Document:

Exhibit 10.21

 

GROUND LEASE

 

THIS GROUND LEASE (hereafter “Lease”) is made effective as of the 29th
day of July 1998, by and among John M. Huish, Trustee of the Huish Land Trust
dated May 24,1984, as to an undivided fifty (50%) interest, and Carolyn B. Huish
Properties, a California limited partnership, by John M. Huish general partner,
as to an undivided fifty (50%) interest, (hereafter, collectively the “Landlord”);
Festival Fun Parks, LLC, a Delaware limited liability company (hereafter “Tenant”)
who hereby agree as follows:

 

RECITALS

 

This Lease is
entered into in contemplation of the following facts and circumstances:

 

A.                      Landlord
owns certain real property located in the City of San Diego, County of San
Diego, State of California, commonly known as San Diego (805) Family Fun Center
and legally described in Exhibit “A” attached hereto (the “Land”).

 

B.                        Tenant
is acquiring the Improvements and Buildings (as hereinafter defined) located on
the Land from Huish Family Fun Centers, Inc., a California corporation (“HFFC”)
concurrent with execution of this Lease and Landlord desires to lease to Tenant
and Tenant desires to lease from Landlord the Land upon the terms and
conditions set forth herein.

 

LEASE

 

For and in consideration of the rents to be paid and covenants to be
performed by Tenant under this Lease, Landlord hereby agrees to lease, and
Tenant agrees to hire from Landlord, on the terms and conditions set forth in
this Lease, the Land, together with all easements, rights, and [ILLEGIBLE] in
connection therewith. As of the date of this Lease, Landlord has terminated all
other [ILLEGIBLE] of the Land. Except as expressly provided to the contrary in
this Lease, any reference to “Land” means the real property plus any
appurtenances and easements described in Exhibit “A” exclusive of any
Improvements now or hereafter located on the Land, notwithstanding that any
such Improvements may or shall be construed as affixed to and as constituting
part of the Land as fixtures or otherwise, and without regard to whether
ownership of the Improvements is in Landlord or in Tenant.

 

Title to the leasehold estate created and demised under this Lease is
subject to all exceptions, easements, rights, rights-of-way and other matters
of record, set forth in the preliminary report issued by Chicago Title
Insurance Company dated March 10, 1998, a copy of which is attached hereto as
Exhibit “B”.

 

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1.                          USE.
Tenant shall use the Land for the purpose of constructing, maintaining, and
operating for profit an amusement facility under the trade name Festival Fun
Parks, LLC including, without limitation, the following amusement attractions:
miniature golf; baseball batting cages; electronic games; bumper boats;
go-karts; mazes; hard rides; and other Festival Fun Parks attractions;
provided, however, Tenant can vary the use consistent with the then highest and
best use of the Land, as reasonably determined by Tenant from time to time
during the term, in which event Landlord agrees not to unreasonably withhold
its consent to amend this paragraph to allow and authorize such alternate use;
provided however, Landlord may consider the impact of the proposed change on
the Gross Income derived from the Land, Buildings and  Improvements in giving or withholding its
consent. Subject to such right of Landlord, Landlord acknowledges that Tenant
may change the use of the Land pursuant to Paragraph 6.1 of this Lease. Tenant
shall use commercially reasonable efforts to use and permit use of the Land for
purposes permitted by this Paragraph 1 which in Tenant’s reasonable opinion
will maximize Gross Income (as hereinafter defined). Tenant shall not use and
shall not permit or suffer the Land or any portion of the Land to be used in
any manner that would violate the provisions of any certificate of occupancy or
conditional use permit issued with respect to any of the Improvements, or any
other license, permit, or other governmental authorization that is required for
the lawful use or occupancy of all or any portion of the Land or the
Improvements. If any license, permit or other governmental authorization is
required for the lawful use or occupancy of all or any portion of the Land or
the Improvements, Tenant shall procure and maintain the same throughout the
term of this Lease or throughout the duration of the period the same shall be
required. Tenant will not use the Land inconsistent with any private covenant,
condition or restriction, currently recorded or hereafter consented to in
writing by Tenant (“CC&R’s”), any conditional use permit (“CUP”) or any
other zoning or other restrictive provision to which the Land is subject.

 

2.                          TERM.
The term of this Lease is 34 years and 11 months, beginning on the date of this
Lease and ending at 12:00 midnight May 31, 2033, unless sooner terminated as
provided for in this Lease.

 

3.                          RENT.
Tenant shall pay to Landlord without abatement, deduction, diminution, offset,
or reduction the following sums during the terms of the Lease:

 

3.1                     Percentage
Rent. Tenant shall pay to Landlord (in their respective undivided
percentage interests) the following amount as Percentage Rent during the term
of this Lease:

 

3.1.1            Except as provided in Section 3.1.2 below,
Tenant shall pay to Landlord Twelve Percent (12%) of Tenant’s Gross Income from
its business operations on the Land (“Percentage Rent”). Any Percentage Rent
payable under this Lease shall be payable, in arrears, on the 21st day of each
month based on Tenant’s Gross Income from the next preceding month. Tenant
shall pay Percentage Rent to Landlord at the address indicated herein for
notices to

 

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Landlord. In no
event shall the Percentage Rent due from Tenant to Landlord during each Fiscal
Year (as defined in Section 3.1.5 below), be less than Two Hundred Forty
Thousand Dollars ($240,000) (the “Minimum Rent”). If at the end of the Fiscal
Year, Percentage Rent paid to Landlord does not equal or exceed Two Hundred
Forty Thousand Dollars ($240,000) in that Fiscal Year, Tenant shall remit the
difference between the Percentage Rent paid during that Fiscal Year and Two
Hundred Forty Thousand Dollars ($240,000) on July 21 of the ensuing Fiscal
Year. Tenant shall pay to Landlord a minimum of Two Hundred Forty Thousand
Dollars ($240,000) rent during any Fiscal Year or Twelve Percent (12%) of all
Gross Income, whichever is greater.

 

3.1.2            Tenant may propose and Landlord will accept
a sublease by Tenant to a McDonald’s franchise or an equivalent food provider
on the Land provided the rent to be paid to Landlord by Tenant for such use
(regardless of the method of calculation for such rent) shall be at least
essentially equivalent in rental income to the Rent derived from a Bullwinkle’s
Restaurant previously operated on the Land pursuant to this Lease or as evidenced
by other Bullwinkle’s Restaurants operated at other Fun Centers. Gross sales
from such subtenant shall not be included in Gross Income in calculating
Percentage Rent under 3.1.1 above. The rent and calculation of rent due from
Tenant to Landlord for such subleased space shall be negotiated concurrent with
execution of such sublease and specified in an amendment to this Lease.

 

3.1.3.         Gross Income consists of the total as
determined under the cash method of accounting, of the following:

 

(a)                       Income
from gross sales of Tenant and/or all licensees and concessionaires of Tenant,
from all businesses conducted upon or from the Land by Tenant and all others,
whether such gross income be evidenced by check, credit, charge account, or
otherwise, and shall include, but not be limited to, the amounts received from
the sale of goods, food, beverage, wares, merchandise, game machine proceeds,
from any amusement, recreational or other use of the Land, Buildings or
Improvements, participation in sales, deposits not refunded and not required to
be refunded at a later date, and other amounts passing to Tenant chargeable or
collected pursuant to any sublease (as hereinafter defined) of the Land,
Buildings or Improvements, or pursuant to any license, consignment, concession
or agreement pertaining to the Land, Buildings or Improvements, and for
services performed on or from the Land, Buildings or Improvements, whether such
sales or services be made by means of merchandise or vending machines on the
Land, Buildings or Improvements, or by provision of goods or services to
locations offsite of the Land except for goods and services provided from
one Fun Center of Tenant to another Fun Center. If any one or more departments

 

3

 

 

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3.1.5            Tenant shall keep true and correct records
of the Gross Income and deductions as provided in Paragraphs 3.1.1 and 3.1.2.
All records relating to the management, operation, maintenance, repair, construction
or alteration of, or addition to the Land and Improvements shall be kept at the
principal office of Tenant for not less than three years after delivery of the
required annual report. Landlord shall have the right, at its cost and at any
reasonable time and from time to time after giving prior written notice to
Tenant, to do or cause to be done any of the following: to audit the records or
cause an audit of the records to be made; to make abstracts from the records;
to make copies of any and all of the records; to examine any or all Subleases;
and to make copies of any or all Subleases. Tenant shall make all records
specified in the notice available at the time specified in the notice, if
reasonable, and at the place where the records are to be kept pursuant to this
Paragraph. All information so obtained by Landlord or otherwise obtained under
the percentage rent provisions of this Lease shall be treated as confidential
except in any litigation or arbitration proceedings between Landlord and Tenant
or Landlord or any Sublessee, concessionaire or licensee and except, further,
that Landlord may divulge the information to a prospective buyer or
encumbrancer of the Land or of Landlord’s interest in the Lease or to a
governmental agency or employee thereof demanding the information. If the audit
discloses that the Gross Income was understated, Tenant shall pay the
additional Percentage Rent forthwith; in the event the additional Percentage
Rent due shall exceed the previously paid rent by the sum of ten percent (10%)
of the Percentage Rent previously paid, Tenant shall also pay to Landlord
together with interest thereon from the date it was due at the maximum interest
rate then permitted by law; and provided further, and in addition, if the error
was in excess of three percent (3%), Tenant shall pay Landlord’s reasonable
audit costs.

 

3.1.6            A “Fiscal Year” shall be considered to
begin on the first day of July of each year during the term of this Lease and
each subsequent anniversary date of the beginning of the first Fiscal Year.
Partial years preceding the first Fiscal Year and following the last full
Fiscal Year of the term of this Lease, for purposes of the Minimum Rent
computation specified above, shall be prorated as to the portion of the
Fiscal Year which has elapsed during the term of this Lease in calculating
Minimum Rent. In consideration of the provisions of Section 3.1.1 of this
Lease, Tenant shall not have any right to change the Fiscal Year.

 

4.                          NO
PARTNERSHIP OR JOINT VENTURE. Nothing in this Lease shall be construed to
render the Landlord in any way or for any purpose a partner, joint venturer, or
associate in any relationship with Tenant other than that of Landlord and
Tenant, nor shall this Lease be construed to authorize either party to act as
agent for the other.

 

5.                          TAXES,
ASSESSMENTS AND UTILITIES. The Parties shall have the following
responsibilities for payment of taxes, assessments and utilities:

 

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5.1                     Payment
of Taxes and Assessments. Tenant shall pay or cause to be paid without any
abatement, deduction, diminution or offset (except as permitted by Paragraph
5.3), (i) all real and personal property taxes, general and special
assessments, excises, impositions, levies and other charges of every
description now or hereafter levied on, assessed against or otherwise imposed
with respect to, the Land, improvements located on the Land, personal property
located on or in the Land or Improvements, the leasehold estate created hereby,
or any subleasehold estate or any right of occupancy under any concession,
license, or other agreement, and (ii) the portion of any taxes or other
impositions in the nature of a tax on Landlord’s right to do business
attributable to Landlord’s rights, powers, duties, or obligations under this
Lease, to the full extent of installments accruing during the term of this
Lease, whether belonging to, or chargeable against, Landlord or Tenant, or
anyone claiming by, through, or under Tenant (hereinafter, collectively ‘Taxes’).
In addition, Tenant shall also pay any Taxes, however described, which may
hereafter be levied, assessed, or imposed in lieu of, as a substitute (in whole
or in part) for, or as an addition to, any other Taxes payable by Tenant
hereunder. Tenant shall make all such payments direct to the charging authority
at least ten (10) days before delinquency and before any fine, interest, or
penalty shall become due or be imposed by operation of law for their
nonpayment. If, however, the law expressly permits the payment of the Taxes in
installments (whether or not interest accrues on the unpaid balance) Tenant
may, at Tenant’s election, utilize the permitted installment method, but shall
pay each installment with interest, if any, before delinquency. Notwithstanding
the above, no affirmative obligation shall be created for the Tenant to pay any
tax, assessment, or other charge which is not or cannot under any circumstances
result in a lien against the Land, Improvements, or leasehold estate or Tenant’s
or Landlord’s interest therein, excepting any Tax described in clause (ii),
above.

 

5.2                     Proration
of Taxes. All payments of Taxes, including permitted installment payments,
shall be prorated for the years in which this Lease commences and terminates.
For permitted installment payments, Tenant shall pay the prorated portion of
those installments falling due after the beginning of the term and prior to the
end of the term.

 

5.3                     Contest
of Taxes. Tenant may contest the legal validity or amount of any Taxes
prior to their delinquency, and may institute any proceedings Tenant considers
necessary, at Tenant’s cost. If Tenant contests any Taxes, Tenant may withhold
or defer payment or pay under protest, but shall protect Landlord and the
Premises by adequate surety bond or other appropriate security satisfactory to
Landlord in its reasonable discretion, which judgment shall be deemed to be
reasonable until otherwise determined by a final judgment of a court of
competent jurisdiction. Tenant shall be responsible for and shall pay all costs
and expenses in any contest or legal proceeding instituted by Tenant. Landlord
shall-join with Tenant for the purpose of contesting any Taxes only when such
joinder is required to properly carry out such contest and only after Tenant
has agreed in writing to fully indemnify Landlord against all and any costs and
expenses

 

6

 

relating to the
contest. In no event shall Landlord be subjected to any liability for costs or
expenses connected to any contest by Tenant, and Tenant agrees to indemnify and
hold harmless from any such costs or expenses.

 

5.4                     Exemptions.
Tenant’s obligations to pay Taxes shall not include the following, whatever
they may be called: income, gift, franchise, estate, inheritance, succession,
capital levy or transfer tax levied or assessed against Landlord by federal,
state, or other governmental agency.

 

5.5                     Proof
of Compliance. Tenant shall retain at its sole cost and expense for the
duration of this Lease a tax service in form and from a company acceptable to
Landlord to notify Landlord whether the Taxes have been paid, and will provide
when requested, receipts and other evidence reasonably required by Landlord
establishing proof of compliance with this Paragraph 5.

 

5.6       Payment
of Utilities. Tenant shall pay or cause to be paid, and hold Landlord and
the property of Landlord including the Land free and harmless from, all charges
for the furnishing of gas, water, electricity, telephone service, and other
public utilities to the Land during the term of this Lease and for the removal
of garbage and rubbish from the Land during the term of this Lease.

 

6.                          MAINTENANCE
OF LAND AND IMPROVEMENTS. The Parties shall have the following
responsibilities with regard to maintenance of the Land and Improvements.

 

6.1                     Duty
to Maintain. Throughout the term of this Lease, Tenant shall, at Tenant’s
sole cost and expense, and at no cost or expense to Landlord, maintain the
Land, Buildings (as hereinafter defined), and the Improvements in accordance
with all applicable laws, permits, licenses and other governmental
authorizations, rules, ordinances, orders, decrees and regulations now or
hereafter enacted, issued, or promulgated by federal, state, county, municipal,
and other governmental agencies, bodies, and courts having or claiming
jurisdiction and all their respective departments, bureaus, and officials (“Laws”).

 

Tenant shall promptly and diligently repair, restore,
alter, add to, remove, and replace, as required, the Buildings and/or
Improvements to maintain or comply as stated above, or to remedy all damage to
or destruction of all or any part of the Buildings and/or Improvements, whether
from act of God, fire, casualty, condemnation or otherwise; provided, that if
during the last ten (10) years of the term of this Lease, a casualty occurs for
which insurance is not required under this Lease and which causes damage(s) in
excess of fifty percent (50%) of the then fair market value of the Buildings
and/or Improvements, or fifty percent (50%) of the pre-casualty replacement
costs of such Buildings and/or Improvements, whichever is greater, then Tenant
may elect to terminate this Lease. Any repair, restoration, alternation,
addition, removal, maintenance,

 

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replacement, and
other act of compliance under this Paragraphs (hereafter collectively referred
to as “Restoration”) shall be completed by Tenant whether or not funds are
available from insurance proceeds, condemnation proceeds or Subtenant
contributions. The Restoration shall satisfy the requirements of any Sublease
then in effect for the Buildings and/or Improvements with respect thereto or,
if no Sublease is then in effect, shall be repaired or restored at least to the
type, standard and quality of the Buildings and/or Improvements in existence
prior to the date of such damage or destruction. Notwithstanding the foregoing,
Tenant can upon Restoration vary the type, standard and/or quality of the
buildings and/or Improvements consistent with the then highest and best use of
the Land, as reasonably determined by Tenant and as approved by Landlord in its
reasonable discretion (Landlord may specifically consider the impact of any
replacement or alteration on the Gross Income generated by the Buildings and/or
Improvements as proposed to be restored); and Tenant shall have the right to
obtain appropriate studies, plans, permits and approvals for purposes of
varying the Buildings and/or Improvements consistent therewith; provided,
however, in the event Tenant elects to vary the Buildings and/or Improvements
as provided above, Tenant shall pay full Minimum Rent until the Restoration is
completed; provided, further, that if Tenant fails to complete the Restoration
within a period of two (2) years, Landlord may terminate this Lease upon
written notice to Tenant. Nothing in this provision defining the duty of
maintenance shall be construed as limiting any right given elsewhere in this
Lease to alter, modify, demolish, remove, or replace any building and/or
Improvement. No deprivation, impairment, or limitation of use resulting from
any event or work contemplated by this Paragraph shall entitle Tenant to any
abatement, deduction, diminution, offset, or reduction in Minimum Rent nor to
any termination or extension of the term, except as expressly provided
otherwise herein. Tenant’s obligation to maintain the Land and all Buildings
and/or Improvements under this Paragraph also requires that Tenant employ
Tenant’s best efforts to cause to be operated its business thereon in a manner
that will produce at all times the maximum volume of Gross Income.

 

6.2                     Contest
by Tenant. Subject to Tenant’s obligation to pay Minimum Rent without
deduction or offset, [illegible] prior written notice to Landlord, Tenant has
the right to contest by appropriate judicial or administrative proceedings,
without cost or expense to Landlord, the validity or application of any Laws
requiring Tenant to repair, maintain, alter, or replace the Buildings and/or
Improvements in whole or in part, and Tenant shall not be in default for
failing to do such work until a reasonable time following final determination
of Tenant’s contest; provided, however, this right shall not abridge, minimize,
or otherwise modify any other applicable provision of this Lease which provision
is to remain in full force and effect. If Tenant gives notice of contest,
Tenant shall indemnify Landlord against all liability and expenses that
Landlord may sustain or incur by reason of Tenant’s failure or delay in
complying with the Laws. Landlord may, but is not required to, contest any such
Laws independently of Tenant, and may take positions inconsistent with those of
Tenant.

 

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7.                          CONSTRUCTION
OF IMPROVEMENTS. Landlord acknowledges that certain improvements have been
constructed on the Land (the “Buildings” and/or the “Improvements” each as
hereinafter defined) and Landlord hereby reconfirms its approval of such
Buildings and/or Improvements. According to the provisions of this Paragraph,
Tenant shall have the right, from time to time during the term of this Lease,
to voluntarily alter, remove, replace, and/or add to all or any part of the
Buildings and/or Improvements (collectively “Construction”) consistent with the
then highest and best use of the Land, as reasonably determined by Tenant,
subject to Landlord’s written consent which shall not unreasonably be withheld.
(Landlord may specifically consider the impact of any alteration or
construction on the Gross Income generated by the Buildings and/or Improvements
as proposed to be restored).

 

7.1                     Minor
Construction. Tenant’s compliance with Paragraph 7.2 is not required for
Tenant’s minor Construction, which consists of aggregate expenditures during
any 12-month period which, including all expenditures of all construction on
the Land within a 12-month period, shall not exceed $2,500,000 (“Minor Amount”).
The minor Amount shall be increased (or decreased) proportionately to any
increase (or decrease) in the Consumer Price Index for All Items–U.S. Average (“CPI”),
as published by the United States Department of Labor, Bureau of Labor
Statistics. In the absence of any such official consumer price index published
by a United States governmental agency, then the most nearly similar index
published by a responsible private organization shall be used. “Major Amount”
means all other Construction which does not constitute a “Minor Amount”.
Construction cost shall include the actual cost to Tenant for any demolition
and any removal of existing Buildings and/or Improvements or parts of Buildings
and/or Improvements as well as for preparation, planning, permits,
construction, and completion of all new Buildings and/or Improvements or parts
of Buildings and/or Improvements.

 

7.2                     Major
Construction. In connection with any construction constituting a Major
Amount to the Buildings and/or Improvements (“Major Construction”) Tenant shall
comply with all the following conditions:

 

7.2.1            Plans and Specifications. Prior to
commencing any Major Construction, and prior to applying for any building
permits relating thereto, Tenant shall deliver to Landlord preliminary plans
and specifications for conceptual review and approval. Landlord shall have the
right to approve such plans and specifications and the construction contemplated
thereby (the “Project”) which consent shall not be unreasonably withheld,
delayed or conditioned. After Landlord’s approval of the preliminary plans and
specifications, Tenant shall deliver to Landlord a complete set of working
construction plans and specifications prepared by an architect or engineer
licensed to practice as such in the State of California. Landlord shall have
the right to approve all such construction plans and specifications for the
Project prior to commencement of any work on the Project, which consent shall
not be unreasonably withheld,

 

9

 

delayed or
conditioned. Said plans and specifications shall provide for the construction
of the Major Construction within the exterior property lines of the Land;
provided, however, that work beyond the Land required by the Laws or work on
utilities serving the Land or affected by the contemplated construction, work
on access areas, and work required by conditional use requirements will not
violate this provision.

 

7.2.2            Notice of Commencement of Construction.
Tenant shall notify Landlord of Tenant’s intention to commence any Major
Construction at least 10 days before commencement of any such work. The notice
shall specify the approximate location and nature of the intended work.
Landlord shall have the right to post and maintain on the Land any notices of
non-responsibility provided for under applicable law, and to inspect the Land,
Buildings and/or Improvements in relation to such work at all reasonable times.

 

7.2.3            General Contractor Funds to Complete.
Tenant shall, upon Landlord’s written request prior to commencement of
construction, contract with a general contractor licensed by the State of
California for any Major Construction or undertake to complete such Major
Construction through its own employees. Tenant shall furnish Landlord with a
true copy of Tenant’s contract with any such general contractor. Landlord’s
consent to or approval of Tenant’s contract with the general contractor shall
not be unreasonably withheld. The quality of construction by such general
contractor, or by Tenant’s own labor force, shall be equivalent to or exceed
the quality of construction of the Buildings and Improvements located upon the
Land prior to the commencement of the Project.

 

7.2.4            Compliance with Laws. Tenant shall
comply with all the Laws, including, without limitation, all permits, licenses,
and other governmental authorizations.

 

7.2.5            Insurance Required. Tenant shall
delivered to Landlord (a) certificates of course of construction insurance, (b)
evidence of workers’ compensation insurance covering all persons employed in
connection with the work and with respect to whom death or bodily injury claims
could be asserted against Landlord or the Land, or Landlord’s interest in the
Land, the Buildings and/or Improvements and this Lease or any of them or
against Tenant, the Buildings and/or Improvements and the leasehold estate of
Tenant, and (c) evidence that Tenant has paid or caused to be paid all premiums
for the coverage described above in this Paragraph and any increase in premiums
on insurance provided for Paragraph 14, sufficient to assure maintenance of all
insurance required under this Lease during the anticipated course of the work.
Tenant shall maintain, keep in force, and pay all premiums required to maintain
and keep in force all insurance required under this Paragraph at all times
during

 

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which such work is
in progress. All such certificates of insurance and insurance policies shall
name Landlord as additional insured and prohibit cancellation without notice.
Landlord shall be provided copies of such policies of insurance.

 

7.3                     Mechanics’
Liens. At all times during the term of this Lease, Tenant shall keep the
Land and all Buildings and/or Improvements now or hereafter located on the Land
free and clear of and shall indemnify, defend and hold Landlord harmless from
all liens and claims of liens for labor, services, materials, supplies, or
equipment performed on or furnished to the Land; provided, however, Tenant
shall have the right to contest any such liens in the same manner as provided
in Paragraph 5.3 with respect to taxes.

 

8.                          OWNERSHIP
OF BUILDINGS, IMPROVEMENTS AND PERSONALITY. The Parties shall have the
following responsibilities with regard to ownership of Buildings, Improvements
and personality:

 

8.1                     Ownership
of Buildings and/or Improvements During Lease Term. Title to all Buildings
and/or Improvements now constructed or that may hereafter be constructed on the
Land by Tenant shall be owned and may be depreciated for income tax purposes by
Tenant during the term of this Lease; provided, however, Landlord disclaims any
warranty of title or any representation or warranty that depreciation may be available
to Tenant.

 

8.2                     Trade
Fixtures. Notwithstanding anything to be contrary which may be expressed or
implied by the foregoing provisions of this Paragraph, Landlord agrees that
trade fixtures may be removed by Tenant during the period commencing upon the
expiration of the term or sooner termination of this Lease and ending thirty
(30) days thereafter, provided that Tenant repairs any damage to the Land,
Buildings and Improvements caused by such removal; provided however, solely
pertaining to miniature golf courses located on the Land. Upon termination of
this Lease pursuant to judgment, written settlement or other agreement
following an Event of Default pursuant to Sections 16.1.1, 16.1.2, 16.1.5 and
16.1.6 of this Lease by Tenant (which default is not cured by any Leasehold
Mortgagee pursuant to the terms and conditions of this Lease), or upon
abandonment of the Land, Buildings and Improvements for one hundred eighty
(180) days, Tenant shall have no right to remove any trade fixtures from any
miniature golf course located on the Land.

 

8.3                     Ownership
of Buildings and/or Improvements at Termination. Subject to Paragraphs 8.2
and 17, all Buildings and/or Improvements for any reason remaining on the Land
at the expiration of the term or sooner termination of this Lease shall,
without compensation to Tenant, then automatically and without any act of
Tenant or any third party, other than any Fee Mortgagee, become Landlord’s
property, and shall be free and clear of all liens and encumbrances other than
those liens and encumbrances currently affecting title to the property and any
other liens and encumbrances consented to or

 

11

 

caused by
Landlord. Tenant agrees to execute, acknowledge, and deliver to Landlord such
instrument as may be reasonably required by Landlord’s title insurer at no cost
to Tenant to issue title insurance assuring title to the Buildings and
Improvements in Landlord upon such termination.

 

9.                          FINANCING
BY TENANT. The parties agree on the following regarding financing to be
obtained by Tenant:

 

9.1                     Leasehold
Financing. Subject to Landlord’s rights under Sections 8.2 and 8.3 Tenant
may at any time during the term of this Lease subject Tenant’s leasehold estate
and attendant rights created under this Lease to one or more mortgages as
security for a loan or loans or other obligations of Tenant; provided that
Tenant shall not have power to create any encumbrance that shall, constitute in
any way a lien or encumbrance on the Landlord’s fee interest in the Land.

 

The holder or holders of any lien created by a
mortgage secured by Tenant’s leasehold estate are referred to herein as “Leasehold
Mortgagees.” A Leasehold Mortgagee or its assigns may enforce its lien and
acquire title to the leasehold estate in any lawful way and, pending
foreclosure of the lien, the Leasehold Mortgagee may take possession of the
Land and operate any business and, perform all obligations of Tenant, and on
foreclosure of the lien by power of sale, judicial foreclosure, or on acquisition
of the leasehold estate by deed in lieu of foreclosure, the Leasehold Mortgagee
may, on notice to Landlord, sell and assign the leasehold estate hereby created
subject to the same limitations or conditions, if any, applicable to the Tenant
under this Lease. The Leasehold Mortgages or any person or entity acquiring the
leasehold estate shall be liable to perform Tenant’s obligations under this
Lease only during the period, if any, in which such person has ownership of the
leasehold estate or possession of the Land. For as long as there is any
leasehold mortgage in effect, Tenant and Landlord hereby expressly stipulate
and agree that they will not modify this Lease in any way nor cancel this Lease
by mutual agreement without the written consent of the Leasehold Mortgagee
having that leasehold mortgage. A Leasehold Mortgagee shall have such further
rights and responsibilities as hereinafter set forth in Paragraph 16.5 of this
Lease.

 

9.2                    No
Subordination of Landlord’s Interest. Tenant shall have no right to
encumber by a mortgage or deed of trust or otherwise the fee of the Land or any
Buildings and/or Improvements located thereon, and any other property so
affixed to the Land, Buildings and/or Improvements as to become apart thereof,
beyond Tenant’s right to encumber its leasehold estate.

 

10.                    MORTGAGES
BY LANDLORD. Except as set forth on Exhibit “B” attached hereto, Landlord
warrants that as of the date of this Lease, the Land is free and clear of any
mortgages or other liens placed by Landlord. Landlord shall have the right at
any time during the term of this Lease to mortgage or hypothecate its ownership
of the Land and/or its interest in this

 

12

 

Lease (“Fee
Mortgage”). Provided the Fee Mortgagee shall execute a commercially reasonable
non-disturbance and attornment agreement with Tenant pursuant to which Tenant
shall at all times remain a Tenant. Tenant shall execute a Subordination
Agreement subordinating this Lease. Tenant shall further use commercially
reasonable efforts to obtain a subordination agreement from any Leasehold
Mortgagee within ninety (90) days (provided the failure to obtain such
subordination agreement shall not be an Event of Default under this Lease).

 

10.1               Subordination,
Non-Disturbance and Attornment. This Lease shall, subject to the Landlord’s
obligation to deliver to Tenant the Non-Disturbance Agreement (as provided
herein) be subject and subordinate to the lien of any Fee Mortgage hereinafter
enforced against the Land, Buildings and Improvements, and to all renewals,
extensions, modifications, consolidations and replacements thereof, and to all
advances made or to be made upon the security of such Fee Mortgage or Trust
Deed, unless the Fee Mortgagee requires in writing that this Lease be superior
thereto. Tenant covenants and agrees in the event any proceedings are brought
for the foreclosure of any Fee Mortgage, to attorn, without any deductions or
offsets whatsoever, except for deductions or offsets, if any, specifically
permitted in this Lease, to the purchaser or any successors thereto upon any
such foreclosure sale or deed in lieu thereof and to recognize such purchaser
as the Lessor under this Lease, provided (1) said purchaser agrees in writing
to assume the duties and obligations of Landlord arising or continuing after
the date it acquires title to this Lease and (2) Tenant shall not be disturbed
so long as Tenant has not then committed or permitted an Event of Default
(which continues beyond any applicable cure periods). Tenant shall, within
fifteen (15) business days of request by Landlord, execute and deliver to
Landlord such further instruments or assurances as Landlord may reasonably deem
necessary to evidence or conform the subordination or superiority of this Lease
to any such Fee Mortgage together with Tenant’s agreement to attorn, subject to
Tenant’s obtaining from such Fee Mortgagee a Non-Disturbance Agreement executed
by the Fee Mortgagee and in form reasonably acceptable to Tenant, providing,
among other things, that as long as Tenant is not in an Event of Default (which
continues beyond any applicable cure period), this Lease shall remain in full
effect for the full term of the Lease, notwithstanding any provision contained
in such Fee Mortgage the rights end obligations of Tenant shall be set forth
and governed by this Lease.

 

11.                    ASSIGNMENT
BY TENANT. The parties agree on the following regarding assignment of
Tenant’s interest under this Lease:

 

11.1               Restrictions
on Assignment. Tenant may only assign this Lease or any interest herein,
subject to the prior written consent of Landlord. Landlord shall not
unreasonably withhold or delay its consent, and shall grant consent if the
proposed assignee is financially equal to or stronger than Tenant and has
sufficient business experience to perform all the agreements, undertakings, and
covenants of this Lease and all other agreements entered into by Tenant that
relate to the management, operation, maintenance, construction, and restoration
of the Buildings, Improvements and the Land.

 

13

 

To assist Landlord
in determining whether or not the proposed assignee is so qualified, Tenant
shall furnish to Landlord at no expense to Landlord, prior to such assignment,
detailed and complete financial statements of the proposed assignee, audited by
a certified public accountant reasonably satisfactory to Landlord (if the
proposed transferee causes its statements to be so audited in its normal course
of business), together with detailed and complete information about the
business of the proposed assignee, including its business experience, the use
to be made of the Land, Buildings and Improvements by the proposed assignee,
projections by the proposed assignee of the sources of funds to be used to
repay any indebtedness of Tenant that the proposed assignee will assume or take
subject to, or agree to pay to Tenant, and other claims on and requirements for
such funds, together with such other information as Landlord may reasonably
require to assist Landlord in determining whether or not the proposed assignee
is so qualified. Landlord shall have 30 days after receipt of the information
described above to notify Tenant of whether it consents or does not consent to
the proposed assignment. Absent any such notification by Landlord during said
30-day period, Landlord shall be conclusively deemed to have consented to the
assignment. A consent by Landlord to one assignment shall not be deemed to be a
consent to any subsequent assignment. Any assignment made contrary to the terms
of this subparagraph shall be null and void unless permitted by subparagraph
11.2 below.

 

11.2               Leasehold
Mortgagees. Notwithstanding anything to the contrary contained in Paragraph
11.1, the consent of Landlord shall not be required for any transfer,
conveyance, or assignment resulting from a foreclosure or acceptance of a deed
in lieu of foreclosure of any Leasehold Mortgagee. Landlord shall reasonably
approve any transfer, conveyance, or assignment by any Leasehold Mortgagee following
its acquisition of this Lease and the leasehold estate of Tenant created hereby
as a result of foreclosure or acceptance of a deed in lieu of foreclosure,
provided, the proposed transferee or assignee shall be acceptable to Landlord
in its reasonable discretion as creditworthy and able to pay the Minimum Rent
due under this Lease and otherwise meets the criteria set forth in Section 11.1

 

11.3               Delegation.
Tenant may at Tenant’s election delegate performance of any or all covenants to
any one or more approved assignees. Any delegation by Tenant shall not relieve
Tenant of any obligation under this Lease unless otherwise provided in this
Lease. In the event of any proposed assignment, Tenant shall provide sufficient
information to Landlord to enable Landlord to make a reasonable commercial
determination that the proposed assignee is of equivalent or greater financial
strength and the equivalent or greater ability to pay the Rent due hereunder as
does Tenant. Upon Landlord’s consent, which shall not be unreasonably withheld,
conditioned or delayed and will be deemed given if not received within
twenty-one (21) days of receipt of such request; if the financial condition and
ability to pay rent by the proposed assignee merits a commercially reasonable
determination that Landlord should release Tenant from further liability of
this Lease, upon such approval Landlord shall release Tenant. Any

 

14

 

assignment
approved by Landlord shall so evidence the release of Tenant from further
liability under this Lease provided however, and in no event, shall Tenant be
relieved of any obligation for Hazardous Materials or environmental
contamination permitted or caused by any Tenant or any Tenant Party (as
provided in Section 20 of this Lease) during the term that the assigning Tenant
was the Tenant under this Lease. This provision shall not be considered to
permit or to broaden the right of assignment beyond the provisions of this
Lease relating to assignment.

 

12.                    SUBLEASES.
The parties agree on the following regarding the subleasing of Tenant’s
interest under this Lease:

 

12.1               Requirements
for Sublease. Tenant shall have the right after the commencement of this
Lease to enter into Subleases without the approval or consent of Landlord,
provided the following provisions are complied with:

 

12.1.1 Each Sublease shall contain a provision
requiring Subtenant to negotiate in good faith with Landlord a commercially
reasonable attornment agreement provided Landlord elects to continue such
Subtenant following a termination of this Lease. The Sublease shall also
provide that following and during the continuance of an Event of Default under
this Lease if requested in writing to do so by Landlord, the Subtenant will
make payments due under the Sublease directly to Landlord and, notwithstanding
any dispute between Landlord and Tenant, any such payment which complies with
the terms and conditions of the Sublease shall constitute full satisfaction of
the Subtenant’s obligation to Tenant under the Sublease and will be credited
against Rents due hereunder. Following an Event of Default of this Lease unless
this Lease is terminated by Landlord, Landlord shall be entitled to terminate
any or all subleases and take over the entirety of the Land, Buildings or
Improvements, unless a Non-Disturbance and Attornment Agreement between
Landlord and such Subtenant is in effect, provided however, Landlord shall have
no obligation to enter into a Non-Disturbance and Attornment Agreement with any
Subtenant; provided further, however, in the event Landlord shall terminate any
or all sublease(s) following an Event of Default by Tenant, the sublessee shall
have the right to remove its trade fixtures which are removable without undue
damage to the Land. Landlord shall not be required or obligated to cure any
default by Tenant under the Sublease, except for those that continue beyond
such date of termination of this Lease.

 

12.1.2 Tenant shall, except following an approved
assignment of Tenant’s interests hereunder, at all times remain primarily
responsible for performance of all terms of this Lease.

 

15

 

12.1.3 Tenant may not Sublease more than Fifteen
Percent (15%) individually, or in the aggregate, or Fifteen Percent (15%) of
the Gross Income derived from the Land, Buildings and Improvements prior to
such Sublease of the Land, Buildings and Improvements without Landlord’s
written consent which will not be unreasonably withheld, delayed or conditioned
and will be given on deemed given if not received within twenty-one (21) days
of receipt.

 

12.1.4 Tenant shall, promptly after execution of each
Sublease, notify Landlord of the name and mailing address of the Subtenant and
shall provide Landlord with a true copy of the Sublease.

 

12.1.5 Tenant shall not at any time accept, directly
or indirectly, more than one month’s prepaid rent from any Subtenant.

 

12.1.6 Any Sublease will at all times be subject to
the terms and conditions of this Lease.

 

12.1.7. Subtenant has agreed to waive collection of
the security deposit, if any, against Landlord, unless Landlord actually
receives the security deposit from Tenant and Tenant fails to refund it to the
Subtenant.

 

13.                    TENANT’S
RIGHT OF FIRST REFUSAL. The parties agree on the following regarding the
Tenant’s right of first refusal in the event that Landlord decides to sell the
Land during the term of this Lease:

 

13.1               Terms
of Right. If Landlord determines during the term of this Lease to sell the
Land and receives an offer from a third party for the purchase of the Land
acceptable to Landlord, it shall notify Tenant in writing (“Landlord’s Sale
Notice”) of the purchase price and terms of sale offered by the third party.
Tenant, within thirty (30) days after receipt of Landlord’s Sale Notice may
elect in writing to purchase Landlord’s interest in the Land at the price and
on the precise terms stated in Landlord’s Sale Notice, in which event Landlord
shall sell and convey Landlord’s interest in the Land to Tenant on the terms
and at the purchase price set forth in the Landlord’s Sale Notice. In the event
Tenant fails to exercise this right of first refusal, to acquire Landlord’s
interest in the Land, Landlord shall have the sole and exclusive right to sell
and convey the Land to the third-party offeror at the price and on the terms
stated in the Landlord’s Sale Notice. If Landlord does not sell and convey its
interest in the Land within one hundred twenty (120) days after the time for
closing set forth in the third party offer, any later sale by Landlord shall be
deemed a new determination by Landlord to sell and convey its interest in the
Land and these procedures should be repeated.

 

13.2               Escrow.
If Tenant elects to purchase the Land as provided in this Paragraph, escrow for
the purchase and sale shall be opened jointly by the parties with an

 

16

 

escrow company
mutually acceptable to the parties (“Escrow Holder”), within five (5) days of
Tenant’s notice to Landlord electing to purchase the Land. Each party shall
execute escrow instructions in a form appropriate to complete purchase and sale
of the Land and shall deposit same with Escrow Holder.

 

14.                    INSURANCE.
The parties agree on the following responsibilities for insuring the Land:

 

14.1               Fire
and Extended Coverage. Tenant, at Tenant’s sole cost and expense, shall
provide and maintain insurance covering the Buildings and the Improvements,
including without limitation, all buildings, structures, and improvements now
situated or which hereafter may be erected or placed on the Land, against loss
or damage by fire, vandalism, malicious mischief, windstorm, hall, smoke,
explosion, riot, civil commotion, vehicles, aircraft, flood or earthquake (if
Landlord and Tenant mutually agree in writing) including, without limitation,
endorsements for increased cost of construction due to changes in laws, agreed
amount or demolition. All such insurance shall be in a sum not less than 90
percent of the replacement cost (the “Replacement Cost”) exclusive of
foundations and below ground improvements and shall contain a “Replacement Cost
Endorsement.” Such insurance shall be in forms and with companies satisfactory
to Landlord in its reasonable discretion. If any dispute as to whether the
amount or coverage of insurance obtained by Tenant complies with the
requirements of this Paragraph cannot be resolved by agreement, Landlord may,
not more often than once every twenty four (24) months, request that the
Replacement Cost be determined, at Tenant’s option, by either (a) the carrier
of the insurance then in force, or (b) such other carrier of insurance as is
reasonably acceptable to Landlord, and the resulting determination shall be
conclusive between the parties for the purpose of this Paragraph.

 

14.2               Use
of Proceeds. Landlord shall, at Tenant’s cost and expense, cooperate fully
with Tenant to obtain the largest possible recovery under all policies of fire
and extended coverage insurance required by Paragraph 14.1. Subject to the
terms of any Leasehold Mortgage that may constitute a lien on Tenant’s interest
in the Lease, all such policies shall provide that the proceeds shall be paid
to Tenant and shall be applied by Tenant for the restoration of any Buildings
and/or Improvements damaged or destroyed by the casualty giving rise to the
insurance claim.

 

14.3               Public
Liability. Throughout the term of this Lease, at Tenant’s sole cost and
expense, and at Tenant’s sole election, Tenant shall keep or cause to be kept
in force, for the mutual benefit of Landlord and Tenant, comprehensive broad
form general public liability insurance against claims and liability for
personal injury, death, or property damage arising from the use, occupancy,
disuse, or condition of the Land, Buildings, Improvements, or adjoining areas
or ways, providing protection in reasonable amounts but not less than
$1,000,000.00 for any one accident or occurrence. Such insurance shall name
Landlord and Tenant as insured, and every three (3) years during the term of
this

 

17

 

Lease, Landlord
and Tenant shall meet and in good faith mutually determine whether such amounts
should be increased to account for inflation or generally larger insurance
settlements or jury verdicts.

 

14.4               Additional
Insurance. Tenant may procure and maintain any insurance not required by
this Lease, but all such insurance shall be subject to all other provisions of
this Lease pertaining to insurance. All insurance required by Paragraph 14
shall specifically name Landlord as additional loss payee and as additional
insured party and Tenant shall provide copies of all insurance policies to
Landlord and shall require all insurers to notify Landlord of any change or
termination to any policy of insurance and/or endorsements.

 

14.5               Form
of Insurance. All insurance required by express provisions of this Lease
shall be carried only with responsible insurance companies reasonably
acceptable to Landlord and licensed to do business in the State of California.
All such policies shall be nonassessable and shall contain language to the
effect that (a) any loss shall be payable notwithstanding any act or negligence
of Landlord or Tenant that might otherwise result in a forfeiture of the
insurance, (b) the insurer waives the right to subrogation against either party
hereto for the negligence of such party, (c) the policies are primary and
noncontributing with any insurance that may be carried by Landlord, and (d)
they cannot be canceled or materially changed except after thirty (30) days
prior written notice by the insurer to Landlord. Tenant shall furnish Landlord
with copies of all such policies certified by the insurer within the following
time limits:

 

(i)                         For
insurance required at the commencement of this Lease, on execution of this
Lease;

 

(ii)                      For
insurance becoming required at a later date, at least fifteen (15) days before
the requirement takes effect, or as soon thereafter as the requirement, if new,
takes effect;

 

(iii)                   For any renewal or replacement of a
policy already in existence, at least fifteen (15) days before expiration or
other termination of the existing policy.

 

14.6               Indemnification.
Landlord shall not be liable, and Tenant shall defend, indemnify, and hold
Landlord harmless against all liability and claims of liability, for damage or
injury to person or property on or about the Land and the Buildings and/or
Improvements from any cause whatsoever, but excluding Landlord’s gross
negligence or willful acts or omissions.

 

15.                    CONDEMNATION.
The parties agree to the following relating to a taking of or damage to all or
any part of the Land, Buildings and/or Improvements or any interest in them by
eminent domain or inverse condemnation:

 

18

 

15.1               Definitions.
The following definitions apply in construing provisions of this Lease relating
to a taking or damage to all or any part of the Land, Buildings and/or
Improvements or any interest in them by eminent domain or inverse condemnation:

 

(i)                         “Taking”
means the taking or damaging, including, without limitation, severance damage,
change of grade, taking possession, or damage to remaining property of Landlord
and/or Tenant by eminent domain or by inverse condemnation or for any public or
quasi-public use. A transfer of title may be either a transfer resulting from the
recording of a final order in condemnation or a voluntary transfer or
conveyance to the condemning agency or entity under threat of condemnation, in
avoidance of an exercise of eminent domain, or while condemnation proceedings
are pending. The taking shall be considered to take place as of the earlier of
(a) the date actual physical possession is taken by the condemnor, or (b) the
date on which the right to compensation and damages accrues under applicable
law.

 

(ii)                      “Total
Taking” means the raking of the fee title to all the Land, Buildings and
Improvements, or a taking of the entire leasehold estate of Tenant, which shall
be considered to exclude any off-site improvements effected by Tenant to serve
the Land, Buildings and/or Improvements on the Land.

 

(iii)                   “Substantial Taking” means the
taking of so much of the Land, Buildings, and/or Improvements, so that in the
reasonable judgment of Tenant a reasonable amount of reconstruction would not
make the Land, Buildings and/or Improvements either (i) a practical improvement
and reasonably suited for Tenant’s continued occupancy for the uses and
purposes for which the Land is leased hereunder, or (ii) reasonably efficient
or economic for Tenant’s use.

 

(iv)                  “Partial
Taking” means any taking of the fee title to the Land, Buildings and/or
Improvements that is not either a Total or a Substantial Taking.

 

(v)                     “Notice
of Intended Taking” means any notice that a reasonably prudent person would
interpret as expressing an existing intention of Taking as distinguished from a
mere preliminary inquiry or proposal. It includes but is not limited to, the
service of a condemnation summons and complaint on a party to this Lease. The
notice is considered to have been received when a party to this Lease receives
from the condemning agency or entity a notice of intent to Take, in writing,
containing a description or map of the proposed Taking reasonably defining the
extent of the Taking. In the case of inverse condemnation, notice is considered
to have been received (i) by Tenant when Tenant receives knowledge of any fact
or circumstance that would lead a reasonable person to conclude that a Taking
by inverse condemnation has occurred or might reasonably be expected to occur,
and (ii) by Landlord when Landlord has received a written communication

 

19

 

(excluding
communications of a generalized informational nature not relating specifically
to inverse condemnation of the Land) that the Land, Buildings and/or
Improvements are being Taken by inverse condemnation.

 

(vi)                  “Award”
means compensation paid for the Taking whether pursuant to judgment or by
agreement or otherwise.

 

15.2.            Giving Notice. The party receiving
any notice of the kinds specified below shall promptly give the other party
notice of the receipt, contents, and date of the notice received:

 

(i)                         Notice
of Intended Taking;

 

(ii)                      Service
of any legal process relating to condemnation of the Land, Buildings and/or
Improvements;

 

(iii)                   Notice in connection with any
proceedings or negotiations with respect to such a condemnation; or

 

(iv)                  Notice
of intent or willingness to make or negotiate a private purchase, sale, or
transfer in lieu of condemnation.

 

15.3               Independent
Representation. Landlord and Tenant shall each have the right to represent
its respective interest in each proceeding or negotiation with respect to a
taking or intended taking and to make full proof of its claims. No agreement,
settlement, sale, or transfer to or with the condemning authority shall be made
without the consent of Landlord. Landlord and Tenant each agree to execute and
deliver to the other any instruments that may be required to effectuate or
facilitate the provisions of this Lease relating to condemnation.

 

15.4               Substantial
Taking. If the Taking is a substantial Taking, Tenant may, by notice to
Landlord given within ninety (90) days after Tenant receives Notice of Intended
Taking, elect to treat the Taking as a Substantial Taking. If Tenant does not
so notify Landlord, the Taking shall he deemed a Partial Taking. A Substantial
Taking shall be treated as a Total Taking if Tenant delivers possession to
Landlord within ninety (90) days after Tenant’s determination that the Taking
was a Substantial Taking.

 

15.5               Total
Taking. On a Total Taking, this Lease shall terminate as of 12.01 a.m. on
whichever of the following first occurs: the date legal title becomes vested in
the agency or entity exercising the power of eminent domain, or the date actual
physical possession is taken by the agency or entity exercising the power of
eminent domain. Thereafter, both Landlord and Tenant shall be released from all
obligations under this Lease, except those specified in this Paragraph. On a
Total Taking, all sums,

 

20

 

including, without
limitation, damages and interest, awarded far the fee or the leasehold or both
or the Buildings and/or Improvements shall be deposited promptly with Landlord
and shall be distributed and disbursed in the following order and priority:

 

First, all real and personal property taxes
constituting a lien on the Land, Buildings and/or Improvements.

 

Second, to Landlord a sum equal to the fair market
value of the Land taken valued at its highest and best use as unimproved land
exclusive of the Improvements (but inclusive of the Buildings) and unburdened
by this Lease and all Subleases.

 

Third, to any Leasehold Mortgagee(s) and/or Lender(s),
the amount(s) due under the Leasehold Mortgage(s) and/or Landlord’s Fee
Mortgage(s).

 

Fourth, to Tenant, the then fair market value of
Tenant’s leasehold estate under this Lease, as well as any award that may be
made for the taking of or damage to any Improvements made by Tenant to the Land
which Tenant would have had the right to remove, but for the condemnation, on
expiration or sooner termination of this Lease.

 

Fifth, to Landlord any expenses or disbursements
(including attorneys’ fees) reasonably paid or incurred by or on behalf of
Landlord for or in connection with the condemnation proceedings.

 

Sixth, to Tenant, a sum equal to the reasonable
removal and relocation cost with respect to any Improvements that Tenant elects
to remove notwithstanding the condemnation; as well as any award for business
goodwill and/or for the interruption of or damage to Tenant’s business.

 

Seventh, to Tenant the expenses or disbursements
(including attorneys’ fees) reasonably paid or incurred by or on behalf of
Tenant for or in connection with the condemnation proceedings.

 

Eighth, the balance, if any, to Tenant if the
condemnation occurs during the first ten (10) years of the term of this Lease;
equally to Landlord and Tenant if the condemnation occurs during the
second ten (10) years (years 11 to 20) of the term of this Lease; thereafter to
Landlord.

 

15.6               Partial Taking.

 

15.6.1 Effect on Rent: Term. On a Partial
Taking, this Lease shall remain in fall force and effect, covering the
remaining Land, Buildings and Improvements except that the Rent hereunder shall
be reduced in the same ratio as

 

21

 

the fair market
value of the portion of the Land taken (excluding Buildings and/or Improvements
then in existence but deducting expenses of collection, including any attorneys
fees of Landlord and Tenant and restoration costs) bears to the fair market
value of the total Land, provided however, in the event a portion of a Building
or Improvement is to be taken, and may be rebuilt, the Rent shall be reduced in
the same ratio as the fair market value of the portion of Land taken exclusive
of Buildings and/or Improvements; provided however, in no event shall the Rent
due to Landlord from Tenant be decreased below the average minimum rent
specified in paragraph 3.1.1 of this Lease.

 

15.6.2 Award. On a Partial Taking, all sums,
including damages and interest, awarded for the fee title or the leasehold or
both, shall be deposited with Landlord and shall be distributed and disbursed
in the following order of priority:

 

First, to Landlord a sum equal to the fair market
value of the Land taken valued at its highest and best use as unimproved land
exclusive of Buildings and/or Improvements and unburdened by this Lease and all
Subleases.

 

Second, to Tenant, the cost of restoring the Buildings
and/or Improvements, provided that such amounts shall be held by Tenant and
applied in the same manner as proceeds of insurance under Paragraph 14.2, and
to the Subtenants, the amount assessed or awarded for their removal or
relocation, plus any amount awarded for detriment to their business, provided,
however, any rights of any Subtenant hereunder shall be governed pursuant to
the terms of the agreement between such Subtenant and Tenant provided however,
such agreement shall provide that no Subtenant shall receive any proceeds from
any such condemnation not otherwise distributable to Tenant pursuant to the
terms of this Lease.

 

Third, to Landlord any expenses or disbursements
(including attorneys’ fees) reasonably and necessarily incurred or paid by or
on behalf of Landlord for or in connection with the condemnation proceedings.

 

Fourth, to the Leasehold Mortgagee and/or the Lender,
the sum(s) equal to the amount necessary to reduce the then principal
balance(s) so that the ratio of the principal balance(s) to fair market value
of the property encumbered by the Leasehold Mortgage and/or the Landlord’s Fee
Mortgage remains the same after the taking as it was before the taking.

 

Fifth, to Tenant any expenses or disbursements
(including attorneys’ fees) reasonably and necessarily incurred or paid by or
on behalf of Landlord for or in connection with the condemnation proceedings.

 

22

 

Sixth, the balance, if any, to Tenant if the
condemnation occurs during the first ten (10) years of the term of this Lease;
equally to Landlord and Tenant if the condemnation occurs during the second ten
(10) years (years 11 to 20) of the term of this Lease; thereafter to Landlord.

 

15.7               Temporary Taking.

 

15.7.1.   Effect on Rent: Term. On a Temporary Taking,
the term of this Lease shall not be reduced or affected in any way and Tenant
shall continue to pay in full the Rent (as herein defined) without diminution,
deduction, offset, reduction, or abatement, and Tenant shall continue to
perform and observe all of the other covenants, conditions, and agreements of
this Lease to be performed or observed by Tenant as though such Temporary
Taking had not occurred.

 

15.7.2.   Award. On a Temporary Taking, any and all
awards and payments made for the temporary use of the whole or any part of the
Land, Buildings and/or Improvements including, without limitation, damages and
interest, shall be paid to Tenant and Tenant shall pay over to Landlord from
such awards and payments that portion of said awards or payments that, in
Tenant’s reasonable judgment, will be required to be expended upon the
termination of this period of temporary use in order to restore the Land as
nearly as may be practicable to the condition in which the same was prior to
such Temporary Taking. If a Temporary Taking is for a period extending beyond
the then current term of this Lease, the sums payable for such Temporary Taking
shall be apportioned between Landlord and Tenant in the same ratios,
respectively, that part of the entire period of such temporary use failing
after the expiration date of the then current term hereof, and that part
falling before said expiration date bear to the entire period of temporary use.

 

16.                    DEFAULT
AND REMEDIES. The Parties agree on the following regarding any default
under the terms of this Lease:

 

16.1.            Event of Default. Each of the
following events shall be a default by Tenant (“Event of Default”) and a breach
of this Lease.

 

16.1.1. Abandonment. Abandonment or surrender
of the Land or of the leasehold estate. The Land shall be deemed vacated if
Tenant’s business is not operated for a period of one hundred eighty (180)
consecutive days for any reason other than a closure for a Major Construction
or renovation, acts of God, casualty, war or insurrection, strikes or labor
disputes, or other matters beyond the reasonable control of Tenant.

 

23

 

16.1.2. Failure to Pay Rent. Should Tenant at
any time be late in paying any scheduled Rent by more than ten (10) days of the
date it is due, Tenant shall be obligated to pay without notice, a late payment
equal to Five Percent (5%) of the first such scheduled Rent payment paid late
within any twelve (12) month period, or Ten Percent (10%) of any additional
scheduled Rent payment not paid within ten (10) days of the scheduled date,
whether such additional payment is consecutive, or occurs within any twelve
(12) month period; provided however, any such late payment shall constitute an
Event of Default under this Lease only in the instance when such Rent and late
fee remain unpaid for thirty (30) days after written notice of such default to
Tenant by Landlord.

 

16.1.3. Failure to Perform. Tenant shall be in
default in any of its other promises, covenants, or agreements contained in
this Lease, and such default shall continue for thirty (30) days after written
notice thereof form Landlord to Tenant; however, if such default is not capable
of being cured within thirty (30) days after written notice thereof, Tenant
shall not be in default if Tenant has commenced and is diligently pursuing such
cure continuously and such cure has commenced within thirty (30) days after
written notice of such default from Landlord to Tenant.

 

16.1.4. Judicial Process. The subjection of any
right or interest of Tenant in, to or under this Lease to attachment,
execution, or other levy, or to seizure under legal process when the claim against
Tenant is material, if not released within one hundred (100) days, or bonded
over in accordance with California Law.

 

16.1.5. Receiver. If not released within one
hundred (100) days, the appointment of a receiver to take possession of the
Land, Buildings and/or Improvements, or of Tenant’s interest in, to, and under
this Lease, the leasehold estate or of Tenant’s operations on the Land for any
reason, including, without limitation, assignment for benefit of creditors or
voluntary or involuntary bankruptcy proceedings, but not including receivership
pursuant to administration of the estate of any deceased or incompetent Tenant
or of any deceased or incompetent individual member of Tenant.

 

16.1.6. Bankruptcy. An assignment by Tenant for
the benefit of creditors; or the voluntary filing by Tenant or the involuntary
filing against Tenant of a petition, other court action or suit under any law
for the purpose of (i) adjudicating Tenant a bankrupt, (ii) extending time for
payment, (iii) satisfaction of Tenant’s liabilities, or (iv) reorganization,
dissolution, or arrangement on account of, or to prevent, bankruptcy or
insolvency; provided, however, that in the case of a voluntary proceeding, if
all consequent orders, adjudications, custodies, and supervisions are
dismissed, vacated, or otherwise

 

 

24

 

permanently stayed
or terminated within one hundred (100) days after the filing or other initial
event, then Tenant shall not be in default under this Paragraph 16.1.6.

 

16.2               Remedies to
Default.

 

16.2.1.   Right to Terminate. In the event of any
default by Tenant, Landlord, in addition to any other remedies available to
Landlord at law or in equity, shall have the option to terminate this Lease and
all rights of Tenant hereunder. No notice of any kind, including a notice of
default, given by Landlord to Tenant shall constitute a termination of this
Lease unless expressly so stated in the notice. In the event Landlord elects to
terminate this Lease, then Landlord may recover from Tenant:

 

(i)                          The
worth at the time of award of any unpaid rent that had been earned at the time
of such termination; plus

 

(ii)                       The
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount
of such rental loss Tenant proves could have been reasonably avoided; plus

 

(iii)                    The worth at the time of award of
the amount by which the unpaid rent for the balance of the term after the time
of award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided; plus

 

(iv)                   Any
other amount, including attorney’s fees and court costs, necessary to
compensate Landlord for all the detriment proximately caused by Tenant’s
failure to perform its obligations under this Lease, and

 

(v)                      At
Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by applicable California law.

 

The term “Rent” as used herein, shall be deemed to be and
to mean the Percentage Rent and Minimum Rent and/or all other sums required to
be paid by Tenant pursuant to the terms of this Lease. As used in subparagraphs
16.2.1 (i) and (ii), above, the “worth at the time of award” is computed by
allowing interest at the rate of ten percent (10%) per anum. The “worth at the
time of award” is to be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award plus one
percent (1%).

 

25

 

16.2.2. Reentry of Land. In the event of any
default by Tenant, Landlord shall also have the right, with or without
terminating this Lease, to reenter the Land and to remove all persons and
property from the Land. Personal property removed may be stored in a public
warehouse or elsewhere at the cost of and for the account of Tenant.

 

16.2.3. Continuation of Lease. Landlord may
elect in the event of a default by Tenant to continue this Lease in full force
and effect and to collect Rent as it becomes due under this Lease. In such
event, but subject to all of the provisions of this Lease which limit the use
of Tenant’s intellectual property, including without limitation, Tenant’s
trademarks, servicemarks, trade names and 
other proprietary information Landlord may enter on and relet the Land,
Buildings and Improvements or any part thereof to a third party or third
parties for such term or terms and at such rental or rentals and on such other
terms and conditions as Landlord in its sole discretion may deem advisable and
shall be the right to make alterations and repairs to the Land. Tenant shall be
liable for all of Landlord’s costs in reletting, including but not limited to
remodeling costs required for the reletting. In the event Landlord relets the
premises, Tenant shall pay all Rent due under and at the time specified in this
Lease, less any amount or amounts actually received by Landlord from the
reletting.

 

16.2.4. Application of Rent from Reletting. In the event that Landlord elects to relet
all or a portion of the Land, Buildings or Improvements following a default by
Tenant, but subject to all of the provisions of this Lease which limit the use
of Tenant’s intellectual property, including without limitation, Tenant’s
trademarks, serviceman, trade names and other proprietary information, the rent
received by Landlord from the reletting shall be applied: first, to the payment
of any indebtedness other than Rent due hereunder from Tenant to Landlord;
second, to the payment of any cost of the reletting; third, to the payment of
the cost of any alterations and repairs to the Land; fourth, to the payment of
Rent due and unpaid under this Lease. The residue, if any, shall be held by
Landlord and applied in payment of future Rent as the same may become due and
payable hereunder. Should that portion of Rent received from the reletting
during any month, which is applied to the payment of Rent hereunder, be less
than the Rent payable during that month by Tenant hereunder, then Tenant shall pay
such deficiency to Landlord immediately on demand therefor by Landlord. Such
deficiency shall be calculated and paid monthly. Tenant shall also pay to
Landlord, as soon as ascertained, any costs and expenses incurred by Landlord
in such reletting or in making such alterations and repairs not covered by the
Rent received from the reletting.

 

16.2.5. Other Rights of Landlord. No act of
Landlord, including but not limited to Landlord’s entry on the Land, efforts to
relet the Land, or maintenance

 

26

 

of the Land, shall
be construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant or unless the termination thereof is decreed
by a court of competent jurisdiction. Notwithstanding Landlord’s election to
continue the Lease in full force and effect after a default by Tenant and to
relet the Land, Buildings or Improvements Landlord may at any time after such
reletting elect to terminate this Lease for any such default.

 

16.3.            Landlord’s Right to Cure. After
expiration of the applicable time for curing a particular default, or before
the expiration of that time in the event of emergency or other condition which
if not remedied by the curing of the default could materially and adversely
affect Landlord’s right or security under this Lease, Landlord may at Landlord’s
election, but is not obligated to, make any payment required of Tenant under
this Lease, or perform or comply with any covenant imposed on Tenant under this
Lease, and the amount so paid plus the reasonable cost of any such performance
or compliance, including, without limitation, attorneys’ fees and
disbursements, plus interest on this sum at the then maximum interest rate
permitted by law from the date of payment, performance, or compliance (herein
called “act”), shall be deemed to be additional Rent payable by Tenant with the
next succeeding installment of Rent. No such act shall constitute a waiver of
default or of any remedy for default or render Landlord liable for any loss or
damage resulting from any such act.

 

16.4.            Right of Subtenants. In the event of
termination of this Lease for any cause, Landlord has and shall retain the sole
and exclusive right in its absolute discretion to terminate or continue any and
all subleases, including a sublease of all or any portion of the Land
concurrent with the termination of this Lease.

 

16.5.            Rights of Leasehold Mortgagee.

 

16.5.1. Right to Cure. Landlord, on providing
Tenant any notice of: (i) default under this Lease, or (ii) the termination of this Lease, or (iii) a
matter on which Landlord may predicate or claim a default, shall at the same
time provide a copy of such notice to every Leasehold Mortgagee (as defined in
Paragraph 19.1) who shall have given Landlord written notice specifying its
name and address. No such notice by Landlord to Tenant shall be deemed to have
been duly given unless and until a copy thereof has been so provided to each
such Leasehold Mortgagee. From and after the date such notice has been given to
each such Leasehold Mortgagee, each such Leasehold Mortgagee shall have the
same period for remedying any default or acts or omissions that are the subject
matter of the notice or causing the same to be remedied, as is given Tenant
after the giving of the notice to Tenant, plus in each instance, the additional
periods of time specified in subparagraph 16.5.2 to remedy, commence remedying,
or cause to be remedied the defaults or acts or omissions that are the subject
matter of the notice. Landlord shall accept such performance by or at the
instigation of each such

 

27

 

Leasehold
Mortgagee as if the same had been done by Tenant. Tenant authorizes each such
Leasehold Mortgagee to take any such action at such Leasehold Mortgagee’s
option and does hereby authorize entry on the Land by each such Leasehold
Mortgagee for such purpose.

 

16.5.2. Notice to Leasehold Mortgagee(s).
Anything contained in this Lease to the contrary notwithstanding, if any
default shall occur that entities Landlord to terminate this Lease, Landlord
shall have no right to terminate this Lease unless, following the expiration of
the period of time, if any, given Tenant to cure the default or the act or
omission that gave rise to the default, Landlord shall notify each Leasehold
Mortgagee of Landlord’s intent to so terminate at least sixty (60) days in
advance of the proposed effective date of the termination if the default is
capable of being cored by the payment of money, and at least seventy-five (75)
days in advance of the proposed effective date of the termination if the
default is not capable of being cured by the payment of money (“Termination
Notice”). The provisions of Paragraph 16.5.3 below shall apply if, during this
sixty (60) or seventy-five (75) day Termination Notice period any such
Leasehold Mortgagee shall:

 

(i)                          Notify
Landlord of the Leasehold Mortgagee’s desire to cure the default; and

 

(ii)                       Pay
or cause to be paid all Rent, Additional Rent, and other payments then due and
in arrears as specified in the Termination Notice to the Leasehold Mortgagee
and which has become due or may become due during the sixty (60) day period;
and

 

(iii)                    Comply in good faith, with
reasonable diligence and continuity, with all nonmonetary requirements of this
Lease then in default and reasonably susceptible of being complied with by the
Leasehold Mortgagee; provided, however, that the Leasehold Mortgagee shall not
be required during the seventy-five (75) day period to cure or commence to cure
any default consisting of Tenant’s failure to satisfy and discharge any lien,
charge, or encumbrance against the Tenant’s interest in this Lease or the Land,
Buildings and/or Improvements junior in priority to the lien of the mortgage
held by such Leasehold Mortgagee.

 

16.5.3. Procedure
on Default.

 

(i)                          If
Landlord shall elect to terminate this Lease by reason of any default of
Tenant, and Leasehold Mortgagee shall have proceeded in the manner provided for
by subparagraph 16.5.2, the specified date for the termination of this Lease as
fixed by Landlord in its Termination Notice

 

28

 

shall be extended
for a period of six (6) months, provided that such Leasehold Mortgagee shall,
during this six-month period: (A) Pay or cause to be paid, the rent, additional
rent, and other monetary obligations of Tenant under this Lease that have
become due and as the same become due, and continue its good faith efforts to
perform all of Tenant’s other obligations under this Lease, excepting (1)
obligations of Tenant to satisfy or otherwise discharge any lien, charge, or
encumbrance against Tenant’s interest in this Lease or the Land, Buildings
and/or Improvements junior in priority to the lien of the mortgage held by
Leasehold Mortgagee and (2) past nonmonetary obligations then in default and
not reasonably expected to be cured by Leasehold Mortgagee; and (B) Take steps
to acquire or sell Tenant’s interest in this Lease by foreclosure of the
Leasehold Mortgage or other appropriate means and prosecute the same to
completion with due diligence.

 

(ii)                       If
at the end of the six (6) month period the Leasehold Mortgagee is complying
with subparagraph 16.5.3 above, this Lease shall not then terminate, and the
time for completion by Leasehold Mortgagee of its proceedings shall continue so
long as Leasehold Mortgagee is enjoined or stayed and thereafter for so long as
such Leasehold Mortgagee proceeds to complete steps to acquire or sell Tenant’s
interest in this Lease by foreclosure of the Leasehold Mortgage and by other
appropriate means with reasonable diligence and continuity; provided, however,
nothing in this subparagraph shall be construed to require Leasehold Mortgagee
to continue such foreclosure proceedings after the default has been cured. If
the default shall be cured and Leasehold Mortgagee shall discontinue such
foreclosure proceedings, this Lease shall continue in full force and effect as
if Tenant had not defaulted under this Lease.

 

(iii)                    If Leasehold Mortgagee is complying
with subparagraph 16.5.3(i), on the acquisition of Tenant’s estate her-in by
Leasehold Mortgagee or its designee or any other purchaser at a Foreclosure
(defined in Paragraph 19.4) under the Leasehold Mortgage (hereafter the “Purchaser”)
and the discharge of all liens, charges, and encumbrances against the Tenant’s
interest in this Lease or the Land, Buildings and/or Improvements that the
Tenant is obligated to satisfy and discharge by reason of the terms of this
Lease, this Lease shall continue in full force and effect as if Tenant had not
defaulted under this Lease, but subject to all of the provisions of this Lease
which limit the use of Tenant’s intellectual property, including without
limitation, Tenant’s trademarks, servicemarks, trade names and other proprietary
information.

 

29

 

(iv)                   Any Purchaser
(who may, but need not be, the Leasehold Mortgagee) who acquires Tenant’s
interest in this Lease at a foreclosure sale, or who otherwise acquires Tenant’s
interest from the Leasehold Mortgagee or by virtue of a Leasehold Mortgagee’s
exercise of its remedies, shall be deemed to have agreed to perform all of the
terms, covenants, and conditions on the part of the Tenant to be performed
hereunder from and after the date of the purchase and assignment, but only for
so long as the Purchaser or Leasehold Mortgagee is the owner of the leasehold
estate. If the Leasehold Mortgagee or Purchaser shall become holder of the
leasehold estate and if the Buildings and/or Improvements on the Land shall
have been or become materially damaged on, before, or after the date of the
purchase and assignment, the Leasehold Mortgagee or Purchaser shall be
obligated to cause restoration only to the extent of the net insurance proceeds
received by the Leasehold Mortgagee or Purchaser by reason of such damage.
However, should the net insurance proceeds be insufficient for the restoration
to the extent required by this Lease and should the Leasehold Mortgagee or its
designee choose not to fully reconstruct the Building and/or Improvements to
the extent required by this Lease, such failure shall constitute an event of
default under this Lease that shall give Landlord the right to terminate this
Lease after thirty (30) days prior written notice to Leasehold Mortgagee or
Purchaser.

 

(v)                      Subject
to all of the provisions of this Lease which limit the use of Tenant’s
intellectual property, including without limitation, Tenant’s trademarks,
servicemarks, trade names and other proprietary information, Leasehold Mortgagee
or other acquirer of the leasehold estate of Tenant pursuant to Foreclosure,
assignment in lieu of Foreclosure or other proceedings may, on acquiring Tenant’s
leasehold estate, only upon express written consent of Landlord, sell and
assign the leasehold estate on such terms and to such persons and organizations
as are acceptable to Leasehold Mortgages or acquirer and to Landlord and
thereafter be relieved of all obligations under this Lease; provided that such
assignee has delivered to Landlord its written agreement to be bound by all of
the provisions of this Lease, including all of the provisions of this Lease
which limit the use of Tenant’s intellectual property, including without
limitation, Tenant’s trademarks, servicemarks, trade names and other
proprietary information.

 

(vi)                   Notwithstanding
any other provisions of this Lease, any sale of this Lease and the leasehold
estate hereby created in any proceedings for the Foreclosure of the Leasehold
Mortgage, or the assignment or transfer of this Lease and of the leasehold
estate hereby created in lieu of the Foreclosure of the Leasehold Mortgage
shall be

 

30

 

deemed to be a
permitted sale, transfer, or assignment of this Lease and of the leasehold estate
hereby created, subject to all of the provisions of this Lease which limit the
use of Tenant’s intellectual property, including without limitation, Tenant’s
trademarks, servicemarks, trade names and other proprietary information.

 

16.5.4. New Lease. In the event of the
termination of this Lease as a result of Tenant’s default, Landlord shall, in
addition to providing the notices of default and termination as required by
subparagraph 16.5.2, provide Leasehold Mortgagee with prompt written notice
that the Lease has been terminated, together with a statement of all sums that
would at that time be due under this Lease but for such termination, and of all
other defaults, if any, then known to Landlord. Landlord agrees to enter into a
new lease (“New Lease”) of the Land with Leasehold Mortgagee or Purchaser for
the remainder of the term of this Lease, effective as of the date of
termination, at the Rent and Additional Rent, and on the terms, covenants, and
conditions (but excluding requirements that are no longer applicable or that
have already been fulfilled) of this Lease, but subject to all of the
provisions of this Lease which limit the use of Tenant’s intellectual property,
including without limitation, Tenant’s trademarks, servicemarks, trade names
and other proprietary information, provided:

 

(i)                          Leasehold
Mortgagee shall make written request on Landlord for the New Lease within sixty
(60) days after the date Leasehold Mortgagee receives Landlord’s Termination
Notice of this Lease given pursuant to this Paragraph.

 

(ii)                       Leasehold
Mortgagee or Purchaser shall pay or cause to be paid to Landlord at the time of
the execution and delivery of the New Lease, any and all sums that would at the
time of execution and delivery thereof be due pursuant to this Lease but for
such termination and, in addition thereto, all reasonable expenses, including
reasonable attorneys’ fees, that Landlord shall have incurred by reason of such
termination and the execution and delivery of the New Lease and that have not
otherwise been received by Landlord from Tenant. On the execution of the New
Lease, Landlord shall allow to the tenant named therein as an offset against
the sums otherwise due under this subparagraph or under the New Lease, an
amount equal to the net income derived by Landlord from the Land during the
period from the date of termination of this Lease to the date of the beginning
of the term of the New Lease. In the event of a controversy as to the amount to
be paid to Landlord pursuant to this subparagraph, the payment obligation shall
be satisfied if the Landlord shall be paid the amount not in controversy, and
the Leasehold Mortgagee or its designee shall agree to pay an additional sum
ultimately determined

 

31

 

to be due plus
interest at the then maximum legal rate and this obligation shall be adequately
secured.

 

(iii)                    Leasehold Mortgagee or Purchaser
shall agree to remedy any of Tenant’s defaults of which Leasehold Mortgagee was
notified by Landlord’s Notice of Termination and which are reasonably
susceptible of being so cured by Leasehold Mortgagee or its designee.

 

(iv)                   The
Leasehold Mortgagee or Purchaser, as tenant under any such New Lease, shall be
liable to perform the obligations imposed on the tenant by the New Lease only
during the period such person has ownership of such leasehold estate.

 

16.5.5. Leasehold Mortgagee Need Not Cure Specified
Defaults. Nothing herein contained shall require Leasehold Mortgagee or
Purchaser as a condition to its exercise of any right hereunder to cure any
default of Tenant not reasonably susceptible of being cured by Leasehold Mortgagee or Purchaser,
including, without limitation, the default referred to in Paragraph 16.1.6 of
this Lease relating to bankruptcy and insolvency and any other paragraphs of
the Lease that may impose conditions of default not susceptible to being cured
by Leasehold Mortgagee or Purchaser, in order to comply with the provisions of
Paragraph 16.5.2 or 16.5.3, or as a condition of entering into the New Lease provided
for Paragraph 16.5.4.

 

16.5.6. No Merger. So
long as any Leasehold Mortgage is in existence, unless all Leasehold Mortgagees
shall otherwise expressly consent in writing, the fee title to the Land and to
the Buildings and/or Improvements and the leasehold estate of Tenant therein
created by this Lease shall not merge but shall remain separate and distinct,
notwithstanding the acquisition of said fee title and said leasehold estate by
Landlord or by Tenant or by a third party, by purchase or otherwise, unless
such merger results from a default by Tenant, which the Leasehold Mortgage(s)
has been given an opportunity to cure and has failed to do so.

 

16.5.7. Method of Giving
Notices. All notices given by Landlord to Leasehold Mortgagees shall be
given by registered or certified mail, return receipt requested, addressed to
the Leasehold Mortgagees at the address last specified in writing to Landlord
by the Leasehold Mortgagees, and any such notice shall be deemed to have been
given when so mailed.

 

16.5.8. Two or More leasehold Mortgagees. In
the event two or more Leasehold Mortgagees each exercise their rights under
this Lease and there is a conflict that renders it impossible to comply with
all requests of the Leasehold

 

32

 

Mortgagees, then
the Leasehold Mortgagee whose Leasehold Mortgage would have senior priority in
the event of a foreclosure shall prevail. If any Leasehold Mortgagee pays any
rent or other sums due under this Lease relating to a period or periods other
than its actual ownership of the leasehold estate, the Leasehold Mortgagee
shall be subrogated to any and all rights that may be asserted against Landlord
with respect to that period or periods of time.

 

16.5.8.1.                              Amendments to Lease.
On request of any Leasehold Mortgagee, Landlord agrees to execute any amendment
to this Lease that does not, in the opinion of Landlord’s counsel, adversely
affect Landlord’s rights hereunder, which opinion, and determination by
Landlord, may be made in its sole and absolute discretion.

 

16.5.8.2.                              Assignment by Leasehold Mortgagee. The term “Leasehold Mortgagee” as used in
this Lease shall mean not only the original lender that loaned money to Tenant
and is named as beneficiary, mortgagee, or security holder in the
security instrument creating any Leasehold Mortgage, but also all subsequent
purchasers or assignees of such security instrument.

 

16.5.9. Landlord’s Default. Landlord shall not
be considered to be in default under this Lease
unless (a) Tenant has given notice specifying the default and Landlord shall
have failed to promptly and diligently cure the default within sixty (60) days
after the notice is given, plus any additional period that is reasonably
requited for the curing of the default if the default is not reasonably susceptible to being cured during this
period, so long as Landlord continuously and diligently proceeds to cure the
default. Tenant waives the protections of Civ. Code §§ 1932 and 1933. Any
judgment against Landlord shall be limited to, and satisfied only out of,
Landlord’s interest in the Land, and this Lease. No money judgment shall be
satisfied from any other assets of Landlord.

 

16.5.10.                                Unavoidable Delay.
Any prevention, delay, nonperformance, or stoppage due to strikes, lockouts,
labor disputes, riots, insurrection, war, and other causes beyond the
reasonable control of either party shall excuse nonperformance for a period of
time equal to the period of any such preventions, delay, nonperformance, or
stoppage; provided, however, that the foregoing shall not excuse the failure of
Tenant to timely and completely perform the obligations imposed by this Lease
for the payment of Rent.

 

16.5.11.                                Waiver. No
waiver of any default shall constitute a waiver of any other breach or default,
whether of the same or any other covenant or condition. No waiver, benefit,
privilege, or service voluntarily given or performed by either party shall give
the other any contractual right by custom,

 

33

 

estoppel, or
otherwise. The subsequent acceptance of Rent pursuant to this Lease shall not
constitute a waiver of any preceding default by Tenant other than default in
the payment of the particular rental payment so accepted, regardless of
Landlord’s knowledge of the preceding breach at the time of accepting the Rent,
nor shall acceptance of Rent or any other payment after termination constitute
a reinstatement, extension, or renewal of the Lease or revocation of any notice
or other act by Landlord.

 

17.                    SURRENDER
OF LAND AND BUILDINGS. At the expiration or earlier termination of this
Lease, Tenant shall surrender to Landlord the possession of the Land, Buildings
and Improvements and deliver to Landlord a good and sufficient grant deed, in
form acceptable for recordation conveying all of its right, title, and interest
therein to Landlord. Tenant shall leave the surrendered Land, Buildings and
Improvements broom-clean condition, except as otherwise expressly provided in
this Lease. All property that Tenant is required to surrender shall become
Landlord’s property on the expiration of or earlier termination of the Lease.
All Improvements that Tenant does not remove under Paragraph 8.2 shall, at
Landlord’s election, be deemed abandoned
and became Landlord’s property; provided, however, upon written notice given to
Tenant by Landlord at least thirty (30) days prior to the expiration of the
term or sooner termination of this Lease, Landlord can require Tenant to remove
all such Buildings and/or Improvements and restore the Land to a “buildable”
condition as reasonably determined by Landlord; provided however, Tenant shall
have a period of ninety (90) days following the termination of the term of this
Lease to commence such work, to remove all such buildings and/or improvements
and restore the Land to a buildable condition and shall diligently pursue such
work to completion, subject only to Landlord delays, any intervening act of God
or governmental action or other matters beyond the control of Tenant (excluding
matters in the control of any Subtenant or non-approved assignees) which
preclude timely completion of such work.

 

If Tenant fails to surrender the Land,
Buildings or Improvements, or fails to remove the Buildings and/or Improvements
and/or restore the Land at the expiration or sooner termination of or as
otherwise set forth herein, and in the manner required under this Lease, Tenant
shall reimburse, defend and indemnify Landlord from all liability and expense
resulting from such failure(s), including, without limitation, claims made by
any succeeding tenant founded on or resulting from such failure(s) of Tenant,
excluding only consequential damages.

 

18.                    ESTOPPEL
CERTTFTCATES. At any time and from time to time, within twenty-one (21)
days after notice of request by either party, the other party shall execute,
acknowledge, and deliver to the requesting party, or to such other recipient as
the notice shall direct, a statement certifying that this Lease is unmodified
and in full force and effect, or, if there have been modifications, that it is
in full force and effect as modified in the manner specified in the statement
The statement shall also state the dates to which the Rent has been paid in
advance. Tenant further, agrees at any time and from to time upon not less than
twenty-one (21) days notice by Landlord to execute, acknowledge and deliver to
Landlord, or any Fee Mortgagee, a

 

34

 

statement in
writing certifying (i) that this Lease is unmodified and in full force and
effect (or if there have been modifications that the same is in full force and
effect as modified and stating the modifications), (ii) whether or not there
are then existing any offsets or defenses against the enforcement of any of the
terms, covenants, or conditions hereof on the part of Tenant to be performed
(and if so, specifying the same); (iii) the dates to which the Percentage Rent
and other Rent and other charges have been paid; (iv) such other matters as may
reasonably be requested, it being intended that any such statement delivered
pursuant to this section may be relied upon by Landlord, Tenant and their
representative lenders, any mortgage, any prospective purchaser of the fee or
leasehold estate or proposed lender on the security of the fee or leasehold
estate of the Land comprising the premises; (v) Tenant will upon receipt of the
Non-Disturbance and Attornment Agreement provided in paragraph 10.1 of this
Lease, attorn to the Fee Mortgagee; (vi) upon Tenant’s receipt of the
Non-Disturbance and Attornment Agreement provided by paragraph 10.1 of this
Lease, and thereafter on written demand specifying that a default under the Fee
Mortgage has occurred, Tenant shall pay rent to the Fee Mortgagee; (vii) Tenant
will not enter into an amendment which materially adversely impacts the Fee
Mortgagee’s interest; (viii) if requested, upon receipt of the Non-Disturbance
and Attornment Agreement provided by paragraph 10.1 of this Lease, Tenant will
sign a commercially reasonable and customary subordination agreement in the
form routinely required by the Fee Mortgagee subordinating the Lease to the Fee
Mortgage; (ix) Tenant will not look to the Fee Mortgagee for the return of any
deposit unless Fee Mortgagee actually receives the deposit.

 

19.                    GENERAL
PROVISIONS. The parties agree to the following general provisions of this
Lease:

 

19.1.            Notice Requirements. As used in this
Lease, notice includes, but is not limited to, the communication of any notice,
request, demand, approval, statement, report, acceptance, consent, waiver, or
appointment. No notice of the exercise of any option or election is required
unless the provision giving the election or option expressly requires notice.
Unless the provisions of this Lease on Rent direct otherwise, Rent shall be
sent in the manner provided for giving notice or as directed by notice from
Landlord.

 

19.1.2 Writing. All notices must be in writing;
provided that no writing other than the check or other instrument representing
the Rent payment itself need accompany the payment of Rent.

 

19.1.3 Delivery. Notice is considered given
either (a) when delivered in person to the person intended named below, or (b)
deposited in the United States mail in a sealed envelope or container, either
registered or certified mail, return receipt requested (except for payments of
Rent which may be sent by first class mail), postage and postal charges
prepaid, addressed by name and address to the party or person intended as
follows:

 

	
  TENANT:

  	
   

  	
  Festival Fun
  Parks, LLC

  

 

35

 

	
   

  	
   

  	
  33208 Paseo
  Cerveza, Suite “C”

  San Juan Capistrano, CA 92675-4898

  
	
   

  	
   

  	
   

  
	
  LANDLORD:

  	
   

  	
  c/o John Huish

  17868 Joyas Court

  Poway, CA 92064-1005

  
	
   

  	
   

  	
   

  
	
  COPY
  TO:

  	
   

  	
  Randall L. Mason, Esquire

  Lewis, D’Amato, Brisbois & Bisgaard LLP

  550 West “C” Street, 8th Floor

  San Diego, California 92101

  

 

19.1.4 Change of Recipient or Address. Either
party may, by notice given at any time or from time to time, require subsequent
notices to be given to another party or an officer or representative, or to a
different address, or both. Notices given before actual receipt of notice of
change shall not be invalidated by the change.

 

19.1.5 Notice by Subtenants. Each Sublease of
the Improvements or the Land shall contain a provision that unless a copy of
the notice is delivered to Landlord pursuant to this Paragraph no notice
regarding an alleged default of Tenant shall be valid. Tenant shall deliver to
Landlord a copy of any notice from a governmental entity received by Tenant
regarding any alleged violations of Laws or from any person allegedly entitled
to give notice under any conditions, covenants, or restrictions binding or
effecting the Land. The provisions of 19.1 of this Lease apply to notices
received or deemed to have been received by a party to this Lease in connection
with a taking. The giving of notice as required by Paragraph 19.2 of this Lease
is to be performed at the time provided therein and in the manner provided in
this Paragraph.

 

19.2               Limitation
on Liability. In consideration of the benefits accrued hereunder, Tenant
covenants and agrees that, in the event of any actual or alleged failure,
breach or default hereunder by Landlord, Tenant’s sole and exclusive remedy
shall be against Landlord’s interest in the Land and the obligations of
Landlord under this Lease do not constitute personal obligations of Landlord,
its trustees, beneficiaries, affiliates or agents, and Tenant shall not seek
recourse against any such or any of their personal assets for satisfaction of
any liability with respect to this Lease.

 

19.3               Right
of Entry. Landlord reserves the right at all reasonable times and upon not
less than forty-eight (48) hours prior written notice to Tenant (except in the
case of an emergency) to enter the Land: (i) to inspect them; (ii) show the
Land, Buildings and Improvements to prospective purchasers, or mortgagees;
(iii) show the Land, Buildings or Improvements to prospective tenants during
the last eighteen (18) months of

 

36

 

the term of this
Lease; (iv) post notices of Non-Responsibility; (v) perform services required
of Landlord; and (vi) perform any covenants of Tenant which Tenant fails to
perform (subject to any notice and/or grace periods contained in this Lease).
Landlord may make such entries without the abatement of Rent and may take such
reasonable steps as required to accomplish the stated services; provided,
however, each such entry shall be made in reasonable manner which, to the
maximum extent reasonably possible, does not interfere with Tenant’s business
operations or security systems. Further, Tenant shall have the right to
accompany Landlord during any such entry (except in the case of an emergency).
Nothing herein contained shall imply any duty on the part of Landlord to do any
such work which under any provision of this Lease Tenant may be required to do,
nor shall it constitute a waiver of Tenant’s default in filing to do the same.

 

19.4.            No Merger. If both Landlord’s and
Tenant’s estates in the Land or the Improvements or both become vested in the
same owner, this Lease shall nevertheless not be destroyed by application of
the doctrine of merger except at the express election of the owner and with the
written consent of all Leasehold Mortgagees.

 

19.5.            Definitions.

 

19.6.1 “Buildings” means all permanently attached
structures which would be considered “buildings” under normal and customary
usage including without limitation, game rooms, snack bars, restaurants, and
specifically including buildings which are part of amusement attractions, such
as ornamentation, obstacles, landscaping and the like.

 

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

 

19.6.3 “Improvements” means all structures, amusement
attractions, parking areas, landscaping, irrigation, utility lines, storm
drains, walls, fences, signs and related improvements (but excluding
Buildings), and all additions to or improvements thereof, now, or at any time
hereafter, located on or in the Land.

 

19.6.4 “Landlord” means the person(s) who is/are the
owner(s) of the Land at the time in question, whether singular or plural in
number and whether named in this Lease as Landlord or having become the
successor in interest of the named Landlord, or the successor of a successor,
whether by assignment, foreclosure, or other transfer and whether intentional
or inadvertent or by operation of law; provided, however, whenever Landlord
hereunder consists of plural persons or entities, then any action or election
by such Landlord under this

 

37

 

Lease shall
require the written approval of greater than fifty percent (50%) of the persons
or entities which then comprise Landlord.

 

19.6.5 “Leasehold Mortgage” means the mortgage or deed
of trust covering Tenant’s leasehold interest in this Lease given by Tenant to
a Leasehold Mortgagee from time to time for the purpose of securing repayment
of funds advanced or to be advanced by a Leasehold Mortgagee to Tenant.

 

19.6.6 “Leasehold Mortgagee”
means the mortgagee or beneficiary under the Leasehold Mortgage.

 

19.6.7 “Person” means person
or persons or other entity or entities or any combination of persons or
entities.

 

19.6.8 “Sublease” means a
lease by Tenant of the Land or Improvements whether such lease is a lease
subordinate to this Lease or a direct lease of Improvements reserved by Tenant.
The term also includes licenses, concessions, or other agreements relating to
the use or occupancy of the Land or Improvements granted by Tenant resulting in
income payable to Tenant.

 

19.6.9 “Subtenant” means the
tenant under a Sublease. The term also includes any licensee or concessionaire.

 

19.6.10 “Tenant” means the
person named as Tenant in this Lease, whether singular or plural in number, or
the person who at the time in question is the successor in interest of Tenant,
or the successor of a successor, whether by assignment, foreclosure, or other
transfer, and whether intentional or inadvertent or by operation of law. It
does not, however, include any person claiming under any assignment or other
transfer prohibited by this Lease, and this definition does not alter the
provisions of this Lease relating to assignment or subletting.

 

19.7.            Number: Gender. The singular number
includes the plural and vice versa whenever the context so requires. The neuter
gender includes the feminine and masculine, the masculine includes the feminine
and neuter, and the feminine includes the neuter, and each includes
corporation, partnership, or other legal entity when the context so requires.

 

19.8.            Governing Law: Venue. This Lease shall
be governed by and construed under the laws of the State of California. In the
event of any dispute or litigation under this Lease, the parties agree that the
Courts of San Diego County shall have jurisdiction over such dispute or
litigation.

 

38

 

19.9.            Exhibits. All exhibits to which reference is made in
this Lease are incorporated in the Lease by the respective references to them,
whether or not they are actually attached. Reference to “this Lease” includes
matters incorporated by reference.

 

19.10.      Entire Agreement. This
Lease contains the entire agreement between the parties. No promise,
representation, warranty, or covenant not included or referred to in this Lease
has been or is relied on by either party. Each party has relied on its own
examination of this Lease, the counsel of its own advisors, and the warranties,
representations, and covenants in the Lease itself and those referred to in
this Lease.

 

19.11.      Invalidity. The
invalidity or illegality of any provision shall not affect the remainder of the
Lease.

 

19.12.      Binding on Heirs. Subject to the
provisions of this Lease on assignment and subletting, each and all of the
conditions of this Lease shall be binding on and shall inure to the benefit of the
heirs, successors, executors, administrators, assigns, and personal
representatives of the respective parties.

 

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

 

19.14.      Counterparts. This
Lease, or the memorandum of this Lease, or both may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.

 

19.15.      Memorandum of Lease. This Lease shall not
be recorded but a Memorandum of this Lease, in the form attached hereto as Exhibit “C” shall be recorded in the County of San
Diego, California.

 

19.16.      Captions. The captions
of the various paragraphs and subparagraphs of this Lease are for the
convenience and ease of reference only and do not define, limit, augment, or
describe the scope, content, or intent of this Lease or of any part or parts of
this Lease, a direct lease of
Improvements reserved by Tenant.

 

20.                    Hazardous Materials.

 

20.1               Use,
Storage, Handling and Disposal of Hazardous Materials. Except for petroleum
products, cleaning products and chlorine used as part of Tenant’s business and
any other Hazardous Materials which are in use at the commencement of this
Lease, and except as provided herein, neither Tenant nor any Tenant Party (as
defined below) shall cause or permit any hazardous materials (as herein
defined) to be used, generated, stored,

 

39

 

released,
transported, handled or disposed in or about the premises at any time following
the execution of this Lease and during the term hereof (such activities are
hereinafter referred to as “Environmental Activities”) except to the extent any
such uses (i) are ordinary and necessary in the operation of Tenant’s business
and (ii) used in compliance with all Hazardous Materials Laws (as herein defined).
Notwithstanding the foregoing, and subject to Tenant’s covenants to strictly
comply with all “hazardous materials laws” (as defined herein) and all the
terms and conditions of this provision, Tenant and all persons by or through
Tenant including, but not limited to, assignees, consignees, licensees,
subtenants, concessionaires (collectively, the “Tenant Parties”), may bring
upon, keep and use in or about the premises (a) general office, kitchen and
kitchen supplies typically used in such areas in the ordinary course of
business, such as copier toner, liquid paper, glue, ink and cleaning solvents
for use in the manner for which they were designed, in such amounts as may be
normal for business operations conducted by Tenant on the Land including such
chemicals and hazardous materials as are utilized for maintaining the bumper
boat pond and other running waters on the premises, (b) petroleum products,
cleaning products and chlorine used as part of Tenant’s business and any other
Hazardous Materials which are in use at the commencement of this Lease, and (c)
those additional Hazardous Materials consented to by Landlord in writing, which
consent shall be in Landlord’s sole discretion. In connection with seeking any
such consent, Tenant shall deliver to Landlord a description of handling,
storage, use and disposal procedures. Notwithstanding the foregoing, except for
all current tanks and the tanks contemplated by the Purchase and Sale Agreement
between Tenant as Buyer, and Huish Family Fun Centers, Inc., executed
concurrently herewith, Tenant shall not install, operate or maintain any above
or below grade tank, sump, pit, pond, lagoon or other storage or treatment
vessel or device on the Land except those devices that currently exist and/or
are currently contemplated and agreed to pursuant to that certain Purchase and
Sale Agreement executed between Tenant and Huish Family Fun Centers, Inc.,
concurrently with this Lease, or as required by health laws and except those
devices that are in existence on the date of execution of this Lease unless Landlord shall subsequently
give its consent in writing after full disclosure and reasonable investigation
by Landlord.

 

20.2               Compliance
with Laws. Tenant, at its sole cost and expense, shall comply and shall
cause the Tenant Parties to comply with all federal, state and local laws,
ordinances, regulations, all rules, licenses, permits, orders, decrees and
judgments relating to Environmental Activities (collectively referred to as “Hazardous
Material Laws”) conducted by Tenant or Tenant Parties on the Land. Tenant’s
failure to commence to comply with Hazardous Materials Laws within sixty (60)
days, or such shorter period as required in any written governmental directive
after written notice from any governmental authority with jurisdiction over the
Land shall constitute an Event of Default under this Lease. The obligations of
Tenant under this section shall (i) survive the expiration or earlier
termination of this Lease without any limitation; (ii) constitute obligations
which are independent and severable from Tenant’s covenants and obligations

 

40

 

to pay Rent under
this Lease; and (iii) inure to the benefit of and be enforceable by, Landlord,
its assignees and successors-in-interest under this Lease.

 

20.3               Disclosure
Notification. Tenant shall immediately advise Landlord in writing of, and
provide Landlord with a copy of (i) any written notices of violation or
potential or alleged violation of any Hazardous Material Laws which are received
by Tenant from any governmental agency concerned with Tenant’s or the Tenant
Parties Environmental Activities, (ii) any and all written inquiry,
investigation, enforcement, clean-up, removal or other governmental or
regulatory actions instituted or threatened relating to the Land; (iii) all
claims made by any third party or threatened by any governmental entity against
Tenant or the Land relating to any Hazardous Materials, and (iv) any release of
any Hazardous Materials on or about the Land, Buildings or Improvements which
Tenant through its officers, directors, general managers and other managers of
Tenant’s use upon the Land, Buildings and Improvements know of or reasonably
believe may have occurred.

 

20.4               Inspection
of Land. In the event that Landlord reasonably believes that Tenant is in
violation of any of Tenant’s duties or obligations under this section, Landlord
may require that Tenant retain at Landlord’s sole cost and expense (except as
noted below), a registered environmental consultant (the “Consultant”)
reasonably acceptable to Landlord to conduct an investigation of the Land,
Buildings and Improvements (“Environmental Assessment”) (i) for Hazardous
Materials contamination in, about or beneath the Land, Buildings and
Improvements; and (ii) to assess all Environmental Activities on the Land,
Buildings and Improvements for compliance with all applicable laws, ordinances
and regulations and for the use of procedures intended to reasonably reduce the
risk of a release of Hazardous Materials. The Environmental Assessment shall be
performed in a manner reasonably calculated to discover the presence of
Hazardous Materials contamination and shall be of a scope and intensity
reflective of the general standards of professional environmental consultants
who regularly provide environmental assessment services in connection with the
transfer or leasing of real property. Initially, the Environmental Assesment
shall take into full consideration the past and present uses of the Land,
Buildings and Improvements by Tenant or by any of the Tenant Parties and other
factors unique to the Land, Buildings and Improvements. The cost of the
Environmental Assessment shall be paid by Landlord. However, Tenant may retain
its own consultant at its own expense to confirm the conclusion of all findings
of Landlord’s consultant. As between Tenant and Landlord, in the event that the
assessment performed by Landlord’s consultant (and confirmed by Tenant’s
consultant) disclose that Tenant or any Tenant Party has breached its obligations
contained in Sections 20.1 and 20.2 such that a release of Hazardous Materials
in violation of Hazardous Materials Laws has been caused by Tenant or any
Tenant Party, Tenant shall comply, at its sole cost and expense, with any
remediation and/or monitoring required by governmental agencies in order to
remedy Tenant’s or such Tenant Party’s breach. In no event shall Tenant be
responsible to Landlord for any remediation of pre-existing Hazardous Materials
or any release

 

41

 

caused by Landlord
or any of Landlord’s agents, employees, or contractors. In the event of a
disagreement between Tenant’s consultant and Landlord’s consultant, they shall
meet and confer as to any additions or conditions requiring correction. Any
remaining disputed or issue shall be resolved by arbitration as specified
further herein. Tenant covenants to reasonably cooperate with the consultant
and to allow entry and reasonable access to all portions of the Land, Buildings
and Improvements for the purpose of consultant’s investigation. If Tenant’s
consultant and Landlord’s consultant reasonably determines that Tenant violated
a duty or obligation set forth in this section in which event the entire cost
thereof shall be paid by Tenant as Additional Rent.

 

20.5               Indemnification
of Landlord. Tenant shall indemnify, defend (with counsel satisfactory to
Landlord) and hold Landlord, its directors, officers, employees, agents,
assigns and any successors in Landlord’s interests under the Lease, harmless
from and against any and all loss, costs, damage, expense (including reasonable
attorneys’ fees and experts’ fees), claims, cause of action, judgment, penalty,
fine or liability directly or indirectly relating to or arising from any breach
of Tenant’s obligations described in this Section 20. Notwithstanding the
foregoing, Tenant shall not be required to indemnify Landlord with respect to
Hazardous Materials which were not used, generated, stored, transported,
handled or disposed of in or about the Land, Buildings and Improvements by
Tenant or any of the Tenant Parties or agents, such as Hazardous Materials
which might migrate onto or under the Land, Buildings and Improvements from
another source or which, existed as of the date of execution of this Lease or
resulted from the negligence of Landlord or Landlord’s agents, contractors, or
employees. Landlord shall have the right, but not the obligation, to join or
participate in any legal proceedings or actions initiated in connection with
Tenant’s Environmental Activities. If Tenant fails to remediate or accept
tender of the obligation to cure or defend, Landlord may also negotiate,
defend, approve and appeal any action taken or issued by any applicable
governmental authority with regard to contamination of the Land, Buildings and
Improvements by any Hazardous Materials. Any costs or expenses incurred by
Landlord for which Tenant or any of the Tenant Parties is or are responsible
under this section or for which Tenant has indemnified Landlord shall be
reimbursed by Tenant to Landlord on demand as Additional Rent.

 

20.6               Remediation.
If any Environmental Activities undertaken by Tenant or any of the Tenant
Parties in violation of Hazardous Materials Laws and the provisions of this
Lease result in contamination of the Land, Buildings and Improvements, or any
portion of the soil, ground or water thereunder, Tenant shall take all actions
at its sole expense and without abatement of rent, as are necessary to return
the affected portion of the Land, Buildings and Improvements, and the soil and
ground water to the condition required by any governmental agencies having
jurisdiction. Landlord shall also have the right to approve any and all
contractors hired by Tenant to perform such remedial work which approval shall
not be unreasonably withheld or delayed. All such remedial work shall be
performed in compliance with all applicable laws and ordinances and regulations

 

42

 

and in such a
manner as to minimize any interference with the use and enjoyment of the Land.
Appearance of Hazardous Materials in or about the Land shall not be deemed an
occurrence of damage or destruction subject to the terms of this Lease
respecting damage or destruction caused by act of God, force of nature, fire,
flood, earthquake or other casualty, unless the remediation of such Land causes
a shut-down of 50% or more of the Land.

 

20.7               Definition
of Hazardous Materials. Hazardous Materials shall mean asbestos, any
petroleum fuel and any hazardous or toxic substance, material or waste which
is, or during the term of this Lease, becomes regulated by any local
governmental authority, State of California or the United States government,
including but not limited to, any material or substance defined as a “Hazardous
Waste”, “Extremely Hazardous Waste”, “Restricted Hazardous Waste”, “Hazardous
Substance”, “Hazardous Material” or ‘Toxic Pollutant” under the California
Health and Safety Code and/or under the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. § 9601 et seq. The term “Hazardous
Materials” will not include cleaning products, landscape fertilizers or other
products in ordinary quantities that are customarily used in the ordinary
course of business of operating and maintaining commercial properties (but
which will nevertheless be used in compliance with applicable Hazardous
Material Laws).

 

20.8               Impact
of Assignment and Subletting. If a proposed transferee’s activities in or
about the Land, Buildings and Improvements involve the use, handling, storage
or disposal of any Hazardous Materials other than those used by Tenant and in
quantities and the uses similar to Tenant’s uses in compliance with this Lease,
(i) it shall be reasonable for Landlord to withhold its consent to such
assignment or sublease in light of the risk of contamination posed by such
activities unless Tenant satisfies the conditions prescribed in the following
clause and/or (ii) Landlord may impose an additional condition to such
assignment or sublease which requires Tenant to establish beyond a reasonable
doubt that such transferee’s activities pose no significantly greater risk of
contamination of the Land, Buildings and Improvements than do Tenant’s
permitted activities in view of the (a) quantities, toxicity and other
properties of the Hazardous Materials to be used by such transferee; (b) the
precautions against a release of Hazardous Materials such transferee agrees to
implement; (c) such transferee’s financial condition as it relates to its
ability to fund a major clean-up and (d) such transferee’s policy and
historical record respecting its willingness to respond to and clean-up a
release of Hazardous Materials.

 

21.                    COMPLIANCE
WITH AMERICAN DISABILITIES ACT AND SIMILAR PROVISIONS. Tenant shall be required
throughout the duration of this Lease to insure the Land, Buildings and
Improvements are in compliance with the American Disabilities Act and any
similar provisions pertaining to the Buildings and/or Improvements erected on
the Land or in the operations of Tenant’s business on the Land during the
duration of this Lease. Tenant shall

 

43

 

this Lease, make
any modifications and corrections to the Buildings and/or Improvements as
required to Comply with the American Disabilities Act, or provisions similar
thereto pertaining to the Buildings and/or Improvements now erected or
subsequently erected on the Land or maintained on the Land during the duration
of this Lease as part of Tenant’s business.

 

19.16. Time of Essence. Time is of the
essence of this Lease.

 

This Lease is executed by the parties hereto as of the date first above
written.

 

	
  TENANT: 

  	
  LANDLORD:

  
	
   

  	
   

  
	
  FESTIVAL
  FUN PARKS, LLC

  	
  HUISH
  LAND TRUST 

  
	
  a
  Delaware limited liability company

  	
  dated
  May 24, 1984

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/
  Mark C Monaco

  	
   

  	
  By:

  	
  /s/
  John M. Huish, Trustee

  
	
   

  	
   

  	
  FEC HOLDING COMPANY, INC.

  	
   

  	
  John
  M. Huish, Trustee

  
	
   

  	
   

  	
  a Delaware Corporation,

  	
   

  	
   

  
	
   

  	
   

  	
  Its Sole Member

  	
  CAROLYN
  B. HUISH PROPERTIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mark C Monaco

  	
   

  	
  By:

  	
  /s/
  John M. Huish, General Partner

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Mark C Monaco

  	
   

  	
  John
  M. Huish, General Partner

  
	
   

  	
   

  	
  Its:

  	
  VICE PRESIDENT

  	
   

  	
   

  	
   

  
										

 

44

 

	
  State of
  California

  	
  )

  
	
   

  	
  )ss.

  
	
  County of San
  Diego)

  	
  )

  

 

 

On 14 July 1998 before me, Katy E. Mazzei personally appeared John M.
Huish personally known to me, or proved to me on the basis of satisfactory
evidence, to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

Witness my hand and official seal.

 

 

[SEAL]

 

	
  KATY E. MAZZEI

  Commission # 1081265

  Notary Public — California

  Fresno County

  My Comm. Expires Dec 17, 1999

  	
   

  

 

 

NEW YORK

 

INDIVIDUAL

 

	
  STATE OF New York

  	
   

  	
  )

  
	
   

  	
   

  	
  )                               ss.

  
	
  COUNTY OF NASSAU

  	
   

  	
  )

  

 

On the 20th  day of July,
1998, before me personally came Mark C. Monaco , to me known to be the person
described in and who executed the foregoing instrument, and acknowledged to me
that he executed the same.

 

	
   

  	
   

  	
   

  	
  /s/ Ellen S. Wissemann

  	
   

  
	
   

  	
   

  	
   

  	
  Notary Public

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ELLEN S. WISSEMANN

  NOTARY PUBLIC, STATE OF NEW YORK

  NO. 01W15082656

  QUALIFIED IN NASSAU COUNTY

  COMMISSION EXPIRES JULY 28, 1999

  

 

 

EXHIBIT A

 

 

DESCRIPTION

 

PARCEL 1:

 

THAT PORTION OF
LOT 54 OF THE HIGHLANDS, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 284, FILED IN THE OFFICE OF THE
COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH 16, 1887, DESCRIBED AS FOLLOWS:

 

BEGINNING AT A
POINT ON THE NORTHERLY LINE OF SAID LOT 54, DISTANT THEREON NORTH 89°52’00”
EAST, 666.51 FEET FROM THE INTERSECTION OF SAID NORTHERLY LINE WITH A LINE
ESTABLISHED BY THE SHAW SURVEY OF 1893, FILED IN THE OFFICE OF THE CITY
ENGINEER OF THE CITY OF SAN DIEGO, SAID SHAW LINE PURPORTEDLY BEING THE
EASTERLY BOUNDARY OF PUEBLO LANDS OF SAN DIEGO AS SAID PUEBLO LANDS ARE SHOWN
ON MISCELLANEOUS MAP NO. 36; THENCE LEAVING SAID NORTHERLY LINE SOUTH 42°48’48”
WEST, 157.52 FEET TO THE BEGINNING OF A TANGENT 310.00 FOOT RADIUS CURVE
CONCAVE SOUTHEASTERLY; THENCE WESTERLY AND SOUTHERLY ALONG SAID CURVE THROUGH A
CENTRAL ANGLE OF 64°59’04”, 351.60 FEET; THENCE TANGENT TO SAID CURVE SOUTH
22°10’16” EAST TO THE SOUTHERLY LINE OF SAID LOT 54; THENCE EASTERLY ALONG SAID
SOUTHERLY LINE TO AN ANGLE POINT IN THE WESTERLY LINE OF MCGRATH-HIGHLANDS
INDUSTRIAL CENTER NO. 2, ACCORDING TO MAP THEREOF NO. 6159, FILED IN THE OFFICE
OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE NORTHERLY ALONG THE WESTERLY
LINE OF SAID MAP NO. 6159 AND THE NORTHERLY PROLONGATION THEREOF TO THE
NORTHERLY LINE OF SAID LOT 54; THENCE WESTERLY ALONG SAID NORTHERLY LINE TO THE
POINT OF BEGINNING.

 

PARCEL 2:

 

A PARCEL OF LAND
IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, LYING
WITHIN A PORTION OF LOT 78 OF RANCHO MISSION, ACCORDING TO PARTITION MAP
THEREOF, FILED IN THE OFFICE OF THE COUNTY CLERK OF SAID COUNTY IN THE ACTION
OF JUAN M. LOCO, ET AL, VS. COMMERCIAL BANK OF SAN DIEGO, AND LYING WITHIN A
PORTION OF THE UNNAMED STREET LYING NORTHERLY OF AND ADJOINING LOT 54 OF THE
HIGHLANDS, ACCORDING TO MAP THEREOF NO. 284. FILED IN THE OFFICE OF THE COUNTY
RECORDER OF SAN DIEGO COUNTY, MARCH 16, 1887.

 

BEGINNING AT A
POINT ON THE NORTHERLY LINE OF SAID LOT 54, DISTANT HEREON NORTH 89°52’00” EAST
666.51 FEET FROM THE INTERSECTION OF SAID NORTHERLY LINE WITH A LINE
ESTABLISHED BY THE SHAW SURVEY OF 1893, FILED IN THE CITY ENGINEERS OFFICE,
CITY OF SAN DIEGO, SAID SHAW LINE PURPORTEDLY BEING THE EASTERLY BOUNDARY OF
PUEBLO LANDS OF SAN DIEGO AS SAID PUEBLO LANDS ARE SHOWN ON MISCELLANEOUS MAP
NO. 361; THENCE LEAVING SAID NORTHERLY LINE, NORTH 42°48’48” EAST 10.00 FEET;
THENCE NORTH 66°38’32” EAST 114.79 FEET; THENCE NORTH 12°48’48” EAST 12.00
FEET; THENCE SOUTH 77°11’12” EAST TO AN INTERSECTION WITH THE NORTHERLY
PROLONGATION OF THE WESTERLY LINE OF MCGRATH-HIGHLANDS INDUSTRIAL CENTER NO. 2,
ACCORDING TO MAP THEREOF NO. 6159, FILED IN THE OFFICE OF THE COUNTY RECORDER
OF SAN DIEGO COUNTY; THENCE SOUTH 10°06’09” EAST ALONG SAID PROLONGATION TO
SAID NORTHERLY LINE OF LOT 54; THENCE ALONG SAID NORTHERLY LINE, SOUTH 89°52’00”
WEST TO THE POINT OF BEGINNING.

 

 

EXHIBIT BExhibit 10.22

 

COMMERCIAL GROUND LEASE

 

MARCH 29,
1999

 

LANDLORD:

 

REALTY
INCOME CORPORATION 

A MARYLAND CORPORATION

 

TENANT:

 

FESTIVAL
FUN PARKS, LLC,

A DELAWARE LIMITED LIABILITY COMPANY

 

PREMISES LOCATION:

 

FAMILY
FUN CENTER

1525 VISTA WAY

VISTA, CA 92083

 

 

COMMERCIAL
GROUND LEASE

 

TABLE OF CONTENTS

 

	
  RECITALS

  	
  1

  
	
  1.

  	
   

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
  1.1

  	
   

  	
  Lease Year

  	
  1

  
	
   

  	
   

  	
  1.2

  	
   

  	
  Hazardous Material

  	
  1

  
	
   

  	
   

  	
  1.3

  	
   

  	
  Environmental Law

  	
  2

  
	
  2.

  	
   

  	
  PREMISES

  	
  2

  
	
  3.

  	
   

  	
  TERM

  	
  2

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Term

  	
  2

  
	
   

  	
   

  	
  3.2

  	
   

  	
  First Option to Extend

  	
  2

  
	
   

  	
   

  	
  3.3

  	
   

  	
  Second Option to Extend

  	
  3

  
	
   

  	
   

  	
  3.4

  	
   

  	
  Third Option to Extend

  	
  3

  
	
   

  	
   

  	
  3.5

  	
   

  	
  Fourth Option to Extend

  	
  3

  
	
   

  	
   

  	
  3.6

  	
   

  	
  Fifth Option to Extend

  	
  3

  
	
  4.

  	
   

  	
  MONTHLY RENT

  	
  3

  
	
   

  	
   

  	
  4.1

  	
   

  	
  Net-Net-Net Lease

  	
  3

  
	
   

  	
   

  	
  4.2

  	
   

  	
  Monthly Rent

  	
  4

  
	
   

  	
   

  	
  4.3

  	
   

  	
  Monthly Rent During the Extension Periods

  	
  4

  
	
  5.

  	
   

  	
  ADDITIONAL RENT

  	
  4

  
	
   

  	
   

  	
  5.1

  	
   

  	
  Consumer Price Index Rental Increase

  	
  4

  
	
  6.

  	
   

  	
  SUBSTITUTE RENT AND INCREASES

  	
  5

  
	
  7.

  	
   

  	
  SECURITY DEPOSIT

  	
  5

  
	
  8.

  	
   

  	
  USE OF THE PREMISES

  	
  5

  
	
  9.

  	
   

  	
  PROPERTY TAXES, ASSESSMENTS AND UTILITIES

  	
  6

  
	
   

  	
   

  	
  9.1

  	
   

  	
  Tenant’s Required Payments

  	
  6

  
	
   

  	
   

  	
  9.2

  	
   

  	
  Payments Not Required by Tenant

  	
  7

  
	
   

  	
   

  	
  9.3

  	
   

  	
  Assessments

  	
  7

  
	
   

  	
   

  	
  9.4

  	
   

  	
  Utility Payments

  	
  7

  
	
   

  	
   

  	
  9.5

  	
   

  	
  Tenant’s Right to
  Contest Utility Charges, Contest Taxes and Seek Reduction of Assessed
  Valuation of the Premises

  	
  7

  
	
   

  	
   

  	
  9.6

  	
   

  	
  Landlord Not Required to Join in Proceedings or
  Contest Brought by Tenant

  	
  8

  
	
   

  	
   

  	
  9.7

  	
   

  	
  Tax Period and Adjustment of Taxes

  	
  8

  
	
  10.

  	
   

  	
  BUILDING and IMPROVEMENTS; TRADE FIXTURES

  	
  9

  
	
   

  	
   

  	
  10.1

  	
   

  	
  Building and Improvements

  	
  9

  
	
   

  	
   

  	
  10.2

  	
   

  	
  Depreciation and Investment Tax Credit

  	
  9

  
	
   

  	
   

  	
  10.3

  	
   

  	
  Trade Fixtures

  	
  9

  
	
   

  	
   

  	
  10.4

  	
   

  	
  Removal of Trade Fixtures

  	
  9

  
	
   

  	
   

  	
  10.5

  	
   

  	
  Financing of Tenant’s Property

  	
  10

  
	
  11.

  	
   

  	
  MAINTENANCE OF THE PREMISES

  	
  10

  
	
   

  	
   

  	
  11.1

  	
   

  	
  Obligation to Maintain the Premises

  	
  10

  
	
   

  	
   

  	
  11.2

  	
   

  	
  Obligation to Keep the Premises Clear

  	
  11

  
	
  12.

  	
   

  	
  REPAIRS AND ALTERATIONS

  	
  11

  
	
   

  	
   

  	
  12.1

  	
   

  	
  Right to Make Alterations

  	
  11

  
	
   

  	
   

  	
  12.2

  	
   

  	
  Tenant Shall Not Render Premises Liable for Any Lien

  	
  11

  
	
  13.

  	
   

  	
  INDEMNITY AND INSURANCE

  	
  12

  
	
   

  	
   

  	
  13.1

  	
   

  	
  Indemnification

  	
  12

  
	
   

  	
   

  	
  13.2

  	
   

  	
  Insurance Company Requirement

  	
  12

  
	
   

  	
   

  	
  13.3

  	
   

  	
  Insurance Certificate Requirements

  	
  13

  

 

1

 

	
   

  	
   

  	
  13.4

  	
   

  	
  Minimum Acceptable Insurance Coverage Requirements

  	
  13

  
	
   

  	
   

  	
  13.5

  	
   

  	
  Additional Insureds

  	
  14

  
	
   

  	
   

  	
  13.6

  	
   

  	
  Mortgage 
  Endorsement

  	
  14

  
	
   

  	
   

  	
  13.7

  	
   

  	
  Renewals, Lapses or Deficiencies

  	
  15

  
	
  14.

  	
   

  	
  PARTIAL AND TOTAL DESTRUCTION OF THE PREMISES

  	
  15

  
	
  15.

  	
   

  	
  CONDEMNATION

  	
  15

  
	
   

  	
   

  	
  15.l

  	
   

  	
  Condemnation Damages

  	
  15

  
	
   

  	
   

  	
  15.2

  	
   

  	
  Termination of Lease Due to Condemnation

  	
  16

  
	
  16.

  	
   

  	
  ASSIGNMENT AND SUBLETTING

  	
  16

  
	
   

  	
   

  	
  16.1

  	
   

  	
  Tenant’ s Right of Assignment and Subletting

  	
  16

  
	
   

  	
   

  	
  16.2

  	
   

  	
  Landlord’s Option to Preserve Subtenancies

  	
  17

  
	
   

  	
   

  	
  16.3

  	
   

  	
  Tenant’s Assignment of
  All Rent from Subletting as Security for Tenant’s Obligations

  	
  17

  
	
   

  	
   

  	
  16.4

  	
   

  	
  Continuing Obligation of Tenant

  	
  17

  
	
   

  	
   

  	
  16.5

  	
   

  	
  Fees and Costs with Regard to Proposed Assignment or
  Sublease

  	
  17

  
	
   

  	
   

  	
  16.6

  	
   

  	
  Landlord’s Right of Assignment

  	
  18

  
	
  17.

  	
   

  	
  DEFAULT AND TERMINATION

  	
  18

  
	
   

  	
   

  	
  17.1

  	
   

  	
  Events of Default

  	
  18

  
	
   

  	
   

  	
  17.2

  	
   

  	
  Landlord’s Remedies

  	
  19

  
	
   

  	
   

  	
  17.3

  	
   

  	
  Late Charge

  	
  22

  
	
   

  	
   

  	
  17.4

  	
   

  	
  Right of Landlord to Re-Enter

  	
  23

  
	
   

  	
   

  	
  17.5

  	
   

  	
  Surrender of Premises

  	
  23

  
	
   

  	
   

  	
  17.6

  	
   

  	
  Interest Charges

  	
  23

  
	
   

  	
   

  	
  17.7

  	
   

  	
  Tenant’s Default

  	
  23

  
	
   

  	
   

  	
  17.8

  	
   

  	
  Default by Landlord

  	
  24

  
	
  18.

  	
   

  	
  RIGHT OF INSPECTION

  	
  24

  
	
  19.

  	
   

  	
  WAIVER OF BREACH

  	
  24

  
	
  20.

  	
   

  	
  NOTICES

  	
  25

  
	
   

  	
   

  	
  20.1

  	
   

  	
  Notice Requirements

  	
  25

  
	
   

  	
   

  	
  20.2

  	
   

  	
  Payments Under Lease

  	
  25

  
	
  21.

  	
   

  	
  RELATIONSHIP OF THE PARTIES

  	
  26

  
	
  22.

  	
   

  	
  SUBORDINATION, ATTORNMENT AND ESTOPPEL

  	
  26

  
	
   

  	
   

  	
  22.1

  	
   

  	
  Subordination and Non-Disturbance

  	
  26

  
	
   

  	
   

  	
  22.2

  	
   

  	
  Attornment

  	
  26

  
	
   

  	
   

  	
  22.3

  	
   

  	
  Estoppel Certificate

  	
  27

  
	
  23.

  	
   

  	
  TENANT’S FINANCIAL STATEMENTS

  	
  27

  
	
  24.

  	
   

  	
  ATTORNEYS’ FEES

  	
  28

  
	
   

  	
   

  	
  24.1

  	
   

  	
  Recovery of Attorneys’ Fees and Costs of Suit

  	
  28

  
	
   

  	
   

  	
  24.2

  	
   

  	
  Party to Litigation

  	
  28

  
	
   

  	
   

  	
  24.3

  	
   

  	
  Landlord’ s Consent

  	
  28

  
	
  25.

  	
   

  	
  CONSENT

  	
  28

  
	
  26.

  	
   

  	
  AUTHORITY TO MAKE LEASE;  COVENANT OF QUIET ENJOYMENT

  	
  29

  
	
   

  	
   

  	
  26.1

  	
   

  	
  Full Power and Authority to Enter Lease

  	
  29

  
	
   

  	
   

  	
  26.2

  	
   

  	
  Quiet Enjoyment

  	
  29

  
	
   

  	
   

  	
  26.3

  	
   

  	
  No Violation of Covenants and Restrictions

  	
  29

  
	
  27.

  	
   

  	
  HAZARDOUS MATERIAL

  	
  29

  
	
   

  	
   

  	
  27.1

  	
   

  	
  Environmental Compliance

  	
  29

  
	
   

  	
   

  	
  27.2

  	
   

  	
  Tenant’s Responsibility for Hazardous Materials

  	
  30

  
	
   

  	
   

  	
  27.3

  	
   

  	
  Survival

  	
  30

  
	
  28.

  	
   

  	
  GENERAL PROVISIONS

  	
  31

  
	
   

  	
   

  	
  28.1

  	
   

  	
  Gender; Number

  	
  31

  
	
   

  	
   

  	
  28.2

  	
   

  	
  Captions

  	
  31

  

 

2

 

	
   

  	
   

  	
  28.3

  	
   

  	
  Exhibits

  	
  31

  
	
   

  	
   

  	
  28.4

  	
   

  	
  Entire Agreement

  	
  31

  
	
   

  	
   

  	
  28.5

  	
   

  	
  Drafting

  	
  31

  
	
   

  	
   

  	
  28.6

  	
   

  	
  Modification

  	
  31

  
	
   

  	
   

  	
  28.7

  	
   

  	
  Joint and Several Liability

  	
  31

  
	
   

  	
   

  	
  28.8

  	
   

  	
  Governing Law

  	
  32

  
	
   

  	
   

  	
  28.9

  	
   

  	
  Attorneys’ Fees

  	
  32

  
	
   

  	
   

  	
  28.10

  	
   

  	
  Time of Essence

  	
  32

  
	
   

  	
   

  	
  28.11

  	
   

  	
  Severability

  	
  32

  
	
   

  	
   

  	
  28.12

  	
   

  	
  Successors and Assigns

  	
  32

  
	
   

  	
   

  	
  28.13

  	
   

  	
  Independent Covenants

  	
  32

  
	
   

  	
   

  	
  28.14

  	
   

  	
  Information Provided

  	
  33

  
	
   

  	
   

  	
  28.15

  	
   

  	
  Limitation of Landlord’s Liability

  	
  33

  
	
   

  	
   

  	
  28.16

  	
   

  	
  No Lease Until Accepted

  	
  33

  
	
   

  	
   

  	
  28.17

  	
   

  	
  Counterparts

  	
  33

  

 

EXHIBIT A - LEGAL
DESCRIPTION OF REAL PROPERTY

EXHIBIT B - MEMORANDUM OF LEASE

 

3

 

COMMERCIAL GROUND LEASE

 

This Commercial Ground Lease (this “Lease”) is dated as of March 29,
1999, between Realty Income Corporation, a Maryland corporation (“Landlord”)
and Festival Fun Parks, LLC, a Delaware limited liability company (“Tenant”)
with reference to the recitals set forth below.

 

RECITALS

 

A. Landlord is the owner of that certain real property (the “Premises”),
the legal description of which is attached hereto and incorporated herein as
Exhibit “A,” commonly known as:

 

Family Fun Center

1525 Vista Way

Vista, CA 92083

 

B. Landlord desires to lease the Premises to Tenant, and Tenant desires
to lease the Premises from Landlord pursuant to the provisions of this Lease.

 

1.                         DEFINITIONS

 

The following terms, when used in this Lease, shall have the meaning
set forth in this Section.

 

1.1                  Lease Year

 

The term “Lease Year” shall mean the first twelve (12) full calendar
months following the Commencement Date (as defined herein) and each subsequent
twelve (12) month period thereafter during the term and any extensions.

 

1. 2               Hazardous
Material

 

The term “Hazardous Material” means any substance, material or waste
which is toxic, ignitable, reactive or corrosive and which is or becomes regulated
by any local or state governmental authority or the United States Government.
The term “Hazardous Material” includes, without limitation, any material or
substance which is (i) defined as a “hazardous waste,” “extremely hazardous
waste,” “restricted hazardous waste,” “hazardous substance,” or “hazardous
material,” by any local, state, or federal law, (ii) oil and petroleum products
and their by-products, (iii) asbestos, or asbestos-containing materials, (iv)
designated as a “hazardous substance” pursuant to the Federal Water Pollution
Control Act, (v) defined as a “hazardous waste” pursuant to the Federal
Resource Conservation and Recovery Act, or (vi) defined as a “hazardous
substance” pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act.

 

1

 

1.3                  Environmental
Law

 

The term “Environmental Law” shall mean any law, statute, regulation,
order, or rule now or hereafter promulgated by any governmental entity, whether
local, state, or federal, relating to air pollution, water pollution, noise
control, and/or transporting, storing, handling, discharge of or disposal of
Hazardous Material, including, without limitation, the following: the Clean Air
Act; the Resource Conservation and Recovery Act, as amended by the Hazardous
Waste and Solid Waste Amendments of 1984; the Comprehensive Environmental
Response Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act of 1986; the Toxic Substances Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act, as amended; the Safe Drinking Water
Act; OSHA; the Hazardous Liquid Pipeline Safety Act; the Hazardous Materials
Transportation Act; and the National Environmental Policy Act, as the same may
be amended from time to time.

 

2.                         PREMISES

 

Landlord leases to Tenant and Tenant leases from Landlord the Premises
on the terms and conditions set forth in this Lease.

 

3.                         TERM

 

3.1                  Term

 

The effective date (the “Commencement Date”) of this Lease shall be the
date upon which escrow is deemed closed pursuant to that certain Purchase
Agreement and Escrow Instructions of even date herewith by and between Tenant,
as seller, and Landlord, as buyer. Concurrently with recording of the deed
transferring ownership of the Premises to Landlord, the Memorandum of Lease, a
copy of which is attached hereto and incorporated herein as Exhibit “B,” may be
recorded by Tenant. The expiration date of the term shall be last day of the
month thirty-four and one-half (34 1/2) years thereafter, unless extended as
set forth in Sections 3.2, 3.3, 3.4, 3.5, and 3.6. References to the term of
the Lease shall include extensions, if any. Except as otherwise expressly
stated, the terms and conditions of this Lease shall remain in effect during
any extension, renewal, or holdover of the initial term.

 

3.2                  First Option
to Extend

 

On or before one hundred twenty (120) days prior to the expiration of
the term, and providing Tenant is not in default of this Lease, Tenant may
extend the term of this Lease for an additional one hundred and twenty (120)
months by notifying Landlord of such intention in writing (the “First Extension
Period”). The maximum term of the Lease with one extension is forty-four and
one-half (44 1/2) years.

 

2

 

3.3                  Second Option
to Extend

 

On or before one hundred twenty (120) days prior to the expiration of
the First Extension Period, and providing Tenant is not in default of this
Lease, Tenant may extend the term of this Lease for an additional one hundred
and twenty (120) months by notifying Landlord of such intention in writing (the
“Second Extension Period”). The maximum term of the Lease with the second
extension is fifty-four and one-half (54 1/2) years.

 

3 4                  Third Option
to Extend

 

On or before one hundred twenty (120) days prior to the expiration of
the Second Extension Period, and providing Tenant is not in default of this
Lease, Tenant may extend the term of this Lease for an additional one hundred
and twenty (120) months by notifying Landlord of such intention in writing (the
“Third Extension Period”). The maximum term of the Lease with the third
extension is sixty-four and one-half (64 l/2) years.

 

3.5                  Fourth Option
to Extend

 

On or before one hundred twenty (120) days prior to the expiration of
the Third Extension Period, and providing Tenant is not in default of this
Lease, Tenant may extend the term of this Lease for an additional one hundred
and twenty (120) months by notifying Landlord of such intention in writing (the
“Fourth Extension Period”). The maximum term of the Lease with the third
extension is seventy-four and one-half (74 l/2) years.

 

3.6                  Fifth Option
to Extend

 

On or before one hundred twenty (120) days prior to the expiration of
the Fourth Extension Period, and providing Tenant is not in default of this
Lease, Tenant may extend the term of this Lease for an additional one hundred
and twenty (120) months by notifying Landlord of such intention in writing (the
“Fourth Extension Period”). The maximum term of the Lease with the third
extension is eighty-four and one-half (84 1/2) years.

 

4.                         MONTHLY
RENT

 

4.1                  Net-Net-Net
Lease

 

This is a net-net-net lease. It is the intention of Landlord and Tenant
that the Monthly Rent (as defined below) and other sums and charges provided
herein shall be absolutely net to Landlord. Except as otherwise specifically
set forth in this Lease, Tenant shall pay all costs, charges, obligations,
assessments, and expenses of every kind and nature against or relating to the Premises
or the use, occupancy, area, possession, leasing, operation, management,
maintenance, or repair thereof, which may arise or become due during the term
hereof, or which may pertain to this transaction which concerns the Premises,
whether

 

3

 

or not now
customary or within the contemplation of the parties hereto, and which, except
for the execution and delivery of this Lease, would have been payable by
Landlord.

 

4.2                  Monthly Rent

 

Tenant shall pay to Landlord as monthly rent (“Monthly Rent”) Twenty
Thousand Six Hundred Four and 17/100 Dollars ($20,604.17). Monthly Rent shall
be payable by Tenant to Landlord in advance in equal monthly installments
commencing upon the Commencement Date and on the first day of each calendar
month thereafter, without prior notice, invoice, demand, deduction, or offset
whatsoever. Landlord shall have the right to accept all rent and other
payments, whether full or partial, and to negotiate checks and payments thereof
without any waiver of rights, irrespective of any conditions to the contrary
sought to be imposed by Tenant. All rent shall be paid to Landlord at the
address to which notices to Landlord are given. The Monthly Rent for any
partial month shall be prorated based upon a thirty (30) day month.

 

4.3                  Monthly Rent
During the Extension Periods

 

In the event Tenant exercises its option to extend the term of the
Lease as set forth above, the Monthly Rent for each Extension Period shall be
the greater of the Monthly Rent paid during the previous year, or the
prevailing fair market rent as determined by an MAI Appraiser, which Appraiser
is acceptable to Landlord and Tenant, and is paid for equally by Tenant and
Landlord. The Base Monthly Rent shall then be adjusted as set forth in Section
5.

 

5.                         ADDITIONAL RENT

 

5.1                  Consumer Price
Index Rental Increase

 

The capitalized terms used herein are defined below. Effective on each
Adjustment Date, Monthly Rent shall be increased by the lesser of (a) twelve
percent (12%) or (b) the increases in the CPI with the percentage increase to
be determined by multiplying the Initial Monthly Rent by a fraction, the
numerator of which shall be the Variable Index and the denominator of which
shall be the Base Index. The product thus obtained shall be payable in advance
in consecutive monthly installments on the first day of each month until the
next Adjustment Date, or the expiration of the term, as the case may be.
Notwithstanding anything contained herein to the contrary, in no event shall
the new Monthly Rent be less than the previous Monthly Rent. Landlord’s delay
or the failure of Landlord, beyond commencement of any Adjustment Date, in
computing or billing for these adjustments will not impair the continuing
obligation of Tenant to pay the rent adjustments. In applying the foregoing
formula for Monthly Rent adjustments, the following terms shall have the
following meanings:

 

4

 

“Adjustment Date”
shall mean, as the case may require, the first day of the sixth (6th), eleventh
(11th), sixteenth (16th), twenty-first (2lst), twenty-sixth (26th), and
thirty-first (31st) Lease Years (and the first day of each option period, if
Tenant exercises its options to extend the term of the Lease pursuant to Sections
3.2, 3.3, 3.4, 3.5, and 3.6); provided, however, if the Commencement Date is
other than the first day of the month, then “Adjustment Date” shall mean, as
the case may require, the first day of the first month occurring after the
sixth (6th), eleventh (11th), sixteenth (16th), twenty-first (21st),
twenty-sixth (26th), and thirty-first (31st) Lease Years (and the first day of
each option period, if Tenant exercises its options to extend the term of the
Lease pursuant to Sections 3.2, 3.3, 3.4, 3.5, and 3.6).

 

“Base Index” shall
mean the CPI for the first month of the first Lease Year.

 

“CPI” shall mean
the Consumer Price Index, All Urban Consumers, All Items, U.S.A. Area,
1982-84=100, as published by the Bureau of Labor Statistics, United States
Department of Labor (U.S. City Average). If such Index is discontinued, CPI
shall then mean the most nearly comparable index published by the Bureau of
Labor Statistics or other official agency of the United States Government as
determined by Landlord.

 

“Initial Monthly
Rent” shall mean the Monthly Rent payable by Tenant for the first full calendar
month of the first Lease Year.

 

“Variable Index”
shall mean the CPI for the month in which the Adjustment Date occurs.

 

6.                         SUBSTITUTE RENT AND INCREASES

 

This Section was
deleted intentionally.

 

7.                         SECURITY DEPOSIT

 

This Section was
deleted intentionally.

 

8.                         USE OF THE PREMISES

 

Tenant shall use the Premises only for a family entertainment and
amusement center and uses consistent therewith and no other uses without the
prior written consent of Landlord which consent shall not be unreasonably
withheld or delayed. Tenant has satisfied itself, and represents to Landlord,
that such use is lawful and conforms to all applicable zoning and other use

 

5

 

restrictions and
regulations applicable to the Premises. Tenant shall, at Tenant’s expense,
comply promptly with all applicable statutes, ordinances, rules, regulations,
orders, covenants and restrictions of record, and requirements in effect during
the term or any part of the term hereof, regulating the use by Tenant of the
Premises, including, without limitation, the obligation at Tenant’s cost, to
alter, maintain, or restore the Premises in compliance and conformity with all
laws relating to the condition, use, or occupancy of the Premises during the
term (including any and all requirements as set forth in the Americans with
Disabilities Act) and regardless of (i) whether such laws require structural or
non-structural improvements, (ii) whether the improvements were foreseen or
unforeseen, and (iii) the period of time remaining in the term. Tenant shall
not perform any acts or carry on any practices which may injure the Premises.

 

9.                         PROPERTY TAXES, ASSESSMENTS
AND UTILITIES

 

9.1                  Tenant’s
Required Payments

 

Tenant shall (i) pay at least fifteen (15) days before delinquency and
as additional rent, all Property Taxes and Other Taxes (as such terms are
defined herein) that accrue during or are otherwise allocable to the term of
this Lease; and (ii) concurrently provide Landlord with evidence of payment
thereof. Property Taxes and Other Taxes together are referred to herein as “Taxes.”
Tenant shall provide Landlord with proof of payment of Taxes as soon as
reasonably possible.

 

9.1.1          “Property Taxes” shall
mean all taxes, assessments, excises, levies, fees, and charges (and any tax,
assessment, excise, levy, fee, or charge levied wholly or partly in lieu
thereof or as a substitute therefor or as an addition thereto) of every kind
and description, general or special, ordinary or extraordinary, foreseen or
unforeseen, secured or unsecured, whether or not now. customary or within the
contemplation of Landlord and Tenant, that are levied, assessed, charged,
confirmed, or imposed on or against, or otherwise with respect to, the Premises
or any part thereof or any personal property used in connection with the
Premises. It is the intention of Landlord and Tenant that all new and increased
taxes, assessments, levies, fees, and charges, and all similar taxes,
assessments, levies, fees, and charges be included within the definition of
Property Taxes for the purpose of this Lease.

 

9.1.2          “Other Taxes” shall mean
all taxes, assessments, excises, levies, fees, and charges (including, without
limitation, charges relating to the cost of providing facilities or services,
and charges relating to documents or instruments of record

 

6

 

effecting or
encumbering the Premises), whether or not now customary or within the contemplation
of Landlord and Tenant, that are levied, assessed, charged, confirmed, or
imposed upon, or measured by, or reasonably attributable to (a) the Premises;
(b) the cost or value or Tenant’s furniture, fixtures, equipment, or personal
property located in the Premises or the cost or value of any leasehold
improvements made in or to the Premises by or for Tenant, regardless of whether
title to such improvements is vested in Tenant or Landlord; (c) rents payable
under the Lease, including, if applicable, Property Taxes, Other Taxes,
insurance, maintenance, and other costs incurred by Tenant; (d) the possession,
leasing, operation, management, maintenance, alteration, repair, use, or
occupancy by Tenant of the Premises; and (e) this transaction or any document
to which Tenant is a party creating or transferring an interest or an estate in
the Premises.

 

9.2                  Payments Not
Required by Tenant

 

Tenant shall not be required to pay any municipal, county, state, or
federal income or franchise taxes of Landlord, or any municipal, county, state,
or federal estate, succession, inheritance, or transfer taxes of Landlord.

 

9.3                  Assessments

 

If any assessment for a capital improvement made by a public or
governmental authority shall be levied or assessed against the Premises, and
the assessment is payable either in a lump sum or on an installment basis, then
Tenant shall have the right to elect the basis of payment; provided, however,
throughout the entire term of this Lease, Tenant shall pay all assessments that
accrue during or are otherwise allocable to the term of this Lease.

 

9.4                  Utility
Payments

 

Tenant shall promptly pay when due all charges for water, gas,
electricity, and all other utilities furnished to or used upon the Premises,
including all charges for installation, termination, and relocations of such
service.

 

9.5                  Tenant’s
Right to Contest Utility Charges, Contest Taxes and Seek Reduction of Assessed
Valuation of the Premises

 

Tenant, at Tenant’s sole cost and expense, shall have the right, at any
time, to seek a reduction in the assessed valuation of the Premises or to
contest any Taxes or utility charges that are to be paid by Tenant; provided,
however, Tenant shall (i) give Landlord written notice of any such intention to
contest at least

 

7

 

thirty (30) days
before any delinquency could occur; (ii) indemnify and hold Landlord harmless
from all liability on account of such contest; (iii) take such action as is
necessary to remove the effect of any lien which attached to the Premises or
the improvements thereon due to such contest, or in lieu thereof, at Landlord’s
election, furnish Landlord with adequate security for the amount of the Taxes
due plus interest and penalties; and (iv) in the event of a final determination
adverse to Tenant, prior to enforcement, foreclosure or sale, pay the amount
involved together with all penalties, fines, interest, costs, and expenses
which may have accrued. Tenant may use any means allowed by statute to protest
Taxes or utility charges as defined in this Section 9 as long as Tenant remains
current as to all other terms and conditions of this Lease. If the protested
Taxes have not been paid, then at Landlord’s request Tenant shall furnish to
Landlord a surety bond issued by an insurance company qualified to do business
in the state where the Premises are located. The amount of bond shall equal one
hundred ten percent (110%) of the total amount of Taxes in dispute. The bond
shall hold Landlord and the Premises harmless from any damage arising out of
the proceeding or contest and shall insure the payment of any judgment that may
be rendered. If Tenant seeks a reduction or contests any Taxes or utility
charges, the failure on Tenant’s part to pay the Taxes or utility charges shall
not constitute a default as long as Tenant complies with the provisions of this
Section.

 

9.6                  Landlord Not
Required to Join in Proceedings or Contest Brought by Tenant

 

Landlord shall not be required to join in any proceeding or contest
brought by Tenant unless the provisions of the law require that the proceeding
or contest be brought by or in the name of Landlord or the owner of the
Premises. In that case, Landlord shall join in the proceeding or contest or
permit it to be brought in Landlord’s name as long as Landlord is not required
to bear any cost. Tenant, on final determination of the proceeding or contest,
shall immediately pay or discharge any decision or judgment rendered, together
with all costs, charges, interest, and penalties incidental to the decision or
judgment.

 

9.7                  Tax Period and
Adjustment of Taxes

 

For the purpose of this Lease, the calculation of Taxes payable by
Tenant for any particular Lease Year shall be based upon the Taxes actually due
and payable in accordance with applicable law during such Lease Year even
though such Taxes may relate to a different period of time (such as the taxing
authority’s fiscal year). [For example, if Taxes are payable on or before
September 30 of each year with respect to the fiscal period beginning on the
immediately preceding July 1 and ending on the immediately succeeding June 30,
then, for all purposes of this Lease, Taxes for Lease Year “X” refers to the
Taxes due and payable on September 30 of such Lease Year even though the same
may relate in part to both such Lease Year and the succeeding

 

8

 

Lease Year.] The
parties hereby understand that, notwithstanding the foregoing, Taxes payable by
Tenant in accordance with the terms of this Lease shall be appropriately
adjusted for any partial Lease Year.

 

10.                  BUILDING AND IMPROVEMENTS; TRADE
FIXTURES

 

10.1            Building and
Improvements

 

The building and any improvements in, on, or about the Premises and all
additions, alterations, modifications, and replacements thereto and thereof at
all times during the term of this Lease any extension term thereof shall be the
property of Tenant. During the term of this Lease, provided Tenant is not in
default, Tenant shall have the right to sell, transfer and convey any or all of
Tenant’s Property without Landlord’s consent. All right, title, and interest of
Tenant therein shall cease, expire, and vest exclusively in Landlord on the
expiration or any termination of this Lease.

 

10.2            Depreciation and
Investment Tax Credit

 

During the term of this Lease, Tenant alone shall be able to claim
depreciation and investment tax credit for taxation purposes (or to permit its
subtenants the right to such benefits) on any building improvements and
fixtures and any changes, additions, and alterations therein and thereto and
any replacements thereof.

 

10.3            Trade Fixtures

 

Notwithstanding anything contained herein to the contrary, Landlord
acknowledges and agrees that the furniture, trade fixtures, equipment,
machinery, furnishings, signs, and other articles of personal property
(collectively, “Trade Fixtures”) now located or hereafter placed or installed
in, on, or about the Premises shall be and remain the property of Tenant.
Tenant shall have the right, at any time during the term, at Tenant’s sole cost
and expense, to install and affix in, to, or on the Premises, such Trade
Fixtures for use in Tenant’s trade or business as Tenant, in its sole and
absolute discretion, may deem advisable. Trade Fixtures that can be removed
without structural damage to the Premises or any building or improvements
thereon shall remain the property of Tenant and may be removed or replaced by
Tenant at any time or times prior to the expiration or earlier termination of
this Lease. In the event of such removal, any damage occasioned to the Premises
shall be fully repaired at the sole cost and expense of Tenant.

 

10.4            Removal of Trade
Fixtures

 

At the expiration or earlier termination of this Lease, provided Tenant
is not in default, Tenant may remove (i) Tenant’s movable Trade Fixtures and
other personal property not permanently

 

9

 

affixed to the
Premises; and (ii) the alterations and additions and signs made by Tenant to
the Premises (collectively, “Tenant’s Property”). All leasehold improvements,
alterations and additions to the Premises, HVAC equipment, non-removable
lighting fixtures, electric switch boxes, plumbing, restroom fixtures, floor
coverings, and other like items which are permanently affixed to the Premises,
more commonly defined as fixtures, shall become the property of the Landlord
immediately following an uncured default, the expiration, or any termination of
this Lease. Any of Tenant’s Property not removed within ten (10) days following
the expiration or earlier termination of this Lease shall be deemed abandoned
by Tenant and, at Landlord’s option, shall become the property of Landlord as
owner of the real property to which they are affixed. Tenant, at its sole cost
and expense, immediately shall repair any damage occasioned to the Premises by
the removal of Tenant’s Property. Upon the expiration or earlier termination of
this Lease, Tenant shall leave the Premises in a neat and clean condition, free
of debris, normal wear and tear excepted.

 

10.5            Financing of Tenant’s Property

 

For purposes of Tenant’s financing or leasing of Tenant’s Property,
Landlord covenants and agrees that to the extent that such property is leased
or financed, then any interest of Landlord in the same shall be subject,
subordinate, and inferior to any lien(s) (and all renewals, extensions, or
replacements thereof) now or hereafter imposed by Tenant upon Tenant’s
Property. Landlord agrees to execute such reasonable and necessary documents to
confirm Landlord’s foregoing covenant in favor of Tenant’s lienholders or
mortgagees.

 

11.                  MAINTENANCE OF THE PREMISES

 

11.1            Obligation to
Maintain the Premises

 

During the term of this Lease, Tenant shall, at its own expense, keep
and maintain the entire Premises in good order and repair, including, but not
limited to, the interior, exterior, foundations, floors, walls, roof and
structure of the building; and the sidewalks, curbs, walls, trash enclosures,
landscaping with sprinkler system (if installed), light standards and parking
areas which are a part of the Premises. Tenant shall make such repairs and
replacements as may be necessary, regardless of whether the benefit of such
repair or replacement extends beyond the term of this Lease. Subject to the
provisions of Section 10, the Premises, including all improvements, shall be
returned to Landlord at the termination or expiration of this Lease in good
condition, ordinary wear excepted. Notwithstanding the foregoing, in the event
of destruction of the Premises by fire or casualty, or condemnation, the
condition of the Premises upon termination of this Lease shall be governed by
Section 14 or Section 15, respectively.

 

10

 

11.2            Obligation to Keep
the Premises Clear

 

Tenant shall keep the Premises, including sidewalks adjacent to the
Premises and loading areas allocated for the use of Tenant, clean and free from
rubbish and dirt at all times. Tenant shall store all trash and garbage within
the Premises and arrange for regular pickup and cartage of such trash and
garbage at Tenant’s expense.

 

12.                  REPAIRS AND ALTERATIONS

 

12.1            Right to Make Alterations

 

At all times during the term of this Lease, except as provided in
Section 17, Tenant shall have the right to make alterations, additions, and
improvements to the interior or exterior of the building. Any alterations,
additions, and improvements which may be made or installed by Tenant, to the
extent it is in existence at the termination or expiration of the Lease, shall
remain upon the Premises and, at the termination or expiration of this Lease,
shall be surrendered with the Premises to Landlord. Any alteration, addition,
or improvement shall be accomplished by Tenant in a good workmanlike manner, in
conformity with applicable laws and regulations. Upon completion of any such
work, Tenant shall provide to Landlord “as-built” plans, building permits,
governmental inspection reports and all other required governmental approvals,
and proof of payment of all labor and materials. Subject to Section 12.2, Tenant
shall pay when due all claims for such labor and materials and shall give
Landlord at least ten (10) days' prior written notice of the commencement of
any such work. Landlord may enter upon the Premises, in such case, for the
purpose of posting appropriate notices, including, but not limited to, notices
of non-responsibility.

 

12.2            Tenant Shall Not Render Premises Liable for
Any Lien

 

Tenant shall have no right, authority, or power to bind Landlord, or
any interest of Landlord in the Premises, nor to render the Premises liable for
any lien or right of lien for the payment of any claim for labor, material, or
for any charge or expense incurred to maintain, to repair, or to make
alterations, additions and improvements to the Premises. Tenant shall in no way
be considered the agent of Landlord in the construction, erection,
modification, repair or alteration of the Premises. Notwithstanding the above,
Tenant shall have the right to contest the legality or validity of any lien or
claim filed against the Premises. No contest shall be carried on or maintained
by Tenant after the time limits in the sale notice of the Premises for any such
lien or claim unless Tenant (i) shall have duly paid the amount involved under
protest; (ii) shall have procured and recorded a lien release bond from a
bonding company acceptable to Landlord in an amount not less than one and
one-half (1-1/2) times the amount involved; or (iii) shall have procured a stay
of all proceedings to enforce foreclosure or collection. Upon a final

 

11

 

adverse
determination of any contest, Tenant shall pay and discharge the amount of the
lien or claim determined to be due, together with any penalties, fines,
interest, cost and expense which may have accrued, and shall provide proof of
payment to Landlord.

 

13.                  INDEMNITY AND INSURANCE

 

13.1            Indemnification

 

Tenant shall indemnify, defend and protect Landlord, and hold Landlord
harmless from any and all loss, cost, damage, expense, liability (including,
without limitation, court costs and reasonable attorneys’ fees) incurred in
connection with or arising at any time and from any cause whatsoever in, or
about the Premises, other than damages proximately caused by reason of the
negligence or willful misconduct of Landlord or its agents and employees,
including, without limiting the generality of the foregoing: (i) any default by
Tenant in the observance or performance of any of the terms, covenants or
conditions of this Lease on Tenant’s part to be observed or performed; (ii) the
use or occupancy of the Premises by Tenant or any person claiming by, through,
or under Tenant; (iii) the condition of the Premises or any occurrence or
happening on the Premises from any cause whatsoever, or (iv) any acts,
omissions, or negligence of Tenant or any person claiming by, through, or under
Tenant, or of the contractors, agents, servants, employees, visitors, or
licensees of Tenant or any such person, in, on, or about the Premises, either
prior to or during the Lease term (including, without limitation, any holdovers
in connection therewith), including, without limitation, any acts, omissions or
negligence in the making or performance of any alterations. Tenant further
agrees to indemnify and hold harmless Landlord, Landlord’s agents, and the
landlord or landlords under all ground or underlying leases, from and against
any and all loss, cost, liability, damage and expense (including, without
limitation, reasonable attorneys’ fees) incurred in connection with or arising
from any claims by any persons by reason of injury to persons or damage to
property occasioned by any use, occupancy, condition, occurrence, happening,
act, omission or negligence referred to in the preceding sentence. The
provisions of this Section shall survive the expiration or sooner termination
of this Lease with respect to any claims or liability occurring prior to such
expiration or termination, and shall not be limited by reason of any insurance
carried by Landlord and Tenant.

 

13.2            Insurance Company Requirement

 

Insurance required by this Lease shall be issued by companies holding a
general policyholder’s rating of at least A/7 as set forth in the most current
issue of Best’s Insurance Guide and authorized to do business in the
state in which the Premises are located. If this publication is discontinued,
then another

 

12

 

insurance rating
guide or service generally recognized as authoritative shall be substituted by
Landlord.

 

13.3            Insurance
Certificate Requirements

 

13.3.1    Tenant shall deliver to
Landlord certificates evidencing the existence and amounts of the insurance
with loss payable clauses as required herein. No policy shall be cancelable or
subject to reduction of coverage or other modification except after thirty (30)
days’ prior written notice to Landlord.

 

13.3.2    The insurance required to be
maintained herein may be carried under blanket policies. The insurance shall
provide for payment of loss jointly to Landlord and Tenant, as their interests
may appear. A stipulated value or agreed amount endorsement deleting the
co-insurance provision to the building policy shall be procured.

 

13.4            Minimum Acceptable Insurance Coverage
Requirements

 

13.4.1    Tenant shall, at Tenant’s
expense, obtain and keep in full force during the term of this Lease a policy
of combined single limit bodily injury and property damage insurance on an
occurrence basis insuring Tenant (with Landlord as an additional insured)
against any liability arising out of the ownership, use, occupancy, or
maintenance of the Premises and all of its appurtenant areas. The insurance
shall be in an amount not less than Two Million Dollars ($2,000,000) per
occurrence. Notwithstanding the foregoing Landlord may require Tenant to
increase the minimum limits of such commercial general liability insurance from
time to time during the term of the Lease to an amount reasonably required by
Landlord. The policy shall provide blanket contractual liability coverage.
However, the limits of the insurance shall not limit the liability of Tenant.
In addition, Tenant shall, at Tenant’s expense, obtain and keep in full force
during the term of this Lease umbrella liability policy in an amount not less
than Two Million Dollars ($2,000,000) in excess of primary insurance. The
insurance required to be carried by Tenant hereunder shall be primary and not
contributory to any other insurance maintained by Landlord.

 

13.4.2    Tenant shall, at Tenant’s
expense, obtain and keep in force during the term of this Lease a policy or policies
of insurance covering loss or damage to the Premises. The insurance shall be in
an amount

 

13

 

not less than the replacement value of the building(s) less slab,
foundation, supports, and other customarily excluded improvements against all
perils of fire, extended coverage, vandalism, malicious mischief, and special
extended perils (“Special Form,” as such term is used in the insurance
industry). In addition, Tenant shall, at Tenant’s expense, obtain and keep in
force during the term of this Lease a policy or policies of insurance covering
loss or damage due to perils caused by earthquake and/or flood.

 

13.4.3    Tenant shall also obtain and
keep in force during the term of this Lease a policy of Business Interruption
insurance covering a period of one (1) year. This insurance shall cover all
real estate taxes and insurance costs for the same period in addition to one
(1) year’s lease rent amount.

 

13.4.4    Tenant shall also obtain and
keep in force during the term of this Lease a worker’s compensation policy,
insuring against and satisfying Tenant’s obligations and liabilities under the
worker’s compensation laws of the state in which the Premises are located,
including Employer’s Liability insurance, in an amount of not less than One
Million Dollars ($1,000,000).

 

13.5            Additional Insureds

 

Tenant shall name as additional insureds or
loss payees, as the case may be, on all insurance, Landlord, Landlord’s
successor(s), assignee(s), nominee(s), nominator(s), corporate and individual
general partners, and agents with an insurable interest as follows:

 

Realty Income Corporation, its officers, directors, and all
successor(s), assignee(s), subsidiaries, corporations, partnerships,
proprietorships, joint ventures, firms and individuals as heretofore, now or
hereafter constituted on which the named insured has the responsibility for
placing insurance and for which similar coverage is not otherwise more
specifically provided.

 

13.6            Mortgage Endorsement

 

If requested by Landlord, the policies of
insurance required to be maintained hereunder shall bear a standard first
mortgage endorsement in favor of any holder or holders of a first mortgage lien
or security interest in the fee and leasehold interest in the Premises, with
loss payable to such holder or holders as their interests may appear.

 

14

 

13.7
           Renewals, Lapses or Deficiencies

 

Tenant shall, at least thirty (30) days prior
to the expiration of such policies, furnish Landlord with renewal certificates
of insurance or renewal binders. Should Tenant fail to provide to Landlord the
renewals or renewal binders, or in the event of a lapse or deficiency of any
insurance coverage specified herein for any reason, Landlord shall notify
Tenant of such lapse and, if not timely cured, Landlord may immediately replace
the deficient insurance coverage with a policy of insurance covering the
Premises of the type and in the limits set forth above. Upon written notice
from Landlord of the placement of insurance, Tenant shall immediately reimburse
Landlord for the total cost of premiums and expense of such insurance
placement. Tenant shall not do or permit to be done anything which shall
invalidate the insurance policies. If Tenant does or permits to be done
anything which shall increase the cost of the insurance policies, then upon
Landlord’s demand Tenant shall reimburse Landlord for any additional premiums
charged to Landlord as a consequence of its taking out such policies
attributable to any acts or omissions or operations of Tenant causing the
increase in the cost of insurance.

 

14.                  PARTIAL AND TOTAL DESTRUCTION OF THE
PREMISES

 

In the event any part or all of the Premises
shall at any time during the term of this Lease be damaged or destroyed,
regardless of cause, Tenant shall give prompt notice to Landlord. Tenant shall
repair and restore all of the Premises to their original condition, including
buildings and all other improvements, as soon as circumstances permit or in
Tenant’s reasonable discretion demolish and clear the improvements damaged so
that the Premises is in a safe and clean condition. Tenant shall hold Landlord
free and harmless from any and all liability resulting from such repairs and
restoration. Tenant shall pay for any cost of repair or restoration in excess
of the available insurance proceeds. Tenant is not entitled to any rent
abatement during or resulting from any disturbance on or partial or total
destruction of the Premises.

 

15.                  CONDEMNATION

 

15.1            Condemnation Damages

 

In the event of the taking or conveyance of
the whole or any part of the Premises by reason of condemnation by any public
or quasi-public body, Landlord and Tenant shall represent themselves
independently in seeking damages before the condemning body. Each party shall
be entitled to the amount awarded respectively to each. Landlord shall not make
a claim in such proceedings for any of the following:

 

15

 

15.1.1 The value attributable to Tenant’s remaining
leasehold interest in the building and improvements as calculated by dividing
the number of months remaining on the Lease by the remaining useful economic
life of the building and improvements (in months) as determined by an
appraiser, acceptable to Landlord and Tenant, which fraction is multiplied by
the value of the building and improvements, as determined by an appraiser,
acceptable to Landlord and Tenant; and

 

15.1.2 Any portion of the award attributable to Tenant’s
furniture, fixtures and equipment installed in the Premises in accordance with
this Lease.

 

15.2            Termination of Lease
Due to Condemnation

 

In the event that the Condemnation materially adversely affects the use
of the Premises as defined in Section 8, as reasonably determined by Tenant and
Landlord, Tenant may terminate the Lease by giving Landlord sixty (60) days’
written notice of its intention to terminate the Lease after receiving notice
of the Condemnation from the condemning authority. The effective date of the
termination shall be the actual date of such taking. In the event of
termination, the rent for the last month of Tenant’s occupancy shall be
prorated and Landlord shall refund to Tenant any rent paid in advance and
Tenant shall thereupon be released from its obligation to pay rent.

 

16.                  ASSIGNMENT AND SUBLETTING

 

16.1            Tenant’s Right of
Assignment and Subletting

 

Tenant shall not voluntarily or by operation of law assign or encumber
its interest in this Lease or in the Premises, or sublease all or any part of
the Premises, or allow any other person or entity to occupy or use any part of
the Premises, without first obtaining the written consent of Landlord, which
consent shall not be unreasonably withheld or delayed, except that the consent
of Landlord shall not be required to transfer, sell, assign or sublease
(collectively “Transfer”) all or any portion of this Lease or the Premises to
an Affiliate of Tenant; provided, however, that in each instance, Tenant shall
notify Landlord of such Transfer and shall remain liable under the terms of the
Lease. An “Affiliate” shall mean any person or entity which directly or
indirectly, through one or more intermediaries controls or is controlled by, or
is under common control with Tenant. For purposes of this definition, the term “control”
shall mean the possession, directly or indirectly, or the power to direct
management and policies of a person or entity, whether through the ownership of
voting securities or equity interests, by contract, or otherwise. Any
assignment, encumbrance, or sublease without Landlord’s consent shall be
voidable and, at Landlord’s election, shall constitute a default. It shall not
be

 

16

unreasonable for
Landlord to withhold its consent to any proposed assignment or subletting if
the proposed transferee does not meet certain criteria, including, but not
limited to, the transferee’s financial condition, the nature, quality, and
character of the transferee, the identity or business character of the
transferee, the nature of the use and occupancy, and the transferee’s business
experience.

 

16.2            Landlord’s Option to
Preserve Subtenancies

 

In the event of Tenant’s surrender of this Lease or the termination of
this Lease in any other manner, Landlord may, at its option, either terminate
any or all subtenancies or succeed to the interest of Tenant as sublandlord
thereunder. No merger shall result from Tenant’s sublease of the Premises under
this Section, Tenant’s surrender of this Lease, or the termination of this
Lease in any other manner.

 

16.3            Tenant’s Assignment
of All Rent from Subletting as Security for Tenant’s Obligations

 

Tenant immediately and irrevocably assigns to
Landlord, as security for Tenant’s obligations under this Lease, all rent from
any subletting  of all or a
part of the Premises as permitted by this Lease. In the event of a default by
Tenant, Landlord, as assignee and as attorney-in-fact for Tenant, or a receiver
for Tenant appointed on Landlord’s application, may collect the rent and apply
it toward Tenant’s obligations under this Lease.

 

16.4            Continuing
Obligation of Tenant

 

No transfer permitted by this Section 16 shall release Tenant or change
Tenant’s primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease unless Landlord explicitly and in writing released
Tenant of further liability and obligations. Landlord’s acceptance of rent from
any other person is not a waiver of any provision of this Section. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant’s
transferee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing remedies against the transferee. Landlord may consent to
subsequent assignments or modifications of this Lease by Tenant’s transferee,
without notifying Tenant or obtaining its consent. Such action shall not
relieve Tenant’s liability under this Lease.

 

16.5            Fees and Costs with
Regard to Proposed Assignment or Sublease

 

If Tenant requests Landlord to consent to a proposed assignment or
sublease, Tenant shall pay to Landlord, whether or not consent is ultimately
given, Landlord’s reasonable attorneys’ fees and other costs incurred in
connection with each such request.

 

17

 

16.6            Landlord’s Right of
Assignment

 

Landlord shall be free at all times, without need of consent or
approval by Tenant, to assign its interest in this Lease and/or to convey fee
title to the Premises. Notwithstanding the foregoing, Landlord shall give
Tenant written notice of any Assignee. Each conveyance by Landlord of
Landlord’s interest in the Lease or the Premises prior to expiration or
termination  hereof shall be subject to
this Lease and shall relieve the grantor of any further obligations or
liability as Landlord, and Tenant shall look solely to Landlord’s successor in
interest for all future obligations of Landlord. Tenant hereby agrees to attorn
to Landlord’s successors in interest, whether such interest is acquired by
sale, transfer, foreclosure, deed in lieu of foreclosure, or otherwise. The
term “Landlord” as used in this Lease, so far as covenants and obligations on
the part of Landlord are concerned, shall be limited to mean and include only
the owner at the time in question of the fee title of the Premises. Without
further agreement, the transferee of such title shall be deemed to have assumed
and agreed to observe and perform any and all obligations of Landlord hereunder
during its ownership of the Premises.

 

17.                               DEFAULT AND TERMINATION

 

17.1            Events of Default

 

The occurrence of any of the following events (each an “Event of
Default”) shall constitute a default by Tenant:

 

17.1.1    Failure by Tenant to pay rent
when due. Notwithstanding the foregoing, or any other provision in this Lease
to the contrary, for not more than two (2) occasions during any twelve (12)
month period of the term of this Lease, as extended, if any rental is not
received when due, Landlord shall notify Tenant, in writing, and Tenant shall
have ten (10) days from the date of receipt of Landlord’s notice to cure any
such failure to pay rental. If rental is not received within the ten (10) day
period following Landlord’s notice, then Tenant shall be in default.

 

17.1.2    Failure by Tenant to perform
or comply with any provision of this Lease (other than as set forth in
Subsection 17.1.1) if the failure is not cured within thirty (30) days after
notice has been given to Tenant. If, however, the failure cannot reasonably be
cured within the cure period, Tenant shall not be in default of this Lease if
Tenant commences to cure the failure within the cure period and diligently and
in good faith continues to cure the failure

 

18

 

17.1.3    A default by Tenant under any
other lease in which Landlord is the landlord and Tenant is the tenant.

 

17.1.4    To the extent permitted by
law, a general assignment by Tenant or any guarantor of the Lease for the
benefit of creditors, or the filing by or against Tenant or any guarantor of
any proceeding under any insolvency or bankruptcy law, unless in the case of a
proceeding filed against Tenant or any guarantor the same is dismissed within
sixty (60) days, or the appointment of a trustee or receiver to take possession
of all or substantially all of the assets of Tenant or any guarantor, unless
possession is restored to Tenant or such guarantor within (30) days, or any
execution or other judicially authorized seizure of all or substantially all of
Tenant’s assets located upon the Premises or of Tenant’s interest in this
Lease, unless such seizure is discharged within thirty (30) days.

 

Any notice delivered pursuant to this Section 17.1 shall be in lieu of,
and not in addition to, any notice that otherwise may be required by law.

 

17.2            Landlord’s Remedies

 

Landlord shall have any one or more of the following remedies after the
occurrence of a default by Tenant. These remedies are not exclusive; they are
cumulative in addition to any remedies now or later allowed by law, in equity,
or otherwise:

 

17.2.1    Terminate this Lease by giving
written notice of termination to Tenant, in which event Tenant immediately
shall surrender the Premises to Landlord. If Tenant fails to so surrender the
Premises, then Landlord, without prejudice to any other remedy it has for
possession of the Premises or arrearages in rent or other damages, may re-
enter and take possession of the Premises and expel or remove Tenant and any
other person or entity occupying the Premises or any part thereof, without
being liable for any damages, whether caused by the negligence of Landlord or
otherwise.

 

17.2.2    No act by Landlord other than
giving notice of termination to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises, or the appointment of a receiver on
Landlord’s initiative to protect Landlord’s interest under this Lease shall not
constitute a termination of this Lease. On termination of the Lease, Landlord
shall have the right to recover from Tenant:

 

19

 

(i)                The worth at the
time of the award of the unpaid rent that had been earned at the time of
termination of this Lease; and

 

(ii)             The worth at the time
of the award of the amount by which the unpaid rent that would have been earned
after the date of termination of this Lease until the time of award exceeds the
amount of the loss of rent that Tenant proves reasonably could have been
avoided; and

 

(iii)          The worth at the time of
the award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of the loss of rent that Tenant
proves reasonably could have been avoided; and

 

(iv)         Any other amount,
including court costs, necessary to compensate Landlord for all detriment
proximately caused by Tenant’s default.

 

The phrase “worth
at the time of the award” as used in clauses (i) and (ii) above is to be
computed by allowing interest at the rate of ten percent (10%) per annum, but
not to exceed the then legal rate of interest. The same phrase as used in
clause (iii) above is to be computed by discounting the amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award,
plus one percent (1%). The term “rent” as used in this Section 17.2.2 means the
Monthly Rent and all other sums payable by Tenant hereunder, including, without
limitation, Taxes and insurance.

 

17.2.3 Landlord
may re-enter and take possession of the Premises without terminating this Lease
and without being liable for any damages, whether caused by the negligence of
Landlord or otherwise. Landlord may relet the Premises, or any part of them, to
third parties, but has no obligation to do so. Landlord may relet the Premises
on whatever terms and conditions Landlord, in its sole discretion, deems
advisable. Reletting can be for a period shorter or longer than the remaining
term of this Lease. Landlord’s action under this Subsection is not considered
an acceptance of Tenant’s surrender of the Premises unless Landlord so notifies
Tenant in writing. Tenant shall be immediately liable to Landlord for all costs
Landlord incurs in reletting the Premises, including brokers’ commissions,
expenses of remodeling the Premises required by the reletting, and like costs.
Tenant shall pay to Landlord the rent due under this Lease on the dates

 

20

 

the rent is due,
less the rent Landlord receives from any reletting.

 

If Landlord elects
to relet the Premises without terminating this Lease, any rent received will be
applied to the account of Tenant, not to exceed Tenant’s total indebtedness to
Landlord; no reletting by Landlord is considered to be for its own account
unless Landlord has notified Tenant in writing that the Lease has been terminated.
If Landlord elects to relet the Premises, rent that Landlord receives from
reletting will be applied to the payment of: (i) first, any indebtedness from
Tenant to Landlord other than rent due from Tenant; (ii) second, all costs,
including maintenance, incurred by Landlord in reletting; and (iii) third, rent
due and unpaid under the Lease. After deducting the payments referred to in
this Subsection, any sum remaining from the rent Landlord receives from
reletting will be held by Landlord and applied in payment of future rent as
rent becomes due under this Lease. If, on the date rent is due under this
Lease, the rent received from the reletting is less than the rent due on that
date. Tenant will pay to Landlord, in addition to the remaining rent due, all
costs, including maintenance. Landlord incurred in reletting which remain after
applying the rent received from the reletting. Tenant shall have no right to or
interest in the rent or other consideration received by Landlord from reletting
to the extent it exceeds Tenant’s total indebtedness to Landlord.

 

17.2.4    Re-enter the Premises without
terminating this Lease and without being liable for any damages, whether caused
by the negligence of Landlord or otherwise, and do whatever Tenant is obligated
to do under the terms of this Lease. The expenses incurred by Landlord in
affecting compliance with Tenant’s obligations under this Lease immediately
shall become due and payable to Landlord as additional rent.

 

17.2.5    In all events, Tenant is
liable for all damages of whatever kind or nature, direct or indirect, suffered
by Landlord, as a result of the occurrence of an Event of Default. If Tenant
fails to pay Landlord in a prompt manner for the damages suffered Landlord may
pursue a monetary recovery from Tenant. Included among these damages are all
expenses incurred by Landlord in repossessing the Premises (including, but not
limited to, increased insurance premiums resulting from Tenant’s vacancy), all
expenses incurred by Landlord in

 

21

 

reletting the
Premises (including, but not limited to, those incurred for advertisements,
brokerage fees, repairs, remodeling, and replacements), all concessions granted
to a new tenant on a reletting, all losses incurred by Landlord as a result of
Tenant’s default (including, but not limited to, any unamortized commissions
paid in connection with this Lease), a reasonable allowance for Landlord’s
administrative costs attributable to Tenant’s default, and all attorneys’ fees
incurred by Landlord in enforcing any of Landlord’s rights or remedies against
Tenant.

 

17.2.6    Pursuit of any of the
foregoing remedies does not constitute an irrevocable election of remedies nor
preclude pursuit of any other remedy provided elsewhere in this Lease or by
applicable law, and none is exclusive of another unless so provided in this
Lease or by applicable law. Likewise, forbearance by Landlord to enforce one or
more of the remedies available to it on an Event of Default does not constitute
a waiver of that default or of the right to exercise that remedy later or of
any rent, damages, or other amounts due to Landlord hereunder.

 

17.2.7    Whether or not Landlord elects
to terminate this Lease or Tenant’s right to possession of the Premises on
account of any default by Tenant, Landlord shall have all rights and remedies
at law or in equity, including, but not limited to, the right to re-enter the
Premises and, to the maximum extent provided by law. Landlord shall have the
right to terminate any and all subleases, licenses, concessions, or other
consensual arrangements for possession entered into by Tenant and affecting the
Premises or, in Landlord’s sole discretion, may succeed to Tenant’s interest in
such subleases, licenses, concessions, or arrangements. In the event of
Landlord’s election to succeed to Tenant’s interest in any such subleases,
licenses, concessions, or arrangements, Tenant shall have no further right to
or interest in the rent or other consideration receivable thereunder as of the
date of notice by Landlord of such election.

 

17.3            Late Charge

 

If Tenant fails to pay when due any payment of rent or other charges
which Tenant is obligated to pay to Landlord under this Lease, there shall be a
late charge in the amount of five percent (5%) of each such obligation. This
sum is intended to compensate Landlord for accounting and administrative
expenses incurred by Landlord, as well as the loss of the use of funds. In

 

22

 

addition to the
late charge, any and all rent or other charges which Tenant is obligated to pay
to Landlord under this Lease which are unpaid shall bear interest at the rate
set forth in Section 17.6 from the date said payment was due until paid.

 

17.4            Right of Landlord to
Re-Enter

 

In the event of any termination of this Lease, Landlord shall have the
immediate right to enter upon and repossess the Premises, and any personal
property of Tenant may be removed from the Premises and stored in any public
warehouse at the risk and expense of Tenant.

 

17.5            Surrender of
Premises

 

No act or thing done by Landlord or any agent or employee of Landlord
during the Lease term shall be deemed to constitute an acceptance by Landlord
or a surrender of Premises unless such intent is specifically acknowledged in a
writing signed by Landlord. The delivery of keys to the Premises to Landlord or
any agent or employee of Landlord shall not constitute a surrender of the
Premises or effect a termination of this Lease, whether or not the keys are
thereafter retained by Landlord and, notwithstanding such delivery, Tenant
shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been terminated properly. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not,
or a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises.

 

17.6            Interest Charges

 

Any amount not paid by one party to the other when due to the other
party will bear interest from the date due at the lesser of (i) the prime
commercial rate being charged by the Bank of America N.A. in effect on the date
due plus two percent (2%) per annum; or (ii) the maximum rate permitted by law.
If Bank of America N.A. is no longer in existence, then another comparable bank
or financial institution shall be substituted by Landlord.

 

17.7            Tenant’s Default

 

If Tenant is in default of the Lease, then:

 

17.7.1    For so long as Landlord does
not terminate Tenant’s right to possession of the Premises, if Tenant obtains
Landlord’s consent, Tenant will have the right to assign or sublet its interest
in the Lease, but Tenant will not be released from liability.

 

23

 

17.7.2    No structural changes to the
building at any cost shall be permitted without the prior written approval of
Landlord.

 

17.7.3    All costs of de-identification
of the Premises shall be paid by Tenant whether or not Landlord terminates this
Lease.

 

17.8            Default by Landlord

 

Landlord shall be in default if Landlord fails to perform any provision
of this Lease required of it and the failure is not cured within thirty (30)
days after notice has been given to Landlord. If, however, the failure cannot
reasonably be cured within the cure period, Landlord shall not be in default of
this Lease if Landlord commences to cure the failure within the cure period and
diligently and in good faith continues to cure the failure. Notices given under
this Section 17.8 shall specify the alleged breach and the applicable Lease
provisions. If Landlord shall at any time default beyond the applicable notice
and cure period, Tenant shall have the right to cure such default on Landlord’s
behalf. Any sums expended by Tenant in doing so, and all reasonably necessary
incidental costs and expenses incurred in connection therewith, shall be
payable by Landlord to Tenant within thirty (30) days following demand therefor
by Tenant, provided, however, that Tenant shall not be entitled to any
deduction or offset against any rent otherwise payable to Landlord under this
Lease.

 

18.                               RIGHT
OF INSPECTION

 

Landlord and Landlord’s authorized representatives shall have the right
after written notice to Tenant, to enter upon the Premises at all reasonable
hours for the purpose of inspecting the Premises or of making repairs,
additions, or alterations in or upon the Premises, and, for the purpose of
exhibiting the Premises to prospective tenants, purchasers, or others. Provided
Tenant is not in default beyond any applicable cure period, Landlord shall not
exhibit any “for sale” signs during the term of the Lease.

 

19.                               WAIVER
OF BREACH

 

No waiver by Landlord of any breach of any one or more of the terms,
covenants, conditions, or agreements of this Lease shall be deemed to imply or
constitute a waiver of any succeeding or other breach. Failure of Landlord to
insist upon the strict performance of any of the terms, conditions, covenants,
and agreements of this Lease shall not constitute or be considered as a waiver
or relinquishment of Landlord’s rights to subsequently enforce any default,
term, condition, covenant, or agreement, which shall all continue in full force
and effect. The rights and remedies of Landlord under this Lease shall be
cumulative and in addition to any and all other rights and remedies which
Landlord has or may have.

 

24

 

20.                               NOTICES

 

20.1            Notice Requirements

 

All notices, requests, or demands herein provided to be given or made,
or which may be given or made by either party to the other, shall be given or
made only in writing and shall be deemed to have been duly given: (i) when
delivered personally at the address set forth below, or to any agent of the
party to whom notice is being given, or if delivery is rejected, when delivery
was attempted; or (ii) on the date delivered when sent via Overnight Mail,
properly addressed and postage prepaid; or (iii) on the date sent via facsimile
transmission; or (iv) seventy-two (72) hours after the time the same is
deposited in the United States mail, properly addressed and first class postage
prepaid, return receipt requested. The proper address to which notices,
requests, or demands may be given or made by either party shall be the address
set forth at the end of this Section or to such other address or to such other
person as any party shall designate. Such address may be changed by written
notice given to the other party in accordance with this Section.

 

If to Landlord:

 

Realty Income
Corporation

Attn: Legal Department 

220 West Crest Street

Escondido, CA    92025-1707

Phone number:       (760) 741-2111

Fax number:      (760) 741-8674

 

If to Tenant:

 

Festival Fun
Parks, LLC

Attn: Property Management Department

18300 Von Karman Ave., Suite 900

Irvine, CA   92614

Phone number:   (949) 261-0404

Fax number:    (949) 261-1414

 

or to such other
address or to such other person as any party shall designate.

 

20.2            Payments Under Lease

 

Rent and all other payments due to Landlord under this Lease shall be
paid in lawful money of the United States of America without offset or
deduction to the name and at the address first given above or to such other
persons or parties or at such other places as Landlord may from time to time
designate in writing.

 

25

 

21.                               RELATIONSHIP OF THE
PARTIES

 

This Lease shall not be deemed or construed by the parties, nor by any
third party, as creating the relationship of (i) principal and agent, (ii)
partnership, or (iii) joint venture between the parties. Neither the method of
computation of rent nor any other provision of this Lease, nor any acts of the
parties are other than in the relationship of Landlord and Tenant.

 

22.                               SUBORDINATION, ATTORNMENT
AND ESTOPPEL

 

22.1            Subordination and
Non-Disturbance

 

Subject to the provisions of this Section, this Lease and the leasehold
estate created hereby shall be, at the option and upon written declaration of
Landlord, subject, subordinate and inferior to the lien and estate of any
liens, trust deeds and encumbrances (“Mortgages”), and all renewals, extensions
or replacements thereof, now or hereafter imposed by Landlord upon the
Premises; provided, however, that this Lease shall not be subordinate to any
Mortgage arising after the date of this Lease, or any renewal, extension or
replacement thereof, unless and until Landlord provides Tenant with an
agreement (“Non-Disturbance Agreement”), signed and acknowledged by each holder
of any such interest setting forth that so long as Tenant is not in default
hereunder, Landlord’s and Tenant’s rights and obligations hereunder shall
remain in force and Tenant’s right to possession shall be upheld. The
Non-Disturbance Agreement may contain additional provisions as are customarily
requested by secured lenders with liens encumbering real property security
similar to the Premises, including, without limitation, Tenant’s agreement to
attorn as set forth in Section 22.2 below. Tenant shall, promptly following a
request by Landlord and after receipt of the Non-Disturbance Agreement, execute
and acknowledge any subordination agreement or other documents required to
establish of record the priority of any such encumbrance over this Lease, so
long as such agreement does not otherwise increase Tenant’s obligations or
diminish Tenant’s rights hereunder.

 

22.2            Attornment

 

In the event of foreclosure of any Mortgage, whether superior or
subordinate to this Lease, then (i) this Lease shall continue in force; (ii)
Tenant’s quiet possession shall not be disturbed if Tenant is not in default
hereunder; (iii) Tenant shall attorn to and recognize the mortgagee or
purchaser at foreclosure sale (“Successor Landlord”) as Tenant’s landlord for
the remaining term of this Lease; and (iv) the Successor Landlord shall not be
bound by (a) any payment of rent for more than one month in advance; and (b)
any amendment, modification or ending of this Lease without the Successor
Landlord’s consent after the Successor Landlord’s name is given to Tenant,
unless the amendment, modification or ending is specifically authorized by the
original Lease and does not require Landlord’s prior agreement

 

26

 

or consent; and
(c) any liability for any act or omission of a prior Landlord. At the request
of the Successor Landlord, Tenant shall execute a new lease for the Premises,
setting forth all of the provisions of this Lease except that the term of the
new lease shall be for the balance of the term of this Lease.

 

22.3            Estoppel Certificate

 

Tenant shall execute and deliver to Landlord, within twenty (20) days
after receipt of Landlord’s request, any estoppel certificate or other
statement to be furnished to any prospective purchaser of or any lender against
the Premises. Such estoppel certificate shall acknowledge and certify each of
the following matters, to the extent each may be true: that the Lease is in
effect and not subject to any rental offsets, claims, or defenses to its
enforcement; the commencement and termination dates of the term; that Tenant is
paying rent on a current basis; that any improvements required to be furnished
under the Lease have been completed in all respects; that the Lease constitutes
the entire agreement between Tenant and Landlord relating to the Premises; that
Tenant has accepted the Premises and is in possession thereof; that the Lease
has not been modified, altered, or amended except in specified respects by
specified instruments; that Tenant has no notice of any prior assignment, hypothecation,
or pledge of rents or the Lease; and such other matters as may reasonably be
requested. Tenant shall also, upon request of Landlord, certify and agree for
the benefit of any lender against the Premises or the building (“Lender”) that
Tenant will not look to such Lender: as being liable for any act or omission of
Landlord; as being obligated to cure any defaults of Landlord under the Lease
which occurred prior to the time Lender, its successors or assigns, acquired
Landlord’s interest in the Premises by foreclosure or otherwise, as being bound
by any payment of rent or additional rent by Tenant to Landlord for more than
one (1) month in advance; or as being bound by Landlord to any amendment or
modification of the Lease without Lender’s written consent. Failure to deliver
the documents required under this Section 22 in the time period required shall
constitute an Event of Default without the need for any notice or cure period.

 

23.                               TENANT’S
FINANCIAL STATEMENTS

 

During the term of the Lease, Tenant shall provide Landlord with
current financial statements as follows: (i) within sixty (60) days of the end
of each fiscal quarter, including the fourth (4th) quarter. Tenant’s profit and
loss statement and balance sheet; and (ii) within one hundred twenty (120) days
of the end of each fiscal year, Tenant’s profit and loss statement, balance
sheet; statement of changes in financial position, and notes to the financial
statements as reviewed or audited by an independent certified public accountant
or accounting firm. Tenant’s filing, and delivering a copy to Landlord, of any
financial statement as required by any securities regulation for which it shall
be

 

27

 

obligated for
purpose of public disclosure, shall be deemed to satisfy this Section.

 

24.                               ATTORNEYS’ FEES

 

24.1            Recovery of
Attorneys’ Fees and Costs of Suit

 

Tenant shall reimburse Landlord, upon demand, for any costs or expenses
incurred by Landlord in connection with any breach or default under this Lease,
whether or not suit is commenced or judgment entered. Such costs shall include
legal fees and costs incurred for the negotiation of a settlement, enforcement
of rights, or otherwise. Furthermore, if any action for breach of or to enforce
the provisions of this Lease is commenced, the court in such action shall award
to the party in whose favor a judgment is entered, a reasonable sum as
attorneys’ fees and costs. Such attorneys’ fees and costs shall be paid by the
losing party in such action.

 

24.2            Party to Litigation

 

Tenant shall indemnify Landlord against and hold Landlord harmless from
all costs, expenses, demands, and liability incurred by Landlord if Landlord
becomes or is made a party to any claim or action (i) instituted by Tenant, or
by any third party against Tenant, or by or against any person holding any
interest under or using the Premises by license of or agreement with Tenant;
(ii) for foreclosure of any lien for labor or material furnished to or for
Tenant or such other person; (iii) otherwise arising out of or resulting from
any action or transaction of Tenant or such other person; or (iv) necessary to
protect Landlord’s interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant’s expense with
counsel reasonably acceptable to Landlord or, at Landlord’s election, Tenant
shall reimburse Landlord for any legal fees or costs incurred by Landlord in
any such claim or action.

 

24.3            Landlord’s Consent

 

Tenant shall pay Landlord’s reasonable attorneys’ fees and other costs
incurred in connection with Tenant’s request for Landlord’s consent under
Section 16, “Assignment and Subletting,” or in connection with any other act
which Tenant proposes to do and which requires Landlord’s consent.

 

25.                               CONSENT

 

Landlord shall have no liability for damages resulting from, nor may
Tenant terminate this Lease as a result of, Landlord’s failure to give any
consent, approval, or instruction reserved to Landlord. Tenant’s sole remedy in
any such event shall be an action for injunctive relief.

 

28

 

26.                               AUTHORITY
TO MAKE LEASE; COVENANT OF QUIET ENJOYMENT

 

26.1              Full Power and
Authority to Enter Lease

 

The parties covenant and warrant that each has full power and authority
to enter into this Lease.

 

26.2              Quiet Enjoyment

 

Landlord covenants and warrants that Tenant shall have and enjoy full,
quiet, and peaceful possession of the Premises, its appurtenances and all
rights and privileges incidental thereto during the term as against all persons
claiming by through, or under Landlord, subject to the provisions of this Lease
and any title exceptions or defects in existence at the time of the conveyance
of the Premises to Landlord by Tenant.

 

26.3              No Violation of
Covenants and Restrictions

 

Tenant shall not violate or cause Landlord to violate any recorded
covenants and restrictions affecting the Premises. Tenant shall defend,
indemnify, and hold harmless Landlord from any costs or expenses incurred from
such a violation.

 

27.                               HAZARDOUS MATERIAL

 

27.1              Environmental
Compliance

 

Tenant shall not cause or permit any Hazardous Material to be brought
upon, or used in or about the Premises by Tenant, its agents, employees,
contractors, or invitees, without the prior written consent of Landlord (which
Landlord shall not unreasonably, withhold as long as Tenant demonstrates to
Landlord’s reasonable satisfaction that such Hazardous Material is necessary or
useful to Tenant’s business and will be used, kept, and stored in a manner that
complies with all laws relating to such Hazardous Material.) If Tenant breaches
the obligations stated in the preceding sentence, if the presence of Hazardous
Material on the Premises caused or permitted by Tenant results in contamination
of the Premises, or if contamination of the Premises by Hazardous Material
otherwise occurs and Landlord has not caused the contamination, then Tenant
shall indemnify, defend, and hold Landlord harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, or losses (including,
without limitation, diminution in value of the Premises, damages for the loss
or restriction on use of rentable or usable space or of any amenity of the
Premises, damages arising from any adverse impact on marketing of space of the
Premises, and sums paid in settlement of claims, attorneys’ fees, consultation
fees, and expert fees) which arise during or after the term of the Lease as a
result of such contamination. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with any
investigation or site conditions or any cleanup, remedial, removal, or
restoration work required by any

 

29

 

federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on or under the Premises. Without limiting
the foregoing, if the presence of any Hazardous Material on the Premises not
caused by Landlord results in any contamination of the Premises, Tenant shall
promptly take all actions at its sole expense as are recommended by
environmental engineers hired by Tenant or Landlord and are necessary to return
the Premises to the condition existing prior to the introduction of any such
Hazardous Material to the Premises; provided that Landlord’s approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material
adverse long-term or short-term effect on the Premises.

 

27.2            Tenant’s
Responsibility for Hazardous Materials

 

Landlord and Tenant acknowledge that Landlord may become legally liable
for the costs of complying with Laws relating to Hazardous Material which are
not caused by Landlord or Tenant including the following: (i) Hazardous
Material present in the soil or ground water on the Premises prior to or
following the Commencement Date of the Lease; (ii) a change in Laws which
relate to Hazardous Material which make Hazardous Material present on the
Premises as of the Commencement Date, whether known or unknown to Landlord, a
violation of such new Laws; (iii) Hazardous Material that migrates, flows, percolates,
diffuses, or in any way moves on to or under the Premises before or after the
Commencement Date; (iv) Hazardous Material present or under the Premises as a
result of any discharge, dumping, or spilling (whether accidental or otherwise)
on the Premises by other tenants of the Premises or their agents, employees,
contractors, or invitees, or by others. Accordingly, Landlord and Tenant agree
that the cost of complying with Laws relating to Hazardous Material on the
Premises for which Landlord is legally liable but did not cause, shall be the
responsibility of and shall be paid by Tenant and Tenant shall indemnify
Landlord with respect to such Hazardous Material. To the extent any such
expense relating to Hazardous Material is subsequently recovered or reimbursed
through insurance, or recovery from responsible third parties, or other action,
Tenant shall be entitled to a reimbursement to the extent it has paid the
maintenance expense to which such recovery or reimbursement relates.

 

27.3            Survival

 

Provisions of this
Section 27 shall survive termination of the tenancy.

 

30

 

28.                               GENERAL PROVISIONS

 

28.1            Gender; Number

 

The use of (i) the neuter gender includes the masculine and feminine
and (ii) the singular number includes the plural, whenever the context
requires.

 

28.2            Captions

 

Captions in this Lease are inserted for the convenience of reference
only and do not define, describe, or limit the scope or the intent of this
Lease or any of its terms.

 

28.3            Exhibits

 

All attached exhibits are a part of this Lease and are incorporated in
full by this reference. Except as specifically provided herein, if any
provision contained in any exhibit hereto is inconsistent or in conflict with
any provisions of this Lease, the provisions of this Lease shall supersede the
provisions of such exhibit and shall be paramount and controlling.

 

28.4            Entire Agreement

 

This Lease contains the entire agreement between the parties relating
to the transactions contemplated hereby and all prior or contemporaneous
agreements, understandings, representations and statements, oral or written,
are merged into this Lease.

 

28.5              Drafting

 

This Lease shall not be construed more strictly against one party than
the other because it may have been drafted by one of the parties or its
counsel, each having contributed substantially and materially to the
negotiation and drafting hereof.

 

28.6              Modification

 

No modification, waiver, amendment, discharge, or change of this Lease
shall be valid unless it is in writing and signed by the party against which
the enforcement of the modification, waiver, amendment, discharge, or change is
or may be sought.

 

28.7            Joint and Several
Liability

 

If any party consists of more than one person or entity, the liability
of each such person or entity signing this Lease shall be joint and several.

 

31

 

28. 8         Governing Law

 

This Lease shall be construed and enforced in accordance with the laws
of the state in which the Premises are located.

 

28.9            Attorneys’ Fees

 

With respect to Section 24 and any other provision in this Lease
providing for payment or indemnification of attorneys’ fees, such fees shall be
deemed to include reasonable fees incurred through any applicable appeal process,
and shall include fees attributable to legal services provided by any in-house
counsel and staff to the prevailing or indemnified party. For purposes hereof,
the services of in-house counsel and their staff shall be valued at rates for
independent counsel prevailing in the metropolitan area in which such counsel
and staff practice.

 

28.10      Time of Essence

 

Time is of the essence of every provision of this Lease.

 

28.11      Severabilitv

 

In the event any term, covenant, condition, or provision of this Lease
is held to be invalid, void, or otherwise unenforceable by any court of
competent jurisdiction, the fact that such term, covenant, condition, or
provision is invalid, void, or otherwise unenforceable shall in no way affect
the validity or enforceability of any other term, covenant, condition, or
provision of this Lease.

 

28.12      Successors and Assigns

 

Except as otherwise provided herein, all terms of this Lease shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective legal representatives, successors, and assigns.

 

28.13      Independent Covenants

 

This Lease shall be construed as though the covenants herein between
Landlord and Tenant are independent and not dependent, and Tenant hereby
expressly waives the benefit of any statute to the contrary and agrees that if
Landlord fails to perform its obligations set forth herein. Tenant shall not be
entitled to make any repairs or perform any acts hereunder at Landlord’s
expense or to any offset of the rent or other amounts owing hereunder against
Landlord; provided, however, the foregoing shall in no way impair the right of
Tenant to commence a separate action against Landlord for any violation by
Landlord of the provisions hereof so long as notice is first given to Landlord
and any holder of a mortgage or deed of trust covering the Building or all or
any portion of the Project (of whose address Tenant has theretofore been
notified) and an opportunity is granted to

 

32

 

Landlord and such holder
to correct such violation as provided above.

 

28.14      Information Provided

 

Tenant warrants and represents that all information Tenant has provided
to Landlord is accurate and correct and Tenant acknowledges that Landlord has
relied upon such information in entering into this Lease.

 

28.15      Limitation of Landlord’s
Liability

 

Notwithstanding anything contained in this Lease to the contrary,
Landlord shall not incur any liability beyond Landlord’s interest in the
Premises upon a breach of this Lease, and Tenant shall look exclusively to such
interest in the Premises for the payment and discharge of any obligations
imposed upon Landlord under this Lease.

 

28.16      No Lease Until Accepted

 

Landlord’s delivery of unexecuted copies or drafts of this Lease is
solely for the purpose of review by the party to whom delivered and is in no
way to be construed as an offer by Landlord nor in any way implies that
Landlord is under any obligation to Lease the Premises. When this Lease has
been executed by both Landlord and Tenant, it shall constitute a binding
agreement to lease the Premises upon the terms and conditions provided herein
and Landlord and Tenant agree to execute all instruments and documents and take
all actions as may be reasonably necessary or required in order to consummate
the lease of the Premises as contemplated herein.

 

28.17      Counterparts

 

This Lease may be executed in any number of counterparts, each of which
shall be deemed an original. The counterparts shall together constitute but one
agreement. Any signature on a copy of this Lease or any document necessary or
convenient thereto sent by facsimile shall be binding upon transmission by
facsimile and the facsimile copy may be utilized for the purposes of this
Lease.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
  Realty
  Income Corporation,

  a Maryland corporation

  	
   

  	
  Festival
  Fun Parks, LLC,

  a Delaware

  limited liability company

  
	
  

  By:

  	
  /s/ Gary Malino

  	
   

  	
   

  	
  

  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
  Gary Malino

  Senior Vice President,

  Chief Financial Officer

  	
   

  	
   

  	
   

  
	
  Date:

  	
  3/29/99

  	
   

  	
   

  	
  Date:

  	
  3/29/99

  	
   

  

 

33

 

COMMERCIAL GROUND LEASE

 

EXHIBIT “A”

 

LEGAL DESCRIPTION OF REAL PROPERTY

 

 

	
  PREMISES
  LOCATION:

  	
  Family Fun Center

  1525 Vista Way,

  Vista, CA 92083

  

 

 

(To be taken from
the Commitment for Policy of Title Insurance.)

 

 

EXHIBIT A

 

PARCEL 1:

 

THE SOUTH 16O FEET OF LOT 2, IN BLOCK 8 OF VISTA FARMS SUBDIV1SION, IN
THE CITY OF VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP
THEREOF NO. 1894, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY, MARCH 18, 1926.

 

EXCEPTING THEREFROM THE EAST 260 FEET.

 

PARCEL 2:

 

THAT PORTION OF LOT 1, BLOCK 8 OF VISTA FARMS SUBDIVISION, IN THE CITY
OF VISTA, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF
NO. 1894, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, MARCH
18, 1926, DESCRIBED AS FOLLOWS:

 

BEGINNING AT THE NORTHWEST CORNER OF SAID LOT 1; THENCE DUE SOUTH ALONG
THE WESTERLY LINE OF SAID LOT 1, A DISTANCE OF 362.80 FEET; THENCE DUE EAST,
393.26 FEET THENCE SOUTH 06° 30’ 20” WEST TO THE SOUTHEASTERLY LINE OF SAID
LOT; THENCE ALONG SAID SOUTHEASTERLY LINE, NORTH 56° 33’ 15” EAST TO THE
SOUTHEAST CORNER OF SAID LOT 1; THENCE DUE NORTH 450.31 TO THE NORTHEAST CORNER
OF SAID LOT; THENCE DUE WEST, 625.00 FEET TO THE POINT OF BEGINNING.

 

EXCEPTING THEREFROM THAT PORTION CONVEYED TO THE STATE OF CALIFORNIA, BY
DEED RECORDED APRIL 14, 1953 IN BOOK 4819, PAGE 574 OF OFFICIAL RECORDS OF SAN
DIEGO COUNTY, SAID PORTION LYING SOUTHEASTERLY OF THE FOLLOWING DESCRIBED LINE:

 

COMMENCING AT A 1 1/4 INCH IRON PIPE WITH TAG MARKED “L.S. 2353”, SET
FOR THE SOUTHWEST CORNER OF LOT 22, BLOCK 6, AS SHOWN ON SAID MAP NO. 1894;
THENCE ALONG THE SOUTH LINE OF SAID LOT 22, NORTH 89° 49’ 24” EAST, RECORD
SOUTH 89° 54’ 33” EAST, 497.27 FEET THENCE NORTH 40° 55’ 30” EAST, 116.65 FEET;
THENCE NORTH 59° 33’ 33” EAST, 93.37 FEET TO THE WESTERLY LINE OF GRAPEVINE
ROAD, AS SAID ROAD IS SHOWN ON MAP NO. 1894; THENCE ALONG SAID WESTERLY LINE,
NORTH 00° 15’ 26” WEST, 36.90 FEET; THENCE LEAVING SAID WESTERLY LINE, NORTH
59° 52’ 33” EAST, 57.66 FEET TO A POINT ON THE EASTERLY LINE OF SAID GRAPEVINE
ROAD; THENCE LEAVING SAID EASTERLY LINE, SOUTH 70° 54’ 00” WEST, 42.27 FEET;
THENCE NORTH 59° 52’ 33” EAST
26.00 FEET; THENCE NORTH 78° 43’ 21” EAST, 176.47 FEET; THENCE NORTH 59° 52’
33” EAST, 311 .53 FEET; THENCE ALONG A TANGENT CURVE TO THE RIGHT WITH A RADIUS
OF 7101.00 FEET, THROUGH AN ANGLE OF 01° 16’ 01”, A DISTANCE OF 136.36 FEET TO
A POINT ON THE EASTERLY LINE OF SAID LOT 1 OF BLOCK 8, DISTANT THEREON SOUTH
00° 13’ 14” EAST, 382.66 FEET FROM A 3/4 INCH PIPE WITH TAG MARKED “L.S. 1162”
SET FOR THE NORTHEAST CORNER OF SAID LOT 1, SAID POINT ALSO BEING DISTANT ALONG
LAST SAID EASTERLY LINE AND ITS SOUTHERLY PROLONGATION NORTH 00° 13’ 14” WEST,
115.21 FEET FROM ENGINEER’S STATION 285 PLUS 48.30 P.O.C. ON THE CENTER LINE OF
THE DEPARTMENT OF PUBLIC WORKS SURVEY, MADE IN 1931, BEING OCEANSIDE, AND VISTA
ROAD XI-SD-196-A.

 

ALSO EXCEPTING THEREFROM THAT PORTION DESCRIBED IN FINAL ORDER OF
CONDEMNATION, RECORDED FEBRUARY 25, 1971 AS FILE NO. 36338 OF OFFICIAL RECORDS
OF SAID COUNTY.

 

 

COMMERCIAL GROUND LEASE 

EXHIBIT “B”

 

	
  Recording requested by, and after recording return
  to:

  	
   

  
	
  

  Realty Income Corporation

  Attn: Legal Department 

  220 West Crest Street

  Escondido, CA 92025-1707

  	
   

  

MEMORANDUM OF LEASE

 

This Memorandum of Lease is made and entered into as of March 29, 1999
by and between Realty Income Corporation, a Maryland corporation (“Landlord”)
and Festival Fun Parks, LLC, a Delaware limited liability company, (“Tenant”)
who agree as follows:

 

1. Terms and Premises. Landlord leases to Tenant and Tenant leases from
Landlord that certain real property (the “Premises”), which legal description
is attached hereto and incorporated herein as Exhibit “A,” and is commonly
known as:

 

Family Fun Center 

1525 Vista Way

Vista, CA 92083

 

for a term of
thirty-four and one-half (34 1/2) years, commencing on or about the date the
deed transferring ownership of the Premises to Landlord is recorded. Landlord
has a vested remainder interest in the improvements located on the Premises,
which will fully pass to Landlord, or its successors and assigns upon the
termination of the leasehold estate.

 

2. Purpose of Memorandum of Lease. This Memorandum of Lease is prepared
for the purpose of recordation and does not modify the provisions of the lease
dated March 29, 1999 and entered into by and between Landlord and Tenant (the
“Lease”).

 

The Lease is incorporated herein by reference. If there are any
conflicts between the Lease and this Memorandum of Lease, the provisions of the
Lease shall prevail.

 

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  Realty Income
  Corporation, 

  a Maryland corporation

  	
   

  	
  Festival Fun Parks,
  LLC,

  a Delaware

  limited liability company

  
	
  By:

  	
  

  	
   

  	
  By:

  	
  

  
	
  Date:

  	
   

  	
   

  	
  Date:

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