Document:

Exhibit 10.19

 

GROUND LEASE

 

THIS GROUND LEASE (the “Lease”) is executed as of this
1st day of November, 1994 (“Effective Date”), by and between LIVERMORE AIRWAY
BUSINESS PARK, a California limited partnership (“Landlord”) and CAMELOT PARK
FAMILY ENTERTAINMENT CENTER OF PLEASANTON VALLEY, L.P., a California limited
partnership (“Tenant”).

 

RECITALS

 

This Lease is made in contemplation of the following
facts, understandings and intentions of the parties:

 

A.            Landlord
is the owner of that certain real property comprised of approximately Five and
Five/Tenths (5.5) acres of unimproved land which is a part of the
Livermore Airway Business Park, located in the City of Livermore, County of
Alameda, state of California, and more particularly described in Exhibit “A”
attached hereto (the “Property”).

 

B.            Tenant
desires to lease from Landlord, and Landlord is willing to lease to Tenant,
upon the terms and conditions stated in this Lease, the Property.

 

ARTICLE 1

LEASE OF PROPERTY

 

1.1           Lease.  For
and in consideration of the Rentals (defined in Section 3.4 below),
conditions, covenants and agreements set forth in this Lease, Landlord hereby
leases to Tenant and Tenant hereby leases from Landlord the Property, subject
to the terms, covenants and conditions of this Lease.

 

1.2           Condition
of the Property.  Tenant acknowledges that it has inspected the
Property and has observed its physical characteristics and condition as fully
as Tenant desires, and hereby waives any and all objections to the physical
characteristics and condition of the Property, whether known or unknown. Tenant
acknowledges that neither Landlord nor any of Landlord’s employees, agents or
representatives has made any representations, warranties or agreements by or on
behalf of Landlord as to any matter concerning the Property, the past or
present uses thereof, or the condition of the Property, or the suitability
thereof for any purposes including the purposes herein contemplated. This
disclaimer applies without limitation to topography, water rights, utilities,
present and future zoning, surface and subsoil conditions, purposes to which
the Property may be suited, drainage, access to public roads or extensions
thereof, presence or absence of hazardous materials, and environmental and land
use laws and regulations to which the Property may be subject. No
representation, warranty, or agreement, if any, made by any person acting on
behalf of Landlord which is not expressly set forth in this Lease shall be
valid or binding on Landlord. Tenant

 

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acknowledges that it has independently and personally inspected the
Property and has examined the current zoning, and all matters of public record
pertaining to the Property, and the development and use thereof, and has entered
into this Lease on the basis of such personal inspection and examination and
not in reliance on any representations, warranties or agreements made by or on
behalf of Landlord, except as specifically set forth herein. Tenant hereby
further acknowledges and agrees that the Property is being leased to and
accepted by Tenant in its present condition, “As-Is,” and that no patent or
latent physical condition of the Property, whether foreseen or unforeseen, or
known, not known or discovered, or arising at any time shall affect the rights
of Tenant and Landlord under this Lease. Tenant acknowledges that Landlord has
processed a parcel map creating a separate legal parcel for the Property (“Parcel
Map”), but the Parcel Map has not yet been recorded in the Official Records of
Alameda County, California Landlord intends to cause the Parcel Map to be
recorded on or before the Term Commencement Date.

 

ARTICLE 2

TERM

 

2.1           Term.  The
term of this Lease (“Term”) shall be for a period of thirty-four (34) years and
six (6) months, commencing on the earlier of (i) the date that Tenant
obtains the first permit from the City of Livenoore for the construction of the
Improvements (as defined in Section 5.1) contemplated by Tenant on the
Property or (ii) the date that all of Tenant’s Conditions Precedent set
forth in Section 4.1 hereof have been satisfied and/or waived (the “Term
Commencement Date”) and ending on the date that is thirty- four (34) years and
six (6) months after the Term Commencement Date, unless sooner terminated
pursuant to the terms of this Lease (“Term”). The expiration or sooner
termination of this Lease is referred to in this Lease as “Lease Termination.”

 

2.2           Delivery
of Possession.  Landlord shall deliver possession of the Property
to Tenant on the Term Commencement Date. If Tenant is permitted to occupy the
Property prior to the Term Commencement Date for any purpose permitted by
Landlord, such early entry shall be at Tenant’s sole risk and subject to all
the terms and provisions hereof, except the payment of Rentals. Landlord shall
have the right to impose such additional conditions on Tenant’s early entry as
Landlord shall deem appropriate.

 

2.3           Delivery
of Possession.  If Landlord is unable to deliver possession of
the Property to Tenant on the Term Commencement Date, Landlord shall not be
subject to liability therefor, nor shall such failure affect the validity of
this Lease or the obligations of Tenant or extend the Term Commencement Date or
the expiration date; except that Tenant’s payment of Impositions shall be
abated beginning on the Term Commencement Date for a period equal to the period
of delay, unless delay in delivering possession of the Property was caused or
contributed to by Tenant

 

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or Tenant’s agents, officers, employees, contractors, servants or
invitees (collectively “Tenants Agents”).

 

ARTICLE 3

RENT

 

3.1           Base
Rent.  Tenant shall pay Landlord monthly rent (“Base Rent”) for
the Property as follows: commencing on the earlier of (i) the date that is
thirty (30) days after the date Tenant opens the Improvements constructed by
Tenant on the Property for business or (ii) October 31, 1995 (such
date is hereafter referred to as the “Rent Commencement Date”), Tenant shall
pay Base Rent for the Property in the amount of Twelve Thousand Dollars
($12,000) per month. Base Rent shall be payable in advance on the first day of
each calendar month during the Term. Base Rent for any partial calendar month
shall be prorated on the basis of a thirty (30) day month. Base Rent shall be
paid at Landlord’s address set forth in Section 16.1 or at such other
place as may be noticed from time to time by Landlord.

 

Tenant and Landlord acknowledge that the projected
development fees imposed by the city of Livermore and County of Alameda in
connection with Tenant’s Project are approximately One Hundred Twenty-five
Thousand One Hundred Forty-six Dollars ($125,146.00) (“Development Fees”). In
order to assist Tenant in bearing, the Development Fees, Landlord hereby grants
to Tenant a conditional abatement of Base Rent in the amount of Five Thousand
Dollars ($5,000.00) per month (“Monthly Abatement”) for the five (5) month
period commencing with the Rent Commencement Date (“Abatement Period”). The
total amount of the conditional abatement of Base Rent is Twenty-five Thousand
Dollars ($25,000.00) (“Aggregate Abatement”). If either Landlord or Tenant are
successful in reducing the Development Fees below One Hundred Twenty-five
Thousand One Hundred Forty-six Dollars ($125,146.00), then the Aggregate
Abatement shall be reduced, dollar for dollar, by the same amount as the
reduction in Development Fees, Any reduction in the Aggregate Abatement shall
be applied first to the Monthly Abatement for the last month of the Abatement
Period up to the Monthly Abatement for such month, and then to the Monthly
Abatement for the previous month until the reduction in the Aggregate Abatement
is exhausted. For example, if the Development Costs are reduced by Seventeen
Thousand Dollars ($17,000.00), then the Aggregate Abatement shall be reduced by
the same amount, and the remaining Aggregate Abatement in the amount of Eight
Thousand Dollars ($8,000.00) shall be applied so that no Monthly Abatement
occurs in the last three (3) months of the Abatement Period, an abatement
of Three Thousand Dollars ($3,000.00) applies to the second month of the
Abatement Period, and the full amount of the Monthly Abatement applies in the
first month of the Abatement Period. If the Development Costs are reduced by
Twenty-five Thousand Dollars ($25,000.00) or more, then there shall be no
abatement of Base Rent.

 

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3.2           Base
Rent Adjustment.  The Base Rent shall be increased every three (3) years
as of the anniversary of the Rent Commencement Date (each such date shall
hereafter be referred to as an “Adjustment Date”) in accordance with the
percentage increase, if any, in the Consumer Price Index-All Urban Consumers
(San Francisco-Oakland-San Jose Area; Base 1982-84 = 100) (“Index”) as
published by the United States Department of Labor, Bureau of Labor Statistics.
The Index for the month preceding each Adjustment Date shall be compared with
the Index for the month next preceding the immediately preceding Adjustment
Date, or in the case of the first adjustment, with the Index for the month next
preceding the Rent Commencement Date, and the Base Rent then in effect shall be
increased in accordance with the percentage increase, if any, between such
Indices. In no event, however, shall the increase in the Base Rent resulting
from such adjustment exceed fifteen percent (15%) of the Base Rent in effect
prior to said adjustment. In addition, in no event shall the Base Rent, as
adjusted, be less than the Base Rent in effect immediately prior to such
adjustment. Landlord shall calculate and give Tenant written notice of any such
increase in the Base Rent and Tenant shall pay the increased Base Rent
commencing on the Adjustment Date. Should the increased Base Rent payable by
Tenant for the period following any Adjustment Date exceed the amount
previously paid by Tenant for such period, Tenant shall pay the difference to
Landlord within ten (10) days following Landlord’s demand therefor. Should
the bureau discontinue the publication of the Index, or publish the same less
frequently, or alter the same in some other manner, the Landlord, in its
discretion, shall adopt a substitute Index or procedure which reasonably
reflects and monitors consumer prices.

 

3.3           Advance
Rent.  On or before January 1, 1995, Tenant shall deposit
with Landlord the sum of Ten Thousand Dollars ($10,000) to be applied against
the Base Rent due for the month commencing with the Rent Commencement Date.

 

3.4           Additional
Rent, Rent and Rentals Defined.  The term “Additional Rent” shall
mean all taxes, charges, costs, and expenses and other sums which Tenant is
required to pay hereunder, and all costs and expenses which Landlord may incur
by reason of any default of Tenant hereunder. “Rental(s)” as used herein shall
collectively mean Base Rent and Additional Rent, unless otherwise indicated.
Additional Rent shall be paid by Tenant to Landlord at the place where Base
Rent is required to be paid.

 

3.5           Lease
Year.  The term “Lease Year” shall mean a calendar year, except
the first Lease Year shall be a partial calendar year commencing on the Rent
Commencement Date if the Lease Term commences on a date other than January 1,
and the last Lease Year shall end on Lease Termination.

 

3.6           Net
Lease.  Base Rent, Additional Rent and any and all other sums
payable hereunder to or on behalf of Landlord, shall be paid without setoff,
counterclaim, abatement, deferment, suspension

 

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or deduction, and except as otherwise expressly provided in this Lease,
without notice or demand, in lawful money of the United States.

 

3.7           Non-Subordination
of Rent or Other Sums.  Tenant hereby covenants and agrees that
the Base Rent, Additional Rent, and any and all other sums payable to Landlord
by Tenant under the provisions of this Lease shall be paid from gross revenues
generated from the Property and improvements thereon and from other Tenant
resources and that all other expenses of Tenant related to the Project (defined
in Section 5.1) shall be subordinate to the payments to Landlord as
required under this Lease. Landlord is not required to take any further action
in order to make effective this subordination.

 

3.8           Late
Charge; Interest.  Tenant acknowledges that late payment by
Tenant to Landlord of Base Rent will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, without limitation, processing and
accounting charges. Accordingly, Tenant shall pay to Landlord, as Additional
Rent without the necessity of prior notice or demand, a late charge equal to
five percent (5%) of any installment of Base Rent which is not received by
Landlord by 4 p.m. on the seventh (7th) calendar day after such payment of
Base Rent is due regardless of whether such seventh (7th) day falls on a
holiday or weekend. The parties agree that such late charge represents a fair
and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. In no event shall this provision for a late charge be deemed
to grant to Tenant a grace period or extension of time within which to pay any
installment of Base Rent or prevent Landlord from exercising any right or
remedy available to Landlord upon Tenant’s failure to pay such installment of
Base Rent when due, including without limitation, the right to terminate this
Lease. If any installment of Base Rent is not received by Landlord by the
thirtieth day after its due date, such installment shall bear interest at an
annual rate equal to the greater of (i) ten percent (10%), or (ii) five
percent (5%) plus the rate established by the Federal Reserve Bank of San
Francisco, as of the twenty-fifth (25th) day of the month immediately preceding
the due date, on advances to member banks under sections 13 and section 13a
of the Federal Reserve Act, as now in effect or hereafter from time to time
amended (the “Stipulated Rate”), commencing on the thirty-first (31st) day
after the due date for such installment, and continuing until such installment
is paid in full. Interest accruing on Base Rent shall be in addition to any
late charge which may be imposed pursuant to this Section. If Tenant fails
to pay Additional Rent (including any late charge payable pursuant to this
Section) due from Tenant to Landlord on or before the due date, in addition to
any other remedy provided by this Lease, Tenant shall pay Landlord the
delinquent sum plus interest on the total delinquent sum at the Stipulated
Rate. Said interest shall accrue from the due date of the delinquent payment to
the date the delinquent payment is received by Landlord.

 

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ARTICLE 4

TENANT’S CONDITIONS PRECEDENT

 

4.1           Tenant’s
Conditions to Lease.  Tenant’s obligation to lease the Property
from Landlord pursuant to the terms and conditions contained herein shall be
subject to the satisfaction and/or waiver of the following conditions on or
before the time periods specified below (each of said conditions shall
hereafter be referred to as a “Condition Precedent” and shall be collectively
referred to as “Conditions Precedent”):

 

(a)           Approvals
and Permits.  During the period commencing with the Effective
Date and ending on the date that is one hundred twenty (120) days after the
Effective Date (“Contingency Period”), Tenant shall, at Tenant’s sole cost and
expense, use diligent efforts to obtain all governmental approvals, licenses
and permits required to construct the Improvements (in accordance with Tenant’s
obligations pursuant to Article 5) on terms and conditions acceptable to
Tenant in Tenant’s reasonable discretion (the “Permits”). Tenant shall fully
and completely comply with all conditions, restrictions and contingencies
imposed upon, or attached to, or made a part of the Permits. Tenant may contest
the validity or request modification of any condition imposed in connection
with the Permits by appropriate legal proceedings, but this right shall not be
deemed or construed in any way as relieving or modifying Tenant’s covenants to
comply therewith during the pendency of such proceedings. Tenant shall protect,
defend, indemnify and hold Landlord and Landlord’s directors, officers,
partners, employees, agents, successors and assigns harmless from and against
any claims, fines, judgments, penalties, losses, damages, costs, expenses or
liabilities (including attorneys’ fees and costs) directly or indirectly
arising in connection therewith. Landlord shall, upon written request by
Tenant, join in any such permitted request for modification, but only if
Landlord shall not be exposed to any liability for payment of any costs or
expenses or otherwise in connection therewith. Tenant shall protect, defend,
indemnify and hold Landlord harmless from any such costs, expenses or
liabilities, including attorneys’ fees and expenses.

 

(b)           Funding.  Within
sixty (60) days after the Effective Date, but in no event later than January 1,
1995, Tenant shall have received a written commitment from third party
investors in form and content satisfactory to Tenant for funding of Tenant’s
Project on the Property.

 

(c)           Preliminary
Plan Approval.  Prior to the expiration of the Contingency
Period, Landlord shall have approved Tenant’s preliminary design review and
site plans and specifications (“Preliminary Plans”) for the Improvements to be constructed
by Tenant on the Property.

 

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(d)           Satisfaction
of Conditions Precedent.  If any of Tenant’s Conditions Precedent
are not satisfied within the time period specified above for satisfaction
thereof, Tenant may terminate this Lease by giving written notice of such
termination to Landlord on or before the date required for the satisfaction of
such Conditions Precedent and receive a refund of the advance rent paid by
Tenant pursuant to Section 3.3 hereof. If Tenant fails to give written
notice of termination of this Lease prior to the expiration of the period for
satisfaction of the applicable Conditions Precedent, Tenant shall be deemed to
have waived and/or satisfied such Conditions Precedent and to have waived
Tenant’s right to terminate the Lease, and this Lease shall continue in full
force and effect. Notwithstanding the foregoing, if Tenant has not satisfied
the Conditions Precedent set forth in Section 4.1(a) above on or
before the expiration of the Contingency Period, then Landlord may terminate
this Lease by giving Tenant written notice of such termination within fifteen
(15) days after the expiration of the Contingency Period and returning the
advance rent paid by Tenant pursuant to Section 3.3 hereof. Landlord’s
failure to give such written notice of termination of the Lease within said
fifteen (15) day period shall be deemed Landlord’s waiver of its right to
terminate the Lease, and the Lease shall remain in full force and effect.

 

ARTICLE 5

CONSTRUCTION

 

5.1           Tenant’s
Obligation.  Tenant shall, at Tenant’s sole cost and risk and in
the manner and within the times set forth in this Article 5, design and
construct upon the Property a family amusement and recreation complex (“Recreation
Facility”) to be operated under the name Camelot Park. The Recreation Facility,
together with any alterations or additions thereto, all landscaping,
installation of or replacement or relocation of utility connections
necessitated by the construction of the Recreation Facility, and curbs,
gutters, sidewalks, driveways and all other real property improvements
incidental and necessary for the successful operation of the Recreation
Facility shall be referred to in this Lease as the “Improvements.” The
Property, together with the Improvements, shall be referred to in this Lease as
the “Project.”

 

The plans and specifications for the Improvements
shall be prepared by, and the construction of the Improvements shall be
conducted under the supervision of, an architect selected by Tenant, licensed
by the State of California and previously approved by Landlord, which approval
will not be unreasonably withheld. Such approval by Landlord shall not
constitute a representation or warranty as to the integrity, ability, or
experience of such architect.

 

5.2           Due
Diligence; Non-Interference.  Promptly after the Term
Commencement Date, Tenant shall, in good faith and with due diligence,
prosecute in accordance with this Lease the construction

 

7

 

of the Improvements. Tenant shall at all times during construction of
the Improvements take all reasonable measures to minimize any damage,
disruption or inconvenience caused by construction of the Improvements and make
adequate provision for the safety of the Property and for the safety and
convenience of all affected persons and properties. Dust, noise, and other
effects of such work shall be controlled using the methods customarily utilized
to control such deleterious effects associated with construction projects in
developed areas of Livermore, California.

 

5.3           Approval
of Plans and Specifications.

 

(a)           Preliminary
Plans.  Not later than sixty (60) days following the Effective
Date, Tenant shall deliver to Landlord for Landlord’s approval two (2) copies
of the Preliminary Plans. Landlord’s approval or disapproval of the Preliminary
Plans shall be made in writing within fifteen (15) days after Landlord’s
receipt thereof. Landlord’s failure to respond within said fifteen (15) day
period shall be deemed approval of the Preliminary Plans. Landlord’s approval
of the Preliminary Plans shall not constitute a representation of the quality
of or an assumption of liability for the design, engineering, safety or
structural integrity of, or any other matter relating to, the Improvements.
Landlord’s approval of the Preliminary Plans may not be unreasonably
withheld.

 

(b)           Final
Plans.  Not later than one hundred fifty (150) days following the
Effective Date, Tenant shall deliver to Landlord for Landlord’s approval two (2) copies
of final plans and specifications for the Improvements sufficient to obtain
building permits for construction of the Improvements (“Final Plans”). During
the preparation of the Final Plans, Tenant shall periodically submit progress
plans to Landlord for Landlord’s review and comment. Landlord’s approval or
disapproval of the Final Plans shall be made in writing within fifteen (15)
days after Landlord’s receipt thereof. Landlord’s failure to respond within
said fifteen (15) day period shall be deemed approval of the Final Plans.
Landlord’s approval of the Final Plans shall not constitute a representation of
the quality of or an assumption of liability for the design, engineering,
safety, or structural integrity of, or
any other permit relating to, the Improvements. Landlord’s approval of the
Final Plans may not be unreasonably withheld.

 

(c)           Resubmittal
of Disapproved Items.  If Landlord disapproves of any item in the
Preliminary Plans or Final Plans, Landlord shall set forth in sufficient detail
the reasons therefor. The parties shall thereafter immediately meet and
negotiate in good faith to modify the applicable plans so as to remove Landlord’s
objections thereto. If the parties have not reached agreement on revised plans
within five (5) days after Landlord has given written notice of
disapproval of the applicable plans, then Tenant may elect (i) to
submit revised plans to Landlord for approval, or (ii) to give notice
contesting the reasonableness of Landlord’s disapproval A contest of reasonableness shall be
determined by arbitration under the jurisdiction of the American Arbitration

 

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Association in accordance with the Commercial Rules of
such Association; provided, however, that such arbitration proceedings shall be
expedited to be completed within five (5) days of written demand therefor
by either party. If the reasonableness of Landlord’s disapproval is sustained
by the arbitrators, then Tenant shall submit revised plans and specifications
to Landlord for approval in accordance with this Section 5.3. If the
reasonableness of Landlord’s disapproval is not sustained, then Tenant’s plans
shall be deemed approved. Notwithstanding the foregoing, if Landlord
disapproves any change in plans during construction of the Project, then Tenant
may elect to immediately arbitrate the reasonableness of Landlord’s
disapproval in accordance with the procedure set forth in this Section 5.3(c) without
the requirement of first negotiating with Landlord. Landlord shall have five (5) days
after receipt to approve or disapprove any resubmitted item.

 

(d)           Changes to Approved Plans.  Any material changes made by
Tenant in the Final Plans after Landlord’s approval thereof shall be submitted
to Landlord for approval, except for interior, nonstructural changes which
shall not require Landlord’s approval.

 

(e)           Compliance with Legal Requirements.  All plans and specifications for
the Improvements shall comply with all applicable laws, statutes, ordinances,
orders, requirements, rules and regulations of any governmental or
quasi-governmental authority now or hereafter in effect (collectively, “Laws”).
Landlord’s approval of the Preliminary Plans and Final Plans shall not be
construed as a representation that said plans comply with requirements of any
Laws.

 

5.4           Prerequisites to the Commencement of
Construction.   Prior to the commencement of construction of
the Improvements Tenant shall, in addition to complying with all Laws:

 

(a)           Plan Approval and Governmental Approval.  Submit the Final Plans to
Landlord for approval as described in Section 5.3 and obtain Landlord’s
approval thereto. In addition, during the Contingency Period, Tenant shall
obtain all Permits for the construction of the Improvements.

 

(b)           Insurance.  Furnish to Landlord policies of insurance evidencing the
coverage required by Section 11.2.

 

(c)           Evidence of Financing.  Tenant shall deliver to Landlord
true copies of all documents evidencing a commitment for financing in an amount
sufficient to cover the total costs necessary and appropriate to construct the
Improvements on the Property and to acquire and install equipment and fixtures
thereon (the “Project Costs”) in accordance, with the Final Plans approved by
Landlord and a reasonable contingency for such costs. “Financing” includes both
the construction (or interim financing) loan, the take-out (also called
permanent or long-term) financing (“Loan”), and/or Tenant’s own funding.

 

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(d)           Construction
Contract.  If Tenant engages a general contractor to construct
the Improvements, Tenant will submit to Landlord evidence that the contractor
is licensed by the State of California.

 

(e)           Notice
to Landlord.  Notify Landlord in writing not less than twenty
(20) days nor more than thirty (30) days prior to the commencement of any
lienable work upon the Property to allow Landlord time and opportunity to post
notices of nonresponsibility or other notices pertaining to such construction.

 

5.5           Commencement
and Completion Dates.  Tenant shall commence construction of the
Improvements within thirty (30) days following receipt of all necessary permits
for the construction of the Improvements, and Tenant shall complete
construction of the Improvements within twelve (12) months following the Term
Commencement Date.

 

5.6           Notice
of Nonresponsibility, Liens; Indemnification.  Nothing in this
Lease shall be construed as constituting Landlord’s consent to the performance
of any labor or the furnishing of any materials or any specific improvements,
alterations of or repairs to the Project or any part thereof by a
contractor, subcontractor, laborer or materialman, nor as giving Tenant or any
other person any right, power or authority to act as agent of or to contract
for, or permit the rendering of, any services, or the furnishing of any
materials, in such manner as would give rise to the filing of a mechanic’s,
laborer’s materialmen’s, supplier’s or vendor’s lien or other claim against the
Property or the improvements thereon (collectively, “Mechanic’s Liens”). Prior
to and during construction of the Improvements or any Alteration described in Article 8,
Landlord shall have the right to enter upon the Property and post notices of
nonresponsibility thereon and to otherwise notify, actually or constructively,
any contractor or subcontractor, laborers, materialmen or other entities or
persons directly or indirectly supplying labor, equipment or materials to the
Property that Landlord is not responsible for the cost thereof. Tenant shall
pay for all labor and services performed for, and all materials used by or
furnished to Tenant and keep the Project free from any liens arising out of
work performed, materials furnished or obligations incurred by Tenant with
respect to the Property. Tenant shall protect, defend, indemnify and hold
Landlord, the Property and Landlord’s directors, officers, partners, employees,
agents, successors and assigns harmless from and against any and all Mechanic’s
Liens recorded against the Property. If any such lien is filed against the
Property, Tenant shall, within ten (10) days after notice to Tenant of the
filing thereof, cause the same to be discharged of record, provided, however,
that Tenant shall have the right to contest the amount or validity, in whole or
in part, of any such lien by appropriate proceedings provided that Tenant first
notifies Landlord, and furnishes such security as may be necessary or
required to prevent any foreclosure proceeding against the Project during the
pendency of such context, including,

 

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without limitation the posting and recordation of a bond complying with
the requirements of California Civil Code section 3143 or any successor or
replacement statute. Tenant shall prosecute such proceedings with due
diligence.

 

5.7           Notice
of Completion.  Upon completion of construction of the
Improvements, Tenant shall promptly file or caused to be filed in the Official
Records of the County of Alameda, California, a notice of completion with
respect to such Improvements and shall deliver to Landlord, at no cost to
Landlord, two (2) sets of final as-built plans and specifications for the
Improvements.

 

ARTICLE 6

USE OF THE PROPERTY AND THE IMPROVEMENTS

 

6.1           Use of
the Property.  The Property shall be used only for the
construction, development and operation of the Improvements permitted pursuant
to Section 5.1 which shall be operated under the name Camelot Park, and
for no other purpose without Landlord’s prior written consent, which consent may be
withheld by Landlord in Landlord’s sole discretion.

 

6.2           Management.  The
Project shall be managed or caused to be managed by Tenant in a prudent and
businesslike manner.

 

6.3           Right
of Entry and Inspection.  Landlord or Landlord’s agents,
representatives or employees shall have the right, but not the obligation, at
any time upon at least twenty-four (24) hours notice (except in emergencies, in
which case no prior notice shall be required) to enter upon the Project for the
purposes of inspecting the Project, determining whether this Lease is being
complied with, posting notices of nonresponsibility, maintaining or repairing
the Improvements after default by Tenant, curing any default by Tenant, showing
the Property to prospective tenants, purchasers or lenders, posting “For Sale”
signs, posting “For Lease” signs at any time during the last twelve (12) months
of the Term, or to do anything reasonably necessary for the protection, safety
or preservation of the Project. Landlord shall not be liable in any manner for
any inconvenience, disturbance, nuisance, or other damage arising out of
Landlord’s entry on the Project as provided in this Section other than
those caused by Landlord’s sole active negligence or willful misconduct.
Nothing in this Lease shall create or imply any duty on the part of
Landlord to make any such inspection or to perform any such work. Tenant
shall not be entitled to an abatement or reduction of Rentals on account of
Landlord’s exercising any rights reserved in this Section, and no such entry
shall constitute an eviction of Tenant or of any of Tenant’s subtenants.

 

6.4           Quiet
Enjoyment.  The parties hereto mutually covenant and agree that
Tenant, by keeping and performing the covenants herein contained, shall at all
times during the Term peaceably and quietly have, hold and enjoy the Property
and the Improvements, without unreasonable hindrance or interruption by
Landlord or

 

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Landlord’s agents, or by any other person or persons lawfully claiming
by, through or under Landlord; subject, however, to any limitations or rights
to terminate any such rights as expressly provided in this Lease.

 

6.5           Nuisance,
Prohibited Use.  Tenant shall not itself and shall prohibit any
person from using the Project or any part thereof for any unlawful
purpose, and shall not itself and shall prohibit any person from performing,
permitting or suffering any act of omission or commission upon or about the
Project or ant part thereof which would result in a nuisance or a
violation of laws. In no event shall Tenant allow the sale or consumption of
alcoholic beverages within any portion of the Project. Landlord acknowledges
that the normal operation of the Recreation Facility on the Property, including
the operation of batting cages, a miniature golf course, an arcade, and related
uses, so long as operated in accordance with all applicable laws, statutes,
codes, rules and regulations, shall not constitute a nuisance.

 

ARTICLE 7

UTILITIES, IMPOSITIONS AND OTHER CHARGES

 

7.1           Utilities.  Tenant
shall be responsible, at Tenant’s sole cost and expense, for the installation
and connection of all utility lines, including without limitation, water,
electricity, gas, sewer and telephone necessary to supply utilities to the
Improvements to be constructed on the Property, and for obtaining any other
services required or desired for the operation of the Project. Tenant agrees to
pay or cause to be paid, as and when they become due and payable, all charges
for water, gas, light, heat, telephone, electricity, garbage, refuse and other
utility, communication and other services rendered or used on or about the
Project at all times during the Term.

 

7.2           Impositions.

 

(a)           Payment
Generally.  Subject to the provisions of Section 7.2(f) and
other limitations in this Article 7, Tenant agrees to pay or cause to be
paid, as Additional Rent, as and when they become due and payable, and before
any fine, penalty, interest or cost may be added thereto, or become due or
be imposed by operation of law for the nonpayment thereof, all taxes,
assessments, franchises, excises, licenses and permit fees, and other
governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen and foreseen, or resulting from increased rate or
valuation, of any kind and nature whatsoever which at any time during the Term may be
assessed, levied, confirmed; imposed upon, or become due and payable out of or
in respect of, or become a lien on: (1) the Project or any part thereof;
(2) the rent and income received by Tenant from subtenants or others for
the use or occupation of the Property and the Improvements thereon; or (3) this
transaction or any document to which Tenant is a party, creating or
transferring an interest or estate in the Property. All such taxes, assessments,
franchises,

 

12

 

excises, licenses and permit fees, and other governmental levies and charges shall hereinafter be referred
to as “Impositions,” and any of the same shall hereinafter be referred to as an
“Imposition.” Any Imposition relating to a fiscal period of the taxing
authority, a part of which period is included within the Term and a part of
which is included in a period of time after natural expiration of the Term,
shall (whether or not such Imposition shall be assessed, levied, confirmed,
imposed upon, become a lien upon the Property, or shall become payable, during
the Term) be adjusted between Landlord and Tenant, and Tenant shall pay that
portion of such Imposition which that part of such fiscal period included
in the period of time before the natural expiration of the Term bears to such
fiscal period, and Landlord shall pay the remainder thereof, if any.
Notwithstanding the foregoing, Tenant shall not be liable for any increase in
real property taxes that results from a reassessment exempted from Proposition
13 as a result of a change in ownership of Landlord or a change of ownership of
or in Landlord’s interest in the Property during the first ninety (90) months
of the term of this Lease, and Landlord shall be responsible during such period
for any such increase in real property taxes resulting from such change in
ownership. Upon the expiration of said ninety (90) month period, Tenant shall
be responsible for all real property taxes assessed against the Premises,
including those resulting from a change in ownership of Landlord or Landlord’s
interest in the Property during the initial ninety (90) months of the term of
the Lease. Notwithstanding the foregoing, in no event shall Landlord be
responsible for an increase in real estate taxes resulting from Tenant’s
acquisition of the fee interest in the Property by Tenant.

 

(b)           Payment
of Impositions in Installments.  If, by law, any Imposition may at
the option of the payer be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Tenant may exercise the
option to pay the same (and any accrued interest on the unpaid balance of such
Imposition) in installments and, in such event, shall pay such installments as may become
due during the Term as the same respectively become due and before any fine,
penalty, further interest or cost may be added thereto; provided, however,
that the entire amount of any such Imposition shall, subject to proration
pursuant to Section 7.2(a) above, be paid by Tenant prior to Lease
Termination, which obligation shall survive Lease Termination.

 

(c)           Landlord’s
Right to Cure.  If Tenant, in violation of any provision of this
Lease, fails to pay and to discharge any Imposition, Landlord may (but
shall not be obligated to) pay or discharge it, and the amount paid by Landlord
and the amount of all costs, expenses, interest and penalties connected
therewith, including attorneys’ fees, shall be deemed to be and shall be
payable by Tenant as Additional Rent and shall be reimbursed immediately to
Landlord by Tenant on demand.

 

(d)           Tax
Receipts.  Tenant shall furnish to Landlord, within forty-five
(45) days after the date when any Imposition

 

13

 

would become delinquent, official receipts from the appropriate taxing
authority or other evidence satisfactory to Landlord evidencing payment
thereof.

 

(e)           Limits
of Tax Liability.  The provisions of this Lease shall not be
deemed to require Tenant to pay any municipal, county, state or federal income,
gross receipts, excess profits, or franchise taxes assessed against Landlord,
or municipal, county, state or federal capital levy, estate, succession,
wealth, inheritance or gift taxes of Landlord; except, however, that Tenant
shall pay all taxes assessed by any governmental authority by virtue of any
operation by Tenant conducted on or out of the Property. If at any time during
the Term, the State of California or any political subdivision of the state,
including any county, city, public corporation, district, or any other
political entity or public corporation of the state, levies or assesses against
Landlord a tax, fee, or excise on rents on the square footage of the Premises,
on the act of entering into this Lease, or on the occupancy of Tenant, or any
other tax, fee, or excise, however described, as a direct substitution in whole
or in part for any real property taxes, Tenant shall pay before
delinquency that tax, fee, or excise on rents.

 

(f)            Permitted
Contests.  Tenant shall have the right to contest the validity or
the amount, in part or in full, of any Imposition which it is obligated to
pay under the provisions of this Lease. Tenant agrees that all such proceedings
shall be begun within the period allowed by law after any contested item is
imposed and shall be diligently prosecuted to final adjudication.

 

Tenant shall give Landlord prompt notice in writing of
any such contest at least ten (10) days before any delinquency occurs if
Tenant intends to withhold payment of the Imposition pending determination of
the contest or at least ten (10) days before institution of any contest if
Tenant intends to contest such Imposition subsequent to payment thereof. Tenant
may only exercise its right to contest an Imposition hereunder while
withholding payment thereof if (i) the subject legal proceedings shall
operate to prevent the collection of the Imposition so contested, or the sale
of the Property, or any part thereof, to satisfy the same, and (ii) prior
to the date such Imposition is due and payable, Tenant gives such reasonable
security as may be required by Landlord from time to time in order to
insure the payment of such Imposition to prevent any sale, foreclosure or
forfeiture of the Property or any part thereof, by reason of such
nonpayment. Upon any such contest and the final determination thereof adversely
to Tenant, Tenant shall, before any further fine, interest, penalty or cost may be
added thereto for nonpayment thereof, pay fully and discharge the amounts
involved in or affected by such contest, together with any penalties, fines,
interest, costs and expenses that may have accrued thereon or that may result
from any such contest by Tenant and, after such payment and discharge by
Tenant, Landlord will promptly return to Tenant such security as Landlord shall
have received in connection with such contest. Any such proceedings to

 

14

 

contest the validity or amount of any Imposition or to recover any
Imposition paid by Tenant shall be prosecuted by Tenant at Tenant’s sole cost
and expense; and Tenant shall protect, indemnify, defend and save harmless
Landlord’s directors, officers, partners, employees, agents, successors and
assigns against any and all claims, fines, judgments, penalties, losses,
damages, costs, expenses or liabilities (including attorneys’ fees and costs),
which may be imposed upon or incurred by Landlord in connection therewith.

 

(g)           Creation
of Special Assessment Districts.  If, during the Tern, any
governmental subdivision or agency shall undertake to create an improvement or
special assessment district, the proposed boundaries of which shall include the
Property, Landlord and Tenant shall each be entitled to support or oppose the
creation of such district or the inclusion of the Property therein, or both,
and to appear in any proceeding relating thereto as their respective interests
in the Property or otherwise may appear. Should either party receive any
notice or other Information relating to the proposed creation of any such
district, the boundaries of which would include the Property, such party shall
promptly notify the other party and deliver to such other party a copy of the
notice and/or information.

 

7.3           Other
Liens.  Except as expressly permitted by Article 10 hereof,
Tenant shall not, directly or indirectly, create or permit to be created or to
remain, and will promptly discharge, at its sole expense, any lien, encumbrance
or charge on or pledge of the Property or the Improvements or any part thereof,
or Tenant’s interest therein, or the Base Rent, Additional Rent or other sums
payable by Tenant under this Lease. Tenant shall notify Landlord promptly of
any lien or encumbrance which has been created on or attached to the Property
or the Improvements, or to Tenant’s leasehold estate therein, whether by act of
Tenant or otherwise.

 

ARTICLE 8 

OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS

 

8.1           Ownership
During Term.

 

(a)           In
General.  All Improvements constructed on the Property by Tenant as
permitted or required by this Lease shall, during the Term, be and remain the
property of Tenant, and Landlord shall not have title thereto; provided,
however, that, except as otherwise expressly provided in this Lease, Tenant
shall have no right to waste, destroy, demolish or remove the Improvements; and
provided further that Tenant’s rights and powers with respect to the
Improvements are subject to the terms and limitations of this Lease. Landlord
and Tenant covenant for themselves and all persons claiming under or through
them that the Improvements are real property except as otherwise provided by
this Lease.

 

(b)           Personal
Property; Trade Fixtures.  All personal, property, furnishings,
fixtures and equipment, including, without

 

15

 

limitation, Tenant’s miniature golf structures and decorations and
batting cages, which are not so affixed to the Property or the Improvements as
to require substantial damage to the Improvements upon removal thereof, shall
constitute personal property (“Personal Property”). At any time during the Term
and at Lease Termination, Tenant shall have the right to remove any and all
such Personal Property; provided that Tenant repairs any damage to the Property
or the Improvements caused by such removal, and restores the Property to the
condition that existed prior to such removal in accordance with all then
applicable laws, rules, regulations, codes and ordinances.

 

For purposes of this Lease, the Personal Property
shall not include those major building components or fixtures necessary for
operation of basic building systems such as, but not limited to, elevators,
escalators, chillers, boilers, plumbing, sanitary fixtures, heating,
ventilating and air conditioning (“HVAC”) systems and central air-cooling
systems.

 

8.2           Ownership
at Termination.  At Lease Termination, all Improvements shall,
without compensation to Lessee become Landlord’s Property, free and clear of
all claims to or against Tenant or any third party, except that if, not later
than sixty (60) days after Lease Termination, Landlord notifies Tenant of
Landlord’s desire that the Improvements be removed, the Improvements and any
debris shall be removed from the property and the Property shall be restored to
the condition existing prior to the construction of such Improvements in
accordance with all then applicable laws, rules, regulations, codes and
ordinances on or before the later of (i) Lease Termination or (ii) sixty
(60) days after Landlord notifies Tenant that the Improvements must be removed.
Tenant shall protect, defend and indemnify Landlord from and against all
claims, fines, judgments, penalties, losses, damages, costs, expenses or
liabilities (including attorneys’ fees and costs) arising from any such claims
with respect to the Improvements, or from Landlord’s exercise of the rights
conferred by this Section 8.2.

 

All Personal Property shall be removed from the
Property at Lease Termination. If any Personal Property is not removed at Lease
Termination, such Personal Property shall be deemed to be abandoned by Tenant
and shall, without compensation to Tenant then become Landlord’s property, free
and clear of all claims to or against them by Tenant or any third party.

 

8.3           Maintenance
and Repair of Improvements.  Subject to the provisions of this
Lease concerning condemnation, alterations, and damage and destruction, Tenant
agrees to maintain or cause to be maintained in good order, repair and
operation the Property and the Improvements throughout the Term without expense
to Landlord and to perform or cause to be performed all repairs and
replacements necessary to maintain and preserve the Property and the
Improvements in a decent, safe and sanitary condition, in compliance with
applicable Laws, and equal in quality and use to

 

16

 

the condition of the improvements, as
originally installed, reasonable wear and tear excepted. Tenant agrees
to keep or cause to be kept the Property and the Improvements clean and clear
of refuse and obstructions and to promptly dispose of all garbage, trash and
rubbish.

 

8.4           Waste.  Subject to Tenant’s rights of alteration as described in Section 8.5
or this Lease, Tenant shall not commit or suffer to be committed any waste of
the Property or the Improvements, or any part thereof.

 

8.5           Alteration of Improvements.  Tenant shall have the right,
without the consent of Landlord, to make any nonstructural alterations of,
additions to, or changes in the Improvements (collectively “Alterations”)
provided that such Alterations:

 

(a)           Do not change the uses for which the
Improvements are allowed to be made by the provisions of Section 6.1;

 

(b)           Do not materially reduce the value of the
Improvements;

 

(c)           Do not materially change the external
architecture or external appearance of the Improvements;

 

(d)           Do not constitute changes costing more than
Twenty-Five Thousand Dollars ($25,000), in the aggregate during any Lease Year.

 

Any Alteration which does not
meet all of the conditions in Section 8.5(a), (b), (c) and (d) above
shall require Landlord’s prior consent which as to the conditions in
subsections (c) and (d) shall not be unreasonably withheld or delayed
and as to the conditions in subsections (a) and (b) may be
withheld by Landlord in Landlord’s sole discretion. In requesting such consent,
Tenant shall submit to Landlord detailed plans and specifications of the
proposed work and an explanation of the reasons thereof. If Landlord does not
respond within thirty (30) days after Tenant’s request, Tenant’s request shall
be deemed disapproved.

 

Notwithstanding the
prohibition in this Section 8.5, Tenant may make such Alterations as
are required by applicable Laws. Before commencing any Alterations requiring
Landlord’s consent, Tenant shall submit plans and specifications to Landlord
for Landlord’s approval, not to be unreasonably withheld. At least ten (10) days
prior to undertaking construction of any Alterations, Tenant shall give written
notice to Landlord setting forth the date work is to commence. Landlord shall
have the right at all reasonable times to post and keep posted on the Property
such notices of non responsibility as Landlord may deem necessary for the
protection of Landlord and the Project from Mechanic’s Liens. All Alterations
shall be installed at Tenant’s sole expense, in compliance with all applicable
Laws, permit requirements and any covenants, conditions or restrictions of
record, by a licensed

 

17

 

contractor, shall be done in a good and workmanlike manner conforming
in quality and design with the Improvements.

 

Tenant shall, prior to
commencement of construction of any Alterations, deliver to Landlord evidence
of financing for the Alterations to be made by Tenant. The foregoing provisions
of this Section shall be applicable to construction, repairs or
Alterations to the Property and the Improvements at all times during the Term.

 

ARTICLE 9

ASSIGNMENT, SUBLETTING, TRANSFER

 

9.1           In General.  Tenant shall not sell, convey,
assign or transfer in any mode or form all or any part of Tenant’s
interest in this Lease or in the Project or any part thereof, sublease all
or any part of the Project, or permit all or any part of the Project
to be used by any person or entity other than Tenant or Tenant’s employees,
except as specifically provided in this Article 9. A sale, conveyance,
assignment, transfer, sublease or allowed use shall hereafter collectively be
referred to as a “Transfer,” and a Person to whom such Transfer is made shall
hereafter be referred to as a “Transferee.”

 

9.2           Voluntary Transfer.

 

(a)           Notice to Landlord.  Tenant shall, by written notice,
advise Landlord of Tenant’s desire on a stated date (which date shall not be
less than thirty (30) days nor more than ninety (90) days after the date of Tenant’s
notice) to Transfer any part of the Project or Lease for any part of
the Term. Tenant’s notice shall state the name, legal composition and address
of the proposed Transferee, and Tenant shall provide the following information
to Landlord with said notice; a true and complete copy of the proposed
assignment or transfer agreement or sublease; financial statement (audited to
the extent available) of the proposed Transferee prepared in accordance with
generally accepted accounting principles within one (1) year prior to the
proposed effective date of the Transfer) a current financial statement of
Tenant; a history of the experience of the Transferee in the operation of a
project such as the Project; and such other pertinent information as may be
requested by Landlord, all in sufficient detail to enable Landlord to evaluate
the proposed Transfer and the prospective Transferee. Tenant’s notice shall not
be deemed to have been served or given until such time as Tenant has provided
Landlord with all information reasonably requested by Landlord pursuant to this
Section 9.2(a) . Tenant shall immediately notify Landlord of any
modification to the proposed terms of such Transfer.

 

(b)           Landlord’s Consent.  Subject to the conditions set
forth in this Section 9.2(b), Landlord shall not unreasonably withhold its
consent to the proposed Transfer on the terms and conditions specified in said
notice. Without otherwise limiting the criteria upon which Landlord may withhold
its consent to any

 

18

 

proposed Transfer, it shall be deemed reasonable for Landlord to
withhold its consent where (i) the net worth of the proposed Transferee
(according to generally accepted accounting principles) is less than the
greater of (1) the net worth of Tenant immediately prior to the Transfer (2) or
the net worth of Tenant at the time this Lease is executed, or (ii) the
Transferee does not have sufficient experience, in Landlord’s reasonable
judgment, to operate the Project in accordance with the terms of this Lease.

 

Any Transfer without Landlord’s written consent shall
be voidable at Landlord’s option, and shall constitute a default by Tenant.
Landlord’s consent to any one Transfer shall not constitute a waiver of the
provisions of this Article 9 as to any subsequent Transfer nor a consent
to any subsequent Transfer. Except as expressly provided below, Landlord’s
consent to a Transfer shall not release Tenant from Tenant’s obligations under
this Lease, and Tenant shall remain jointly and severally liable with the
Transferee. Notwithstanding the foregoing, Landlord shall release Tenant from
any further liability accruing under the Lease from and after the date the
assignment of the Lease to a Transferee if all of the following conditions are
satisfied (“Release Conditions”):

 

(i)      Tenant
demonstrates to Landlord’s reasonable satisfaction that the net worth of the
Transferee is greater than or equal to the greater of (i) the net worth of
Tenant at the time this Lease is executed (which net worth shall be deemed to
be Two Million Five Hundred Thousand Dollars ($2,500,000.00) for purposes of
these Release Conditions) or (ii) the net worth of Tenant immediately
prior to the assignment;

 

(ii)     Tenant
demonstrates to Landlord’s reasonable satisfaction that the Transferee has
substantial experience in the development, management and operation of family
amusement and recreation complexes similar to the Project. For purposes of
determining whether the Transferee has such substantial experience, the
Transferee shall have, at a minimum, either of the following: (1) experience
in the development, construction and operation of family amusement and
recreation complexes similar to those currently operated under the name “Camelot
Park” as of the date of this Lease or (2) one or more principals of the
Transferee shall have occupied a senior level management position in an entity
operating or managing one or more family amusement and recreation complexes of
the same type as currently operated under the name “Camelot Park” as of the
date of this Lease;

 

(iii)    Tenant
demonstrates to Landlord’s reasonable satisfaction that the Transferee has the
financial capacity and ability to perform the obligations of the Tenant
under the Lease.

 

(iv)    No default by
Tenant then exists or would exist under this Lease as of the date of Landlord’s
consent to such assignment; and

 

19

 

(v)     Landlord has
consented to the assignment of the Lease to the Transferee and the Transferee
has assumed all of the obligations of the Tenant under the Lease pursuant to
Paragraph 9(c) hereof.

 

To illustrate the operation of the Release Conditions,
an entity such as Tenant, which has (i) a net worth of at least Two
Million Five Hundred Thousand Dollars ($2,500,000), (ii) partners and
managers who have substantial experience in the development, construction, and
operation of family amusement and recreation complexes, and (iii) a
relationship with an entity which has shown the ability to raise Eighteen
Million Dollars ($18,000,000) in cash equity for the construction, development,
and management of other similar family amusement and recreation complexes would
satisfy the Release Conditions.

 

If all of the Release Conditions are satisfied at the
time Landlord consents to the assignment, then Landlord shall evidence its
release of Tenant from any liability accruing under the Lease from and after
the date of the assignment of the Lease by including such release provision in
Landlord’s consent to the assignment. If any of the Release Conditions are not
satisfied as of the date of Landlord’s consent to the assignment, then Tenant
shall not be released from any liability under the Lease and shall remain
jointly and severally liable with the Transferee. The acceptance of Rentals by
Landlord from any person entity other than Tenant shall not be deemed a waiver
by Landlord of any provision of this Lease or to be a consent to any Transfer.

 

If Tenant disagrees with Landlord’s decision as to
whether any Transferee has satisfied conditions (i), (ii), or (iii) of the
Release Conditions, then Tenant may give notice contesting the
reasonableness of Landlord’s disapproval. A contest of reasonableness shall be
determined by arbitration under the jurisdiction of the American Arbitration
Association in accordance with the Commercial Rules of such Association.
If the reasonableness of Landlord’s disapproval is sustained by the
arbitrators, then Tenant shall not be released from its obligations under the
lease upon the transfer thereof to the Transferee. If the reasonableness of
Landlord’s disapproval is not sustained, then Tenant shall be released from all
obligations under the lease upon the effective date of the transfer to the
Transferee.

 

(c)           Assumption
of Obligations.  If Landlord consents to any Transfer, such
consent shall be conditioned upon the Transferee expressly assuming and
agreeing to be bound by each of Tenant’s covenants, agreements and obligations
contained in this Lease, pursuant to a written assignment and assumption
agreement in a form approved by Landlord. If Landlord consents to a
proposed Transfer, such Transfer shall be valid and the Transferee shall have
the right to take possession of the Project only if an executed original of the
Transfer is delivered to Landlord, and such document contains the same terms
and conditions as stated in

 

20

 

Tenant’s notice to Landlord given pursuant to Section 9.2(a) above,
except for any such modifications to which Landlord has consented in writing.

 

(d)           Collection
of Rent.  Tenant hereby irrevocably gives to and confers upon
Landlord, as security for Tenant’s obligations under this Lease, the right,
power and authority to collect all rents from any Transferee and Landlord, as
assignee of Tenant, or a receiver for Tenant appointed on Landlord’s
application, may collect such rent and apply it toward Tenant’s
obligations under this Lease; provided, however, that until the occurrence of
any default by Tenant, Tenant shall have the right to collect such rent. Upon
the occurrence of any default by Tenant, Landlord may at any time without
notice in Landlord’s own name sue for or otherwise collect such rent, including
rent past due and unpaid, and apply the same, less costs and expenses of
operation and collection, including reasonable attorneys’ fees, toward Tenant’s
obligations under this Lease. Landlord’s collection of such rents shall not
constitute an acceptance by Landlord of attornment by such subtenants.

 

(e)           Intentionally
Omitted.

 

(f)            Corporations
and Partnerships.  So long as any of Gerald B. Johnson, Geoffrey
C. Beaumont, William L. Rameson or Ronald Rameson hold a general partnership
Interest in Tenant or individually or in combination hold a general partnership
or majority interest in an entity that is the managing general partner or
controls the general partner of Tenant, then any sale or transfer of
partnership interests in Tenant, whether voluntary, involuntary, or by
operation of law and whether occurring at one time or over a period of time,
shall not be deemed a Transfer of this Lease requiring Landlord’s written
consent. If none of Gerald B. Johnson, Geoffrey C. Beaumont, William L. Rameson
or Ronald Rameson hold a general partnership interest in Tenant or individually
or in combination hold a managing general partner or majority interest in an
entity that is the managing general partner or controls the managing general
partner of Tenant, then any sale or transfer of any general partnership
interests in Tenant, whether voluntary, involuntary, or by operation of law and
whether occurring at one time or over a period of time, or the dissolution of
the partnership shall be deemed a Transfer of this Lease or the Project
requiring the prior written consent of Landlord. Notwithstanding the foregoing,
the Transfer by any of Gerald B. Johnson, Geoffrey C, Beaumont, William L.
Rameson or Ronald Rameson of a general partnership interest in Tenant or a
managing general partnership or majority interest in an entity that is the
managing general partner or controls the managing general partner of Tenant to
members of said individuals’ families for estate planning purposes shall not be
deemed a Transfer requiring Landlord’s consent hereto. If Tenant is a
corporation, any dissolution, merger, consolidation or other reorganization of
Tenant, any sale or transfer (or cumulative sales or transfers) of fifty
percent (50%) or more of the capital stock of Tenant, or any sale (or

 

21

 

cumulative sales) of substantially all of the assets of Tenant shall be
deemed a Transfer of this Lease or the Project requiring the prior consent of
Landlord; provided, however, the sale or transfer of all or any of the capital
stock of the corporation which comprises Tenant, the capital stock of which is
at the time of Transfer publicly traded, shall not be deemed a Transfer of this
Lease or the Project.

 

(g)           Reasonable
Provisions.  Tenant expressly agrees that the provisions of this Article 9
are not unreasonable standards or conditions for purposes of section 1951.4(b) (2) of
the California Civil Code, as amended from time to time, or for any other
purpose.

 

(h)           Attorneys’
Fees and Administrative Costs.  Tenant shall pay, as Additional
Rent, Landlord’s actual attorneys’ fees incurred in connection with reviewing,
investigating, processing and/or documenting any requested Transfer, whether or
not Landlord’s consent is granted.

 

9.3           Involuntary
Transfer. No interest of Tenant in this Lease or the Project shall be
transferable by operation of law, including, without limitation, the Transfer
of this Lease by testacy or intestacy. Each of the following acts shall be
considered an involuntary Transfer:

 

(a)           If Tenant
is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors,
or a proceeding under the Bankruptcy Act is instituted in which Tenant is the
bankrupt; or, if Tenant is a partnership or consists of more than one person or
entity, if any partner of the partnership or other person or entity is or
becomes bankrupt or insolvent, or makes an assignment for the benefit of
creditors;

 

(b)           Levy of a
writ of attachment or execution on this Lease;

 

(c)           Appointment
of a receiver with authority to take possession of the Project in any
proceeding or action to which Tenant is a party; or

 

(d)           Foreclosure
of any lien affecting Tenant’s interest in the Project.

 

An involuntary Transfer shall constitute a default by
Tenant and if Landlord elects to terminate this Lease, this Lease shall not be
treated as an asset of Tenant. If the Lease is not terminated, the provisions
of Section 9.2(b) above, regarding rents paid by a Transferee, shall
apply.

 

22

 

ARTICLE 10

MORTGAGES

 

10.1         Leasehold Mortgages.  Notwithstanding Article 9,
commencing with the date that is six (6) months after the Rent
Commencement Date, Tenant shall have the right to mortgage, pledge, deed in
trust, assign rents, issues and profits and/or collaterally assign its interest
in this Lease, or the leasehold estate created by any sublease, and to assign
or pledge assignment of the sane as security for any debt (the holder of any
such mortgage, pledge or other encumbrance, and the beneficiary of any such
deed of trust or assignment being referred to in this Lease as a “Leasehold
Mortgagee” and the mortgage, pledge, deed of trust, assignment or other
instrument referred to in this Lease as a “Leasehold Mortgage”), upon and
subject to each and all of the following terms and conditions:

 

(a)           Amount and Purpose.  Leasehold Mortgages shall be
limited in purpose to (i) financing or refinancing of the Project Costs,
and/or (ii) raising capital for construction and development of additional
family amusement and recreation complexes operated under the name “Camelot Park”
or any other name then used by the family amusement and recreation complexes
currently operated under the name “Camelot Park.” “Project Costs” as used in
this Lease shall mean the total costs necessary and appropriate to remodel the
Improvements on the Property, to construct new Improvements or to rehabilitate
or acquire and install new equipment and fixtures thereon. In no event shall
Leasehold Mortgages be used to finance the initial construction of the
Improvements on the Property or to finance the initial acquisition and
installation of equipment and fixtures thereon.

 

(b)           Coverage.  A permitted Leasehold Mortgage shall, except as hereinafter
provided, cover all of Tenant’s interest in the Lease, and the rents, issues
and profits therefrom. A Leasehold Mortgage shall not cover more than Tenant’s
interest in the Lease, the Property or the Improvements. Landlord shall have
the right of prior approval of any Leasehold Mortgage covering less than Tenant’s
entire interest in the Lease, the Property or the Improvements. Permitted
Leasehold Mortgages shall be subordinate to the fee simple title of Landlord to
the Property and to the terms and conditions of this Lease.

 

(c)           Non-Subordination of Landlord’s Interest.  In no event shall Landlord be
required to subordinate any of Landlord’s right, title or interest in the
Project to any Leasehold Mortgagee.

 

(d)           Insurance and Condemnation.  Permitted Leasehold Mortgages
shall contain provisions permitting the disposition and application of the
insurance proceeds and condemnation awards in the manner provided in this
Lease.

 

(e)           Institutional Lenders.  Permitted Leasehold Mortgages are
to be originated only by responsible bona fide Institutional Lenders reasonably
satisfactory to Landlord. For the purposes hereof the term “Institutional
Lender” shall consist of the following lending institutions having a net worth
of One

 

23

 

Hundred Million Dollars ($100,000,000) or more: a commercial or savings
bank; a trust company; an insurance company; a savings and loan association; a
building and loan association; or a pension, retirement or welfare fund.

 

(f)            Rights
Subject to Lease.  All rights acquired by said Leasehold
Mortgagees under said Leasehold Mortgages shall be subject to all rights of Landlord
under this Lease, and to each and all of the covenants, conditions and
restrictions set forth in this Lease, which covenants, conditions and
restrictions are not and shall not be waived by Landlord by reason of the
giving of such Leasehold Mortgage. Notwithstanding any foreclosure of any such
Leasehold Mortgage, Tenant shall remain liable for the payment of the Rentals
reserved in this Lease and the performance of all of the terms, covenants and
conditions of this Lease which by the terms hereof are to be carried out and
performed by Tenant.

 

(g)           Landlord
Approval.  Tenant shall not enter into any Leasehold Mortgage as
permitted hereunder without the prior written approval of Landlord, which
approval Landlord agrees not to unreasonably withhold. Landlord shall not be
deemed unreasonable in withholding consent if such Leasehold Mortgage does not
comply with each and every term and condition referred to in this Section 10.1.
If Landlord fails to give such written approval within thirty (30) days after written
request by Tenant, then, Landlord shall be deemed to have disapproved such
Leasehold Mortgage.

 

(h)           Notice
to Landlord.  No Leasehold Mortgage shall be binding upon
Landlord in the enforcement of Landlord’s rights and remedies provided in this
Lease, by law or in equity, unless and until a certified copy of the original
Leasehold Mortgage, bearing the date and book and page or recordation
thereof, and a copy of the original promissory note secured by such Leasehold
Mortgage has been delivered to Landlord, together with written notice of the
addressee to which notices shall be sent to Leasehold Mortgagee. If a Leasehold
Mortgage is assigned, such assignment shall not be binding upon Landlord unless
and until a certified copy thereof bearing the date and book and page of
recordation, together with written notice of the address to which notices shall
be sent to the assignee, have been delivered to Landlord. If Tenant encumbers
its leasehold estate by way of a Leasehold Mortgage as permitted herein and the
provisions of this subsection (h) immediately above are complied
with, this Lease shall not be terminated or cancelled on account of any default
by Tenant in the performance of the terns, covenants or conditions of this
Lease until Landlord has complied with the provisions of Section 10.2.

 

10.2         Rights
and Obligations of Leasehold Mortgagees.  If Tenant obtains a
Leasehold Mortgage in accordance with Section 10.1, then, as long as any
such Leasehold Mortgage remains unsatisfied of record, the following provisions
shall apply:

 

24

 

(a)           Notice.  If
any Leasehold Mortgagee registers with Landlord its name and address in writing
and complies with Section 10.l (h), no notice of default by Landlord to
Tenant shall be deemed to have been duly given unless and until a copy thereof
has been personally delivered or mailed to the Leasehold Mortgagee by
registered or certified mail at the address registered with Landlord.

 

(b)           Right
to Cure.  If Tenant is in default hereunder, the Leasehold
Mortgagee shall, within the period and otherwise as herein provided, have the
right (but not the obligation) to remedy such default, or cause the same to be
remedied, and Landlord shall accept such performance by or at the instigation of
such Leasehold Mortgagee as if the same had been done by Tenant.

 

Tenant hereby constitutes and appoints the Leasehold
Mortgagee Tenant’s agent and attorney in fact with full power, in Tenant’s
name, place and stead, and at Tenant’s cost and expense, to enter upon the
Property, and the Improvements and perform all acts required to be
performed herein or in any sublease made hereunder by Tenant. No Leasehold
Mortgagee shall have the right to take or perform any action hereunder,
under its Leasehold Mortgage or otherwise which might result in any detriment
to the rights of a prior Leasehold Mortgagee with respect to the same lease or
leasehold premises.

 

(c)           Estoppel
Certificate.  Within ten (10) days following Tenant’s
written request therefor, Landlord shall execute and deliver to Tenant or to
the Leasehold Mortgagee identified in Tenant’s notice, an estoppel certificate
in the form attached hereto as Exhibit “B.”

 

(d)           Personal
Property Lien Waiver.  Upon Tenant’s written request, Landlord
shall execute and deliver to a lender extending financing to Tenant secured by
Tenant’s trade fixtures and personal property a Personal Property Lien Waiver
in the form attached hereto as Exhibit “C.”

 

ARTICLE 11

INDEMNIFICATION, INSURANCE, DAMAGE AND DESTRUCTION

 

11.1         Indemnification.  Tenant
hereby agrees to protect, defend, indemnify and hold harmless Landlord and
Landlord’s directors, officers, partners, employees, agents, successors and
assigns from and against any and all claims, fines, judgments, penalties,
damages, losses, liabilities, costs or expenses, including without limitation
attorneys’ fees and legal costs, due to any cause including without limitation,
bodily injury and property damage, which arises out of or is in any way
attributable to the use or occupancy of the Project or any part thereof by
Tenant or Tenant’s Agents, the acts or omissions of Tenant or Tenant’s Agents,
or Tenant’s breach of this Lease, except to the extent caused by the willful
misconduct or sole negligence of Landlord. This provision shall survive Lease
Termination. Landlord shall not be liable for injury or damage which nay be
sustained by the person, goods, wares, merchandise or property of Tenant, its
employees, invitees or customers or any other person in or about the Project
caused by or resulting from any cause whatsoever.

 

25

 

11.2         Required
Insurance.  During the Term, Tenant at its sole cost and expense
shall maintain or cause to be maintained:

 

(a)           “All risk”
property insurance against loss or damage to the Improvements on the Property
resulting from fire, windstorm, hail, lightning, vandalism, malicious mischief,
and such other perils ordinarily included in extended coverage casualty
insurance policies. If Tenant voluntarily carries insurance coverage for
additional causes, such coverage shall be treated in all respects as the policy
or policies required to be kept under this subsection (a), for so long as
Tenant continues to voluntarily carry such coverage. All insurance hereunder shall
be maintained in an amount not less than one hundred percent (100%) of the Full
Insurable Value of the Improvements as defined in Section 11.3 (such value
to include amounts spent for construction of the Improvements, architectural
and engineering fees, and inspection and supervision);

 

(b)           Workmen’s
compensation insurance and comprehensive general liability and property damage
insurance in the minimum amount of Five Million Dollars ($5,000,000) per
occurrence and Five Million Dollars ($5,000,000) in the aggregate combined
single limit for both bodily injury and property damage which includes blanket
contractual liability, broad form property damage, personal injury, and
completed operations. The minimum limits specified above are the minimum
amounts required by Landlord, and may be reasonably revised by Landlord
from time to time to meet changed circumstances, including without limitation
changes in the purchasing power of the dollar and changes consistent with the
standards required by other landlords in the county in which the Project is
located. All such insurance shall specifically insure Tenant’s performance of
the indemnity, defense and hold harmless agreements contained in this Lease,
although Tenant’s indemnity, defense and hold harmless obligations shall not be
limited to the amount of any insurance required of or carried by Tenant under
this Section 11.2(b) and Tenant is responsible for insuring that the
amount of liability insurance carried by Tenant is sufficient for Tenant’s
purposes.

 

(c)           “All Risk”
insurance including, without limitation, coverage against sprinkler damage,
vandalism and malicious mischief covering the Personal Property. Such insurance
shall be in an amount of not less than the full insurable value of the property
insured. The proceeds of such insurance, so long as this Lease remains in
effect, shall be used to repair or replace the Personal Property so insured.

 

(d)           Course of
construction insurance in the same amounts as required in Section 11.2(a) above
for “all risk” property insurance, and covering all construction activities on the Project;

 

(e)           Business
interruption insurance insuring against loss or damage by fire or vandalism and
all hazards included in

 

26

 

the present all risk extended coverage endorsement or under the
provisions of such successor extended coverage endorsement as may be
available in an amount sufficient to pay the Rentals for a period of at least
one (1) year, as reasonably estimated by Landlord; and

 

(f)            Demolition and debris removal insurance.

 

11.3         Definition
of “Full Insurable Value”.  The term “Full Insurable Value” as
used in this Lease shall mean the actual replacement cost excluding the cost of
excavation, foundation and footings below the ground level of the Improvements.
To ascertain the amount of coverage required, Tenant shall cause the full
insurable value to be determined from time to time by appraisal by the insurer
or by any appraiser mutually acceptable to Landlord and Tenant, not more often
than once each three (3) years; except that no such appraisals shall be
required if the policy is written on a “replacement cost” basis.

 

11.4         General
Insurance Provisions.  All insurance required to be carried by
Tenant hereunder shall be in companies, on forms and with loss payable clauses
satisfactory to Landlord. No such policy shall be cancellable except after
thirty (30) days’ written notice to Landlord. All policies to be carried by
Tenant under this Lease shall name Landlord and its agents and designated
lenders as additional insureds. Such insurance shall be the primary insurance
as respects Landlord and shall contain a cross liability endorsement. Such
policies shall provide coverage on an occurrence basis and not on a claims made
basis. In no event shall the limits of such policies be considered as limiting
the liability of Tenant under this Lease.

 

Certificates of insurance shall be deposited with
Landlord together with appropriate evidence of payment of the current premiums
therefor; and, at least thirty (30) days prior to expiration of any such
policy, certificates of renewal policies and evidence of payment shall be so
deposited. The certificate of insurance applicable to course of construction
insurance shall be deposited with Landlord together with appropriate evidence
of payment of the current premium therefore, prior to commencement of
construction of the Improvements or any Alterations upon the Property. There
shall be no apportionment of premiums with respect to any insurance maintained
pursuant to this Article 11 at Lease Termination.

 

Landlord and Tenant each hereby waives any and all
rights of recovery against the other or against the officers, partners,
employees and agents of such other party for loss of or damage to such waiving
party or its property or the property of others under its control, arising from
any cause to the extent insured against under any property damage insurance
policy carried by such waiving party and to the extent such waiver is permitted
under such insurance policy and does not prejudice coverage under such policy.
Tenant shall obtain and furnish evidence to Landlord of the waiver

 

27

 

by Tenant’s insurance carriers of any right of subrogation against
Landlord.

 

11.5         Failure
to Maintain Insurance.  If Tenant fails or refuses to procure or
maintain insurance as required by this Lease, Landlord shall have the right,
but not the obligation, to procure and maintain the insurance described in Section 11.2
for the benefit of Tenant and Landlord. The premiums paid by Landlord shall be
treated as Additional Rent due from Tenant, to be paid immediately upon demand.

 

11.6         Disposition
of Insurance Proceeds Resulting from Loss or Damage to Improvements.  Except
as expressly provided in this Article 11, all proceeds of insurance with
respect to loss or damage to the Improvements to be maintained and repaired by
Tenant during the Terra shall be payable, under the provisions of the policy of
insurance, jointly to Tenant and Landlord, and except as provided below, said
proceeds shall constitute a trust fund to be used for the restoration of the
Improvements in accordance with the provisions of Section 11.7.

 

11.7         Damage or Destruction.

 

(a)           Notice.  Tenant agrees to give notice to Landlord of any damage that
may occur on the Property or the Improvements where the costs of
restoration are estimated to exceed Twenty-five Thousand Dollars ($25,000).
Such notice shall be given within five (5) days after such damage.

 

(b)           Duty to
Restore.  If the Improvements shall be damaged or destroyed by
any casualty for which Tenant is required to maintain insurance hereunder, then
Tenant shall, at Tenant’s sole cost and expense, make full repair of said
damage and shall restore the Improvements to the condition which existed prior
to said damage with such alterations or changes thereto as are required by then
current building codes or are approved by Landlord provided that Landlord shall
not unreasonably withhold such approval. If Landlord’s approval is so required,
Tenant shall submit plans and specifications related thereto for Landlord’s
reasonable approval. Tenant agrees to promptly commence and prosecute to
completion the settlement of insurance proceeds with respect to any event of
damage or destruction of the Improvements. If the Improvements are damaged or
destroyed by a casualty for which Tenant is not required to maintain insurance
hereunder, then Tenant shall have the right, but not the obligation, at Tenant’s
sole cost and expense, to repair said damage and restore the Improvements to
the condition that existed prior to such damage. If Tenant elects to repair the
damage and restore the Improvements, such repair and restoration shall be made
in accordance with all of the terms of this Section 11.7.

 

(c)           Time
for Restoration.  Tenant agrees that the restoration of the
Improvements following an insured casualty shall be commenced by Tenant within
fifteen (15) days after settlement

 

28

 

of insurance proceeds, but in any event within one hundred eighty (180)
days after the event causing such damage or destruction. If Tenant has not
settled the insurance proceeds with its insurer by the date that is one hundred
eighty (180) days after the date of the damage or destruction, Tenant shall
initiate legal action against its insurer to obtain such proceeds within said
one hundred eighty (180) day period. The required restoration shall be
completed with due diligence and within a reasonable time thereafter. If Tenant
elects to repair and restore the Improvements after damage resulting from an
uninsured casualty, restoration shall commence not later than ninety (90) days
following the damage or destruction and shall be completed with due diligence
and within a reasonable time thereafter. There shall be no abatement of Rentals
in the event of any damage or destruction to the Property or the Improvements
located thereon.

 

(d)           Duty to Make Safe and Clear Property.  Tenant agrees that,
notwithstanding any other provision of this Lease, upon any event of damage or
destruction to the Improvements, Tenant shall at its sole cost and expense
(whether or not insurance proceeds are available therefore, but subject to
reimbursement from insurance proceeds if and when available) immediately take
such actions and undertake and complete such work as is necessary to assure the
safe condition of the Property and the damaged Improvements and protect the
Property and remaining portions of the Improvements, and any adjoining
structures or properties from damage pending the ultimate disposition of the
Improvements.

 

11.8         Net
Insurance Proceeds Defined.  As used in this Lease, the term “Net
Insurance Proceeds” means the gross insurance proceeds paid by an insurer to
Tenant for loss or damage to the Improvements, less any and all reasonable
costs and expenses of collecting, recovering, holding and disbursing the same.
Tenant agrees to promptly commence and thereafter diligently prosecute to
completion the settlement of insurance proceeds with respect to any event of
damage to or destruction of the Improvements. In any event, Tenant agrees to
furnish Landlord with a reasonable estimate of the amount of the prospective
insurance recovery as soon as such information is available to Tenant, and from
time to time to furnish updated estimates thereof to Landlord. Any settlement
of insurance proceeds by Tenant shall be subject to Landlord’s prior approval,
which approval shall not be unreasonably withheld.

 

11.9         Continuing
Obligation to Pay Rentals.  Except as otherwise expressly
provided in this Section 11.9, Tenant’s obligation to make payments of
Base Rent, Rentals and all other obligations hereunder and to perform all
of its covenants and conditions shall not be affected by such damage or
destruction resulting from any cause whatsoever, regardless of whether or not
insurance proceeds are available to repair and restore such damage and
destruction, and Tenant hereby waives the provisions of any statute or law now
or hereafter in effect contrary to such obligations of Tenant as herein set
forth, or which relieves Tenant therefrom. Without limiting the generality of
the foregoing,

 

29

 

Tenant hereby waives the provisions of sections 1932, 1933(4), and 1942
of the California Civil Code. Notwithstanding the foregoing, in the event of
the occurrence of material damage and destruction to the Improvements during
the last three (3) years of the Term of this Lease, then either Landlord
or Tenant shall have the right to terminate this Lease by giving written notice
of such termination to the other party within thirty (30) days after the date
of such damage or destruction. If either party terminates this Lease, any Net
Insurance Proceeds payable to Tenant as a result of such damage or destruction
shall be paid to Landlord for application to the Rentals that would have
accrued for the remainder of the Term of the Lease.

 

ARTICLE 12

EMINENT DOMAIN

 

12.1         In General.  As used in this Lease, the term “Taking” shall mean a taking
or damaging, including severance damage, by eminent domain, inverse
condemnation, or for any public or quasi-public use under any statute. The
Taking may occur pursuant to the recording of a final order in
condemnation or by voluntary sale or conveyance in lieu of condemnation. The
Taking shall be considered to have occurred as of the date upon which title to
the portion of the Project taken passes to and vests in the condemnor or the
effective date of any order for possession, whichever is earlier (the “Date of
Taking”). If there is a Taking of all or any portion of the Property or the
Improvements, then, as between Landlord and Tenant, the interests of Landlord
and Tenant in the award and the effect of the Taking upon this Lease shall be
as set forth in this Article 12.

 

12.2         Partial Taking.  Upon a Taking of only a part of
the Project thereon which does not qualify as a Substantial Taking pursuant to Section 12.3
below (a “Partial Taking”), this Lease shall (i) terminate and end as to
the portion of the Project so taken, as of the Date of Taking, (ii) continue
in full force and effect as to the portion of the Project not so taken and (iii) be
modified such that from and after such date the Base Rent required by this
Lease to be paid by Tenant to Landlord shall be reduced in the proportion which
the value of the part of the Project so taken bears to the total value of
Tenant’s interest in the Project. Upon such partial termination, all Rentals
and other sums paid or payable under this Lease for the portion taken shall be
prorated and paid up to the Date of Taking. Any amount due to Tenant shall be
credited against Base Rent next coming due.

 

12.3         Substantial
Taking.  Notwithstanding anything to the contrary contained in Section 12.2,
upon any Taking of a portion of the Project which (i) renders the
operation of the Project remaining uneconomical and affects the use of more
than twenty percent (20%) of the Improvements (a “Substantial Taking”), Tenant
shall have the right to terminate this Lease upon notice to Landlord given
within sixty (60) days after the Date of Taking and such termination shall
become effective as of the date of such

 

30

 

notice. Upon termination of this Lease pursuant to this Section 12.3,
all Rentals shall be prorated to the Date of Taking. Within thirty (30) days
following the date of termination, any amounts due Tenant shall be refunded to
Tenant and any amounts due Landlord shall be paid to Landlord.

 

12.4         Total
Taking.  Upon a Taking of the entire Project (“Total Taking”),
this Lease and all of the right, title and interest thereunder shall cease on
the Date of Taking. Upon termination of this Lease pursuant to this Section 12.4,
all Rentals shall be prorated to the Date of Taking. Within thirty (30) days
following the date of termination, any amounts due Tenant shall be refunded to
Tenant and any amounts due Landlord shall be paid to Landlord.

 

12.5         Restoration
on a Partial Taking.  Promptly after a Partial Taking, Tenant
shall, in the manner specified in provisions of this Lease relating to
maintenance, repairs and alterations, restore the Improvements so as to place
them in a condition suitable for the uses and purposes for which the Property
is leased subject to the provisions of this Article 12.

 

12.6         Disposition
of Award.  In the event of a Total Taking or if the Lease is
terminated as a result of a Substantial Taking, the award of compensation
attributable to the Project shall be allocated as follows: If the Total Taking
or Substantial Taking occurs during the Option Term, the award shall first be
paid to Landlord in an amount equal to the Option Purchase Price for the
Property that Tenant would pay if Tenant exercised the Option on the same date
as the date the Taking occurs. The balance of the award shall be paid to Tenant
as compensation for the value of the Improvements and any severance damages
thereto and the value of Tenant’s leasehold interest. If the Total Taking or
Substantial Taking occurs after the expiration of the Option Term, then the
award shall first be paid to Landlord in an amount equal to the value of
Landlord’s fee interest in the Property, but in no event less than an amount
equal to the Option purchase Price for the last year of the Option Term,
increased by four percent (4%) per annum for each year after the expiration of
the Option Term until and including the year in which the Taking occurs. The
balance of the award shall be paid to Tenant as compensation for the value of
the Improvements, any severance damages thereto and the value of Tenant’s
leasehold interest. Tenant shall have the right to apply for a separate award
for Tenant’s goodwill and impairment of operation. In the event of a Partial
Taking where the Lease remains in effect and Tenant is obligated to restore or
repair the Improvements, then Tenant shall use that portion of the award
attributable to the Improvements to restore the Improvements as provided in Section 12.5
above in accordance with plans and specifications approved in writing by Landlord
which approval shall not be unreasonably withheld or delayed. In the event of a
Partial Taking, the amount of the award attributable to the Improvements shall
not include any portion of the award attributable to the unexpired Term as to
the portion or all of the Property so taken,

 

31

 

which amount shall be payable to Landlord. To the extent that said
award for the Improvements exceeds the Cost of such restoration, repair or
rebuilding, then such award shall belong to Tenant.

 

12.7         Temporary
Taking.  Upon a Taking of all or any part of the Project for
a specified term, which term is specified at the date of Taking and does not
exceed one (1) year, the Term shall not be reduced or affected in any way
and Tenant shall continue to pay and be liable for all Rentals for which it is
obligated under this Lease. Such a Taking shall hereafter be referred to as a “Temporary
Taking.” A Temporary Taking does not include a Taking which is to last for an
indefinite period and/or which will terminate only upon the happening of a
specified event unless it can be determined at the time of the Taking when such
event will occur. A Taking for an indefinite term or for a term of more than
one (1) year shall be treated as a Total Taking, Substantial Taking or
Partial Taking, as applicable, in accordance with this Lease. Subject to the
other provisions of this Section 12.7, upon a Temporary Taking Tenant
shall be entitled to any award or payment for the temporary use of the Project
attributable to the period prior to the date of Lease Termination, and Landlord
shall be entitled to any award or payment for such use attributable to the
period after Lease Termination. If any lump sun prepayment is made to Tenant in
an amount equal to or greater than Twenty-five Thousand Dollars ($25,000) for
the temporary use of the Property and/or the Improvements for a period of time
Subsequent to the making of said payment Lessee shall deposit said sum with
Landlord, to be held in an interest bearing account to be released to Tenant in
equal monthly increments over the period for which such payment is made,
provided that Tenant has paid in full the Base Rent and all other Rentals due
under this Lease. If possession of the Property and/or the Improvements taken
shall revert to Tenant prior to Lease Termination, Tenant shall promptly
following the date such Temporary Taking ends restore the Property and the
Improvements. If possession of the Property and the Improvements taken shall
not revert to Tenant prior to Lease Termination, and Landlord elects not to
require Tenant to remove the Improvements pursuant to Section 8.2, any
sums deposited pursuant to this Section 12.7 shall be paid over to
Landlord on the date this Lease terminates and Tenant shall be excused from its
obligation to restore the Property and/or the Project Improvements. If
possession of the Property and the Improvements taken shall not revert to
Tenant prior to Lease Termination, and Landlord elects to require Tenant to
remove the Improvements pursuant to section 8.2, then any sums held by
Landlord pursuant to this section 12.7 at Lease Termination shall be paid
over to Landlord, and promptly after the Taking terminates, Tenant shall at
Tenant’s sole cost, remove the Improvements as required by Section 8.2.
Any award or payment for the temporary Taking which is made on or after Lease
Termination shall be paid to and retained by Landlord.

 

12.8         Notice of
Taking.  Upon a Taking of all or any portion of the Project, or
the commencement of a proceeding or negotiations which might result in such
Taking, the party having notice of such

 

32

 

Taking or of the commencement of any such proceeding or negotiations,
shall promptly give written notice thereof to the other party. 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 the claims that it has pursuant to, and as may be
limited by, the terms of this Lease relating to the allocation of award
proceeds. No agreement, settlement, sale, or transfer to or with the condemning
authority shall be made without the consent of Landlord and Tenant except that
the consent of Tenant shall not be required if at the tine there exists a
default hereunder by Tenant. Landlord and Tenant each agrees to execute and
deliver to the other, and Tenant agrees to cause all Project subtenants to
execute and deliver to Landlord, any instruments which may be required to
effectuate or facilitate the provisions of this Lease relating to a Taking.

 

12.9         Waiver of
C.C.P. Section 1265.130.  Each party waives the provisions
of the Code of Civil Procedure section 1265.130, which allows either party
to petition the Superior Court to terminate this Lease in the event of a Taking
of the Project.

 

ARTICLE 13

DEFAULTS

 

13.1         Tenant
Defaults.  The occurrence of any one or more of the following
events shall constitute a default hereunder by Tenant:

 

(a)           The
abandonment of the Property by Tenant.

 

(b)           The
failure by Tenant to make any payment of Base Rent or other Rentals as and when
due.

 

(c)           Tenant’s
failure to commence or complete construction of the Improvements or obtain the
first permit for the Improvements within the time and as required by Article 5
above.

 

(d)           The
failure by Tenant to timely observe or perform any of the express or
implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in Section 13.1(a), (b) or (c) above.

 

(e)           (i)            The
making by Tenant of any general assignment for the benefit of creditors; (ii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant’s assets located at the Property or of Tenant’s interest in this Lease,
or (iii) the attachment, execution or other judicial seizure of
substantially all of Tenant’s assets located at the Property or of Tenant’s
interest in this Lease.

 

13.2         Remedies.  Upon
a default by Tenant, Landlord shall have the following remedies, in addition to
all other rights and remedies provided by law, in equity or otherwise provided
in this

 

33

 

Lease, to which Landlord may resort cumulatively or in the
alternative:

 

(a)           Landlord may continue
this Lease in full force and effect, and this Lease shall continue in full
force and effect as long as Landlord does not terminate this Lease, and
Landlord shall have the right to collect Rentals when due. No act by Landlord
other than giving written notice to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Property or the appointment of a receiver on
Landlord’s initiative to protect Landlord’s interest under this Lease shall not
constitute a termination of Tenant’s right to possession.

 

(b)           Landlord may terminate
this Lease and Tenant’s right to possession of the Property at any time if (i) such
default is in the payment of Rentals and it is not cured within five (5) days
after written notice from Landlord, or, (ii) with respect to the defaults
referred to in Section 13.1(d), such default is not cured within thirty
(30) days after written notice from Landlord; provided, however, that if the
nature of Tenant’s default is such that more than thirty (30) days are
reasonably required for its cure, if Tenant does not commence to cure the
default within the thirty (30) day period or does not diligently and in good faith
prosecute the cure to completion within a reasonable time thereafter, or, (iii) with
respect to the defaults referred to in Sections 13.1(a), (c) or (e), such
default is not cured within thirty (30) days after written notice from
Landlord. The parties agree that any notice given by Landlord to Tenant
pursuant to this Section 13.2(b) shall be sufficient notice for
purposes of California Code of Civil Procedure section 1161 and Landlord
shall not be required to give any additional notice in order to be entitled to
commence an unlawful detainer proceeding. On termination, Landlord has the
right to remove all Tenant’s personal property, signs and trade fixtures and
store same at Tenant’s cost and to recover from Tenant as damages:

 

(1)           The worth
at the time of award of unpaid Rentals and other sums due and payable which had
been earned at the time of termination; plus

 

(2)           The worth
at the time of award of the amount by which the unpaid Rentals and other sums
due and payable which would have been payable after termination until the time
of award exceeds the amount of such Rental loss that Tenant proves could have
been reasonably avoided; plus

 

(3)           The worth
at the time of award of the amount by which the unpaid Rentals and other sums
due and payable for the balance of the Tern after the time of award exceeds the
amount of such Rental loss that Tenant proves could be reasonably avoided; plus

 

(4)           Any other
amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant’s

 

34

 

failure to perform Tenant’s obligations under this Lease, or
which, in the ordinary course of things, would be likely to result therefrom,
including, without limitation, any costs or expenses incurred by Landlord: (a) in
retaking possession of the Property; (b) in maintaining, repairing,
preserving, restoring, replacing, cleaning, altering or rehabilitating the
Property or any portion thereof, including such acts for reletting to a new
tenant or tenants; (c) for leasing commissions; or (d) for any other
costs necessary or appropriate to relet the Property; plus

 

(5)           such other
amounts in addition to or in lieu of the foregoing as may be permitted
from time-to-time by the laws of the state of California.

 

The “worth at the time of award” of the amounts
referred to in Section 13.2(b)(l) and (2) is computed by allowing
interest at the Stipulated Rate. The “worth at the time of award” of the amount
referred to in Section 13.2(b)(3) is 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%).

 

(c)           Tenant
hereby waives any right of redemption or relief from forfeiture under
California Code of Civil Procedure sections 1174 or 1179, or under any other
present or future similar law, if Tenant is evicted or Landlord takes
possession of the Property by reason of any default by Tenant hereunder.

 

(d)           No delay
or omission of Landlord to exercise any right or remedy shall be construed as a
waiver of any such right or remedy or of any default by Tenant hereunder.

 

(e)           If Tenant
fails to make any payment or perform any other act on its part to be
made or performed under this Lease, Landlord may, but shall not be obligated to
and without waiving or releasing Tenant from any obligation of Tenant under
this Lease, make such payment or perform such other act to the extent
Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All sums so paid by Landlord and all penalties, interest and
costs in connection therewith shall be due and payable by Tenant immediately on
demand, together with interest at the Stipulated Rate from the date of payment
by Landlord to the date of payment by Tenant to Landlord, plus collection costs
and attorneys' fees.

 

13.3         Default
by Landlord.  Landlord shall not be deemed to be in default in
the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within thirty
(30) days after written notice by Tenant to Landlord specifying wherein
Landlord has failed to perform such obligation; provided, however, that if
the nature of Landlord’s obligation is such that more than thirty (30) days are
required for its performance then Landlord shall not be deemed to be in default
if it shall commence such performance within such thirty-day period and
thereafter diligently prosecute the same to

 

35

 

completion. Notwithstanding any other
provision of this Lease, in no event shall Landlord be liable to Tenant for
consequential damages, or loss of or interference with Tenant’s business,
including without limitation lost profits.

 

13.4         Expenses of Prevailing Party.  If either party incurs any
expense, including reasonable attorneys’ fees, in connection with any action or
proceeding instituted by either party arising out of this Lease, the party
prevailing in such action or proceeding shall be entitled to recover its
reasonable expenses including attorneys’ fees from the other party.

 

13.5         Limitation of Liability.  In the event that Tenant obtains
a judgment against Landlord resulting from any default or other claim arising
under this Lease, such judgment may only be satisfied from the rents,
issues and profits or other income actually received on account of Landlord’s
right, title and interest in and to the Property and no other real, personal or
mixed property of Landlord (or any partners, directors, officers, shareholders
or employees of Landlord, if any), wherever situated, shall be subject to levy
to satisfy such judgment.

 

ARTICLE 14 

HAZARDOUS MATERIALS

 

14. 1        Prohibition on Use.  Except as otherwise expressly
provided in this Article 14, Tenant shall not use, generate, manufacture,
produce, store, release, discharge, or dispose of, on, under or about the
Property or any part of the Project, or transport to or from the Property
or any part of the Project, any Hazardous Materials or allow Tenant’s
Agents to do so. The term “Hazardous Materials” shall mean any chemical,
substance or material which has been or is hereafter determined by any federal,
state, local or other governmental authority to be capable of posing risk of
injury to health or safety, including without limitation:

 

(a)           Those substances included within the
definitions of “hazardous substances,” “hazardous materials,” “toxic
substances,” or “solid waste” under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (“CERCLA”), 42 U.S.C. section 9601
et seq., the Resource conservation and Recovery Act of 1976, as amended (“RCRA”),
42 U.S.C. section 6901 et seq., and the Hazardous Materials Transportation
Act, 49 U.S.C. sections 1801, et seq., and in the regulations promulgated
pursuant to said laws;

 

(b)           Those substances defined as “hazardous wastes”
in section 25117 of the California Health & Safety Code, or as “hazardous
substances” in section 25316 of the California Health & Safety
Code, and in the regulations promulgated pursuant to said laws;

 

36

 

(c)           Those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or designated by the Environmental
Protection Agency (or any successor agency) as hazardous substances (see,
e.g., 40 CFR Part 302 and amendments thereto);

 

(d)           Such other
substances, materials and wastes which are or become regulated under applicable
local, state or federal law, or the United States government, or which are or
become classified as hazardous or toxic under federal, state, or local laws or
regulations, including without limitation, California Health & Safety
Code, Division 20, and Title 26 of the California Code of Regulations; and

 

(e)           Any
material, waste or substance which is (i) petroleum, (ii) asbestos, (iii) polychlorinated
biphenyls, (iv) designated as a “hazardous substance” pursuant to section 311
of the Clean Water Act of 1977, 33 U.S.C. sections 1251, et  seq.
(33 U.S.C. § 1321) or listed pursuant to section 307 of the Clean
Water Act of 1977 (33 U.S.C. § 1317); (v) flammable explosives, or (vi) radioactive
materials.

 

Notwithstanding the foregoing, Tenant may use and
store common office and household products, pesticides, and paints that contain
small quantities of Hazardous Materials in connection with the operation,
maintenance, and repair of the Project, provided that all such products are
used and disposed in accordance with all applicable laws, statutes, codes,
regulations, and ordinances. In addition, Tenant may use and store on the
Property gasoline as fuel for the internal combustion engines used to operate
Tenant’s machinery and construct an above-ground storage tank for the storage
of such gasoline. Tenant shall obtain all necessary permits and approvals from
all applicable governmental authorities for the construction and maintenance of
such above-ground storage tank and shall promptly comply with any law,
ordinance or regulation of any applicable governmental authority requiring
modifications to the Property or improvements thereon that are intended to
protect the Premises and the environment against the release of gasoline or
other Hazardous Materials used by Tenant. Tenant shall provide Landlord, upon
Landlord’s written request, which request shall not be made more than once per
calendar year, with a list of Hazardous Materials used, kept or stored by
Tenant on the Property, other than common office and household products,
pesticides, and paint, including any changes from the previous list of
Hazardous Materials prepared by Tenant.

 

Tenant shall protect, defend, indemnify and hold
harmless Landlord and Landlord’s directors, officers, partners, employees,
agents, successors and assigns from and against any and all claims, fines,
judgments, penalties, losses, damages, costs, expenses or liabilities
(including attorneys’ fees and costs) directly or indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, transportation to or from, or presence
of a

 

37

 

Hazardous Material (collectively, a “Release”) on, under or about the
Property or any part of the Project or areas in the vicinity of the
Project by Tenant or Tenant’s Agents, including, without limitation, (a) all
foreseeable consequential damages, including without limitation, loss of rental
income and diminution in property value; and (b) the costs of any
investigation, monitoring, removal, restoration, abatement, repair, cleanup,
detoxification or other ameliorative work of any kind or nature and the
preparation and implementation of any closure, remedial or other required
plans. For purposes of this Article 14, the acts or omissions of Tenant or
Tenant’s Agents (whether or not they are negligent, intentional, willful or
unlawful) shall be strictly attributable to Tenant.

 

14.2         Landlord’s
Statement.  To Landlord’s actual knowledge, without inquiry or
investigation and based solely upon that certain Phase I Environmental Site
Assessment dated October 1992 prepared by Professional Service Industries, Inc.,
Project No. H-582-24035, a copy of which Landlord has delivered to Tenant,
no Hazardous Materials have been released or discharged in, on, under or from
the Premises in violation of laws, statutes, ordinances, rules and
regulations governing Hazardous Materials.

 

ARTICLE 15 

OPTION TO PURCHASE

 

15.1         Grant of
Option.  Landlord hereby grants to Tenant the right to purchase
the Property at the price and upon the terms and conditions set forth
hereinbelow (the “Option”). Nothing herein shall prevent Landlord from selling,
transferring, or assigning its interest in the Property and/or this Lease and,
in the event of such sale, transfer or assignment, the purchaser, transferee or
assignee shall acquire its interest in the Property subject to the terms of the
Option:

 

15.2         Term and
Exercise of Option.

 

(a)           Term.  The
tern of the Option (“Option Term”) shall be for the period commencing on the
Term Commencement Date and ending at 5:00 p.m. on the date that is the
tenth (10th) anniversary of the Term Commencement Date.

 

(b)           Termination.  If
(i) Tenant fails to exercise the Option prior to the expiration of the
Option Term in strict compliance with the terms and conditions of this Article,
(ii) Tenant fails to tender the sum of Fifty Thousand Dollars ($50,000)
(as required in Section 15.3(b) below) to Escrow Holder concurrently
with delivery of the Exercise Notice (as defined in Section 15.3(a) hereof)
to Landlord, (iii) the Lease terminates during the Option Term for any
reason whatsoever, or (iv) Tenant timely exercises the Option prior to the
expiration of the Option Term but fails to close escrow for the purchase of the
Property not later than thirty (30) days after exercise of the Option for any
reason other than a default by Landlord under this Article, then

 

38

 

the Option shall automatically terminate, and
Tenant shall have no further rights under this Article. Upon termination of the
Option and Tenant’s rights hereunder, Tenant shall, upon written request by
Landlord, execute, acknowledge and deliver to Landlord a release of option,
quitclaim deed or such other document as may be reasonably required by
Landlord to verify the termination of Tenant’s rights under this Article.

 

15.3         Exercise of Option.

 

(a)           Exercise Notice.  Tenant shall exercise the Option,
if at all, prior to the expiration of the Option Term by delivering written
notice of exercise to Landlord prior to the expiration of the option Tern (“Exercise
Notice”).

 

(b)           Deposit.  Concurrently with the delivery of the Exercise Notice to
Landlord, Tenant shall deliver a non-refundable deposit of cash in the amount
of Fifty Thousand Dollars ($50,000) (“Purchase Deposit”) to First American Title
Guaranty Company (“Escrow Holder”) at its office in Livermore, California, as a
deposit against the purchase price. Immediately after Tenant’s delivery of the
Exercise Notice to Landlord and delivery of the Purchase Deposit to Escrow
Holder, Landlord and Tenant shall execute and deliver to Escrow Holder escrow
Instructions for the disposition of the Deposit in accordance with the terms of
this Article 15. The Purchase Deposit shall be credited against the
purchase price at the close of escrow. Notwithstanding the foregoing, Tenant
shall have no right to exercise the Option at any time while Tenant is in
default under the Lease. In no event shall any Rentals or other amounts paid by
Tenant under this Lease (other than the Purchase Deposit) be applied against
the purchase price of the Property.

 

15.4         Terms of Purchase.  If Tenant timely exercises the
Option in accordance with the terms and conditions of this Article, the
Property shall be purchased by Tenant on all of the terms and conditions set
forth below:

 

(a)           The purchase price for the Property. (“Option
Purchase Price”), determined as of the date of Close of Escrow, shall be as
follows:

 

	
  Year of Option Term 

  In Which Closing Occurs

  	
   

  	
  Option 

  Purchase Price

  	
   

  	
   

  
	
  1

  	
   

  	
  $

  	
  1,800,000.00

  	
   

  	
   1995

  
	
  2

  	
   

  	
  $

  	
  1,872,000.00

  	
   

  	
   1996

  
	
  3

  	
   

  	
  $

  	
  1,946,880.00

  	
   

  	
   1997

  
	
  4

  	
   

  	
  $

  	
  2,024,755.00

  	
   

  	
   1998

  
	
  5

  	
   

  	
  $

  	
  2,105,745.00

  	
   

  	
   1999

  
	
  6

  	
   

  	
  $

  	
  2,189,975.00

  	
   

  	
   2000

  
	
  7

  	
   

  	
  $

  	
  2,277,574.00

  	
   

  	
   2001

  
	
  8

  	
   

  	
  $

  	
  2,368,677.00

  	
   

  	
   2002

  
	
  9

  	
   

  	
  $

  	
  2,463,424.00

  	
   

  	
   2003

  
	
  10

  	
   

  	
  $

  	
  2,561,961.00

  	
   

  	
   2004

  

 

39

 

The Option Purchase Price shall be paid in cash at the close of escrow.

 

(b)           Escrow
shall close not later than ninety (90) days after exercise of the Option.

 

(c)           The
deposit to be made by Tenant for the purchase of the Property shall be in the
amount and made at the time described in Section 15.3(b) above.

 

(d)           The
Property shall be purchased by Tenant “As Is”, without representation or
warranty of any kind, express or implied. Landlord shall not be liable to
Tenant as a result of the presence of any Hazardous Materials in, on or about
the Property. Tenant acknowledges that it has already performed all
investigations it desires to perform with respect to the Property and that
it is satisfied as to all matters relating to the Property.

 

(e)           The
Property shall be transferred to Tenant subject to all exceptions to title
shown in that certain Preliminary Title Report dated as of September 26,
1994, Order No. 651401 issued by Escrow Holder, the Parcel Map creating a
separate legal parcel for the Property, the lien for real property taxes not
yet due and payable, any other exceptions to title which may be placed on
the Property through no fault or agreement of Landlord (except judgment or tax
liens that nay be imposed against Landlord or its partners), any title
exceptions mutually agreed to by Landlord and Tenant during the Term, and all
other matters affecting title which are created by or were suffered by Tenant
during the Term.

 

(f)            Purchase
and sale of the Property shall take place through an escrow established with
Escrow Holder. On or before the close of escrow, Seller shall execute and
deliver into escrow a grant deed for the Property.

 

(g)           The
purchaser shall be Tenant; provided, however, that Tenant may transfer the
Option concurrently within an assignment of the Lease provided that Landlord
consents to the assignment in accordance with Article 9 of this Lease.

 

(h)    Landlord shall
pay documentary transfer taxes, the CLTA portion of the premium for Tenant’s
title insurance, and one-half (1/2) of the escrow fee. Tenant shall pay the
ALTA portion of the premium for Tenant’s title insurance, the cost of any
survey Tenant elects to obtain in connection with its title insurance, and
one-half (1/2) of the escrow fee. The remaining costs of closing shall be
allocated between Landlord and Tenant in accordance with the custom in Alameda
County, California.

15.5         Liquidated
Damages.  TENANT ACKNOWLEDGES THAT IF IT DEFAULTS IN ITS
PERFORMANCE HEREUNDER AFTER DELIVERY OF THE

 

40

 

EXERCISE NOTICE AND PRIOR TO THE CLOSE OF ESCROW, WHICH SHALL INCLUDE
WITHOUT LIMITATION TENANT’S FAILURE TO CLOSE ESCROW WITHIN NINETY (90) DAYS
AFTER EXERCISE OF THE OPTION, LANDLORD SHALL BE ENTITLED TO COMPENSATION FOR
THE DETRIMENT RESULTING FROM THE REMOVAL OF THE PROPERTY FROM THE MARKET. THE
PARTIES HERETO AGREE THAT THE DAMAGES THAT LANDLORD SHALL SUSTAIN AS A RESULT
OF SUCH BREACH WILL BE EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN.
THEREFORE, THE PARTIES AGREE THAT IF, AFTER DELIVERY OF THE EXERCISE NOTICE,
TENANT FAILS TO PURCHASE THE PROPERTY AS A RESULT OF A BREACH IN ITS
OBLIGATIONS HEREUNDER, ESCROW HOLDER SHALL BE AUTHORIZED TO PAY THE PURCHASE
DEPOSIT TO LANDLORD, AND LANDLORD SHALL BE ENTITLED TO RETAIN THE SUM OF THE
PURCHASE DEPOSIT, AND SAID SUM SHALL BE PAID AND RECEIVED AS LIQUIDATED DAMAGES
AND NOT AS A PENALTY. EXCEPT WITH RESPECT TO TENANT’S BREACH OF ANY INDEMNITY
OBLIGATION OR ANY OTHER OBLIGATION OF TENANT HEREUNDER (OTHER THAN THE COVENANT
TO PURCHASE THE PROPERTY) WHICH SURVIVES THE CLOSE OF ESCROW (WHICH BREACH
SHALL ENTITLE LANDLORD TO SEEK ANY AND ALL REMEDIES AVAILABLE AT LAW AND IN
EQUITY AND FOR WHICH BREACH THIS SECTION 15.5 SHALL NOT APPLY), BOTH
PARTIES ACKNOWLEDGE AND AGREE THAT SAID AMOUNT IS PRESENTLY A REASONABLE
ESTIMATE OF LANDLORD’S DAMAGES IN THE EVENT OF TENANT’S BREACH OF ITS
OBLIGATION TO PURCHASE THE PROPERTY AFTER DELIVERY OF THE EXERCISE NOTICE
CONSIDERING ALL OF THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT,
INCLUDING THE RELATIONSHIP OF THE SUM TO THE RANGE OF HARM TO LANDLORD THAT
REASONABLY COULD BE ANTICIPATED AND THE ANTICIPATION THAT PROOF OF ACTUAL
DAMAGES WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT. BY INITIALING THIS
PARAGRAPH BELOW, THE PARTIES HERETO SIGNIFY THEIR APPROVAL AND CONSENT TO THE
TERMS OF THIS PARAGRAPH.

 

	
   

  	
  /s/ TR

  	
   

  	
  /s/ GB

  	
   

  
	
   

  	
  Landlord’s Initials

  	
  Tenant’s Initials

  

 

ARTICLE 16

GENERAL PROVISIONS

 

16.1         Notices,
Demands and Communications between the Parties.  Formal notices,
demands and communications between Landlord and Tenant shall be in writing and
shall be deemed sufficiently given if dispatched by personal delivery,
air-courier messenger service, or registered or certified mail, postage
prepaid, return receipt requested, to the parties at the addresses set forth
below and shall be deemed delivered (i) if personally delivered or sent by
air-courier messenger service on the date of delivery, or (ii) if sent by
mail on the second business day after deposit into the united States mail. Such
written notices, demands and communications may be sent in the same manner
to other addresses as either party may from time to time designate by mail
as provided in this Section.

 

Landlord:               Livermore
Airway Business Park

3375 Scott Blvd., Suite 30B 

Santa Clara, CA 95054 

Attn: Terrence J. Rose

 

41

 

	
  Tenant:

  	
   

  	
  Camelot Park

  
	
   

  	
   

  	
  3405 Michelson Drive

  
	
   

  	
   

  	
  Irvine, CA 92715

  
	
   

  	
   

  	
  Attn: Mr. Gerald B. Johnson

  

 

16.2         Time of
Essence.  Time is of the essence with respect to the performance
of each of the covenants and agreements contained in this Lease.

 

16.3         Transfer
by Landlord; Release From Liability.  If Landlord sells or
transfers the Property or any part thereof, and as a part of such
transaction assigns its interest as Landlord in and to this Lease, then from
and after the effective date of such sale, assignment or transfer, Landlord
shall have no further liability under this Lease to Tenant except as to matters
of liability which shall have accrued and are unsatisfied as of the date of
such transfer, it being intended that the covenants and obligations contained
in this Lease on the part of Landlord shall be binding upon Landlord and
its successors and assigns only during and in respect of their respective
periods of ownership of the fee. Any funds held by Landlord at the time of such
transfer in which Tenant has an interest, less any deductions permitted by law
or this Lease, shall be transferred to the assignee. Tenant shall, immediately
upon written request from Landlord or any such assignee, execute and deliver to
such assignee an instrument in proper form by which Tenant attorns to said
assignee.

 

16.4         Subordination.  This
Lease, at Landlord’s option, shall be subject and subordinate to the lien of
any mortgages or deeds of trust (including all advances thereunder, renewals,
replacements, modifications, supplements, consolidations, and extensions
thereof) in any amount or amounts whatsoever now or hereafter placed on or
against or affecting the Project or any part thereof, or Landlord’s
interest or estate therein. Tenant covenants and agrees to execute and deliver
within ten (10) days following Landlord’s request and without charge
therefor, such further instruments evidencing the subordination of this Lease
to the lien of any such mortgages or deeds of trusts as may be required by
Landlord or a lender making a loan affecting the Property for Landlord’s
benefit; provided that with respect to a mortgage or deed of trust which is
hereafter placed on or against or affecting the Project or any part thereof
by Landlord, or Landlord’s interest or estate therein, such mortgagee or
beneficiary under such mortgage or deed of trust agrees in writing to recognize
Tenant’s Option and the right to purchase the Property at the applicable Option
Purchase Price and that this Lease shall not be terminated in the event of any
foreclosure if Tenant is not in default under this Lease. Failure of Tenant to
execute such instruments evidencing subordination of this Lease shall
constitute a default by Tenant hereunder. If any mortgagee or beneficiary of
Landlord shall elect to have this Lease prior to the lien of its mortgage or
deed of trust, and shall give written notice thereof to Tenant, this Lease
shall be deemed prior to such mortgage or

 

42

 

deed of trust, whether this Lease is dated prior or subsequent to the
date of said mortgage or deed of trust, or the date of the recording thereof.

 

16.5         Attornment.  Upon
foreclosure or the exercise of the power of sale under any mortgage or deed of
trust made by the Landlord and covering Landlord’s interest in the Project,
Tenant shall attorn to the purchaser upon any such foreclosure or sale and
recognize such purchaser as the Landlord under this Lease, provided such
purchaser expressly agrees in writing to be bound by the terms of the Lease.

 

16.6         Estoppel
Certificate; Financial Statements.  At all times during the Term,
Tenant shall, within ten (10) days following request by Landlord therefor
and without charge, execute, acknowledge and deliver to Landlord any and all
documents, estoppel certificates, and current financial statements (audited to
the extent available) of Tenant requested by Landlord in connection with the
sale or financing of the Project or requested by a lender making a loan
affecting the Project. Landlord may require Tenant in any estoppel
certificate to: (i) certify that this Lease is unmodified, in full force
and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and
has not been assigned, (ii) acknowledge that there are not, to Tenant’s
knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults if any are claimed, (iii) certify the date to
which Rentals and other charges are paid in advance, if any, (iv) certify
the current amount of Base Rent due under the Lease; (v) evidence the
status of this Lease as may be reasonably required; (vi) certify such
other matters relating to this Lease and/or the Project as may be
requested by a lender making a loan to Landlord or a purchaser of Landlord’s
interest in the Project. Any such estoppel certificate may be conclusively
relied upon by any prospective purchaser or encumbrancer of Landlord’s
interest. Any financial statement of Tenant shall include an opinion of a
certified public accountant (if available) and a balance sheet and profit and
loss statement for the most recent fiscal year, all prepared in accordance with
generally accepted accounting principles consistently applied. Tenant’s failure
to deliver the statement described in this Section 16.6 above within the
time specified therein shall be conclusive upon Tenant that (i) this Lease
is in full force and effect, without modification except as may be
represented by Landlord, and has not been assigned, (ii) there are no
uncured defaults in Landlord’s performance, (iii) no Rentals have been
paid in advance except those that are set forth in this Lease. If Tenant fails
to deliver the estoppel statement described in this Section above within
the time specified therein, Tenant hereby irrevocably constitutes and appoints
Landlord as Tenant’s special attorney-in-fact to execute and deliver the
statement to any third party. Tenant’s failure to deliver any financial
statements, estoppel certificates or other documents as required pursuant to
this Section shall be a default by Tenant.

 

43

 

16.7         No
Partnership.  Nothing contained in this Lease and no acts of
Landlord or Tenant shall be deemed or construed to create the relationship of
principal and agent, or of partnership, or of joint venture, or of any
association between Landlord and Tenant other than that of Landlord and Tenant.

 

16.8         Compliance
with Law.  Tenant shall, at its sole cost, comply with all Laws
pertaining to the use, occupancy or condition of the Property and the
Improvements, as well as operations conducted thereon. Tenant’s obligations
pursuant to this Section 16.8 shall include without limitation maintaining
or restoring the Property and making structural and nonstructural alterations
and additions in compliance and conformity with all Laws and recorded documents
relating to the use, occupancy and condition of the Project during the Term.
Tenant shall take all proper and necessary action to cause the Project to be
kept, maintained, used and occupied in compliance with the Americans with
Disabilities Act of 1990, as the same may be amended from time to time.
Tenant shall obtain any permits, licenses or other authorizations required for
the lawful operation of its business at the Property. The judgment of any court
of competent jurisdiction, or the admission of Tenant or any sublessee or
permittee in any action or proceeding against them, or any of them, whether
Landlord be a party thereto or not, that Tenant, sublessee or permittee has
violated any such Law shall be conclusive of that fact as between Landlord and
Tenant.

 

16.9         Surrender
of Property; Holding Over.  Upon Lease Termination, Tenant shall
surrender and deliver the Property and the Improvements thereon, peaceably to
Landlord immediately upon such expiration or termination in good order,
condition and repair, except for reasonable wear and tear, but subject, however
to the provisions of Article 12 of this Lease regarding condemnation, Article 11
of this Lease regarding damage and destruction and Section 8.2 above.

 

Any holding over with the written consent of Landlord
after Lease Termination shall be construed to be a tenancy from month to month
at one hundred fifty percent (150%) of the monthly Base Rent for the month
immediately preceding Lease Termination in addition to all Rentals payable
hereunder, and shall otherwise be on the terms and conditions herein specified
in so far as applicable. If Tenant remains in possession of the Property after
Lease Termination without Landlord’s consent, Tenant shall indemnify Landlord
against any loss or liability resulting from Tenant’s failure to surrender the
Property, including, without limitation, any claims made by any succeeding
tenant based upon delay in the availability of the Property.

 

16.10       Severability.  If
any provision of this Lease shall, be adjudged invalid, illegal or
unenforceable by a court of competent jurisdiction, the remaining provisions of
this Lease shall not be affected thereby, but this Lease shall be construed as
if such invalid, illegal or unenforceable provisions had not

 

44

 

been contained herein, and the remainder of this Lease shall be valid
and enforceable to the fullest extent permitted by law. However, if Tenant’s
obligation to pay Rentals is determined to be invalid or unenforceable, this
Lease at the option of Landlord shall terminate.

 

16.11       Binding
Effect.  This Lease, and the terms, provisions, promises,
covenants and conditions hereof, shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns.

 

16.12       Captions.  The
captions contained in this Lease are for convenience of reference and shall not
be construed to limit or extend the meaning of any part of this Lease.

 

16.13       Entire
Agreement, Waivers and Amendments.  This Lease contains the
entire agreement of the parties with respect to all or any part of the
subject matter of this Lease. Landlord and Tenant agree that this Lease
supersedes and cancels any and all agreements, negotiations, arrangements or
understandings, whether written or oral, between and among themselves and their
agents or representatives relative to the Property or this Lease. Any
agreements, warranties or representations not expressly contained in this Lease
shall in no way bind Landlord. All waivers of the provisions of this Lease must
be in writing and signed by the appropriate authorities of Landlord or Tenant
and all amendments hereto must be in writing and signed by the appropriate
authorities of Landlord and Tenant.

 

16.14       Approvals.  All
consents or approvals to be given by Tenant or Landlord shall not be
unreasonably withheld or delayed unless this Lease expressly provides for the
discretion of the party in giving such consent or approval.

 

16.15       Plans
and Data.  Tenant hereby assigns to Landlord as additional
security to Landlord for Tenant’s performance hereunder, all contracts entered
into by Tenant with contractors, architects or other design or construction
professionals to the extent the contracts are assignable, as well as all plans
and data relating to the Project, including, without limitation, soils reports,
engineering reports, architectural plans and specifications, site plans and
surveys. Tenant shall deliver copies of all such contracts, plans and data
promptly after they are executed or prepared as the case may be.

 

16.16       Memorandum
of Lease.  On the written request of either party hereto, the
parties hereto shall execute and acknowledge a Memorandum of Lease in form and
content reasonably acceptable to both Landlord and Tenant. The party requesting
the Memorandum of Lease shall record the memorandum at its sole cost and
expense. Promptly upon Lease Termination, Tenant shall execute and deliver to
Landlord a quitclaim deed in recordable form pursuant to which

 

45

 

Tenant quitclaims its present and/or future interest in this Lease, the
Property and the Improvements.

 

16.17       Gender
and Number.  The neuter gender includes the feminine and
masculine, the masculine includes the feminine and neuter, and the feminine
includes the masculine and neuter, and each includes an individual or a
corporation, partnership or other legal entity when the context so requires.
The singular number includes the plural and the plural includes the singular
whenever the context so requires.

 

16.18       Conditions.  All
agreements by Tenant contained in this Lease, whether expressed as covenants or
conditions, shall be construed to be both covenants and conditions, conferring
upon Landlord, in the event of a breach thereof, the right to terminate this
Lease.

 

16.19       Real
Estate Broker.  Each party represents and warrants to the other
party that it has not had dealings in any manner with any real estate broker,
finder, or other person with respect to the Property in the negotiation and
execution of this Lease. Landlord represents and warrants that it has not
entered into any written listing agreement or other agreement with a broker
requiring the payment of a commission in this transaction. Tenant agrees to
indemnify and hold harmless Landlord from all damage, loss, liability and
expense (including attorneys’ fees and related costs) arising out of or
resulting from any claims for commissions or fees that may be or have been
asserted against Landlord by any broker, finder or other person with whom
Tenant has or purportedly has dealt with in connection with the Property and
the negotiation and execution of this Lease, The obligations of the parties
under this Section 16.19 shall survive termination of this Lease.

 

IN WITNESS WHEREOF, the parties have executed this Lease
as of the date set forth above.

 

	
   

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIVERMORE
  AIRWAY BUSINESS PARK, 

  a California limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  TERRENCE J. ROSE

  	
   

  
	
   

  	
   

  	
  Its:

  	
  General
  Partner

  

 

46

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  CAMELOT
  PARK FAMILY ENTERTAINMENT, 

  CENTER OF PLEASANTON VALLEY, L. P., 

  a California limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  CAMELOT
  PARK OF PLEASANTON 

  VALLEY, L.P., a California 

  limited partnership, its 

  General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By :

  	
  CAMELOT
  PARK OF 

  PLEASANTON VALLEY, INC., 

  a California corporation, 

  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Geoffrey
  C. Beaumont

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Chief Financial Officer

  	
   

  
							

 

47

 

EXHIBIT “A”

 

Legal description

 

REAL PROPERTY in the City of Livermore, County of Alameda, State of
California, described as follows:

 

Parcel 1 of Parcel Map 6232, being a subdivision of Parcel A, Parcel
Map 3110, filed July 15, 1980 in Book 119 of Parcel Maps at Pages 43
through 45, Alameda County Records.

 

48

 

EXHIBIT “B”

 

LANDLORD’S ESTOPPEL CERTIFICATE

 

This Landlord’s Estoppel Certificate is dated               ,
19      , by LIVERMORE AIRWAY BUSINESS PARK, a
California limited partnership (“Landlord”), whose address is 2600 Kitty Hawk
Road, Suite 100, Livermore, California, 94550. Landlord understands that
CAMELOT PARK FAMILY ENTERTAINMENT CENTER OF PLEASANTON VALLEY, L.P., a
California limited partnership (“Trustor”), and                                           
(“Lender”) have entered into, or are about to enter into, an agreement whereby
Lender has acquired or will acquire a Deed of Trust to Lender on Trustor’s
leasehold interest in the Property described below.

 

To induce Lender to extend one or more loans or other
financial accommodations to Trustor against such security interest in the
Property and for other valuable consideration, with knowledge that Lender is
relying thereon, Landlord hereby certifies as follows:

 

1.             The
Lease.  Landlord has leased the Property to Trustor pursuant to a
lease (the “Lease”) dated                 ,
1994.

 

2.             Real
Property Description.  The Lease covers the real property,
together with all improvements thereon (the “Real Property”) located in Alameda
County, State of California, as more particularly described in Exhibit “A”
attached hereto and made a part hereof. The Real Property or its address
is commonly known as 2501 Kitty Hawk Road, Livermore, California, 94550.

 

3.             Estoppel.  Landlord
certifies to Lender that:

 

(a)           Lease
in Effect.  The Lease (i) has been fully executed and
accepted by Landlord, (ii) is in full force and effect, and (iii) has
not been modified or changed, either in writing or orally, except as reflected
in the copy of the Lease provided to Lender.

 

(b)           No
Default.  As of the date of this Certificate, (i) all
conditions and obligations to be performed by Landlord under the lease to the
date hereof have been satisfied, (ii) there exists no breach, default, or
event or condition which with the giving of notice or the passage of time, or
both, would constitute a breach or default by Trustor under the Lease, and (iii) there
are no existing claims, defenses, or offsets against obligations of Trustor
under the Lease, including any against rents due or to become due under the
terms of the Lease.

 

(c)           Entire
Agreement.  The Lease constitutes the entire agreement between
Landlord and Trustor with respect to the Lease of the Property.

 

1

 

(d)           No
Prepaid Rent.   No deposits or prepayments of rent have been made
in connection with the Lease except as follows:

 

	
   

  	
  .

  

 

4.  Agreements.  Landlord
hereby agrees with Lender that, during all such tines as Lender is the
beneficiary of the security interest in the Property described above, Landlord
will notify Lender in accordance with Section 10.2(a) of the Lease in
writing concurrently with any notice given to Trustor of any breach or default
on the part of Trustor under the Lease, and Landlord agrees that Lender
shall have the right, but not the obligation, to cure any breach or default
specified in such notice in accordance with Section 10.2(b) of the
Lease.

 

	
   

  	
   

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  LIVERMORE
  AIRWAY BUSINESS PARK, a 

  California limited partnership

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
							

 

2

 

EXHIBIT “C”

 

PERSONAL PROPERTY LIEN WAIVER

 

This Personal Property Lien Waiver is entered into as
of this     day of           ,
19  , by and between LIVERMORE AIRWAY BUSINESS PARK, a California
limited partnership (“Landlord”), CAMELOT PARK FAMILY ENTERTAINMENT CENTER OF
PLEASANTON VALLEY, L.P., a California limited partnership (“Debtor”), and                                          
(“Lender”).

 

RECITALS

 

A.            WHEREAS,
Landlord is the owner of that certain real property located in the City of
Livermore, County of Alameda, State of California, legally described on the
attached Exhibit “A” (the “Real Property”); and

 

B.            WHEREAS,
Lender has extended or agreed to extend credit to Debtor against the security
of, among other collateral, Debtor’s equipment, furniture, furnishings,
fixtures, machinery, and tools more particularly described in Exhibit “B”
attached hereto, together with all additions, accessions, improvements,
replacements, and substitutions thereto and thereof (the “Goods”) which Goods
are to be located on and may be affixed to the Real Property; and

 

WHEREAS, Bank, as a condition to such extension of
credit, requires that Landlord consent to the removal by Bank of the Goods from
the Real Property no matter how the Goods may be affixed thereto, and to
other matters set forth below.

 

NOW, THEREFORE, Landlord and Bank agree as follows:

 

1.             The
Goods shall be and remain personal property and shall not be considered a part of
the Real Property, regardless of whether or by what means the Goods are or may become
attached or affixed to the Real Property.

 

2.             Any
rights which Landlord may claim to have in and to the Goods, no matter how
arising, shall be second and subordinate to the rights and interests of Bank
therein.

 

3.             Landlord
agrees to permit Bank, its agents, and employees at any reasonable time, and
from time to time, up to the date that is thirty (30) days after the date of
the expiration or earlier termination of the lease between Landlord and Debtor
(“Lease”) to enter upon the Real Property for the purpose of removing the
Goods. Within said thirty (30) day period, Bank shall repair any damage to the
Real Property caused by removal of the Goods and shall restore the portion of
the Real Property from which the Goods are removed to the condition that
existed prior to such removal in accordance with all applicable laws, statutes,
building codes, and regulations

 

1

 

in effect as of the date of such removal. Bank’s right of entry onto
the property shall be limited to the purpose of removal of the Goods and repair
of any damage caused by such removal. If the Goods have not been removed from
the Real Property on or before the expiration of thirty (30) days after the
date of expiration or any earlier termination of the Lease, the Goods shall be
deemed abandoned.

 

4.             Landlord
shall notify Bank in accordance with Section 10.2 (a) of the Lease in
writing of any default on the part of Debtor under the Lease. In
consideration for the right of entry granted to Bank hereunder, Bank agrees to
pay to Landlord from the date the Lease terminates until the later of (i) thirty
(30) days after the date of such termination, or (ii) the date that Bank
has removed the Goods and repaired any damage caused by such removal, a daily
license fee equivalent to not more than one thirtieth (l/30th) of the minimum
or base monthly rental provided for in the Lease for such period.

 

5.             This
Consent shall be governed by and construed by the laws of the State of California
and shall inure to the benefit of and be binding upon the successors, heirs,
and assigns of the undersigned and Bank.

 

6.             In the
event of any action in relation to this Consent, the prevailing party, in
addition to all other sums to which it may be entitled, shall be entitled
to reasonable attorneys’ fees.

 

7.             Any
notices, payments, and information which either party may desire or may be
required to give or make to the other party herein shall be given or made by
hand delivery or through deposit in the United States mail, postage prepaid, to
the address set below

 

2

 

the signature of such party or to such other address as may, from time
to time, be specified in writing by each party.

 

IN WITNESS WHEREOF, the parties have executed this
Consent at             ,
California on this           
day of           ,
1994.

 

	
   

  	
  TRUSTOR:

  
	
   

  	
   

  
	
   

  	
  CAMELOT PARK FAMILY ENTERTAINMENT 

  CENTER OF PLEASANTON VALLEY, L.P., a 

  California limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  CAMELOT PARK OF PLEAS ANTON 

  VALLEY, L.P., a California 

  limited partnership, its General 

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  CAMELOT PARK OF PLEASANTON 

  VALLEY, INC., a California 

  corporation, its General 

  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LANDLORD:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIVERMORE AIRWAY BUSINESS PARK, a 

  California limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BANK:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

3

 

FIRST
AMENDMENT TO GROUND LEASE

 

This FIRST AMENDMENT TO
GROUND LEASE (this “First Amendment”) is dated as of June 29, 1998, and is
entered into by and between LIVERMORE AIRWAY BUSINESS PARK, a California
limited partnership (“Lessor”), and CAMELOT PARK FAMILY ENTERTAINMENT CENTER OF
PLEASANTON VALLEY, L.P., a California limited partnership (“Lessee”).

 

R E C I T A L S

 

A.            Lessor and Lessee entered into that certain
Ground Lease dated as of November 1, 1994 (the “Original Lease”) for the
lease of approximately 5.5 acres of land located in the City of Livermore,
County of Alameda, State of California, as described more particularly on Exhibit “A”
attached hereto and made a part hereof (the “Demised Premises”). The
Original Lease as amended by this First Amendment shall be referred to
hereinafter as the “Lease.”

 

B.            Lessee desires to obtain Lessor’s consent to
Lessee’s assignment of the Lease, all subleases thereunder, if any, and Lessee’s
leasehold interest in the Demised Premises to Festival Fun Parks, LLC, a
Delaware limited liability company (“FFP”). In addition, Lessee desires to
obtain Lessor’s consent in accordance with Article 10 of the Lease, to FFP
entering into a financing arrangement with Fleet Capital Corporation, and the
securing of all obligations, indebtedness and liabilities of FFP under such
financing arrangements by one or more deeds of trust or other instruments
secured by Lessee’s interest in the Lease, any sublease(s) thereunder, and a
leasehold interest in the Demised Premises (collectively, “Lessee’s Interest”).

 

In consideration of the
foregoing recitals, the mutual covenants contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Lessor and Lessee hereby agree as follows:

 

A
G R E E M E N T

 

1.             DEFINITIONS; EFFECT ON LEASE. All capitalized
terms used in this First Amendment which are not defined herein shall have the
same meanings set forth in the Original Lease.

 

2.             PERMITTED LEASEHOLD MORTGAGE. Subject to the
other terms and conditions set forth in the Lease and this First Amendment,
Lessor hereby consents in accordance with Section 10.1(g) of the
Lease to FFP entering into a Leasehold Mortgage in favor of Fleet Capital
Corporation in the form set forth in Exhibit “B” attached
hereto (“Fleet Leasehold Mortgage”). Lessor’s consent is subject to the
condition that the Fleet Leasehold Mortgage shall be subject to all of the
terms and conditions of the Lease as

 

1

 

who has such substantial experience within one hundred twenty (120)
days after the date of such party’s acquisition of the Lessee’s interest under
the Lease. The operational experience of the party acquiring the Lessee’s
interest in the Lease or the operator selected by such party shall be subject
to the prior written approval of Lessor which shall not be unreasonably
withheld, and which consent shall be granted or denied within thirty (30) days
after such acquiring party has provided Lessor with evidence of its operating
experience or the name and evidence of the experience of its selected operator.
Any conveyance of the Lessee’s interest in the Lease and the Demised Premises
by any party acquiring such interest by judicial foreclosure, exercise of a
power of sale in the Leasehold Mortgage or by deed in lieu of foreclosure shall
be in accordance with the terms of Article 9 of the Lease.

 

4.             CONSENT
TO ASSIGNMENT OF LEASE. Notwithstanding anything to the contrary contained in
the Lease, Lessor hereby consents to the assignment of the Lease, all subleases
thereunder, if any, and Lessee’s leasehold interest in the Demised Premises to
FFP, and the assumption by FFP of all of Lessee’s rights and obligations under
the Lease, all subleases thereunder and Lessee’s leasehold interest in the
Demised Premises pursuant to that certain Assignment and Assumption of Lease
attached hereto as Exhibit “C” (“Assignment and Assumption”). Lessor’s
consent to the Assignment and Assumption shall not release Lessee from any
payments or obligations arising prior to the effective date of the assignment
of the Lease. The Assignment and Assumption shall be effective as of the date
set forth therein.

 

5.             MODIFICATION;
ENTIRE AGREEMENT. This First Amendment may not be modified or terminated
orally, and constitutes the entire agreement between the parties with respect
to the subject matter hereof.

 

6.             SUCCESSORS
AND ASSIGNS. This First Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns (including, without limitation, FFP).

 

7.             CONSTRUCTION;
REAFFIRMATION. Except as expressly amended hereby, all of the terms and
conditions of the Original Lease shall remain unmodified and in full force and
effect. In the event of a conflict between the terms of the Original Lease and
the terms of this First Amendment, the terms of this First Amendment shall
govern and prevail. The Original Lease, as amended by this First Amendment, is
hereby reaffirmed.

 

8.             COUNTERPARTS.
This First Amendment may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which, together, shall constitute
one and the same instrument, binding on the parties hereto. The signature of
either party hereto to any counterpart hereof shall be deemed a signature
to, and may be appended to, any other counterpart hereof. Facsimile
signatures shall be fully binding
and effective for all purposes as if they were original signatures.

 

3

 

IN WITNESS WHEREOF, Lessor and Lessee have executed
this First Amendment as of the day and year first written above.

 

	
  LESSEE:

  	
  LESSOR:

  
	
   

  	
   

  
	
  CAMELOT PARK FAMILY

  	
  LIVERMORE AIRWAY BUSINESS PARK,

  
	
  ENTERTAINMENT CENTER OF

  	
  a California limited partnership

  
	
  PLEASANTON VALLEY, L.P.,

  	
   

  
	
  a California limited partnership

  	
  By:

  	
  /s/ TERRENCE ROSE

  	
   

  
	
   

  	
   

  	
  TRUSTEE

  
	
  By:

  	
  Camelot Park of Pleasanton Valley,

  	
   

  	
  Terrence and Trudy Rose 1979

  
	
   

  	
  L.P., a California limited

  	
   

  	
  Living Trust, as amended,

  
	
   

  	
  partnership, General Partner

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GERALD
  B. JOHNSON

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gerald
  B. Johnson

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
								

 

4

 

	
  RECORDING REQUESTED BY

  AND WHEN RECORDED MAIL TO: 

  Paul, Hastings, Janofsky & Walker LLP 

  555 South Flower Street, 23rd Floor 

  Los Angeles, California 90071 

  Attn: Rick S. Kirkbride, Esq.

   

  MAIL ALL TAX STATEMENTS TO:

  Festival Fun Parks, LLC 

  104 West Anapamu Street, Suite G 

  Santa Barbara, CA 93101

  	
   

  Recorded
  in Official Records, Alameda County

  Patrick O’Connell, Clerk Recorder

  22.00

   

  98264289
  08:30am 07/30/98

   

  005 420162 33 15 000062

  A20 6 7.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00

   

   

  

 

SPACE ABOVE THIS LINE
RESERVED FOR RECORDER’S USE

 

ASSIGNMENT AND ASSUMPTION
OF LEASE

 

THIS ASSIGNMENT AND
ASSUMPTION OF LEASE (this “Assignment”)
is made and entered into as of the 30th day of June, 1998 (the “Effective Date”), by and between CAMELOT
PARK FAMILY ENTERTAINMENT CENTER OF PLEASANTON VALLEY, L.P., a California
limited partnership (“Assignor”), and FESTIVAL FUN PARKS, LLC, a Delaware
limited liability company (“Assignee”), with reference to the following facts:

 

A.            Assignor is the tenant under that certain
lease dated November 1, 1994, entered into by and between Assignor and
Livermore Airway Business Park, a California limited partnership, as landlord (“Landlord”), as
amended by that certain First Amendment to Ground Lease entered into between
Assignor and Landlord as of the date but prior to the execution hereof (as
amended, the “Lease”), for the lease of certain real property
located in the City of Livermore, County of Alameda, State of California, and
more particularly described on Exhibit “A” attached hereto (the “Property”).

 

B.            Assignor desires to assign to Assignee, as of
the Effective Date, all of its right, title and interest in, to and under the
Lease, and Assignee desires to receive from Assignor such assignment and to
assume each and all of the obligations of Assignee as tenant under the Lease to
be performed following the Effective Date.

 

NOW THEREFORE, in
consideration of the promises and conditions contained herein, the parties
hereto do hereby agree as follows:

 

1.             Assignment.  Assignor
hereby assigns and transfers to Assignee all of its right, title and interest
in, to and under the Lease, effective as of the Effective Date.

 

2.             Assumption.  Assignee hereby assumes, effective as of the
Effective Date, all obligations of Assignor as Tenant under the Lease which
first arise from and after the Effective Date and agrees to be bound by and perform all
of Tenant’s covenants, duties and obligations which first arise thereunder from
and after the Effective Date.

 

 

Notwithstanding the foregoing, Assignee shall
have no obligation, liability or responsibility for any liability, cost,
expense or obligation of Assignor under the Lease arising prior to the
Effective Date, or attributable to such period.

 

3.             Successors and
Assigns.  This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.

 

4.             Attorneys’ Fees.  If any dispute should arise between the
parties hereto regarding the terms or subject matter of this Assignment or the
enforcement or breach of such terms, then the party prevailing in such dispute,
whether by out-of-court settlement or final judicial determination, shall be
entitled to recover from the non-prevailing party all costs and expenses of
such dispute incurred by such prevailing party, including, without limitation,
reasonable attorneys’ fees.

 

5.             Interpretation.  This Assignment shall be construed and
enforced in accordance with the laws of the State of California.

 

IN WITNESS WHEREOF, the
undersigned have executed this Assignment as of the date first above written.

 

“ASSIGNOR”

 

CAMELOT PARK FAMILY ENTERTAINMENT 

CENTER OF PLEASANTON VALLEY, L.P.,

a California limited partnership

 

	
  By:

  	
  Camelot Park of Pleasanton
  Valley, L.P.,

  a California limited partnership,

  General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Camelot Park of Pleasanton
  Valley, Inc.,

  a California corporation,

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ GERALD B. JOHNSON

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Gerald B. Johnson

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

2

 

“ASSIGNEE”

 

FESTIVAL FUN PARKS, LLC,

a Delaware limited liability company

 

	
   

  	
  FEC
  Holding Company, Inc., to sole member

  
	
   

  	
   

  
	
  By:

  	
  /s/ MARK
  C. MONACO

  	
   

  
	
   

  	
  Name:

  	
  Mark
  C. Monaco

  	
   

  
	
   

  	
  Title:

  	
  VICE
  PRESIDENT

  	
   

  

 

3

 

98264289

 

EXHIBIT “A”

 

LEGAL DESCRIPTION OF
PROPERTY

 

That certain property located in the City of Livermore, County of
Alameda, State of California, described as follows:

 

PARCEL 1, PARCEL MAP 6232, FILED FEBRUARY 27, 1995, IN BOOK 216 OF
PARCEL MAPS, PAGES 86 - 87, ALAMEDA COUNTY RECORDS.

 

ASSESSOR’S PARCEL NO. 904-0004-054

 

4

 

98264289

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )

  
	
  COUNTY OF ORANGE

  	
  )

  

 

On July 22, 1998, before me, Dorothy Schaus, a
Notary Public in and for said State, personally appeared Gerald B. Johnson,
personally known to me to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his 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.

 

	
  Signature

  	
  /s/ DOROTHY SCHAUS

  	
  (Seal)

  

 

	
   

  	
   

  	
  DOROTHY SCHAUS 

  Commission # 1158638 

  Notary Public - California 

  Orange County 

  My Comm. Expires Oct 13, 2001

  

 

 

98264289

 

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 ackowledged to me that he executed the same.

 

	
   

  	
  /s/ ELLEN S. WISSEMANN

  	
   

  
	
   

  	
  Notary
  Public

  

 

 

ELLEN S. WISSEMANN

NOTARY PUBLIC, STATE OF NEW YORK
NO. 01WI5082656
QUALIFIED IN NASSAU COUNTY
COMMISSION EXPIRES JULY 28, 1999Exhibit
10.20

 

MODESTO GROUND LEASE

 

This Ground Lease is made on February
9, 1993, between Berberian Trust Properties (hereinafter called “Lessor”),
and Camelot Park Family Entertainment Center, Inc., a California corporation,
(hereinafter called “Lessee”).

 

Lessor leases to Lessee, and Lessee hires from Lessor, the premises
hereinafter described.

 

ARTICLE I

 

PREMISES, TERM AND POSSESSION

 

Section 1.1.            Premises.

 

The premises consists of approximately 6 acres (280,266 square feet) of
the existing 10 acre parcel known as Assessors Parcel No. 078-0915-370 in the
county of Stanislaus, state of California. The premises are more particularly
described and set forth in Exhibit A attached hereto and incorporated herein by
this reference. The premises include any appurtenances and improvements.

 

Section 1.2.            Term.

 

The term of this Lease shall commence on March 1, 1993, and expire at
midnight on August 31, 2027, (34.5 years later, 414 months) unless extended or
sooner terminated as provided for in this Lease—See addendum dated 9/10/96.

 

Section 1.3.            Possession.

 

Possession of the premises shall be delivered to Lessee at the
beginning of the term.

 

ARTICLE II

 

RENT

 

Section 2.1.            Rent.

 

Lessee shall pay to Lessor the following sums: $165,357.00 to Lessor as
minimum annual net rent, payable in advance, in monthly installments of
$13,779.75 each on the first day of each month beginning the earlier of (a) six
(6) months from the date Lessee obtains the last necessary governmental permit
to commence construction of the improvements; or (b) the date which Lessee
opens the premises for business to the general public. Said date shall be
hereafter referred to as the “Rent Commencement Date”. This annual rent is
subject to adjustments as provided in Section 2.2 below; however, it shall
never be less than $165,357.00 per annum. Provided however that if Lessee fails
to obtain all governmental permits within eight (8) months of the date this
Lease

 

 

is signed, or this Lease agreement shall automatically terminate, and
Lessor shall refund Lessee’s deposit.

 

Section 2.2.            Adjustment of Annual Rent.

 

A.       Cost
of Living Adjustments. The minimum annual net rent shall be adjusted upward
or downward on the anniversary date of the commencement of the Lease, every
three (3) years beginning on the Rent Commencement Date, referred to below as
the “Adjustment Date”, according to the following calculation:

 

The base for computing the adjustment is the
annual average index figure for the Rent Commencement Date (the “Index Date”),
as shown in the Consumer Price Index, all Urban Consumers - San Francisco -
Oakland (CPI-U) based on the year 1982 - 1984 - 100, as published by the U.S.
Department of Labor’s Bureau of Labor Statistics. The base figure for the Index
Date and the date of the Rent Commencement Date will be memorialized by an
addendum to this Lease signed by Lessor and Lessee.

 

The index for the Adjustment Date shall be
computed as a percentage of the base figure. For example, assuming the base
figure on the Index Date is 110 and the index figure on the Adjustment Date is
121, the percentage to be applied is 121/110 -1.10 = 110 percent. That
percentage shall be applied to the initial annual net rent, provided, however,
that in no three (3) year period shall the annual rent increase more than fifteen
(15) percent from the previous three-year period. Nor shall the minimum monthly
rent be less than the initial minimum monthly rent.

 

The index for the Adjustment Date shall be
the one reported in the U.S. Department of Labor’s newest comprehensive official
index then in use and most nearly answering the foregoing description of the
index to be used. If it is calculated from a base different from the base year
1982-1984 = 100 used for the base figure above, the base figure used for
calculating the adjustment percentage shall first be converted under a formula
supplied by the Bureau.

 

If the described index shall no longer be
published, another index generally recognized as authoritative shall be
substituted by agreement of the parties. If they are unable to agree within 30
days after demand by either party, the substitute index shall, on application
of either party, be selected by the chief officer of the San Francisco regional
office of the Bureau of Labor Statistics or its successor.

 

B.        Adjustment
Based on Fair Market Value.
At the option of Lessor, the minimum annual rent shall be adjusted on the
fifteenth (15th) and thirtieth (30th) anniversary dates of the Rent
Commencement Date of the Lease, referred to below as the Rent Adjustment Dates,
to the greater of: (1) an increase proportionate to one-half of the cumulative
increase in the CPI-U index over the period from the Rent Commencement Date to
the respective Rent Adjustment Date, or (2) the rent derived from the fair
market value

 

2

 

reappraisal procedure calculated as set forth in the paragraphs below.

 

The parties written agreement within ninety
(90) days before the applicable Rent Adjustment Dates shall be a conclusive
determination between the parties of the fair market value for the period to
which the adjustment applies. If the parties have not so agreed by the
applicable Rent Adjustment Dates, the determination shall be made by appraisal
as more specifically provided in Section 2.2 (c) below. If Lessor has not
negotiated a fair market value rent adjustment at least ninety (90) days prior
to the Rent Adjustment Date, then Lessor shall have initiated appraisal at
least seventy five (75) days before the applicable Rent Adjustment Date. If
Lessor fails to initiate the appraisal, no adjustment shall be made until the
period to which the next Rent Adjustment Date applies.

 

The rent as adjusted shall be equal to ten
percent (10%) of the fair market value of the leased land with a use
restriction as a family amusement park, without any improvements on the
premises except for improvements made at Lessor’s cost. Determination of the
fair market value shall be based on real property unimproved, except for
improvements made at Lessor’s cost with a use restriction as a family amusement
park or such other higher use as may actually be conducted on the premises,
giving consideration to the freeway adjacent location of the premises, on the
applicable Rent Adjustment Date without taking the leasehold into account.

 

If the appraisal determination of adjusted
rent is made after the applicable Rent Adjustment Date, Lessee shall continue
to pay rent at the rate applicable to the preceding period until the adjustment
rate is determined. The party indebted shall, promptly after determination, pay
any difference for the period affected by the adjustment.

 

C.        Appraisal. If Lessor initiates appraisal, then within
10 days each party, at its cost and by giving notice to the other party, shall
appoint a real estate appraiser with at least five (5) years’ full time
commercial appraisal experience in the area in which the premises are located
to appraise the fair market value of the land under the parameters of
subsection (B) above. If a party does not appoint an appraiser within ten (10)
days after the other party has given notice of the name of its appraiser, the
single appraiser appointed shall be the sole appraiser and shall set the fair
market value of the land. If the two appraisers are appointed by the parties as
stated in this paragraph, they shall meet promptly and attempt to set the fair
market value of the land. If they are unable to agree within thirty (30) days
after the second appraiser has been appointed, they shall attempt to select a
third appraiser meeting the qualifications stated in this paragraph within ten
(10) days after the last day the two appraisers are given to set the fair
market value of the land. If they are unable to agree on the third appraiser,
either of the parties to this lease by giving ten (10) days’ notice to the
other party can file

 

3

 

a petition with
the American Arbitration Association solely for the purpose of selecting a
third appraiser who meets the qualifications stated in this paragraph. Each party
shall bear half the cost of the American Arbitration Association’s appointing
the third appraiser and of paying the third appraiser’s fee. The third
appraiser, however selected, shall be a person who has not previously acted in
any capacity for either party.

 

Within thirty (30) days after the selection of the third appraiser, a
majority of the appraisers shall set the fair market value of the land. If a
majority of the appraisers are unable to set the fair market value of the land
within the stipulated period of time, the three appraisals shall be added
together and their total divided by three; the resulting quotient shall be the
fair market value of the land.

 

If, however, the low appraisal and/or the high appraisal are more than
ten percent (10%) lower and/or higher than the middle appraisal, the low
appraisal and/or the high appraisal shall be disregarded. If only one appraisal
is disregarded, the remaining two appraisals shall be added together and their
total divided by two; the resulting quotient shall be the fair market value of
the land. If both the low appraisal and the high appraisal are disregarded as
stated in this paragraph, the middle appraisal shall be the fair market of the
land.

 

After the fair market value of the land has been set, the appraisers
shall immediately notify the parties.

 

Section 2.3.            Security
Deposit

 

Upon satisfaction of conditions contained in Lessee’s offering circular
to investors for the release of escrowed investment funds, but not later than
90 days after the date of execution of this Lease, Lessee shall deposit with
Lessor the sum of $13,779.75. Said security deposit will be applied by Lessor
to the first month’s rent; provided however that if Lessee does not obtain all
necessary zoning for the family amusement park and all the necessary
governmental permits within 240 calendar days after the date first written
above, the deposit shall immediately be refunded by Lessor to Lessee and Lessee
shall be relieved of all obligations under this Lease and the Lease shall be terminated.
Lessee shall use its best efforts to obtain all necessary zoning and permits.

 

Section 2.4.            Taxes
and Other Governmental Charges.

 

A.       Payment of Taxes.
Lessee shall pay before delinquency during the term directly to the taxing
authorities, as additional rent, all taxes, assessments, levies and other
governmental charges of every description, whether general, special, ordinary,
extraordinary or otherwise (individually “imposition” and collectively “impositions”)
levied on or assessed against the premises, improvements located on the
premises (hereinafter defined), personal property located on or in the premises
or an

 

4

 

improvement, the leasehold estate, or any subleasehold estate, whether
belonging to or chargeable against Lessor or Lessee.

 

Within thirty (30) days after request of
Lessor, Lessee shall furnish to Lessor a copy(s) of the receipted tax bill(s)
evidencing the payment of the imposition in question.

 

Lessee shall not be required to pay any
municipal, county, state, or federal income or franchise taxes of Lessor, or
any municipal, county, state or federal state, succession, inheritance, or
transfer taxes of Lessor, nor shall Lessee be liable for any increase in real
property taxes that result from a change of ownership of the property. Provided
however, that the limitation on Lessee’s liability for increase in real
property taxes resulting from a change of ownership of the property shall lapse
upon the Lessee’s assignment of its leasehold interest to an unaffiliated and
unrelated third party assignee and its release and discharge hereunder. If at
any time during the term the State of California or any political subdivision
of the state, including any county, city, public corporation, district, or any
other political entity or public corporation of this state, levies or assesses
against Lessor a tax, fee, or excise on rents, on the square footage of the
premises, on the act of entering into this Lease, or on the occupancy of
Lessee, or any other tax, fee, or excise, however described, as a direct
substitution in whole or in part for any real property taxes, Lessee shall pay
before delinquency that tax, fee, or excise on rents.

 

Lessee’s liability to pay impositions and
taxes under this Section 2.4 shall be prorated on the basis of a 365-day year
to account for any fractional portion of a fiscal tax year included in the term
at its commencement and at its end.

 

B.        Creation
of Special Assessment Districts. If during the term any governmental subdivision or agency shall
undertake to create an improvement or special assessment district, the proposed
boundaries of which shall include the premises, Lessor and Lessee shall each be
entitled to support or oppose the creation of such district or inclusion of the
premises therein or both, and to appear in any proceeding relating thereto as
their respective interest in the premises or otherwise may appear. Should
either party receive any notice or other information relating to the proposed
creation of any such district, the boundaries of which would include the
premises,, such party shall promptly notify the other party and deliver to such
other party a copy of the notice and/or information.

 

C.        Right
to Contest Taxes. Lessee may
contest the validity or amount of any imposition agreed to be paid by Lessee
and/or any assessed valuation upon which such imposition is or will be based
provided Lessee protects Lessor and the premises from any lien by adequate
surety bond or other appropriate security. If Lessee undertakes any such
contest, it shall so notify Lessor. Should Lessee be unsuccessful in any such
contest, such imposition and any

 

5

 

interest and/or
penalties resulting therefrom shall be immediately paid to the taxing
authorities in question. Lessee hereby agrees to hold Lessor and the premises
harmless from all costs and expenses that may result from Lessee’s contest of
such imposition as herein provided. Lessor shall not be required to join in any
proceeding or contest brought by Lessee unless the provisions of any law
require that the proceeding or contest be brought by or in the name of the
Lessor or any owner of the premises. In that case, Lessor shall join in the
proceeding or contest or permit it to be brought in Lessor’s name, all costs
thereof including Lessor’s attorneys’ fees to be borne by Lessee.

 

D.        Combined Assessment.
If the premises are assessed with other property of Lessor for purposes of
property taxes, assessments, or other ad varolem or improvement levies, all
taxes imposed on the entire parcel of which the premises are a part shall,
until the premises are separately assessed, be prorated and Lessee shall pay
that fraction of the entire tax computed as a proportion of the total area.

 

Section 2.5.            Payment
of Rent.

 

All rent and other amounts payable by Lessee hereunder, shall be paid
to Lessor at the address set forth in this Lease. This Lease shall be deemed
and construed to be a triple net lease, except as otherwise provided herein.

 

ARTICLE III

 

USES OF PREMISES AND IMPROVEMENTS

 

Section 3.1.            Permitted
Uses.

 

Lessee shall have the right to use and to permit the use of the
premises and improvements hereafter constructed therein for a family oriented
amusement park and for such other lawful uses as Lessor shall consent to in
writing, which consent may not be withheld unreasonably. As used herein “a
family oriented amusement park” shall include, but not be limited to, arcades,
picnic facilities, video games, miniature golf, go-carts, motor raceway,
theaters, batting cages, bumper boats, fish pond, games, radio-controlled
vehicles, ancillary food services, related activities and attractions, and all
future games and uses not inconsistent with family entertainment (“permitted
uses”). As used herein “improvements” means and includes, without limitation,
all buildings, paving and other physical structures on the premises; all
landscaping, excavations, planting and earth contours placed by human design on
the premises, and all fixtures, including trade fixtures of sublessees that
cannot be removed without causing structure damage. Lessee may construct
demolish, remove, replace, alter, relocate, reconstruct or add to improvements
as provided in Section 4.1.

 

6

 

Section 3.2.            Restrictions,
Easements, Zoning Changes and Use Permits.

 

The parties acknowledge that in order for Lessee to carry out its
intended use of the premises, it may be necessary, desirable, or required to
obtain additional use, zoning, subdivision or other land use permits or
approvals relating to any part of the premises, including without limitation
permits relating to the permitted uses. Lessor agrees, from time to time on the
request of Lessee and at no cost to Lessor, to execute such documents,
petitions and authorizations as may be appropriate or required in order to
obtain such land use permits and approvals.

 

Lessee may enter into agreements restricting use of, and granting
easements over the premises, provided they are limited to the term of this
Lease, and Lessor agrees to execute any such agreements at the request of
Lessee consistent with the use of the premises. Lessor grants to Lessee the
right to grant to public utilities or public service corporations, for the
purpose of serving only the premises, rights of way or easements on or over the
premises for poles or conduits, or for underground services or both for
telephone, electricity, water, sanitary or storm sewers or both, and for other
utilities and municipal or special districts.

 

Section 3.3.            Signs.

 

Lessee shall be allowed to install all signs approved by appropriate
governmental agencies anywhere on the premises.

 

Section 3.4.            Exclusive
Use.

 

Lessor agrees that it shall not enter into any other lease within a
five (5) mile radius (as measured from the air) for a family oriented amusement
park.

 

Section 3.5.            Special
Rules Regarding Use.

 

Lessee agrees to adopt and post on the demised premises rules of the
park and to use its best efforts to enforce these rules at all times, so long
as the rules remain legally enforceable. The rules, subject to reasonable
changes from time to time in the discretion of management, and subject to
Lessor’s reasonable approval, shall include the following: “no loitering; no
foul language; no alcoholic beverages or drugs; no smoking in any area; no pets
(guide dogs for deaf or blind excepted) ; no team sport club jackets/school
jackets only; no headbands or bandannas; no skateboards; shirt and shoes
required; shirts must be buttoned; stay on paved walkways; obey all signs; we
reserve the right to refuse admittance, and to expel unruly persons at the
discretion of management.” If Lessee fails to enforce the foregoing rules or is
negligently lax in enforcing the rules which are legally enforceable, then Lessor
and Lessee agree to submit the issue of reasonable measures of enforcement to
arbitration as provided below.

 

7

 

Section 3.6.            Arbitration.

 

The issues to be submitted to the arbitrator are the issue of whether
or not Lessee was negligently lax in its enforcement of the rules, and what
measures should be reasonably adopted by Lessee for enforcing the rules,
recognizing there may be isolated events which occur that are outside of the
Lessee’s ability to control, regardless of Lessee’s use of due diligence and
care in such enforcement. The arbitrator shall have the authority to award to
the prevailing party his reasonable attorneys’ fees and charge the
non-prevailing party with the same and with all costs of arbitration.

 

In the event there are successive arbitrations required within any
twenty-four (24) month period and the Lessee is found to have negligently
breached its responsibilities hereunder in two successive such arbitrations,
the arbitrators may impose in addition to the enhanced rule enforcement
procedures that they may order, such penalty as they may deem necessary to
achieve compliance with these rules, not to exceed ten percent (10%) of the
base rent for the period of twelve (12) months following each such arbitration
finding that the Lessee failed to act with reasonable diligence in enforcing
its rules, in addition to the award of costs and fees provided above.

 

In the event either party desires arbitration, the parties may agree
upon a mutually acceptable arbitrator, or if they are unable to agree upon such
arbitrator within ten (10) days of the first written request therefore, they
shall proceed pursuant to the rules of the American Arbitration Association, or
either party may petition the presiding judge of the Superior Court of
California for the County of Stanislaus to appoint an arbitrator. Such
arbitration shall allow the usual rules of discovery involved in civil
litigation, provided the arbitration must commence within sixty (60) days of the
appointment of the arbitrator and be resolved within thirty (30) days
thereafter. The award of the arbitrator shall be binding upon both parties and
enforceable by court order.

 

In the event there are two successive arbitration proceedings in which
the arbitrator finds in favor of the Lessee, that Lessee has acted with
reasonable diligence in enforcing the rules, then the arbitrator may award to
Lessee compensation in addition to his reasonable attorneys’ fees and costs in
the form of a rent reduction not to exceed ten percent (10) of the base rent
for the following twelve (12) months for each successive ruling in favor of the
Lessee.

 

8

 

ARTICLE IV

 

IMPROVEMENTS

 

Section 4.1.            Lessee’s
Duty to Construct New Improvements.

 

Within sixty (60) days after all governmental approvals have been
obtained which are necessary for the construction and operation of a family
oriented amusement park and for the construction of all the improvements set
forth on Exhibit B, Lessee shall comply with the conditions of major
construction below and shall commence the construction of the improvements set
forth on Exhibit B.

 

Section 4.2.            Lessee’s
Election to Construct New Improvements.

 

At any time during the term of this Lease, Lessee may, but is not
obligated to, construct or otherwise make new improvements on any part or all
of the premises and to demolish, remove, replace, alter, relocate, reconstruct,
or add to any then existing improvements in whole or in part, and to modify or
change the contour or grade, or both, of the land, provided Lessee is not then
in default under any condition or provision of this Lease and provided the
improvements following the work are at least equal to the value to any
improvements as they were before being demolished, removed, replaced, altered,
relocated, reconstructed, modified or changed. All salvage shall belong to
Lessee.

 

Section 4.3.            Conditions
and Covenants of Major Construction.

 

A.       Lessee shall comply with
all the following conditions and covenants and shall do so before any major
work or construction, alteration, or repair as defined in Section 4.1 or 4.2
above, is commenced on the premises, and before any building materials have
been delivered to the premises by Lessee or under Lessee’s authority, or
procure Lessor’s written waiver of the condition(s) or covenant(s) specified in
the waiver:

 

1.         Deliver to Lessor two (2)
sets and obtain Lessor’s approval of preliminary construction plans and
specifications of such work including, but not limited, to preliminary grading
and drainage plans, soil tests, utilities, sewer and service connections,
locations of ingress and egress to and from public thoroughfares, curbs,
gutters, parkways, street lighting, designs and locations for outdoor signs, storage
areas and landscaping, all sufficient to enable potential contractors and
subcontractors to make reasonably accurate bid estimates and to enable Lessor
to make an informed judgment about the design and quality of construction.

 

Lessor shall not unreasonably withhold approval of preliminary plans
and specifications. Lessor shall communicate its approval or disapproval by
notice to Lessee, and disapproval shall be accompanied by specification of the
grounds for disapproval, provided that Lessor’s failure to provide to Lessee
written

 

9

 

disapproval within
ten (10) days after receipt of the plans shall be conclusively considered to be
approval.

 

Following Lessor’s first or any subsequent disapproval, Lessee may
elect (i) to submit revised plans and specifications or (ii) to give notice
contesting the reasonableness of Lessor’s disapproval. A contest of
reasonableness shall be determined by arbitration under the jurisdiction of the
American Arbitration Association in accordance with the Commercial Rules of
such Association. If the reasonableness of Lessor’s disapproval is sustained,
then Lessee shall perform as in (i) above; if it is not sustained, the plans
and specifications shall be deemed approved.

 

2.         Deliver to Lessor the
written approval of the plans and specifications by the financial institution
that shall have made the commitment for financing such work, if any.

 

3.         Deliver to Lessor true
copies of all governmental permits and authorizations required for such work,
and one (1) complete set of final plans and specifications and working drawings
consistent with the previously approved preliminary plans and specifications.

 

4.         Notify Lessor of Lessee’s
intention to commence such work at least twenty (20) days before commencement
thereof or delivery of any materials. The notice shall specify the approximate
location and nature of the intended improvements. Lessor shall have the right
to post and maintain on the premises any notices of non-responsibility provided
for under applicable law and to inspect the premises in relation to the
construction at all reasonable times.

 

5.         Deliver to Lessor true
copies of all documents evidencing the commitment of financing for the work. “Financing”
includes both the construction (or interim) financing (loan); the take-out
(also called permanent or long-term) financing (loan); and/or satisfactory
proof of Lessee’s own capital funding. Lessee shall also complete all
construction lien-free, except for any lien in favor of any entity providing
the take-out financing.

 

6.         Deliver to Lessor (i)
certificates of insurance evidencing coverage for builder’s risk, (ii) evidence
of workmen’s 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 Lessor or the premises, and (iii) evidence that Lessee has
paid or caused to be paid all premiums for the coverage described above in this
subparagraph 6 and any increase in premiums on insurance provided for in
Article VI on insurance sufficient to assure maintenance of all insurance above
during the anticipated course of the work. Lessee shall maintain and keep in
force and pay all premiums required to maintain and keep in force all insurance
above at all times during which such work is in progress.

 

10

 

B.        Completion of
Construction. Once work is begun as required herein Lessee shall with
reasonable diligence prosecute to completion all construction of improvements,
subject to weather availability of labor and materials, additions or
alterations. All work shall be performed in a good and workmanlike manner,
shall substantially comply with plans and specifications submitted to Lessor as
required herein and shall comply with all applicable governmental permits,
laws, ordinances and regulations.

 

C.        Notice of Completion.
On completion of any substantial work of improvement during the term, Lessee
shall file or cause to be filed a notice of completion. Lessee hereby appoints
Lessor as Lessee’s attorney-in-fact to file the Notice of Completion on Lessee’s
failure to do so after the work of improvement has been substantially
completed.

 

D.        Non-Liability of Lessor.
Lessor’s approvals as required by this Section 4.3 shall not make Lessor
responsible for the improvement with respect to which an approval is given or
the construction thereof, and Lessee shall defend and indemnify Lessor against
all liability and claims of liability for damage or injury to persons or
property or for death of persons arising from or in connection with such
improvement or construction.

 

E.        Lessee’s Rights
Regarding Improvements. After the completion of any new construction,
Lessee shall have the right to alter, reconstruct, modify, remodel, relocate,
remove and demolish all or any part of the improvements located on the premises
and any other improvements located on the premises thereafter, and further, to
locate and construct (all in accordance with the provisions of this Lease including,
without limitation, this Article IV) any other improvements of any type or kind
on the premises; provided, however, that no such action shall be taken which
will substantially reduce the value of the improvements unless within
reasonable time the improvements, when completed, will have a fair market value
at least equal to the fair market value of the improvements immediately prior
to the taking of such action.

 

Section 4.4.            Maintenance;
Repairs; Alterations; Reconstruction.

 

Subject to the rights of Lessee set forth in Sections 4.1 and 4.2,
Lessee, at Lessee’s sole cost and expense, shall maintain the premises and all
improvements located thereon, throughout the term of this Lease, in a neat,
sanitary manner and, in accordance with all applicable laws, ordinances,
orders, rules, regulations and requirements of (i) federal, state, county,
municipal and other governmental agencies having or claiming jurisdiction; (ii)
the insurance underwriting board or insurance inspection bureau having or
claiming jurisdiction; and (iii) all insurance companies insuring all or any
part of the premises or improvements or both. Without limiting the generality
of the foregoing Lessee shall perform each and every obligation set forth in
clauses (1) through (5) of Section 1941.2(a) of the California Civil Code, any

 

11

 

amendment thereof
or any law of similar import that may hereafter be enacted.

 

Except as provided in Section 4.7, Lessee shall promptly and diligently
repair, restore and replace as required to maintain or comply as above, or to
remedy all damage to or destruction of all or any part of the improvements,
resulting wholly or in part from causes required by this Lease to be covered by
fire or extended coverage insurance. There shall be no abatement of rent based
on a complete or partial destruction of the premises so long as this Ground
Lease is in force.

 

The completed work of maintenance, compliance, repair, restoration or
replacement shall be equal in value, quality and use to the condition of the
improvements before the event giving rise to the work, except as expressly
provided to the contrary by this Lease. Lessor shall not be required to furnish
any services or facilities or to make any repairs or alterations of any kind in
or on the premises. Lessor’s election to perform any obligations of Lessee
under this Lease on Lessee’s failure or refusal to do so shall not constitute a
waiver of any right or remedy for Lessee’s default, and Lessee shall promptly
reimburse, defend and indemnify Lessor against all liability, loss, cost, and
expense arising from it.

 

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 improvement, or as limiting provisions relating
to condemnation or damage or destruction during the final year or years of the
term. No deprivation, impairment or limitation of use resulting from any event
or work contemplated by this paragraph shall entitle Lessee to any offset,
abatement or reduction in rent nor any termination or extension of the Lease.

 

In determining whether Lessee had acted promptly as required under the
foregoing paragraph, one of the criteria to be considered is the availability
of any applicable insurance proceeds.

 

Section 4.5.            Right
to Contest Government to Order.

 

Lessee has the right to contest by appropriate judicial or
administrative proceeding, without cost or expense to Lessor, the validity or
application of any law, ordinance, order, rule, regulation or requirement
(hereinafter called law) that Lessee repair, maintain, alter or replace the
improvements in whole or in part, and Lessee shall not be in default for
failing to do such work until a reasonable time following final determination
of Lessee’s contest. Lessor may, but is not required to, contest any such law
independently of Lessee. Lessor may, and on Lessee’s notice of request shall,
joint in Lessee’s contest.

 

12

 

Section 4.6.            Major
and Minor Distinguished.

 

Lessor’s approval is not required for Lessee’s minor repairs,
alterations or additions. “Minor” means a construction cost not exceeding
$50,000. Constructions costs includes the cost of labor, materials, and a
reasonable profit to a general contractor and subcontractors for any demolition
and any removal of existing improvements or parts of improvements, as well as
for preparation, construction and completion of all new improvements, parts of
improvements, reconstructions, maintenance and repairs. The dollar amounts
stated above shall be adjusted by the percentage change in the index described
in Section 2.2(A).

 

“Major” repairs, alterations or additions are those not defined as
minor above. For major repairs, alterations or additions, Lessee shall comply
with all conditions of major construction elsewhere in this Lease.

 

If Lessee’s proposed work does not substantially alter the
then-existing use of the premises, Lessor’s approval of plans and specifications
shall not be required. If Lessor’s approval is required, the provisions
relating to Lessor’s approval and the conditions of major construction shall
apply.

 

Section 4.7             Damage
or Destruction during Final Years of Term.

 

Lessee is relieved from the obligation to, but may, repair, restore or
reconstruct improvements damaged or destroyed during the final five (5) years
of the term if (1) the work of repairing, restoring or reconstructing would
constitute a “major” repair or alteration as defined above; and (2) Lessee
complies with all of the following conditions:

 

1.         Lessor gives notice of
the damage or destruction promptly but not later than thirty (30) days after
the event, detailing facts that qualify the casualty under this provision;

 

2.         Is not in default under
any provision or condition of this Lease;

 

3.         Within thirty (30) days
after giving the notice above, effectively transfers to Lessor all right, title
and interest in and to this Lease;

 

4.         Pays in full, or has paid
in full, any outstanding indebtedness incurred by Lessee and secured by an
encumbrance or encumbrances on the leasehold and any fixtures or improvements
attached thereto;

 

5.         Delivers possession of
the premises to Lessor and quit claims all right, title and interest in the
land and improvements if, and promptly after, ceasing to do business on the
premises;

 

13

 

6.         Causes to be discharged
all liens and encumbrances resulting from any act or admission of Lessee; and

 

7.         Relinquishes all
remaining options to extend or renew the Lease, provided that the giving of
notice of damage or destruction as a condition of relief from the obligation to
repair, restore or reconstruct shall conclusively be construed as such
relinquishment.

 

Section 4.8.            Ownership
of Improvements.

 

All improvements located on the premises shall be the sole property of
Lessee and shall remain the property of Lessee throughout the term of this
Lease. Upon the expiration or termination of this Lease, Lessee shall have the
right to remove any or all fixtures or improvements or both and Lessee shall
have the obligation to remove such fixtures or improvements if requested by
Lessor, provided all resultant injuries to the premises and remaining
improvements are completely remedied by Lessee and Lessee complies with Lessor’s.
reasonable requirements respecting the resultant appearance.

 

Section 4.9.            Mechanics’
and Other Liens.

 

Lessee shall pay or cause to be paid the total cost and expense of all
works of improvement as that phrase is defined in the applicable mechanics’
lien law in effect as of the date of this Lease.

 

Lessee shall not permit any mechanic’s, materialman’s, contractor’s,
subcontractor’s or other lien arising from any work of improvement, however it
may arise, to stand against the premises or any improvement thereon. If any
such lien shall be filed against the premises or improvements. Lessee shall
cause the same to be discharged within ten (10) days after actual notice of
such filing, by payment, deposit or bond. If Lessee shall fail to discharge any
such lien, Lessor may, but shall not be obligated to, discharge the same and
any amount so paid or deposited by Lessor and all expenses so incurred by
Lessor, including reasonable attorneys’ fees, shall become immediately due and
payable by Lessee to Lessor together with interest at the maximum rate then
permitted by law. Lessee may in good faith and at Lessee’s own expense contest
the validity of any such asserted lien, claim or demand, provided Lessee has
furnished the bond required in Section 3143 of the California Civil Code, any
amendment thereof or any law or similar import hereafter enacted for providing
a bond freeing a premises from such a lien claim.

 

14

 

ARTICLE V

 

ASSIGNMENT, SUBLETTING, ENCUMBRANCE AND RIGHT OF FIRST REFUSAL

 

Section 5.1             Assignment.

 

Lessee shall not assign, sell or otherwise transfer (collectively “assign”
and the act thereof “assignment”) its interest in this Lease or in the estate
created hereby, in whole or in part, unless:

 

1.         The proposed assignment
is first approved in writing by Lessor, which approval shall not be
unreasonably withheld;

 

2.         There is no existing
default on the part of Lessee in performance or observance of any of the provisions
hereof;

 

3.         The assignment is in
writing, is duly executed and acknowledged by Lessee and the assignee, is in a
form satisfactory to Lessor, provides that assignee assumes and agrees to carry
out and perform all of the provisions hereof on the part of Lessee to be
carried and out and performed as a direct obligation of Lessor; and

 

4.         An executed original of
such assignment is delivered to Lessor.

 

Section 5.2.            Release.

 

Lessee shall remain liable hereunder unless its assignee has a net
worth at least equal to that of Lessee and the assignee shall have a minimum
net worth of $250,000 at the time of the assignment.

 

Section 5.3.            Subletting.

 

Lessee shall have the right at any time and from time to time during
the term to sublet all or any part or parts of the improvements on the
premises, provided that Lessee shall remain primarily obligated to perform
Lessee’s obligations hereunder and provided that the following provisions are
complied with:

 

A.       Each sublease shall contain
a provision, satisfactory to Lessor and to each leasehold mortgagee
(hereinafter defined) having an interest at the time the sublease is executed,
requiring the sublessee to attorn to Lessor or, in the event of any proceeding
to foreclose any leasehold mortgage, to the leasehold mortgagee, or any person
designated in a notice from a leasehold mortgage, if Lessee defaults in the
payment of rent and other sums hereunder and if the sublessee is notified of
Lessee’s default in the payment of rent and other sums hereunder and instructed
to make subtenant’s rental payments to Lessor or to such leasehold mortgagee or
to such designated person. No sublease shall allow a sublessee to prepay
monthly rent more than one month in advance.

 

15

 

B.        Lessee
shall, promptly after execution of each sublease, notify Lessor of the name and
mailing address of the subtenant and, shall, on demand, permit Lessor to
examine and copy the sublease.

 

Section 5.4.            Right to Encumber Leasehold Interest.

 

Lessee shall have right, upon approval by
Lessor, which approval shall not be unreasonably withheld, to encumber Lessee’s
interest in and to Lessee’s trade fixtures and equipment, and to hypothecate
Lessee’s leasehold interest under this Lease, to secure financing thereof;
provided, however, that any such financing shall be subordinate to this Lease
and each of the Lessor’s rights hereunder. Lessee shall have no right by such
financing to in any way affect or encumber Lessor’s interest as Lessor under
this Lease. Upon approval of such financing by Lessor, Lessor agrees to execute
a Landlord’s Consent and/or Landlord’s Estoppel Certificate as may be required
by the entity providing the financing in a form substantially similar to the
Landlord’s Consent and Landlord’s Estoppel Certificate attached hereto as
Exhibit C and Exhibit D, respectively.

 

ARTICLE VI

 

INDEMNITY AND INSURANCE

 

Section 6.1.            Indemnity.

 

Lessor shall not be liable and Lessee shall
defend and indemnify landlord against all liability and claims of liability for
damage or injury to person or property on or about the premises from any cause
arising during the term hereof, irrespective of whether the claim is asserted
during or after the term. Lessee waives all claims against Lessor for damage or
injury to person or property arising or asserted to have arisen from any cause
whatsoever.

 

Section 6.2.            Fire and Extended Coverage Insurance.

 

Throughout the term Lessee shall at its sole
cost and expense keep or cause to be kept insured for the mutual benefit of
Lessor and Lessee all improvements located on or appurtenant to the premises
against loss or damage by fire and such other risks as are now or hereafter
included in an extended coverage endorsement in common use for commercial
structures, including vandalism and malicious mischief. The amount or the
insurance shall be sufficient to prevent either Lessor or Lessee from becoming
a coinsurer under the provisions of the policies, but in no event shall the
amount be less than eighty percent (80%) of the then actual replacement cost,
excluding costs of replacing excavations and foundations, but without deduction
for depreciation (herein called “full replacement value”). Lessee may include
any leasehold or fee mortgagee as a loss payee. Lessor shall, at Lessee’s cost
and expense, cooperate fully with Lessee to obtain the largest

 

16

 

possible recovery. Any proceeds from any such insurance policy shall be
paid and distributed in accordance with the provisions of Section 6.7 dealing
with an insurance trustee.

 

The “full replacement value” (as defined in
this Section 6.2) of the improvements to be insured under this Section 6.2
shall be determined by the company issuing the insurance policy at the time the
policy is initially obtained. Not more frequently than once every three (3)
years, either party shall have the right to notify the other party that it
elects to have the full replacement value redetermined by an insurance company.
The redetermination shall be made promptly and in accordance with the rules and
practices of the Board of Fire Underwriters, or a like board recognized and
generally accepted by the insurance company, and each party shall be promptly
notified of the results by the company. The insurance policy shall be adjusted
according to the redetermination.

 

Section 6.3.            Public Liability Insurance.

 

Beginning on the date Lessee enters upon the
premises and throughout the term, Lessee shall at its sole cost and expense
keep or cause to be kept in force for the mutual benefit of Lessor and Lessee
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 premises, improvements or adjoining areas
or ways, providing protection of at least five million dollars ($5,000,000) for
bodily injury or death to any one person, at least five million dollars
($5,000,000) for any one accident or occurrence and at least five hundred
thousand dollars ($500,000) for property damage and issued by an insurance
company with an A.B. Best rating of A, X or better and admitted to do business
in California.

 

Not more frequently than each three (3)
years, if, in the reasonable opinion of the insurance broker retained by
Lessor, the amount of public liability and property damage insurance coverage
at that time is not adequate based on increases in the Consumer Price Index,
Lessee shall increase the insurance coverage as reasonably required by Lessor’s
insurance broker.

 

Section 6.4.            Insurance Policy Form. Content and Insurer.

 

All insurance required by the express
provisions hereof shall be carried only by responsible insurance companies
licensed to do business in California and reasonably acceptable to Lessor, and
the policies therefor shall be in form reasonably acceptable to Lessor. All
such policies shall be nonassessable and shall contain language, to the extent
obtainable, to the effect that (i) any loss shall be payable notwithstanding
any act or negligence of Lessor that might otherwise result in the forfeiture
of the insurance, (ii) the insurer-waives the right of subrogation against
Lessor and against Lessor’s agents and representatives, (iii) the policies are
primary and noncontributing with any insurance that may be carried by Lessor
and (iv) the policies cannot be cancelled or materially

 

17

 

changed except
after thirty (30) days’ notice by the insurer to Lessor or Lessor’s designated
representative.

 

Section 6.5.            Failure
to Maintain Insurance & Proof of Compliance.

 

A.       Proof of Compliance.
Lessee shall deliver to Lessor, in the manner required for notices, copies of
certificates of all insurance policies required hereunder together with
evidence satisfactory to Lessor of payment required for procurement and
maintenance of the policy within the following time limits:

 

1.         For
insurance required at the commencement of this lease, within fifteen (15) days
after execution of this Lease;

 

2.         For
insurance 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; and

 

3.         For any
renewal or replacement of a policy already in existence, at least ten (10) days
before expiration or termination of the existing policy.

 

B.        Lessor’s Remedies.
If Lessee fails or refuses to procure or maintain insurance as required hereby
or fails or refuses to furnish Lessor with required proof that the insurance
has been procured and is in force and paid for, Landlord shall have the right,
at Lessor’s election, to procure and maintain such insurance. The premiums paid
by Lessor shall be. treated as added rent due from Lessee, with interest at the
maximum rate then permitted by law, to be paid on demand by Lessor. Lessor
shall give Lessee prompt notice of the payment of premiums, stating the amounts
paid and the names of the insurer or insurers.

 

ARTICLE VII

 

CONDEMNATION

 

Section 7.1.            Effect
on Lease.

 

If all or any portion of the premises shall be taken or condemned
pursuant to the exercise of or the threat of the exercise of the power of
eminent domain by any organization having the right to exercise said power,
then as to the portion taken, this Lease shall terminate as of the date the
condemning authority takes possession of the premises. As of the date of
termination, the rent to be paid under this Lease shall be reduced for the
balance of the term in proportion to the ratio which the area of the premises
taken bears to the total area of the premises. Any unearned rent paid in
advance that is reduced as provided herein shall be proportionately refunded by
Lessor to Lessee.

 

18

 

Section 7.2.            Condemnation
Award.

 

Any payment received from a condemning authority shall be allocated
between Lessor and Lessee as follows:

 

A.       The part attributable to
the value of the land and severance damages attributable to the land, after
deducting the value of the leasehold interest created by this Lease, shall be
paid to Lessor.

 

B.        The part attributable to
the value of this leasehold interest and to the value of the improvements and
severance damage attributable to the improvements shall be paid to Lessee. In
valuing the leasehold interest of Lessee in this Lease, the period of time to
be utilized shall be that period between the date such interest is being valued
and the end of the term.

 

Section 7.3.            Right
to Terminate.

 

If the portion of the premises remaining after the date of condemnation
has improvements located thereon that constitute a sound architectural whole
unit under then existing governmental regulations or has improvements located
thereon which can, under feasible economic standards of real estate
development, be restored to a sound architectural whole unit, or with or
without existing improvements can be utilized under then existing governmental
regulations and feasible economic standards of real estate development for the
highest and best improvements thereon, then this Lease as to the portion
remaining shall remain in full force and effect, and Lessee, to the extent
required hereunder, shall proceed to restore the improvements. Otherwise,
Lessor and Lessee each shall have the election for a period of ninety (90) days
after the condemning authority takes possession of the premises to terminate
this Lease.

 

ARTICLE VIII

 

DEFAULT AND REMEDIES

 

Section 8.1.            Defaults
by Lessee.

 

The following shall constitute defaults of Lessee under this Lease :

 

A.       If Lessee fails to pay the
rental herein reserved, or any part thereof, or any other sum required by
Lessee to be paid to Lessor or other third party, at the times or in the manner
herein provided; or

 

B.        If Lessee should violate
any of the provisions of Article v; or

 

C.        If default should be made
in any other terms, covenants, or conditions on Lessee’s part herein contained,
and shall not be

 

19

 

cured within ten
(10) days after written notice by Lessor, provided, however, if the default is
of such a character as to require more than ten (10) days to cure, such ten
(10) day period shall be extended to such period as may be required to cure the
alleged default, providing Lessee shall have commenced the cure thereof during
such ten (10) day period and shall proceed diligently to effect the cure
thereof.

 

Section 8.2             Lessor’s
Remedies.

 

If any default of Lessee shall continue following a notice of default
and the applicable cure period, Lessor shall have the right to exercise any one
or more of the rights or remedies available to a Lessor under the laws of the
State of California, consecutively or concurrently, including, without
limitation, the right:

 

A.       To terminate this Lease and
Lessee’s right to possession hereunder, immediately or at any time after such
default or breach and without prior notice, and recover from Lessee (i) the
worth at the time of award of the unpaid rent which had been earned at the time
of termination, plus interest (ii) the worth at the time of the 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 for the same
period that Lessee proves could have been reasonably avoided, plus interest,
(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 for the same period that Lessee proves could be reasonably avoided,
said excess to be discounted by a rate equal to the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent, and (iv)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by Lessee’s failure to perform Lessee’s obligations under
this Lease or which in the ordinary course of things would be likely to result
therefrom, including cost of litigation and attorneys’ fees. In the event of
termination, Lessor shall have the option, without notice or demand, to enter
upon and repossess the premises and remove any personal property of Lessee from
the premises and store it in any public warehouse at the risk and expense of
Lessee. Lessee hereby waives all claims for damages which may be caused by the
re-entry of Lessor and taking possession of the premises or removing or storing
the personal property of Lessee as herein provided, and will save Lessor
thereby, and no such re-entry shall be considered or construed to be a forcible
entry;

 

B.        To continue this Lease in
full force and effect, including Lessee’s right to possession, and Lessor’s
right to enforce all of its rights and remedies under this Lease and to collect
rent and all other sums payable by Lessee hereunder as the same become due. The
Parties agree that acts of maintenance or preservation or efforts to relet the
premises, or the appointment of a receiver upon the initiative of Lessor to
protect its interest under this Lease shall not constitute a termination of
Lessee’s right to possession for the purposes of this subparagraph (b)

 

20

 

unless accompanied
by a written notice from Lessor to Lessee of Lessor’s election to so terminate;

 

C.        To seek such other
equitable and/or legal relief as may be available to Lessor under the laws of
the State of California; and

 

D.        If Lessee is in default in
the payment of rent and other sums due under this Lease and Lessor collects
sub-rents from sublessees at the premises as provided in Section 5.2, Lessor
shall apply such sub-rents to the following in the following order:

 

1.         costs without limitation,
attorneys’ fees, court costs and other litigation and related expenses;

 

2.         costs and expenses
incurred in leasing or releasing the premises, or parts thereof, including,
without limitation, commissions, alteration and fixturing costs, and the like;
and

 

3.         rent and other sums due
under this Lease. If there remain any sums after the foregoing application of
sub-rents received, Lessor shall remit any such remaining sums to Lessee.

 

Section 8.3.            Definition
of Rental.

 

The word rental as used herein includes monthly rental, impositions,
real property taxes and assessments, payments for insurance and utilities, and
all other like sums and/or changes which are payable by Lessee as provided in
this Lease.

 

Section 8.4.            Notice
and Right to Cure.

 

A.       Lessor’s Right to Cure
Lessee’s Defaults. Lessor may at any time after Lessee commits an act of
default upon ten (10) days’ notice, or a shorter period if additional damage
may result, cure the act of default for the account and at the expense of Lessee.
If Lessor, at any time, by reason of an act of default, is compelled to pay, or
elects to pay, any sum of money or to do any act that will incur the payment of
any sum of money, or is compelled to incur any expenses, such sum paid by
Lessor and/or expense incurred by Lessor shall be due immediately from Lessee
to Lessor together with interest thereon. Such sum, with additional interest
thereon, shall be additional rental.

 

B.        Leasehold Mortgagee’s
Right to Cure Default. Each such leasehold mortgagee shall have thirty (30)
days after service of notice of Lessee’s default or breach within which, at
leasehold mortgagee’s election, either:

 

1.         To make good the default
or breach, whether by the payment or expenditure of money or the performance of
any other matter required under this lease, which payment, expenditure or
performance Lessor will accept as though made or performed by Lessee, leasehold
mortgagee being subrogated to Lessee’s rights under this lease upon so doing;
or

 

21

 

2.         To commence and
diligently pursue to completion foreclosure under the leasehold mortgage or
other appropriate proceedings in the nature thereof or otherwise acquire Lessee’s
leasehold estate with diligence, and perform all agreements and conditions of
this lease requiring the payment or expenditure of money by the Lessee until
such time as such leasehold estate is so acquired or sold upon foreclosure or
other appropriate proceedings in the nature thereof.

 

C.        If the alleged default is
nonpayment of rent, taxes or other sums to be paid by Lessee to Lessor, Lessee
shall have ten (10) days after notice is given to cure the default. For the
cure of any other default, Lessee shall promptly and diligently after notice
commence curing the default and shall have thirty (30) days after notice is
given to complete the cure or in the case of a failure or omission that cannot
be cured by the payment of money and cannot be cured within thirty (30) days,
such additional time as is reasonably required for the curing of the default.

 

D.        If Lessee shall have
failed 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, Lessor
may at its election, but is not obligated to, make any payment required of
Lessee under this lease or under any note or other document pertaining to the
financing of improvements or fixtures on the premises, or perform or comply
with any term, agreement or condition imposed on Lessee hereunder or any such
note or document, and the amount so paid plus the reasonable cost of any such
performance or compliance, plus interest on such sum at the highest rate then
permitted by law from the date of payment, performance or compliance shall be
deemed to be additional rent payable by Lessee on Lessor’s demand. No such
payment, performance or compliance shall constitute a waiver of default or of
any remedy for default or render Lessor liable for any loss or damage resulting
from the same.

 

Section 8.5.            Late
Charges; Interest on Delinquent Sums.

 

A.       Late Charges. Lessee
hereby acknowledges that late payment by Lessee to Lessor of rental will cause
Lessor to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Accordingly, if any installment of
rent or any other sum due from Lessee shall not be survived within ten (10)
days from the date such rent or other sum is due, Lessee shall pay to Lessor a
late charge equal to three percent (3%) of such overdue amount. The parties
hereby agree that such late charge represents a fair and reasonable estimate of
the costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee’s
default with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder.

 

B.        Interest. In
addition to the late charges provided in subparagraph (a), any rental due
hereunder not paid when due as

 

22

 

provided in this
Lease shall bear interest from the date due until paid at the maximum legal
rate of interest per annum which may be charged from time to time under the
laws of California.

 

Section 8.6.            Landlord’s
Default.

 

Lessor shall not be considered to be in default under this lease unless
(i) Lessee has given notice specifying the default and (ii) Lessor has failed
for thirty (30) days to cure the default, if it is curable, or to institute and
diligently pursue reasonable corrective or ameliorative acts for incurable
defaults. Lessee shall have the right of termination for Lessor’s default only
after notice to and consent by all leasehold mortgagees under existing
leasehold mortgages permitted by this lease. Lessee waives the protections of
Section 1942 of the California Civil Code.

 

Section 8.7.            New
Lease.

 

On termination of this lease on Lessee’s default Lessor shall enter
into a new lease with the leasehold mortgagee under a then existing mortgage
permitted by this lease, as provided in and subject to the conditions of
Section 5.4.

 

Section 8.8.            Arbitration.

 

Except as otherwise provided in Section 2.2.C and 3.6, whenever the
terms of this Lease require that a dispute be settled by arbitration, the
matter shall be submitted to binding arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association. The costs
of such arbitration board shall be borne by the non-prevailing party. Any such
arbitration shall be conducted and held in the City of San Francisco,
California.

 

Section 8.9.            Broker’s
Commission.

 

Lessor and Lessee each represent and warrant to the other that neither
has incurred or is aware of any broker’s or finder’s fee payable in connection
with the origin, negotiation, execution or performance of this Lease, except
for a broker’s commission payable to Norris, Beggs & Simpson (“Norris”)
pursuant to a signed written agreement dated 9/19/92 between Lessor and Norris.
If either party has dealt with any other real estate broker or agent, or any
other person in connection with this Lease, and if as a result thereof there is
any broker’s or finder’s fee payable to such person, the party dealing with
such person shall be solely responsible for the payment of such commission or
fee, and shall hold the party harmless from and against any liability with
respect thereto, including attorney’s fees incurred in connection therewith.

 

23

 

ARTICLE IX

 

GENERAL CONDITIONS

 

Section 9.1.            Inspection.

 

Lessor and Lessor’s agents and servants may, at all reasonable times,
enter the premises, provided it does not unreasonably interfere with the
activities of Lessee or its sublessees, for the purposes of inspecting the same
or the performance by Lessee of the terms and conditions hereof, for the
purpose of posting and keeping posted thereon notices of non-responsibility,
and for the purpose of exhibiting the premises to prospective purchasers or
lessees thereof.

 

Section 9.2.            Holding
Over.

 

In the event Lessee holds over or remains in possession of the premises
after the expiration or termination of the term with Lessor’s written consent,
such holding over or continued possession shall be deemed to be a tenancy from
month to month on the same terms and conditions in force immediately prior to
such holding over.

 

Section 9.3.            Estoppel
Certificates.

 

Lessor and Lessee shall execute, acknowledge, and deliver to the other
at any time within ten (10) days after request by Lessor or Lessee a statement
in writing certifying if such be the case, 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), the date of commencement of this Lease, the
dates on which the rent and other charges have been paid, and such other
information as Lessor or Lessee shall reasonably request. It is acknowledged by
both parties that any such statement is intended to be delivered by the party
requesting the same and relied upon by prospective purchasers, mortgagees, or
assignees thereof.

 

Section 9.4.            Bankruptcy
and Insolvency.

 

Lessee agrees that (i) in the event of any proceeding under the
Bankruptcy Act, or any amendment thereto, be commenced by Lessee, or (ii) in
the event any such proceeding against Lessee is not dismissed within ninety
(90) days after filing, or (iii) if Lessee be adjudged insolvent, or makes an
assignment for the benefit of creditors, or (iv) if a writ of attachment or
execution be levied on the leasehold estate created hereby and be not released
or satisfied within ninety (90) days thereafter, or (v) if a receiver be
appointed in any proceeding or action to which Lessee is a party, with
authority to take possession or control of the premises or the business
conducted therein by Lessee and the same not be dismissed within ninety (90)
days after his appointment, then this Lease at the option of Lessor shall
immediately cease and terminate and shall in nowise be treated as an asset of
Lessee. In

 

24

 

that event, Lessee
shall have no further rights hereunder; and Lessor shall have the right, after
the exercise of such option, to immediately re-enter and repossess itself of
the premises as of its original estate.

 

Section 9.5.            Notice.

 

All notices, requests, demands, consents, approvals, and other
communications required or permitted to be given or delivered hereunder shall
be in writing and be sent by regular United States mail, postage prepaid, and
addressed to the party intended at its address designated by notice to the
other party.

 

Section 9.6.            Waiver.

 

The failure of either party, in any one or more instances, to demand or
enforce the strict performance by the other of any covenant or condition of
this Lease shall not be construed as a waiver of relinquishment for the future
of such or any other covenant or condition hereof. The receipt or acceptance or
performance of any act required by this Lease by the other party, with
knowledge of the breach of any covenant or condition hereof, shall not be
deemed a waiver of such breach, nor shall the acceptance of rent by Lessor in a
lesser amount than is due hereunder (regardless of any endorsement or any check
or any statement in any letter accompanying any payment of rent) operate or be
construed either as an accord and satisfaction or in any manner other than as a
payment on account of the earliest rent then unpaid by Lessee, and no waiver by
either party of any covenant or Condition of this Lease shall be deemed to have
been made unless set forth in writing and signed by the party making the
waiver.

 

Section 9.7.            Attorneys’
Fees.

 

If either party shall institute legal proceedings against the other
based upon a cause of action arising out of this Lease, the prevailing party in
such proceedings shall recover from the other party all costs and expenses
incurred by it in such proceedings, including reasonable attorneys’ fees to be
fixed by the court.

 

ARTICLE X

 

MISCELLANEOUS PROVISIONS

 

Section 10.1.          Cooperation.

 

Lessor and Lessee shall cooperate with each other and do all acts and
execute and deliver all documents necessary to carry out all the terms and
conditions of this Lease.

 

25

 

Section 10.2.          Time
of Essence.

 

Time is of the essence of this Lease and of each and every provision
hereof.

 

Section 10.3           Severability.

 

If any covenants or conditions of this Lease, or the application
thereof to any person or circumstance, shall to any extent be invalid or
unenforceable, the remainder of this Lease, and the application of such
covenant or condition to persons or circumstances other than those as to which
it is invalid or unenforceable, shall not be affected thereby, and each
covenant and condition of this Lease shall be valid and be enforced to the
fullest extent permitted by law.

 

Section 10.4.          Covenants
Are Conditions.

 

Every provision, agreement, term and condition of this Lease shall be
construed to be both a covenant and a condition. Except where the context
clearly indicates otherwise, the granting of a right to take any action
hereunder shall not be deemed to create an obligation to take such action.

 

Section 10.5.          Binding
Effect.

 

The terms and conditions of this Lease shall be binding upon and inure
to the benefit of the heirs, executors, administrators, successors and assigns
of each of the parties hereto, subject to the restrictions contained in Article
V.

 

Section 10.6.          Interpretation
and Construction of Lease.

 

A.       The table of contents of
this Lease and the captions of the various articles and sections are for
convenience and ease of reference only and do not define, limit, augment or
describe the scope, content or intent of this Lease or any part or parts of
this Lease.

 

B.        All paragraphs, sections
and articles referred to herein are paragraphs, sections and articles of this
Lease unless otherwise specified and all exhibits referred to herein are
exhibits attached to this Lease unless otherwise specified.

 

C.        Exhibit A, attached hereto
and to which reference is made in this Lease, is incorporated herein by the
respective reference to it” References to “this lease” or “the lease” include
matters incorporated herein by reference.

 

D.        The neuter gender includes
the feminine and masculine, the masculine includes the feminine and the neuter,
and the feminine includes the neuter, and each includes corporation,
partnership or other legal entity when the context so requires.

 

26

 

E.        The
singular number includes the plural whenever the context so requires.

 

F.        This
Lease contains the entire agreement between the parties. No promise,
representation, warranty or agreement not included 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 his own advisors and warranties, representations and
agreements in the Lease itself. The failure or refusal of Lessee to inspect the
premises or improvements, or the failure of either party to read the Lease or
other documents or to obtain legal or other advice relevant to the transaction
constitutes a waiver of any objection, contention,, or claim that might have
been based on such reading, inspection or advice.

 

G.        The
invalidity or illegality of any provision of this Lease shall not affect the
reminder of the Lease.

 

H.        Time is
of the essence of each provision of this Lease.

 

I.         All
the undertakings of Lessee hereunder shall be deemed and construed to be “conditions”
as well as undertakings as though the words specifically expressing or
imparting conditions and undertakings were used in each separate instance.

 

J.         This Lease shall be interpreted, construed
and enforced in accordance with laws of the State of California.

 

Section 10.7.          Non-merger of Estates.

 

If both Lessor’s and Lessee’s estates in the
premises or the improvements or both become vested in the same owner, this
Lease shall nevertheless not be destroyed by the application of the doctrine of
merger except at the express election of the owner and the consent of the
leasehold mortgagees under all leasehold mortgages existing under the
provisions of this Lease and the consent of the mortgagees under all mortgages
upon the fee estate.

 

Section 10.8.          Joint and Several Obligations.

 

If either Lessor or Lessee consists of more
than one person, the obligation of all such persons is joint and several.

 

Section 10.9.          Successors.

 

Subject to the provisions of this Lease on
assignment and subletting, each and all the terms, agreements and conditions to
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. Upon the sale, assignment or transfer of Lessor’s
interest in the premises to a financially responsible party, Lessor shall
immediately be released and discharged from all obligations arising under this
Lease, except for any pre-existing default by Lessor.

 

27

 

Section 10.10.        Consent
and Approval.

 

Wherever the consent and/or approval of a party is required under this
Lease, such consent and/or approval shall not be unreasonably withheld or
delayed. Immediately after the term commences, and from time to time during the
term, Lessor shall notify Lessee of the name of one individual comprising
Lessor with whom Lessee shall communicate in connection with any matters
involving this Lease, including, without limitation, any matter requiring the
consent and/or approval of Lessor. The decision of any such designated
individual shall be binding on the other individuals who comprise the Lessor
hereunder as between Lessor and Lessee.

 

Executed on the date first set forth hereinabove.

 

 

	
  Lessor

  	
   

  	
  Berberian Trust Properties

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Arnold H. Gazarian, Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Dianne B. Gazarian, Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Lessee

  	
   

  	
  Camelot Park Family Entertainment

  Centers, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Gerald B. Johnson

  

 

28

 

EXHIBIT A

 

LEGAL DESCRIPTION OF LEASED PREMISES

 

(To be provided by
Lessor)

 

 

EXHIBIT B

 

SCHEDULE OF IMPROVEMENTS

 

(To be provided by
Gerald Johnson)

 

	
  Arcade Castle
  Building (l0.000sf)

  	
   

  	
  410,000.

  	
   

  
	
  Arcade Games

  	
   

  	
  400,000.

  	
   

  
	
  Batting Cages (9 stations)

  	
   

  	
  165,000.

  	
   

  
	
  Bumper Boats

  	
   

  	
  78,000.

  	
   

  
	
  General Site Expenses

  	
   

  	
  220,000.

  	
   

  
	
  Golf Courses (36 holes)

  	
   

  	
  325,000.

  	
   

  
	
  Engineering, Drafting, Permits & Fees

  	
   

  	
  130,000.

  	
   

  
	
  Landscaping

  	
   

  	
  100,000.

  	
   

  
	
  Obstacles

  	
   

  	
  92,000.

  	
   

  
	
  Organization & Offering Expenses

  	
   

  	
  40,000.

  	
   

  
	
  Off-sites & Admin

  	
   

  	
  150,000.

  	
   

  
	
  Parking Lot

  	
   

  	
  85,000.

  	
   

  
	
  Pre-Opening Operations

  	
   

  	
  25,000.

  	
   

  
	
  Race Track & Cars

  	
   

  	
  230,000.

  	
   

  
	
  Contingencies & Working Capital

  	
   

  	
  50,000.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  2,500,000.

  	
   

  
					

 

 

EXHIBIT C

 

RECORDATION
REQUESTED BY:

 

WHEN RECORDED
RETURN TO:

 

SEND TAX NOTICES
TO:

 

LANDLORD’S CONSENT

 

This Landlord’s
Consent is entered into among Camelot Park Family Entertainment Center, Inc., a
California corporation (“Borrower”), whose address is 1766 Union Street, Suite
A, San Francisco, California 94123;                                                                 
(“Lender”), whose address is                                                                                    ;
and Berberian Trust Properties (“Landlord”) whose address is                                                                                     .
Borrower and Lender have entered into or are about to enter into, an agreement
whereby Lender has acquired or will acquire a security interest or other
interest in the Collateral. Some or all of the Collateral may be affixed or
otherwise become located on the Premises. To induce Lender to extend the Loan
to Borrower against such security interest in the Collateral and for other
valuable consideration, Landlord hereby agrees with Lender and Borrower as
follows.

 

DEFINITIONS. The
following words shall have the following meanings when used in this Agreement.
Terms not otherwise defined in this Agreement shall have the meanings
attributed to such terms in the Commercial Code. All reference to dollar
amounts shall mean amounts in lawful money of the United States of America.

 

Agreement. The word
“Agreement” means this Landlord’s Consent, as this Landlord’s consent may be
amended or modified from time to time, together with all exhibits and schedules
attached to this Landlord’s Consent from time to time.

 

Borrower. The word “Borrower”
means Camelot Park Family Entertainment Center, Inc.

 

 

collateral. The word “Collateral” means certain of
Borrower’s personal property in which Lender has acquired or will acquire a
security interest, including without limitation the following specific
property:

 

 

 

 

Landlord. The word “Landlord” means Berberian Trust Properties. The term “Landlord”
is used for convenience purposes only. Landlord’s interest in the Premises is that of sublessor, and is prior
and superior to that of Lender.

 

Lease. The word “Lease” means that certain lease of the Premises, dated February 9, 1993, between Landlord
and Borrower.

 

Lender. The word “Lender” means                                               , the successors and assigns.

 

Loan. The word “Loan” means the loan, or any other financial accommodations,
Lender has made or is making to Borrower, which has been approved by Landlord
pursuant to the Lease.

 

Premises. The word “Premises” means the real property located in Stanislaus County,
State of California, commonly known as                                                                                         ,
and more fully described in Exhibit A attached hereto.

 

BORROWER’S
ASSIGNMENT OF LEASE.
Borrower hereby assigns to Lender all of Borrower’s rights in the Lease, as
partial security for the Loan. The parties intend that this assignment will be
a present transfer to Lender of all of Borrower’s rights under the Lease,
subject to Borrower’s rights to use the Premises and enjoy the benefits of the
Lease while not in default on the Loan or Lease. Upon full performance by
Borrower under the Loan, the assignment shall be ended, without the necessity
of any further action by any of the parties. The assignment includes all
renewals of any amendments to the Lease or the Loan, until the Loan is paid in
full. No amendments may be made to the Lease without Lender’s prior written
consent, which shall not be unreasonably withheld or delayed.

 

CONSENT
OF LANDLORD. Landlord
consents to the above assignment. If Borrower defaults under the Loan or the
Lease, Lender may reassign the Lease, and Landlord agrees that Landlord’s
consent to any such reassignment will not be unreasonably withheld or delayed.
So long as Lender has not entered the Premises for the purposes of operating a
business, Lender will have no liability under the Lease, including without
limitation, liability for rent. However, to the extent that Lender fails to
cure any default within the time limits and as specified in Article VIII of the
Lease, Landlord

 

2

 

shall have the
right to terminate the Lease and exercise any and all rights available to
Landlord under Article VIII and the Loan. Whether or not Lender enters into
possession of the Premises for any purpose, Borrower will remain fully liable
for all obligations of Borrower as lessee under the lease. While Lender is in
possession of the Premises, Lender will cause all payments due under the Lease
and attributable to that period of time to be made to Landlord. If Lender later
reassigns the Lease or vacates the Premises, Lender will have no further
obligation to Landlord, however, any assignee shall first have executed an
assignment agreeing to comply with and be bound by each of the terms and
provisions of the Lease.

 

LEASE
DEFAULTS. Both Borrower and Landlord agree and represent to
Lender that, to the best of their knowledge, there is no breach or offset
existing under the Lease or
under any other agreement between Borrower and Landlord, as of the date of
execution hereof. Landlord agrees not to terminate the Lease, despite any
default by Borrower, without giving Lender written notice of the default and an
opportunity to cure the default within a period of time from the receipt of the
notice as provided in Article VIII, Section 8.4 of the Lease.

 

DISCLAIMER
OF INTEREST. Landlord hereby consents to Lender’s security
interest in the Collateral. Landlord agrees that any lien or claim it may now
have or may hereafter have in the Collateral will be subject at all times to
Lender’s security interest in the Collateral and will be subject to the rights
granted by this Agreement.

 

ENTRY
ONTO PREMISES. Landlord and Borrower grant to Lender the
right to enter upon the Premises for the purpose of removing the Collateral
from the Premises or conducting
sales of the Collateral on the Premises. The rights granted to Lender in this
Agreement will continue until a reasonable time after Lender received notice in
writing from Landlord that Borrower no longer is in lawful possession of the
Premises. If Lender enters onto the Premises and removes the Collateral, Lender
agrees with Landlord not to remove any Collateral in such a way that the
Premises are damaged, without either repairing any such damage or reimbursing
Landlord for the cost of repair.

 

MISCELLANEOUS
PROVISIONS. This Agreement shall extend to and bind the
respective heirs, personal representatives, successors and assigns of the
parties to this Agreement. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is in writing and signed by Lender.
Without notice to Landlord and without affecting the validity of this Landlord’s
Consent, Lender may do or not do anything it deems appropriate or necessary
with respect to the Loan, any obligors on the Loan, or any Collateral for the
Loan, including without limitation, extending, renewing, rearranging or
accelerating any of the Loan

 

3

 

indebtedness. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a provision
of this Agreement shall not constitute a waiver of or prejudice Lender’s right
otherwise to demand strict compliance with that provision or any other
provision. Whenever consent by Lender is required in this Agreement, the
granting of such consent by Lender in any one instance shall not constitute
continuing consent to subsequent instances where such consent is required.

 

BORROWER AND
LANDLORD ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS LANDLORD’S CONSENT
AND BORROWER AND LANDLORD AGREE TO ITS TERMS. THIS AGREEMENT IS DATED                                ,
19      .

 

	
  Borrower:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Camelot Park
  Family Entertainment

  Center, Inc., a California corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Gerald
  B. Johnson

  	
   

  	
   

  
	
   

  	
  President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  Lender:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Landlord’s
  signature

  	
   

  	
   

  	
  Authorized Officer

  

 

4

 

LENDER ACKNOWLEDGMENT

 

	
  STATE OF

  	
   

  	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
   

  	
   

  	
  )

  	
   

  
						

 

On                               ,
before me,                                                         ,
personally appeared                                                 , personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the Landlord’s Consent and acknowledged to me that he or she
executed the same in his or her authorized capacity, and that by his or her
signature on this Landlord’s Consent, he or she, or the entity upon behalf of
which he or she acted, executed this Landlord’s Consent.

 

WITNESS my hand
and official seal.

 

	
  Signature

  	
   

  	
   

  

 

 

BORROWER ACKNOWLEDGMENT

 

	
  STATE OF

  	
  California

  	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  Santa Barbara

  	
   

  	
  )

  	
   

  
						

 

On March 28, 1993,
before me, Nancy E. Keel, personally appeared Gerald B. Johnson, President of
Camelot Park Family Entertainment Center, Inc., personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the Landlord’s Consent and acknowledged to me that he or she
executed the same in his or her authorized capacity, and that by his or her
signature on this Landlord’s Consent, he or she, or the entity upon behalf of
which he or she acted, executed this landlord’s Consent.

 

WITNESS my hand
and official seal.

 

 

	
  Signature

  	
  /s/ Nancy E. Craig

  	
   

  	
  [SEAL]

  	
  OFFICIAL NOTARY SEAL

  NANCY E. CRAIG

  Notary Public — California
SANTA BARBARA COUNTY

  
	
   

  	
   

  	
   

  	
  My Comm. Expires JUN 24,
  1994

  

 

5

 

LANDLORD ACKNOKLEDGMENT

 

	
  STATE OF

  	
   

  	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
   

  	
   

  	
  )

  	
   

  
						

 

On                                         ,
before me,                                                          ,
personally appeared                                                         ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the Landlord’s Consent and
acknowledged to me that he or she executed the same in his or her authorized
capacity, and that by his or her signature on this Landlord’s Consent, he or
she, or the entity upon behalf of which he or she acted, executed this Landlord’s
Consent.

 

WITNESS my hand
and official seal.

 

 

	
  Signature

  	
   

  	
   

  

 

6

 

EXHIBIT D

 

RECORDATION
REQUESTED BY:

 

WHEN RECORDED
RETURN TO:

 

SEND TAX NOTICES
TO:

 

LANDLORD’S ESTOPPEL CERTIFICATE

 

This Estoppel
Certificate is dated                                      
among Camelot Park Family Entertainment Center, Inc., a California corporation
(referred to below as “Trustor”), whose address is 1766 Union Street Suite A,
San Francisco, California 94123;                               
(referred to below as “Lender”), whose address is                                                                                        ;
and Berberian Trust Properties (referred to below as “Landlord”) whose address
is                                                                            .
Trustor and Lender have entered into or are about to enter into, an agreement
whereby Lender has acquired or will acquire a Deed of Trust to Lender on
Trustor’s leasehold interest in the Property described below.

 

To induce Lender
to extend one or more loans or other financial accommodations to Trustor
against such security interest in the Property and for other valuable
consideration, with knowledge that Lender is relying thereon, Landlord and
Trustor hereby agree with Lender as follows:

 

THE LEASE. Landlord has leased the Property to
Trustor pursuant to a lease (the “Lease”) dated February 9, 1993, a memorandum of which was recorded as follows:

 

 

 

 

REAL
PROPESTY DESCRIPTION.
The Lease covers the following described real property, together with
all improvements thereon (the “Real Property”) located in Stanislaus County,
State of California:

 

AS PER EXHIBIT “A”
ATTACHED HERETO AND MADE A PART THEREOF

 

The Real Property
or its address is commonly known as                                                                                            .
The Assessor’s Parcel Numbers for the Real Property are                               
and                                   .

 

 

ESTOPPEL. Landlord and Trustor hereby jointly and
severally represent and warrant to Lender that:

 

(a) Lease in Effect. The Lease (i) has been fully executed and
accepted by Landlord and Trustor, (ii) is in full force and effect, and (iii)
has not been modified or changed, either in writing or orally, except as
reflected in the copy of the Lease provided to Lender.

 

(b) No Default. As of the date of this Certificate, (i) all
conditions and obligations to be performed by either Landlord or Trustor under
the Lease to the date hereof, have been satisfied: (ii) there exists no breach,
default or event or condition which, the giving of notice or the passage of
time, or both, would constitute such a breach or default under the Lease; and
(iii) there are no existing claims, defenses or offsets against obligations of
either Landlord or Trustor under the Lease, including any against rents due or
to become due under the terms of the Lease.

 

(c) Entire Agreement. The Lease constitutes the entire agreement
between Landlord and Trustor with respect to the Lease of the Property.

 

(d) No Prepaid Rent. No deposits or prepayments of rent have been
made in connection with the Lease except for a deposit and prepayment of the
first month in the amount of $13,779.75.

 

AGREEMENTS. Landlord and Trustor hereby jointly and
severally agree with Lender that, during all such times as Lender is the
beneficiary of the security interest in the Property described above:

 

(a) Modification, Termination and Cancellation. Landlord and Trustor will not consent to any
modification, termination or cancellation of the Lease unless Lender first
consents thereto in writing.

 

(b) Notice of Default. Landlord will notify Lender in writing
concurrently with any notice given to Trustor of any breach or default on the
part of Trustor under the Lease, and Landlord agrees that Lender shall have the
right, but not the obligation, to cure any breach or default specified in such
notice within the time periods set forth in Article VIII, Section 8.4 of the
Lease, and Landlord will not declare a default of the Lease if Lender cures
such defaults provided in said Article VIII Section 8.4.

 

MISCELLANEOUS
PROVISIONS. This
Agreement shall extend to and bind the respective heirs, personal
representatives, successors and assigns of the parties to this Certificate.
This Certificate shall be governed by and construed in accordance with the laws
of the

 

2

 

rights under this
Certificate unless such waiver is in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Certificate shall not constitute a waiver of or prejudice Lender’s right
otherwise to demand strict compliance with that provision or any other
provision.

 

TRUSTOR AND
LANDLORD EACH ACKNOWLEDGE HAVING READ ALL THE PROVISIONS OF THIS LANDLORD’S
ESTOPPEL CERTIFICATE AND EACH AGREES TO ITS TERMS. THIS CERTIFICATE IS DATED                                       ,
19    .

 

	
  Grantor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Camelot Park
  Family Entertainment Center, Inc.,

  a California corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Gerald
  B. Johnson

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  Lender:

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Berberian
  Trust Properties

  	
   

  	
   

  	
  Authorized Officer

  
								

 

3

 

TRUSTOR ACKNOWLEDGMENT

 

	
  STATE OF

  	
  California

  	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  Santa Barbara

  	
   

  	
  )

  	
   

  
						

 

On. March 28, 1993, before me, Nancy E. Craig, personally appeared Gerald
B. Johnson, President of Camelot Park Family Entertainment, Inc., personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to this Estoppel Certificate and acknowledged
to me that he or she executed the same in his or her authorized capacity, and
that by his or her signature on this Estoppel Certificate he or she, or the
entity upon behalf of which he or she acted executed this Estoppel Certificate.

 

	
  WITNESS my hand and official seal.

  	
   

  	
  [SEAL]

  	
  OFFICIAL NOTARY SEAL

  
	
  Signature

  	
  /s/ Nancy E. Craig

  	
   

  	
  NANCY E. CRAIG

  Notary Public — California,
SANTA BARBARA COUNTY

  My Comm. Expires JUN 24, 1994

  
					

 

LANDLORD ACKNOWLEDGEMENT

 

	
  STATE
  OF

  	
   

  	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY
  OF

  	
   

  	
   

  	
  )

  	
   

  
						

 

On                                                    ,
before me,                                                                                        ,
personally appeared                                                                                                         ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to this Estoppel Certificate and
acknowledged to me that he or she executed the same in his or her authorized
capacity, and that by his or her signature on this Estoppel certificate he or
she, or the entity upon behalf of which he or she acted executed this Estoppel
Certificate.

 

WITNESS my hand and official seal.

 

 

	
  Signature

  	
   

  	
   

  

 

4

 

LENDER ACKNOWLEDGMENT

 

	
  STATE
  OF

  	
   

  	
   

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY
  OF

  	
   

  	
   

  	
  )

  	
   

  
						

 

On                                                ,
before me,                                                                                      ,
personally appeared                                                                                                              ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to this Estoppel Certificate and
acknowledged to me that he or she executed the same in his or her authorized
capacity, and that by his or her signature on this Estoppel Certificate he or
she, or the entity upon behalf of which he or she acted executed this Estoppel Certificate.

 

WITNESS my hand
and official seal.

 

 

	
  Signature

  	
   

  	
   

  

 

5

 

ADDENDUM
TO THAT CERTAIN LEASE DATED FEBRUARY 9, 1993 BY AND BETWEEN BERBERIAN TRUST
PROPERTIES, “LESSOR”, AND CAMELOT PARK FAMILY ENTERTAINMENT CENTER OF MODESTO,
L.P., a California limited partnership, AS SUCCESSOR IN INTEREST TO CAMELOT
PARK FAMILY ENTERTAINMENT CENTER, INC., a California corporation, “LESSEE”, FOR
THE PROPERTY COMMONLY KNOWN AS CAMELOT PARK, IN MODESTO, CALIFORNIA, “PREMISES”.

 

This Addendum, dated September 10, 1996, is entered into by and between
the Lessor and Lessee in order to memorialize the Rent Commencement Date as
well as establish the base figure for the Index Date as referenced herein.

 

1).       Lessor and Lessee hereby acknowledge and
agree the Lessee opened for business on July 3, 1993. Accordingly, pursuant to
Section 2.1. of the Lease the Rent Commencement Date shall be July 3, 1993.

 

2).       As prescribed under Section 2.2.A., Lessor
and Lessee hereby acknowledge and agree that, based on the July 3, 1993 Rent
Commencement Date, the July 1993 Consumer Price Index, defined under the Lease,
shall be established as the Index Date. It is further agreed that the base
figure for said Index Date shall be one hundred forty-six and one tenth
(146.1).

 

Except as set forth herein, the Lease shall remain unamended and in full
force an effect. Notwithstanding anything to the contrary, where any conflict
in terms arises between this Addendum and any previously executed agreements,
this Addendum shall prevail.

 

IN WITNESS WHEREOF, this Addendum is executed by the parties hereto as of
the date first set forth below.

 

 

	
  LESSOR

  	
   

  	
  BERBERIAN TRUST PROPERTIES

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated

  	
    9-23-96

  	
   

  	
   

  	
  By:

  	
  /s/ Arnold H. Gazarian

  	
   

  
	
   

  	
   

  	
   

  	
  Arnold H. Gazarian, Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated

  	
    9-23-96

  	
   

  	
   

  	
  By:

  	
  /s/ Dianne B. Gazarian

  	
   

  
	
   

  	
   

  	
   

  	
  Dianne B. Gazarian, Trustee

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LESSEE

  	
   

  	
  CAMELOT FAMILY ENTERTAINMENT

  CENTER OF MODESTO, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated

  	
    9-16-96

  	
   

  	
   

  	
  By:

  	
  /s/ Gerald B. Johnson

  	
   

  
	
   

  	
   

  	
   

  	
  Gerald B. Johnson, President

  CAMELOT PARK OF MODESTO, INC. 

  General Partner.

  

 

 

FIRST AMENDMENT TO MODESTO
GROUND LEASE

 

This FIRST AMENDMENT TO MODESTO GROUND LEASE
(this “First Amendment”) is dated as of June 29, 1998, and is entered into by
and between J-MAR SISK ROAD PROPERTY, L.P., a California limited partnership,
successor-in-interest to Berberian Trust Properties, a California partnership (“Lessor”);
and CAMELOT PARK FAMILY ENTERTAINMENT CENTER OF MODESTO, L.P., successor in
interest to Camelot Park Family Entertainment Center, Inc., a California
corporation (“Lessee”).

 

R  E
C  I  T  A  L  S

 

A.       Lessor
and Lessee entered into that certain Modesto Ground Lease dated as of February
9, 1993 (the “Original Lease”), as modified by that certain addendum dated as
of September 10, 1996 (“Addendum”) for the lease of approximately six acres of
commercial land in the County of Stanislaus, State of California, described
more particularly in Exhibit “A” attached hereto and made a part hereof
(the “Demised Premises”). The Original Lease as modified by the Addendum and as
amended by this First Amendment shall be referred to herein as the “Lease.”

 

B.        Lessee
desires to set forth and/or clarify its right to enter into financing
arrangements and, in connection therewith, to secure all obligations,
indebtedness and liabilities under such financing arrangements by one or more
deeds of trust or other instruments (as the same may be amended, a “Leasehold
Deed of Trust”) secured by Lessee’s interest in the Lease, any sublease(s)
thereunder, and a leasehold interest in the Demised Premises (collectively, “Lessee’s
Interest”).

 

C.        Lessee
desires to obtain Lessor’s consent Lessee’s assignment of the Lease, all
subleases thereunder, if any, and Lessee’s leasehold interest in the Demised
Premises to Festival Fun Parks, LLC, a Delaware limited liability company (“FFP”).

 

In consideration of the foregoing recitals,
the mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Lessor and Lessee hereby agree as follows:

 

A G R E E M E N T

 

1.         DEFINITIONS;
EFFECT ON LEASE. All capitalized terms used in this First Amendment which are
not defined herein shall have the same meanings set forth in the Original
Lease.

 

2.         RIGHT
TO ENCUMBER. Notwithstanding anything to the contrary contained in the Original
Lease, Lessee may, without Lessor’s consent but with prior notice to Lessor,
mortgage or grant one (1) or more security interests in Lessee’s Interest for
the benefit of one or more leasehold mortgagees and any assignees thereof (each
a “Leasehold Mortgagee”) and assign the Lease and any sublease(s) thereunder,
as collateral security under a Leasehold Deed of Trust, upon the condition that
all rights acquired under such Leasehold Deed of Trust shall be subject to each
and all of the covenants, conditions and restrictions set forth in the Lease,
and to all rights and interests of Lessor therein, none of which covenants,
conditions or restrictions is or shall be waived by Lessor by reason of the
right

 

 

e.         During such
time, if any, as the Leasehold Mortgagee or its nominee or designee has become
the Lessee, whether by assignment, purchase at foreclosure sale or otherwise,
the Leasehold Mortgagee or its nominee or designee shall be obligated, as the
Lessee, for the curing of any prior defaults under the Lease and for the
payment of rent and the performance of Lessee’s covenants and agreements under
the Lease. If the Leasehold Mortgagee or its nominee or designee becomes the
Lessee under the Lease, all of the future obligations and liabilities of the
Leasehold Mortgagee or its nominee or designee shall cease and terminate upon
assignment of the Lease to any assignee of the Lease approved by Lessor
pursuant to Article V of the Original Lease; provided, however, nothing
contained herein shall be construed to release the Lessee from liability to the
extent the Lessee is not the Leasehold Mortgagee; provided, further, such
Lessee may be released pursuant to the terms of the Original Lease. Except
where the Leasehold Mortgagee has become the Lessee, no liability for the
payment of rent or the performance of any of Lessee’s covenants and agreements
under the Lease shall attach to or be imposed upon the Leasehold Mortgagee, all
such liability being hereby expressly waived by Lessor.

 

f.          Lessor, within ten (10) days after a request in writing by Lessee or the
Leasehold Mortgagee, shall furnish a written statement, duly
acknowledged, that the Lease is in full force and effect and that there are no
defaults thereunder by Lessee, or if there are any defaults, such statement
shall specify the defaults Lessor claims exist.

 

g.         If Lessee
fails to exercise any extension, renewal or purchase option in the Lease,
Lessor shall promptly send the Leasehold Mortgagee written notice thereof, and
the Leasehold Mortgagee, within thirty (30) days after receipt of such notice,
may exercise any such option on behalf of Lessee.

 

h.         Subject to
the Leasehold Mortgagee’s complying with the conditions of this First Amendment
and subject to the consent rights of
Lessor regarding transfers, assignments and subletting of the Demised Premises
contained in Article V of the Original Lease, Lessor hereby consents to: (i)
the foreclosure of a Leasehold Deed of Trust, (ii) any sale of Lessee’s
interest in the Lease and the Demised Premises in connection with a
foreclosure, whether by judicial proceedings or by virtue of any power of sale
contained in the Leasehold Deed of Trust, (iii) any conveyance of Lessee’s
interest in the Lease and the Demised Premises from Lessee to the Leasehold
Mortgagee or its nominee or designee by virtue of or in lieu of foreclosure or
other appropriate proceedings, and (iv) if Leasehold Mortgagee or its nominee
or designee become the holder of Lessee’s interest in the Lease and the Demised
Premises, the conveyance of such interest by Leasehold Mortgagee or its nominee
or designee with the consent of Lessor pursuant to Article V of the Original
Lease.

 

4.         CONSENT
TO ASSIGNMENT OF LEASE. Notwithstanding anything to the contrary contained in
the Lease, Lessor hereby consents to the assignment of the Lease, all subleases
thereunder, if any, and Lessee’s leasehold interest in the Demised Premises to
FFP, which assignment to FFP shall be effective immediately upon Lessor’s
receipt of an executed copy of that certain Assignment and Assumption of Lease
in the form attached hereto as Exhibit “B” executed by Lessee and FFP.

 

3

 

5.         MODIFICATION;
ENTIRE AGREEMENT. This First Amendment may not be modified or terminated
orally, and constitutes the entire agreement between the parties with respect
to the subject matter hereof.

 

6.         SUCCESSORS
AND ASSIGNS. This First Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns (including, without limitation, FFP).

 

7.         CONSTRUCTION;
REAFFIRMATION. Except as expressly amended hereby, all of the terms and
conditions of the Original Lease shall remain unmodified and in full force and
effect. In the event of a conflict between the terms of the Original Lease and
the terms of this First Amendment, the terms of this First Amendment shall
govern and prevail. The Original Lease, as amended by this First Amendment, is
hereby reaffirmed.

 

8.         COUNTERPARTS.
This First Amendment may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which, together, shall constitute one
and the same instrument, binding on the parties hereto. The signature of either
party hereto to any counterpart hereof shall be deemed a signature to, and may
be appended to, any other counterpart hereof. Facsimile signatures shall be
fully binding and effective for all purposes as if they were original signatures.

 

IN WITNESS WHEROF, Lessor and Lessee have
executed this First Amendment as of the day and year first written above.

 

 

	
  LESSEE:

  	
   

  	
  LESSOR:

  
	
   

  	
   

  	
   

  
	
  CAMELOT PARK FAMILY

  ENTERTAINMENT CENTER OF

  MODESTO, L.P.,

  a California limited partnership

  	
   

  	
  J-MAR SISK ROAD PROPERTY,
  L.P.,

  a California limited partnership

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Camelot Park of Modesto, L.P.,

  	
   

  	
   

  
	
   

  	
  a California limited partnership, 

  	
   

  	
  By:

  	
  J-MAR DEVELOPMENT CO., GEN PARTN

  	
   

  
	
   

  	
  General Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  [Illegible]

  	
   

  
	
  By:

  	
  Camelot Park of Modesto, Inc.,

  	
   

  	
   

  
	
   

  	
  a California corporation, 

  	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
  General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald B.
  Johnson

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gerald B.
  Johnson

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
													

 

4

 

EXHIBIT A

 

DESCRIPTION OF DEMISED PREMISES

 

5

 

EXHIBIT B

 

FORM OF ASSIGNMENT AND ASSUMPTION OF LEASE

 

6

 

	
  RECORDING REQUESTED BY AND

  WHEN RECORDED MAIL TO:

  Paul, Hastings, Janofsky & Walker LLP

  555 South Flower Street, 23rd Floor

  Los Angeles, California 90071

  Attn: Rick S. Kirkbride, Esq.

  	
  Stanislaus, County Recorder

  Karen Mathews Co Recorder Office

   

  DOC – 98—0069039—00

  Acct    501-Chicago Title

  Thursday, JUL 30, 1998 08:00:00

  
	
  REC      
  $17.00

  	
  MOD   $17.00

  	
  MIC    $2.00

  
	
  MAIL ALL TAX STATEMENTS TO:

  	
  STF        $11.00

  	
   

  	
   

  
	
  Festival Fun Parks, LLC

  104 West Anapamu Street, Suite G

  Santa Barbara, CA 93101

  	
  Ttl Pd

  	
  $47.00

  	
  Nbr—0000242758

  
	
   

  	
   

  	
  AAF/R1/2—12

  

 

SPACE ABOVE THIS LINE RESERVED FOR RECORDER’S USE

 

ASSIGNMENT AND ASSUMPTION OF LEASE

 

THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this “Assignment”) is made and entered into as of the 30th day of June, 1998 (the “Effective Date”), by and between CAMELOT PARK FAMILY
ENTERTAINMENT CENTER OF MODESTO, L.P., a California limited partnership (“Assignor”), and FESTIVAL FUN PARKS, LLC, a
Delaware limited liability company (“Assignee”), with
reference to the following facts:

 

A.        Assignor is the tenant
under that certain lease dated February 9, 1993, entered into by and between
Assignor and Berberian Trust Properties, as landlord (“Landlord”), as modified by that certain addendum dated as of September 10,
1996, and as amended by that certain First Amendment to Modesto Ground Lease
entered into between Assignor and Landlord as of the date but prior to the
execution hereof (as amended, the *“Lease”),
for the lease of certain real property located in the County of Modesto, State
of California, and more particularly described on Exhibit “A” attached hereto (the “Property”).

 

B.        Assignor desires to assign
to Assignee, as of the Effective Date, all of its right, title and interest in,
to and under the Lease, and Assignee desires to receive from Assignor such
assignment and to assume each and all of the obligations of Assignee as tenant
under the Lease to be performed following the Effective Date.

 

NOW THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereto do hereby agree as follows:

 

1.         Assignment. Assignor hereby assigns and transfers to Assignee all of its
right, title and interest in, to and under the Lease, effective as of the
Effective Date.

 

2.         Assumption. Assignee hereby assumes,
effective as of the Effective Date, all obligations of Assignor as Tenant under
the Lease which first arise from and after the Effective Date and agrees to be
bound by and perform all of Tenant’s covenants, duties and obligations which
first arise thereunder from and after the Effective Date. Notwithstanding the
foregoing, Assignee shall have no obligation, liability or responsibility

 

            RECORDED IN ORDER
PRESENTED

 

	
   

  	
  RECORDER’S MEMO

  [ILLEGIBLE] RECORD IS DUE TO

  [ILLEGIBLE] OF ORIGINAL DOCUMENT

  

 

* “Lease” is
unrecorded

 

 

	
  STATE
  OF  CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY
  OF

  	
  Orange

  	
   

  	
  )

  	
   

  
					

 

On July 22, 1998,
before me, the undersigned, personally appeared Gerald B. Johnson, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the
instrument.

 

 

	
   

  	
   

  	
  DOROTHY SCHAUS

  
	
  WITNESS
  my hand and official seal.

  	
   

  	
  Commission # 1158638

  
	
   

  	
   

  	
  [SEAL]

  	
  Notary Public - California
Orange County

  My Comm. Expires Oct 13, 2001

  
	
  /s/
  Dorothy Schaus

  	
   

  	
   

  	
   

  
	
  Notary
  public in and for said State

  	
   

  	
  (SEAL)

  

 

 

for any liability, cost, expense or obligation of Assignor under the
Lease arising prior to the Effective Date, or attributable to such period.

 

3.         Successors and Assigns. This Assignment shall be binding on and
inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors in interest and assigns.

 

4.         Attorneys’ Fees. If any dispute should arise between the
parties hereto regarding the terms or subject matter of this Assignment or the
enforcement or breach of such terms, then the party prevailing in such dispute,
whether by out-of-court settlement or final judicial determination, shall be
entitled to recover from the non-prevailing party all costs and expenses of
such dispute incurred by such prevailing party, including, without limitation,
reasonable attorneys’ fees.

 

5.         Interpretation. This Assignment shall be construed and enforced
in accordance with the laws of the State of California.

 

IN WITNESS WHEREOF, the undersigned have
executed this Assignment as of the date first above written.

 

	
  “ASSIGNOR”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CAMELOT PARK FAMILY ENTERTAINMENT

  CENTER OF MODESTO, L.P.,

  a California limited partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Camelot Park of Modesto, L.P., 

  	
   

  	
   

  
	
   

  	
  a California limited partnership,

  General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:   Camelot Park of Modesto,
  Inc.,
         a California corporation,
         General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald B.
  Johnson

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Gerald B.
  Johnson

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
   

  
							

 

2

 

	
  “ASSIGNEE”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  FESTIVAL FUN
  PARKS, LLC,

  a Delaware limited liability company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: FEC Holding
  Company, Inc., its Member

  	
   

  	
   

  
	
  By:

  	
  /s/ Mark C. Monaco

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Mark C. Monaco

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  	
   

  

 

3

 

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”

 

LEGAL DESCRIPTION OF PROPERTY

 

4

 

EXHIBIT “A”

 

That certain
property located in the State of California, County of Stanislaus, described as
follows:

 

Parcel 2,
according to Parcel Map filed for record on June 15, 1993 in Book 45 of Parcel
Maps, at Page 95, Stanislaus County Records and being a portion of the
Southwest quarter of the Northeast quarter of Section 3, Township 3 South,
Range 8 East, Mount Diablo Base and Meridian.

 

Modesto

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