Agenda packet — Safety and Communities Committee, February 9, 2026

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www.modestogov.com
AGENDA
City of Modesto

SAFETY AND COMMUNITIES COMMITTEE

COUNCIL WORKSHOP
2001-40 Del Puerto Room.

Tenth Street Place, 1010 10th Street
Modesto, California
Monday, February 09, 2026 at 4:00 PM
Roll Call: Chris Ricci, Chair
Rosa Escutia-Braaton, Vice-Chair
Jeremiah Williams, Member
Alternates: Eric Alvarez, Nick Bavaro, David Wright, Sue Zwahlen Council has not delegated directive or final approval authority to the Committees.

Committee actions are recommendations to the full City Council, not final decisions on an issue. * Public Comment will only be in-person. Members of the public who wish to address the Committee, by providing public comment, during the meeting must do so in-person in the 2001-40 Del Puerto Room. As an alternative, members of the public may also provide written public comment submitted via email as indicated in the Submitting Comments by Email instructions on this agenda. Zoom will still be available for viewing and Wordly translation. * Members of the public will be allowed to provide public comment through Zoom if a Councilmember is participating remotely pursuant to the provisions of California Government Code section 54953.8.3.
*If a technical issue arises with Zoom or the phone dial-in option, the Council meeting will continue unless the meeting is being held pursuant to the provisions of Senate Bill 707, California Government Code section 54953.8.3. Alternative viewing options are listed below, and the meeting is physically open to the public.
“Wordly” can translate into 25+ different languages! To access written translation during the meeting, please scan the QR Code or click this link https://attend.wordly.ai/join/RJDY-6364.
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"Wordly" puede traducir a más de 25 idiomas diferentes! Para acceder a la traducción durante la reunión, por favor escanee el código QR o haga clic en el enlace https://attend.wordly.ai/join/RJDY-6364.

You may observe a livestream of the meeting at http://media.modestogov.com. You may also view or listen to the meeting as indicated below.

THE MEETING CAN BE VIEWED BY ZOOM VIDEO

CONFERENCING OR TELEPHONE
Joining the Committee meeting via Zoom
The City of Modesto is now offering the ability to view Committee meetings via telephonic conferencing via “Zoom” video conferencing computer technology. The meeting may be accessed through the use of Zoom using the following options:
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Joining the Committee meeting via Telephone
If you don’t have a smart phone or computer to access the meeting via Zoom, you can listen by phone, by calling 1-877-853-5257 (Toll Free) or 1-888-475-4499 (Toll Free) and enter the Webinar ID: 958 9549 7651 Passcode: 84326

PUBLIC COMMENT PERIOD
Three-minute time limit per speaker.

Only interested persons in the audience may present these matters. Under State law, Committee Members may respond to matters being presented under this item only as follows:
a. Briefly respond to statements made or questions raised. b. Ask a question for clarification.
c. Provide a reference to staff or other resources for factual information. d. Request staff to report back at a subsequent meeting. e. Finally, a Committee Member or the Committee itself may take action to direct staff to place a matter of business on a future agenda.

SUBMITTING COMMENTS BY E-MAIL
Written comments may be submitted via email to: [email protected] (include Agenda Item Number in the subject line). All comments will be shared with the - 2 -
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Committee Members and placed in the record but will not be read aloud during the meeting.

Written comments must be received two hours before the meeting.

This Agenda is on file in the City Clerk’s Office, Sixth Floor, 10th Street Place, Posting Board at entry of 10th Street Place, and is available on the City’s Web site at www.modestogov.com.

Materials related to an item on this Agenda submitted to the Council after distribution of the agenda packet are available for public inspection in the Clerk’s office during normal business hours. Such documents are also available online, subject to staff’s ability to post the documents before the meeting, at the following website www.modestogov.com/councilmeetings.

In accordance with the requirements of Title II of the Americans with Disabilities Act (“ADA”) of 1990, the Fair Employment & Housing Act (“FEHA”), the Rehabilitation Act of 1973 (as amended), Government Code section 11135 and other applicable codes, the City of Modesto (“City”) will not discriminate against individuals on the basis of disability in the City’s services, programs, or activities. For more information, please visit the City of Modesto website at https://www.modestogov.com/865/Americans-with-Disabilities-Act-ADA In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk (209) 577-5396. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting
Any and all of the following agenda items are subject to action by the Modesto City Council.

CONSENT ITEMS – ROLL CALL VOTE REQUIRED:

Information concerning the consent items listed below has been forwarded to each Committee Member prior to this meeting for study. Unless some member of the audience or Committee Member has a question concerning an item and asks that it be withdrawn from the consent list, the Committee approves the items at one time. The action taken by the Committee in approving consent items is set forth in the explanation of this individual item.

CONSENT
An item may be removed from consent and discussed at the request of an audience member or Committee member.

Consent

1. Consider granting two non-exclusive easements to Modesto Irrigation District for electrical utility access on a portion of César E. Chávez Park (APN 103-018-001) and forwarding to Council for approval. (Funding Source: Not Applicable)  Motion recommending granting two non-exclusive easements to Modesto Irrigation District for electrical utility access on a portion of César E. Chavez Park (APN 103-018-001) and forwarding to Council for approval.

ENGINEERING SERVICES; Nathan Houx, 209-571-5526, [email protected] - 3 -
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Consent

2. Consider the First Amendment to the Lease Agreement between Beard Land Improvement Company of Modesto, Ca and the City of Modesto for the Lease of the Modesto Fire Department Administration Building located at 409 12th Street, Modesto, Ca, extending the term of the agreement to March 31, 2029, increasing the Agreement amount by $706,074 to a new estimated total amount not to exceed $1,196,790, and forwarding to Council for approval. (Funding Source: General Fund)  Motion recommending the First Amendment to the Lease Agreement with Beard Land Improvement Company of Modesto, Ca and the City of Modesto for the Lease of the Modesto Fire Department Administration Building located at 409 12th Street, Modesto, Ca, extending the term of the agreement to March 31, 2033, increasing the Agreement amount by $706,074 to a new estimated total amount not to exceed $1,196,790 and forwarding to Council for approval.

FIRE DEPARTMENT; Shanon Evans, 209-572-9590, [email protected]

NEW BUSINESS

3. Consider the purchase of a factory-new Lycoming TIO-540-AH1A engine for the Modesto Police Department’s GA8 TC-320 Airvan, Sky-1 to GippsAero Pty Ltd, Victoria, Australia, for a total amount not to exceed $254,000 and forwarding to Council for approval. (Funding Source: Traffic Safety Fund)  Motion recommending the purchase of a factory-new Lycoming TIO-540- AH1A engine with GippsAero Pty Ltd, Victoria, Australia for the Modesto Police Department’s GA8 TC-320 Airvan, Sky-1, for a total amount not to exceed $254,000 and forwarding Council for approval.

POLICE DEPARTMENT; Christopher Adams, 209-572-9500,
[email protected]

ADJOURNMENT
Posted pursuant to Government Code Section 54954.2 on the bulletin board at Tenth Street Place on at by
date time signature
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

February 9, 2026
Date: January 16, 2026
TO: Safety and Communities Committee
Chris Ricci, Chair
Rosa Escutia-Braaton, Vice-Chair
Jeremiah Williams, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Toby Wells, Director of Engineering Services/City Engineer SUBJECT: Grant of Non-Exclusive Easements to Modesto Irrigation District at César E.

Chávez Park (APN 103-018-001)
CONTACT: Nathan Houx, Parks Planning and Development Manager, [email protected], 209-571-5526
DESCRIPTION:

Consider granting two (2) non-exclusive easements to Modesto Irrigation District for electrical utility access on a portion of César E. Chávez Park (APN 103-018-001) and forwarding to Council for approval. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

This item is consistent with the following 2025-2026 Strategic Plan Area of Focus: Quality of Life.

BACKGROUND:

On July 9, 2019, by Resolution No. 2019-333, Council authorized staff to move forward with the submission of a grant application for the renovation of César E. Chávez Park and authorized the City Manager to accept the grant award on behalf of the City. On February 20, 2020, staff received notification from the California State Department of Parks and Recreation that the César E.

Chavez Park Renovation Project was selected for funding and on March 26, 2020, the City Manager signed the grant agreement on behalf of the City awarding the City of Modesto $8.5 million dollars for the renovation of César E. Chavez Park.

On November 10, 2020, per Council Resolution 2020-474, Council approved a Design Agreement with O’Dell Engineering for the preparation of the construction documentation for this project, for an amount not to exceed $795,669. Since 2021, staff have worked with the Consultant and stakeholders to design a project that would meet the needs and wants of the community, Prop 68 grant requirements, and is fiscally responsible and viable. #1..
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Safety and Communities Committee, February 9, 2026
Grant of Non-Exclusive Easements to Modesto Irrigation District at César E. Chávez Park (APN 103-018-001)

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On September 10, 2024, per Council Resolution 2024-328, City Council awarded a construction contract for the César E. Chávez Park Renovation Project to Harris Builders, Inc. of Hilmar, CA, for a total payment amount not to exceed $14,978,853. Construction began in November 2025.

DISCUSSION:

The Cesar E. Chavez Park Renovation Project includes construction of a new aquatic center which increases the electrical power demand above the existing park facilities. A secondary power transformer is required to meet the additional demand and will be located adjacent to the pool equipment mechanical building. This second transformer will be located on the opposite side of the park site from the primary transformer power source. New underground power utilities are necessary to transmit power from the primary power transformer source to the secondary power transformer unit.

The electrical utility provider, Modesto Irrigation District (MID), requires the owner (City of Modesto) to provide easements where new electrical utilities reside, and provide long-term maintenance access to all electrical utility facilities that are located on the City property.

The city has retained a registered civil engineer to prepare plans for the new electrical utilities and easement documentation. The plans have been reviewed and approved by the Modesto Irrigation District (MID) and City staff. The easements will provide the necessary legal access for construction and ongoing maintenance of the utility infrastructure, ensuring compatibility with the aquatic center and supporting the City’s infrastructure needs.

FISCAL IMPACT:

There is no fiscal impact to the City caused by the proposed action.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion recommending granting two (2) non-exclusive easements to Modesto Irrigation District for electrical utility access on a portion of César E. Chavez Park (APN 103-018-001) and forwarding to Council for approval.

Approved by:

Toby Wells, Director of Engineering Services/City
Engineer
Joseph P. Lopez, City Manager
Attachments:

1. Grant of Easements (2) with exhibits
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1 No Recording Fees Required Per Government
Code Section 27383
The Undersigned Declares:

No Documentary Transfer Tax (R&T Code 11911)

MAIL TAX STATEMENT

RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:

Modesto Irrigation District
Secretary, Board of Directors
P.O. Box 4060
Modesto, California 95352
APN: 103-018-001 Space Above This Line for Recorder's Use

GRANT OF EASEMENT
THIS GRANT OF EASEMENT (“Easement”) is made and entered into as of _____________________, 2025 (the “Effective Date”), by and between the CITY OF MODESTO, A MUNICIPAL CORPORATION (“Grantor”) and the MODESTO IRRIGATION DISTRICT, an irrigation district organized and existing under the Constitution and laws of the State of California, its successors and assigns (“Grantee”).

RECITALS
Grantor holds a fee interest in certain real property in the City of Modesto, California (the “Property”), as more particularly described on Exhibit “A” and depicted on Exhibit “B”, attached hereto and made a part hereof by reference. Grantor has agreed to grant to Grantee an irrevocable, perpetual, and non-exclusive easement over a portion of the Property as more particularly depicted on Exhibit “B” (the “Easement Area”), on the terms and condition set forth in this Grant, for the right to construct, install, place, operate, inspect, maintain, replace and forever use thereon overhead and underground electrical and telecommunication facilities, consisting of poles, crossarms, wires, cables, braces, insulators, transformers, service lines, fixtures, appurtenances, anchors and guys together with such other overhead and underground electrical and telecommunication facilities and equipment as may, in Grantee’s sole discretion, be necessary or desirable.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor and Grantee hereby agree as follows:

1. Grantor hereby grants and conveys to Grantee, and its contractors, agents, employees,successors and assigns, an irrevocable, perpetual, and non-exclusive easement and right of way whenever and wherever necessary, for the right to construct, install, place, operate, inspect, maintain, replace and forever use thereon overhead, across, and underground electrical and telecommunication facilities, consisting of poles, crossarms, wires, cables, braces, insulators, transformers, service lines, fixtures, appurtenances, anchors and guys together with such other overhead and underground electrical and telecommunication facilities and equipment as may, in Grantee’s sole discretion, be necessary or desirable, in, on, under, over and across the Property.

2. Grantor hereby covenants and agrees, by and for itself, and its successors and assigns, that Grantor shall keep the Easement Area clear from buildings, structures, fences, explosives, excessive tree growth and shrubs, and other materials or growths, whether permanent or temporary, and any other obstruction interfering or which may interfere with the Easement Area and right-of-way by Grantee (each, a “Prohibited Encroachment”). Grantee shall have the right to remove, at Grantor’s cost and expense, any Prohibited #1..
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2 Encroachment the Grantee deems, in Grantee’s sole discretion, is interfering or may interfere with the use of the Easement Area or as Grantee deems necessary, in Grantee’s sole discretion, to comply with applicable local, state, or federal laws and regulations. In the event Grantee removes any Prohibited Encroachment as permitted in this Paragraph, Grantor shall pay the cost thereof to Grantee, plus an administrative charge within thirty (30) days of Grantee’s invoice therefor.

3. Grantee is granted the right to construct, place, inspect, maintain, replace and use across, upon, in and under the Easement Area, underground and associated aboveground electrical and telecommunication facilities, consisting of electrical cables, conduits, concrete conduit encasements, transformers, switchgear, concrete equipment pads, equipment vaults, secondary service terminals, pull boxes, manholes, fixtures and appurtenances, together with such other underground and associated aboveground electrical and telecommunication facilities as may, in Grantee’s sole discretion, be necessary or desirable. Grantee is also granted the right from time to time to increase or decrease the size, weight, number, or capacity and to change the position of Grantee’s facilities installed over, across, upon, in, along or under the Easement Area.

Grantee, its contractors, agents and employees shall at all times have the right of ingress to and egress from said Grantee facilities and the Easement hereby granted. Grantee shall further have the right to place tools, equipment, implements and materials within the Easement Area as necessary to exercise the rights conveyed hereunder.

4. Grantor further grants to Grantee the right to assign to any public utility the right to construct, install, inspect, maintain, operate, place, replace, remove and use communications facilities within the Easement Area (including ingress thereto and egress therefrom).

5. Grantor reserves the right to use the Property for purposes that will not interfere with the Easement Area and Grantee’s full enjoyment of the rights hereby granted. Notwithstanding the preceding sentence, Grantor shall not increase or decrease, or permit to be increased or decreased, the now existing ground elevations of said Easement Area without the prior written consent of the Grantee.

6. As a condition of this grant of Easement and the Easement Area, Grantor’s use and enjoyment of the Easement Area shall not hinder, conflict, or interfere with the exercise of the Grantee’s rights hereunder, and no excavation, building, structure or obstructions shall be constructed by Grantor within the Easement Area.

Grantor is expressly prohibited from adding, installing, or constructing to the surface or subsurface of the Easement Area any improvement that will impede the maintenance, inspection, operation, rehabilitation, or replacement of the electrical and telecommunication facilities within the Easement Area.

7. Grantor shall not relocate the Easement Area or any of the electrical and telecommunication facilities located thereon without Grantee’s consent, which may be withheld in Grantee’s sole discretion. In the event the electrical and telecommunication facilities within the Easement Area are relocated, Grantor shall be responsible for all costs and expenses associated with such relocation and cost of replacement if necessary.

Grantor, at its sole cost and expense, shall provide a replacement easement for said electrical and telecommunication facilities and appurtenances of the same width as the Easement Area and containing the same terms and conditions as herein provided. No less than thirty (30) days prior to such relocation, Grantor shall provide the plans and/or specifications of any such electrical and telecommunication facilities and appurtenances to be relocated for Grantee’s approval.

8. Grantee shall also have the right to temporarily use an additional ten (10) feet on each side of Grantor’s land adjacent to the Easement Area as may be necessary in Grantee’s sole discretion during any alteration, removal, replacement, reconstruction or repair of Grantee’s underground and aboveground facilities within the Easement Area.
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3 9. In order to assure the Easement cannot be eliminated through foreclosure or other enforcement of an existing mortgage, deed of trust, lien or judgment of record, Grantor expressly agrees that the holders of any such mortgages, deeds of trust, judgments or liens shall subordinate their respective interests to the Easement.

10. Grantor covenants that it is the owner of the above-described Property and has full right, power, and authority to grant this Easement, and that the Property is free and clear of encumbrances and liens of whatsoever character except those recorded against the Property.

11. To the fullest extent permitted by law, Grantor shall defend (at Grantor’s sole cost and expense with legal counsel reasonably acceptable to Grantee), indemnify, protect, and hold harmless Grantee, its officers, directors, employees, and agents (collectively the “Indemnified Parties”), from and against any and all liabilities, actions, suits, claims, demands, losses, costs, judgments, arbitration awards, settlements, damages, demands, orders, penalties, and expenses including legal costs and attorney fees (collectively “Claims”), including but not limited to Claims arising from injuries to or death of persons (Grantor’s employees included), for damage to property, including property owned by Grantee, or from any violation of any federal, state, or local law or ordinance, alleged to be caused by the negligent acts, omissions or willful misconduct of Grantor in connection with or arising out of this Easement.

12. Failure of a party hereto to insist on any one occasion upon strict compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of any rights or powers hereunder at any one time or more times be deemed a waiver or relinquishment of such other right or power at any other time or times.

13. This Easement contains the entire agreement of the parties relating to the subject matter hereof and supersedes all prior negotiations, agreements, or understandings. No supplement, modification, or amendment of this Easement shall be binding unless executed in writing and signed by both parties.

14. The terms and provisions of this Easement and right-of-way shall be perpetual, shall run with the land, and shall be binding upon future owners of the Property, or any portion thereof and shall inure to the benefit of the respective heirs, executors, administrators, personal representatives, successors, and assigns of Grantee and Grantor.

15. The undersigned warrants they have authority to act on behalf of Grantor and to bind Grantor and all who may claim through it to the terms and conditions of this Easement.

EXECUTED:________________, 20_____
GRANTOR:

CITY OF MODESTO, A MUNICIPAL CORPORATION
By: _______________________________________
Joseph P. Lopez, City Manager
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4 EXHIBIT A

DESCRIPTION OF PROPERTY
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5 EXHIBIT B

DEPICTION OF PROPERTY AND EASEMENT AREA
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7 CERTIFICATE OF ACCEPTANCE
Pursuant to Section 27281 of the
California Government Code
This is to certify that the interest in real property conveyed by the Grant of Easement dated , 2025, from theCITY OF MODESTO, A MUNICIPAL CORPORATION, as Grantor thereunder, to Modesto Irrigation District, an irrigation district, as Grantee thereunder, is hereby accepted by the undersigned officer on behalf of Modesto Irrigation District, pursuant to the authority conferred by Resolution No. 2024-78, adopted by the Board of Directors of the Modesto Irrigation District on November 12, 2024, and the Grantee consents to recordation thereof by its duly authorized officer.

Dated: MODESTO IRRIGATION DISTRICT
By:

Name: Jimi Netniss
Its: General Manager
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1 No Recording Fees Required Per Government
Code Section 27383
The Undersigned Declares:

No Documentary Transfer Tax (R&T Code 11911)

MAIL TAX STATEMENT

RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:

Modesto Irrigation District
Secretary, Board of Directors
P.O. Box 4060
Modesto, California 95352
APN: 103-018-001 Space Above This Line for Recorder's Use

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Grantor and Grantee hereby agree as follows:

2. Grantor hereby covenants and agrees, by and for itself, and its successors and assigns, that Grantor shall keep the Easement Area clear from buildings, structures, fences, explosives, excessive tree growth and shrubs, and other materials or growths, whether permanent or temporary, and any other obstruction interfering or which may interfere with the Easement Area and right-of-way by Grantee (each, a “Prohibited Encroachment”). Grantee shall have the right to remove, at Grantor’s cost and expense, any Prohibited #1..
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2 Encroachment the Grantee deems, in Grantee’s sole discretion, is interfering or may interfere with the use of the Easement Area or as Grantee deems necessary, in Grantee’s sole discretion, to comply with applicable local, state, or federal laws and regulations. In the event Grantee removes any Prohibited Encroachment as permitted in this Paragraph, Grantor shall pay the cost thereof to Grantee, plus an administrative charge within thirty (30) days of Grantee’s invoice therefor.

8. Grantee shall also have the right to temporarily use an additional ten (10) feet on each side of Grantor’s land adjacent to the Easement Area as may be necessary in Grantee’s sole discretion during any alteration, removal, replacement, reconstruction or repair of Grantee’s underground and aboveground facilities within the Easement Area.
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3 9. In order to assure the Easement cannot be eliminated through foreclosure or other enforcement of an existing mortgage, deed of trust, lien or judgment of record, Grantor expressly agrees that the holders of any such mortgages, deeds of trust, judgments or liens shall subordinate their respective interests to the Easement.

15. The undersigned warrants they have authority to act on behalf of Grantor and to bind Grantor and all who may claim through it to the terms and conditions of this Easement.

EXECUTED:________________, 20_____
GRANTOR:

CITY OF MODESTO, A MUNICIPAL CORPORATION
By: _______________________________________
Joseph P. Lopez, City Manager
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4 EXHIBIT A

DESCRIPTION OF PROPERTY
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5 EXHIBIT B

DEPICTION OF PROPERTY AND EASEMENT AREA
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6 #1..
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7 CERTIFICATE OF ACCEPTANCE
Pursuant to Section 27281 of the
California Government Code
This is to certify that the interest in real property conveyed by the Grant of Easement dated , 2025, from theCITY OF MODESTO, A MUNICIPAL CORPORATION, as Grantor thereunder, to Modesto Irrigation District, an irrigation district, as Grantee thereunder, is hereby accepted by the undersigned officer on behalf of Modesto Irrigation District, pursuant to the authority conferred by Resolution No. 2024-78, adopted by the Board of Directors of the Modesto Irrigation District on November 12, 2024, and the Grantee consents to recordation thereof by its duly authorized officer.

Dated: MODESTO IRRIGATION DISTRICT
By:

Name: Jimi Netniss
Its: General Manager
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

February 9, 2026
Date: January 12, 2026
TO: Safety and Communities Committee
Chris Ricci, Chair
Rosa Escutia-Braaton, Vice-Chair
Jeremiah Williams, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Shanon Evans, Interim Fire Chief
SUBJECT: First Amendment to Lease Agreement for 409 12th Street, Modesto, CA CONTACT: Shanon Evans, Interim Fire Chief, [email protected], 209-572-9590 DESCRIPTION:

Consider the First Amendment to the Lease Agreement between Beard Land Improvement Company of Modesto, Ca and the City of Modesto for the Lease of the Modesto Fire Department Administration Building located at 409 12th Street, Modesto, Ca, extending the term of the agreement to March 31, 2029, increasing the Agreement amount by $706,074 to a new estimated total amount not to exceed $1,196,790, and forwarding to Council for approval. (Funding Source:

General Fund)
STRATEGIC PLAN ELEMENT:

This recommended action supports the City’s 2025-2026 Strategic Plan focus on quality of life under Goal A: Improve Community Safety.

BACKGROUND:

Modesto Fire staff had been working out of multiple locations since returning to the City from the dissolution of Modesto Regional Fire Authority (MRFA) in 2014. Fire Prevention, Training and Administrative staffs occupied four (4) different sites and spent approximately $90,000 per year to occupy those sites. With staff spread between multiple locations, efficiency was lost in travel time and face-to-face communication was reduced.

On March 5, 2019, by Resolution No. 2019-110, Council approved a seven-year agreement for an amount not to exceed $102,960 annually and a total amount not to exceed $706,074 over the seven-year term that ends on March 31, 2026. At the time, this seven-year total was based on a monthly cost of $7,401, increasing to monthly cost of $8,580 over the seven-year term.

In January 2019, the Fire Chief and City Manager decided to move the firefighters out of Fire Station 1 due to the continued degradation of the building and numerous roof leaks. #2..
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Safety and Communities Committee, February 9, 2026
First Amendment to Lease Agreement for 409 12th Street, Modesto, CA

Page 2 of 3 ends

To provide a safe working environment for the firefighters and still maintain an effective emergency response to the downtown area, the decision was made to vacate the Administration Building adjacent to Fire Station 1 and move the firefighters into that building as living quarters. This left the Administration staff without a permanent space to work and temporarily staffed two (2) additional locations.

Fire Department staff worked with the City’s real estate division to find a long-term lease for adequate office space to accommodate all administrative staff in the downtown area.

Ongoing issues at Fire Station 1 and the relocation of the firefighters into the Administration Building expedited the need for securing a long-term office building. The property located at 409 12th Street accommodated the needs of the organization, as well as provided fiscal efficiency, by securing higher quality space that can accommodate all necessary staff in a single location for a nominal increase in cost over the original 3-year term of the proposed lease.

DISCUSSION:

To provide continuity of Administration operations, the Modesto Fire Department (MFD) requires an amendment to the current lease agreement with Beard Land Improvement Company to extend the lease of the MFD Administration building located at 409 12th Street, Modesto, Ca. This amendment will also include the increase in funding needed to accommodate the three (3) year lease extension.

Modesto Municipal Code Section 8-5.202 authorizes the City to acquire, construct, enlarge, remodel, renovate, alter, improve, furnish, equip and lease as lessee, with the proceeds of bonds, a facility solely for the purpose of selling or leasing as lessor such facility to such participating party, and is further authorized to make any contracts for such purposes. The City is also authorized to contract with such participating party to undertake on behalf of the City to construct, enlarge, remodel, renovate, alter, improve, furnish, and equip such a facility. Therefore, this First Amendment to the lease agreement for 409 12th Street shall be authorized to extend the term of agreement through March 31, 2029.

FISCAL IMPACT:

This increase in funds will cover the monthly rent for this 8,820 square foot office site that the Fire Administration staff currently occupies. The monthly base rent will start at $13,230 and increase by 3% each year of the lease agreement for a total amount not to exceed $1,196,790 over the three-year term. This includes the current term ($706,074) plus the additional extended threeyear term ($706,074). While the current increase reflects a move toward market value, it remains below prevailing rates. Year one of the amendment equates to approximately $18 per square foot.

Based on a review of current market data, average asking rent for office space in Modesto generally ranges from $22 to $26 per square foot per year, with rates varying based on building quality, location, and amenities. When compared to these market averages, the proposed lease rate for the Fire Administration Building is below the average office rental rates currently observed in Modesto.

Historical annual spending for property lease on Beard Land Improvement Company Agreement #155654 and projections reflecting annual rates per the amendment are noted below. The annual amount increases by 54.2% from Fiscal Year 2025/2026 to 2026/2027. #2..
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Safety and Communities Committee, February 9, 2026
First Amendment to Lease Agreement for 409 12th Street, Modesto, CA

Page 3 of 3 ends

Fiscal Year Annual Amount
2019/2020 $88,812
2020/2021 $90,996
2021/2022 $93,252
2022/2023 $95,580
2023/2024 $97,968
2024/2025 $100,428
2025/2026 $102,960
Security Deposit $6,078
Original Agreement Total $706,074
Given the increase in monthly rent, staff recommends adding $706,074 to the agreement for a revised amount not to exceed $1,196,790. For 2025/2026, the increase will come from the existing operating budget and an increase in funding is being requested as part of the Fiscal Year 2026/2027 budget process.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion recommending the First Amendment to the Lease Agreement with Beard Land Improvement Company of Modesto, Ca and the City of Modesto for the Lease of the Modesto Fire Department Administration Building located at 409 12th Street, Modesto, Ca, extending the term of the agreement to March 31, 2033, increasing the Agreement amount by $706,074 to a new estimated total amount not to exceed $1,196,790 and forwarding to Council for approval.

Approved by:

Shanon Evans, Interim Fire Chief
Joseph P. Lopez, City Manager
Attachments:

1. First Amendment

2. Original Agreement

3. Updated CA Levine Act Disclosure form
Fiscal Year Annual Amount
2026/2027 $158,760
2027/2028 $163,524
2028/2029 $168,432
Amendment Total $490,716
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52332560.2/516658.0001

FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (“Amendment”) is made as of XXX (the “Effective Date”) between BEARD LAND IMPROVEMENT COMPANY, a California corporation (“Landlord”), and the CITY OF MODESTO (“Tenant”).

RECITALS
A. Landlord and Tenant entered into that certain Lease dated March 6, 2019 (the “Lease”) under which Landlord leases to Tenant and Tenant leases from Landlord the building located at 409 12th Street, Modesto, Stanislaus County, California, containing approximately 8,820 square feet of rentable space, as more particularly described in the Lease as the Premises.

B. Landlord and Tenant desire to amend the Lease to extend the term of the Lease on the terms and conditions set forth herein.

AMENDMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant do hereby agree as follows:

1. Definitions. The Recitals are hereby incorporated into the terms of this Amendment. All capitalized terms used, but not defined, in this Amendment shall have the meaning ascribed to them in the Lease.

2. Term. The term of the Lease is hereby extended for three (3) years commencing on April 1, 2026, and ending on March 31, 2029 (the “Extended Term”). “Term,” as used in the Lease and this Amendment, shall include the Extended Term.

3. Monthly Base Rent. Tenant shall pay to Landlord, as monthly Base Rent for the Premises during the Extended Term, monthly payments in advance on the first day of each month as follows:

Period Monthly Base Rent
April 1, 2026-March 31, 2027 $13,230.00
April 1, 2027-March 31, 2028 $13,626.90
April 1, 2028-March 31, 2029 $14,035.71

4. Additional Rent and Other Amounts Owed by Tenant. The additional rent payment obligations under Section 4.2 of the Lease are hereby relieved in their entirety.

However, nothing in this First Amendment shall be interpreted to relieve, modify or defer any other obligations of Tenant to pay any amounts owed by Tenant to Landlord under the Lease, such as for maintenance, repairs, and alterations, pursuant to Section 7 of the Lease. #2..
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2 52332560.2/516658.0001

5. Option. This Section 5 supersedes and replaces in full all options to extend the term of the Lease or similar rights otherwise contained in the Lease, if any, which shall be of no further force or effect. References to Section 15 refer to the section contained in the Lease. (a) Definition. As used in this Section 5 the word “Option” means the right or option to extend the term of the Lease.
(b) Options Tied to Lease. The Option herein granted to Tenant is not assignable separate and apart from the Lease, nor may the Option be separated from the Lease in any manner, either by reservation or otherwise.
(c) Multiple Options. In the event that Tenant has multiple Options to extend the Lease a later Option cannot be exercised unless the prior Option to extend the Lease has been so exercised.
(d) Effect of Default on Options.
(i) Tenant shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary, (i) during the time commencing from the date Landlord gives to Tenant a notice of default and continuing until the noncompliance alleged in said notice of default is cured, or (ii) during the period of time commencing on the date after a monetary obligation to Landlord is due from Tenant and unpaid (without any necessity for notice thereof to Tenant) and continuing until the obligation is paid, or (iii) at any time after an event of default which does not require notice of such default to Tenant, or (iv) in the event that Landlord has given to Tenant three or more notices of default within any twelve (12) month period, whether or not the defaults are cured during the twelve (12) month period prior to the time that Tenant intends to exercise the subject Option.
(ii) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise an Option because of the provisions of Section 5(d)(i).
(iii) All rights of Tenant under the provisions of an Option shall terminate and be of no further force or effect, notwithstanding Tenant’s due and timely exercise of the Option, if, after such exercise and during the term of the Lease, (i) Tenant fails to pay to Landlord a monetary obligation of Tenant for a period of three (3) days after such obligation becomes due, or (ii) Tenant fails to commence to cure a default specified in Section 15.1(b) of the Lease within thirty (30) days after the date that Landlord gives notice to Tenant of such default and/or Tenant fails thereafter to diligently prosecute said cure to completion, or (iii) Tenant commits a default described in Section 15.1(c), 15.1(d), 15.1(e), 15.1(f) or 15.1(g) of the Lease (without any necessity of Landlord to give notice of such default to Tenant), or (iv) Landlord gives to Tenant three or more notices of default within a twelve (12) month period under Section 15.1 of the Lease, whether or not the defaults are cured during the twelve (12) month period prior to the time that Tenant intends to exercise the subject Option. (e) Option to Extend. Tenant shall have four (4) consecutive options to extend the term of the Lease for a period of one (1) year each (each an “Option Period”), provided Tenant gives Landlord irrevocable written notice of its election to exercise such option #2..
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3 52332560.2/516658.0001
at least four (4) months but not more than six (6) months prior to the end of the then-current term, subject to Section 5(d).
(f) Rent Increases During Option Periods. If Tenant exercises its option to extend the term of the Lease, the monthly Base Rent for the extended term shall be determined as set forth below:
(i) The monthly Base Rent during the first (1st) year of the applicable Option Period shall be the higher of the then current fair market rental determined in accordance with the following procedure, or the then current monthly Base Rent plus three percent (3%) (the latter of which is referred to herein as the "Minimum Base Rent"):
(A) Landlord and Tenant shall meet on or about the first day of the month following Landlord’s receipt of said written notice exercising the Option and shall attempt to agree on a market value of monthly Base Rent for the Premises (the “FMRV”) for the applicable Option Period. If Landlord and Tenant agree on such a market value of monthly Base Rent within fifteen (15) days of the date of such meeting between Landlord and Tenant, Landlord and Tenant will forthwith execute a written agreement confirming the monthly rental pursuant to this Section 5(f).
(B) If the parties are unable to agree upon a FMRV for the applicable Option Period within the time period provided above, then within ten (10) business days thereafter, Landlord and Tenant shall each submit to the other of them the monthly FMRV proposed by them (which shall be given to each appraiser upon their appointment). Landlord shall appoint an MAI real estate appraiser and immediately notify Tenant in writing of said appointment and of the name and address of the appraiser so appointed, and Tenant upon receipt of such notice shall similarly within the ten (10) business day period appoint an MAI real estate appraiser and immediately notify Landlord in writing of said appointment and of the name and address of the appraiser so appointed. If either party fails to appoint an appraiser within the time period set forth above, and such failure continues for five (5) business days following written notice of such failure from the other party, then the sole appointed appraiser shall be authorized to select the FMRV pursuant to this provision. The two appraisers (or single appraiser, if applicable) shall select either the monthly FMRV proposed by Landlord or Tenant as the monthly FMRV. If the two appraisers do not, within fifteen (15) days after the appointment of the second appraiser, agree upon the monthly FMRV for the Premises, then the two appraisers shall immediately appoint a third MAI real estate appraiser. (If they fail to do so, either party hereto may petition the Superior Court of Stanislaus County to appoint said third appraiser.) Within thirty (30) days following appointment of said third MAI real estate appraiser, such appraiser shall select either the monthly FMRV proposed by Landlord or Tenant as the monthly FMRV, and the higher of that value or the Minimum Base Rent shall be the Base Rent in the Option Period. The decision of the appraiser(s) shall be made in writing and signed by the appraiser(s). Copies of the written decision shall be delivered to Landlord and Tenant. The charges and expenses of the appraisers shall be paid by the party whose determination of monthly Base Rent was not selected. Each appraiser shall have not less than ten (10) years’ experience in appraising commercial properties in Stanislaus County similar to the Premises. #2..
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4 52332560.2/516658.0001
(ii) In the event the monthly Base Rent is not determined using the foregoing procedure until after the first day of the applicable Option Period, Tenant shall pay the Minimum Base Rent during such Option Period until the new monthly Base Rent is determined and, after the new monthly Base Rent has been determined, shall pay the new monthly Base Rent for the remaining months of the applicable Option Period and shall have ten (10) days after the new monthly Base Rent has been determined to pay Landlord the difference, if any, between the new monthly Base Rent and the Minimum Base Rent that has been paid by Tenant. (g) Extension Terms. Except for the adjustment in the monthly Base Rent provided by Section 5(f) and except as otherwise provided by this Section 5, the Lease shall remain unmodified and in full force and effect during each Option Period provided such Option is validly exercised and becomes effective.

6. Effect of Amendment. Except as expressly amended herein, all other terms and conditions of the Lease shall remain in full force and effect. The Lease, as amended hereby, constitutes the entire agreement of the parties and no further modification of the Lease shall be binding and effective unless evidenced by an agreement, in writing, signed by both Landlord and Tenant. In the case of any inconsistency between the provisions of the Lease and this Amendment, the provisions of this Amendment shall govern and control.

7. Brokers. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the extension of the term or the other terms and conditions set forth herein and that they know of no real estate broker or agent who is entitled to a commission in connection with this Amendment. Each party agrees to indemnify, protect and defend the other party against, and hold the other party harmless from, any and all claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses (including without limitation reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of any dealings with any real estate broker or agent occurring by, through, or under the indemnifying party.

8. Authority. Each signatory of this Amendment hereby represents that he or she has the authority to execute and deliver the same on behalf of the party for which such signatory is acting. Tenant represents that it has not made any assignment, sublease, transfer, conveyance of the Lease or any interest therein or in the Premises.

9. Miscellaneous. This Amendment may be executed in counterparts, each of which shall be deemed an original, but such counterparts, when taken together, shall constitute one agreement. An electronic signature or a signed copy of this Amendment transmitted electronically to the other party shall be binding upon the signatory thereto. [signature page follows]
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5 52332560.2/516658.0001
IN WITNESS WHEREOF the parties hereto have executed this Amendment as of the date first set forth above.

LANDLORD: TENANT:

BEARD LAND IMPROVEMENT
COMPANY, a California corporation

CITY OF MODESTO
By: Dillon Olvera
Its: President & CEO
Dated:

By:

Its:

Dated:

By:

Its:

Dated:

APPROVED AS TO FORM:

By:

Its:

APPROVED AS TO FORM:

By:

Its:

ATTEST:

By:

Its:

SEAL
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SECTION 1.

SECTION 2.

SECTION 3.

SECTION 4.

SECTION 5.

SECTION 6.

SECTION 7.

SECTION 8.

SECTION 9.

SECTION 10.

SECTION 11.

SECTION 13.

SECTION 14.

SECTION 15.

SECTION 16.

SECTION 17.

SECTION 18.

SECTION 19.

SECTION 20.

SECTION 21.

SECTION 22.

SECTION 23.

SECTION 24.

SECTION 25.

SECTION 26.

SECTION 27.

SECTION 28.

SECTION 29.

SECTION 30.
020422.0001 \5365418.6
[City of Modesto 409 12th Street, Modesto]
LEASE

TABLE OF CONTENTS
Definitions ................................................................................................... 1 Premises ....................................................................................................... I Term ............................................................................................................. 1 Rent. ............................................................................................................. 2 Security Deposit. .......................................................................................... 4 Use ............................................................................................................... 4 Maintenance, Repairs and Alterations ......................................................... 6 Insurance; Indemnity ................................................................................... 9 Operating Expense Payments .................................................................... 12 Real Property Taxes ................................................................................... 13 Utilities and Janitorial Services ................................................................. 14 Assignment and Subletting ........................................................................ 16 Environmental Provisions .......................................................................... 17 Defaults; Remedies .................................................................................... 19 Condemnation ............................................................................................ 22 Estoppel Certificate ................................................................................... 22 Landlord's Liability ................................................................................... 23 Severability ................................................................................................ 23 Interest on Past-due Obligations ................................................................ 24 Time of Essence ......................................................................................... 24 Additional Rent. ......................................................................................... 24 Termination of Prior Agreements; Amendments ...................................... 24 Notices ....................................................................................................... 24 Waivers ...................................................................................................... 24 Cumulative Remedies ................................................................................ 25 Covenants and Conditions ......................................................................... 25 Binding Effect; Choice of Law .................................................................. 25 Subordination ............................................................................................. 25 Landlord's Access . .................................................................................... 25 #2..
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SECTION 31.

SECTION 32.

SECTION 33.

SECTION 34.

SECTION 35.

SECTION 36.

SECTION 37.

SECTION 38.

SECTION 39.

SECTION 40.

SECTION 41.

SECTION 42.

SECTION 43.

SECTION 44.

SECTION 45.

SECTION 46.

SECTION 47.

SECTION 48.

SECTION 49.

SECTION 50.
020422.000 I \5365418.6
[City of Modesto 409 12th Street, Modesto]
Auctions ..................................................................................................... 26 Signs .......................................................................................................... 26 Merger ........................................................................................................ 26 Guarantor ................................................................................................... 26 Quiet Possession ........................................................................................ 26 Security Measures ...................................................................................... 26 Easements .................................................................................................. 27 Performance Under Protest. ....................................................................... 27 Authority .................................................................................................... 27 Terms and Headings .................................................................................. 27 Exhibits ...................................................................................................... 27 Successors and Assigns ............................................................................. 27 Professional Fees ....................................................................................... 28 Sunshine Ordinance ................................................................................... 28 Joint and Several Liability ......................................................................... 28 Broker Indemnification .............................................................................. 28 Holding Over. ............................................................................................ 29 Limited Termination Right. ....................................................................... 29 Separate Counterparts ................................................................................ 29 Venue ......................................................................................................... 29 11 #2..
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LEASE
THIS LEASE (this "Lease") dated, and made effective, as of l'Y\0.Yt'.h l Q , 2019 (the "Effective Date"), is entered into by and between BEARD LAND IMPROVEMENT COMPANY, a California corporation ("Landlord"), and the CITY OF MODESTO ("Tenant").

SECTION 1. Defmitions.

In addition to any other terms defined in this Lease, the following terms shall have the following meanings:

1.1 Building. "Building" shall mean the building, containing approximately 8,820 square feet of rentable space, located upon the Land,

1.2 Land. "Land" shall mean the land located at 409 12th Street, Modesto, California.

1.3 Premises. "Premises" shall mean the Land and the Building and related fixtures and appurtenances as depicted on EXHIBIT A attached hereto and made a part hereof.

1.4 Tenant's Share. "Tenant's Share" shall equal 100%.

SECTION 2. Premises.

Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises for the term, at the rental, and upon all of the provisions set forth herein. This Lease does not include the right to use the roof of.the Building.

SECTION 3. Term.

3.1 Term. The term of this Lease shall commence on the later of March ~L 2019, or the date Landlord delivers possession of the Premises to Tenant (the "Commencement Date") and shall expire at 11 :59 p.m. on the date that is seven (7) years after the Commencement Date plus any fractional calendar month following the Commencement Date if tlie Commencement Date does not occur on the first day of a calendar month (the "Expiration Date"), unless sooner terminated as provided herein.

3.2 Delivery. Landlord shall make good faith efforts to deliver the Premises to Tenant by March R , 2019; provided, however, that if Landlord cannot deliver possession of the Premises to Tenant on or prior to the date that is fourteen (14) days after such date (the "Outside Delivery Date"), then either Landlord or Tenant may terminate this Lease by providing written notice to the other of such termination at any time after the Outside Delivery Date and prior to Landlord's delivery of possession of the Premises, such termination shall become effective upon receipt of such notice, each party hereto shall be released and relieved from all further liability hereunder, and Tenant shall have no claim against Landlord (and Landlord shall have no liability) hereunder, at law or in equity, arising from Landlord's failure to deliver possession of the Premises to Tenant.
020422.000 I \5365418.6 1
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3.3 Landlord's Delivery of Premises. The parties acknowledge and agree that Landlord shall deliver the Premises to Tenant in an usable and habitable condition of that of an General Office use. Tenant acknowledges that Landlord may require additional time after the Commencement Date to fully deliver the Premises.

SECTION 4. Rent.

4.1 Monthly Rent.
(a) Tenant shall pay to Landlord, as rent for the Premises during the term of this Lease on and after the Commencement Date monthly payments in advance on the first day of each month as follows (the monthly rent pursuant to this sentence, the "Base Rent"):

Period Monthly Base Rent
Months 1-12* April 1, 2019 March 31, 2020 $6,078
Months 13-24 April 1, 2020 March 31, 2021 $6,260
Months 25-36 April 1, 2021 March 31, 2022 $6,448
Months 37-48 April 1, 2022 March 31, 2023 $6,642
Months 49-60 April 1, 2023 March 31, 2024 $6,841
Months 61-72 April 1, 2024 March 31, 2025 $7,046
Months 73-84 April 1, 2025 March 31, 2026 $7,257
* Including any fractional calendar month following the Commencement Date if the Commencement Date does not occur on the first day of a calendar month. If the Commencement Date does not occur on the first day of a calendar month; such fractional month's Base Rent to be due and paid on the Commencement Date. For clarification and by way of example only, if the Commencement Date is March 10, Tenant's payment of Base Rent for the fractional month containing the Commencement Date (i.e., March 11-31 in this example) shall be due on March

10. Concurrently with its execution of this Lease, Tenant shall deliver to Landlord Twelve Thousand One Hundred Fifty Six Dollars ($12,156.00) for both the Security Deposit (defined in Section 5) and for the first full month's Base Rent.

The Base Rent shall be paid to Landlord in legal tender of the United States of America at the address of Landlord as stated in this Lease, or at such other address as may be designated by Landlord from time to time, without deduction or offset. The Base Rent payable under this Section 4.1 shall be in addition to any other sums payable by Tenant to Landlord under this Lease. Rent for any period during the term which is for less than one (1) calendar month shall be a pro rata portion of the monthly installment.
020422.000 I \5365418.6 2
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4.2 Additional Rent Payments. Commencing on the Commencement Date, Tenant shall pay, in advance with each monthly payment of Base Rent (or separately, if Base Rent is then abated) the amounts due by Tenant pursuant to Sections 8.2, 9 and 10.1 (the "Additional Rent Provisions").

Tenant's payments pursuant to the Additional Rent Provisions for the term, shall be One Thousand Three Hundred Twenty-Three Dollars ($1,323) per month ($0.15 per square foot per month), subject to reconciliation pursuant to Section 4.2(a). Estimated payments shall not be required to be kept separate from Landlord's other monies, but may be intermingled with other moneys of Landlord and shall not bear interest.
(a) Within ninety (90) days after the end of each calendar year, or, if sooner, the end of the term of the Lease, Landlord shall furnish to Tenant an itemized statement (the "Landlord's Expense Statement") certified as correct in all material respects by an officer of Landlord or the property manager for Landlord showing in detail (with such substantiating documentation as may be reasonably appropriate or as Tenant may reasonably request) setting forth the amounts due by Tenant pursuant to the Additional Rent Provisions for the prior calendar year. The estimated payments made by Tenant pursuant to this Section 4.2 shall be reconciled against amounts due by Tenant pursuant to the Additional Rent Provisions as shown on Landlord's Expense Statement. Any underpayments by Tenant pursuant to the Additional Rent Provisions for the prior calendar year shall be paid by Tenant to Landlord in equal monthly payments over the subsequent twelve month period along with Tenant's estimated payments for the then-present calendar year pursuant to the Additional Rent Provisions. If the Tenant's estimated payments pursuant to this Section 4.2 exceeded the amount due from Tenant for such calendar year, such excess shall be credited in equal monthly amounts against Tenant's next twelve monthly estimated payments pursuant to this Section 4.2, without interest.

Notwithstanding the foregoing, if during the last calendar year of the Lease term, Tenant underpaid amounts due pursuant to the Additional Rent Provisions as shown in Landlord's Expense Statement for such period, Tenant shall pay the full amount of the underpayment within ninety (90) days after Tenant's receipt of Landlord's Expense Statement, however, Tenant shall not be required to pay Additional Rent Provisions that exceed Fifteen Thousand Eight Hundred Seventy-Six Dollars ($15,876) annually. If Tenant's estimated payments during the last calendar year of the Lease term exceed the actual amounts determined to be owed as shown in the Landlord Expense Statement for such period, Landlord shall refund the difference in cash to Tenant within ninety (90) days of the end of the term of this Lease, without interest. This Section 4.2 shall survive the expiration or termination of the term of this Lease. (b) During reasonable business hours and upon reasonable prior written notice, after receipt of the Landlord's Expense Statement for the prior calendar year, Tenant, or Tenant's authorized agent, shall have the right, not more frequently than once in any calendar year, to examine all of Landlord's (and/or Landlord's agent's) books and records pertaining to Additional Rent Provisions. Any over-billing discovered by such audit shall be promptly refunded to Tenant, without interest. In the event the overstatement of charges exceeds five percent (5%) of the amounts previously billed to Tenant by Landlord, Landlord shall reimburse Tenant for all reasonable out-of-pocket costs of such audit. Tenant shall have three (3) months from the date of receiving the Landlord's Expense Statement to audit such books and records and to deliver to Landlord in writing all objections to the information set forth in the Landlord's Expense Statement. Any and all items in the Landlord's Expense Statement to which Tenant fails to make a written objection within such three (3) month period shall be considered as final and 020422.0001 \5365418.6 3
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accepted by Tenant, and Tenant shall have no right to object to the same. Tenant shall treat as confidential any information obtained by Tenant pursuant to this Section 4.2.

SECTION 5. Security Deposit.

Tenant shall deliver to Landlord pursuant to Section 4.1, Six Thousand Seventy Eight Dollars ($6,078.00) as security for the performance by Tenant of every covenant and condition of this Lease (the "Security Deposit"). The Security Deposit may be co-mingled with other funds of Landlord and shall bear no interest. If Tenant shall default with respect to any covenant or condition of this Lease, including, but not limited to the payment of Base Rent or other payments hereunder, Landlord may apply the whole or any part of such Security Deposit to the payment of any sum in default or any sum which Landlord may be required to spend by reason of Tenant's default. If any portion of the Security Deposit is so applied, Tenant, upon demand by Landlord, will deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount. Subject to Tenant's obligations under this Section 5 and under Section

7.2(d), and Landlord's right to apply the Security Deposit to address any failure of Tenant to satisfy those obligations, the Security Deposit or any balance thereof shall be returned to Tenant within thirty (30) days after expiration of the Lease Term hereof and Tenant's return of the Premises to Landlord, provided that Tenant is not then in default hereunder. Tenant hereby waives the benefit of the provisions of California Civil Code Section 1950. 7. If Landlord sells its interest in the Premises during the term of this Lease and deposits with the purchaser the Security Deposit or balance of it then, upon such sale, Landlord shall be discharged from any :further liability with respect to the Security Deposit.

SECTION 6. Use.

6.1 Use by Tenant. The Premises shall be used and occupied, in compliance with all applicable laws, only for the following uses: general office and for no other purpose. Under no circumstances shall Tenant use or occupy the Premises in a manner which constitutes a nuisance or a hazard or store or distribute Hazardous Materials (as defined in Section 13.1) on or from the Premises. Tenant shall comply with and abide by Landlord's existing rules and regulations for the Premises as of the Effective Date. Tenant shall be responsible for confirming that Tenant's use of the Premises complies with any zoning or use ordinances and/or laws, and obtaining all necessary permits and/or approvals. Landlord makes no representation or warranty regarding Tenant's ability or right to use the Premises for Tenant's intended purpose.

6.2 Compliance with Law. Tenant shall, at Tenant's sole expense, promptly comply with all applicable laws, ordinances, rules, regulations, orders, certificates of occupancy, conditional use or other permits, variances, covenants and restrictions of record, the recommendations of Landlord's engineers or other consultants, and requirements of any fire insurance underwriters, rating bureaus or government agencies, now in effect or which may hereafter come into effect, whether or not they reflect a change in policy from that now existing, during the term or any part of the term hereof, relating in any manner to the Premises, or the occupation and use by Tenant of the Premises. Tenant shall, at Tenant's sole expense, comply with all requirements of the Americans With Disabilities Act ("ADA") that relate to Tenant's particular use of the Premises 020422.000 I \5365418.6 4
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( as opposed to general office, warehouse, manufacturing and distribution operations) and Tenant's Alterations (as hereinafter defined), fixtures furniture and equipment, and all federal, state and local laws and regulations governing occupational safety and health. Tenant shall conduct its business and use the Premises in a lawful manner for only the purposes permitted by Section 6.1. Tenant shall not use or permit the use of the Premises in any manner that will tend to or create waste or a nuisance. Tenant shall obtain, at its sole expense, any permit or other governmental authorization required to operate its business· from the Premises. Landlord shall not be liable for the failure of any other person on the Premises to abide by the requirements of this Section 6.2 or to otherwise comply with applicable laws and regulations, and Tenant shall not be excused from the performance of its obligations under this Lease due to such a failure.

6.3 Condition of Premises; No Certified Access Specialist ("CASp") Inspection.

Landlord warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC") and all other such elements in the Premises, other than those constructed by Tenant, shall be in good operating condition upon the completion of Landlord's Work, and that the structural elements of the roof, bearing walls and foundation of the Building shall be free of material defects. If a non-compliance with said warranty exists on the date that Landlord's Work is completed, or if one of such systems or elements should malfunction or fail within the appropriate warranty period, and provided the Tenant has obtained the maintenance contracts required by Section 7.2(b), Landlord shall, as Landlord's sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Tenant setting forth with specificity the nature and extent of such non-compliance, malfunction or failure, rectify the same at Landlord's expense. The warranty period shall be as follows: (i) six (6) months as to the HV AC systems, and (ii) ninety (90) days as to the remaining systems and other elements of the Building. If Tenant does not give Landlord the required notice within the appropriate warranty period, correction of such noncompliance, malfunction or failure shall be the obligation of Tenant at Tenant's sole cost and expense. Except for Landlord's obligation to complete Landlord's Work and as otherwise set forth herein, Tenant, upon Landlord's delivery of the Premises, shall accept the Premises "AS IS" and in the condition existing as of the date thereof, and subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record.

The Premises have not undergone a CASp inspection. Pursuant to Civil Code Section 193 8( e ), Landlord provides the following statutory notice to Tenant:

A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the subject premises, the commercial property owner or Landlord may not prohibit the Tenant or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the Tenant or tenant, if requested by the Tenant or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection, the payment of the fee for the CASp inspection, and the cost of 020422.0001\5365418.6 5
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making any repairs necessary to correct violations of constructionrelated accessibility standards within the premises.

Unless Landlord separately agrees in writing, all costs for the CASp inspection and the cost of making any repairs necessary to correct violations of construction-related accessibility standards shall be the sole responsibility of Tenant. Tenant shall inform Landlord in writing prior to obtaining a CASp inspection. Any alterations or repairs related thereto shall be subject to all of the requirements set forth in this Lease, including, without limitation, obtaining Landlord's approval for any alterations or repairs, approval which Landlord shall not unreasonably withhold.

SECTION 7. Maintenance, Repairs and Alterations.

7.1 Landlord's Obligations. Except as noted in the provisions of this Section 7.1, Section 10 and Section 16.2, it is intended by the parties hereto that Landlord have no obligation to maintain, repair or replace the Premises, or the equipment therein, all of which obligations are intended to be that of Tenant. Except for damage caused by any negligent or intentional act or omission of Tenant or Tenant's agents, employees or invitees, in which event Tenant shall repair and restore the damage at Tenant's sole expense, and except as otherwise provided by this Lease, Landlord, at Landlord's expense, shall keep in good order, condition and repair the foundation of the Building, the structural integrity of the Building slabs, the structural components of the exterior load bearing walls of the Building, the structural components of interior load bearing walls of the Building (if any) and the structure components of the roof of the Building. Landlord shall have no obligation to maintain the interior surface or the exterior surface of the exterior walls, the surface of any interior walls or any doors, plate glass or windows, or any wall joints.

Landlord shall have no obligation to perform maintenance, repairs or replacements under this Section 7.1 until a reasonable time after receipt of written notice from Tenant of the need for such work. It is the intention of the parties that the terms of this Lease govern the respective obligations of the parties as to maintenance, repair and replacement of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect (whether for Tenant to perform maintenance, repair or replacement at Landlord's expense or for Tenant to terminate this Lease) to the extent it is inconsistent with the terms of this Lease.

7.2 Tenant's Obligations.
(a) Subject to the provisions of Section 7.1, Section 10 and Section 16.2, Tenant shall, at Tenant's sole expense, keep the Premises and the Alterations (as hereinafter defined), if any, in good order, condition and repair (whether or not the portion of the Premises requiring repairs, or the means of repairing the same, are reasonably or readily accessible to Tenant, and whether or not the need for such repairs occurs as a result of Tenant's use, any prior use, the elements or the age of such portion of the Premises), including, but not limited to, all equipment or facilities, such as plumbing, electrical, lighting facilities, boilers, pressure vessels, fire protection system (including detection and suppression elements), fixtures, the interior and the exterior surfaces of the exterior walls (but not the structural components of the exterior walls), the interior walls, ceilings, floor coverings, windows, doors, plate glass, skylights within the Premises, loading dock equipment, driveways, sidewalks, and paving and parking areas of the Premises, the fencing, non-structural components of the roofs (including the roof membrane), 020422.000 I \5365418.6 6
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signs of Tenant and the HV AC equipment serving the Premises. Tenant, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Section 7.2(b). Tenant's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair, provided, however, that Tenant shall have no obligation to make any replacements that are required to be capitalized for federal income tax purposes to the plumbing, electrical or fire protection systems, or to replace the driveways, sidewalks, paving or parking areas, or the roof, load bearing walls, or any structural components of the Premises.

Tenant shall, during the term of this Lease, keep the exterior appearance of the Building in a first-class condition (including, without limitation, graffiti removal) consistent with the exterior appearance of other similar facilities of comparable age and size in the vicinity. Tenant shall conduct and operate its business such that Tenant does not overload or damage the Premises or the utilities servicing the Premises. Notwithstanding the foregoing, in the event the HV AC system feasibly cannot be repaired but requires replacement during the term (as the term may be extended), then in light of the fact that the same will require a substantial expenditure by Tenant, and will result in a benefit to Landlord following the expiration of the term, the following provisions shall govern: upon the expiration or earlier termination of this Lease, Landlord shall reimburse Tenant for the unamortized portion of the reasonable expenses incurred by Tenant in connection with the replacement of the HV AC system, based on (1) the date of the installation of such new HV AC system; and (2) the useful life of said equipment, not to exceed, however, ten (10) years.
(b) Tenant shall, at Tenant's sole expense, procure and maintain contracts, with copies provided promptly to Landlord, in customary form and substance for, and with contractors specializing and experienced in the maintenance of, the following equipment and improvements, if any, if and when installed on the Premises: (i) HV AC equipment, (ii) boiler and pressure vessels, (iii) fire protection system, including detection and suppression elements, (iv) clarifiers, (v) basic utility feed to the perimeter of the Building, and (vi) any other equipment, if reasonably required by Landlord. However, Landlord reserves the right, if Tenant fails to procure and maintain contracts with the aforementioned contractors, and upon notice to Tenant, to procure and maintain any or all of such service contracts, and Tenant shall reimburse Landlord, upon demand, for the cost thereof.
(c) If Tenant fails to perform Tenant's obligations under this Section 7.2 or under any other Section of this Lease, Landlord may, at Landlord's option, enter upon the Premises after ten (10) days' prior written notice to Tenant (except in the case of emergency, in which case no notice shall be required), perform such obligations on Tenant's behalf and put the Premises in good order, condition and repair. The cost thereof shall be due and payable as additional rent to Landlord with Tenant's next rental installment and the amount due shall bear interest until paid as provided in Section 19.
(d) On the last day of the term hereof, or on any sooner termination, Tenant shall surrender the Premises to Landlord in the same condition as received, ordinary wear and tear excepted, clean and free of debris, shall restore the Premises as required by this Section 7 .2( d), and, unless Landlord otherwise directs, shall remove all cables or wiring installed by Tenant.

Tenant shall repair any damage to the Premises occasioned by the installation or removal of 020422.0001\5365418.6 7
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Tenant's personal property or improvements. Notwithstanding anything to the contrary otherwise stated in this Lease, Tenant shall leave the airlines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing and fencing on the Premises in good operating condition. At Landlord's request, Tenant shall deliver to Landlord a quitclaim deed releasing any interest or right of Tenant in the Premises.

7.3 Alterations and Additions.
(a) Tenant shall not, without Landlord's prior written consent, which Landlord shall not unreasonably withhold, make any alterations, improvements, additions, or Tenant Installations ( collectively "Alterations") in, on or about the Premises, except for nonstructural, cosmetic Alterations not exceeding $10,000.00 annually during the term of this Lease, of which Tenant shall give Landlord prompt prior written notice as required below. In any event, whether or not in excess of $10,000.00 in annual cost, Tenant shall make no change or alter the exterior of the Premises nor the exterior of the Building, nor change or alter the Building systems (including, without limitation, mechanical, plumbing or electrical) without Landlord's prior written consent. As used in this Section 7.3 and elsewhere in this Lease the term "Tenant Installations" shall include, without limitation, installation of machinery and equipment, window coverings, lighting fixtures, air conditioning, plumbing and fencing. Should Tenant make any Alterations without the prior approval of Landlord, Landlord may require that Tenant immediately remove any or all of such Alterations. Landlord may require that Tenant remove any or all of its Alterations on or before surrender of possession at the expiration of the term and restore the Premises to its prior condition.
(b) Any Alterations in or about the Premises that Tenant shall desire to make and which require the consent of the Landlord shall be presented to Landlord in written form, with detailed plans of the proposed project. If Landlord shall give its consent, the consent shall be deemed conditioned upon Tenant acquiring a permit to do so, if required, from appropriate governmental agencies, the furnishing of a copy thereof to Landlord prior to the commencement of the work, the compliance by Tenant of all conditions of said permit in a prompt and expeditious manner and the Alterations being done in a good and workmanlike manner and in compliance with all applicable laws.
(c) Tenant shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Tenant at or for use in the Premises, which are or may be secured by any mechanic's or materialmen's lien against the Premises or any interest therein.

Tenant shall give Landlord not less than fifteen (15) days' notice prior to the commencement of any work at the Premises, and Landlord shall have the right to post notices of non-responsibility in or on the Premises as provided by law. If Tenant, in good faith, shall contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense defend itself and Landlord against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against the Landlord or the Premises. On written request from Landlord, Tenant shall furnish a release bond as provided under California Civil Code Section 3143 or any successor statute, which shall release such lien from the Premises. (d) Upon termination of this Lease, any property of Tenant not removed by Tenant at surrender of the Premises ( or within seven (7) days after termination of this Lease by Landlord 020422.000 I \5365418.6 8
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because of Tenant's default) shall be considered abandoned, and Landlord may remove any or all such items, and store the same in a public warehouse or elsewhere for the account and at the expense and risk of Tenant. If Tenant shall fail to pay the cost of storing any such property after it has been stored for a period of thirty (30) days or more, Landlord may sell any or all of such property at public or private sale, in such manner and at such times and places as Landlord, in its sole discretion, may deem proper, without notice to or demand upon Tenant. Landlord shall apply the proceeds of such sale, without interest, as follows:
(i) First, to the costs and expenses of such sale, including Landlord's attorneys' fees;
(ii) Second, to the payment of the expense of or charges for removal and storing any such property;
(iii) Third, to the payment of any other sum of money which may then or thereafter be due to Landlord from Tenant under any of the terms of this Lease; and (iv) Fourth, the balance, if any, to Tenant.
(e) All fixtures, trade fixtures, equipment, alterations, additions, improvements and appurtenances attached to or built into the Premises before or during the term of this Lease, whether by Landlord at its expense or at the expense of Tenant or both, shall be and remain part of the Premises and shall not be removed by Tenant at the end of the term of this Lease, unless otherwise expressly provided for in this Lease. Such fixtures, equipment, alterations, additions, improvements, and appurtenances which shall remain in the Premises shall include all floor coverings, window coverings, paneling, molding, doors, vaults, plumbing systems, cabinetry, electrical systems, lighting systems, silencing equipment, communication systems, all fixtures and outlets for the systems mentioned above and for all telephone, radio, telegraph, and television purposes, or any special flooring or ceiling installations. (t) Tenant's machinery and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, shall remain the property of Tenant and shall be removed by Tenant subject to the provisions of Section 7.2(d).

SECTION 8. Insurance; Indemnity.

8.1 Tenant's Insurance. Tenant shall, at Tenant's expense, obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily Injury and Property Damage Insurance naming Landlord as an additional insured with respect to the Premises and insuring against any liability arising out of the use, occupancy or maintenance of the Premises and all other areas appurtenant thereto. Such insurance shall be in an amount not less than $2,000,000.00 per occurrence with an annual aggregate not less than $5,000,000.00. In addition, Tenant is required to provide equipment breakdown or "boiler and machinery" coverage either through an "all-risks" property policy, a package policy, or a monoline policy covering direct physical loss or damage. Tenant's policy shall include business interruption insurance that is sufficient in the amount to pay the annual Base Rent and due hereunder for a period of at least one year. Tenant shall also maintain business automobile liability insurance, in an amount not 020422.000 l \5365418.6 9
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less than $1,000,000.00, covering all owned, non-owned and hired vehicles to be used in connection with Tenant's use and occupancy of the premises. Additionally, Tenant shall maintain Workers Compensation insurance, satisfying all statutory limits and requirements, as well as employers' liability insurance, in an amount not less than $1,000,000.00.

Upon notice from Landlord to Tenant said policy amount shall be increased as reasonable during the term to reflect coverage requirements of Landlord's insurance carrier. The limits of said insurance shall not, however, limit the liability of Tenant hereunder. Tenant shall deliver to Landlord a certificate evidencing the existence and amounts of insurance required to be maintained under this Section 8.1 and if a claim is made which is or could be asserted against Landlord, upon request of Landlord, Tenant shall deliver to Landlord copies of policies of liability insurance required under this Section 8.1. No such policy shall be subject to cancellation or subject to reduction of coverage or other modification, except after thirty (30) days' prior written notice to Landlord. Tenant shall, not later than five (5) business days before the expiration of such policies, furnish Landlord with evidence of renewals or binders thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant upon demand.

Notwithstanding anything in this Lease to the contrary, Tenant shall have the right to effect self-insurance to satisfy the insurance required of Tenant in Section 8.1, on the following terms and conditions: (i) "self-insurance" shall mean that either Tenant is itself acting as though it were the insurance company providing the insurance required under the provisions hereof and shall pay any amounts due in lieu of insurance proceeds which would have been payable if the insurance policies had been carried, which amounts shall be treated as insurance proceeds for all purposes under this Lease; (ii) all amounts which Tenant pays or is required to pay and all loss or damages resulting from risks for which Tenant has elected to self-insure shall be subject to the waiver of subrogation in Section 8.4 and shall not limit Tenant's indemnification obligations set forth in this Lease; and (iii) Tenant's right to effect and to continue to effect the self-insurance is conditioned upon and subject to Tenant's maintaining appropriate loss reserves for the amount of its self-insurance obligations under this Lease which are actuarially derived in accordance with accepted standards of the insurance industry and accrued (i.e., charged against earnings) or otherwise funded. Landlord shall have the right, during the term of this Lease, and not more often than once per calendar year, to request sufficient information from Tenant, which Tenant shall provide within thirty (30) days of Landlord's written request, to determine that Tenant's loss reserves satisfy the obligations of this Section 8.1.

8.2 Property Insurance. Landlord shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, but not Tenant's fixtures, goods or inventory, or equipment, in an amount not to exceed the full replacement value thereof, as the same may exist from time to time, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, flood and special extended perils ("Special Form Causes of Loss", as such term is used in the insurance industry), but with such exclusions as Landlord may require. Landlord may also carry such earthquake and terrorism coverage as Landlord deems appropriate or as may be required by Landlord's mortgagee, as well as rent loss insurance covering the rents under this Lease for a period of twelve (12) months, Combined Single Limit Bodily Injury and Property Damage insurance naming Landlord as the insured and insuring Landlord against any liability arising out 020422.000 I \5365418.6 10
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of the use, occupancy or maintenance of the Premises and all other areas appurtenant thereto, and such other coverages as may be commercially appropriate for property similar to the Premises, as determined by Landlord. Tenant shall pay for such insurance maintained by Landlord under this Section 8.2 and Tenant shall be liable for any deductible amounts under such property coverage.

Landlord shall estimate the amount of such insurance cost due from Tenant pursuant to this Section 8.2, and require that such insurance cost be paid in advance to Landlord by Tenant monthly with the monthly Base Rent. Premiums for policy periods commencing prior to or extending beyond the term of this Lease shall be prorated to correspond to the term of this Lease.

All amounts due to Landlord from Tenant under this Section 8.2, shall be subject to the Additional Rent Provisions limit set forth in Section 4.2.

8.3 Insurance Policies. Insurance required hereunder shall be in companies holding a "General Policyholders Rating" of at least A-, or such other rating as may be required by Landlord's mortgagee, as set forth in the most current issue of "Best's Insurance Guide," or in case of discontinuance of such publication, a comparable guide selected by Landlord. All required .insurance of Tenant hereunder shall be primary and any applicable insurance maintained by Landlord shall be excess and noncontributing. Tenant shall deliver to Landlord certificates evidencing the existence and amounts of such insurance and written confirmation from an independent risk management company acceptable to Landlord that the Cross-Liability Requirement has been satisfied. Each such policy shall provide that the company will endeavor to provide Landlord at least thirty (30) days prior written notice of cancellation or reduction of coverage or other adverse modification. Tenant shall furnish Landlord with certificates evidencing the renewal of such policies and the confirmation required by this Section 8.3 as to such renewal or, upon three (3) business days prior written notice to Tenant, Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant upon demand. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in Section 8.2.

8.4 Waiver of Subrogation. Landlord and Tenant shall cause the insurance company issuing their respective property insurance to waive any subrogation rights that those companies may have against the other of them. Tenant shall also obtain a similar waiver with respect to any subtenants or other occupants of the Premises, provided that Tenant shall be bound to comply with the provisions of Section 13 relating to any such subtenants or occupants. Except for the obligation of Tenant to pay any deductible amounts under Landlord's property insurance pursuant to Section 8.2, Landlord and Tenant waive any right that either may have against the other on account of any loss or damage that could have been insured under property insurance with special form causes of loss coverage or its equivalent, whether or not such insurance is in effect.

8.5 Tenant's Assumption of Risk and Waiver. Landlord shall not be liable to Tenant, Tenant's employees, agents or invitees for: (i) any damage to property of Tenant, or of others, located in, on or about the Premises, (ii) the loss of or damage to any property of Tenant or of others by theft or otherwise, or (iii) any such damage caused by other tenants or persons in the Premises, occupants of adjacent property, or the public, or caused by operations in construction of any private, public or quasi-public work. Landlord shall in no event be liable for any consequential damages or loss of business or profits and Tenant hereby waives any and all claims for any such damages. All property of Tenant kept or stored on the Premises shall be so 020422.0001 \5365418.6 11
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kept or stored at the sole risk of Tenant and Tenant shall hold Landlord harmless from any claims arising out of damage to the same, including subrogation claims by Tenant's insurance earners.

8.6 Tenant's Indemnification of Landlord. Tenant shall indemnify, defend, protect and hold Landlord and Landlord's partners, officers, directors, employees, agents, successors and assigns (collectively, "Landlord Indemnified Parties") harmless from and against, any and all claims, damages, judgments, suits, causes of action, losses, liabilities and expenses, including reasonable attorneys' fees and court costs ("Claims"), arising or resulting from (i) any act or omission of Tenant or any of Tenant's agents, employees, contractors, subtenants, assignees or licensees, with respect to acts or omissions within the Premises only, (collectively, "Tenant Parties"); (ii) the use of the Premises and conduct of Tenant's business by Tenant or any Tenant Parties, or any other activity, work or thing done, permitted or suffered by Tenant or any Tenant Parties, in or about the Premises, including but not limited to any activity, work or thing associated with any Alterations or Tenant Installations; and (iii) any default by Tenant of any obligations on Tenant's part to be performed under this Lease (collectively, "Indemnified Claims"). Notwithstanding the foregoing, Tenant's indemnification obligation under this Section 8.6 shall not apply to the extent any such Claims are attributable to the negligence or willful misconduct of Landlord. In case any action or proceeding is brought against Landlord or any Landlord Indemnified Parties by reason of any such Claims, Tenant, upon notice from Landlord, shall defend the same at Tenant's expense by counsel approved in writing by Landlord, which approval shall not be unreasonably withheld.

8.7 Survival; No Release of Insurers. Tenant's covenants, agreements and indemnification in Section 8.5 and Section 8.6 with respect to any event which occurs during the term hereof or which accrues or arises during the term hereof shall survive the expiration or earlier termination of this Lease and are not intended to and shall not relieve any insurance carrier of its obligations under policies required to be carried by Tenant pursuant to the provisions of this Lease.

SECTION 9. Operating Expense Payments. Landlord shall estimate Tenant's Share of Operating Expenses, and require that such amount be paid in advance to Landlord by Tenant monthly pursuant to Section 4.2. The term "Operating Expenses" means all costs and expenses incurred by Landlord with respect to the ownership, maintenance, and operation of the Premises ( other than amounts due from Tenant under Sections 8.2 and 10.1 hereof, which are dealt with under those sections), including, without limitation: to the extent paid by Landlord hereunder, maintenance, repair and replacement of all portions of the Premises not required to be maintained, repaired and replaced by Tenant hereunder; amounts paid to contractors and subcontractors for work or services performed in connection with any of the foregoing; charges or assessments of any association to which the Premises is subject; an annual property management fee equal to three percent (3%) of: Base Rent, Landlord's insurance, Operating Expense gross receipts, and Real Property Taxes (as hereinafter defined) payable each year; the cost of any additions or alterations made by Landlord to the Premises or the Building in order to comply with Legal Requirements ( other than those expressly required herein to be made by Tenant) or that are appropriate to the continued operation of the Premises or the Building as an office/warehouse facility in the market area, provided that the cost of additions or alterations that are required to be capitalized for federal income tax purposes shall be amortized on a straight 020422.000 I \5365418.6 12
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line basis over a period equal to the lesser of the useful life thereof for federal income tax purposes or 1 O years. Except as noted herein, Operating Expenses do not include costs, expenses, depreciation or amortization for improvements constructed by Landlord prior to the Commencement Date, debt service under mortgages, ground lease rent, costs of restoration to the extent of net insurance proceeds received by Landlord with respect thereto, or leasing commissions. Tenant agrees that Landlord may self-manage the property, and collect the fee described herein. Nothing in this Section shall diminish or alter the obligations of Tenant under Section 7 hereof.

SECTION 10. Real Property Taxes.

10.1 Payment of Real Property Taxes. Subject to Tenant's reimbursement obligations, Landlord shall pay the Real Property Taxes, as defined in Section 10.3, applicable to the Premises. Tenant shall be responsible for payment to Landlord of the full amount incurred by Landlord during the term of this Lease for the Real Property Taxes applicable to the Premises, subject to the provisions for payment and reconciliation set forth in Section 4.2. In the event that the Premises is part of a larger parcel, Tenant shall be responsible for the entire amount of the Real Property Taxes allocable to the Building and a pro rata share of the amount of the Real Property Taxes 'allocable to the Land based upon the percentage that the acreage of the Land bears to the acreage of the larger parcel, as conclusively determined by Landlord from the valuations assigned in the assessor's work sheets or such other information as may be reasonably available. If any installment of Real Property Taxes shall cover any period of time prior to or after the expiration or termination of this Lease, Tenant's share of such installment shall be prorated. Landlord shall estimate the current Real Property Taxes, and require that such taxes be paid in advance to Landlord by Tenant monthly pursuant to Section 4.2.

10.2 Additional Improvements. Without limiting Section 10.1 hereof, Tenant shall pay to Landlord upon demand the entirety of any increase in Real Property Taxes over the Term, including any amounts assessed by reason of additional improvements placed upon the Premises by Tenant or at Tenant's request.

10.3 Definition of "Real Property Taxes". As used herein, the term "Real Property Taxes" shall include any form of real estate tax or assessment, general, special, supplementary, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax ( other than inheritance, personal income or estate taxes) imposed on the Premises by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage or other improvement district thereof, as against the Premises. The term Real Property Tax shall also include any tax, fee, levy assessment or charge (i) in substitution of, partially or totally, any tax, fee, levy assessment or charge hereinabove included within the definition of Real Property Tax, or (ii) the nature of which was previously included within the definition of Real Property Tax, or (iii) which is imposed as a result of a transfer, either partial or total, of Landlord's interest in the Premises or which is added to a tax or charge hereinbefore included within the definition of Real Property Tax by reason of such transfer, or (iv) which is imposed by reason of this transaction, any modifications or changes hereto, or any transfers hereof. 020422.000 I \5365418.6 13
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10.4 Personal Property Taxes.
(a) Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property contained in the Premises or elsewhere on the Premises which is owned by Tenant. When possible, Tenant shall cause trade fixtures, furnishings, equipment, Tenant Installations and all other personal property of Tenant to be assessed and billed separately from the real property of Landlord. (b) If any personal property shall be assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to such personal property within ten (10) days after receipt of a written statement setting forth the taxes applicable to such personal property.

SECTION 11. Utilities and Janitorial Services.

Tenant shall pay for all water, sewer, gas, heat, light, power, telephone, cable, communication and other utilities and services supplied to the Premises, together with any taxes thereon, and shall be responsible for obtaining all such utilities and services in Tenant's name. If any such services are not separately metered to Tenant, Tenant shall reimburse Landlord for its equitable share of the cost of such utility service, as reasonably determined from time to time by Landlord. Tenant, at Tenant's sole expense, shall provide the necessary janitorial and trash collection services to maintain the Premises in a good orderly manner at all times during the Lease term, or any extension thereof. Tenant shall pay the cost of any required governmental inspections of improvements to the Premises, including but not limited to, the fire suppression system and backflow devices.

SECTION 12. Damage or Destruction.

12.1 Definitions.
(a) "Building Partial Damage" shall herein mean damage or destruction to the Building to the extent that the cost of repair is less than fifty percent (50%) of the insured value of the Building as a whole immediately prior to such damage or destruction and the damage is such that the Building may be repaired, reconstructed or restored within a period of one (1) year from the date of such casualty.
(b) "Building Total Destruction" shall herein mean damage or destruction to the Building to the extent that the cost of repair is fifty percent ( 5 0%) or more of the full insured of the Building as a whole immediately prior to such damage or destruction or the Building may not be repaired reconstructed or restored within a period of one ( 1) year from the date of such casualty.
(c) "Insured Loss" shall mean damage or destruction which was caused by an event covered by the insurance described in Section 8.
( d) "Insured Value" shall mean value of Building as shown on the property coverage insurance maintained by Landlord.
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12.2 Partial Damage--Insured Loss. Subject to the prov1s10ns of Section 12.4, Section 12.5 and Section 12.6, if at any time during the term of this Lease there is damage which is an Insured Loss and which falls into the classification of Building Partial Damage, then Landlord, at Landlord's expense, shall repair such damage, but not Tenant's fixtures, goods or inventory, equipment or Tenant Installations, as soon as reasonably possible and this Lease shall continue in full force and effect.

12.3 Partial Damage--Uninsured Loss. Subject to the provisions of Section 12.4, Section 12.5 and Section 12.6, if at any time during the term of this Lease there is damage which is not an Insured Loss and which falls within the classification of Building Partial Damage, unless caused by a negligent or willful act of Tenant (in which event Tenant shall make the repairs at Tenant's expense), Landlord may at Landlord's option either (i) repair such damage as soon as reasonably possible at Landlord's expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to Tenant within thirty (30) days after the date of the occurrence of such damage of Landlord's intention to terminate this Lease, as of the date of the occurrence of such damage. In the event Landlord elects to give such notice of Landlord's intention to terminate this Lease, Tenant shall have the right within twenty (20) days after the receipt of such notice to give written notice to Landlord of Tenant's intention to repair such damage at Tenant's sole expense, without reimbursement from Landlord, in which event this Lease shall continue in full force and effect, and Tenant shall proceed to make such repairs as soon as reasonably possible.

12.4 Total Destruction. If at any time during the term of this Lease there is damage, whether or not an Insured Loss, including destruction required by any authorized public authority, which falls into the classification of Building Total Destruction, this Lease shall automatically terminate as of the date of such total destruction.

12.5 Damage Near End of Term. If at any time during the last twelve (12) months of the term of this Lease there is damage, whether or not an Insured Loss, which falls within the classification of Building Partial Damage, Landlord may at Landlord's option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Tenant of Landlord's election to do so within thirty (30) days after the date of occurrence of such damage.

12.6 Abatement of Rent; Tenant's Remedies.
(a) In the event of damage described in Section 12.2 or Section 12.3, and Landlord or Tenant repairs or restores the Premises pursuant to the provisions of this Section 12, the Base Rent payable under this Lease for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Tenant's use of the Premises is materially impaired. Tenant shall have no claim against Landlord for any relocation costs, loss of use, rent or other costs, expenses, fees or charges associated with any replacement premises, storage fees or costs, or for any incidental, consequential damages or punitive damages. (b) If Landlord is obligated to repair or restore the Premises under the provisions of this Section 12 and does not commence such repair or restoration within ninety (90) days after such obligation shall accrue, unless Landlord is delayed due to reasons beyond Landlord's 020422.000 I \5365418.6 15
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control, Tenant may at Tenant's option cancel and terminate this Lease by giving Landlord written notice of Tenant's election to do so at any time before commencement of such repair or restoration. In such event this Lease shall terminate as of the date of such notice. Landlord will be considered to be delayed in repairing or restoring the Premises for reasons beyond its control if such delay is caused by the inability of Landlord to obtain necessary permits and approvals from governmental authorities or commencement of work is delayed by inclement weather, war, civil unrest, labor disturbances or other reasons beyond Landlord's control. In such case, Landlord shall have an additional period of time to commence repair or restoration equal to the time of such delay. ·

12.7 Termination--Advance Payments. Upon termination of this Lease pursuant to this Section 12, an adjustment shall be made concerning advance rent, if any, made by Tenant to Landlord so that Tenant shall be responsible only for the rent for the period preceding the date of damage or destruction.

12.8 Waiver. Landlord and Tenant waive the provisions of any statutes which relate to termination of leases when leased property is destroyed and agree that such event shall be governed by the terms of this Lease.

SECTION 13. Assignment and Subletting.

13.1 Landlord's Consent Required. Subject to Section 13.2 and Section 13.5, Tenant shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Tenant's interest in this Lease or in the Premises, without Landlord's prior written consent, which Landlord shall not unreasonably withhold. Landlord shall respond to Tenant's request for consent hereunder in a timely manner and any attempted assignment, transfer, mortgage, encumbrance or subletting without such consent shall be void, and shall constitute a breach of this Lease.

13.2 Tenant Affiliate. Tenant may assign this Lease or sublet the Premises, or any portion thereof, without Landlord's consent, to any business entity which controls, is controlled by or is under common control of Tenant, to any business entity resulting from the merger or consolidation with Tenant, or to any business entity which acquires all or substantially all of Tenant's assets (a "Tenant Affiliate"), provided that such transfer is for a legitimate business purpose and not principally for the purpose of transferring Tenant's leasehold estate, and provided further that Tenant gives Landlord prior written notice of such assignment or sublet and such assignee assumes, in full, the obligations of Tenant under this Lease. Any such assignment shall not, in any way, affect or limit the liability of Tenant under the terms of this Lease even if after such assignment or subletting the terms of this Lease are materially changed or altered, without the consent of Tenant, the consent of whom shall not be necessary. Any assignee or subtenant shall assume and be bound by all of the terms and provisions of this Lease including, but not limited to, the provisions of Section 6.1 which limit the permissible uses of the Premises.

Landlord's consent to any subleasing or assignment shall not be construed as acquiescence to any other use (unless this Lease is amended to permit such other use) or as a waiver of any other provisions of this Lease.
020422.000 I \5365418.6 16
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13.3 No Release of Tenant. Regardless of Landlord's consent, no subletting or assignment shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay the rent and to perform all other obligations to be performed by Tenant hereunder, including without limitation, any extension of the Term. The acceptance ofrent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.

In the event of default by any assignee of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee. Landlord may consent to subsequent assignments or subletting of this Lease or amendments or modifications to this Lease with assignees of Tenant without notifying Tenant or any other assignee, or any successor of Tenant, and without obtaining its or their consent thereto and such action shall not relieve Tenant of liability under this Lease.

13.4 Attorney's Fees. In the event Tenant shall assign or sublet the Premises or request the consent of Landlord to any assignment, subletting, or waiver of rights in any removable personal property to be placed on the Premises by Tenant, or if Tenant shall request the consent of Landlord for any act Tenant proposes to do, then each party shall be responsible for its own attorneys' fees incurred in connection therewith.

13.5 Limitation on Assignment and Subletting. Tenant shall have no right to assign this Lease or to sublet all or any portion of the Premises to any individual or entity which is a Tenant in any real property owned by Landlord or any affiliate of Landlord in Stanislaus County, California or to any affiliate of any such individual or entity. Tenant shall have no right to assign ( or to offer to assign) this Lease or to sublet ( or to offer to sublet) all or any portion of the Premises to any individual or entity who/which is seeking to lease space which Landlord or an affiliate of Landlord has or will have available to lease in Stanislaus County, California. Except in connection with the merger or consolidation of Tenant ( or the sale of all or substantially all of the assets of the original Tenant), Tenant shall have no right to assign this Lease or to sublet all or any portion of the Premises for less than the then fair market rental rate for comparable commercial properties.

13.6 Excess Rent. In the event of any permitted sublet or assignment, Tenant shall pay to Landlord, as additional rent immediately upon receipt by Tenant, fifty percent (50%) of any excess rent, monies or other consideration received by or due to Tenant from the assignee or subtenant over and above the rent payable by Tenant to Landlord hereunder for the remainder of this Lease.

SECTION 14. Environmental Provisions.

14.1 Defined Terms.
(a) Hazardous Materials. For purposes of this Lease, "Hazardous Materials" shall mean any substance which is or becomes at any time during the term: (i) defined under any Environmental Law (defined below) as a hazardous substance, hazardous waste, hazardous material, pollutant or contaminant; (ii) a petroleum hydrocarbon, including crude oil or any fraction thereof; (iii) a hazardous, toxic, corrosive, flammable, explosive, infectious, radioactive, 020422.000 I \5365418.6 17
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carcinogenic or a reproductive toxicant; or (iv) otherwise regulated under any Environmental Laws. "Hazardous Materials" shall not mean chemicals that are used in ordinary quantities for cleaning of the Premises and which are handled, stored and disposed of in accordance with all applicable laws.
(b) Environmental Laws. For purposes ofthis Lease, "Environmental Laws" shall mean all present and future federal, state and local laws, statutes, ordinances, regulations, rules, judicial and administrative orders and decrees, permits, licenses, approvals, authorizations and similar requirements of all federal, state and local governmental agencies or other governmental entities with legal authority pertaining to the protection of human health and safety or the environment.
(c) Release. For purposes of this Lease, "Release" shall mean any accidental or intentional spilling, leaking, pumping, pouring, emitting, emptying, discharging, injection, escaping, leaching, migrating, dumping or disposing into the air, land, surface water, ground water or the environment (including without limitation the abandonment or discarding of receptacles containing any Hazardous Materials).

14.2 Compliance With Environmental Laws. Landlord shall indemnify Tenant for any contamination present at the Premises as of the Effective Date, or otherwise introduced to the Premises by Landlord or its agents. Tenant's use of, and operations at, the Premises shall at all times comply with all applicable Environmental Laws. Without limiting the generality of the foregoing, Tenant shall procure and maintain in effect at all times during the term, extended term(s) and any holdover period any permits and licenses required by any Environmental Laws for Tenant's operations on or about the Premises.

14.3 Releases. Tenant shall not cause or permit to occur during the term, extended term(s) or any holdover period any Release of a Hazardous Material or any condition of pollution or nuisance on or about the Premises, whether affecting the surface water or ground water, air, the soil, the surface of the Premises, or the subsurface environment. Prior to or upon the date Tenant ceases to occupy the Premises, Tenant shall have removed from the Premises all Hazardous Materials introduced onto or permitted on the Premises by Tenant. In the event any Release of a .

Hazardous Material to the environment, or any condition of pollution or nuisance, occurs on or about or beneath the Premises during the term, extended term(s) or any holdover period as a result of any act or omission of Tenant or Tenant's employees, agents, contractors, invitees or guests, Tenant shall promptly undertake remedial measures as required to clean up, abate or otherwise respond to the Release, pollution or nuisance in accordance with applicable Environmental Laws at Tenant's sole expense.

14.4 Environmental Indemnity. Tenant shall indemnify, defend, protect and hold all Indemnitees (as defined below) harmless from and against any and all claims, suits, causes of action, demands, losses, damages (including, without limitation, foreseeable and unforeseeable consequential damages and punitive damages), diminution of property value, liabilities, fines, penalties, costs, taxes, charges, administrative and judicial proceedings, orders, judgments, settlements, remedial actions and compliance requirements (including, without limitation, enforcement and clean-up actions), third-party claims (including, without limitation, tort, economic and property claims), natural resource damages, additional costs of ownership, 020422.000 I \536541~.6 18
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maintenance and development of the Premises ( over and above those incurred for the ownership, maintenance and development of the Premises as tendered to Tenant), expenses (including without limitation reasonable attorneys' fees and expenses, costs of defense and costs and expenses of all experts and consultants) arising, directly or indirectly, in whole or in part, out of:
(a) any non-compliance by Tenant, or any of Tenant's employees, agents, contractors, with any Environmental Laws; (b) any use, storage, generation, production, Release, disposal or transportation by Tenant, or any of Tenant's employees, agents, contractors, of any Hazardous Materials at, on, in, about or under the Premises at any time during Tenant's occupancy or possession of the Premises; or ( c) the migration from the Premises, at any time, of any Hazardous Materials Released by Tenant, or any of Tenant's employees, agents, contractors, at, on, in, about, or under the Premises at any time during Tenant's occupancy and/or possession of the Premises. Tenant shall promptly assume its defense and indemnification obligations (with counsel reasonably acceptable to Landlord) upon written notice from any Indemnitee and Indemnitees may participate in the defense of the claim. Tenant shall not settle any claim without Indemnitees' agreement, which agreement shall not be unreasonably withheld. "Indemnitees" shall mean and include Landlord, any successor in interest to Landlord, and the respective officers, directors, trustees, employees, agents, successors, assigns, and insurers of Landlord or any successor of Landlord.

SECTION 15. Defaults; Remedies.

15.1 Defaults. The occurrence of any one or more of the following events shall constitute a material default and breach of this Lease by Tenant:
(a) The failure by Tenant to make any payment ofrent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of three (3) days after written notice thereof from Landlord to Tenant. In the event that Landlord serves Tenant with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or Quit shall also constitute the notice required by this subsection.
(b) The failure by Tenant to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Tenant, other than described in Subsection (b) above, where such failure shall continue for a period of thirty (30) days after written notice there_offrom Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commenced such cure within said thirty (30) day period and diligently prosecutes such cure to completion within ninety (90) days thereafter. (c) (i) The making by Tenant of any general arrangement or assignment for the benefit of creditors; (ii) Tenant becomes a "debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Tenant's assets or of Tenant's interest in 020422.000 I \5365418.6 19
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this Lease, where such seizure is not discharged within thirty (30) days. If any provision of this Section 14(c) is contrary to any applicable law, such provision shall be of no force or effect. ( d) The occurrence of any Release or condition in violation of Environmental Laws and Hazardous Materials provisions in Section 14.
(e) The failure of Tenant to comply with any applicable laws governing the Premises and the failure to cure such noncompliance within the earlier of (i) thirty (30) days after delivery to Tenant from Landlord, or the applicable governmental authority, of written notice of such non-compliance, or (ii) any time required for compliance under applicable law. (f) The discovery by Landlord that any financial statement given to Landlord by Tenant, any assignee of Tenant, any subtenant of Tenant, any successor in interest of Tenant or any guarantor of Tenant's obligation hereunder, and any of them, was materially false when made.
(g) The failure by Tenant to observe or perform any of the covenants, conditions or provisions of any other lease by Landlord to Tenant, where such failure shall continue after the applicable notice and/or cure period, if any.

15.2 Remedies. In the event of any such default or breach by Tenant, Landlord may at any time thereafter, with notice of demand in accordance with Section 15.1, if any, and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such default or breach:
(a) Terminate Tenant's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant's default including, but not limited to, the following: (a) the worth at the time of award of any unpaid rent which had been earned at the time of such termination; plus (b) the worth at the time of award of the amount by which the unpaid Rent for the balance of the term after termination under the time of award exceeds the amount of such rental loss that is proved could have been reasonably avoided; plus ( c) the worth at the time of award of the amount by which the unpaid Rent which would have been due after the time of award exceeds the amount of such rental loss that is proved could be reasonably avoided; plus (d) any other amount necessary to compensate Landlord for the detriment proximately caused by Tenant's failure to perform his obligations under this Lease or which in the ordinary course of events would be likely to result therefrom; plus (e) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable state law. Upon any such re-entry Landlord shall have the right to make any reasonable repairs, alterations, or modifications to the Premises which Landlord in its sole discretion deems reasonable and necessary. As used in (a) above, the "worth at the time of award" shall be computed by adding interest to such amounts at the maximum rate permitted by law. As used in (b) and (c) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the U.S. Federal Reserve Bank at the time of award plus one percent (1 %).
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(b) Maintain Tenant's right to possession in which case this Lease shall continue in effect whether or not Tenant shall have abandoned the Premises. In such event Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Landlord under the law or in equity including, without limitation, any remedy under California Civil Code § 1951.2, California Civil Code §1951.3, or California Civil Code §1951.4.

Unpaid installments of rent and other unpaid monetary obligations of Tenant under the terms of this Lease shall bear interest as provided in Section 20.

Landlord shall have no obligation to relet the Property or to otherwise endeavor to mitigate damages upon a default or breach by Tenant; this sentence shall not impair or affect the right of Tenant, if Landlord is seeking to recover damages under either California Civil Code § 1951.2(a)(2) or California Civil Code § 1951.2(a)(3), to prove the rental loss which could have been reasonably avoided by Landlord, if any, and reduce the damages payable to Landlord as provided thereby, if at all. Landlord and Tenant agree that such reasonable avoidance does not require Landlord to lease all or any portion of the Premises to any individual or entity which is a tenant in any real property owned by Landlord or any affiliate of Landlord in Stanislaus County, California or to any affiliate of any such individual or entity, to lease all or any portion of the Premises to any individual or entity who/which is seeking to lease space which Landlord or an affiliate of Landlord has or will have available to lease in Stanislaus County, California, to lease all or any portion of the Premises for less than the then fair market rental rate for comparable commercial properties or to lease the Premises to more than one tenant.

15.3 Default by Landlord. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time after written notic~ by Tenant to Landlord, specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion.

15.4 Late Charges. Tenant acknowledges that late payment by Tenant to Landlord of rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or trust deed covering the Premises. Accordingly, if any installment of Base Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Tenant, Tenant shall pay to Landlord a late charge equal to five percent (5%) of such overdue amount (or, if higher, $250.00). The parties acknowledge that it is impractical to determine the amount of Landlord's damages in such instances and such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. In the event that a late charge 020422.000 I \5365418.6 21
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is payable hereunder, whether or not collected, for three (3) installments of Base Rent, or three (3) installments of Additional Rent Provisions, or any combination thereof, within any twelve (12) month period, then rent shall automatically become due and payable quarterly in advance, rather than monthly, notwithstanding Section 4 or any other provisions of this Lease to the contrary.

15.5 Impounds. In the event of any late payments or delinquent accounts, Landlord may, at its option, apply any payments received as follows: first to accrued late charges and attorneys' fees, second to accrued interest, then to Base Rent, Operating Expenses, Insurance and Real Property Taxes, with any remaining amount to any other outstanding charges or costs.

SECTION 16. Condemnation.

16.1 Total Taking. If the whole of the Premises or so much thereof as to render the balance unusable by Tenant shall be taken under power of eminent domain, this Lease shall automatically terminate as of the date of such condemnation, or as of the date possession is taken by the condemning authority, whichever is earlier. If a partial taking so renders the balance of the Premises unusable by Tenant, Tenant shall give written notice thereof to Landlord within thirty (30) days of the taking. No award of any partial or entire taking shall be apportioned and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof; provided, however, if a separate award is available and it does not reduce the award to Landlord, Tenant shall be entitled to any award made to Tenant for the taking of personal property and fixtures belonging to Tenant or for Tenant's relocation costs or business interruption compensation.

16.2 Partial Taking. In the event of a partial taking of the Premises which does not result in a termination of this Lease pursuant to Section 16.1, Base Rent shall be equitably abated, effective as of the date possession of the Premises is required to be surrendered, based upon the part of the Building so made unusable by Tenant. Landlord shall restore the portion of the Premises remaining usable to as near its former condition as reasonably possible using that portion of the condemnation award attributable to such restoration costs.

16.3 Temporary Taking. No temporary taking of the Premises or of Tenant's rights therein or under this Lease shall terminate this Lease or give Tenant any right to any abatement of rent hereunder. Any award made to Tenant by reason of any such temporary taking allocable to the term of this Lease shall belong entirely to Tenant and Landlord shall not be entitled to share therein.

16.4 Sale. A sale by Landlord to any authority having the power of eminent domain, either under threat of condemnation or while condemnation proceedings are pending shall be deemed a taking under the power of eminent domain for all purposes under this Section 16.

SECTION 17. Estoppel Certificate.

17.1 Tenant shall at any time upon not less than ten (10) days' prior written notice from Landlord execute, acknowledge and deliver to Landlord and to such other person(s) as Landlord 020422.000 I \5365418.6 22
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may designate a statement in writing (i) certifying that this Lease is unmodified and in full force and effect ( or, if modified, stating the nature of such modification and certifying that this 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, (ii) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults if any are claimed, and (iii) as to such other factual matters as Landlord may reasonably request. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises.

17.2 Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant (i) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) that there are no uncured defaults in Landlord's performance, and (iii) that not more than one (1) month's rent has been paid in advance.

17.3 At any time upon not less than fourteen (14) days' prior written notice from Landlord, Tenant shall deliver to Landlord and/or any lender or purchaser designated by Landlord, such financial statements of Tenant that are public records and not otherwise exempt from disclosure under state and federal law, as may be reasonably required by Landlord or such lender or purchaser. Such statements shall include the past three (3) years financial statements of Tenant.

All such financial statements shall be received by Landlord and such lender or purchaser in confidence and shall be used only in connection with the ownership, financing and/or purchase of the Premises.

SECTION 18. Landlord's Liability.

18.1 Limitation on Liability. Notwithstanding anything contained in this Lease to the contrary, the obligations of Landlord under this Lease (including any actual or alleged breach or default by Landlord) do not constitute personal obligations of the directors, officers or shareholders of Landlord or Landlord's partners, and Tenant shall not seek recourse against the individual directors, officers or shareholders of Landlord, or any of their personal assets for satisfaction of any liability with respect to this Lease.

18.2 Transfer of Landlord's Interest. The term "Landlord" as used herein shall mean only the owner or owners at the time in question of the fee title or a tenant's interest in a ground lease of the Premises. In the event of any transfer of such title or interest, Landlord herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord's obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then granter at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. Subject to the foregoing limitations, the obligations contained in this Lease to be performed by Landlord shall be binding on Landlord's successors and assigns, but only during their respective periods of ownership.

SECTION 19. Severability.

The invalidity of any provision of this Lease as determined by a court of competent jurisdiction shall in no way affect the validity of any other provision hereof. 020422.000 I \5365418.6 23
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SECTION 20. Interest on Past-due Obligations.

Any amount due to Landlord that is past due pursuant to Section 15.4, shall bear interest at the rate of ten percent (10%) as of the date such sums are due, but in no event in excess of the maximum rate allowable under law. Payment of such interest shall not excuse or cure any default by Tenant under this Lease.

SECTION 21. Time of Essence.

Time is expressly declared of the essence herein.

SECTION 22. Additional Rent.

Any and all monetary obligations of Tenant to Landlord under the terms of this Lease shall be deemed to be rent.

SECTION 23. Termination of Prior Agreements; Amendments.

This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement, letter of intent, or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. Except as otherwise stated in this Lease, if at all, Tenant hereby acknowledges that Landlord or any employees or agents has not made any oral or written warranties or representations to Tenant relative to the condition or use by Tenant of the Premises and Tenant acknowledges that Tenant assumes all responsibility regarding the Occupational Safety Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease, unless otherwise specifically stated in this Lease.

SECTION 24. Notices.

Any notice required or permitted to be given hereunder shall be in writing and may be given by personal delivery, or by established overnight courier (e.g. Federal Express) or by certified mail, return receipt requested, and if given personally or by courier or mail, shall be deemed sufficiently given if addressed to Tenant or to Landlord at the address noted with the signature of the respective parties, as the case may be. Either party may by notice to the other specify a different address for notice purposes. A copy of all notices required or permitted to be given to Landlord hereunder shall be concurrently transmitted to such party or parties at such addresses as Landlord may from time to time hereafter designate by notice to Tenant.

SECTION 25. Waivers.

No waiver by Landlord of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision.

Landlord's consent to, or approval of any act, shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent by Landlord shall not be a waiver of any preceding breach by Tenant of any provision 020422.0001\5365418.6 24
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hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent.

SECTION 26. Cumulative Remedies.

No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

SECTION 27. Covenants and Conditions.

Each provision ofthis Lease performable by Tenant shall be deemed both a covenant and a condition.

SECTION 28. Binding Effect; Choice of Law.

Subject to the provisions of Section 13, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the State of California.

SECTION 29. Subordination.

29.1 This Lease, at Landlord's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the real property of which the Premises is a part and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof, provided that the holder of such security agrees in writing that Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease to be performed by Tenant, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground Landlord shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof.

29.2 Tenant shall execute any documents required to effectuate an attomment, a subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Tenant's failure to execute such documents within ten (10) days after written demand shall constitute a material default by Tenant hereunder, or, at Landlord's option, Landlord shall execute such documents on behalf of Tenant as Tenant's attorney-in-fact. Tenant does hereby make, constitute and irrevocably appoint Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead, to execute such documents in accordance with this Section 29.2.

SECTION 30. Landlord's Access.

Landlord and Landlord's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, lenders, or Tenants, and making such alterations, repairs, improvements or additions to the 020422.000 I \5365418.6 25
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Premises as Landlord may deem necessary or desirable. Landlord may at any time place on or about the Premises any ordinary "For Sale" signs and Landlord may at any time during the last year of the term hereof place on or about the Premises any ordinary "For Lease" signs, all without rebate of rent or liability to Tenant.

SECTION 31. Auctions.

Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Landlord's prior written consent.

Notwithstanding anything to the contrary in this Lease, Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.

SECTION 32. Signs.

Tenant shall have the right to install its customary signage at the Premises subject to compliance with all applicable laws (including any REA or CC&Rs applicable to the Premises) and Landlord's prior written consent, which shall not be unreasonably withheld. Tenant shall obtain all required permits for its signage. Tenant may place its signage in those locations designated by Landlord.

SECTION 33. Merger.

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

SECTION 34. Guarantor.

As of the Effective Date there is no guaranty of this Lease.

SECTION 35. Quiet Possession.

Upon Tenant paying the rent for the Premises and observing and performing all of the covenants, and provisions on Tenant's part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the term subject to all of the provisions of this Lease.

SECTION 36. Security Measures.

Tenant hereby acknowledges that the rental payable to Landlord hereunder does not include the cost of guard service or other security measures, and that Landlord shall have no obligation whatsoever to provide same. Tenant assumes all responsibility for the protection of Tenant, its agents and invitees from acts of third parties. 020422.0001 \5365418.6 26
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SECTION 37. Easements.

Landlord reserves to itself the right, from time to time, to grant such easements, rights and dedications that Landlord deems necessary or desirable, and to cause the recordation of subdivision maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Tenant. Tenant shall sign any of the aforementioned documents upon request of Landlord and failure to do so shall constitute a material breach of this Lease.

SECTION 38. Performance Under Protest.

If at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as voluntary payment, and there shall survive the right on the part of said party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease.

SECTION 39. Authority.

Each of Landlord and Tenant represent and warrant to the other of them that this Lease has been duly authorized, executed and delivered by such person, and that each has full authority for fulfill its obligations hereunder.

SECTION 40. Terms and Headings.

The words "Landlord" and "Tenant" as used in this Lease shall include the plural as well as the singular. Words used in any gender include other genders. The Section headings of this Lease are not a part of this Lease and shall have no effect upon the construction or interpretation of any part of it. Any deletion of language from this Lease prior to its execution by Landlord and Tenant shall not be construed to raise any presumption, canon of construction or implication, including, without limitation, any implication that the Landlord and/or Tenant intended thereby to state the converse of the deleted language.

SECTION 41. Exhibits.

All Exhibits attached to this Lease are hereby incorporated in this Lease for all purposes as though set forth at length herein.

SECTION 42. Successors and Assigns.

Subject to the provisions of Section 13, and except as otherwise provided in this Lease, all of the covenants, conditions and provisions of this Lease shall be binding upon, and shall inure to the benefit of, Landlord and Tenant and their respective heirs, personal representatives and permitted successors and assigns; provided, however, no rights shall inure to the benefit of 020422.000 I \5365418.6 27
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any assignee or subtenant of Tenant unless the transfer to such assignee or subtenant is made in compliance with the provisions of Section 13, and no options or other rights which are expressly made personal to the original Tenant shall be assignable to or exercisable by anyone other than the original Tenant under this Lease.

SECTION 43. Professional Fees.

Tenant shall pay to Landlord, upon demand, all sums reasonably incurred by Landlord in connection with any default or breach by Tenant under this Lease or holding over of possession by Tenant after expiration or earlier termination of this Lease, including without limitation all costs, expenses and fees of accountants, appraisers, attorneys and other professionals, and any collection agency fees and expenses and other collection charges. If either Landlord or Tenant brings suit against the other with respect to this Lease, including for unlawful detainer or any other relief against the other, or for a declaratory judgment, then all costs and expenses incurred by the prevailing party (including without limitation, its actual appraisers, accountants', attorneys' and other professional fees, expenses and court costs), shall be paid by the other party, on demand.

SECTION 44. Sunshine Ordinance.

In accordance with applicable state law and municipal code, contracts, contractors' bids, leases, agreements, responses to requests for proposals, and all other records of communications between Tenant and persons or firms seeking contracts will be open to inspection immediately after a contract has been awarded. Nothing in this provision requires the disclosure of a private person's or organization's net worth or other proprietary financial data submitted for qualification for a contract, lease, agreement or other benefit until and unless that person or organization is awarded the contract, lease, agreement or benefit. Information provided which is covered by this Section will be made available to the public upon request.

SECTION 45. Joint and Several Liability
If more than one person or entity executes this Lease as Tenant: (a) each of them is and shall be jointly and severally liable for the covenants, conditions, provisions and agreements of this Lease to be kept, observed and performed by Tenant; and (b) the act or signature of, or notice from or to, any one or more of them with respect to this Lease shall be binding upon each and all of the persons and entities executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or signed or given or received such notice.

SECTION 46. Broker Indemnification.

Neither party is using a broker in this transaction. Each shall indemnify, defend, protect and hold the other harmless from and against any claims, demands, liabilities, damages or expenses (including attorneys' fees and costs incurred in defending against any claim or demand) for brokerage commissions, finder fees or related costs incurred by said party arising from any commitments or agreements alleged to have been made by each party relating to this Lease. 020422.000 I \5365418.6 28
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SECTION 47. Holding Over.

If Tenant holds over after the expiration or earlier termination of the term of this Lease, Tenant shall become a Tenant at sufferance only, upon the terms and conditions set forth in this Lease so far as applicable (including Tenant's obligation to pay any additional rent under this Lease), but at a monthly Base Rent equal to two hundred percent (200%) of the monthly Base Rent applicable to the Premises immediately prior to the date of such expiration or earlier termination. Acceptance by Landlord of rent after such expiration or earlier termination shall not constitute consent to a hold over or result in an extension of this Lease. Tenant shall pay an entire month's monthly Base Rent calculated in accordance with this Section 47 plus the rent pursuant to the Additional Rent Provisions without proration for a partial month for any portion of a month it holds over and remains in possession of the Premises.

SECTION 48. Limited Termination Right.

If Landlord and Tenant enter into a separate lease for a fire station and associated offices and/or administrative space substantially comparable to the Premises (the "New Fire Station Lease"), then Tenant, upon not less than six (6) months advance written notice to Landlord, shall have the right to terminate this Lease effective at any time on or after the Commencement Date of the New Fire Station Lease.

SECTION 49. Separate Counterparts.

This Lease may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same instrument.

Portable document format (PDF), or other electronic copies of signed counterparts of this Lease shall have the same effect as an original signed counterpart.

SECTION 50. Venue
Venue for any action brought by either party to this Agreement shall be maintained in Stanislaus County, in the proper court having jurisdiction. [Signature Page Follows]
020422.000 I \5365418.6 29
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LANDLORD AND TENANT HA VE CAREFULLY READ AND REVIEWED THIS

LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY

EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS

EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND

EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH RESPECT TO THE PREMISES.

Landlord and Tenant hereto have executed this Lease at the place on the dates specified immediately adjacent to their respective signatures.

Executed at Modesto, California
on , 2019.

Address: 530 Eleventh Street
Modesto, CA 95354
Attention: President
T.I.N. for Landlord: ___ __ _
Executed at ------- on _____ ,2019.

Address: --------
Attention: --------
T.I.N. for Tenant: ______ _
020422.000 I \5365418.6
LANDLORD:

BEARD LAND IMPROVEMENT
COMP ANY, a California corporation
ByN}jl~
Title: President & CEO
TENANT:

CITY OF MODESTO
By: ~ _.,
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Adam
CITY
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

February 9, 2026
Date: January 20, 2026
TO: Safety and Communities Committee
Chris Ricci, Chair
Rosa Escutia-Bratton, Vice-Chair
Jeremiah Williams, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Brandon Gillespie, Chief of Police
SUBJECT: Sky-1 Air Support Unit Engine Replacement
CONTACT: Christopher Adams, Captain, [email protected], 209-572-9500 DESCRIPTION:

Consider the purchase of a factory-new Lycoming TIO-540-AH1A engine for the Modesto Police Department’s GA8 TC-320 Airvan, Sky-1 to GippsAero Pty Ltd, Victoria, Australia, for a total amount not to exceed $254,000, and forwarding to Council for approval. (Funding Source:

Traffic Safety Fund)
STRATEGIC PLAN ELEMENT:

The recommended action supports the City’s 2025-2026 Strategic Plan for Governance and Service Delivery by building community trust in City government through responsive, transparent, and efficient service delivery.

BACKGROUND:

On February 28, 2023, by Resolution No. 2023-87, City Council approved the purchase of a Gipps Aero GA8 aircraft for use by the Modesto Police Department (MPD) for a total not to exceed $741,578. The aircraft, now designated as Sky-1, was delivered to MPD on March 31, 2023. With fewer than 250 units built and sold in the United States, the Gipps Aero GA8 is a highly specialized and proven law enforcement aviation platform used by agencies nationwide to support crime suppression, emergency response, and officer safety operations.

Sky-1 is a mission-critical public safety aircraft that provides aerial support for patrol operations, criminal investigations, regional mutual aid, missing-person searches, disaster response, and high-risk incident management. The aircraft is equipped with a FLIR Star SAFIRE 380HD camera system, retractable sensor pod, Motorola radios, downlink equipment, and a Churchill moving-map system, allowing for real-time situational awareness and coordination with ground #3..
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Safety and Communities Committee, February 9, 2026
Sky-1 Air Support Unit Engine Replacement

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units and the Real Time Crime Center. Sky-1 is one of the most heavily utilized law-enforcement aircraft in the region, averaging more than 900 flight hours annually.

The scale and operational tempo of Sky-1 underscore the importance of maintaining a safe and reliable aircraft. In 2025 alone, the Air Support Unit flew 813 flight hours and responded to 2,448 calls for service in support of patrol operations, criminal investigations, and emergency response. Those missions directly contributed to 296 arrests, including 126 felony arrests, 144 misdemeanor arrests, and 26 DUI arrests, as well as the mitigation of 30 vehicle pursuits through aerial coordination and de-escalation. These statistics reflect the aircraft’s critical role in violent crime response, officer safety, pursuit management, and real-time situational awareness.

Any interruption to this capability would have an immediate and measurable impact on public safety and emergency response throughout the community.

The GA8 Airvan is certified for operation with only one FAA-approved engine model: the Lycoming TIO-540-AH1A. The Federal Aviation Administration recommends a Time Between Overhaul (TBO) interval of 2,100 flight hours. While public aircraft operations are not strictly governed by Part 91 and Part 135 requirements, the Modesto Police Department voluntarily adheres to these standards to maximize safety, reliability, and liability protection. Replacing the engine at this stage ensures continued compliance with FAA airworthiness standards and preserves the department’s commitment to operating under the highest aviation safety practices.

Since acquiring Sky-1 in April 2023, Air Support Unit personnel and maintenance crews have maintained the aircraft to exceptionally high standards. The aircraft has now exceeded 2,019 flight hours and is approaching the recommended TBO threshold. While Sky-1 remains within acceptable operating limits, replacement of the engine is now operationally necessary to ensure continued airworthiness, mission readiness, and safe flight operations.

DISCUSSION:

The engine installed on Sky-1 is the single most critical mechanical component of the aircraft.

Any failure, degradation, or unplanned downtime immediately affects patrol response, officer safety, investigative capabilities, and emergency operations. Unlike many fleet assets, aircraft engine reliability is not simply a maintenance issue. It is a flight safety issue with direct implications for pilot safety, public safety, and City liability. The nature of law enforcement aviation requires immediate deployment, sustained flight operations, and high-power performance in demanding operational environments. These conditions place extraordinary mechanical demands on the engine and require a replacement strategy that prioritizes safety, predictability, and operational continuity.

As Sky-1 approaches the manufacturer’s recommended Time Between Overhaul threshold, continued operation without proactive replacement increases the risk of mechanical failure, unscheduled maintenance, and extended aircraft downtime. Any prolonged grounding of the aircraft would significantly reduce the department’s ability to provide aerial support for violent crime response, missing and at-risk persons, large-scale emergencies, and critical incident management. The loss of this capability would also impact officer safety by reducing situational awareness during pursuits, perimeter operations, and tactical incidents.

The purchase of a factory-new Lycoming TIO-540-AH1A engine provides the highest possible safety margin for flight crews and the community. A new engine offers predictable maintenance #3..
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Sky-1 Air Support Unit Engine Replacement

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cycles, full manufacturer warranty protection, and a known performance history with zero prior operating time. This eliminates uncertainty and operational risk associated with previously operated or rebuilt engines.

A factory-new engine also minimizes operational downtime. Installation requires approximately two weeks of labor, allowing Sky-1 to return to service quickly and maintain uninterrupted public safety operations. The engine will be installed under the City of Modesto’s existing contract with Mather Aviation, LLC. The installation services were included in the scope of work approved by City Council under Resolution No. 2025-273, approved on July 22, 2025, for a total amount not to exceed $587,544.

In addition, the purchase of a new engine allows the City to retain its current engine core, which has been maintained to exceptionally high standards. Retaining this core provides a strategic spare asset that can significantly reduce downtime in the event of an unexpected maintenance emergency such as a bird strike or propeller incident. In those scenarios, aircraft are grounded until an engine and propeller are replaced and recertified. Having a ready replacement engine available can reduce downtime by several months and preserve the department’s aerial response capability during critical periods.

Ensuring that Sky-1 is equipped with a factory-new, type-certified engine is a necessary investment in the City’s emergency response infrastructure and a critical step in protecting the safety of Modesto residents, visitors, and first responders. The reliability of this aircraft directly supports public safety operations where failure is not an option and where the consequences of service interruption would be felt immediately across the community.

GippsAero Pty Ltd is the Original Equipment Manufacturer (OEM) of the GA8 Airvan aircraft and holds exclusive proprietary rights to the aircraft’s design, engineering, and manufacturing processes. The GA8 Airvan incorporates proprietary systems and configurations that cannot be legally or technically replicated by third parties. All GA8 components must be fully compatible with existing OEM-supplied systems to ensure proper performance, reliability, regulatory compliance, and lifecycle support. Procurement through any source other than the OEM or its authorized distribution channel would void warranty protections, compromise system integrity, and introduce significant technical and operational risk. As a result, GippsAero is the only authorized and qualified source for the Sky-1 engine procurement.

On January 21, 2026, the City Manager authorized the Purchasing Manager to solicit the procurement for a factory-new Lycoming TIO-540-AH1A engine. Modesto Municipal Code Section 8-3.203 generally requires all purchases, which meet or exceed $100,000 for material, equipment, or contractual services to follow formal bid procedures. However, MMC8-3.204(b) provides that a purchase may be exempted from the City’s formal bidding requirement where the Purchasing Agency’s requirements can be met solely by a single article or process. Here, GippsAero is the only authorized and qualified source for the Sky-1 engine procurement.

Therefore, staff recommends the purchase of the factory-new Lycoming TIO-540-AH1A engine to GippsAero Pty Ltd, Victoria, Australia should be exempt from the formal bidding procedures in accordance with Modesto Municipal Code 8-3.204(b) since GippsAero Pty Ltd, Victoria, Australia is the Sole Provider of the factory-new Lycoming TIO-540-AH1A engine. #3..
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Sky-1 Air Support Unit Engine Replacement

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FISCAL IMPACT:

Funding for the purchase of the factory-new Lycoming TIO-540-AH1A engine for Sky-1 a onetime cost of $254,000 and will be purchased with funds from the Traffic Safety Fund. This purchase will not impact the General Fund.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion recommending the purchase of a factory-new Lycoming TIO-540-AH1A engine with GippsAero Pty Ltd, Victoria, Australia for the Modesto Police Department’s GA8 TC-320 Airvan, Sky-1, for a total amount not to exceed $254,000, and forwarding Council for approval.

Approved by:

Brandon Gillespie, Chief of Police
Joseph P. Lopez, City Manager
Attachments:

1. Financial Interest Disclosure Form

2. CA Levine Act Disclosure Form

3. Signed Bid Waiver
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Revised 3/14/2025
Bid Waiver Approval Form
Supplier Name: Amount of Bid Waiver Request:

Supplier Contact: Supplier Phone No:

Are Federal Funds being utilized for portion of purchase? Yes No A bid waiver is required for any procurement commitment greater than $ 3,500 where a minimum of three bids are not obtained.

Justification for waiving the competitive bid requirements is limited to the following (provide detailed information in the comments section of form):

Reason for Bid Waiver - Check Box:

Sole Source - The item/service is unique in its specifications such that only one vendor is qualified to provide the good or service (Formal bidding exception under MMC 8-3.204(b)) – SOLE SOURCE LETTER ATTACHMENT REQUIRED OEM - Original Equipment Manufacturer / Distributor - OEM LETTER

ATTACHMENT REQUIRED
Inflexible time constraints preclude the bidding process - Exigent or emergency circumstances (Formal bidding exception under MMC 8-3.204 (c)) The incumbent's cost, delivery and quality can be compared to a previous quote/bid obtained within the last six months, for the same or similar item/service (Total purchase must be less than $100,000)
Professional Services defined under MMC 8-3.103 (Formal bidding exception under MMC 8-3.204 (a)) – staff should make effort to solicit at least three informal proposals.

Single Bid/Proposal – More than one supplier could provide the goods or service, but only one supplier provided bid/proposal for solicitation.

Amendment – Extending agreement for no more than one year to allow the City to complete formal bidding process for new agreement (MMC 8-3.204 (e)).

Amendment – Amending the goods or services under the existing agreement to include similar types of goods and services (MMC 8-3.204 (f)) Requisition No: Department:

Project Description:

The purchase of any item utilizing any Federal Funding must comply with current applicable Circular #3..
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Revised 3/14/2025
Other (requires detailed comments)

NEW TECHNOLOGY PURCHASES
Does the new technology meet the criteria to be reviewed by the Technology Steering and Alignment Committee (TSAC)? Yes ____ No ____
If yes, was it approved by this committee? Yes ____ No ____ Approval Name Signature Date
Requestor
Division Manager
Department Director
Chief Information Officeri
Buyer
Purchasing Manager
Director of Finance
i Information technology (IT) purchases will require Chief Information Officer Signature Buyer Comments:
(insert required text field in Adobe)
Comments:
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memo
Date: January 7, 2026
To: Brandon Gillespie, Chief of Police via Chain of Command From: Chris Adams, Captain
Re: Gipps Aero Business Justification
Purpose
This memorandum provides a business justification for the replacement of the Lycoming TIO-540-AH1A engine installed on the Modesto Police Department’s Gipps Aero GA8 Airvan (Sky-1). After a comprehensive operational, safety, fiscal, and risk assessment, Air Support Unit staff and maintenance personnel recommend the purchase of a factory-new Lycoming engine through Gipps Aero as the most responsible and strategically sound option for the City.

Background
Sky-1 is a mission-critical law enforcement aircraft providing aerial support for patrol operations, criminal investigations, regional mutual aid, emergency response, and officer safety. The aircraft is equipped with a FLIR Star SAFIRE 380HD camera system, retractable pod, Motorola radios, downlink equipment, and a Churchill moving-map system. It is one of the most heavily utilized law-enforcement aircraft in the region, averaging more than 900 flight hours per year.

The GA8 Airvan is certified for use with only one FAA-approved engine: the Lycoming TIO-540-AH1A. The FAA recommends a Time Between Overhaul (TBO) interval of 2,100 hours. While public aircraft operations are not strictly bound by Part 91 and Part 135 requirements, the Modesto Police Department voluntarily adheres to these standards to maximize safety, reliability, and liability protection.

Since acquiring Sky-1 in April 2023, Air Support personnel and maintenance crews have maintained the aircraft to exceptionally high standards. The aircraft has now exceeded 2,019 flight hours and is beyond the recommended annual TBO cycle. While it remains within acceptable operating limits, replacement of the engine is now operationally necessary.

Strategic Considerations
The engine installed on Sky-1 is the most critical single component of the aircraft. Any failure, degradation, or unplanned downtime directly impacts patrol response, officer safety, investigative support, and regional mutual-aid capabilities. Unlike many fleet assets, aircraft engine reliability is not merely a maintenance issue — it is a flight safety issue with direct liability exposure to the City.
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Date:

Page: 2
For that reason, the replacement strategy must prioritize:

Flight safety and crew protection
Predictable maintenance cycles
Warranty protection
Operational continuity
Long-term fiscal responsibility
Risk mitigation and liability reduction
Replacement Options Evaluated
Three viable pathways were evaluated by Air Support Unit leadership and maintenance staff:

Option 1: Overhaul of the Current Engine (Existing Core) Under this option, Sky-1’s current engine would be removed, shipped to an FAA-certified overhaul facility, rebuilt to service limits, and reinstalled.

This option presents several operational and risk challenges. The aircraft would be grounded for an estimated four to eight weeks, depending on shop scheduling, shipping, inspection findings, and parts availability. While the current engine has been meticulously maintained, any overhaul introduces uncertainty once the engine is disassembled. Hidden defects, internal wear, or unforeseen component failures could extend downtime and increase cost.

Additionally, overhaul warranties are limited and typically apply only to the specific work performed, not to the entire engine. Any subsequent failure would require the City to prove overhauler fault, shifting risk and cost exposure back to the City.

Option 2: Overhaul of an Unknown Used Core
Under this option, a used engine core from another aircraft would be acquired and overhauled to service limits.

While this option may appear less expensive on paper, it introduces the highest level of operational risk. The history of the core is unknown. The City would have no assurance regarding how the engine was operated, maintained, or stressed. There is no way to determine whether the engine was removed due to routine TBO, mechanical failure, abuse, or abnormal operating conditions.

This uncertainty directly conflicts with aviation best practices for mission-critical public safety aircraft and introduces unacceptable risk to flight crews, the department, and the City.

Option 3: Purchase of a Factory-New Lycoming Engine
This option involves the purchase of a brand-new, factory-built Lycoming TIO-540-AH1A engine through Gipps Aero, the aircraft manufacturer and authorized distributor. #3..
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Date:

Page: 3
This engine would be delivered with zero prior operating history, a full Lycoming factory warranty, and a new 2,200-hour TBO. Installation downtime is limited to approximately 80 labor hours (roughly two weeks), allowing Sky-1 to return to service rapidly.

This option also allows the City to retain its current engine core, which has been maintained to extremely high standards and remains a reliable asset. Retaining the core provides a strategic spare engine, significantly reducing downtime in the event of an unexpected maintenance emergency such as a bird strike or propeller incident. In those scenarios, aircraft are grounded until an engine and propeller are replaced and recertified. Having a ready replacement engine on hand can reduce downtime by several months.

Fiscal Analysis
Although the factory-new engine carries a higher initial purchase price, it provides the strongest long-term financial position when total lifecycle cost is considered.

Factory-New Lycoming Engine (via Gipps Aero):

Purchase price: $254,000
Full factory warranty
2,200-hour TBO reset
$35,000 manufacturer credit for future GA8 parts
Retained core value: approximately $40,000
Total future cost reduction: approximately $75,000
Effective long-term cost: approximately $179,000
By comparison:

Ly-Con overhaul: $131,828–$172,628 with limited 12-month warranty Victor Aviation overhaul: $163,695–$189,877 with limited warranty and refurbished parts
When warranty coverage, reliability, downtime risk, liability exposure, and retained asset value are considered, the factory-new engine represents the most fiscally responsible longterm investment.

Operational and Risk Advantages
The factory-new engine provides:

The highest possible safety margin for flight crews
Full manufacturer warranty protection
Predictable maintenance cycles
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Date:

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Maximum operational availability
Reduced liability exposure
Elimination of unknown core risk
Long-term fleet sustainability
Strategic spare engine capability
In a law-enforcement aviation environment, engine reliability is directly tied to officer safety, public safety, and mission success. This platform supports pursuits, perimeter containment, missing-person searches, violent crime response, and emergency operations.

Any avoidable risk is unacceptable.

The Lycoming TIO-540-AH1A is the only FAA-certified engine approved for the GA8 Airvan. Lycoming is the sole manufacturer of this engine, and Gipps Aero is the only authorized distribution channel for this airframe.

No other vendor can provide a factory-new, type-certified engine for Sky-1. Overhaul facilities are not equivalent vendors, as they do not provide new engines and do not offer manufacturer warranty coverage. As such, competitive bidding is not applicable for this procurement.

Recommendation
After comprehensive review by Air Support Unit staff, maintenance personnel, and command leadership, it is recommended that the Modesto Police Department proceed with the purchase of a factory-new Lycoming TIO-540-AH1A engine through Gipps Aero at a cost of $254,000.

This approach provides the highest level of safety, reliability, fiscal responsibility, and longterm sustainability for the City’s aviation program while protecting flight crews and minimizing operational risk.

Respectfully,
Chris Adams, Captain
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Safety and Communities CommitteeFebruary 9, 2026

Safety and Communities Committee
February 9, 2026