GROUND LEASE AGREEMENT. By and between. Northern California Conference Association of Seventh-Day Adventists. and

Transcription

1 GROUND LEASE AGREEMENT By and between Northern California Conference Association of Seventh-Day Adventists and Redevelopment Agency of the City of Pittsburg 773\106\

2 TABLE OF CONTENTS Page ARTICLE 1. DEFINITIONS AND EXHIBITS... 1 Section 1.1 Definitions...1 Section 1.2 Exhibits...5 ARTICLE 2. LEASE OF THE PROPERTY... 5 Section 2.1 Property...5 Section 2.2 Term...5 Section 2.3 Possession...7 Section 2.4 Memorandum of Lease...7 ARTICLE 3. RENT... 7 Section 3.1 Annual Rent....7 Section 3.2 Advances for Lease Obligations...8 ARTICLE 4. CONSTRUCTION OF IMPROVEMENTS... 8 Section 4.1 Construction of Improvements...8 Section 4.2 Construction Standards....8 Section 4.3 No Liens...10 Section 4.4 Permits, Licenses and Easements...10 ARTICLE 5. USE, CHARACTER, OPERATION AND MAINTENANCE OF IMPROVEMENTS Section 5.1 Discretion Retained by Agency...10 Section 5.2 Limitations on Use...11 Section 5.3 Compliance with Laws...11 Section 5.4 Assistance in Making Payments...11 Section 5.5 Permitted Contests...11 Section 5.6 No Hazardous Materials...12 ARTICLE 6. TITLE TO IMPROVEMENTS; QUIET ENJOYMENT; INSPECTIONS Section 6.1 During the Term...12 Section 6.2 After the Term...12 Section 6.3 Benefits of Improvements During Term...13 Section 6.4 Quiet Enjoyment...13 Section 6.5 The Landlord's Right of Inspection...13 ARTICLE 7. ASSIGNMENT AND SUBLETTING Section 7.1 Landlord's Pre-Approval of Transfers...13 Section 7.2 Agency's Right to Purchase...14 Section 7.3 Transfer by Landlord \106\ i

3 TABLE OF CONTENTS (Continued) Page ARTICLE 8. INSURANCE; DAMAGE AND DESTRUCTION OF IMPROVEMENTS Section 8.1 Section 8.2 Section 8.3 Insurance Requirements...14 Damage or Destruction...15 Insurance Proceeds Upon Permitted Termination...15 ARTICLE 9. APPROVED SECURITY INTERESTS Section 9.1 Section 9.2 Section 9.3 Section 9.4 Section 9.5 Section 9.6 Right to Encumber...16 Landlord's Fee Encumbrance...16 Subordination...16 Estoppel Certificates...17 Mortgage of Landlord's Estate...17 Registration of Approved Security Interests...17 ARTICLE 10. SURRENDER; HOLDING OVER; Section 10.1 Surrender of Property Section 10.2 Holding Over...18 Section 10.3 No Merger...18 ARTICLE 11. EMINENT DOMAIN Section 11.1 Taking Section 11.2 Temporary Taking...19 ARTICLE 12. EVENTS OF DEFAULT Section 12.1 Events of Default...20 Section 12.2 Rights and Remedies Section 12.3 Default by the Landlord...20 ARTICLE 13. MISCELLANEOUS PROVISIONS Section 13.1 Notice, Demands and Communication...21 Section 13.2 Conflict of Interests...22 Section 13.3 Non-Liability of Officials, Employees and Agents...22 Section 13.4 Enforced Delay...22 Section 13.5 Title of Parts and Sections...22 Section 13.6 Indemnity Section 13.7 Applicable Law...23 Section 13.8 Severability; Entire Agreement...23 Section 13.9 Legal Actions...23 Section Binding Upon Successors; Covenants to Run With Land...24 Section Parties Not Co-Venturers...24 Section Action by the Agency Section City As Third-Party Beneficiary \106\ ii

4 TABLE OF CONTENTS (Continued) Page Section Amendments...24 Section Operating Memoranda; Implementation Agreements...24 Section Multiple Originals; Counterparts...25 EXHIBITS: EXHIBIT A EXHIBIT B Legal Description of the Property Memorandum of Lease 773\106\ iii

5 GROUND LEASE AGREEMENT THIS GROUND LEASE AGREEMENT (the "Lease") is entered into as of the day of, 2008, (the "Lease Commencement Date") by and between Northern California Conference Association of Seventh-Day Adventists, a California religious corporation (the "Landlord") and the Redevelopment Agency of the City of Pittsburg, a public body, corporate and politic (the "Agency" or the "Tenant"). RECITALS A. Capitalized terms used, but not defined, in these Recitals shall have the meaning set forth in Section 1.1. B. The Landlord owns the Property, as more particularly described in Exhibit A. The Property is located within the Project Area and is subject to the Redevelopment Plan. C. Pursuant to authority granted under the Community Redevelopment Law, the Agency has the responsibility to implement the Redevelopment Plan, incorporated into this Lease by this reference. The Redevelopment Plan affects and controls the development and use of all real property located within the Project Area. D. The Agency desires to cause the redevelopment of the Site in accordance with the goals and objectives of the Redevelopment Plan by alleviating the existing blight on the Site and causing the development of the Improvements. E. The Landlord desires to lease the Property to the Agency and the Agency desires to lease the Property from the Landlord pursuant to the terms of this Lease. F. The Agency has determined that entering into this Lease is not subject to the requirements of CEQA pursuant to Section of the CEQA Guidelines, and that the Agency shall comply with all applicable requirements of CEQA prior to entering into the Agency Development Documents. Therefore, the Landlord and the Tenant agree as follows: ARTICLE 1. DEFINITIONS AND EXHIBITS Section 1.1 Definitions. The following capitalized terms have the meanings set forth in this Section 1.1 wherever used in this Lease, unless otherwise provided: (a) "Adjacent Property" means that certain real property owned by the Agency and adjacent to the Property. 773\106\

6 (b) "Agency" or "Tenant" means the Redevelopment Agency of the City of Pittsburg, a public body, corporate and politic. (c) "Agency Development Documents" means, collectively, the DDA and/or the Sublease Agreement, as may be amended from time to time, or any other agreement between the Agency and the Developer, for the redevelopment of the Property. (d) "Approved Security Interest" means a mortgage, deed of trust, or other reasonable method of security encumbering the Tenant's and/or the Developer's leasehold estate in the Property and, if requested by an Approved Security Interest Holder or by the Agency, the Landlord's fee estate in the Property that (i) meets the requirements of this Agreement, and (ii) secures any loan and/or refinancing approved by the Agency in connection with the approval of the Financing Plan. (e) "Approved Security Interest Holder" means the holder or beneficiary of an Approved Security Interest. (f) "CEQA" means the California Environmental Quality Act (Public Resources Code Section et seq.), and any state or local implementing guidelines in connection therewith. (g) "City" means the City of Pittsburg, a municipal corporation. (h) "Community Redevelopment Law" means the California Community Redevelopment Law (Health and Safety Code Section et seq.). (i) "DDA" means a Disposition and Development Agreement by and between the Agency and the Developer for the redevelopment of the Site. (j) "Default Interest Rate" means the rate of ten percent (10%) per month during the relevant period over which the Default Interest Rate is to be applied under this Lease, but in no event greater than the maximum rate permitted by law. (k) "Developer" means Domus or another experienced and reputable developer selected by the Agency, including, but not limited to, a limited partnership the general partner of which is an affiliate of Domus, to cause the development of the Site pursuant to the Redevelopment Plan and the Community Redevelopment Law. (l) liability company. "Domus" means Domus Development LLC, a California limited (m) "Financing Plan" means the Developer's financing plan for the development of the Improvements as approved by the Agency in accordance with the Agency Development Documents. 773\106\

7 (n) "Governmental Authority(ies)" means any federal, state, and/or local agency, department, commission, board, bureau, administrative or regulatory body, or other public instrumentality having jurisdiction over the Property or any portion thereof. (o) "Hazardous Materials" means any substance, material, or waste which is: (1) defined as a "hazardous waste", "hazardous material", "hazardous substance", "extremely hazardous waste", "restricted hazardous waste", "pollutant" or any other terms comparable to the foregoing terms under any provision of California law or federal law; (2) petroleum; (3) asbestos and asbestos containing materials; (4) polychlorinated biphenyls; (5) radioactive materials; (6) MTBE; or (7) determined by California, federal or local governmental authority to be capable of posing a risk of injury to health, safety, property or the environment. The term "Hazardous Materials" shall not include: (i) construction materials, gardening materials, household products, office supply products or janitorial supply products customarily used in the construction, maintenance, rehabilitation, or management of commercial properties, buildings and grounds, or typically used in household activities, or (ii) certain substances which may contain chemicals listed by the State of California pursuant to California Health and Safety Code Section et seq., which substances are commonly used by a significant portion of the population living within the region of the Improvements, including but not limited to, alcoholic beverages, aspirin, tobacco products, nutrasweet and saccharine, so long as such materials and substances are stored, used, and disposed of in compliance with all applicable Hazardous Materials Laws. (p) "Hazardous Materials Laws" means all federal, state, and local laws, ordinances, regulations, orders and directives pertaining to Hazardous Materials. (q) "Improvements" means the improvements to be constructed by (or on behalf of) the Developer on the leasehold interest of the Property pursuant to the Agency Development Documents. As of the Lease Commencement Date, the Agency anticipates that the improvements to be developed on the Site will consist of approximately sixty (60) to eighty (80) units of multi-family housing for seniors and related improvements a portion of which shall be located on the Property. As used in this Lease, the term "Improvements" shall only apply to the portion of the improvements physically located on the Property. (r) "Land Use Approvals" means any governmental or regulatory approvals, permits or authority necessary for the development and operation of the Improvements, including but not limited to, mitigation measures or other conditions imposed under CEQA. (s) "Landlord" means Northern California Conference Association of Seventh-Day Adventists, a California religious corporation. 773\106\

8 (t) "Lease Commencement Date" means the date first written above. (u) "Memorandum of Lease" means the memorandum of this Lease and right of first refusal to be recorded against the Property substantially in the form attached as Exhibit D. (v) "Parties" means the Agency and the Landlord. (w) "Preliminary Title Report" means that certain preliminary title report, number , dated June 5, 2007, issued by North American Title Company. (x) "Prepaid Rent" means the amount of Five Hundred Fifty-Four Thousand Four Hundred Dollars ($554,000) which shall be paid by the Agency to the Landlord in accordance with Section 3.1(a). (y) "Prepaid Rent Period" means the portion of the Term of this Lease commencing on the Lease Commencement Date and expiring on the Rent Commencement Date. (z) "Project Area" means all real property located within the Los Medanos Community Development Project Area within Pittsburg, California, as more particularly described and set forth in the Redevelopment Plan. (aa) "Property" means that certain real property located in the City and more particularly described in the attached Exhibit A. (bb) "Redevelopment Plan" means the Community Development Plan for the Los Medanos Community Development Project. (cc) "Rent" means the amount set forth in Section 3.1, plus all other amounts owed by the Tenant to the Agency. (dd) "Rent Commencement Date" means, (ee) "Site" means, collectively, the Property and Adjacent Property, both of which are anticipated to be leased to the Developer pursuant to the Sublease Agreement for the development of the Improvements. (ff) "Sublease Agreement" means the sublease or other agreement between the Agency and the Developer by which the Agency conveys a long-term leasehold interest in the Site to the Developer and the Developer constructs and operates the Improvements. (gg) "Transfer" means any total or partial sale, assignment or conveyance, or any trust or power, or any transfer in any other mode or form, of or with 773\106\

9 respect to this Lease or of the leasehold in the Property or fee estate in the Improvements or any part thereof or any interest therein, of the Improvements constructed thereon, excluding: (i) any leasing of the Property by the Agency to the Developer, (ii) any security interest recorded against the Property in accordance with the Financing Plan, (iii) the assignment and assumption of this Lease by the City (following which the Agency shall be released from any further duty or obligation hereunder), or (iv) the leasing of the individual units within the Improvements. (hh) "Tenant" or "Agency" means Redevelopment Agency of the City of Pittsburg, a public body corporate and politic. Section 12.1 (ii) "Tenant Event of Default" means an event described in (jj) "Term" means the term of this Lease, commencing on the Lease Commencement Date and ending on the earlier to occur of (1) the sixty-fifth (65th) anniversary of the Lease Commencement Date (unless extended pursuant to Section 2.2); (2) the date set forth in the Early Termination Notice (as more particularly described in Section 2.2, below); or (3) the date of any termination of this Lease in accordance with the provisions hereof. (kk) "Transfer" has the meaning set forth in Section 7.1. Section 1.2 Exhibits. The following exhibits are attached to and incorporated into this Lease: Exhibit A: Exhibit B: Legal Description of the Property Memorandum of Lease ARTICLE 2. LEASE OF THE PROPERTY Section 2.1 Property. Subject to the terms, covenants, and conditions hereof and in consideration of rents to be paid pursuant to this Lease, the Landlord hereby leases the Property to the Tenant, and the Tenant hereby leases and takes from the Landlord, the Property. Section 2.2 Term, Option to Extend, Early Termination by Agency. (a) Term; Option to Extend. Unless sooner terminated pursuant to the provisions of this Lease, this Lease shall continue in full force and effect for the Term, commencing on the Lease Commencement Date and expiring on midnight the day immediately preceding the sixty-fifth (65) anniversary of the Lease Commencement Date. Notwithstanding the foregoing, the Tenant (at the Tenant's sole discretion) shall have the option to extend the Term of this Lease for thirty-four (34) years following the 773\106\

10 expiration of the initial Term (the "Option Period"), provided that the Tenant is not in default under the terms of this Lease and the Tenant has provided the Landlord a written notice as set forth below. The Tenant may exercise the option to extend this Lease for the Option Period by giving written notice thereof to the Landlord not later than ninety (90) calendar days prior to the expiration of the initial Term. During the Option Period, the Tenant shall pay the Landlord annual rent in an amount equal to the annual rent due during the final years of the initial Term, and shall lease the Property from the Landlord on the same terms and conditions as are set forth in this Lease. (b) Early Termination of Lease by Agency. Notwithstanding any other provision of this Lease, in the event that, at any time during the Term, (i) the Agency terminates this Lease as set forth herein, or (ii) the Developer fails to obtain the Agency approval of the Financing Plan, in accordance with the Agency Development Documents, by July 31, 2009, then the Agency may (but shall not be obligated to) terminate this Lease by providing a written notice to the Landlord (the "Early Termination Notice"). The Early Termination Notice shall state the date on which the Lease shall terminate, which shall be no earlier than thirty (30) calendar days following the date of the Early Termination Notice. Following the termination of this Lease pursuant to the Early Termination Notice: (i) this Lease shall terminate, and be of no further force or effect; (ii) the Landlord shall, to the extent applicable, return the portion of the Prepaid Rent as set forth in Section 2.2(c); (iii) neither party shall have any further obligation to the other under this Lease except for those provisions that explicitly survive the termination of this Lease; and (iv) the Agency shall have no further obligation to pay any Rent or any other amount to the Landlord. If requested by the Landlord following the Agency's delivery of the Early Termination Notice, the Agency shall execute a quitclaim deed conveying its interest in the Improvements to the Landlord. (c) Landlord Return of portion of Prepaid Rent. Provided that the Agency has paid the Prepaid Rent in accordance with Section 3.1(a), in the event this Lease is terminated at any time during the Prepaid Rent Period, then the Landlord shall return a prorata portion of the Prepaid Rent to the Agency in accordance with this Section 3.1(c). If this Lease is terminated prior to the expiration of the Prepaid Rent Period, then the Early Termination Notice shall set forth the number of months remaining in the Prepaid Rent Period, and the amount of the Prepaid Rent which shall be returned by the Landlord to the Agency. The Parties agree and acknowledge that, as of the Lease Commencement Date, the Rent is equal to Six Thousand Six Hundred Dollars ($6,600) per month, and that the Landlord shall return to the Agency a prorata portion of the Prepaid Rent equal to such monthly Rent amount multiplied by the number of months remaining in the Prepaid Rent Period. In the event the Landlord fails to return such prorata portion of the Prepaid Rent to the Agency within thirty (30) days following the Landlord's receipt of the Early Termination Notice, then: (i) such failure shall constitute a Landlord Event of Default, and (ii) notwithstanding any other provision of this Lease (including, but not 773\106\

11 limited to, any other remedy available to the Agency), the Agency shall have the option to seek an action for specific performance to compel the Landlord to return such prorata portion of the Prepaid Rent. Following the expiration of the Prepaid Rent Period, the Landlord shall have no obligation to return any portion of the Prepaid Rent following the early termination of this Lease. Section 2.3 Possession. The Landlord agrees to, and shall, provide possession of the Property to the Tenant as of the Lease Commencement Date. To the best of the Landlord's knowledge, the Property is subject only to the encumbrances listed in the Preliminary Title Report and such encumbrances approved by the Agency and recorded concurrently with the Memorandum of Lease. The Landlord shall indemnify, hold harmless, and defend (with counsel reasonably selected by the Agency) the Agency for any claim, cost or expense incurred in connection with the removal of any lien encumbrance or other title defect other than those set forth in the Preliminary Title Report. Section 2.4 Memorandum of Lease. On or before the Lease Commencement Date, the Parties shall execute and acknowledge the Memorandum of Lease, in the form attached hereto as Exhibit B, which the Tenant shall cause to be recorded against the Property. Section 3.1 Annual Rent. ARTICLE 3. RENT (a) Prepaid Rent. The Agency shall pay a portion of the Rent in advance. The Prepaid Rent to be paid by the Agency is equal to Five Hundred Fifty- Four Thousand Four Hundred Dollars ($554,000) and shall be paid by the Agency in the manner set forth in this Section 3.1(a). Within five (5) days following the Lease Commencement Date, the Agency shall pay the Landlord twenty-five percent (25%) of the Prepaid Rent (in the amount equal to One Hundred Thirty-Eight Thousand Dollars ($138,000)). Provided this Lease is not terminated in accordance with Section 2.2(b), thereafter, the Agency shall pay the Landlord the remaining seventy-five percent (75%) of the Prepaid Rent (in the amount equal to Four Hundred Fifteen Thousand Eight Hundred Dollars ($415,800)) within five (5) days following the issuance of the building permit for the Improvements. (b) Payment. Provided that this Lease remains in effect and the Landlord is not in default hereunder, the Tenant shall pay to the Landlord, throughout the Term, the Rent in the amount and manner provided in this Section 3.1. Except for the amount of Prepaid Rent, which the Tenant shall pay as a partial prepayment of the total Rent due pursuant to this Lease, no Rent shall be payable prior to the Rent Commencement Date. Commencing on the Rent Commencement Date, and on 773\106\

12 January 1 of each year of the Term thereafter, the Tenant shall pay the Landlord Rent in an annual amount of Seventy-Nine Thousand Two Hundred Dollars ($79,200) per year. (c) Location. The Tenant shall pay the Rent to the Landlord, in lawful money of the United States of America, to the Landlord at the address for the Landlord set forth in Section 13.1, or to such other person or at such other place as the Landlord may from time to time designate by notice in writing to Tenant, during the Term in accordance with the terms of this Lease. Section 3.2 Advances for Lease Obligations. The Landlord shall at all times have the right (at its sole election and without any obligation so to do) to advance on behalf of the Tenant any amount payable under this Lease by the Tenant, or to otherwise satisfy any of the Tenant's obligations under this Lease, provided that (except in case of emergency calling for immediate payment) the Landlord shall first have given the Tenant no less than sixty (60) days advance written notice of the Landlord's intention to advance such amounts on behalf of the Tenant. All amounts advanced by the Landlord shall be separate from and additional to the Rent, and shall be immediately due and payable by the Tenant to the Landlord and shall bear interest from the date of advance at the Default Interest Rate. All amounts advanced by the Landlord pursuant to this Section 3.3 or similar provisions of this Lease are hereinafter referred to as "Advances". ARTICLE 4. CONSTRUCTION OF IMPROVEMENTS Section 4.1 Construction of Improvements. Any building erected on any portion of the Property, and any alteration, construction, remodeling, reconstruction or repair work undertaken on or within any existing building on any portion of the Property shall at all times be of first-class construction and architectural design. All such alteration, construction, remodeling, reconstruction or repair work shall be diligently prosecuted, and completed (1) without cost to the Landlord (except as otherwise provided herein), (2) in good and workmanlike manner, and (3) in accordance with any plans and specifications approved by the Agency pursuant to the Agency Development Documents. The Tenant shall, or shall cause the Developer to, secure all Land Use Approvals for any construction plans for the Property. Section 4.2 Construction Standards. (a) General Standards. All construction of the Improvements, and alteration or repair work thereon shall be accomplished expeditiously and diligently by reputable licensed contractor(s) in accordance with the Agency Development Documents. (b) Compliance with Construction Documents and Laws; Issuance of Permits. The Agency shall use commercially reasonable good faith efforts to cause the 773\106\

13 Developer to construct all Improvements in compliance with the requirements of the construction documents approved by the Agency in accordance with the Agency Development Documents. (c) Construction Safeguards. The Tenant shall use commercially reasonable good faith efforts to cause the Developer to erect and properly maintain at all times, as required by the conditions and the progress of work performed by the Developer, all reasonable safeguards for the protection of workers and the public. As more particularly set forth in Section 13.6(b), below, the Tenant shall indemnify, defend, and hold the Landlord harmless from any claim resulting from the Tenant's failure to comply with the requirements of this subsection (c). (d) Notice of Completion. Upon completion of any construction, the Tenant shall use commercially reasonable good faith efforts to cause the Developer to file or cause to be filed in the Official Records of the County of Contra Costa a notice of completion with respect to the applicable construction. (e) Discharge of Liens. The Tenant shall not permit or suffer to be created or to remain, and will discharge, any lien (including, but not limited to, the liens of mechanics, laborers, materialmen, suppliers or vendors for work or materials alleged to be done or furnished in connection with the Property and the Improvements thereon), encumbrances or other charge upon the Property and the Improvements thereon, or any part thereof, or upon the Tenant's leasehold interest therein. The Tenant and/or the Developer shall have the right to contest in good faith and by appropriate legal proceedings the validity or amount of any mechanics', laborers', materialmen's, suppliers' or vendors' lien or claimed lien; provided that the Tenant shall cause the Developer to utilize all reasonable means (including the posting of adequate security for payment) to protect the Property and any part thereof or the Improvements thereon against foreclosure, and shall cause the Developer to indemnify and hold harmless the Landlord from any adverse effects resulting from such lien. (f) Protection of the Landlord. Nothing in this Lease shall be construed as constituting the consent of the Landlord, expressed or implied, to the performance of any labor or the furnishing of any materials or any specific improvements, alterations of or repairs to the Property or the Improvements thereon, or any part thereof, by any contractor, subcontractor, laborer or materialman, nor as giving the Tenant or any other person any right, power or authority to act as agent of or to contract for, or permit the rendering of, any services or the furnishing of any materials in such manner as would give rise to the filing of mechanics' liens or other claims against the fee interest of the Property. The Landlord shall have the right at all reasonable times to post and keep posted on the Property any notices which the Landlord may deem necessary for the protection of the Landlord and of the Property and the Improvements thereon from mechanics' liens or other claims. In addition, but subject to the second paragraph of subsection (e) above, the Tenant shall cause the Developer to 773\106\

14 make prompt payment of all monies due and legally owing to all persons doing any work or furnishing any materials or supplies to the Developer, or any of its respective contractors or subcontractors in connection with the Property and the Improvements thereon. (g) Contractor(s). All construction, alteration or repair work permitted herein shall be performed by reputable, licensed contractors with skills and experience necessary to perform such work to the quality standard set forth in this Article 4. Section 4.3 No Liens. The Tenant shall not have any right, authority or power to bind the Landlord, or the Landlord's fee interest in the Property, for any claim for labor or material or for any other charge or expense, lien or security interest incurred in connection with the development, construction or operation of the Improvements or any change, alteration or addition thereto. Any easements necessary and incidental to the development, construction and operation of the Improvements are subject to the approval of the Landlord, which shall not be unreasonably withheld, delayed or conditioned. Section 4.4 Permits, Licenses and Easements. The Landlord will cooperate with the Tenant and the Developer in the submittal of applications for all required permits, licenses, applications for utility services and easements, provided that the Tenant and the Developer shall be responsible for obtaining any and all permits, licenses, easements and other authorizations required by any Governmental Authorities with respect to any construction or other work to be performed on the Property and for granting or causing to be granted all permits, licenses, easements and other governmental authorizations that are necessary or helpful for electric, telephone, gas, water, sewer, drainage, access and such other public or private utilities or facilities as may be reasonably necessary or desirable in connection with the construction or operation of the Improvements. The Tenant and/or the Developer shall be entitled, without separate payment to the Landlord for tap or connection fees, to tap into the existing lines, facilities and systems of applicable electric, gas, cable, water, sewer, sewer treatment and other utilities serving the Property, provided the Tenant and/or the Developer remains responsible for payment of such fees therefor. ARTICLE 5. USE, CHARACTER, OPERATION AND MAINTENANCE OF IMPROVEMENTS Section 5.1 Discretion Retained by Agency. (a) Agency Redevelopment of the Property. The Parties recognize and acknowledge that the manner in which the Property and the Improvements are developed, used and operated are matters of critical concern to the Agency by reason of (1) the prominence of the location of the Property, and (2) the impact which the Improvements are expected to have upon the Project Area and surrounding properties 773\106\

15 and upon the economic development of the surrounding area. In order to give the Agency assurance that the Property will be redeveloped in accordance with the Community Redevelopment Law and the Redevelopment Plan, the Landlord agrees that at all times during the Term of this Lease, the Agency may enter into the Agency Development Documents, and any amendment thereto, in the sole discretion of the Agency (and without the approval or consent of the Landlord). (b) Landlord Cooperation. The Landlord agrees and acknowledges that it is in the best interests of the Parties that the Agency promptly cause the redevelopment of the Property. The Landlord further agrees and acknowledges that, as of the Lease Commencement Date, the Agency desires to redevelop the Property by causing the Developer to construct and operate an affordable housing project consisting of approximately sixty (60) to eighty (80) units, and related improvements, at the Site, a portion of which shall be located on the Property. The Landlord further agrees to cooperate in good faith with the Agency, the Developer, the Developer's lenders, and all other parties hired or retained by the Agency and/or the Developer for the redevelopment of the Site. Section 5.2 Limitations on Use. During the term of this Lease, the Property shall only be used for the development and operation of the Improvements as reasonably determined by the Agency. Section 5.3 Compliance with Laws. The Tenant shall use commercially reasonable good faith efforts to cause the Developer to comply with all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations and ordinances affecting the Improvements the use thereof, or construction thereon, including those which require the making or any structural, unforeseen or extraordinary changes, whether or not any such statutes, laws, rules, orders, regulations or ordinances which may be hereafter enacted were within the contemplation of the Parties at the time of execution of this Lease, or involve a change of policy on the part of the Governmental Authority enacting the same. Section 5.4 Assistance in Making Payments. The Parties acknowledge that Developer will be responsible for making various payments to third parties, such as tax and utility payments. In case any person or entity to whom any sum is directly payable by the Developer (e.g., a tax collector or utility company) shall refuse to accept payment of such sum from the Developer (due to the fact that the Developer is not the fee owner of the Property or for any other reason), the Agency shall thereupon give written notice of such fact to the Landlord and the Agency shall cause the Developer to pay such sum directly to Landlord at the address specified in Section 13.1 hereof, and Landlord shall thereupon pay such sum to such person or entity. Section 5.5 Permitted Contests. The Tenant and/or the Developer shall not be required to pay, discharge or remove any taxes (including penalties and interest) upon or against the Improvements, or any part thereof, so long as the Tenant and/or the Developer shall in good faith contest the same or the validity thereof by appropriate 773\106\

16 legal proceedings and shall give to the Landlord prompt notice in writing of such contest. The Tenant shall cause the Developer to, prior to the date such taxes are due and payable, meet all requirements for contest imposed by the taxing entity whose tax is being contested (including, without limitation, depositing any sums required by such taxing entity). The Landlord shall cooperate with the Tenant in providing the Tenant information in connection with contests permitted under this Section 5.5. Section 5.6 No Hazardous Materials. The Tenant hereby represents and warrants to the Landlord that, at all times from and after the Lease Commencement Date, the Tenant shall not use the Property as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials, in violation of any Hazardous Materials Laws. ARTICLE 6. TITLE TO IMPROVEMENTS; QUIET ENJOYMENT; INSPECTIONS. Section 6.1 During the Term. The Landlord hereby grants to the Agency, without warranty express or implied, any right, title, or interest that the Landlord has or may have in the Improvements now or hereafter located on the Property, which Improvements are and shall at all times during the Term be deemed real property. Notwithstanding any provision in this Lease to the contrary, the Improvements and all alterations, additions, equipment and fixtures built, made or installed by the Agency and/or the Developer in, on, under or to the Property or the Improvements shall be the sole property of the Agency and/or the Developer until the expiration of the Term or other termination of this Lease. It is the intent of the Parties hereto that this Lease shall create a constructive notice of severance of the Improvements from the Property without the necessity of a deed from the Landlord after the Improvements have been constructed. Section 6.2 After the Term. Upon the expiration of the Term or other termination of the Lease, the Improvements shall be deemed to be and shall automatically become the property of the Landlord, without cost or charge to the Landlord. The Landlord agrees that the Agency and/or the Developer, at any time prior to the sixtieth (60th) day after the expiration or other termination of this Lease, may remove from the Property, the Personal Property, and any and all equipment which the Agency and/or the Developer has furnished for maintenance purposes, provided that the Agency and/or the Developer shall repair any physical damage to the Property caused by the removal of such equipment and property. The Tenant agrees to execute (or to use commercially reasonably good faith efforts to cause the Developer to execute), at the request of the Landlord at the end of the Term, a quitclaim deed of the Improvements to the Landlord to be recorded at the Landlord's option and expense and any other documents that may be reasonably required by the Landlord or the Landlord's 773\106\

17 title company to provide the Landlord title to the Property and the Improvements free and clear of all monetary liens and monetary encumbrances not caused or agreed to by the Landlord. In no event shall the Landlord have any ownership interest in or to the Adjacent Property or the improvements thereon. Section 6.3 Benefits of Improvements During Term. The Landlord acknowledges and agrees that any and all depreciation, amortization, tax credits and other tax benefits for federal or state tax purposes relating to the Improvements located on the Property and any and all additions thereto, substitutions therefor, fixtures therein and other property relating thereto shall be deducted or credited exclusively to the Tenant and/or the Developer during the Term and for the tax years during which the Term begins and ends. Section 6.4 Quiet Enjoyment. The Landlord covenants and warrants that the Tenant and its subtenants (including but not limited to the Developer and the Developer's tenants) shall peaceably and quietly have, hold, occupy, use and enjoy, and shall have the full, exclusive and unrestricted use and enjoyment of, all of the Property during the Term. During the Term, the Landlord hereby warrants that the Landlord shall not interfere with, impede, disrupt, or take (or cause to be taken) any action that has, or could be expected to have, an adverse impact on the Tenant and its subtenants (including but not limited to the Developer and the Developer's tenants) use and occupancy of the Property. Any violation of this covenant shall constitute all of the following: (i) a Landlord Event of Default, (ii) the constructive eviction of the Tenant, and (iii) a nuisance. Section 6.5 The Landlord's Right of Inspection. Notwithstanding Section 6.4 above, the Landlord, in person or through its agents, upon at least fourteen (14) calendar days prior written notice to the Tenant, shall have the right to enter upon the Property for purposes of reasonable inspections performed during reasonable business hours in order to assure compliance by the Tenant with its obligations under this Lease. During such inspection the Landlord shall not unreasonably disturb the Developer's tenants quiet use and enjoyment of the Property. In no event shall the Landlord have access to individual units within the Improvements. ARTICLE 7. ASSIGNMENT AND SUBLETTING Section 7.1 Landlord's Pre-Approval of Transfers. The Landlord agrees and acknowledges that the Agency was established pursuant to the Community Redevelopment Law for the exclusive purpose of causing the redevelopment of the Project Area in accordance with the Redevelopment Plan. The Landlord further agrees and acknowledges that the Agency has particular skill and expertise in redevelopment activities, including but not limited to, commercial real estate development. Therefore, because of such qualifications and identity of the Agency, the Landlord hereby preapproves any Transfer by the Agency (including but not limited to a Transfer to the City 773\106\

18 or a Transfer or Transfers to the Developer, or Approved Security Interests), and hereby agrees to execute such additional documents as may be reasonably requested by the Agency to evidence the Landlord's consent and pre-approval of Transfers, including, but not limited to promptly executing the documents set forth in Article 9, provided, however, the Agency shall have no obligation to obtain any additional consent or approval by the Landlord to effectuate such Transfers. Section 7.2 Agency's Right of First Refusal. The Landlord agrees that Landlord shall not sell the Property during the Term of this Lease (as may be extended by the Agency as set forth in this Lease), except in the manner set forth in this Section. If at any time during the Term of this Lease (as may be extended by the Agency as set forth in the Lease) Landlord receives from any third party a bona fide offer to purchase the Property at a price and on terms acceptable to Landlord, Landlord shall give written notice of the offer to Agency. Within ninety (90) days after Landlord gives the Agency written notice of the third-party offer to purchase the Property, the Agency shall have the right to purchase the Property at the same price and on the same terms and conditions set forth in the third-party offer (the "Agency Right of First Refusal"). To exercise its right, the Agency must within the same ninety (90) day period deposit in escrow with any escrow company located in Contra Costa County, California, and reasonably acceptable to the Parties, all moneys and instruments required by the terms of the offer to be paid or delivered to the Landlord on close of escrow and shall also give Landlord written notice of the deposit. In the event Agency fails to exercise the option to purchase in accordance with the provisions of this Section, then the Landlord may sell the Property to the third party making the offer on the same terms and conditions set forth in that offer. If for any reason the Property is not sold to the initial party making the offer, Landlord shall give Agency the same right to purchase the Property set forth above on receiving each subsequent offer from each third party that is acceptable to Landlord, if any. Section 7.3 Transfer by Landlord. In the event of a sale, assignment, transfer or conveyance by the Landlord of the fee interest in the Property or of the Landlord's rights under this Lease (following the expiration of Agency's Right of First Refusal set forth above), this Lease shall not be affected by any such sale, and the Tenant agrees to attorn to any such purchaser or assignee. ARTICLE 8. INSURANCE; DAMAGE AND DESTRUCTION OF IMPROVEMENTS Section 8.1 Insurance Requirements. The Landlord acknowledges that the Agency is self-insured that such self-insurance is adequate for the purposes of this Lease and that the Agency is under no obligation to acquire or maintain any additional insurance policies under this Lease. 773\106\

19 Section 8.2 Damage or Destruction. In the event of major damage or destruction to the Improvements on the Property during the Term, the Tenant shall have the right, at the Tenant's election, to either: (i) make or cause the Developer to make full repair of such damage and fully restore the Improvements on the Property in accordance with the applicable provisions of the Agency Development Documents, or (ii) to terminate this Lease. If the Tenant elects to terminate this Lease, the Tenant shall comply with all of the following conditions: (a) The Tenant shall give the Landlord written notice of the damage or destruction within thirty (30) days after the event causing such damage or destruction; (b) As promptly as is feasible, the Tenant shall or shall cause the Developer to repair or restore the damaged Improvements to the extent necessary to make them safe from immediate danger to the public; and (c) The Tenant shall deliver possession of the Property and the Improvements thereon to the Landlord and shall quitclaim (and shall cause the Developer to quitclaim) to the Landlord all right, title and interest in the Property and the Improvements thereon. Following such termination of this Lease, neither Party shall have any further duty or obligation under this Lease except for those provisions that explicitly survive the termination of this Lease. Major damage or destruction to the Improvements on the Property (as used in this Article) means damage or destruction where the cost to make full repair of such damage and restore the Improvements in accordance with the provisions of this Article would be two percent (2%) or more of the replacement cost of all of the Improvements on the Property in their entirety. The calculation of such percentage shall be based upon the replacement cost of the Improvements on the Property as of the date of the damage or destruction. The determination of whether any particular damage or destruction constitutes major damage or destruction within the meaning of this paragraph shall be determined and certified by a professional cost estimator experienced in such matters designated by the Agency within thirty (30) days after the occurrence of such damage or destruction. Section 8.3 Insurance Proceeds Upon Permitted Termination. Upon termination of this Lease pursuant to this Article, insurance proceeds, if any, for the Improvements not used in repair or restoration shall be the property of the Agency and shall be distributed in the manner set forth in the Agency Development Documents. 773\106\

20 ARTICLE 9. APPROVED SECURITY INTERESTS Section 9.1 Right to Encumber. The Tenant and the Developer (or any other party which has entered into or assumed the Agency Development Documents) shall have the right during the Term to encumber, through an Approved Security Interest all of the Tenant's right, title and interest in the Property subject to the provisions of this Lease. Section 9.2 Landlord's Fee Encumbrance. In addition to the Tenant's and the Developer's right to encumber their leasehold estate in the Property and the Developer's fee in the Improvements, the Landlord shall encumber its fee title in the Property with the Approved Security Interests as set forth in the Financing Plan, approved by the Agency pursuant to the Agency Development Documents, or if requested by an Approved Security Interest Holder from time to time to permit the redevelopment of the Property. If requested by the Landlord, the Agency shall cause the Developer to provide the Landlord copies of the documents to be executed by the Landlord or that shall otherwise encumber the Landlord's fee title in the Property. The Landlord shall have ten (10) days to review and approve such documents. The Landlord shall approve such documents so long as such documents do not conflict with the requirements of Section 9.3. The Landlord's failure to either approve or disapprove of such documents within such ten (10) period shall be deemed approval, and upon the expiration of such ten (10) period (without Landlord's approval or disapproval) the Landlord shall immediately execute any documents necessary to encumber its fee title in the Property and such failure shall constitute a default under Section 12.3 without regard to any notice and cure period set forth therein which the Landlord and the Tenant acknowledge shall not apply to this Section 9.2. Section 9.3 Subordination. In addition to the Approved Security Interests, the Landlord shall permit the further encumbrance of the Landlord's fee interest in the Property. Upon written request by the Tenant to further encumber the Landlord's fee interest in the Property, the Landlord agrees to provide the subordination provided in this Section 9.3, subject to the conditions described in this Lease, including the following: (a) The liability of the Landlord under any documents executed in connection with any loan shall be limited by the express terms of the instrument of subordination. The limitations shall include: the limitation of the Landlord's liability solely to the interest or interests subordinated, and the Landlord's right not to execute any instrument which would obligate the Landlord for the payment of the loan secured by a deed of trust to which the fee is subordinated. (b) Provided the conditions of this Section are satisfied, the Landlord shall, within ten (10) days after written request by the Tenant, execute, acknowledge and deliver an instrument of subordination, together with other documents as may be reasonably required by the Approved Security Interest Holder, from the Landlord in favor of the Approved Security Interest Holder to effectuate the provisions of this 773\106\

21 Section. The Landlord will immediately pay over to the Tenant proceeds received by the Landlord, if any, of any the Approved Security Interests and the proceeds of any Approved Security Interests received by the Landlord shall be considered a trust fund to be paid to the Tenant. The agreement of subordination contained herein shall be selfoperative and no further instrument of subordination shall be necessary unless it be required by an Approved Security Interest Holder or any other party (other than the Landlord). If any proceeds are made payable to both the Landlord and the Tenant, the Landlord shall immediately sign any documents necessary to transfer the proceeds to the Tenant. Section 9.4 Estoppel Certificates. The Landlord and the Tenant agree that at any time, and from time to time, upon not less than twenty (20) days' prior written notice by the other party, or upon request from any Approved Security Interest Holder or a permitted assignee or other interested party, the Landlord or the Tenant will execute, acknowledge and deliver to the other party or to such other parties a statement in writing certifying (a) that this Lease is unmodified and in full force and effect; (b) the date through which the Rent has been paid; and (c) that, to the knowledge of the certifier (if such be the case), there is no default, set-off, defense or other claim against the Landlord or the Tenant, as applicable, other than those, if any, so specified under the provisions of this Lease. It is intended that any such statement may be relied upon by any persons proposing to acquire the interest of the Landlord, the Tenant or any Approved Security Interest Holder, as the case may be, in this Lease or by any assignee of any Approved Security Interest Holder. Section 9.5 Mortgage of Landlord's Estate. Except for the Approved Security Interests, the Landlord agrees not to encumber or convey any interest in the Landlord's fee interest in the Property with any deed to secure debt, mortgage, deed of trust or other instrument in the nature thereof as security for any debt which is not expressly subordinate to the Tenant's and/or the Developer's interest in the Property under this Lease and to any Approved Security Interest without the written consent of the Tenant. The Landlord agrees not to permit any liens arising from work contracted for by the Landlord to be filed against the Property without causing the same to be removed or bonded over within thirty (30) days of such filing. Section 9.6 Registration of Approved Security Interests. The Tenant shall provide written notice to the Landlord of the name and address of each Approved Security Interest under this Lease. 773\106\