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GOVERNMENT PROPERTY IMPROVEMENT LEASE
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1.
Date. The date of this Government Property Improvement Lease (the “Lease”) is
___________, 202_ (the “Execution Date”).
2.
Parties. The Parties to this lease are as follows:
A.
CITY OF MESA, ARIZONA, an Arizona municipal corporation (“Landlord”)
20 East Main Street, Suite 500
P. O. Box 1466
Mesa, Arizona 85211-1466
Attn: Lisa Davis, Real Estate Manager
Landlord may also be referred to in this Lease as the “City.”
______________________, a(n)________________ (“Tenant”)
B.
Parties. Landlord and Tenant may be referred to in this Lease individually as a
“Party” or collectively as the “Parties.”
3.
Recitals. As background to this Lease, the Parties agree, acknowledge and recite as
follows, each of which shall be deemed a material term and provision of this Lease:
A.
This Lease is part of a larger multi-phased, multi-document commercial transaction
entered into by and between City and Tenant, with respect to the redevelopment of an important
parcel of real property located in a redevelopment area within the single central business district
of the City of Mesa and represents only a portion of the consideration exchanged by and between
the Parties in connection with the overall transaction.
B.
In partial consideration for Landlord’s promise to execute and deliver this Lease,
Tenant has agreed separately to construct, operate, and maintain a redevelopment project on the
Land in accordance with the terms of a development agreement dated _______ (the “Development
Agreement”), which was recorded on _______, as Recording No. __________ in the Official
Records of Maricopa County, Arizona (“Official Records”).
C.
The Land is located in City’s Central Main Plan, which was unanimously adopted
by the Mesa City Council in January 2012. The Land is also located in the Town Center
redevelopment area within City’s Central Business District which was adopted by the Mesa City
Council in 1999, and which designation of slum and blight was renewed by resolution adopted
April 6, 2020. City has determined that the redevelopment of this unique Property located near
the center of downtown Mesa, the Center/Main Street light rail station, and the Hibbert Parking
Garage, and the development of the Project in conformity with the Development Agreement will
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reduce the blight in the City’s Central Business District and further promote City’s vision to
redevelop and revitalize its downtown and the Town Center redevelopment area.
D.
Pursuant to the Development Agreement, Tenant (as the named Developer) agreed
to construct certain improvements and to conduct redevelopment activities on the Land (the
“Project”).
E.
Further pursuant to the Development Agreement, Tenant (as the named Developer
of the Project) agreed to dedicate, at no cost or expense to Landlord, certain public improvements
constructed by Tenant as part of its redevelopment construction activities on the Land.
F.
Further pursuant to the Development Agreement, Tenant (as the named Developer
of the Project) agreed to certain operating covenants and use restrictions with respect to the
construction, operation, and maintenance of its redevelopment project as contemplated in the
Development Agreement.
G.
All of the foregoing obligations of Developer, inter alia, were referred to
collectively in the Development Agreement as the “Developer Undertakings.”
H.
In consideration of Tenant’s completion of the Developer Undertakings required
by the Development Agreement, and in further recognition of the direct, tangible benefits to be
received by Landlord as a result of Tenant’s performance under the Development Agreement
(including, but not limited to, the construction of the Project in a formerly blighted area) (as the
named Developer of the Project)), upon the conveyance of the Land and the Improvements to
Landlord by Tenant, Landlord has agreed to lease the Land and Improvements to Tenant, and
Tenant has agreed to lease the Land and Improvements from Landlord, on the terms and conditions
set forth in this Lease.
I.
Tenant, as Developer under the Development Agreement, and in compliance with
the terms and conditions of the Development Agreement, has conveyed the Land and
Improvements to Landlord, so that legal title to the Land and the Improvements has now vested in
Landlord.
J.
It is intended by Landlord and Tenant that (i) this Lease be subject to the provisions
of A.R.S. § 42-6201 et seq.; (ii) Landlord is a “Government Lessor” as defined in A.R.S. § 42-
6201; and (iii) the Improvements on the Land, whether presently existing, having been constructed
in accordance with the Development Agreement, or to be constructed on the Land, are intended to
be Government Property Improvements for all purposes as defined in A.R.S. § 42-6201.
4.
Lease of the Premises.
A.
Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon and in consideration of the terms and conditions contained in this Lease, (i) all
surface and subsurface rights on and above the real property more particularly described in Exhibit
A attached to and incorporated into this Lease (the “Land”); and (ii) all improvements presently
situated on the Land, or which may be constructed on the Land hereafter by Tenant (the
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“Improvements”; the Land and the Improvements collectively, “Premises”); subject, however,
to:
(1)
All covenants, restrictions, easements, agreements, and reservations of
record;
(2)
Present and future building restrictions and regulations, entitlements,
permits, zoning laws at the time the permit is applied for, ordinances, resolutions, and regulations
of the municipality in which the Land lies and all present and future ordinances, laws, regulations,
and orders of all boards, bureaus, commissions, and bodies of any municipal, county, state, or
federal authority, now or hereafter having jurisdiction;
(3)
The condition and state of repair of the Premises as the same may be on the
Commencement Date;
(4)
Any public easements granted to the City of Mesa;
(5)
The Development Agreement.
B.
Condition of Premises. Subject to Section 4(A), the Premises are being leased to
Tenant in their as-is, where-is condition, with no representation or warranty of any nature from the
Landlord, and specifically as to (but in no event limited to) any hazardous conditions or Hazardous
Materials in, on, at or under the Premises. Tenant acknowledges that it (i) designed and
constructed the Improvements, (ii) owned the Land and Improvements prior to their conveyance
to Landlord, and (iii) has been in continuous, uninterrupted possession of the Land and
Improvements since the date of Tenant’s acquisition of the Land; and by executing this Lease and
entering onto the Premises, Tenant accepts the Premises in their as-is, where-is condition and
unconditionally releases Landlord from any liability with respect to the condition of the Premises.
C.
Term. Notwithstanding the actual date of conveyance of the Land and
Improvements by Tenant to Landlord, the term of this Lease (“Term”) shall commence on the
date of the certificate of occupancy issued for all Improvements constructed on the Land
(“Commencement Date”), and shall expire at 12:00 midnight on the last day of the Rental Period,
unless this Lease is sooner terminated as hereinafter provided. Concurrently with their execution
of this Lease, Landlord and Tenant shall execute a Certificate of Commencement Date in form
attached hereto as Exhibit E. Notwithstanding the foregoing, Tenant may terminate this Lease at
any time during the Term by written notice to Landlord, subject to Tenant’s obligations of
Indemnity that survive the termination of this Lease, in which event the Land and Improvements
will be conveyed to Tenant by Landlord pursuant to the terms of Section 33. Upon termination or
expiration of this Lease or for any other reason whatsoever, and notwithstanding the conveyance
of fee title to the Land and Improvements to Tenant, all public easements in favor of the City of
Mesa shall survive pursuant to the terms of Section 33.
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5.
Definitions.
For the purposes of this Lease, the following words shall have the definition and meaning
set forth in this agreement:
(a)
“Additional Payments” means as defined in Section 7.
(b)
“Affiliate” means, with respect to Tenant (including all entities that have an
ownership interest in Tenant), any person or legal entity that is controlled by Tenant, that controls
Tenant or that is under common control with Tenant, whether direct or indirect, and whether
through ownership of voting securities, by control or otherwise. For purposes of this definition,
“control” shall be conclusively presumed in the case of direct or indirect ownership of fifty percent
(50%) or more of outstanding interests in terms of value or voting power of Tenant.
(c)
“Applicable Laws” means as defined in Section 12(A).
(d)
“Commencement Date” means as defined in Section 4(C).
(e)
“Commence” or “Commencement of Construction” has the meaning given in the
Development Agreement.
(f)
“Complete” or “Completion of Construction” has the meaning given in the
Development Agreement.
(g)
“Default Rate” means a rate of interest equal to four percent (4%) per annum in
excess of the so-called “prime interest rate” then in effect as published in the Wall Street Journal
(or comparable publication reasonably selected by Landlord, if the Wall Street Journal is not then
being published, or does not regularly publish “prime rate” information) compounded monthly
from the date of the act, event, omission or default giving rise to Landlord’s right to receive such
interest payment.
(h)
“Developer Undertakings” means as defined in Section 3(J).
(i)
“Development Agreement” means as defined in Section 3(B).
(j)
“Environmental Laws” means as defined in Section 32(A)(1).
(k)
“Event of Default” means as defined in Section 20(A).
(l)
“Exceptions” means as defined in Section 13(A).
(m)
“Force Majeure” means as defined in Section 31.
(n)
“Impositions” means as defined in Section 7(A).
(o)
“Improvements” means as defined in Section 4(A).
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(p)
“Indemnify” and “Indemnity” and “Indemnification” mean as defined in Section
16(A).
(q)
“Institutional Lender” means any savings bank, bank or trust company, savings
and loan association, insurance company, mortgage banker, mortgage broker, finance company,
college or university, governmental pension or retirement funds or systems, any pension retirement
funds or systems of which any of the foregoing shall be trustee, provided the same be organized
under the laws of the United States or of any State thereof, or a Real Estate Investment Trust as
defined in Section 856 of the Internal Revenue Code of 1986 as amended.
(r)
“Land” means as defined in Section 4(A), and as legally described in Exhibit A.
(s)
“Landlord” means the City of Mesa, Arizona, a municipal corporation.
(t)
“Landlord Claims” means as defined in Section 7(F).
(u)
“Landlord Deed” means as defined in Section 13(A).
(v)
“Landlord Indemnified Parties” means as defined in Section 16(A).
(w)
“Lease” means this Government Property Improvements Lease.
(x)
“Major Work” means as defined in Section 17(A).
(y)
“Maintenance Costs” means as defined in Section 6(B).
(z)
“Minor Work” means as defined in Section 17(A).
(aa)
“Monetary Default” means as defined in Section 20(A).
(bb)
“Mortgagee” means the holder, trustee, or beneficiary of any Permitted Mortgage.
(cc)
“Net Rent” means as defined in Section 6(A).
(dd)
“Permitted Mortgage” means any mortgage or deed of trust that constitutes a lien
upon this Lease, the leasehold estate hereby created, or all (or any portion of) Tenant’s interest in
the Project, and which complies with the requirements of Section 19.
(ee)
“Permitted Mortgagee” means the beneficiary, secured party or mortgagee under
any Permitted Mortgage, and its successors and assigns and purchasers at any foreclosure sale.
(ff)
“Premises” means as defined in Section 4(A) and described in Exhibit A.
(gg)
“Project” means the Land and the Improvements, and other construction and
redevelopment activities on the Land conducted by Tenant, in accordance with the Development
Agreement, as defined in Section 3(D).
(hh)
“Public Health Event” means as defined in Section 31.
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(ii)
“Purchase Price” means as defined in Section 33(C).
(jj)
“Regulated Substances” means as defined in Section 32(A)(2).
(kk)
“Release” means as defined in Section 32(A)(3).
(ll)
“Rental Period” means the period beginning on the date of the certificate of
occupancy issued for all Improvements constructed on the Land, and terminating eight (8) years
after such date; provided, however, that in accordance with A.R.S. §42-6209(G), the Rental Period
may not exceed eight (8) years including any abatement period.
(mm) “Tenant” means the Tenant named herein and its permitted successors and assigns.
(nn)
“Term” means as defined in Section 4(C).
(oo)
“Transfer” means as defined in Section 19(B).
6.
Rent.
A.
Net Rent.
(1)
Net Annual Rental. Tenant will pay to Landlord, in collected funds and at
the addresses specified or furnished pursuant to Section 23, during the Term of this Lease net rental
(“Net Rent”) in the amount of $10,000.00 per year. The amount of Net Rent reflects the fact that
Tenant owned the Land and Improvements prior to the conveyance of the Land and Improvements
to Landlord at no cost to Landlord and is intended to compensate Landlord for Landlord’s
administrative and other expenses in maintaining this Lease, rather than to reflect fair market rental
value.
(2)
Annual Installments. All payments of Net Rent will be made in annual
installments, in advance, without notice, commencing on the Commencement Date, and on each
anniversary of the Commencement Date, during the Term.
(3)
Other Payments and Obligations. Net Rent will be in addition to all of the
other payments to be made by Tenant and other obligations to be performed by Tenant, as
hereinafter provided.
B.
Rent Absolutely Net. It is the purpose and intent of the Landlord and Tenant that
Net Rent payable hereunder will be absolutely net to Landlord so that this Lease will yield to
Landlord the Net Rent herein specified, free of any charges, assessments, Impositions, or
deductions of any kind charged, assessed, or imposed on or against the Premises and without
abatement, deduction or set-off by the Tenant, and Landlord will not be expected or required to
pay any such charge, assessment or Imposition or be under any obligation or liability hereunder
except as herein expressly set forth, and that all costs expenses, and obligations of any kind relating
to the maintenance and operation of the Premises including all construction, alterations, repairs,
reconstruction, and replacements as hereinafter provided, which may arise or become due during
the Term hereof (collectively, “Maintenance Costs”) will be paid by Tenant; and Tenant will
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Indemnify, defend, pay and hold harmless Landlord Indemnified Parties for, from and against any
and all such costs, expenses, and obligations in accordance with Section 16.
C.
Non-Subordination. Landlord’s interest in this Lease, as the same may be modified,
amended, or renewed, will not be subject or subordinate to (a) any mortgage now or hereafter
placed upon Tenant’s interest in this Lease or the Premises, or (b) any other liens or encumbrances
hereafter affecting Tenant’s interest in this Lease or the Premises.
D.
No Release of Obligations. Except for either a mutual release and waiver of rights
and liabilities arising under this Lease or to the extent expressly provided in this Lease, no
happening, event, occurrence, or situation during the Rental Period, whether foreseen or
unforeseen, and however extraordinary (including, without limitation, Tenant’s failure, refusal, or
inability for any reason to operate and maintain the Project) shall permit the Tenant to quit or
surrender the Premises or this Lease nor shall it relieve the Tenant of its liability to pay the Net
Rent and Additional Payments and other charges under this Lease, nor shall it relieve the Tenant
of any of its other obligations under this Lease (including, but not limited to, Tenant’s obligation
to Indemnify Landlord Indemnified Parties).
7.
Additional Payments. Tenant shall pay (“Additional Payments”) during the Term
hereof, without notice and without abatement, deduction, or setoff, before any fine, penalty,
interest, or cost may be added thereto, or become due or be imposed by operation of law for the
nonpayment thereof, the following:
A.
Impositions. Tenant shall pay to Landlord, with and in addition to its payment of
Net Rent, all sums, impositions, costs, expenses and other payments and all taxes (including
personal property taxes and taxes on rents, leases or occupancy, if any, and government property
improvement lease excise tax), assessments, special assessments, enhanced municipal services
district assessments, water and sewer rents, rates and charges, charges for public utilities, excises,
levies, licenses, and permit fees, any expenses incurred by Landlord on behalf of Tenant pursuant
to this Lease (including the Administrative Fee provided for herein), and other governmental or
quasi-governmental charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, of any kind and nature whatsoever which, at any time during the Term hereof may be
assessed, levied, confirmed, imposed upon, or grow or become due and payable out of or with
respect to, or become a lien on, the Premises or any part thereof, or any appurtenances thereto, any
use or occupation of the Premises, or such franchises as may be appurtenant to the use of the
Premises (all of which are sometimes herein referred to collectively as “Impositions” and
individually as an “Imposition”) provided, however, that:
(1)
if, by law, any Imposition may at the option of the Tenant be paid in
installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Tenant
may exercise the option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and in such event, shall pay such installments as they become due
during the Term hereof before any fine, penalty, further interest or cost may be added thereto; and
(2)
any Imposition (including Impositions which have been converted into
installment payments by Tenant, as referred to in subparagraph (A) above) relating to a fiscal
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period of the taxing authority, a part of which period is included within the Term hereof and a part
of which is included in the period of time after the expiration of the Term hereof shall (whether or
not such Imposition shall be assessed, levied, confirmed, imposed upon or become a lien upon the
Premises, or shall become payable, during the Term hereof) be adjusted between Landlord and
Tenant as of the expiration of the Term hereof, so that Tenant shall pay that portion of such
Imposition attributable to the tenancy period and Landlord shall pay the remainder thereof.
B.
Rental Taxes. Tenant shall pay to Landlord, with and in addition to its payment of
Net Rent, all taxes imposed by any governmental unit on Net Rent and Additional Payments
received by Landlord.
C.
Payments In-Lieu. Because of the applicability to this Lease of GPLET as defined
in Section 7(G), Tenant recognizes and acknowledges that the removal of the Land and
Improvements from the ad valorem tax rolls may reduce revenue to local school districts.
Accordingly, and in order to address such reduction in revenue, Tenant, in lieu of payment of such
ad valorem taxes, will make a one-time, lump sum payment to the Maricopa Community College
District, Mesa Public School District, and East Valley Institute of Technology District
(collectively, the “School Districts”) as follows:
Maricopa Community College District
$2,532.00
Mesa Public School District
$14,238.00
East Valley Institute of Technology District
$117.00
Total
$16,887.00
The in-lieu payments must be delivered to City through escrow associated with the conveyance of
the Land to City as described in Section 5.1 of the Development Agreement on or before the
closing date, shall be non-refundable, and shall not be off-set against any Payments due under this
Lease. City will subsequently deliver the in-lieu payments to the Maricopa Community College
District, Mesa Public School District, and East Valley Institute of Technology District. The
termination of this Lease at any time prior to the expiration of the Rental Period will not entitle
Tenant to a refund of any portion of the in-lieu payments.
D.
Contest. Tenant, if it shall so desire, and at its sole cost and expense, may contest
the validity or amount of any Imposition, in which event, Tenant may defer the payment thereof
during the pendency of such contest; provided, that upon request by Landlord at any time after the
same shall have become due, Tenant shall deposit with the Landlord any amount sufficient to pay
such contested item together with the interest and penalties thereon (as reasonably estimated by
Landlord), which amount shall be applied to the payment of such item when the amount thereof
shall be finally fixed and determined. Nothing herein contained, however, shall be so construed as
to allow such item to remain unpaid for a length of time that permits the Premises or any part
thereof, or the lien thereon created by such Imposition, to be sold for the nonpayment of the same.
If the amount so deposited shall exceed the amount of such payment, the excess shall be paid to
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Tenant or, in case there shall be any deficiency, the amount of such deficiency shall be promptly
paid by Tenant to Landlord together with all interest, penalties or other charges accruing thereon.
At any time that the Tenant hereunder is an Institutional Lender, the requirements for deposits set
forth in this Section shall be waived by Landlord.
E.
Assessment Reduction. Tenant, at its sole cost and expense, may seek at any time
to obtain a lowering of an Imposition or assessment upon the Premises for the purpose of reducing
the amount thereof. However, in such event, Landlord will not be required to cooperate with
Tenant and may in fact oppose such endeavor. Tenant shall be authorized to collect any refund
payable as a result of any proceeding Tenant may institute for that purpose and any such refund
shall be the property of Tenant to the extent to which it may be based on a payment made by
Tenant.
F.
Hold Harmless. Landlord shall not be required to join in any action or proceeding
referred to in Section 7(D) (unless required by law or any rule or regulation in order to make such
action or proceeding effective, in which event any such action or proceeding may be taken by
Tenant in the name of the Landlord only with Landlord’s prior written consent). Tenant hereby
agrees to Indemnify, defend, pay and hold Landlord Indemnified Parties harmless for, from and
against any and all costs, expenses, claims, loss or damage by reason of, in connection with, on
account of, growing out of or resulting from, any such action or proceeding (collectively,
“Landlord Claims”).
G.
Government Property Lease Excise Tax. As required under A.R.S. § 42-6206,
Tenant is hereby notified of its potential tax liability under the Government Property Lease Excise
Tax provisions of A.R.S. § 42-6201, et seq (“GPLET”).
(1)
Failure of Tenant to pay the tax if and when due and after an opportunity to
cure is an Event of Default that could result in the termination of Tenant’s interest in this Lease
and of its right to occupy the Premises.
(2)
In accordance with A.R.S. § 42-6209(B), Tenant will notify the Maricopa
County Treasurer and Landlord and apply for the abatement before the taxes under A.R.S. § 42-
6201 et seq. are due and payable in the first year after the certificate of occupancy is issued.
(3)
Notwithstanding the foregoing, or any other term of this Lease (including,
but not limited to, the Recitals to this Lease), Landlord does not represent, warrant or guarantee
that the benefits provided by GPLET including, but not limited to, any abatement of GPLET during
any portion of the Term, will be available or in effect at any time during the Term. The benefits
provided by GPLET are not a condition to the effectiveness of this Lease or Tenant’s obligations
under this Lease; and the nonexistence or failure of GPLET to be maintained, or any changes in or
amendments to GPLET, will not be a default by Landlord. In the event that GPLET is no longer
available, or the provisions of GPLET are modified to the extent that Tenant believes that this
Lease no longer provides the benefits intended by Tenant, then either Landlord or Tenant may
terminate this Lease by delivering not less than thirty (30) days written notice to the other, subject
to Tenant’s obligations of Indemnity that survive the termination of this Lease, in which event the
Land and Improvements will be conveyed to Tenant by Landlord as though Tenant had exercised
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the Purchase Option granted in Section 33. In the event of a termination hereunder, Landlord shall
execute and record a Special Warranty Deed to Tenant in form attached hereto as Exhibit D.
H.
SID 228. Tenant further agrees to make an annual, lump-sum in-lieu payment in
the amount that would have been specially assessed by City of Mesa Special Improvement District
No. 228 (“SID 228”) and paid by Tenant if Tenant were the fee owner of the Land and
Improvements. Landlord (or the Downtown Mesa Association) will determine the amounts of
such annual in-lieu payments, and Tenant will pay that amount within thirty (30) days of Tenant’s
receipt of an invoice for each such amount.
8.
Insurance.
A.
Tenant Obligation to Insure. Tenant shall procure and maintain for the duration of
this Lease, at Tenant’s own cost and expense, insurance against casualty to or loss of the Premises
and against claims for injuries to persons or damages to property which may arise from or in
connection with this Lease by the Tenant, its agents, subtenants, employees, contractors, licensees
or invitees in accordance with the insurance requirements set forth in Exhibit B attached hereto.
Additionally, Tenant shall be responsible for carrying fire and extended risk insurance coverage
for the full replacement value of the Improvements. The Landlord shall be named as Loss Payee
on all property insurance policies because Landlord is the fee title owner of the Land (and all
proceeds from insurance policies obtained by Landlord shall be used in accordance with Section
17(B)); provided further, if Tenant’s insurance is not sufficient to pay claim(s) which arise in
connection with this Lease, the Landlord’s insurance (or self-insurance retention) will not be
obligated to, and will not pay, any claims including, but not limited to, any claims for damage to
the Land or the Improvements. Notwithstanding the foregoing, in the event of casualty to the
Project (whether or not such casualty is insured or fully insured with respect to the cost of
restoration), Tenant must promptly repair, restore or rebuild the Project to its pre-casualty
condition or, within sixty (60) days of such casualty, exercise its option to repurchase the Premises
pursuant to Section 33.
B.
Failure to Maintain Insurance. If Tenant fails or refuses to provide a copy of the
renewal insurance certificates, together with evidence of payment of premiums therefor, or
otherwise fails or refuses to procure or maintain insurance as required by this Lease, Landlord
shall have the right, at Landlord’s election, and without prior notice, to procure and maintain such
insurance. The premiums paid by Landlord shall be due and payable from Tenant to Landlord on
the first day of the month following the date on which the premiums were paid. Landlord shall
give prompt notice of the payment of such premiums, stating the amounts paid and the names of
the insurer(s) and insured(s). The lapse or cancellation of any policy of insurance required herein,
in whole or in part for the benefit of Landlord, is an Event of Default. No cure of such default can
be accomplished unless a new or renewed policy is issued which specifically provides the required
coverage to the Landlord for any liability arising during the lapsed or previously uncovered period.
C.
Relationship to Obligations to Indemnify Landlord Indemnified Parties. Tenant’s
obligation to maintain insurance is in addition to, and not in lieu of, Tenant’s obligation of
Indemnity set forth in Section 11(C), Section 16, Section 32, and elsewhere in this Lease.
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9.
Waste. Tenant shall not commit or suffer to be committed any waste on or impairment of
the Premises.
10.
Landlord’s Performance for Tenant. If Tenant shall fail to pay any Imposition or make
any other payment required to be made under this Lease or shall default in the performance of any
other covenant, agreement, term, provision, limitation, or condition herein contained, following
any applicable Notice required by and Tenant’s failure to cure under Section 20, Landlord, without
being under any obligation to do so and without thereby waiving such default, may make such
payment and/or remedy such other default for the account and at the expense of Tenant, without
additional notice and without unreasonable interference with any occupants, guests, or permittees
on the Premises. Tenant will promptly pay (but no later than thirty (30) days from Landlord’s
Notice to Tenant and evidence of such payment by Landlord) all bills for any expense required by
Landlord in connection therewith, and bills for all such expenses and disbursements of every kind
and nature whatsoever including reasonable attorney’s and administrative fees involved in
collection or endeavoring to collect Net Rent, Additional Payments or any part thereof, or
enforcing or endeavoring to enforce any right against Tenant, under or in connection with this
Lease, or pursuant to law including (without being limited to) any such cost, expense, and
disbursements involved in instituting and prosecuting summary proceedings, as well as bills for
any property, material, labor or services provided, furnished, or rendered, or caused to be provided,
furnished or rendered, by Landlord to Tenant, with respect to the Premises and other equipment
and construction work done for the account of the Tenant within; and if not paid within thirty (30)
days, the amount thereof shall immediately become due and payable (together with interest at the
Default Rate) with no further Notice required, as Additional Payments.
11.
Uses and Maintenance.
A.
Absence of Warranties. Tenant, as the prior owner of the Land and the party that
constructed (or caused the construction of) the Improvements, now leases the Premises after a full
and complete examination of the Premises, as well as the title to the Premises and with knowledge
of its present uses and all restrictions on use. Tenant accepts the same in the condition or state in
which they exist as of the Commencement Date without any representation or warranty, express
or implied in fact or by law, by Landlord and without recourse to Landlord, as to the title, the
nature, condition, or usability of the Premises or the use or uses to which the Premises or any part
thereof may be put. Tenant may, at its expense, obtain a leasehold policy of title insurance.
Landlord shall not be required to furnish any services or facilities or to make any repairs or
alterations in or to the Premises or to provide any off-site Improvements, such as utilities or paving,
or other forms of access to the Premises, other than what may already exist on the Commencement
Date, or that Landlord has agreed to provide in the Development Agreement, throughout the Term
hereof. Tenant hereby assumes the full and sole responsibility for the condition, construction,
operation, repair, demolition, replacement, maintenance, and management of the Premises
including, but not limited to, the performance of all burdens running with the Land.
B.
Permitted Uses. Tenant agrees that it shall use the Premises only for those purposes
and uses described in the Development Agreement. In no event shall the Premises (or any part)
be used for any purpose (i) prohibited by any Applicable Laws or (ii) prohibited by this Lease.
Regardless of the uses which would otherwise be allowed pursuant to the zoning classification or
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12
other ordinances which may be applicable to the Premises at any time during the Rental Period,
the uses set forth in Exhibit C are expressly prohibited. Additionally, during the Rental Period use
of the Premises by Tenant or related subtenants is hereby restricted to the maintenance and
operation of the Project and its reasonably related activities; and the Premises may not be used for
any other purpose without the prior written consent of Landlord, which may be given or withheld
at Landlord’s sole and absolute discretion. Moreover, any permitted use which involves the
handling, production and/or storage of Hazardous Materials on the Premises shall be subject to all
applicable federal, state and local laws rules and regulations.
C.
Maintenance, Repairs, and Indemnity. Tenant, at its sole cost and expense, shall
take good care of the Premises, make all repairs thereto, interior and exterior, structural and
nonstructural, ordinary and extraordinary, foreseen and unforeseen, and shall maintain and keep
the Premises and the sidewalks, curbs, and landscaping in commercially acceptable order, repair,
and condition in accordance with City of Mesa standards and this Lease, whichever is more
stringent. As stated in Section 6(B), it is the intent of Landlord and Tenant that this Lease be an
absolute net lease to Landlord, with Landlord having no obligation during the Term for the
maintenance, repair or replacement of the Project (or any part of the Project). Tenant shall also
keep the sidewalks in front of the Premises and any adjacent alley free and clear from rubbish and
shall not obstruct the same or allow the same to be obstructed in any manner. Tenant shall
Indemnify, defend, pay and hold the Landlord Indemnified Parties harmless for, from and against
any and all claims or demands, upon or arising out of any accident, injury, or damage to any person
or property occurring in or upon the Premises or any part thereof, or upon the sidewalks about the
Premises, however caused, or any act (whether intentional or negligent) of any employee, agent,
director, officer, contractor or invitee of Tenant, and shall keep the Premises free and clear of any
and all mechanics’ liens or other similar liens or charges incidental to work done or material
supplied in or about the Premises.
D.
Tenant’s Failure to Maintain or Repair. In the event Tenant fails to maintain and
repair the Premises in the condition required by Section 11(C) of this Lease, Landlord may send
the notice required under Sections 20 and 23 of this Lease, and after the expiration of the cure
period set forth therein, may terminate this Lease in accordance with Section 20(F).
E.
Alterations. After the Commencement Date, Tenant shall not, absent compliance
with all Applicable Laws, erect any structures, make any Improvements, or do any other
construction work on the Premises or alter, modify, or make additions, Improvements, or repairs
to or replacements of any structure, now existing or built at any time during the Term hereof, or
install any fixtures (other than trade fixtures removable without injury to the Premises) except in
compliance with all Applicable Laws. No Landlord consent shall be required in connection with
the foregoing work, except for normal municipal approvals required for plans, permits, approvals,
and the like. In the event of any failure on the part of Tenant to comply with this requirement,
Landlord may terminate this Lease in accordance with Section 20(F).
12.
Compliance With Applicable Laws.
A.
Tenant Obligations. Tenant shall timely assume and perform any and all
obligations of Landlord under any covenants, easements, and agreements affecting the title to the
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13
Premises and shall diligently comply with, at its own expense during the Term hereof, all present
and future laws, acts, rules, requirements, orders, directions, ordinances, and/or regulations,
ordinary or extraordinary, foreseen or unforeseen, concerning the Premises or any part thereof, or
the use thereof, or the streets adjacent thereto, of any federal, state, municipal, or other public
department, bureau, officer, or authority, or other body having similar functions (“Applicable
Laws”), or of any liability, fire, or other insurance company having policies outstanding with
respect to the Premises, whether or not such laws, acts, rules, requirements, orders, directions,
ordinances and/or regulations require the making of structural alterations or the use or application
of portions of the Premises for compliance therewith or interfere with the use and enjoyment of
the Premises, the intention of the Parties being with respect thereto that Tenant, during the Term
hereby granted, shall discharge and perform all the obligations of Landlord, as well as all
obligations of Tenant, arising as aforesaid, and Indemnify, defend, pay and hold Landlord
Indemnified Parties harmless for, from and against all such matters, so that at all times the rental
of the Premises shall absolutely be net to the Landlord without deduction or expenses on account
of any such law, act, rule, requirement, order direction, ordinance and/or regulation whatever it
may be; provided, however, that Tenant may, in good faith (and wherever necessary, in the name
of, but without expense to and with the prior written permission of, Landlord), contest the validity
of any such law, act, rule, requirement, order, direction, ordinance and/or regulation that does not
require the payment of money and, pending the determination of such contest, may postpone
compliance therewith, except that Tenant shall not so postpone compliance therewith, as to subject
Landlord to the risk of any fine or penalty or to prosecute for a crime, or to cause the Premises or
any part thereof to be condemned, vacated, untenantable or uninsured.
B.
Certificate of Occupancy. Tenant, at its sole cost and expense, shall obtain any
certificate of occupancy with respect to the Premises which may at any time be required by any
governmental agency having jurisdiction thereof.
13.
Ownership and Operation of Premises.
A.
Ownership of Improvements. During the Term, title to Premises is vested in
Landlord free and clear of all liens, claims, encumbrances and conditions other than those set forth
in the deed conveying title from Tenant to Landlord (the “Landlord Deed”) and in the title
insurance policy issued to Landlord as owner (collectively, the “Exceptions”). During the Term,
and subject to lawful acts undertaken by Landlord in its capacity as a municipality, Landlord will
not impair title to the Premises.
B.
Tenant’s Management and Operating Covenant. During the Term, Tenant shall
prudently manage and operate (or cause to be managed and operated) the Project, in accordance
with the requirements of this Lease and all Applicable Laws.
14.
Impairment of Landlord’s Title.
A.
No Liens. Tenant shall not create, or suffer to be created or to remain, and shall
promptly discharge any mechanic’s, laborer’s, or materialman’s lien which might be or become a
lien, encumbrance, or charge upon the Premises or any part thereof or the income therefrom and
Tenant will not suffer any other matter or thing arising out of Tenant’s use and occupancy of the
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14
Premises whereby the estate, rights, and interests of Landlord in the Premises or any part thereof
might be impaired.
B.
Discharge. If any mechanic’s, laborer’s, or materialman’s lien shall at any time be
filed against the Premises or any part thereof, Tenant, within thirty (30) days after Tenant’s receipt
of a notice of the filing thereof, shall cause such lien to be discharged of record by payment,
deposit, bond, order of court of competent jurisdiction or otherwise. Tenant shall notify Landlord
in writing of its action to either satisfy or contest the lien and, if contested, of the matter’s status
on a monthly basis until concluded. If Tenant shall fail to cause such lien to be discharged within
the period aforesaid, then, in addition to any other right or remedy, Landlord may, but shall not be
obligated to, discharge the same either by paying the amount claimed to be due or by procuring
the discharge of such lien by deposit or by bonding. Any amount so paid by Landlord and costs
and expenses incurred by Landlord in connection therewith, shall constitute an Additional Payment
payable by Tenant and shall be paid by Tenant to Landlord within thirty (30) days from demand
therefor, together with proof of payment and detailed invoices.
C.
No Implied Consent. Nothing contained in this Lease shall be deemed or construed
in any way as constituting Landlord’s expressed or implied authorization, consent or request to
any contractor, subcontractor, laborer or materialman, architect, or consultant, for the construction
or demolition of any improvement, the performance of any labor or services or the furnishing of
any materials for any Improvements, alterations to or repair of the Premises or any part thereof.
D.
No Agency Intended. The Parties acknowledge that Tenant is entitled to occupy
and operate the Premises. Accordingly, the Parties agree that Tenant is not the agent of Landlord
for the construction, alteration or repair of any Improvement Tenant may construct upon the
Premises, the same being done at the sole expense of Tenant.
15.
Inspection. Landlord has and retains the right to enter upon the Premises, or any part
thereof, for the purpose of confirming that Tenant is observing and performing the obligations
assumed by it under this Lease, all without hindrance from Tenant; provided that (absent an
emergency) such entry does not interfere with Tenant’s business operations; and provided further
that Landlord shall give Tenant at least three (3) days written notice prior to any inspection of any
building interior. This three-day Notice provision shall not be construed to prohibit or delay any
entry by Landlord (i) in the event of an emergency; (ii) in its capacity as a municipality exercising
its police power or in its criminal law enforcement capacity; (iii) authorized by any writ or warrant
issued by any court; or (iv) authorized by any health or welfare statute, code, ordinance, rule or
regulation.
16.
Indemnification.
A.
Indemnification. Tenant shall indemnify, defend, pay and hold Landlord, its
successors and assigns, its elected and appointed officials, employees, agents, boards,
commissions, representatives, and attorneys (collectively, including Landlord, the “Landlord
Indemnified Parties”) harmless for, from and against any and all liabilities, suits, obligations,
fines, damages, penalties, claims, costs, charges and expenses including property damage, personal
injury and wrongful death and further including, without limitation, architects’ and attorneys’ fees
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15
and disbursements, which may be imposed upon or incurred by or asserted against Landlord
Indemnified Parties by reason of any of the following occurring during the Term unless caused
solely by the gross negligence or willful misconduct of the Landlord Indemnified Parties:
(1)
Tenant’s construction of any Improvements constituting the Project, or any
other work done therein, on or about the Premises or any part thereof by Tenant or its agents;
(2)
any use, nonuse, possession, occupancy, alteration, repair, condition,
operation, maintenance or management of the Premises or Improvements;
(3)
any nuisance made or suffered on the Premises or Improvements;
(4)
any failure by Tenant to keep the Premises or Improvements, or any part
thereof, in a safe condition;
(5)
any acts or omissions of the Tenant or any subtenant or any of its or their
respective agents, contractors, employees, licensees or invitees;
(6)
any fire, accident, injury (including death) or damage to any person or
property occurring in, on or about the Premises or any part thereof;
(7)
any failure on the part of Tenant to pay Net Rent or to perform or comply
with any of the covenants, agreements, terms or conditions contained in this Lease on its part to
be performed or complied with and the exercise by Landlord of any remedy provided in this Lease
with respect thereto;
(8)
any lien or claim which may be alleged to have arisen against or on the
Premises or Improvements or any part thereof or any of the assets of, or funds appropriated to,
Landlord or any liability which may be asserted against Landlord with respect thereto to the extent
arising, in each such case, out of the acts of Tenant, its contractors, agents, subtenants;
(9)
any failure on the part of Tenant to keep, observe, comply with and perform
any of the terms, covenants, agreements, provisions, conditions or limitations contained in the
subleases or other contracts and agreements affecting the Premises or Improvements or any part
thereof, on Tenant’s part to be kept, observed or performed;
(10)
any transaction relating to or arising out of the execution of this Lease or
other contracts and agreements affecting the Premises or Improvements, the Project or any part
thereof or any activities performed by any party, person or entity which are required by the terms
of this Lease or such other contracts and agreements;
(11)
any tax including any tax attributable to the execution, delivery or recording
of this Lease, with respect to events occurring during the term of this Lease; and
(12)
any loss of or reduction in state shared monies arising in connection with a
claim brought or maintained under A.R.S. §41-194.01 to the extent that Tenant prevents or delays
any termination of this Lease pursuant to Section 29(O) of this Lease.
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16
Any or all of the foregoing obligations may be referred to as an “Indemnification” or
“Indemnity”; and the obligation of Tenant to provide Indemnification of Landlord Indemnified
Parties may be referred to as an obligation to “Indemnify.”
B.
Tenant will hold all goods, materials, furniture, fixtures, equipment, machinery and
other property whatsoever on the Premises and Improvements at the sole risk of Tenant and
Indemnify, defend, pay and hold the Landlord Indemnified Parties harmless for, from and against
any and all loss or damage thereto by any cause whatsoever, other than ordinary wear and tear and
repair and replacement arising out of Tenant’s maintenance obligations.
C.
The obligations of Tenant under this Section shall not in any way be affected by
the absence in any case of covering insurance or by the failure or refusal of any insurance carrier
to perform any obligation on its part to be performed under insurance policies affecting the
Premises.
D.
If any claim, action or proceeding is made or brought against the Landlord
Indemnified Parties by reason of any event to which reference is made in this Section, then, upon
demand by Landlord, Tenant, at its sole cost and expense, shall resist or defend such claim, action
or proceeding in Landlord’s name, if necessary, by the attorneys for Tenant’s insurance carrier (if
such claim, action or proceeding is covered by insurance), otherwise by such attorneys as Landlord
shall approve, which approval shall not be unreasonably withheld or delayed.
E.
The provisions of this Section shall survive the expiration or earlier termination of
this Lease for a period of two (2) years.
17.
Damage or Destruction.
A.
Tenant’s Obligations to Repair and Restore. If, at any time during the Term, the
Premises, or any Improvement thereon, or any part thereof, shall be damaged or destroyed by fire,
casualty or other occurrence of any kind or nature, ordinary or extraordinary, foreseen or
unforeseen, Tenant, at its sole cost and expense, and whether or not the insurance proceeds, if any,
shall be sufficient for the purpose, shall repair, alter, restore, replace, or rebuild the same as nearly
as possible to its value, and equal to or better than condition, and character immediately prior to
such damage or destruction. The restoration shall comply with the timeframes in Subsections
17(A)(1) and 17(A)(2), as applicable, and must be performed by licensed and bondable Arizona
contractors. Alternatively, if Tenant elects not to repair any such damage or destruction, then
Tenant, within sixty (60) days of such damage or destruction, must exercise its option to repurchase
the Premises pursuant to Section 33. Anything herein to the contrary notwithstanding, Tenant shall
immediately secure the Premises and undertake temporary repairs and work necessary to protect
the public and to protect the Premises from further damage.
(1)
Minor Repairs or Restoration. Repair, alteration, or restoration estimated
to cost ten thousand dollars ($10,000) or less and temporary repairs for the protection of other
property pending the completion of any thereof, are considered and referred to in this Section as
the “Minor Work.” Minor Work shall Commence within thirty (30) days from the date of the
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17
damage or destruction and must be Completed within one hundred twenty (120) days after timely
commencement of the Minor Work.
(2)
Major Repairs, Restoration or Replacement. Any repair, alteration,
restoration estimated to cost more than ten thousand dollars ($10,000), or any replacement or
rebuilding, are considered and referred to in this Section as “Major Work.” Major Work shall
Commence within one hundred eighty (180) days from the date of the damage or destruction and
must be Completed within two hundred forty (240) days after timely commencement of the Major
Work.
B.
Payment of Insurance Proceeds. Subject to the requirements or limitations imposed
by a Permitted Mortgagee, all proceeds from insurance policies obtained by Tenant to cover such
damage or destruction (except proceeds to cover loss for Tenant’s personal property) shall be used
to repair and restore the Premises as required under this Lease. Additionally, as a Loss Payee on
all property insurance policies as required by Section 8, all proceeds from insurance policies
obtained by Landlord shall be used to repair and restore the Premises as required under this Lease.
C.
Property Insurance. Tenant shall be responsible for carrying fire and extended risk
insurance as set forth in Section 8(A).
D.
Lease Obligations Continue. Tenant shall not be entitled to any abatement,
allowance, reduction, or suspension of Net Rent because part or all of the Premises shall be
untenantable owing to the partial or total destruction thereof. No such damage or destruction shall
affect in any way the obligation of Tenant to pay Net Rent, Additional Payments, and other charges
required to be paid, or release Tenant from any non-monetary obligations imposed upon Tenant
under this Lease.
18.
Condemnation.
A.
Taking. Landlord acknowledges that, due to the nature of the structure of the
Premises, if at any time during the Term of this Lease, title to any portion of the Premises shall be
taken in condemnation proceedings or by any right of eminent domain or by agreement in lieu of
such proceedings, Tenant shall have the right to terminate this Lease effective as of the date
possession is transferred to the condemning authority and the Net Rent and Additional Payments
reserved shall be apportioned and paid to the date of such taking. All compensation paid by the
condemning authority in the case of any condemnation (total or partial) shall be the sole property
of Tenant free and clear of any right, title, claim or interest of Landlord.
B.
If No Tenant Termination. If Tenant does not elect to terminate this Lease, then,
in the event of any taking of less than the whole or substantially all of the Premises, Tenant may,
at its sole election and if Tenant is reasonably able to do so, continue to operate and maintain the
remaining Premises as contemplated by the Development Agreement, in which case, neither the
Net Rent nor the Rental Period of this Lease will be reduced or affected in any way, and the Lease
will continue in full force and effect with respect to the balance of the Premises.
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18
C.
Rights of Participation. Tenant shall have the sole right, at its own expense, to
appear in and defend any condemnation proceeding and participate in any and all hearings, trials,
and appeals therein. Landlord, at the request of Tenant, shall execute a Disclaimer of Interest in
the condemnation action evidencing the fact that Landlord has no interest in the proceeds of the
condemnation.
D.
Notice of Proceeding. In the event Landlord or Tenant shall receive notice of any
proposed or pending condemnation proceedings affecting the Premises, the Party receiving such
notice shall notify the other Party of the receipt and contents thereof within five (5) days from
receipt of the notice.
E.
Relocation Benefits. Tenant shall also retain any federal, state or local relocation
benefits or assistance provided in connection with any condemnation or prospective condemnation
action.
19.
Encumbrances and Assignments.
A.
Tenant may encumber its leasehold interest in the Premises to obtain a collateral
loan, permanent financing or refinancing for the Project (a “Permitted Mortgage”), subject to the
following:
(1)
Tenant may encumber its interest in this Lease and Premises only if Tenant
is not then in default of any of its obligations under this Lease beyond any applicable cure period.
There may be only one (1) Permitted Mortgage in existence with respect to this Lease at any time,
and junior liens or encumbrances of any kind are prohibited. The holder of a Permitted Mortgage
shall be a “Permitted Mortgagee.”
(2)
With respect to such leasehold financing, Landlord will agree to a form of
commercially reasonable non-disturbance and recognition agreement with not more than one (1)
Permitted Mortgagee as well as other reasonable, non-material or administrative modifications to
this Lease requested by a recognized Institutional Lender. In no event will Landlord subordinate
its interest in the Land or the Premises to such leasehold financing.
(3)
A Permitted Mortgage cannot secure obligations other than costs,
obligations and expenses in connection with the Project or obligations of any person other than
Tenant.
(4)
A Permitted Mortgage shall cover no interest in the Land and Improvements
other than Tenant’s interest in this Lease.
(5)
Tenant or the holder of a Permitted Mortgage shall promptly deliver to
Landlord in the manner herein provided for the giving of notice to Landlord, a true copy of the
Permitted Mortgage(s), of any assignment thereof, and of the satisfaction thereof; and
(6)
For the purpose of this Section, the making of a Permitted Mortgage shall
not be deemed to constitute an assignment or transfer of this Lease, nor shall any holder of a
Permitted Mortgage, as such, be deemed an assignee or transferee of this Lease or of the leasehold
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19
estate hereby created so as to require such holder of a Permitted Mortgage, as such, to assume the
performance of any of the terms, covenants, or conditions on the part of Tenant to be performed
hereunder; but the purchaser at any sale of this Lease in any proceedings for the foreclosure of any
Permitted Mortgage, or the assignee or transferee of this Lease under any instrument of assignment
or transfer in lieu of the foreclosure of any Permitted Mortgage, shall be deemed to be an assignee
or transferee within the meaning of this Section and shall be deemed to have assumed the
performance of all the terms, covenants, and conditions on the part of Tenant to be performed
hereunder from and after the date of such purchase and assignment.
B.
No assignment, subletting or other transfer of this Lease, or any rights granted by
this Lease to Tenant (each, a “Transfer”), will be permitted without the prior written consent of
Landlord, which will not be unreasonably withheld, conditioned or delayed. Any Transfer will
require the express assumption in writing by the transferee of all of Tenant’s obligations under this
Lease including all obligations of Indemnification of Landlord and the Landlord Indemnified
Parties. Any assignment, subletting or transfer in violation of this Lease will be void, and not
voidable, and shall confer no rights or the proposed assignee, subtenant or transferee. In addition,
this Lease may not be assigned apart from the Development Agreement, and any assignee or
transferee of Tenant must assume all of the obligations (including obligations of Indemnity) of the
Developer in the Development Agreement. Notwithstanding the foregoing, nothing herein shall
be deemed to limit or impact Tenant’s right and ability to lease residential or commercial premises
within the Project to residential and commercial tenants in the ordinary course of its business.
C.
A Transfer is not deemed to include the rental of individual commercial or
residential premises within the Project to subtenants. All such subleases shall be on terms that are
commercially reasonable.
20.
Default By Tenant.
A.
Events of Default. The happening of any one of the following events (each, an
“Event of Default”) shall be considered a material breach and default by Tenant under this Lease:
(1)
Monetary Default. If default shall be made in the due and punctual payment
of any Net Rent or Additional Payments (a “Monetary Default”) within twenty (20) days after
written notice thereof to Tenant.
(2)
Non-Monetary Default. If default shall be made by Tenant in the
performance of or compliance with any of the covenants, agreements, terms, limitations, or
conditions of this Lease other than a Monetary Default, and such default shall continue for a period
of thirty (30) days after written Notice thereof from Landlord to Tenant; provided, that if Tenant
proceeds with due diligence during such thirty (30) day period to substantially cure such default
and is unable by reason of the nature of the work involved, to cure the same within the required
thirty (30) days, its time to do so shall be extended by the time reasonably necessary to cure the
same, but in no event more than one hundred twenty (120) days.
(3)
Bankruptcy—Voluntary. If Tenant shall file a voluntary petition in
bankruptcy or take the benefit of any relevant legislation that may be in force for bankrupt or
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20
insolvent debtors or shall file any petition or answer seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief for itself under any present or
future federal, state, or other statute, law or regulation, or if Tenant shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any
substantial part of its properties, or shall make any general assignment for the benefit of creditors
and not dismiss such actions within sixty (60) days.
(4)
Bankruptcy—Involuntary. If a petition shall be filed against Tenant seeking
any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future federal, state, or other statue, law or regulation, and has not been
dismissed, vacated or stayed for ninety (90) days, or if any trustee, receiver or liquidator of Tenant,
or of all or substantial part of its properties, shall be appointed without the consent or acquiescence
of Tenant and such appointment has not been dismissed, vacated or stayed for ninety (90) days.
(5)
Insurance. The lapse, termination or cancellation of any policy of insurance
required to be maintained by Tenant herein, in whole or in part for the benefit of Landlord, shall
be an Event of Default unless cured within twenty (20) days of such lapse. No cure of such default
can be accomplished unless a new or renewed policy is issued which specifically provides the
required coverage to the Landlord for any liability arising during the lapsed or previously
uncovered period.
(6)
Development Agreement. Any Event of Default (as defined in the
Development Agreement) of Developer under the Development Agreement, subject to all grace
periods, cure periods, and periods of Enforced Delay (as defined in the Development Agreement)
provided in the Development Agreement.
(7)
Sublicense Agreement of Parking Spaces. Any default of Tenant (as the
“Licensee”) under the Parking License (as defined in the Development Agreement), subject to all
grace periods and cure periods provided in the Parking License.
B.
Tenant Liability Continues. No such expiration or termination of this Lease shall
relieve Tenant of its obligations of Indemnity under this Lease, and all such obligations of
Indemnity arising prior to the Lease expiration or termination shall survive any such expiration or
termination of this Lease for a period of two (2) years and shall apply to any claim or action that
is commenced within such two (2) year period.
C.
No Implied Waivers. No failure by Landlord to insist upon the strict performance
of any covenant, agreement, term or condition hereof or to exercise any right or remedy consequent
upon a breach hereof, and no acceptance of full or partial rent during the continuance of any such
breach, shall constitute a waiver of any such breach or of such covenant, agreement, term or
condition. No covenant, agreement, term or condition hereof to be performed or complied with
by Landlord or Tenant, and no breach thereof, shall be waived, altered or modified, except by a
written instrument executed by the Party to be charged therewith. No waiver of any breach shall
affect or alter this Lease, but each and every covenant, agreement, term, limitation and condition
hereof shall continue in full force and effect with respect to any other then existing or subsequent
breach hereof.
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21
D.
Remedies Cumulative. In the event of any breach by Tenant of any of the
covenants, agreements, terms or conditions hereof, Landlord, in addition to any and all other rights,
shall be entitled to enjoin such breach and shall have the right to invoke any right and remedy
allowed at law or in equity, by statute or by this Lease for such breach. In the event of Tenant’s
failure to pay Net Rent or Additional Payments on the date when due, Tenant shall pay Landlord
interest on any such overdue payments and associated late charges at the Default Rate, but in no
event an amount greater than permitted by law, but this shall in no way limit any claim for damages
for Landlord for any breach or default by Tenant, except that Landlord shall not be entitled to
special, consequential or punitive damages.
E.
Late Charge. In the event that any payment required to be made by Tenant to
Landlord under the terms of this Lease is not received within ten (10) days after the due date
thereof, a late charge may, at Landlord’s option, be charged, following Notice to Tenant, and shall
become an Additional Payment in an amount equal to ten percent (10%) of the late payment.
F.
Termination of Lease. If an Event of Default is not cured within any applicable
time period after service of Notice of the Event of Default and Landlord serves an additional Notice
to Tenant of Landlord’s intent to terminate and quitclaim pursuant to this Section and the Event of
Default is not cured within ten (10) days of the additional Notice, Landlord may terminate this
Lease and quitclaim the Land and all Improvements to Tenant; provided, however, that the
termination of this Lease and the conveyance of the Land and Improvements to Tenant will not
terminate or otherwise restrict Tenant’s obligations to Indemnify Landlord Indemnified Parties as
required in this Lease.
21.
Default By Landlord. In the event of any breach by Landlord of any of the covenants,
agreements, terms, or conditions hereof, Tenant, as its sole and exclusive remedy, may enjoin such
breach through petition for specific performance, and Tenant will have no right to seek or recover
(and hereby expressly waives such right to seek or recover) any and all damages incurred by Tenant
including actual, special, exemplary, consequential, multiple or punitive damages.
22.
Unenforceable Terms. If any term or provision hereof or the application thereof to any
person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby, and each term and
provision hereof shall be valid and be enforced to the fullest extent permitted by law.
23.
Notices. Any notice, request, demand, statement, or consent herein required or permitted
to be given by either Party to the other in this Lease (each, a “Notice”), shall be in writing signed
by or on behalf of the Party giving the notice and addressed to the other at the address as set forth
below:
If to Landlord:
City of Mesa
Attn: City Manager
20 East Main Street
Mesa, Arizona 85201
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22
and
City of Mesa
Attn: Real Estate Manager
20 East Main Street
Mesa, Arizona 85201
With a required copy to:
City of Mesa
Attn: City Attorney
20 East Main Street, Suite 850
Mesa, Arizona 85201
If to Tenant:
With a required copy to:
If to Lender:
With a required copy to:
Each Party may by notice in writing change its address for the purpose of this Lease, which
address shall thereafter be used in place of the former address. Each Notice to any Party shall be
deemed sufficiently given, served, or sent for all purposes hereunder (i) upon personal delivery, or
(ii) one business day after deposit with any recognized courier or express service for next business
day delivery. Communications delivered by telephone or digitally shall not constitute “Notice.”
24.
Condition of Premises. Tenant represents that the Premises, the title to the Premises,
parking, drive and walk areas adjoining the Premises, the environmental condition of the Premises
and any subsurface conditions thereof, and the present uses and non-uses thereof, have been
examined by Tenant and that Tenant accepts the same in the condition or state in which they or
any of them may be on the date of the execution of this Lease, without representation or warranty,
express or implied in fact or by law, by Landlord and without recourse to Landlord, as to the nature,
condition, or usability thereof or the use or uses to which the Premises or any part thereof may be
put, except as such uses are permitted under the Development Agreement.
25.
Quiet Enjoyment. Subject to all of the conditions, terms, and provisions contained in this
Lease, Landlord covenants that Tenant, upon paying the Net Rent, and Additional Payments and
observing and keeping all terms, covenants, agreements, limitations, and conditions hereof on its
part to be kept, shall quietly have and enjoy the Premises during the term hereof, without hindrance
or molestation by Landlord.
26.
Estoppel Certificates. Landlord or Tenant may request, a certificate evidencing whether
or not:
A.
This Lease is in full force and effect along with the amount and current status of
the Net Rent and Additional Payments due hereunder;
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23
B.
This Lease has been modified or amended in any respect or describing such
modifications or amendments, if any; and
C.
There are any existing defaults under this Lease, to the knowledge of the Party
executing the certificate, and specifying the nature of such defaults, if any.
Such certificate shall be returned to the requesting Party not later than twenty (20) days following
receipt of the request, and in no event shall the certificate require that Landlord subordinate its
interest in the Premises to any Party.
27.
Consents.
A.
Parties and Notice. Whenever the consent or approval of a Party to this Lease is
required or reasonably requested under this Lease, if the Party whose consent or approval is
required fails to notify the other Party in writing within thirty (30) days (except where a different
period is otherwise specified herein for the giving of such consent or approval) after the giving of
a written request therefor in the manner specified herein for the giving of Notice, it shall be
concluded that such consent or approval has been given. Except as otherwise provided in
Applicable Laws, Landlord’s City Manager may execute and deliver any consent required by this
Lease.
B.
No Unreasonable Withholding. Wherever in this Lease the consent or approval of
either Party is required, such consent or approval shall not be unreasonably withheld, conditioned
or delayed, except and unless where otherwise specifically provided. The remedy of the Party
requesting such consent or approval, in the event such Party should claim or establish that the other
Party has unreasonably withheld or delayed such consent or approval, shall be limited to injunction
or declaratory judgment and in no event shall such other Party be liable for a money judgment.
28.
Limitation of Landlord’s Liability. Landlord shall not be responsible or liable for any
damage or injury to any property, fixtures, merchandise, or decorations or to any person or persons
at any time on the Premises from steam, gas, electricity, water, rain, or any other source whether
the same may leak into, issue or flow from any part of the Improvements or from pipes or plumbing
work of the same, or from any other place or quarter; nor shall Landlord be in any way responsible
or liable in case of any accident or injury including death to any of Tenant’s employees, agents,
subtenants, or to any person or persons in or about the Premises or the streets, sidewalks or vaults
adjacent thereto; and Tenant agrees that it will not hold Landlord in any way responsible or liable
therefor and will Indemnify the Landlord Indemnified Parties pursuant to Section 16. Landlord
shall not be liable for interference with light or incorporeal hereditaments caused by anybody or
the operation of or for any governmental authority in the construction of any public or quasi-public
work, and Landlord shall not be liable for any latent or any other defects in the Premises.
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24
29.
Miscellaneous.
A.
Landlord’s Right of Cancellation. All Parties hereto acknowledge that this
agreement is subject to cancellation by the City of Mesa for a conflict of interest pursuant to the
provisions of A.R.S. § 38-511.
B.
Choice of Law. This Lease shall be construed and enforced in accordance with the
substantive laws of the State of Arizona, without regard to principles of conflicts of laws.
C.
Memorandum. Landlord and Tenant agree that at the request of either, each will
execute a “Memorandum of Lease” in form attached hereto as Exhibit F for recording in the Office
of the County Recorder, Maricopa County, Arizona.
D.
Entire Agreement. This Lease with its schedules and annexes, contains the entire
agreement between Landlord and Tenant and any executory agreement hereafter made between
Landlord and Tenant shall be ineffective to change, modify, waive, release, discharge, terminate,
or effect an abandonment of this Lease, in whole or in part, unless such executory agreement is in
writing and signed by the Party against whom enforcement of the change, modification, waiver,
release, discharge, termination, or the effect of the abandonment is sought.
E.
Corrections and Minor Amendments. The City Manager is authorized to execute
and deliver on behalf of the Landlord, without the further consent and approval of the City Council,
amendments to this Lease that correct typographical or similar errors, revise or update legal
descriptions or other exhibits, that do not materially revise any business or policy provision of this
Lease, that otherwise are ministerial in nature, and that have been reasonably approved by Tenant.
F.
Amendments. No amendment to this Lease will be effective unless it is in writing
and has been approved by the Parties (including, but not limited to, approval by the City Council
of the City of Mesa at its sole discretion, except as set forth in Subsection (E) above). In addition,
in compliance with A.R.S. § 42-6209(C)(3), Landlord may not approve an amendment to change
the use of the Premises during the period that any statutory abatement of GPLET applies unless:
“(a) The government lessor notifies the governing bodies of the county and any city, town
and school district in which the government property improvement is located at least sixty days
before the approval. The notice must include the name and address of the prime lessee, the
location and proposed use of the government property improvement and the remaining term of the
lease or development agreement.
“(b) The government lessor determines that, within the remaining term of the lease or
development agreement, the economic and fiscal benefit to this state and the county, city or town
in which the government property improvement is located will exceed the benefits received by the
prime lessee as a result of the change in the lease or development agreement on the basis of an
estimate of those benefits prepared by an independent third party in a manner and method
acceptable to the governing body of the government lessor. The estimate must be provided to the
government lessor and the governing bodies of the county and any city, town and school district
in which the government property improvement is located at least thirty days before the vote of the
{00573918.1}
25
governing body. A change in use under a lease or development agreement between a prime lessee
and a government lessor to residential rental housing is exempt from the economic estimate
analysis requirements of this subdivision.”
G.
Captions. The captions of Sections in this Lease and any Table of Contents are
inserted only as a convenience and for reference, and they in no way define, limit, or describe the
scope of this Lease or the intent of any provision thereof. References to Section numbers are to
those in this Lease unless otherwise noted.
H.
Execution and Delivery. This Lease shall bind Tenant upon its execution thereof.
Landlord shall be bound only after it executes and delivers the Lease to Tenant following approval
by the City Council of the City of Mesa, in such Council’s sole discretion.
I.
Counterparts. This Lease may be executed by the Parties in counterparts, each of
which shall be deemed an original, but all of which together constitute one and the same
instrument.
J.
Singular and Plural, Gender. If two or more persons, firms, corporations, or other
entities constitute either the Landlord or the Tenant, the word “Landlord” or the word “Tenant”
shall be construed as if it reads “Landlords” or “Tenants,” and the pronouns “it,” “he,” and “him”
appearing herein shall be construed to be the singular or plural, masculine, feminine, or neutral
gender as the context in which it is used shall require.
K.
Multiple Parties. If at any time Landlord, Tenant, or any Permitted Mortgagee
(Landlord, Tenant or any such mortgagee being in this Section referred to as a “Party”) is other
than one individual, partnership, firm, corporation, or other entity, the act of, or notice, demand,
request, or other communication from or to, or payment of refund from or to, or signature of, or
any one of the individuals, partnerships, firms, corporations, or other entities then constituting such
Party with respect to such Party’s estate or interest in the Premises or this Lease shall bind all of
them as if all of them so had acted, or so had given or received such notice, demand, request, or
other communication, or so had given or received such payment or refund, or so had signed, unless
all of them previously have executed and acknowledged in recordable form and given a notice
(which has not theretofore been revoked by notice given by all of them) designating not more than
three individuals, partnerships, firms, corporations, or other entities as the agent or agents for all
of them. If such a notice of designation has previously been given, then, until it is revoked by
notice given by all of them, the act of, or notice, demand, request or other communication from or
to, or payment or refund from or to, or signature of, the agent or agents so designated with respect
to such Party’s estate or interest in the Premises or this Lease shall bind all of the individuals,
partnerships, firms, corporations, or other entities then constituting such Party as if all of them so
had acted, or so had given or received such notice, demand, request, or other communication, or
so had given or received such payment or refund, or so had signed.
L.
Exhibits and Incorporation. The following exhibits, which are attached hereto or
are in the possession of the Landlord and Tenant, are incorporated herein by reference as though
fully set forth:
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26
Exhibit A
Legal Description of the Land
Exhibit B
Required Insurance
Exhibit C
Prohibited Uses
Exhibit D
Special Warranty Deed Conveying Property to Tenant
Exhibit E
Certificate of Commencement Date
Exhibit F
Memorandum of Lease
M.
Immigration Reform and Control Act of 1986 (IRCA). Tenant understands and
acknowledges the applicability of the IRCA to it and agrees to comply with the IRCA for all
activities undertaken under this Lease and agrees to permit Landlord to inspect its personnel
records to verify such compliance.
N.
No Boycott of Israel. Tenant certifies pursuant to A.R.S. §35-393.01 that it is not
currently engaged in, and for the Term of this Lease will not engage in, a boycott of Israel.
O.
Preserve State Shared Revenue. Notwithstanding any other provision of, or
limitation in, this Lease to the contrary, if pursuant to A.R.S. §41-194.01 the Attorney General
determines that this Lease violates any provision of state law or the Constitution of Arizona,
Landlord and Tenant are not able (after good faith attempts) to modify the Lease so as to resolve
the violation with the Attorney General within thirty days of notice from the Attorney General
pursuant to and under the provisions of A.R.S. §41-194.01(B)(1), this Lease shall automatically
terminate at midnight on the thirtieth day after receiving such notice from the Attorney General,
and upon such termination, the Parties shall have no further obligations under this Lease.
Additionally, if the Attorney General determines that this Lease may violate a provision of state
law or the Constitution of Arizona under A.R.S. §41-194.01(B)(2), City shall be entitled to
terminate this Lease, except if Tenant timely posts such bond, if required; and provided further,
that if the Arizona Supreme Court determines that this Lease violates any provision of state law or
the Constitution of Arizona, City may terminate this Lease and convey or quitclaim the Land and
Improvements to Tenant; and the Parties shall have no further obligations hereunder.
30.
Equal Employment Opportunity. Tenant shall comply with all ordinances and other
requirements of the City of Mesa relating to nondiscrimination and equal employment opportunity.
In performing under this contract, Tenant shall not discriminate against any worker, employee or
applicant, or any member of the public, because of race, color, religion, gender, national origin,
age, sexual orientation or disability, nor otherwise commit an unfair employment practice. Tenant
will take affirmative action to ensure that applicants are employed, and that employees are dealt
with during employment, without regard to their race, color, religion, gender, national origin, age,
sexual orientation or disability. Such action shall include, but not be limited to, the following:
employment, upgrading, demotion or transfer; recruitment or recruitment advertising; layoff or
termination; rates of pay or other forms of compensation; and selection for training including
apprenticeship. Tenant further agrees that this clause will be incorporated in all subcontracts
entered into with suppliers of materials or services, and all labor organization furnishing skilled,
unskilled and union labor, or who may perform such labor or services in connection with this
contract.
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27
31.
Force Majeure; Extension of Time of Performance. In addition to specific provisions
of this Lease, performance by any Party hereunder shall not be deemed to be in default where
delays or defaults are due to war; insurrection; strikes, lock-outs; riots; floods; earthquakes; fires;
casualties; acts of God; acts of the public enemy; a Public Health Event (as defined below); freight
embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually
severe weather; inability (when either Party is faultless) of any contractor, subcontractor or
supplier; acts of the other Party (each, an event of “Force Majeure”). For purposes of this
Agreement, “Public Health Event” means any one or more of the following but only if and as
ordered by an applicable governmental authority: epidemics; pandemics; plagues; viral, bacterial
or infectious disease outbreaks; public health crises; national health or medical emergencies;
governmental restrictions on the provision of goods or services or on citizen liberties including
travel, movement, gathering or other activities, in each case arising in connection with any of the
foregoing, and including governmentally-mandated closure, quarantine, “stay-at-home,” “shelter-
in-place” or similar orders or restrictions; or workforce shortages or disruptions of material or
supply chains resulting from any of the foregoing. A lack of funds or inability to obtain funds shall
not be included in this definition of Force Majeure; nor shall events of Force Majeure excuse any
required payment by Tenant to Landlord that are required under this Lease. An extension of time
for any such cause shall only be for the period of the enforced delay, which period shall commence
to run from the time of the commencement of the cause. If, however, notice by the Party claiming
such extension is sent to the other Party more than thirty (30) days after the commencement of the
cause, the period shall commence to run only thirty (30) days prior to the giving of such notice.
32.
Compliance With Environmental Laws.
A.
Definitions.
(1)
“Environmental Laws” means those laws promulgated for the protection
of human health or the environment including (but not limited to) the following as the same are
amended from time to time: the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. §§9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
§§6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. §§2601 et seq.; the Safe Drinking
Water Act, 42 U.S.C. §§ 300f et seq.; the Clean Water Act, 33 U.S.C. §§1251 et seq.; the Clean
Air Act, 42 U.S.C. §§7401 et seq.; the Arizona Environmental Quality Act, A.R.S. §§49-101 et
seq.; the Occupational Safety and Health Act of 1970, as amended, 84 Stat. 1590, 29 U.S.C. §§651-
678; Maricopa County Air Pollution Control Regulations; Archaeological Discoveries, A.R.S.
§§41-841 et seq.; regulations promulgated thereunder and any other laws, regulations and
ordinances (whether enacted by the local, county, state or federal government) now in effect or
hereinafter enacted that deal with Regulated Substances and the regulation or protection of human
health and the environment including, but not limited to, the ambient air, ground water, surface
water, and Land use including substrata soils.
(2)
“Regulated Substances” means:
(a)
Any substance identified or listed as a hazardous substance,
pollutant, hazardous material, or petroleum in the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. §§9601 et seq.; the Hazardous Materials
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28
Transportation Act, 49 U.S.C. §1801 et seq., and in the regulations promulgated thereto; and
Underground Storage Tanks, U.S.C. §§6991 to 6991i.
(b)
Any substance identified or listed as a hazardous substance,
pollutant, toxic pollutant, petroleum, or as a special or solid waste in the Arizona Environmental
Quality Act, A.R.S. §§49-201 et seq.; including, but not limited to, the Water Quality Assurance
Revolving Fund Act, A.R.S. §§49-281 et seq.; the Solid Waste Management Act, A.R.S. §§49-
701 et seq.; the Underground Storage Tank Regulation Act, A.R.S. §§49-1001 et seq.; and
Management of Special Waste, A.R.S. §§49-851 to 49-868.
(c)
All substances, materials and wastes that are, or that become,
regulated under, or that are classified as hazardous or toxic under any Environmental Law during
the term of this Agreement.
(3)
“Release” means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or dumping.
B.
Compliance. Tenant shall, at Tenant’s own expense, comply with all present and
hereinafter enacted Environmental Laws, and any amendments thereto, affecting Tenant’s
operation on the Premises. Tenant shall not cause or permit any Regulated Substance to be used,
generated, manufactured, produced, stored, brought upon, or released on, or under the Premises,
or transported to or from the Premises, by Tenant, its agents, employees, contractors, invitees or a
third party in a manner that would constitute or result in a violation of any Environmental Law or
that would give rise to liability under an Environmental Law.
C.
Indemnification.
(1)
Tenant shall indemnify, defend, pay and hold harmless, upon written
demand, the Landlord Indemnified Parties (as defined in Section 16(A)), for, from and against any
and all liabilities, obligations, damages, charges and expenses, penalties, suits, fines, claims, legal
and investigation fees or costs, arising from or related to any claim or action for injury, liability,
breach of warranty or representation, or damage to persons, property, the environment or the
Premises and any and all claims or actions brought by any person, entity or governmental body,
alleging or arising in connection with contamination of, or adverse effects on, human health,
property or the environment pursuant to any Environmental Law, the common law, or other statute,
ordinance, rule, regulation, judgment or order of any governmental agency or judicial entity, which
are incurred or assessed as a result, whether in part or in whole, of any use of the Premises during
the Term of this Lease or any previous lease or uses of the Premises by Tenant or its owners or
affiliated entities, agents, employees, invitees, contractors, visitors or licensees. Regardless of the
date of termination of this Lease, Tenant’s obligations and liabilities under this Section shall
continue so long as the Landlord bears any liability or responsibility under the Environmental
Laws for any use of the Premises during the term of this Lease. This Indemnification of the
Landlord Indemnified Parties by Tenant includes, without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial actions, removal or restoration
work required or conducted by any federal, state or local governmental agency or political
subdivision because of Regulated Substances located on the Premises or present in the soil or
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29
ground water on, or under the Premises. The Parties agree that Landlord’s right to enforce this
covenant to Indemnify is not an adequate remedy at law for Tenant’s violation of any provision of
this Section and that Landlord shall also have the rights set forth in this Section in addition to all
other rights and remedies provide by law or otherwise provided for in this Lease.
(2)
Without limiting the foregoing, if the presence of any Regulated Substance
on, or under the Premises results in any contamination of the demised Premises or any adjacent
real property during the Term of this Lease, Tenant shall promptly take all actions at its sole cost
and expense as are necessary to mitigate any immediate threat to human health or the environment.
Tenant shall then undertake any further action necessary to return the Premises or other property
to the condition existing prior to the introduction of any Regulated Substance to the Premises;
provided that Landlord’s written approval of such actions shall first be obtained, such consent not
to be unreasonably withheld, conditioned or delayed, Tenant shall undertake such actions without
regard to the potential legal liability of any other person, however, any remedial activities by
Tenant shall not be construed as to impair Tenant’s rights, if any, to seek contribution or indemnity
from another person.
(3)
Tenant shall, at Tenant’s own cost and expense, make all tests, reports,
studies and provide all information to any appropriate governmental agency as may be required
pursuant to the Environmental Laws pertaining to Tenant’s use of the Premises. This obligation
includes, but is not limited to, any requirements for a site characterization, site assessment and/or
a cleanup plan that may be necessary due to any actual or potential spills or discharges of Regulated
Substances on, or under the Premises, during the term of this Lease. At no cost or expense to
Landlord, Tenant shall promptly provide all information requested by Landlord pertaining to the
applicability of the Environmental Laws to the Premises, to respond to any governmental
investigation, or to respond to any claim of liability by third parties which is related to
environmental contamination.
In addition, Landlord shall have the right to access, within ten (10) days of Tenant’s receipt
of written request, and copy any and all records, test results, studies and/or other documentation,
other than trade secrets, regarding environmental conditions relating to the use, storage, or
treatment of Regulated Substances by the Tenant on, or under the Premises.
(4)
Tenant shall immediately notify Landlord, and Landlord shall immediately
notify Tenant, as applicable, of any of the following: (a) any correspondence or communication
from any governmental agency regarding the application of Environmental Laws to the Premises
or Tenant’s use of the Premises, (b) any change in Tenant’s or Landlord’s use of the Premises that
will change or has the potential to change Tenant’s or Landlord’s obligations or liabilities under
Environmental Laws, and (c) any assertion of a claim or other occurrence for which Tenant or
Landlord may incur an obligation under this Section.
(5)
Tenant shall insert the provisions of this Section in any sublease agreement
or contract by which it grants a right or privilege to any person, firm or corporation under this
Lease.
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30
(6)
Tenant shall, at its own expense, obtain and comply with any permits or
approvals that are required or may become required as a result of any use of the Premises by the
Tenant, its agents, employees, contractors, invitees and assigns.
(7)
Tenant shall obtain and maintain compliance with any applicable financial
responsibility requirements of federal and/or state law regarding the ownership or operation of any
underground storage tank(s) or any device used for the treatment or storage of a Regulated
Substance and present evidence thereof to Landlord, as may be applicable.
D.
Noncompliance.
(1)
Tenant’s failure or the failure of its agents, employees, contractors, invitees
or of a third party to comply with any of the requirements and obligations of this Section or
applicable Environmental Law shall constitute a material default of this Lease. Notwithstanding
any other provision in this Lease to the contrary, after applicable notice and right to cure, Landlord
shall have the right of “self-help” or similar remedy in order to minimize any damages, expenses,
penalties and related fees or costs, arising from or related to a violation of Environmental Law on,
or under the Premises, without waiving any of its rights under this Lease. The exercise by Landlord
of any of its rights under this Section shall not release Tenant from any obligation it would
otherwise have hereunder.
(2)
The covenants in this Section shall survive the expiration or earlier
termination of this Lease for a period of two (2) years.
33.
Purchase and Re-acquisition of Premises. The Parties acknowledge the requirement of
A.R.S. §42-6209(G) that the Term of this Lease is prohibited from extending beyond eight (8)
years from the issuance of a certificate of occupancy for the Project. In recognition of this
limitation and requirement, Tenant agrees to re-acquire its fee interest in the Premises at the end
of the Term (or earlier termination of this Lease). Landlord and Tenant hereby confirm Tenant’s
obligation to purchase the Premises according to the terms and conditions hereinafter set forth.
A.
Requirement of Exercise. Notwithstanding anything in this Lease to the contrary,
Tenant is obligated to purchase the Premises at the expiration of the Term (or earlier termination
of this Lease). In the event that Tenant fails to complete the purchase of the Premises within six
(6) months following the expiration of the Term (or earlier termination of this Lease), Landlord
will quitclaim its interest in the Premises to Tenant (subject to all public easements and public
utility easements existing in favor of or benefiting the City of Mesa, Arizona), but will retain all
rights of Indemnification granted in this Lease including (but not limited to) Section 16 and Section
32.
B.
Exercise of Obligation. Tenant’s obligation to purchase the Premises is effective,
and Tenant has the right to purchase of the Premises, at any time after the execution of this Lease;
provided that Tenant’s right to purchase is conditioned upon Tenant curing any monetary default
then existing under this Lease; and further provided that Landlord may waive this requirement in
Landlord’s sole discretion. Tenant may purchase the Premises at any time during the Rental Period
by delivering Notice of its intent to purchase the Premises to Landlord (the “Reacquisition
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31
Notice”); and the purchase of the Premises by Tenant must be completed no later than the earlier
of (i) six (6) months following the delivery of the Reacquisition Notice to Landlord, or (ii) six (6)
months after the expiration of the Term (or earlier termination of this Lease).
C.
Purchase Price. The Purchase Price for the Premises (“Purchase Price”) is Five
Thousand and no/100 Dollars ($5,000.00). The Purchase Price reflects the fact that Tenant initially
owned the Land and constructed all of the Improvements at Tenant’s sole cost and expense and is
intended to cover Landlord’s administrative, legal and related expenses in connection with the
transfer of the Premises to Tenant.
D.
Conveyance of Title and Delivery of Possession. Landlord and Tenant agree to
perform all acts necessary to complete the conveyance of the Premises to Tenant within ninety
(90) days after delivery to Landlord of Tenant’s Reacquisition Notice, or on the last day of the
Rental Period, whichever first occurs. Landlord shall convey title to the Premises to Tenant (by
Special Warranty Deed in the form attached to this Lease as Exhibit D) in the same condition as
title was transferred to Landlord in the Landlord Deed, and subject to the Exceptions and all other
matters of record, and further subject to all easements and similar rights in favor of the City of
Mesa with Tenant accepting all matters, claims, liens, instruments and exceptions (and Landlord
having no liability or responsibility therefor) recorded against (or otherwise affecting) the Land
and Improvements from and after the date of the Landlord Deed. Landlord has no responsibility
to eliminate, cure or “endorse over” any exceptions to title; and provided further, the Parties agree
that all public easements in favor of the City of Mesa are approved title exceptions on the Land.
Landlord’s then acting City Manager (or such City Manager’s designee) is authorized to execute
and deliver the Deed on behalf of Landlord. All expenses in connection with conveyance of the
Premises to Tenant including, but not limited to, title insurance (if requested by Tenant),
recordation and notary fees and all other closing costs (including escrow fees if use of an escrow
is requested by Tenant), shall be paid by Tenant. Tenant is not required to deliver a Reacquisition
Notice to Landlord at the expiration of the Rental Period if there has been no earlier termination
of this Lease. Although Tenant will have been in actual possession of the Premises throughout the
Term, (i) legal possession of the Premises will be deemed to have been delivered to Tenant
concurrently with the conveyance of title pursuant to the Deed, and (ii) Landlord Indemnified
Parties will retain all rights of Indemnification granted in this Lease including (but not limited to)
Section 16 and Section 32. The terms of this Section will survive the termination of this Lease and
the recordation of any deed from Landlord to Tenant.
Signatures of Landlord and Tenant are on the following two (2) pages.
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32
34.
Signatures. The Parties have executed this Lease to be effective as of the Execution Date.
LANDLORD:
CITY OF MESA, ARIZONA,
a municipal corporation
By:
_______________________________
Name: _______________________________
Its:
_______________________________
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33
TENANT:
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34
Exhibit A to Government Property Improvements Lease
Legal Description of the Land
[See attached]
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35
Wood, Patel & Associates, Inc.
July 7, 2026
602.335.8500
WP# 255775
www.woodpatel.com
Page 1 of 4
11
LEGAL DESCRIPTION
AC Hotel Mesa AZ Lot
1
A portion of Lots 3 and 4, Block 8, Mesa Arizona, recorded in Book 23, page 18, Maricopa County
Records (MCR), lying within the northeast quarter of Section 22, Township 1 North, Range 5 East,
of the Gila and Salt River Meridian, Maricopa County, Arizona, more particularly described as
follows:
COMMENCING at the intersection of Main Street and Centennial Way, a calculated position
based on the Record of Survey for Central Mesa Light-Rail Extension, recorded in Book 1257,
page 45, MCR, from which the intersection of Main Street and Hibbert, a calculated position based
on said Record of Survey, bears South 89°45'21" East (basis of bearing), a distance of 794.95 feet;
THENCE along the centerline of said Main Street, South 89°45'21" East, a distance of 65.97 feet;
THENCE leaving said centerline, North 00°14'39" East, a distance of 66.00 feet, to the east right-
of-way line of said Centennial Way and the POINT OF BEGINNING;
THENCE along said east right-of-way line, North 00°13'05" East, a distance of 144.50 feet;
THENCE leaving said east right-of-way line, South 89°45'21" East, a distance of 171.64 feet, to
the west line of the east 160 feet of said Lot 3;
THENCE along said west line, South 00°15'48" West, a distance of 14.42 feet, to the north line of
the south 130.08 feet of said Lot 3;
THENCE leaving said west line, along said north line, South 89°45'21" East, a distance of 100.00
feet, to the west line of the east 60 feet of said Lot 3;
THENCE leaving said north line, along said west line, South 00°15'48" West, a distance of 130.08
feet, to the north right-of-way line of said Main Street;
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Legal Description
July 7, 2026
AC Hotel Mesa AZ
WP# 255775
Lot 1
Page 2 of 4
THENCE leaving said west line, along said north right-of-way line, North 89°45'21" West, a
distance of 271.53 feet, to the POINT OF BEGINNING.
Containing 37,802 square feet or 0.8678 acres, more or less. Subject to existing right-of-ways and
easements.
This legal description is based on client provided information and is located within an area surveyed by
Wood, Patel & Associates, Inc. during the month of June, 2026. Any monumentation noted in this legal
description is within acceptable tolerance (as defined in Arizona Boundary Survey Minimum Standards
dated 02/14/2002) of said positions based on said survey
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Exhibit B to Government Property Improvements Lease
Insurance Requirements
Tenant shall procure and maintain insurance during the applicable “Coverage Period,” as
shown on the below chart, against claims for injury to persons or damage to property which may
arise from or in connection with the Premises and/or in the performance of work or construction
of the Premises by Tenant, its agents, representatives, employees, contractors, or subcontractors.
The insurance requirements herein are minimum requirements for the Lease, of which this
Exhibit is a part (“Lease”), and in no way limits the indemnity covenants contained in the Lease.
Landlord in no way warrants that the minimum limits contained herein are sufficient to protect
Tenant from liabilities that might arise from or in connection with the Premises, and Tenant is free
to purchase additional insurance as Tenant may determine.
A.
MINIMUM SCOPE AND LIMITS OF INSURANCE: Tenant shall provide coverage
during the Coverage Period and with limits of liability not less than those stated below.
Type
Amount
Coverage Period
General Liability (which shall
include operations, products,
completed operations, and
contractual liability coverage)
With limits not less than
$3,000,000 combined single
limit per occurrence and not
less than $5,000,000 general
aggregate.
Coverage shall be in effect
upon or prior to and remain in
effect for the Term of the
Lease.
Property (all risks of loss
including risks covered by
fire and extended coverage,
terrorism, vandalism and
malicious mischief)
In an amount not less than
full replacement cost of
structure and all fixtures.
Coverage shall be in effect
upon or prior to the earlier of
when the Builder’s Risk
policy is no longer in effect
or when substantial
completion of construction
and a final certificate of
occupancy is obtained, and
coverage shall thereafter
remain in effect for the
remainder of the Term of the
Lease.
Commercial Automobile
Liability
With limits not less than
$1,000,000 each occurrence,
Combined Single Limit for
bodily injury and property
damage covering owned,
non-owned and hired auto
coverage as applicable.
Coverage shall be in effect
upon or prior to and remain in
effect for the Term of the
Lease.
Workers’ Compensation
Employers’ Liability
Statutory Limits
Coverage shall be in effect
upon or prior to and remain in
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$500,000 each accident, each
employee
effect for the Term of the
Lease.
Liquor Liability
$5,000,000
Coverage shall be in effect
upon or prior to and remain in
effect for the Term of the
Lease, provided Tenant sells
and/or serves alcohol
Professional Liability
$2,000,000
Coverage shall be in effect
upon or prior to any
construction activities and
maintained until the
substantial completion of
construction and a final
certificate of occupancy is
obtained.
Blanket Crime Policy
$1,000,000
Coverage shall be in effect
upon or prior to and remain in
effect for the Term of the
Lease.
Equipment Breakdown
Coverage
$5,000,000 (or such other
amount as agreed to in
writing between the Parties
that is sufficient to cover all
such risks)
Coverage shall be in effect
upon or prior to the earlier of
when the Builder’s Risk
policy is no longer in effect
or when substantial
completion of construction
and a final certificate of
occupancy is obtained, and
coverage shall thereafter
remain in effect for the
remainder of the Term of the
Lease.
B.
ADDITIONAL INSURANCE REQUIREMENTS: The policies shall include, or be
endorsed to include, provisions with the following effect:
1.
Landlord, and its agents, officials, volunteers, officers, elected officials, and
employees, shall be named as additional insureds and added by endorsements on all general
liability insurance policies and commercial automotive liability policies.
2.
On insurance policies where the Landlord is to be named as an additional insured,
the Landlord shall be named as additional insured to the full limits and to the same extent of
coverage as the insurance purchased by Tenant, even if those limits of coverage are in excess of
those required by the Lease.
3.
The Tenant’s insurance coverage shall be primary and non-contributory with
respect to all other Landlord insurance sources.
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4.
All policies shall include a waiver of subrogation rights in favor of the Landlord,
its agents, officials, volunteers, officers, elected officials, and employees. Tenant shall obtain a
workers’ compensation policy that is endorsed with a waiver of subrogation in favor of Landlord
for all work performed by Tenant, its employees, agents, contractors and subcontractors. Tenant
agrees to obtain any endorsement that may be necessary to comply with this waiver of subrogation
requirement.
5.
All general liability policies shall include coverage for explosion, collapse,
underground work, and contractual liability coverage, which shall include (but is not limited to)
coverage for Tenant’s indemnification obligations under the Lease.
6.
Landlord shall be named as Loss Payee on all property insurance policies. Proceeds
of any property damage insurance shall be applied as required by Section 17 of this Lease.
C.
EXCESS OR UMBRELLA POLICY: In addition to a primary policy, an excess or
umbrella policy may be used to meet the minimum requirements if the excess or umbrella coverage
is written on a “following form” basis.
D.
NOTICE OF CANCELLATION: Tenant shall use good faith efforts to obtain from each
insurance company a provision in each insurance policy to the effect that it shall not be suspended,
voided, cancelled, or reduced in coverage except after thirty (30) days’ prior written notice has
been given to Landlord. Such notice shall be sent directly to Risk Management, City Attorney’s
Office, City of Mesa, 20 E. Main Street, P.O. Box 1466, MS-1077, Mesa, Arizona 85211-1466.
E.
ACCEPTABILITY OF INSURERS: Insurance is to be placed with insurers duly licensed
or authorized to do business in the State of Arizona and with an “A.M. Best” rating of not less than
A- VII. Landlord in no way warrants that the above-required minimum insurer rating is sufficient
to protect the Tenant from potential insurer insolvency.
F.
ENDORSEMENTS AND VERIFICATION OF COVERAGE: Tenant shall provide
Landlord with Certificates of Insurance signed by the Issuer with applicable endorsements for all
policies as required herein. All Certificates of Insurance and any required endorsements are to be
received and approved by the Landlord before the applicable Coverage Period. Each applicable
insurance policy required by the Lease must be in effect at or prior to and remain in effect for the
Coverage Period. All Certificates of Insurance and endorsements shall be sent directly to the City
Attorney, City Attorney’s Office, City of Mesa, 20 E. Main Street, P.O. Box 1466, MS-1077,
Mesa, Arizona 85211-1466. Landlord reserves the right to require complete copies of all insurance
policies required by the Lease at any time, but not more than once each twelve consecutive months
during the Term of the Lease.
G.
TENANT’S DEDUCTIBLES AND SELF-INSURED RETENTIONS: Any deductibles or
self-insured retention in excess of $250,000 shall be declared to and be subject to approval by
Landlord. Tenant shall be solely responsible for the payment of any deductible or self-insured
amounts and waives any rights it may have to seek recovery of such amounts from Landlord and
its agents, officials, volunteers, officers, elected officials, and employees.
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H.
TENANT’S CONTRACTORS AND DESIGN PROFESSIONALS: Tenant shall require
and verify that the general contractor and all subcontractors maintain reasonable and adequate
insurance with respect to any work on or at the Premises, all such policies shall include: (i) a waiver
of subrogation rights in favor of the Landlord, its agents, officials, volunteers, officers, elected
officials, and employees, (ii) a waiver of liability in favor of the Landlord, its agents, officials,
volunteers, officers, elected officials, and employees releasing and holding harmless the same from
any and all liability for any and all bodily injury, including death, and loss of or damage to
property, and (iii) Landlord, and its agents, officials, volunteers, officers, elected officials, and
employees, shall be named as additional insureds and added by endorsements on all general
liability insurance policies and commercial automotive liability policies. Tenant shall require all
design professionals (e.g., architects, engineers) to obtain Professional Liability Insurance with
limits of liability not less than those stated in the above chart.
I.
LANDLORD’S RIGHT TO ADJUST. With written notice to Tenant of not less than 60
days, Landlord may reasonably adjust the amount and type of insurance Tenant is required to
obtain and maintain under this Lease as reasonably required by Landlord from time-to-time.
J.
FAILURE TO PROCURE. If Tenant fails to procure or maintain any insurance required
hereunder, Landlord may, but is not required to, procure and maintain any or all of the insurance
required of Tenant under this Lease. In such event, all costs of such insurance procured and
maintained by Landlord shall be the responsibility of Tenant and shall be fully reimbursed to
Landlord within ten (10) business days after Landlord’s request payment thereof.
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Exhibit C to Government Property Improvements Lease
Prohibited Uses
1.
Alcohol Beverage Sales, as defined by Section 11-64-4 of the Zoning Ordinance,
except as part of a restaurant or bar concept, room service at the Hotel, or in-room bars at the Hotel
(e.g., mini bars).
2.
Kennel, as defined by Section 11-64-4 of the Zoning Ordinance.
3.
Marijuana Cultivation Facility, Marijuana: Dual Licensee Facility, Marijuana
Establishment, Marijuana Infusion Facility, and Medical Marijuana Dispensary, each as defined
by Section 11-86-5 of the Zoning Ordinance.
4.
Non-chartered Financial Institution, as defined by Section 11-64-4 of the Zoning
Ordinance.
5.
Off-Track Betting Establishment, as defined by Section 11-86-4 of the Zoning
Ordinance.
6.
Pawn Shops, as defined by Section 11-64-4 of the Zoning Ordinance.
7.
Social Service Facility, as defined by Section 11-64-4 of the Zoning Ordinance.
8.
Tattoo and Body Piercing Parlors, as defined by Section 11-64-4 of the Zoning
Ordinance, to the maximum extent such prohibition is allowed by law.
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Exhibit D to Government Property Improvements Lease
When Recorded, Mail to:
City of Mesa
Real Estate Services
20 East Main Street, Suite 500
Mesa, Arizona 85201
====================================================================
SPECIAL WARRANTY DEED
====================================================================
For the consideration of the sum of Ten Dollars ($10.00) and other valuable consideration
received, City of Mesa, Arizona, an Arizona municipal corporation (“Grantor”), does hereby
convey to _______ (“Grantee”), all of Grantor’s right, title and interest in and to the following
described real property situated in Maricopa County, Arizona, together with all Improvements
thereon and all of Grantor’s interest in any rights and privileges appurtenant thereto:
SEE EXHIBIT “A” ATTACHED HERETO AND BY THIS
REFERENCE MADE A PART HEREOF (the “Property”);
Subject to all matters of record as of the date of recording of this deed in the Official
Records of the Maricopa County Recorder’s Office; municipal and public taxes and assessment;
conditions, easements, encroachments, rights-of-way, or restrictions, which a physical inspection
or accurate ALTA survey of the Property would reveal; and applicable municipal, county, state,
or federal zoning and use regulations;
And Grantor hereby binds itself and its successors to warrant and defend the title against
all of the acts of Grantor done or performed in Grantor’s capacity and status as holder of fee title
to the Property pursuant to the terms of that certain Government Property Improvements Lease
dated _____________ and which has expired, but not as against the lawful acts of Grantor in its
capacity as a municipal corporation) and no other, subject to the matters set forth above.
In witness whereof, Grantor has caused this Special Warranty Deed to be executed as of
this ___ day of ______, 202__.
(Signatures on the following pages)
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GRANTOR:
City of Mesa, Arizona, an Arizona municipal corporation
By:_____________________________
Name: ______________________
Its:__________________________
STATE OF ARIZONA
)
) ss.
County of Maricopa
)
On this the ____ day of __________, 20___, before me, the undersigned Notary Public,
personally appeared ______________________________, who acknowledged ____self to be the
________________________ of the City of Mesa, Arizona, an Arizona municipal corporation,
and that, being authorized so to do, __he executed the foregoing instrument for the purposes herein
contained on behalf of the Grantor.
In witness whereof, I hereunto set my hand and official seal.
___________________________
Notary Public
My Commission Expires:
__________________________
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IN WITNESS WHEREOF, Grantee has approved and accepted this Special Warranty Deed
as of this ___ day of ______, 20___.
GRANTEE:
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Exhibit “A” to Special Warranty Deed
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Exhibit E to Government Property Improvements Lease
================================================================
CERTIFICATE OF COMMENCEMENT DATE
================================================================
Landlord and Tenant under that certain Government Property Improvements Lease dated
with an Execution Date of ________________, and to which this Exhibit “E” is attached (the
“Lease”), hereby certify and confirm that the “Commencement Date” of the Lease (as defined in
Section 4(C) of the Lease) is _____________ (notwithstanding a different Execution Date or date
of execution of this Certificate), and that the Lease expires at the end of the eighth (8th) year
following the Commencement Date.
DATED: _________, 202__.
[Signature Page Follows]
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[Signature Page to Certificate of Commencement]
TENANT:
LANDLORD:
City of Mesa, Arizona, an Arizona municipal
corporation
By:
__________________________________
Printed Name:
___________________________
Its:
___________________________________
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Exhibit F to Government Property Improvements Lease
Form of Memorandum of Lease
WHEN RECORDED RETURN TO:
City of Mesa
Real Estate Services
20 East Main Street, Suite 500
Mesa, Arizona 85201
===============================================================
MEMORANDUM OF LEASE
===============================================================
This memorandum of lease constitutes constructive notice of record that there is in
existence a government property improvement lease as generally described in this memorandum
(the “Lease”). This memorandum is executed by the Landlord and the Tenant for recording
purposes only as to the Lease, and it is not intended and shall not modify, amend, supersede or
otherwise effect the terms and provisions of said Lease. In the event of a conflict or ambiguity
between anything contained in the Lease, and anything contained in this memorandum, the Lease
will control and prevail. Capitalized terms in this memorandum of lease that are not defined herein
have the meanings ascribed to them in the Lease.
1.
Name of Document:
Government Property Improvement Lease
2.
Name of Landlord:
City of Mesa, Arizona, an Arizona municipal corporation
(the “Landlord”)
3.
Name of Tenant:
(the “Tenant”)
4.
Address of Landlord: City of Mesa
20 East Main Street, Suite 200
Mesa, Arizona 85211-1466
5.
Address of Tenant:
6.
Date of Lease:
_______________________________________
7.
Lease Term: Commencing on the Commencement Date and expiring
eight (8) years thereafter.
8.
Commencement Date: _______________________________________
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9.
Title Transfer:
Landlord will convey title to the Leased Premises at the end
of the Lease Term, on the conditions set forth in the Lease.
10. Leased Premises:
The real property legally described in Exhibit “A” attached
hereto and made a part hereof, together with the government
property improvements, and all other improvements, related
rights, and appurtenances thereto
A copy of the Lease is maintained at the offices of the Landlord and the Tenant at their
respective addresses set forth above.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum of
Lease on __________ , 2025.
(Signatures and acknowledgments are on the following two pages)
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LANDLORD’S SIGNATURE PAGE
Landlord:
City of Mesa, Arizona, an Arizona municipal
corporation
By:
Name:
Its:
STATE OF ARIZONA
)
) SS
COUNTY OF MARICOPA )
The foregoing was acknowledged before me this _____ day of _________, 20__, by
_______________the __________________of the CITY OF MESA, ARIZONA, an Arizona
municipal corporation, on behalf of the City.
________________________________
Notary Public
My commission expires: ________________
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TENANT’S SIGNATURE PAGE
TENANT:
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Exhibit “A” to Memorandum of Lease