

(3)              If the assignee is a corporation whose shares
are not traded on a public stock exchange, all principal shareholders shall
sign the lease as Tenant, or guarantee Tenant’s performance.

B.                                     Right to Sublet. Provided that Tenant is not in default
under any covenant or condition of this Lease, Tenant shall have the absolute
right to sublet all or any part or parts of the Premises or the improvements or
both, and to assign, encumber, extend, or renew any sublease, provided the
following provisions are complied with:

(1)                                  Each sublease shall contain a provision,
satisfactory to Landlord and to each leasehold mortgagee having an interest at
the time the sublease is executed, requiring sublessee to attorn to Landlord
or, in the event of any proceeding to foreclose any leasehold

 15
 

 

mortgage, to the leasehold mortgagee, or any person
designated in a notice from leasehold mortgagee, if Tenant defaults under this
lease and if the sublessee is notified of Tenant’s default and instructed to
make sublessee’s rental payments to Landlord or leasehold mortgagee or
designated person as in this paragraph.

(2)                                  Tenant shall, promptly after execution of each
sublease, notify Landlord of the name and mailing address of the sublessee and
shall, on demand, permit Landlord to examine and copy the sublease.

18.                                 Tenant’s Non-liability After Assignment. On any assignment made in accordance with
the provisions and conditions of this lease, but not until completion of any
improvements under construction at the time of assignment, lien free, as
required of Tenant under this lease, Tenant shall have no further obligation
under this lease and, as between Landlord and Tenant, shall be considered to
have assigned to assignee all claims against Landlord arising under this lease.
Nothing herein contained shall be construed to release Tenant from any
liability or obligation arising before the effective date of the assignment.
This section 18 shall not apply to any sublease hereunder.

19.                                 Insurance.

A.                                   Fire and Extended Coverage. Throughout the term, at Tenant’s sole cost and
expense, Tenant shall keep or cause to be kept insured for the mutual benefit
of Landlord and Tenant all improvements located on or appurtenant to the
Premises against loss or damage by fire and such other risks as are now or
hereafter included in an extended coverage endorsement in common use for
commercial structures, including vandalism and malicious mischief. The amount
of the insurance shall not be less than the full replacement value of the
improvements (the “insurable value”). Landlord shall not carry any insurance
the effect of which would be to reduce the protection or payment to Tenant
under any insurance that this lease obligates Tenant to carry. If any dispute
whether the amount of insurance complies with the above cannot be resolved by
agreement, Landlord may, not more often than once every six (6) months, request
the carrier of the insurance then in force, or other qualified person
acceptable to both parties (acceptance not to be unreasonably withheld), to
determine the full insurable value as defined in this provision, and the
resulting determination shall be conclusive between the parties for the purpose
of this section. Tenant may include the holder of any mortgage on the leasehold
as a loss payee; on Landlord’s notice of demand, Tenant shall include the
holder of any mortgage on the fee as a loss payee to the extent of that
mortgage interest.

B.                                     Proceeds of Fire and Extended Coverage
Insurance. Landlord shall,
at Tenant’s cost and expense, cooperate fully with Tenant to obtain the largest
possible recovery, and all policies of fire and extended coverage insurance
required by section 19A shall provide that the proceeds shall be paid to the
most senior leasehold mortgagee who shall act as a trustee in disbursing said
proceeds in the same manner as a construction loan for the purposes of rebuilding,
repairing and restoring the improvements on the Premises to a condition
substantially identical to the condition immediately before the occurrence of
loss, damage or destruction.

 16
 

 

C.                                     Builder’s Risk Coverage. Before commencement of any demolition or construction,
Tenant shall maintain in force until completion and acceptance of the work, “all
risks” builder’s risk insurance, including vandalism and malicious mischief,
earthquake, increased cost of construction and rental value endorsements, in
forms and with a company reasonably acceptable to Landlord, covering
improvements in place and all material and equipment at the job site furnished
under contract, but excluding contractor’s, subcontractor’s, and construction
manager’s tools and equipment and property owned by contractor’s or subcontractor’s
employees, covering the full replacement value of work on the job site.

D.                                    Public Liability Insurance. Throughout the term, at Tenant’s sole cost
and expense, Tenant shall keep or cause to be kept in force, for the mutual
benefit of Landlord and Tenant, comprehensive broad form general public
liability insurance against claims and liability for personal injury, death or
property damage arising from the use, occupancy, disuse, or condition of the
Premises, improvements, or adjoining areas or ways with a single combined liability
limit of not less than Three Million Dollars ($3,000,000.00). Not more
frequently than every two (2) years, if, in the opinion of Landlord’s lender or
of the insurance broker retained by Landlord, the amount of public liability
and property damage insurance coverage at that time is not adequate, Tenant
shall increase the insurance coverage as required by either Landlord’s lender or
Landlord’s insurance broker.

E.                                      Other Insurance. Tenant may procure and maintain any
insurance not required by this lease, but all such insurance shall be subject
to all other provisions of this lease pertaining to insurance and shall be for
the mutual benefit of Landlord and Tenant.

F.                                      Policy Form, Content, Insurer. All insurance required by express provisions
of this lease shall be carried only in responsible insurance companies licensed
to do business in California. All such policies shall name both Landlord and
Tenant as insured, shall be non-assessable and shall contain language stating
that (i) the insurer waives the right of subrogation against Landlord and
against Landlord’s agents and representatives, and to the extent obtainable, to
the effect that (ii) any loss shall be payable notwithstanding any act or
negligence of Landlord that might otherwise result in a forfeiture of the
insurance, (iii) the policies are primary and noncontributing with any
insurance that may be carried by Landlord, and (iv) they cannot be canceled or
materially changed except after thirty (30) days’ notice by the insurer to Landlord
or Landlord’s designated representative. At the expiration of the term,
Landlord shall reimburse Tenant pro rata for all prepaid premiums on insurance
required to be maintained by Tenant, and Tenant shall assign all Tenant’s
right, title and interest in that insurance to Landlord. Tenant may effect for
its own account any insurance not required under this lease. Tenant may provide
by blanket insurance covering the Premises and any other location or locations
any insurance required or permitted under this lease provided it is acceptable
to all mortgagees.

G.                                     Failure to Maintain Insurance; Proof of
Compliance. Tenant shall
deliver to Landlord, in the manner required for notices, copies or certificates
of all insurance policies required by this lease, together with evidence
satisfactory to Landlord of payment required for procurement and maintenance of
the policy.

 17
 

 

For insurance required at
the commencement of this lease, copies or certificates shall be obtained within
sixty (60) days after execution of this lease.

If Tenant fails or refuses
to procure or to maintain insurance as required by this lease or fails or
refuses to furnish Landlord with required proof that insurance has been
procured and is in force and paid for, Landlord shall have the right, at
Landlord’s election and on five (5) days’ notice, to procure and maintain such
insurance. The premiums paid by Landlord shall be treated as added rent due
from Landlord with interest at the maximum allowable legal rate in effect in
California on the date when the premium is paid, to be paid on the first day of
the month following the date on which the premiums were paid. Landlord shall
give prompt notice of the payment of such premiums, stating the amounts paid
and the names of the insurer or insurers, and interest shall run from the date
of the notice.

H.                                    Landlord’s Non-liability. Landlord shall not be liable, and Tenant
shall defend and indemnify Landlord against all liability and claims of
liability, for damage or injury to person or property on or about the Premises
from any cause. Tenant waives all claims against Landlord for damage or injury
to person or property arising, or asserted to have arisen, from any cause
whatsoever.

20.                                 Condemnation.

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.

 18
 

 

(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;

(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 (1) 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

 19
 

 

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, to the leasehold
mortgagee, such sum as is necessary to satisfy and discharge the lien of the
leasehold mortgagee secured by the leasehold interest.

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 (provided that Tenant’s share thereof shall be
subject to the rights of all leasehold mortgagees).

If appraisal becomes
necessary under this section 20D, 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 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.

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.

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.

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:

 20
 

 

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, to the leasehold
mortgagee, such sum as is necessary to reduce the principal amount of the lien
of the leasehold mortgagee to not more than the appraised fair market value of
the improvements (subject to the remaining term of this lease) upon completion
of such restoration.

Fourth, 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 (provided that Tenant’s share thereof shall be
subject to the rights of all leasehold mortgagees).

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.

21.                                 Tenant’s Default. Each of the following events shall be a
default by Tenant and a breach of the lease:

A.                                   Abandonment or surrender of the Premises or
of the leasehold estate, or failure or refusal to pay when due any installment
of rent or any other sum required by this lease

 21
 

 

to be paid by Tenant, or to perform as required or
conditioned by any other covenant or condition of this lease.

B.                                     The subjection of any right or interest of
Tenant to attachment, execution, or other levy, or to seizure under legal
process, if not released within thirty (30) days; provided, that the
foreclosure of any mortgage permitted by provisions of this lease relating to
purchase or construction of improvements shall not be construed as a default
within the meaning of this paragraph.

C.                                     The appointment of a receiver to take
possession of the Premises or improvements or of Tenant’s interest in the
leasehold estate or of Tenant’s operations on the Premises for any reason,
including, but not limited to, assignment for benefit of creditors or voluntary
or involuntary bankruptcy proceedings, but not including receivership (i) pursuant
to administration of the estate of any deceased or incompetent Tenant or of any
deceased or incompetent individual member of any Tenant, or (ii) pursuant to
any mortgage permitted by provisions of this lease relating to purchase or
construction of improvements, or (iii) instituted by Landlord, the event of
default being not the appointment of a receiver at Landlord’s instance but the
event justifying the receivership, if any.

D.                                    An assignment by Tenant for the benefit of
creditors or the filing of a voluntary or involuntary petition by or against
Tenant under any law for the purpose of adjudicating Tenant a bankrupt; or for
extending time for payment, adjustment, or satisfaction of Tenant’s
liabilities; or for reorganization, dissolution, or arrangement on account of
or to prevent bankruptcy or insolvency; unless the assignment or proceeding,
and all consequent orders, adjudications, custodies, and supervisions are
dismissed, vacated, or otherwise permanently stayed or terminated within thirty
(30) days after the assignment, filing, or other initial event.

As a precondition to
pursuing any remedy for an alleged default by Tenant, Landlord shall, before
pursuing any remedy, give notice of default to Tenant and to all qualifying
subtenants and mortgagees whose names and addresses were previously given to
Landlord in a notice or notices from Tenant or any qualifying mortgagee stating
that the notice was for the purpose of notice under this provision and/or
Section 16 of this lease. A qualifying subtenant is a subtenant in possession
under an existing sublease for which notice has been provided to Landlord. A
qualifying mortgagee is a mortgagee under a mortgage then existing under the
provisions of this lease relating to purchase, construction or refinance of
improvements. Each notice of default shall specify in detail the alleged event
of default and the intended remedy.

With regard to notification
of default to, and recourse of, a mortgagee, the parties agree that the
provisions of Section 16 of this lease shall apply.

If the alleged default is
nonpayment of rent, taxes, or other sums to be paid by Tenant as provided in
the section on rent, or elsewhere in this lease directed to be paid as rent,
Tenant shall have ten (10) days after notice is given to cure the default. For
the cure of any other default, Tenant shall promptly and diligently after the
notice commence curing the default and shall have thirty (30) days after notice
is given, to complete the cure plus any additional period that is reasonably
required for the curing of the default.

 22
 

 

Any subtenant of the entire
premises shall have the right, at its election, to cure a curable default under
this lease, or under any mortgage then existing under provisions of this lease
relating to purchase or construction or improvements, or under both. If any
such subtenant cures all defaults then existing, or if any such subtenant cures
all defaults that are then curable and other defaults are non-curable, or if
all then existing defaults are non-curable, that subtenant’s possession and use
shall not be disturbed by Landlord or by mortgagee as long as (1) the subtenant
performs his sublease’s provisions, (2) the subtenant attorns to Landlord and
mortgagee according to their respective interests, and (3) subsequent defaults
are cured as in the above provisions or are non-curable.

After expiration of the
applicable time for curing a particular default, or before the expiration of
that time in the event of emergency, Landlord may at Landlord’s election, but
is not obligated to, make any payment required of Tenant under this lease or
under any note or other document pertaining to the financing of improvements or
fixtures on the Premises or perform or comply with any covenant or condition
imposed on Tenant under this lease or any such note or document, and the amount
so paid plus the reasonable cost of any such performance of compliance, plus
interest at the highest rate allowed by law from the date of payment,
performance, or compliance (herein called act), shall be deemed to be
additional rent payable by Tenant with the next succeeding installment of rent.
No such act shall constitute a waiver of default or of any remedy for default
or render Landlord liable for any loss or damage resulting from any such act.

22.                                 Landlord’s Remedies. If any default by Tenant shall continue
uncured, following notice of default as required by this lease, for the period
applicable to the default under the applicable provision of this lease,
Landlord has the following remedies in addition to all other rights and
remedies provided by law or equity, to which Landlord may resort cumulatively
or in the alternative:

A.                                   Termination. Landlord may at Landlord’s election terminate this lease by giving
Tenant written notice of termination. On the giving of the notice, all Tenant’s
rights in the Premises and all improvements shall terminate. Promptly after
notice of termination, Tenant shall surrender and vacate the Premises and all
improvements in broom clean condition, and Landlord may reenter and take possession
of the Premises and all remaining improvements and eject all parties in
possession or eject some and not others or eject none; provided that no
subtenant qualifying under non-disturbance provisions of this lease shall be
ejected. In addition to all other rights and remedies Landlord may have,
Landlord shall have all of the rights and remedies of a landlord under Section
1951.2 of the California Civil Code. Termination under this section 22A shall
not relieve Tenant from the payment of any sum then due to Landlord or from any
claim for damages previously accrued or then accruing against Tenant.

B.                                     Reentry Without Termination. Landlord may at Landlord’s election reenter
the Premises, and, without terminating this lease, at any time and from time to
time relet the Premises and improvements or any part or parts thereof for the
account and in the name of Tenant or otherwise. Landlord may at Landlord’s
election eject all persons or eject some and not others or eject none; provided
that no subtenant qualifying under non-disturbance provisions of

 23

 

this
lease shall be ejected. Landlord shall apply all rents from reletting as in the
provision on assignment of subrents, section 22F hereof. Any reletting may be
for the remainder of the term or for a longer or shorter period. Landlord may
execute any leases made under this provision either in Landlord’s name or in
Tenant’s name and shall be entitled to all rents from the use, operation, or
occupancy of the Premises or improvements or both. Tenant shall nevertheless
pay to Landlord on the due dates specified in this lease the equivalent of all
sums required of Tenant under this lease, plus Landlord’s expenses, less the
avails of any reletting or attornment. No act by or on behalf of Landlord under
this provision shall constitute a termination of this lease unless Landlord
gives Tenant notice of termination.

C.                                     Tenant’s Personal Property. Landlord may at Landlord’s election use Tenant’s
personal property and trade fixtures or any of such property and fixtures
without compensation and without liability for use or damage, or store them for
the account and at the cost of Tenant. The election of one remedy for any one
item shall not foreclose an election of any other remedy for another item or
for the same item at a later time.

D.                                    Recovery of Rent. Landlord shall be entitled at Landlord’s
election to each installment of rent or to any combination of installments for
any period before termination, including rent accrued prior to the payment
date, as such term is defined in section 3 hereof, and interest accrued thereon
(all of which accrued rent and interest shall be immediately due and payable
upon the occurrence of any default hereunder), plus interest at the lesser of
ten percent (10%) per annum or the highest rate allowed by law from the due
date of each rental installment; provided, in the case of accrued rent and
interest due upon default, interest shall run from the date of default on both
accrued rent and accrued interest. Subject to section 22F, avails of reletting
or attorned subrents shall be applied, when received, as follows: (1) to
Landlord to the extent that the avails for the period covered do not exceed the
amount due from and charged to Tenant for the same period, and (2) the balance
to Tenant.

E.                                      Damages. Landlord shall be entitled at Landlord’s election to damages in the
following sums: (1) all amounts that would have fallen due as rent between the
time of termination of this lease and the time of the claim, judgment, or other
award, less the avails of all relettings and attornments, plus interest on the
balance at the highest rate allowed by law; and (2) the “worth” at the time of
the claim, judgment, or other award, of the amount by which the unpaid rent for
the balance of the term exceeds the then fair rental value of the Premises at
the lower of the fair rental value as then encumbered by the lease and
improvements and the fair rental value unencumbered by the lease and
improvements. “Worth,” as used in this provision, is computed by discounting
the total at the discount rate of the Federal Reserve Bank of San Francisco at
the time of the claim, judgment, or award, plus one percent (1%).

Landlord shall also be
entitled to any other amount reasonably necessary to compensate Landlord for
all the detriment proximately caused by Tenant’s failure to perform Tenant’s
obligations under this lease or that in the ordinary course of things would be
likely to result from Tenant’s default, including, but not limited to, the cost
of recovering possession of the Premises, commissions and other expenses of
reletting, the amount of all taxes, insurance and other charges that Tenant
would have paid periodically during the remainder of the term or extended term
of the lease (discounted to present value), reasonable attorneys’ fees and any
other

 24
 

 

reasonable cost. Landlord
shall have the remedy described in California Civil Code section 1951.4
(Landlord may continue the lease in effect after Tenant’s breach and
abandonment and recover rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations).

F.                                      Assignment
of Subrents. Tenant assigns to Landlord all subrents and other sums falling
due from subtenants, licensees, and concessionaires (herein called subtenants)
during any period in which Landlord has the right under this lease, whether
exercised or not, to reenter the Premises for Tenant’s default, and Tenant
shall not have any right to such sums during that period. This assignment is
subject and subordinate to any and all assignments of the same subrents and
other sums made, before the default in question, to a mortgagee under any
mortgage permitted by provisions of this lease relating to purchase or
construction of improvements. Landlord may at Landlord’s election reenter the
Premises and improvements with or without process of law, without terminating
this lease, and either or both collect these sums or bring action for the
recovery of the sums directly from such obligors. Landlord shall receive and
collect all subrents and avails from reletting, applying them: first, to the payment
of reasonable expenses (including attorneys’ fees or brokers’ commissions or
both) paid or incurred by or on behalf of Landlord in recovering possession,
placing the Premises and improvements in good condition, and preparing or
altering the Premises or improvements for reletting; second to the reasonable
expense of securing new Tenants; third, to the fulfillment of Tenant’s
covenants to the end of the term; and fourth, to Landlord’s uses and purposes.
Tenant shall nevertheless pay to Landlord on the due dates specified in this
lease the equivalent of all sums required of Tenant under this lease plus
Landlord’s expenses, less the avails of the sums assigned and actually
collected under this provision. Landlord may proceed to collect either the
assigned sums or Tenant’s balances or both, or any installment or installments
of them, either before or after expiration of the term, but the period of
limitations shall not begin to run on Tenant’s payments until the due date of
the final installment to which Landlord is entitled nor shall it begin to run
on the payments of the assigned sums until the due date of the final
installment due from the respective obligors.

23.                                 Notice
of Landlord’s Default. Landlord shall not be considered to be in default under
this lease unless (1) Tenant has given notice specifying the default and (2)
Landlord has failed for thirty (30) days to cure the default, if it is curable,
or to institute and diligently pursue reasonable corrective or ameliorative
acts for non-curable defaults. Tenant shall have the right of termination for
Landlord’s default only after notice to and consent by all mortgagees under mortgages
then existing under provisions of this lease relating to purchase or
construction or improvements. Tenant waives the protections of Civil Code
Sections 1932 and 1933.

24.                                 Unavoidable
Default or Delay. Any prevention, delay, nonperformance, or stoppage due to
any of the following causes shall excuse nonperformance for a period equal to any
such prevention, delay, nonperformance, or stoppage, except the obligations
imposed by this lease for the payment of rent, taxes, insurance, or obligations
to pay money that are treated as rent. The causes referred to above are
strikes, lockouts, labor disputes, failure of power, irresistible superhuman
cause, acts of public enemies of this state or of the United States, riots, insurrections,
civil commotion, inability to obtain labor or materials or reasonable
substitutes for either, governmental restrictions or regulations or controls
(except those reasonably foreseeable

 25
 

 

in
connection with the uses contemplated by this lease), or other causes beyond
the reasonable control of the party obligated to perform.

25.                                 Waiver, Voluntary Acts. No waiver of any default shall constitute a
waiver of any other breach or default, whether of the same or any other
covenant or condition. No waiver, benefit, privilege, or service, voluntarily
given or performed by either party shall give the other any contractual right
by custom, estoppel, or otherwise. The subsequent acceptance of rent pursuant
to this lease shall not constitute a waiver of any preceding default by Tenant
other than default in the payment of the particular rental payment so accepted,
regardless of Landlord’s knowledge of the preceding breach at the time of
accepting the rent, nor shall acceptance of rent or any other payment after
termination constitute a reinstatement, extension, or renewal of the lease or
revocation of any notice or other act by Landlord.

26.                                 Attorneys’ Fees. If either party brings any action or
proceeding to enforce, protect, or establish any right or remedy, or to
interpret any provisions of this lease, the prevailing party shall be entitled
to recover reasonable attorneys’ fees. Arbitration is an action or proceeding
for the purpose of this provision.

27.                                 Arbitration. Arbitration may be required only for matters for which arbitration is
mentioned in this lease. For other matters, the party served with notice of
arbitration may reject the notice by failing to respond to it, by giving notice
of rejection, or by taking action inconsistent with arbitration.

Arbitration is initiated and
required by giving notice specifying the matter to be arbitrated. If action is
already pending on any matter concerning which the notice is given, the notice
is ineffective unless given before the expiration fourteen (14) days after
service of process on the person giving the notice.

Except as provided to the
contrary in these provisions on arbitration, the arbitration shall be in
conformity with and subject to applicable rules and procedures of the American
Arbitration Association. If the American Arbitration Association is not then in
existence or for any reason fails or refuses to act, the arbitration shall be
in conformity with and subject to provisions of the California Code of Civil
Procedure relating to arbitration as they stand amended at the time of the
notice.

The arbitrator(s) shall be
bound by this lease. Pleadings in any action pending on the same matter shall,
if the arbitration is required or consented to, be deemed amended to limit the
issues to those contemplated by the rules prescribed above. Each party shall
pay half the cost of arbitration including arbitrators’ fees. Attorneys’ fees
shall be awarded as separately provided in this lease.

28.                                 Notice. 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

 26
 

 

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

with a copy to:

Roderick
A. Rodewald 

Diehl
& Rodewald 

1043
Pacific Street 

San Luis Obispo, CA 93401

Tenant:

Mission
Community Bank

581
Higuera Street

San Luis Obispo, CA 93401

with a copy to:

Matthew
S. Kennedy, Esq.

MATTHEW
S. KENNEDY, APLC

772
Santa Rosa Street

San
Luis Obispo, California 93401

[805]
544-5003 [fax]

E-Mail:
msk@KennedyLawRealty.com

29.                                 Performance of Tenant’s Covenants by Others. Tenant may at Tenant’s election delegate
performance of any or all covenants to any one or more subtenants, or
subtenants of subtenants, and the performance so delegated shall be deemed
Tenant’s performance. This provision shall not be considered to permit or
broaden the right of assignment or subletting beyond the provisions of this
lease relating to assignment and subletting.

30.                                 Non-merger of Fee and Leasehold Estates. If both Landlord’s and Tenant’s estates in
the Premises or the improvements or both become vested in the same owner, this
lease shall nevertheless not be destroyed by application of the doctrine of
merger except at the express election of the owner and the consent of the
mortgagee or mortgagees under the mortgages existing under provisions of this
lease relating to the purchase or construction of improvements.

31.                                 Estoppel Certificates. At any time and from time to time, within
ten (10) days after notice of request by either party, the other party shall
execute, acknowledge, and deliver to the requesting party, or to such other
recipient as the notice shall direct, a statement certifying

 27
 

 

that
this lease is unmodified and in full force and effect, or, if there have been
modifications, that it is in full force and effect as modified in the manner
specified in the statement. The statement shall also state the dates to which
the rent and any other charges have been paid in advance. The statement shall
be such that it can be relied on by any auditor, creditor, commercial banker,
and investment banker of either party and by any prospective purchaser or
encumbrancer of the Premises or improvements or both or of all or any part or
parts of Tenant’s or Landlord’s interests under this lease.

Tenant’s failure to execute,
acknowledge, and deliver, on request, the certified statement described above
within the specified time shall constitute acknowledgment by Tenant to all
persons entitled to rely on the statement that this lease is unmodified and in
full force and effect and that the rent, and other charges have been duly and
full paid to and including the respective due dates immediately preceding the
date of the notice of request and shall constitute a waiver, with respect to
all persons entitled to rely on the statement, of any defaults that may exist
before the date of the notice.

32.                                 Joint and Several Obligations. If either Landlord or Tenant consists of more
than one person, the obligation of all such persons is joint and several.

33.                                 Right of Entry.  Upon
reasonable advance notice to Tenant, Landlord and Landlord’s agents shall have
the right to enter the Premises at reasonable times during normal business
hours for the following purposes: (i) inspection of the Premises; (ii) curing
any default by Tenant; and (iii) showing the Premises to potential purchasers,
lessees and/or mortgagees.

34.                                 Certain Definitions.

A.                                   Mortgage means mortgage, deed of trust, or other
encumbrance recognized in this state at the time it attaches as a contractual
security interest in the real property.

B.                                     Mortgagee means mortgagee, beneficiary, or
other obligee of an indebtedness secured by a mortgage.

C.                                     Foreclosure includes judicial foreclosure,
sale under a power or sale given in the mortgage, and all other remedies
provided by law or equity or set out in the mortgage and enforceable in this
state at the time of the foreclosure for divesting the obligee of title in the
event of the obligee’s default.

35.                                 Additional Rent. All monetary obligations of Tenant to
Landlord under this lease, including but not limited to the payment of rent,
utilities, insurance, taxes and other real property assessments, maintenance
and repairs, and other expenses payable by Tenant, shall be deemed to be rent.

36.                                 Captions, Table of Contents. The table of contents of the lease and the
captions of the various articles and paragraphs of this lease are for
convenience and ease of reference only and do not define, limit, augment, or
describe the scope, content or intent of this lease or of any part or parts of
this lease.

 28
 

 

37.                                 Gender. The neuter gender includes the feminine and masculine, the masculine includes
the feminine and neuter, and the feminine includes the neuter, and each
includes corporation, partnership, or other legal entity when the context so
requires.

38.                                 Singular; Plural. The singular number includes the plural
whenever the context so requires.

39.                                 Entire Agreement. This lease contains the entire agreement
between the parties. No promise, representation, warranty, or covenant not
included in this lease has been or is relied on by either party. Each party has
relied on his own examination of this lease, the counsel of his own advisors,
and the warranties, representations, and covenants in the lease itself. The
failure or refusal of either party to inspect the Premises or improvements, to
read the lease or other documents, or to obtain legal or other advice relevant
to this transaction constitutes a waiver of any objection, contention, or claim
that might have been based on such reading, inspection, or advice.

40.                                 Severability. The invalidity or illegality of any
provision shall not affect the remainder of the lease.

41.                                 Successors. Subject to the provisions of this lease on assignment and subletting,
each and all of the covenants and conditions of this lease shall be binding on
and shall inure to the benefit of the heirs, successors, executors, administrators,
assigns, and personal representatives of the respective parties.

42.                                 Governing Law; Venue. This lease shall be governed and construed in
accordance with the laws of the State of California. Venue for any action or
arbitration arising out of this lease shall be in San Luis Obispo, California.

43.                                 Tenant’s Duty to Surrender. At the expiration or earlier termination of
the term, Tenant shall surrender to Landlord the possession of the Premises.
Surrender or removal of improvements, fixtures, trade fixtures, and
improvements shall be as directed in provisions of this lease on ownership of
improvements at termination. Tenant shall leave the surrendered premises and
any other property in good and broom clean condition except as provided to the contrary
in provisions of this lease on maintenance and repair of improvements. All
property that Tenant is required to surrender shall become Landlord’s property
at termination of the lease. All property that Tenant is not required to
surrender but that Tenant does abandon shall, at Landlord’s election, become
Landlord’s property at termination.

If Tenant fails to surrender
the Premises at the expiration or sooner termination of this lease, Tenant
shall defend and indemnify Landlord from all liability and expense resulting
from the delay or failure to surrender, including, without limitation, claims
made by any succeeding tenant based on or resulting from Tenant’s failure to
surrender.

 29
 

 

This lease shall terminate
without further notice at expiration of the term. Any holding over by Tenant
after expiration shall not constitute a renewal or extension or give Tenant any
rights in or to the Premises except at otherwise expressly provided in this
lease.

44.                                  Execution in Counterparts. This lease, or the memorandum of this
lease, or both, may be executed in two (2) or more counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.

45.                                  Recordation of Memorandum Only. This lease shall not be recorded; only a memorandum
of this lease shall be recorded. The parties shall execute the memorandum in
form and substance as required by a title insurance company insuring Tenant’s
leasehold estate or the interest of any leasehold mortgagee or fee mortgagee,
and sufficient to give constructive notice of the lease and purchase option to
subsequent purchasers and mortgagees.

46.                                  Right of First Refusal.

(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 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 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 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 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.

(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.

 30
 

 

47.                                 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.

IN WITNESS WHEREOF,
Landlord and Tenant have executed this lease as of the date and year first
above written.

	
   

  	
  Landlord:

  
	
   

  	
   

  
	
   

  	
  WALTER
  BROS. CONSTRUCTION CO., INC.,

  a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Donald C. Walter 

  
	
   

  	
   

  	
    Donald
  C. Walter 

    President

  
	
   

  	
   

  
	
   

  	
  Tenant:

  
	
   

  	
   

  
	
   

  	
  MISSION
  COMMUNITY BANK, 

  a California corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Anita Robinson

  
	
   

  	
   

  	
    Anita
  Robinson

  
	
   

  	
   

  	
    President

  

 

 31

 

EXHIBIT “A”

Legal Description

[Actual
Legal Description to be attached upon completion of Lot Line Adjustment, but
consisting of approximately 37,760 square feet gross, 32,033 square feet net of
real property located at the corner of South Higuera and Prado Road, in the
City of San Luis Obispo, County of San Luis Obispo, State of California (a
portion of Assessor’s Parcel No. 053-041-033), as shown on the proposed Vesting
Tentative Map attached hereto as Exhibit “A-1”].

 

Order
Number:   4001-2539189 ( ) 

Page Number:  6

LEGAL
DESCRIPTION

Real property in the City of
San Luis Obispo, County of San Luis Obispo, State of California, described as
follows:

That portion of Lot 21 of the
San Luis Obispo Suburban Tract, in the City of San Luis Obispo, County of San
Luis Obispo, State of California, according to the map recorded February 7,
1906 in Book 1, Page 92 of Record of Surveys, described as follows:

Commencing at the most
Southerly corner of Parcel B denoted on Parcel Map No. SL-84-284, recorded in
Parcel Map Book 38, Page 60;

Thence South 3°54’55” West,
along the Westerly right of way of South Higuera Street (80 feet wide), 120.98
feet to a 1 1/4 inch iron pipe
tagged L.S. 3877 and the point of beginning;

Thence North 86°14’05” West,
323 feet to a I’, 4 inch iron pipe tagged L.S. 3877; Thence South 3°45’55”
West, 3 feet to a I Y4 inch iron pipe tagged L.S. 3877; Thence North 86°14’05”
West, 62 feet to a 1 1/4 inch iron pipe tagged L.S. 3877; Thence South 3°45’55”
West, 22.70 feet to a 1’ A inch iron pipe tagged L.S. 3877;

Thence South 74°38’05” West,
252.44 feet, more or less, to the Easterly line of the land described in the
deed to Adrian R. Manthie, et ux., recorded June 15, 1955 in Book 807, Page 360
of Official Records and denoted on Parcel Map SLO-73-495;

Thence Easterly and Southerly
along the Northerly and Easterly boundary of last said Manthie property to the
Northerly line of Prado Road (40 feet wide);

Thence
Easterly along the Northerly line of said Prado Road and Northerly along the
Westerly line of the property conveyed by Walter Brothers Construction Company,
Inc., to the City of San Luis Obispo, recorded May 6, 1975 in Book 1831, Page
595 of Official Records, to the point of beginning.

Said land is shown as Parcel
1 on Map recorded May 10, 1989 in Book 59, Page 89 of Record of Surveys.

EXCEPTING THEREFROM all
geothermal resources as defined in Section 6903 of the California Public
Resources Code within’ or that may be produced from said real property,
provided, however that the ‘surface of said real property shall never be used
for the exploration, development, extraction, removal, ot storage of any
thereof, ‘as reserved by Standard Oil Company of California, a Corporation, in
deed recorded October 29, 1974 in Book 1803, Page 799 of Official Records.

ALSO EXCEPTING THEREFROM the
sole and exclusive right from time to time to drill and maintain wells or other
works into (except for oil, gas, and other hydrocarbons not herein reserved by
grantor), or through said real property below, a depth of 500 feet and to
produce, inject, store or remove from and through such wells or works, oil gas,
water and other substances of whatever nature, including the right to perform
any and aN operations deemed by Grantor necessary or convenient for the
exercise of such rights, as reserved by Standard Oil Company of California, a
Corporation, in deed recorded October 29, 1974 in Book 1803, Page 799 of
Official Records.

APN: 053-041-033

First
American Title

 

 

EXHIBIT “A-1”

 

 

SECRETARY
CERTIFICATE

I, Cindy M. Harrison, Assistant Secretary of Mission
Community Bank, hereby certify that the Bylaws of the Corporation were adopted
on December 23, 2003, including that portion of the Bylaws specifically
pertaining to powers of the President as follows:

The President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the corporation. The President shall have the general powers and duties of
management usually vested in the office of the President of a corporation, and
shall have such other powers and duties as may be prescribed by the Board of
Directors or these Bylaws.

IN WITNESS WHEREOF, I have
hereunto set my hand as of the 15th day of September, 2006.

	
  

  	
   

  
	
  /s/ Cindy M.
  Harrison 

  	
   

  
	
  Cindy M.
  Harrison 

  	
   

  
	
  Assistant
  SecretaryExhibit 10.2

WHEN
RECORDED MAIL TO:

MISSION
COMMUNITY BANK

P. O. Box 789

San Luis Obispo, California 93406

MEMORANDUM
OF LEASE

THIS MEMORANDUM OF LEASE (“Memorandum”)
dated as of September 21, 2006 is entered into between WALTER BROS. CONSTRUCTION CO., INC., a
California corporation (“Landlord”) and MISSION
COMMUNITY BANK, a California banking corporation (“Tenant”).

RECITALS

A.       On or about September 21, 2006, Landlord and Tenant entered
into Ground Lease [Private] (Lease), pursuant to which Landlord leased to
Tenant and Tenant leased from Landlord real property, more particularly
described in attached Exhibit A and incorporated by reference (“Premises”).

B.       Landlord and Tenant desire to execute this Memorandum to
provide constructive notice of Tenant’s rights under the Lease to all third
parties.

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

1.            Term.   Landlord leases the Premises to Tenant for a
term of fifty (50) years, beginning October 1, 2006 (“Commencement Date”), and
ending at midnight on September 30, 2056.

2.            Lease Terms. This lease of the Premises to Tenant is
pursuant to the Lease, which is incorporated in this Memorandum by reference.

3.            Leasehold Deed of Trust. Landlord agrees to allow Tenant to obtain one
or more loans for improvements on the Premises secured by a leasehold deed of
trust. Landlord has agreed to give the beneficiary under this leasehold deed of
trust notice of any default by Tenant under the Lease and the right to cure
this default within thirty (30) of written notice to the beneficiary. Landlord
also agrees to recognize the purchaser of the leasehold interest at the
foreclosure sale as

 1
 

 

the
tenant under the Lease, whether this purchaser is the beneficiary under the
leasehold deed of trust or a third party.

4.             Right of First Refusal.   Subject to the rights set forth in the Lease, Landlord has granted
Tenant rights of first refusal as to offers to purchase the Premises during the
term, or any portion of its interest in the Premises.

5.             Successors and Assigns. This Memorandum and the Lease shall bind and
inure to the benefit of the parties and their respective heirs, successors, and
assigns, subject, however, to the provisions of the Lease on assignment. 

6.             Governing Law.   This Memorandum and the Lease are governed by
California law.

Executed
as of the date first written above.

	
  TENANT:

  	
   

  	
  LANDLORD:

  
	
  MISSION
  COMMUNITY BANK

  	
   

  	
  WALTER BROS. CONSTRUCTION CO., INC.,

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Anita
  Robinson

  	
   

  	
   

  	
  By:

  	
  /s/ Donald C. Walter

  	
   

  
	
  Name:

  	
  Anita Robinson

  	
   

  	
  Name:

  	
  DONALD C. WALTER

  	
   

  
	
  Its:

  	
  President

  	
   

  	
  Its:

  	
  President

  	
   

  
							

 

 2
 

 

ACKNOWLEDGEMENT

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF SAN
  LUIS OBISPO

  	
  )

  

 

On September 21, 2006, before me personally appeared, Anita Robinson, who is personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name [is] subscribed to the within instrument
and acknowledged to me that [she] executed
the same in [her] authorized capacity, and
that by [she] signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

WITNESS my hand and official
seal.

	
  Signature 

  	
  /s/ Aileen C.
  Cota

  	
   

  	
  

  

 

(Seal)

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF SAN
  LUIS OBISPO

  	
  )

  

 

On SEPTEMBER 21, 2006,
before me personally appeared, DONALD C. WALTER, who is personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person(s) whose name [is] subscribed to the within instrument
and acknowledged to me that [he] executed
the same in [his] authorized
capacity, and that by [he] signature
on the instrument the person, or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS
my hand and official seal

	
  Signature 

  	
  /s/ Roderick A.
  Rodewald

  	
   

  	
  

  

 

(Seal)

 3

 

EXHIBIT “A”

Legal
Description

[Actual Legal Description to be attached upon
completion of Lot Line Adjustment, but consisting of approximately 37,760
square feet gross, 32,033 square feet net of real property located at the
corner of South Higuera and Prado Road, in the City of San Luis Obispo, County
of San Luis Obispo, State of California (a portion of Assessor’s Parcel No.
053-041-033), as shown on the proposed Vesting Tentative Map attached hereto as
Exhibit “A-1”].

 

Order
Number:  4001-2539189 ( ) 

Page Number:  6

LEGAL
DESCRIPTION

Real property in the City of
San Luis Obispo, County of San Luis Obispo, State of California, described as
follows:

That portion of Lot 21 of the
San Luis Obispo Suburban Tract, in the City of San Luis Obispo, County of San
Luis Obispo, State of California, according to the map recorded February 7,
1906 in Book 1, Page 92 of Record of Surveys, described as follows:

Commencing at the most
Southerly corner of Parcel B denoted on Parcel Map No. SL-84-284, recorded in
Parcel Map Book 38, Page 60;

Thence South 3°54’55” West,
along the Westerly right of way of South Higuera Street (80 feet wide), 120.98
feet to a 1 1/4 inch iron pipe tagged L.S. 3877 and the point of beginning;

Thence North 86°14’05” West,
323 feet to a I’ ,4 inch iron pipe tagged L.S. 3877; Thence South 3°45’55”
West, 3 feet to a I Y4 inch iron pipe tagged L.S. 3877; Thence North 86°14’05”
West, 62 feet to a 1 1/4
inch iron pipe tagged L.S. 3877; Thence South 3°45’55” West, 22.70 feet to a 1’
A inch iron pipe tagged L.S. 3877;

Thence South 74°38’05” West,
252.44 feet, more or less, to the Easterly line of the land described in the
deed to Adrian R. Manthie, et ux., recorded June 15, 1955 in Book 807, Page 360
of Official Records and denoted on Parcel Map SLO-73-495;

Thence Easterly and Southerly
along the Northerly and Easterly boundary of last said Manthie property to the
Northerly line of Prado Road (40 feet wide);

Thence Easterly along the
Northerly line of said Prado Road and Northerly along the Westerly line of the
property conveyed by Walter Brothers Construction Company, Inc., to the City of
San Luis Obispo, recorded May 6, 1975 in Book 1831, Page 595 of Official
Records, to the point of beginning.

Said land is shown as Parcel
1 on Map recorded May 10, 1989 in Book 59, Page 89 of Record of Surveys.

EXCEPTING THEREFROM all
geothermal resources as defined in Section 6903 of the California Public
Resources Code within’ or that may be produced from said real property,
provided, however that the ‘surface of said real property shall never be used
for the exploration, development, extraction, removal, ot storage of any
thereof, ‘as reserved by Standard Oil Company of California, a Corporation, in
deed recorded October 29, 1974 in Book 1803, Page 799 of Official Records.

ALSO EXCEPTING THEREFROM the
sole and exclusive right from time to time to drill and maintain wells or other
works into (except for oil, gas, and other hydrocarbons not herein reserved by
grantor), or through said real property below, a depth of 500 feet and to
produce, inject, store or remove from and through such wells or works, oil gas,
water and other substances of whatever nature, including the right to perform
any and aN operations deemed by Grantor necessary or convenient for the
exercise of such rights, as reserved by Standard Oil Company of California, a
Corporation, in deed recorded October 29, 1974 in Book 1803, Page 799 of
Official Records.

APN: 053-041-033

First
American Title

 

 

EXHIBIT “A-l”

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