GROUND LEASE
This GROUND LEASE (this "Lease") is entered into as of December 1, 2022 (the "Effective Date"), between the CITY OF CRESCENT CITY ("Landlord") and DANCO COMMUNITIES, a California corporation ("Lessee") who agree as follows:
RECITALS
A. The Landlord is the owner of that certain real property located in the City of Crescent City, California (the "City") and described in the legal description attached hereto as Exhibit A and incorporated herein by this reference (the "Property" or "Leased Premises"); B. The Landlord and Lessee desire to enter into this Lease relating to the Property.
NOW, THEREFORE, in consideration of the foregoing, the Landlord and Lessee agree as follows:
ARTICLE 1
TERMS AND PROVISIONS
1.1 AGREEMENT TO LEASE. Landlord hereby leases the Property to Lessee, and Lessee hereby leases the Property from Landlord, subject to the provisions and conditions set forth herein.
ACCEPTANCE OF PROPERTY. Landlord makes no representations, expressed or implied, with respect to the legality, fitness, or desirability of the Property for Lessee's intended use. It Lessee desires to do so, Lessee shall have the right to conduct its own investigation, to its satisfaction, with respect to any matters affecting Lessee's ability to use the Property for Lessee's intended use.
1.3 AS-IS CONVEYANCE.
1.3.1 Condition of Leased Premises. This Lease is made "AS IS," with no warranties or representations by the Landlord concerning the condition of the Leased Premises or Improvements, including the presence or absence of any Hazardous Materials. Lessee hereby agrees and acknowledges that except in the event of any fraud, misrepresentation, or withholding of information by Landlord: (i) neither Landlord, nor anyone acting for or on behalf of Landlord, has made any representation, statement, warranty or promise to Lessee concerning the development potential or condition of the Leased Premises or Improvements; (ii) in entering into this Lease, Lessee has not relied on any representation, statement or warranty of Landlord, or anyone acting for or on behalf of Landlord, other than as may expressly be contained in writing in this Lease; (iii) all matters concerning the Leased Premises and Improvements have been or shall be independently verified by Lessee and that Lessee shall purchase or lease the Leased Premises and Improvements on Lessee's own prior examination thereof; and (iv) THAT LESSEE IS LEASING THE LEASED PREMISES IN AN "AS IS" PHYSICAL CONDITION AND IN AN "AS IS" STATE OF REPAIR.
1.3.2 General Release. Subject to Section 1.3.1 above, Lessee and its owners, employees, agents, assigns and successors agree that upon the Effective Date, Lessee shall be deemed conclusively to have released and discharged Landlord and its agents, employees, trustees, assigns and successors, from any and all damages, losses, demands, claims, debts, liabilities, obligations, causes of action and rights, whether known or unknown, by Lessee regarding the Leased Premises and Improvements, including, but not limited to, the environmental condition of the Leased Premises and Improvements.
1.4 TERM.
1.4.1 The Lease shall have an initial term (the "Initial Term") that commences on the Effective Date and continues until the earlier to occur of: (a) one (1) calendar year following the Etfective Date, and (b) the satisfaction by the City of all requirements for a transfer of the Property in compliance with the Surplus Land Act as set forth in Government Code Sections 54220-54323. Upon the termination of the Initial Term, Landlord shall have the following options to be exercised at its sole and absolute discretion: (x) Landlord shall have the right to extend the initial term for a period of not less than (65) years; (y) Landlord shall have the right terminate this Agreement and negotiate an agreement for the purchase of the fee interest in the Property; or (z) Landlord shall have the right to terminate this Agreement. The Initial Term, together with any extension term hereunder shall be referred to as the "Term" herein.
1.4.2 Lessee shall upon the expiration or sooner termination of this Lease surrender the Property and Improvements to Landlord in good and clean condition, ordinary wear and tear excepted, including any buildings, structures, improvements or additions located on the Property. All personal property not removed by Lessee, upon any such termination, shall, without compensation to Lessee, then become Landlord's property, free and clear of all claims to or against them by Lessee or any third person, firm or entity.
1.5 RENT.
1.5.1 Rent. Lessee shall pay Landlord ground lease rent ("'Annual Rent") on or before the annual anniversary of the Effective Date in the amount of One Dollar ($1) every year commencing on the one-year anniversary of the Effective Date.
1.5.2 Additional Rents. In addition to the Annual Rent, any and all of the payments that Lessee is required to make hereunder to or for the benefit of Landlord shall be deemed to be "Additional Rents." All such Additional Rents shall be payable in accordance with the provisions of the Sections of this Lease specifying the payment of such Additional Rents. The Annual Rent and Additional Rents payable hereunder shall be deemed "Rents" reserved by Landlord, and any remedies now or hereafter given to Landlord under the laws of the State of California for collection of the Rents shall exist in favor of Landlord, in addition to any and all other remedies specified in this Lease.
1.6 USE.
1.6.1 Lessee shall, throughout the Term, continuously use the Property only for the construction, development, operation, marketing for lease and leasing of a 27-unit apartment building and related amenities located thereon, to be commonly known as Harbor Point, together with all tangible personal property located on or affixed thereto and used in connection with the ownership, operation and maintenance of the Property (collectively, the "Improvements") and such other uses as are reasonably and customarily attendant to such uses and permitted by law.
Further, Lessee agrees:
2 (i) not to use the Leased Premises for any disorderly or unlawful purpose;
(ii) to use its commercially reasonable efforts to prevent any action by any tenants from committing or maintaining any nuisance or unlawful conduct on or about the Leased Premises;
(iii) to use its commercially reasonable efforts to prevent any action by any tenant that would cause Lessee to violate any of the covenants and conditions of this Lease with respect to the Improvements;
(IV) upon notice from Landlord, to take reasonable action, if necessary, to abate any action by any tenant that would cause Lessee to violate this Lease; and (V) subject to the rights of tenants, to permit Landlord and its agents upon not less than seventy-two (72) hours written notice to inspect the Leased Premises or any part thereof at any reasonable time during the Term.
1.6.3 Except as otherwise in compliance with applicable local, federal or state laws, Lessee shall not discriminate against, or segregate any person or group of persons on the grounds of race, color, creed, religion, sex, sexual orientation, marital status, national origin, ancestry, disability, medical condition, age, familial status, or source of income in the lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Leased Premises nor shall Lessee, or any person claiming under or through Lessee, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees of the Leased Premises. Lessee shall otherwise comply with all applicable local, state, and federal laws concerning discrimination. The foregoing covenant shall run with the land.
1.6.4 Lessee shall not cause, maintain, or permit any nuisance or waste in, on, or about the Property.
1.7 COMPLIANCE WITH LAW. Lessee shall not use the Property or permit anything to be done in or about the Property which will in any way conflict with any applicable law, statute, ordinance, or governmental rule, regulation, or requirement now in force or which may hereafter be enacted or promulgated.
1.8 TAXES.
1.8.1 Lessee shall, during the entire Lease Term, at its own cost and expense, pay the public officers charged with their collection, as the same become due and before any fine, penalty, interest, or other charge may be added to them for nonpayment, all real estate taxes, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind and nature, made, assessed, levied, or imposed upon, or due and payable in connection with, or which become a lien upon, the Property, the Improvements, or any part of the Property or Improvements, or upon the Lessee's leasehold interest in the Property pursuant to this Lease. 3 1.8.2 Lessee shall have the right, by appropriate proceedings, to protest or contest in good faith any assessment or re-assessment of taxes, any special assessment, or the valldity of any taxes or of any change in assessment or tax rate; provided, however, prior to any such challenge Lessee must post a bond or other security in an amount sufficient to insure full payment of the taxes.
1.8.3 To the extent applicable, during the term of the Lease, Lessee shall pay any and all personal property taxes assessed against equipment, trade fixtures, inventory, or other personal property owned by Lessee and located in, on, or about the Property and the Improvements.
Lessee shall indemnify, defend, and hold Landlord and the Property harmless from and against any such personal property taxes.
1.9 ASSIGNMENT AND SUBLETTING.
1.9.1 The qualifications and identities of Lessee and its principals are of particular concern to the Landlord. It is because of those qualifications and identity that the Landlord has entered into this Lease with Lessee. Lessee shall not assign all or any part of its interests in this Lease to any other entity without the prior written approval of the Landlord, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, Landlord hereby consents to the following transactions: (i) assignment of this Lease to a limited partnership in which Danco Communities is an affiliate of a general partner, (i) transfer of the limited partner's interest in Lessee to a limited partner investor; (iii) transfer by the limited partner investor of its limited partner interest in Lessee to an entity in which the limited partner investor or its affiliate manages and controls, directly or indirectly, the management decisions of said entity; (iv) the withdrawal, removal and/ot replacement of Lessee's general partners) by the limited partner investor, its successors or assigns for a default under the Lessee's partnership agreement provided that Landlord has approved the replacement general partner, which approval shall not be unreasonably withheld, and (v) the transfer of the Project or interest in the Lessee pursuant to options or rights of first refusal granted in the Tenant's partnership agreement.
1.9.2 Lessee shall have the right from time to time to enter into subleases or rental agreements with tenants for occupancy of the Improvements and the Property or for laundry or cell tower facilities without the need to obtain approval of Landlord.
1.9.3 Notwithstanding anything to the contrary contained in this Lease, any transfer of the limited partnership interests in Lessee, either directly or indirectly, in whole or in part, shall not constitute a default under this Lease and shall not require Landlord's consent. Further, and notwithstanding anything to the contrary contained in this Lease, the removal of any general partner of Lessee by a limited partner of Lessee for cause pursuant to Lessee's agreement of limited partnership shall not constitute a default under this Lease and shall not require Landlord's consent, provided, however, that any replacement general partner shall be subject to Landlord's consent, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Landlord's consent should not be required for a substitute general partner that is an affiliate of Lessee's limited partner.
1.10 HOLD HARMLESS.
1.10.1 Indemnifications. Lessee hereby agrees to indemnify, protect, hold harmless 4 and defend (by counsel reasonably satisfactory to Landlord) Landlord, its officers, directors, agents and employees from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorneys fees and expenses (collectively "claims"), arising from or relating to the Property, Lessee's obligations under this Lease, and the construction or operation of the Improvements, except to the extent caused by the negligence or willful misconduct of Landlord, or any of its officers, directors, agents or employees.
This indemnity shall survive the termination of this Lease. In the event any Permitted Leasehold Mortgagee becomes the lessee under this Lease or becomes a lessee under any new lease permitted hereunder, the Permitted Leasehold Mortgagee shall be liable only for the indemnity obligations of Lessee under this Lease or a new lease relating to acts, omissions, events or conditions first occurring or existing after the time that the Permitted Leasehold Mortgagee first becomes lessee under this Lease or such new lease (the "Leasehold Transfer Date").
1.11 OWNERSHIP OF PROPERTY DURING THE TERM AND UPON
EXPIRATION OR TERMINATION OF LEASE: LANDLORD PURCHASE
OPTION.
1.11.1 During the Term of this Lease, the Improvements, including all buildings, structures, fixtures, additions and improvements located on the Property (other than personal property owned by Landlord or others) shall be owned in fee by Lessee. The parties hereto agree that Lessee shall bear all risk of loss with respect to the Improvements and that the benefits and burdens of ownership of the Improvements are vested in Lessee.
1.11.2 Upon expiration or termination of this Lease, ownership of the Improvements, including all buildings, structures, fixtures, additions, equipment, other improvements, any security deposits then held by Lessee (upon delivery of which, Landlord shall assume all obligations to subtenants with respect thereto), any reserve accounts associated with the Improvements, and any other real property whatsoever located on the Property shall revert to the Landlord, without compensation to Lessee, and be surrendered to Landlord with the Property, but not including personal property or property which is permitted to be removed from the Property by Lessee or other owner; provided, however that Lessee shall repair any physical damage to the Improvements or the Property caused by the removal of personal property.
1.11.3 Upon termination of this Lease, whether by expiration of the Term or otherwise, the Improvements and all personal property not removed by Lessee, shall then become the property of Landlord. Lessee agrees to execute, at the request of Landlord upon Lease termination, a quitclaim deed of the Improvements to Landlord to be recorded at Landlord's option and any other documents that may be reasonably required by Landlord or Landlord's title company to provide Landlord title to the Property and the Improvements.
1.12 SUBROGATION.
2.12.1 Neither Landlord nor Lessee shall be liable to the other or to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage to any building, structure, or other tangible property, or any resulting loss of income, or losses under 5 worker's compensation laws and benefits (even though such loss or damage might have been occasioned by the negligence of such party, its agents, or employees), if any such loss or damage is covered by insurance benefiting the party suffering the loss or damage. Landlord and Lessee hereby mutually release each other from liability and waive all right to recover against each other or against officers, employees, agents or representatives of each other for any loss or damage to any person or property caused by or resulting from risks insured against under any insurance policies carried by the parties; provided, however, this paragraph shall be inapplicable if it would have the effect, but only to the extent that if would have the effect, of invalidating any insurance coverage of Landlord or Lessee. The parties shall, to the extent available, cause each insurance policy obtained hereunder to provide a waiver of subrogation except as otherwise permitted herein.
1.13 INSURANCE.
During the Term of this Lease, and for any required period thereafter as set forth below, the Lessee shall purchase and maintain in full force and effect, at no cost to the Landlord, the following insurance policies, all of which shall be provided by companies and/or agencies approved to do business in the State of California:
1.13.1 Leased Premises Insurance. "All risk" insurance covering all risks of physical loss or damage to any of the Improvements, with liability limits of not less than one hundred percent (100%) of the "full replacement value" thereof, which insurance shall be provided by Lessee. Such policies shall be broad form and shall include, but shall not be limited to, coverage for fire, extended coverage, vandalism, malicious mischief and storm (but shall exclude earthquake and terrorism insurance). Perils customarily excluded from all risk insurance, e.g., earthquake and flood, may be excluded. The term "full replacement value" shall exclude the cost of excavation, foundations and footings.
1.13.2 General Liability Insurance. Commercial general liability and automobile liability insurance, covering loss or damage resulting from accidents or occurrences on or about or in connection with the Improvements or any work, matters or things under, or in connection with, or related to this Lease, with personal injury, death and property damage combined single limit liability of not less than One Million Dollars ($1,000,000) for general liability and One Million Dollars ($1,000,000) for automobile liability for each accident or occurrence and an aggregate limit of not less than Two Million Dollars ($2,000,000) for general liability, and an aggregate limit of not less than Four Million Dollars ($4,000,000) for umbrella and excess liability.
Coverage under any such comprehensive policy shall be broad form and shall include, but shall not be limited to, operations, contractual, elevators, owner's and contractor's protective, products and completed operations, and the use of all owned, non-owned and hired vehicles.
1.13.3 Workers' Compensation Insurance. In the event Lessee has employees, Lessee shall carry or cause to be carried Workers' Compensation insurance with limits as required by the State of California and Employer's Liability limits of One Million Dollars ($1,000,000) for bodily injury by accident and One Million Dollars ($1,000,000) per person and in the annual aggregate for bodily injury by disease covering all persons employed by Lessee in connection with the Improvements and with respect to whom death, bodily injury, or sickness insurance claims could be asserted against Landlord or Landlord.
6 1.13.4 Builders' Risk Insurance. During the course of construction of the Improvements, Lessee or Lessee's general contractor shall provide builders risk insurance for not less than the value of the construction contract (excluding the cost of excavation, foundations and footings).
1.13.5 General Requirements. All policies described in Section 1.13 shall include Landlord, its officers, officials, employees and volunteers and Lessee, together with the Permitted Leasehold Mortgagees, as named insureds, as their respective interests may appear. All policies described in Section 1.13 shall contain (a) if available, the agreement of the insurer to give Landlord and Permitted Leasehold Mortgagees, as applicable, at least ten (10) days' notice prior to cancellation (including, without limitation, for non-payment of premium) or any material change in said policies; (b) an agreement that such policies are primary and non-contributing with any insurance that may be carried by Landlord; (c) a provision that no act or omission of Lessee shall affect or limit the obligation of the insurance carrier to pay the amount of any loss sustained; (d) a waiver by the insurer of all rights of subrogation against Landlord and its authorized parties in connection with any loss or damage thereby insured against; and (e) terms providing that any loss covered by such insurance may be adjusted with Lessee, but shall be payable to the holder of the Permitted Leasehold Mortgagee who then holds a first priority Permitted Leasehold Mortgage upon Lessee's leasehold estate under this Lease.
1.13.6 Evidence of Insurance. Certificates of insurance for all insurance required to be maintained by Lessee shall be furnished by Lessee to Landlord. Landlord reserves the right to require complete, certified copies of all required insurance policies, including endorsements demonstrating the coverage required by this Lease at any time.
1.13.7 Failure to Maintain. If Lessee fails to maintain such insurance, Landlord, at its election, may procure such insurance as may be necessary to comply with the above requirements (but shall not be obligated to procure same), and Lessee agrees to repay to Landlord as Additional Rent the cost of such insurance.
1.13.8 Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A: VII or such other rating as may be reasonably acceptable to Landlord.
1.14 UTILITIES.
During the Term of this Lease, Lessee shall make all arrangements for and pay for all services and utilities to the Property.
1.15 HOLDING OVER.
In the event Lessee fails to vacate the Property and fulfill all of its obligations hereunder at the end of the Term, Lessee shall be liable for all damages incurred by Landlord by reason of the inability to deliver possession of the Property or any portion thereof to any other person.
1.15.1 Surrender of Leased Premises. Lessee covenants that upon any termination of this Lease, whether by lapse of time or because of any of the conditions or provisions contained herein, Lessee will peaceably and quietly yield and surrender possession of the Leased Premises to Landlord. The foregoing, however, will be subject to the rights of tenants or others in possession 7 pursuant to tenant leases with Lessee, provided that such tenants are not in default thereunder and attorn to Landlord as their Landlord. An action of forcible detainer shall lie if Lessee holds over after a legal demand for possession is made by Landlord following the termination of this Lease.
1.15.2 No Right to Possession after Termination. Lessee has no right to retain possession of the Leased Premises or any part thereof beyond the expiration or earlier termination of this Lease. Any holding over by Lessee (or any successor-in-interest to Lessee) after the expiration or earlier termination of this Lease shall be construed to be a tenancy at sufferance on all of the terms and conditions set forth herein to the extent not inconsistent with a tenancy at sufferance. Acceptance by Landlord of rent or any other sum payable hereunder after such expiration or earlier termination shall not result in an extension or renewal of this Lease. If Lessee fails to surrender the Leased Premises upon the expiration or earlier termination of this Lease, Lessee shall indemnify, defend and hold harmless Landlord from and against all loss, damage, cost, liability or expense (including, without limitation, attorneys' fees and expenses) resulting from or relating to such failure to surrender the Leased Premises including, without limitation, any claim made by any succeeding lessee.
1.17 DAMAGE. RECONSTRUCTION.
1.17.1 In the event the Property is damaged by fire or other perils covered by extended coverage insurance, Lessee shall use all available insurance proceeds to repair or rebuild the Improvements, unless Lessee and Landlord agree that such repair or rebuilding is not economically feasible, and this Lease shall remain in full force and effect. In the event that Lessee and Landlord agree that repair or rebuilding the Improvements is not economically feasible, Landlord may elect to terminate the Lease and Lessee shall be entitled to any and all insurance proceeds received by Lessee as a result of such damage.
1.17.2 Lessee shall not be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Property, Lessee's personal property, or any inconvenience or annoyance occasioned by such damage, repair, reconstruction, or restoration.
1.17.3 Notwithstanding anything contained in this Section 1.17 to the contrary, any rights of Landlord under this Section 1.17, including, without limitation, any right to terminate this Lease, shall be expressly subject to the rights of any Permitted Leasehold Mortgagee and Lessee's limited partner and to the terms and conditions of any Permitted Leasehold Mortgage and Lessee's partnership agreement.
1.18 DEFAULT.
1.18.1 Subject to Force Majeure delay and the notice and cure periods contained in Sections 1.18.2, 1.18.3, and 1.18.4, the failure by either the Landlord or Lessee to observe or perform any covenants, conditions, or provisions of this Lease to be observed or performed by such party shall constitute a default under this Lease. Notwithstanding the immediately preceding sentence, the party in default must commence to cure, correct or remedy such breach within the applicable time period set forth below after receipt of written notice and shall complete such cure, correction or remedy with reasonable diligence, and during any period of curing shall not be in default under this Lease, so long as it endeavors to complete such cure, correction or remedy with reasonable diligence, and provided such cure, correction or remedy is completed within the applicable time period set forth below after receipt of written notice.
1.18.2 If a monetary event of default occurs under this Lease, then prior to exercising any remedies hereunder, the complaining party shall give the party in default written notice of such default. The party in default shall have a period of ten (10) calendar days after such notice is received or deemed received within which to cure the default prior to exercise of remedies by the complaining party.
1.18.3 If a non-monetary event of default occurs under this Lease, then prior to exercising any remedies hereunder, the complaining party shall give the party in default written notice of such default. If the default is reasonably capable of being cured within thirty (30) calendar days after such notice is received or deemed received, the party in default shall have such period to effect a cure prior to exercise of remedies by the complaining party. If the default is such that it is not reasonably capable of being cured within thirty (30) days, and the party in default (i) initiates corrective action within said period, and (ii) diligently, continually, and in good faith works to effect a cure as soon as possible, then the party in default shall have such additional time as is reasonably necessary to cure the default prior to exercise of any remedies by the complaining party, but in no event more than ninety (90) days from the date of written notice of default, unless additional time is agreed to by Landlord and Lessee.
1.18.4 If Lessee fails to take corrective action or cure the default within the time period described in Section 1.18.2 or 1.18.3 above, Landlord shall give Lessee and, as provided in Section 1.18.5, below, the limited partner of Lessee, written notice thereof, whereupon, subject to the terms of Lessee's partnership agreement, the limited partner of Lessee may remove and replace the general partner with a substitute general partner in accordance with Section 1.9 above, who shall effect a cure within a reasonable time thereafter in accordance with the foregoing provisions.
Landlord agrees to accept cures tendered by the limited partner of Lessee within the cure periods provided in this Agreement. Additionally, in the event the limited partner of Lessee is precluded from curing a non-monetary default due to an inability to remove the general partner as a result of a bankruptcy, injunction, or similar proceeding by or against Lessee or its general partner, Landlord agrees to forbear from terminating this Lease during the period during which the limited partner of Lessee is so precluded from acting, not to exceed 180 days, provided such limited partner is otherwise in compliance with the foregoing provisions. In no event shall the injured party be precluded from exercising remedies if its security becomes or is about to become materially jeopardized by any failure to cure a default
1.19 HAZARDOUS MATERIALS.
1.19.1 Definitions.
(a) Hazardous Materials or Hazardous Substances: Any oil or any fraction thereof or petroleum products or "hazardous substance"; any other waste, substance or material designated or regulated in any way as "toxic" or "hazardous"; and any additional wastes, substances or material which at such time are classified, considered or regulated as hazardous or toxic under any other present or future environmental or other similar laws relating to the Leased Premises, but excluding any substances or materials used in the construction, development, 9 maintenance or operation of the Improvements, so long as the same are used in accordance with all applicable laws.
(b) Hazardous Materials Law: All federal, state, and local laws, ordinances, regulations, orders and directives pertaining to Hazardous Materials in, on or under the Leased Premises or any portion thereof.
1.19.2 Certain Covenants and Agreements. The Lessee hereby covenants and agrees that:
The Lessee shall not knowingly permit the Property or any portion thereof to be a site for the use, generation, treatment, manufacture, storage, disposal or transportation of Hazardous Materials or otherwise knowingly permit the presence of Hazardous Materials in, on or under the Property in violation of any applicable law; The Lessee shall keep and maintain the Property and each portion thereof in compliance with, and shall not cause or permit the Property or any portion thereof to be in violation of, any Hazardous Materials Laws;
Upon receiving actual knowledge of the same the Lessee shall immediately advise the Landlord in writing of:
(i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against the Lessee or the Property pursuant to any applicable Hazardous Materials Laws; any and all claims made or threatened by any third party against the Lessee or the Property relating to damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in the foregoing clause (i) and this clause (ii) are hereinafter referred to as "Hazardous Materials Claims");
(ii) the presence of any Hazardous Materials in, on or under the Property in such quantities which require reporting to a government agency; or (iii) If the Landlord reasonably determines that the Lessee is not adequately responding to a Hazardous Material Claim or any condition in clauses (i) and (i) above, the Landlord shall have the right to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any such Hazardous Materials Claims and to have its reasonable attorney's fees in connection therewith paid by the Lessee.
Without the Landlord's prior written consent, which shall not be unreasonably withheld or delayed, the Lessee shall not take any remedial action in response to the presence of any Hazardous Materials on, under, or about the Property (other than in emergency situations or as required by governmental agencies having jurisdiction), nor enter into any settlement agreement, consent decree, or other compromise in respect to any Hazardous Materials
1.19.3 Indemnity. Without limiting the generality of the indemnification set forth in Section 2.10 above, the Lessee hereby agrees to indemnify, protect, hold harmless and defend (by counsel reasonably satisfactory to the Landlord) the Landlord, its councilmembers, 10 commissioners, officers, agents, successors, assigns and employees (the "Indemnitees") from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including, but not limited to, attorney's fees and expenses), arising directly or indirectly, in whole or in part, out of:
(a) The failure of the Lessee or any other person or entity (other than Landlord) to comply with any Hazardous Materials Law relating in any way whatsoever to the handling, treatment, presence, removal, storage, decontamination, cleanup, transportation or disposal of Hazardous Materials into, on, under or from the Property; (b) Any release or discharge of any Hazardous Materials into, on, under or from the Property, whenever occurring, or the presence in, on, or under the Property of any Hazardous Materials; or
(c) Any activity or omission of activity carried on or undertaken on or off the Property that is related to the Lessee occupying or present on the Property, in connection with the handling, treatment, removal, storage, decontamination, cleanup, transport or disposal of any Hazardous Materials located or present on or under the Property. The Lessee's indemnity obligations as they pertain to activities occurring off the Property shall only extend to activities performed by or arising from activities performed by the Lessee or any employees, agents, contractors or subcontractors of the Lessee or the Former Owner.
The foregoing indemnity shall further apply to any residual contamination on or under the Property, or affecting any natural resources, and to any contamination of any property or natural disposal of any such Hazardous Materials, and irrespective of whether any of such activities were subsection shall survive expiration of the Term or other termination of this Lease, and shall remain in full force and effect.
1.20 RIGHTS OF LEASEHOLD MORTGAGEES.
1.20.1 DEFINITIONS.
For purposes of this Lease, the term "mortgage" shall include whatever security instruments are used in the locale of the Property, such as, without limitation, deeds of trust, security deeds, and conditional deeds. The term "mortgage" shall also include any instruments required in connection with a sale-leaseback transaction. The term "mortgagee" shall include the holder of the secured position under each of the foregoing types of instruments, including but not limited to the beneficiary under a deed of trust, the secured party under a security agreement and the lessor in a sale-leaseback transaction. (b) For purposes of this Lease, the term "Leasehold Mortgage" means a conveyance of a security interest in this Lease and all of Lessee's interests in the Property (collectively referred to as "Lessee's Leasehold Interests") to a lender (a "Leasehold Mortgagee") or the conveyance of Lessee's Leasehold Interests to the Leasehold Mortgagee or its assignee in connection with a foreclosure or a deed in lieu of foreclosure of such loan. 11 (c) For purposes of this Lease, the terms "Permitted Leasehold Mortgage" and "Permitted Leasehold Mortgagee" shall mean, respectively, a Leasehold Mortgage and a Leasehold Mortgagee, entered into in accordance with this Section 1.20.
1.20.2 RIGHT TO ENCUMBER. At any time and from time to time during the Term, notwithstanding anything contained in this Lease to the contrary, Lessee shall have the right from time to time, without the consent of Landlord, to enter into one or more Leasehold Mortgages with one or more Leasehold Mortgagees, upon and subject to each and all of the following terms and conditions:
Subject to Section 1.20.2(b), below, the Leasehold Mortgage shall cover all of Lessee's interest in the Lease, the Property and the Improvements and shall cover no interest in any other real property other than Lessee's real property. (b) Unless otherwise reasonably required by the applicable Leasehold Mortgagee, the Leasehold Mortgage shall be without subordination of the fee simple title of the Property.
1.20.4 LANDLORD'S RIGHT TO CURE DEFAULTS. In the event of a default or breach by Lessee of any Permitted Leasehold Mortgage, Lessee and Permitted Leasehold Mortgagee shall be obligated to provide notice to Landlord of such breach, and Landlord shall have the right to cure the default. In such event, Landlord shall be entitled to reimbursement by Lessee of all costs and expenses incurred by Landlord in curing the default, with interest at the highest rate permitted by law, as Additional Rents (collectively, "Landlord's Cure Payments"), provided in the event of a subsequent foreclosure of a Permitted Leasehold Mortgage, the party acquiring the Lessee's Leasehold Interests shall not be obligated to pay Landlord any of Landlord's Cure Payments, provided further that Lessee shall continue to be personally liable to repay Landlord any Landlord's Cure Payments.
1.20.5 RIGHTS OF PERMITTED LEASEHOLD MORTGAGEE. If Lessee and/or Lessee's successors and assigns (including, but not limited to, any sublessee of Lessee) shall mortgage its interest in this Lease and the Lessee's Leasehold Interests, or any part or parts thereof as permitted by this Section, the following provisions shall apply:
(a) No Amendment. There shall be no cancellation, surrender, amendment or modification of this Lease either by unilateral action of Landlord or Lessee, or by joint action of Landlord and Lessee, without the prior consent in writing of each Permitted Leasehold Mortgagee.
(b) Right to Notice of Default. Landlord shall, upon serving Lessee with any notice of default, simultaneously serve a copy of the notice of default upon each Permitted Leasehold Mortgagee. No notice by Landlord to Lessee under the Lease shall be deemed to have been served unless and until a copy thereof shall have been served upon each Permitted Leasehold Mortgagee as set forth herein.
(c) Right to Cure. Each Permitted Leasehold Mortgagee shall have the right, but not the obligation, at any time prior to termination of this Lease, and without payment of any penalty, to pay all of the rents due hereunder, to effect any insurance, to pay any taxes or 12 assessments, to make any repairs or improvements, to do any other act or thing required of Lessee hereunder, and to do any act or thing which may be necessary and proper to be done in the performance and observance of the agreements, covenants and conditions hereof to prevent termination of this Lease. Each Permitted Leasehold Mortgagee and its agents and contractors shall have full access to the Property for purposes of accomplishing any of the foregoing. Any of the foregoing done by any Permitted Leasehold Mortgagee shall be as effective to prevent a termination of this Lease as the same would have been if done by Lessee. (d) Cure Periods. Notwithstanding anything to the contrary contained in the Lease, Landlord shall have no right to terminate the Lease on account of any uncured default of Lessee unless (a) following the expiration of all applicable grace and cure periods afforded to Lessee under the Lease, Landlord first gives each Permitted Leasehold Mortgagee not less than sixty (60) days' notice of its intent to terminate the Lease as a result of such default, if Lessee's default consists of a failure to pay money to Landlord a "Monetary Default"), and not less than one hundred twenty (120) days' notice of its intent to terminate the Lease, if Lessee's default is of any other type (a "Non-Monetary Default"), and (b) each Permitted Leasehold Mortgagee fails to cure such Monetary Default within sixty (60) days after receipt of such notice (in the case of a Monetary Default) or each Permitted Leasehold Mortgagee fails to cure or, in good faith and with reasonable diligence and continuity, commence to cure such Non-Monetary Default within said one hundred twenty (120) day period (in the case of a Non-monetary Default). If any such Non- Monetary Default cannot reasonably be cured by such Permitted Leasehold Mortgagee within said one hundred twenty (120) day period (or is such that possession of the Leased Premises is necessary for such Permitted Leasehold Mortgagee to remedy the default), the date for termination shall be extended for such period of time as may be reasonably required to enable such Permitted Leasehold Mortgagee to remedy such default, if (a) a Permitted Leasehold Mortgagee shall have fully cured any Monetary Default under this Lease within sixty (60) days after its receipt of notice of Landlord's intent to terminate the Lease, and shall continue to pay currently such monetary obligations as and when the same are due (subject to any notice and cure provisions given in the Lease), and (b) a Permitted Leasehold Mortgagee commences, or causes any trustee under the applicable mortgage to commence, within such 120 day period, proceedings to foreclose, either non-judicially or judicially, upon the interest in the Premises encumbered by the mortgage (and thereafter pursues such proceedings with reasonable diligence). Nothing in this Section 1.20.5 shall be construed to require a Permitted Leasehold Mortgagee to continue any foreclosure proceeding it may have commenced against Lessee after all defaults have been cured by a Permitted Leasehold Mortgage or Lessee, and if such defaults shall be cured and the Permitted Leasehold Mortgagee shall discontinue such foreclosure proceedings, the Lease shall continue in full force and effect as if Lessee had never defaulted under the Lease. Nothing herein shall require a Permitted Leasehold Mortgagee who has acquired Lessee's leasehold interest and has taken possession of the Leased Premises to cure any Non-Monetary Default which is not reasonably capable of being cured by such Leasehold Mortgagee, and such default shall be deemed to be waived following Permitted Leasehold Mortgagee's acquisition of Lessee's leasehold interest and such Permitted Leasehold Mortgagee's timely cure of all Monetary Defaults and all Non-Monetary Defaults which are reasonably capable of cure by such Permitted Leasehold Mortgagee in accordance with the foregoing provisions.
13 (e) Condition of Termination. Any right of Landlord to terminate this Lease as the result of the occurrence of any default shall be subject to, and conditioned upon: (1) Landlord having first given to each Permitted Leasehold Mortgagee written notice of the default as required under Section 1.20.5(b) above; and (2) each Permitted Leasehold Mortgagee having failed to remedy such default or acquire Lessee's leasehold estate hereunder or commence foreclosure or other appropriate proceedings in the nature thereof as set forth in Section 1.20.5(c) above. (f) Suspension of Cure Period. If any Permitted Leasehold Mortgagee is prohibited from commencing or prosecuting foreclosure or other appropriate proceedings in the nature thereof by any process or injunction issued by any court, or by reason of any action by any court having jurisdiction of any bankruptcy or insolvency proceeding involving Lessee, the times specified in Section 1.20.5(d) above, for commencing or prosecuting foreclosure or other proceedings shall be extended for the period of the prohibition, so long as the Permitted Leasehold Mortgagee shall have fully cured any default by Lessee in payment of Rent under this Lease and shall continue to pay currently the Rent as and when due, subject to any applicable notice and grace periods.
1.20.6 Landlord agrees that, in the event of termination of the Lease for any reason (including without limitation by reason of any default by Lessee or by reason of the disaffirmance thereof by a receiver, liquidator or trustee for Lessee or its property), Landlord, if requested by any Permitted Leasehold Mortgagee, will enter into a new lease of the Leased Premises with the most senior Permitted Leasehold Mortgagee requesting a new lease, which new lease shall commence as of the date of termination of the Lease and shall run for the remainder of the Lease term, at the same rent and additional rent and upon the same terms, provisions, covenants and agreements, and subject to the rights, if any, of any parties then in possession of any part of the Lease Premises, provided:
(a) The Permitted Leasehold Mortgagee shall make written request upon Landlord for the new lease within sixty (60) days after the date of termination; (b) The Permitted Leasehold Mortgagee shall pay to Landlord at the time of the execution and delivery of the new lease any and all sums which would, at the time of the execution and delivery thereof, be due and unpaid pursuant to the Lease but for its termination (other than the payment of any amount that was secured by a lien on the Lessee's Leasehold interest that was junior to such mortgage), and in addition thereto any expenses, including reasonable attorneys' fees, to which Landlord shall have been subjected by reason of Lessee's default; (c) The Permitted Leasehold Mortgagee shall perform and observe all covenants in the Lease to be performed and observed by Lessee, and shall further remedy any other conditions which Lessee under the terminated Lease was obligated to perform under its terms, to the extent the same are curable or may be performed by the Permitted Leasehold Mortgagee; (d) The new lease shall be expressly made subject to the rights, if any, of Lessee under the terminated Lease; and
(e) The lessee under the new lease shall have the same right, title and interest in and to the buildings and improvements on the Leased Premises as Lessee had under the terminated Lease immediately prior to its termination.
14 1.20.8 Nothing herein contained shall require any Permitted Leasehold Mortgagee to enter into a new lease pursuant to Section 1.20.6, above, nor to cure any default of Lessee referred to above.
1.20.9 If a Permitted Leasehold Mortgagee shall elect to demand a new lease, Landlord agrees, at the request of, on behalf of and at the expense of the leasehold mortgagee, upon a guaranty or other assurance from it reasonably satisfactory to Landlord, to institute and pursue diligently to conclusion the appropriate legal remedy or remedies to oust or remove the original Lessee from the Premises, but not any sublessees actually occupying the Premises or any part thereof.
1.20.10 Unless and until Landlord has received notice from each Permitted Leasehold Mortgagee that the Permitted Leasehold Mortgagee elects not to demand a new lease as provided in Section 2.21.6, above, or until the period therefor has expired, Landlord shall not cancel or agree to the termination or surrender of any existing subleases nor enter into any new subleases hereunder without the prior written consent of the Permitted Leasehold Mortgagee(s). (a) Loss Payable Endorsement. Landlord and Lessee agree that the name of a Permitted Leasehold Mortgagee shall, at its request, be added to the "Loss Payable Endorsement" of any and all insurance policies required to be carried by Lessee under this Lease, and that all insurance proceeds are to be paid to, and applied in the manner specified by the holder of the first priority Permitted Leasehold Mortgage.
(b) No Consent Required to Foreclosure. Notwithstanding anything contained in this Lease to the contrary, foreclosure of any Permitted Leasehold Mortgage, or any sale thereunder, whether by judicial proceedings or by virtue of any power contained in the Permitted Leasehold Mortgage, or any conveyance of the Lessee's Leasehold Interests hereunder from Lessee to any Leasehold Mortgagee or its designee through, or in lieu of, foreclosure or other appropriate proceedings in the nature thereof, shall not require the consent of Landlord or constitute a breach of any provision of or a default under this Lease, and upon such foreclosure, sale or conveyance, Landlord shall recognize in writing the purchaser or other transferee referred to in the preceding sentence in connection therewith as the Lessee hereunder.
Proceeds of Insurance and Condemnation. The proceeds from any insurance policies or arising from a condemnation award to Lessee shall be paid to and held by the Permitted Leasehold Mortgagee of highest priority and distributed pursuant to the provisions of such Permitted Leasehold Mortgage, and such Permitted Leasehold Mortgagee may reserve the right to apply to the mortgagee debt (in the order of priority) all, or any part, of the proceeds. (d) Notice of Proceedings. The parties hereto shall give to each Permitted Leasehold Mortgagee notice of any arbitration proceedings or condemnation proceedings involving Lessee's Leasehold Interests, or of any pending adjustment of insurance claim, and each Permitted Leasehold Mortgagee shall have the right to intervene therein and shall be made a party to such proceedings. The parties hereto do hereby consent to such intervention. In the event that any Permitted Leasehold Mortgagee shall not elect to intervene or become a party to the proceedings, that Permitted Leasehold Mortgagee shall receive notice and a copy of any award or decision made in connection therewith.
15 1.20.11 Landlord shall, at any time upon not less than ten (10) days' prior written notice from Lessee, execute, acknowledge and deliver to Lessee a statement in writing (i) certifying that the Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that the Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Landlord's knowledge, any uncured defaults on the part of Lessee, or specifying such defaults if any are claimed. Any such statement may be conclusively relied on by any encumbrances or prospective encumbrances of the Lease. Landlord's failure to deliver such statement within such time shall be conclusive upon Landlord (i) that the Lease is in full force and effect without modification except as may be represented by Lessee, and (i) that there are no uncured defaults in Lessee's performance; or such failure may be considered by Lessee as a default by Landlord under the Lease.
1.20.12 The Leasehold shall not merge with the fee interest in all or any portion of the Leasehold Premises, notwithstanding the ownership of the fee and the Leasehold by the same person(s) or entityies), without the written consent of every leasehold mortgagee.
1.20.13 All rights herein granted to Lessee shall also apply to every successor and assign of Lessee (including, but not limited to, any sublessee of Lessee). All rights herein granted to any leasehold mortgagee of Lessee shall also apply to any leasehold mortgagee of any successor or assign of Lessee (including, but not limited to, any sublessee of Lessee).
1.20.14 Lessee shall have the right to contest by appropriate legal proceedings, and in good faith, without cost or expense to Landlord, the validity of any law, ordinance, order, rule, regulation or requirement.
1.20.15 Further Protections. Landlord and Lessee shall cooperate in adding to this Lease, by suitable amendment from time to time, any provision which may be reasonably requested by any proposed Permitted Leasehold Mortgagee for the purpose of implementing the mortgagee- protection provisions contained in this Lease and allowing such Permitted Leasehold Mortgagee reasonable means to protect or preserve the lien of its Leasehold Mortgage upon the occurrence of a default under the terms of this Lease. Landlord and Lessee each agree to execute and deliver (and to acknowledge, if necessary, for recording purposes) any agreement necessary to effect any such amendment; provided, however, that no such amendment shall in any way affect the Term or rent under this Lease unless agreed to by Landlord in its sole and absolute discretion, nor otherwise in any material respect adversely affect any rights of Landlord under this Lease.
1.20.16 Additional Agreement. Landlord shall, upon request, execute, acknowledge and deliver to a Permitted Leasehold Mortgagee, an agreement prepared by such Permitted Leasehold Mortgagee and reviewed by Landlord at the sole cost and expense of Lessee, in form satisfactory to such Permitted Leasehold Mortgagee, among Landlord, Lessee and the Permitted Leasehold Mortgagee, agreeing to all of the provisions of this Lease.
1.21 RESTRICTION ON ENCUMBRANCE BY LANDLORD. Landlord shall not, sell, transfer, mortgage or otherwise encumber its interest in the Property (referred to as a "Fee Mortgage") without the prior written consent of (a) Lessee, which Lessee may withhold in its sole discretion, and (b) each Permitted Leasehold Mortgagee (each in its sole discretion). Any Fee Mortgage, including amendments thereto, shall be subordinated to this Lease and the holder of such Fee Mortgage shall, in the event of a foreclosure of the Fee Mortgage, be unconditionally obligated 16 to recognize the rights of Lessee under this Lease (and all encumbrances on the same), and the holder of any Fee Mortgage shall be obligated to execute, acknowledge and deliver to Lessee a statement confirming such subordination from time-to-time.
1.22 QUIET ENJOYMENT. Absent a continuing uncured default by Lessee, Landlord agrees not to disturb the possession, interest or quiet enjoyment of Lessee in the Property for any reason, or in a manner which would materially adversely affect any Permitted Leasehold Mortgage.
1.23 AUTHORITY. Landlord represents and warrants that: (i) Landlord is duly organized and existing, (ii) the person(s) executing this Lease on behalf of Landlord are duly authorized to execute and deliver the same on behalf of the Landlord, (i) Landlord has taken such formal action as may be required by law to bind Landlord and Landlord is formally bound to the provisions of this Lease, and (iv) entering into this Lease does not violate any provision of any other agreement to which Landlord is bound.
1.24 NO LITIGATION. Landlord hereby represents that there are no actions, whether voluntary or otherwise, pending against Landlord under any insolvency, bankruptcy or other debtor reliet laws of the United States or any state. Landlord has not received written notice of any pending eminent domain proceedings or other governmental actions or any judicial actions of any kind against the Leased Premises.
1.25 ESTOPPEL CERTIFICATE. Landlord shall provide estoppel certificates at the Lessee's request upon reasonable notice certifying to the status of the Lease and related matters.
1.26 EASEMENT. Landlord will join in the Conveyance of grants of easement reasonably necessary for the development of the Leased Premises.
1.27 GENERAL PROVISIONS.
1.27.1 The waiver by either party of any term, covenant, or condition herein contained shall not be a waiver of such term, covenant, or condition on any subsequent breach.
1.27.2 All notices and demands which may or are to be required or permitted to be given by either party to the other hereunder shall be in writing. All notices and demands shall be sent by United States Mail, postage prepaid, as certified mail, return receipt requested to the address for each party set forth in the signature block of this Lease. All notices shall be deemed to be served upon actual receipt.
1.27.3 Time is of the essence of this Lease and each and all of its provisions in which performance is a factor.
1.27.4 The covenants and conditions herein contained, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators, and assigns of the parties hereto.
1.27.5 In addition to specific provisions of this Lease, performance by either party hereunder shall not be deemed to be in default where delays or defaults are due to war, insurrection, floods, earthquakes, fires, casualties, Acts of God, epidemics, quarantine restrictions, 17 governmental restrictions or priority, unusually severe weather, inability to secure necessary labor, materials or tools, acts of the other party, acts or failure to act of the Landlord or any other public or governmental Landlord or entity or any other causes beyond the control or without the fault of the party claiming an extension of time to perform. An extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, if notice by the party claiming such extension is sent to the other party within thirty (30) days of knowledge of the commencement of the cause. Times of performance under this Lease may also be extended in writing by mutual agreement of the parties.
1.27.6 If any action or proceeding is brought by either party against the other under this Lease, the prevailing party shall be entitled to recover all costs and expenses, including the fees of its attorney in such action or proceeding. This provision shall also apply to any post judgment action by either party, including without limitation efforts to enforce a judgment.
1.27.7 Any provision of this Lease which shall prove to be invalid, void, or illegal shall in no way affect, impair, or invalidate any other provision hereof and such other provisions shall remain in full force and effect.
1.27.8 Except otherwise expressly provided in this Lease, no remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.
1.27.9 This Lease shall be governed by the laws of the State of California. Proper venue for any action shall be in Del Norte County, California.
1.27.10 Nothing contained in this Lease shall be deemed or construed as creating a partnership, joint venture, or any other relationship between the parties hereto, or cause Landlord to be responsible in any way for the debts or obligations of Lessee, or any other party.
1.27.11 No amendment, change, or addition to, or waiver of termination of, this Lease or any part hereof shall be valid unless in writing and signed by both Landlord and Lessee.
1.27.12 The provisions of this Lease shall be interpreted in a reasonable manner to effect the purpose and intent of the parties to this Lease.
1.27.13 This Lease may be simultaneously executed in multiple counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original.
[SIGNATURES PAGES FOLLOW]
18 IN WITNESS WHEREOF, the Landlord and the Lessee have signed this Agreement as of the dates set opposite their signatures.
LANDLORD
CITY OF CRESCENT CITY
By: _
Eric Wier, City Manager
LESSEE
DANCO COMMUNITIES, a California corporation
By:
Daniel Johnson
President
19 EXHIBIT A
LEGAL DESCRIPTION
That real property situated in the City of Crescent City, County of Del Norte, State of California, more particularly described as follows:
PARCEL ONE:
BEGINNING at the most Northerly corner of Block 75 of the City of Crescent City, according to the official surveys and monuments of said City; and running Thence Westerly along Seventh Street, 95 feet;
Thence at a right angle Southerly, 72 feet;
Thence at a right angle Easterly, 95 feet to "f" Street; and Thence Northerly along "" Street, 72 feet to the point of beginning.
PARCEL TWO:
BEGINNING at a point on the Easterly line of H Street, 72 feet Southerly from the most Westerly corner of Block 75 of the City of Crescent City, according to the official surveys and monuments; and running
Thence Southerly along said line of "H" Street, 90 feet; Thence at a right angle Easterly, 240 feet to the Westerly line of "" Street; Thence Northerly along said line of "I" Street, 90 feet; and Thence at a right angle Westerly, 240 feet to the point of beginning. [APN 118-170-002]
20