Document:

Exhibit 10.17

 

GROUND LEASE

 

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

 

RECITALS

 

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

 

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

 

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

 

LEASE

 

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

 

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

 

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1.         USE. Tenant shall
use the Land for the purpose of constructing, maintaining, and operating for
profit an amusement facility under the trade name Festival Fun Parks, LLC
including, without limitation, the following amusement attractions: miniature
golf; baseball batting cages; electronic games; bumper boats; go-karts; mazes;
hard rides; and other Festival Fun Parks attractions (the “Fun Center
Use”) located on that portion of the Land, Buildings and
Improvements known as 16800 Magnolia Street, Fountain Valley, California
992708, and further, Tenant shall use the land for the purpose of maintaining
and operating for profit a Bullwinkles’ Restaurant (“Restaurant
Use”) located on that portion of the premises commonly known as
16922 Magnolia Street, Fountain Valley, California 92708); provided, however,
Tenant can vary the Fun Center Use
and/or the Restaurant Use consistent with the
then highest and best use of the Land, as reasonably determined by Tenant from
time to time during the term, in which event Landlord agrees not to
unreasonably withhold its consent to amend this paragraph to allow and
authorize such alternate use; provided however, Landlord may consider the
impact of the proposed change on the Gross Income derived from the Land,
Buildings and Improvements on the Fun Center
Use and/or the Restaurant Use,
whichever is proposed to be varied, in giving or withholding its consent.
Subject to such right of Landlord, Landlord acknowledges that Tenant may change
the Fun Center Use and/or the Restaurant Use of the Land pursuant to Paragraph 6.1 of this
Lease. Tenant shall use commercially reasonable efforts to use and permit use
of the Land for purposes permitted by this Paragraph 1 which in Tenant’s
reasonable opinion will maximize Gross Income (as hereinafter defined). Tenant
shall not use and shall not permit or suffer the Land or any portion of the
Land to be used in any manner that would violate the provisions of any
certificate of occupancy or conditional use permit issued with respect to any
of the Improvements, or any other license, permit, or other governmental
authorization that is required for the lawful use or occupancy of all or any
portion of the Land or the Improvements. If any license, permit or other governmental
authorization is required for the lawful use or occupancy of all or any portion
of the Land or the Improvements, Tenant shall procure and maintain the same
throughout the term of this Lease or throughout the duration of the period the
same shall be required. Tenant will not use the Land inconsistent with any
private covenant, condition or restriction, currently recorded or hereafter
consented to in writing by Tenant. (“CC&R’s”), any conditional use permit
(“CUP”) or any other zoning or other restrictive provision to which the Land is
subject.

 

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

 

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

 

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

 

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3.1.1    Except
as provided in Section 3.1.2 below, Tenant shall pay to Landlord Twelve Percent
(12%) of Tenant’s Gross Income from its business operations on the Land,
Buildings and Improvements comprising the Fun Center Use
(“Percentage Rent”). Any Percentage Rent payable under this Lease shall be
payable, in arrears, on the 21st day of each month based on Tenant’s Gross
Income from the next preceding month. Tenant shall pay Percentage Rent to
Landlord at the address indicated herein for notices to Landlord. In no event
shall the Percentage Rent due from Tenant to Landlord during each Fiscal Year
(as defined in Section 3.1.5 below), be less than Two Hundred Forty Thousand
Dollars ($240,000) (the “Minimum Rent”). If at the end of the Fiscal Year,
Percentage Rent paid to Landlord does not equal or exceed Two Hundred Forty
Thousand Dollars ($240,000) in that Fiscal Year, Tenant shall remit the
difference between the Percentage Rent paid during that Fiscal Year and Two
Hundred Forty Thousand Dollars ($240,000) on July 21 of the ensuing Fiscal
Year. Tenant shall pay to Landlord a minimum of Two Hundred Forty Thousand
Dollars ($240,000) rent during any Fiscal Year or Twelve Percent (12%) of all
Gross Income, whichever is greater.

 

3.1.2    Tenant
shall pay to Landlord Six Percent (6%) of Tenant’s Gross Income from its
business operations on the portion of the Land, Buildings and Improvements
comprising the Restaurant Use
(“Restaurant Rent”). Any Restaurant Rent payable under this Lease shall be
payable, in arrears, on the 21st day of each month based on Tenant’s Gross
Income from the next preceding month. Tenant shall pay Restaurant Rent to
Landlord at the address indicated herein for notices to Landlord. In no event
shall the Restaurant Rent due from Tenant to Landlord during each Fiscal Year
(as defined in Section 3.1.6 below), be less than Seventy-Five Thousand Dollars
($75,000) (the “Minimum Rent”). If at the end of the Fiscal Year, Restaurant
Rent paid to Landlord does not equal or exceed Seventy-Five Thousand Dollars
($75,000) in that Fiscal Year, Tenant shall remit the difference between the
Restaurant Rent paid during that Fiscal Year and Seventy-Five Thousand Dollars
($75,000) on July 21 of the ensuing Fiscal Year. Tenant shall pay to Landlord a
minimum of Seventy-Five Thousand Dollars ($75,000) rent during any Fiscal Year
or Six Percent (6%) of all Gross Income, whichever is greater.

 

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

 

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calculation of
rent due from Tenant to Landlord for such subleased space shall be negotiated
concurrent with execution of such sublease and specified in an amendment to
this Lease.

 

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

 

(a)        Separately
calculated for the Fun Center Use
and for the Restaurant Use, Gross Income includes: Income from gross sales of Tenant
and/or all licensees and concessionaires of Tenant, from all businesses
conducted upon or from the Land by Tenant and all others, whether such gross
income he evidenced by check, credit, charge account, or otherwise, and shall
include, but not be limited to, the amounts received from the sale of goods,
food, beverage, wares, merchandise, game machine proceeds, from any amusement,
recreational or other use of the Land, Buildings or Improvements, participation
in sales, deposits not refunded and not required to be refunded at a later
date, and other amounts passing to Tenant chargeable or collected pursuant to
any sublease (as hereinafter defined) of the Land, Buildings or Improvements,
or pursuant to any license, consignment, concession or agreement pertaining to
the Land, Buildings or Improvements, and for services performed on or from the
Land, Buildings or Improvements, whether such sales or services be made by
means of merchandise or vending machines on the Land, Buildings or
Improvements, except for goods and services provided from one Fun Center of
Tenant to another Fun Center. If any one or more departments or other divisions
of Tenant’s business shall be sublet, licensed, consigned, subjected to
concessions or provided pursuant to any other agreement or business arrangement
on or from the Land, Buildings or Improvements by Tenant, including any
Subtenant (as hereinafter defined) or conducted by any person, firm or
corporation other than Tenant, including any Subtenant, then there shall be
included in Gross Income of such departments or divisions, whether such Gross
Income results from gross sales or services rendered, in the same manner and
with the same effect as if the sales or services of such departments and
divisions of Tenant’s business had been conducted by Tenant, including any
Subtenant, itself. Gross Income shall not include price discounts or credits
granted, or receipts from sales of services or merchandise for which cash has been
refunded, or allowances made on services or merchandise claimed to be defective
or unsatisfactory; and there shall be deducted from Gross Income the sales
price of merchandise returned by customers for exchange, provided that the
sales price of merchandise delivered to the customer in exchange shall be
included in Gross Income. Gross Income shall not include the amount of any
sales, use or gross income tax imposed by any

 

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federal, state,
municipal or governmental authority directly on sales or services and collected
from customers, provided that the amount thereof is added to the selling price
and paid by the Tenant; including any Subtenant, to such governmental
authority. Also, Gross Income shall not include transfers of merchandise
between stores of Tenant, including any Subtenant, if any, provided there is no
consideration paid in connection with such transfer and no such transfer is
made to avoid liability for Percentage Rent. No franchise or capital stock tax
and no income or similar tax based upon income or profits as such shall be
deducted from Gross Income in any event whatever. Each charge or sale upon
installment or credit shall be treated as a sale for the full price in the
month during which such charge or sale shall be made, irrespective of the time
when Tenant, including any Subtenant, concessionaire, licensee, consignee,
etc., shall receive payment (whether full or partial) therefor. Provided, however, in no event shall Gross Income from the Fun Center
Use be Included in calculating Gross Income from the Restaurant Use, nor shall
any Gross Income from the Restaurant Use be included in calculating Gross
Income from the Fun Center Use.

 

3.1.5    Upon
written request by Landlord, Tenant shall, within sixty (60) calendar days,
deliver to Landlord in the manner prescribed in this Lease for giving notices,
a statement prepared on a cash basis and otherwise in accordance with generally
accepted accounting principles consistently applied and by a certified public
accountant acceptable to Landlord showing the Gross Income and deductions as
provided in Paragraphs 3.1.1 and 3.1.2 for the preceding Fiscal Year (as
hereinafter defined).

 

3.1.6    Tenant
shall keep separately for the Fun Center Use
and for the Restaurant Use, true and correct records of the Gross Income and deductions
as provided in Paragraphs 3.1.1 and 3.1.2. All records relating to the
management, operation, maintenance, repair, construction or alteration of, or
addition to the Land and Improvements shall be kept at the principal office of
Tenant for not less than three years after delivery of the required annual
report. Landlord shall have the right, at its cost and at any reasonable time
and from time to time after giving prior written notice to Tenant, to do or
cause to be done any of the following: to audit the records or cause an audit
of the records to be made; to make abstracts from the records; to make copies
of any and all of the records, to examine any or all Subleases; and to make
copies of any or all Subleases. Tenant shall make all records specified in the
notice available at the time specified in the notice, if reasonable, and at the
place where the records are to be kept pursuant to this Paragraph. All
information so obtained by Landlord or otherwise obtained under the percentage
rent provisions of this Lease shall be treated as confidential except in any
litigation or arbitration proceedings between Landlord and Tenant or

 

5

 

Landlord or any
Sublessee, concessionaire or licensee and except, further, that Landlord may
divulge the information to a prospective buyer or encumbrancer of the Land or
of Landlord’s interest in the Lease or to a governmental agency or employee
thereof demanding the information. If the audit discloses that the Gross Income
was understated, Tenant shall pay the additional Percentage Rent forthwith; in
the event the additional Percentage Rent due shall exceed the previously paid
rent by the sum of ten percent (10%) of the Percentage Rent previously paid,
Tenant shall also pay to Landlord together with interest thereon from the date
it was due at the maximum interest rate then permitted by law; and provided
further, and in addition, if the error was in excess of three percent (3%),
Tenant shall pay Landlord’s reasonable audit costs.

 

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

 

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

 

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

 

5.1       Payment of
Taxes and Assessments. Tenant shall pay or cause to be paid without any
abatement, deduction, diminution or offset (except as permitted by Paragraph
5.3), (i) all real and personal property taxes, general and special
assessments, excises, impositions, levies and other charges of every
description now or hereafter levied on, assessed against or otherwise imposed
with respect to, the Land, improvements located on the Land, personal property
located on or in the Land or Improvements, the leasehold estate created hereby,
or any subleasehold estate or any right of occupancy under any concession,
license, or other agreement, and (ii) the portion of any taxes or other
impositions in the nature of a tax on Landlord’s right to do business
attributable to Landlord’s rights, powers, duties, or obligations under this
Lease, to the full extent of installments accruing during the term of this
Lease, whether belonging to, or chargeable against, Landlord or Tenant, or
anyone claiming by, through, or under Tenant (hereinafter, collectively
‘Taxes’). In addition, Tenant shall also pay any Taxes, however described, which
may hereafter be levied, assessed, or imposed in lieu of, as a substitute

 

6

 

(in whole or in
part) for, or as an addition to, any other Taxes payable by Tenant hereunder.
Tenant shall make all such payments direct to the charging authority at least
ten (10) days before delinquency and before any fine, interest, or penalty
shall become due or be imposed by operation of law for their nonpayment. If,
however, the law expressly permits the payment of the Taxes in installments
(whether or not interest accrues on the unpaid balance) Tenant may, at Tenant’s
election, utilize the permitted installment method, but shall pay each
installment with interest, if any, before delinquency. Notwithstanding the
above, no affirmative obligation shall be created for the Tenant to pay any
tax, assessment, or other charge which is not or cannot under any circumstances
result in a lien against the Land, Improvements, or leasehold estate or
Tenant’s or Landlord’s interest therein, excepting any Tax described in clause
(ii), above.

 

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

 

5.3       Contest of
Taxes. Tenant may contest the legal validity or amount of any Taxes prior
to their delinquency, and may institute any proceedings Tenant considers
necessary, at Tenant’s cost. If Tenant contests any Taxes, Tenant may withhold
or defer payment or pay under protest, but shall protect Landlord and the
Premises by adequate surety bond or other appropriate security satisfactory to
Landlord in its reasonable discretion, which judgment shall be deemed to be
reasonable until otherwise determined by a final judgment of a court of
competent jurisdiction. Tenant shall be responsible for and shall pay all costs
and expenses in any contest or legal proceeding instituted by Tenant. Landlord
shall join with Tenant for the purpose of contesting any Taxes only when such
joinder is required to properly carry out such contest and only after Tenant
has agreed in writing to fully indemnify Landlord against all and any costs and
expenses relating to the contest. In no event shall Landlord be subjected to
any liability for costs or expenses connected to any contest by Tenant, and
Tenant agrees to indemnify and hold harmless from any such costs or expenses.

 

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

 

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

 

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

 

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

 

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

 

Tenant shall promptly and diligently repair, restore,
alter, add to, remove, and replace, as required, the Buildings and/or
Improvements to maintain or comply as stated above, or to remedy all damage to
or destruction of all or any part of the Buildings and/or Improvements, whether
from act of God, fire, casualty, condemnation or otherwise; provided, that if
during the last ten (10) years of the term of this Lease, a casualty occurs for
which insurance is not required under this Lease and which causes damage(s) in
excess of fifty percent (50%) of the then fair market value of the Buildings
and/or Improvements, or fifty percent (50%) of the pre-casualty replacement
costs of such Buildings and/or Improvements, whichever is greater, then Tenant
may elect to terminate this Lease. Any repair, restoration, alternation,
addition, removal, maintenance, replacement, and other act of compliance under
this Paragraphs (hereafter collectively referred to as “Restoration”) shall be
completed by Tenant whether or not funds are available from insurance proceeds,
condemnation proceeds or Subtenant contributions. The Restoration shall satisfy
the requirements of any Sublease then in effect for the Buildings and/or
Improvements with respect thereto or, if no Sublease is then in effect, shall
be repaired or restored at least to the type, standard and quality of the
Buildings and/or Improvements in existence prior to the date of such damage or
destruction. Notwithstanding the foregoing, Tenant can upon Restoration vary
the type, standard and/or quality of the buildings and/or Improvements
consistent with the then highest and best use of the Land, as reasonably
determined by Tenant and as approved by Landlord in its reasonable discretion
(Landlord may specifically consider the impact of any replacement of alteration
on the Gross Income generated by the Buildings and/or Improvements as proposed
to be restored); and Tenant shall have the right to obtain appropriate studies,
plans, permits and approvals for purposes of varying the Buildings and/or
Improvements consistent therewith; provided, however, in the event Tenant
elects

 

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to vary the Buildings
and/or Improvements as provided above, Tenant shall pay full Minimum Rent until
the Restoration is completed; provided, further, that if Tenant fails to
complete the Restoration within a period of two (2) years, Landlord may
terminate this Lease upon written notice to Tenant. Nothing in this provision
defining the duty of maintenance shall be construed as limiting any right given
elsewhere- in this Lease to alter, modify, demolish, remove, or replace any
building and/or Improvement. No deprivation, impairment, or limitation of use
resulting from any event or work contemplated by this Paragraph shall entitle
Tenant to any abatement, deduction, diminution, offset, or reduction in Minimum
Rent nor to any termination or extension of the term, except as expressly
provided otherwise herein. Tenant’s obligation to maintain the Land and all
Buildings and/or Improvements under this Paragraph also requires that Tenant
employ Tenant’s best efforts to cause to be operated its business thereon in a
manner that will produce at all times the maximum volume of Gross Income.

 

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

 

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

 

7.1       Minor
Construction. Tenant’s compliance with Paragraph 7.2 is not required for
Tenant’s minor Construction, which consists of aggregate expenditures during
any 12-month period which, including all expenditures of all construction on
the Land within a 12-month period, shall not exceed $2,500,000 (“Minor
Amount”). The

 

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minor Amount shall
be increased (or decreased) proportionately to any increase (or decrease) in
the Consumer Price Index for All Items–U.S. Average (“CPI”), as published by
the United States Department of Labor, Bureau of Labor Statistics. In the
absence of any such official consumer price index published by a United States
governmental agency, then the most nearly similar index published by a
responsible private organization shall be used. “Major Amount” means all other
Construction which does not constitute a “Minor Amount”. Construction cost
shall include the actual cost to Tenant for any demolition and any removal of
existing Buildings and/or Improvements or parts of Buildings and/or
Improvements as well as for preparation, planning, permits, construction, and
completion of all new Buildings and/or Improvements or parts of Buildings
and/or Improvements.

 

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

 

7.2.1    Plans
and Specifications. Prior to commencing any Major Construction, and prior
to applying for any building permits relating thereto, Tenant shall deliver to
Landlord preliminary plans and specifications for conceptual review and
approval. Landlord shall have the right to approve such plans and
specifications and the construction contemplated thereby (the “Project”) which
consent shall not be unreasonably withheld, delayed or conditioned. After
Landlord’s approval of the preliminary plans and specifications, Tenant shall
deliver to Landlord a complete set of working construction plans and
specifications prepared by an architect or engineer licensed to practice as
such in the State of California. Landlord shall have the right to approve all
such construction plans and specifications for the Project prior to
commencement of any work on the Project, which consent shall not be
unreasonably withheld, delayed or conditioned. Said plans and specifications
shall provide for the construction of the Major Construction within the
exterior property lines of the Land; provided, however, that work beyond the
Land required by the Laws or work on utilities serving the Land or affected by
the contemplated construction, work on access areas, and work required by
conditional use requirements will not violate this provision.

 

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

 

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

 

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

 

7.2.5    Insurance
Required. Tenant shall deliver to Landlord (a) certificates of course of
construction insurance, (b) evidence of workers’ compensation insurance
covering all persons employed in connection with the work and with respect to
whom death or bodily injury claims could be asserted against Landlord or the
Land, or Landlord’s interest in the Land, the Buildings and/or Improvements and
this Lease or any of them or against Tenant, the Buildings and/or Improvements
and the leasehold estate of Tenant, and (c) evidence that Tenant has paid or
caused to be paid all premiums for the coverage described above in this
Paragraph and any increase in premiums on insurance provided for Paragraph 14,
sufficient to assure maintenance of all insurance required under this Lease
during the anticipated course of the work. Tenant shall maintain, keep in
force, and pay all premiums required to maintain and keep in force all
insurance required under this Paragraph at all times during which such work is
in progress. All such certificates of insurance and insurance policies shall
name Landlord as additional insured and prohibit cancellation without notice.
Landlord shall be provided copies of such policies of insurance.

 

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

 

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

 

11

 

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

 

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

 

8.3       Ownership
of Buildings and/or Improvements at Termination. Subject to Paragraphs 8.2
and 17, all Buildings and/or Improvements for any reason remaining on the Land
at the expiration of the term or sooner termination of this Lease shall, without
compensation to Tenant, then automatically and without any act of Tenant or any
third party, other than any Fee Mortgagee, become Landlord’s property, and
shall be free and clear of all liens and encumbrances other than those liens
and encumbrances currently affecting title to the property and any other liens
and encumbrances consented to or caused by Landlord. Tenant agrees to execute,
acknowledge, and deliver to Landlord such instrument as may be reasonably
required by Landlord’s title insurer at no cost to Tenant to issue title
insurance assuring title to the Buildings and Improvements in Landlord upon
such termination.

 

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

 

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

 

12

 

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

 

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

 

10.       MORTGAGES BY LANDLORD.
Except as set forth on Exhibit “B” attached hereto, Landlord warrants that as
of the date of this Lease, the Land is free and clear of any mortgages or other
liens placed by Landlord. Landlord shall have the right at any time during the
term of this Lease to mortgage or hypothecate its ownership of the Land and/or
its interest in this Lease (“Fee Mortgage”). Provided the Fee Mortgagee shall
execute a commercially reasonable non-disturbance and attornment agreement with
Tenant pursuant to which Tenant shall at all times remain a Tenant. Tenant
shall execute a Subordination Agreement subordinating this Lease. Tenant shall
further use commercially reasonable efforts to obtain a subordination agreement
from any Leasehold Mortgagee within ninety (90) days (provided the failure to
obtain such subordination agreement shall not be an Event of Default under this
Lease).

 

10.1     Subordination,
Non-Disturbance and Attornment. This Lease shall, subject to the Landlord’s
obligation to deliver to Tenant the Non-Disturbance Agreement (as provided
herein) be subject and subordinate to the lien of any Fee Mortgage hereinafter
enforced against the Land, Buildings and Improvements, and to all renewals,
extensions, modifications, consolidations and replacements thereof, and to all
advances made or to be made upon the security of such Fee Mortgage or Trust
Deed, unless the Fee Mortgagee requires in writing that this Lease be superior
thereto. Tenant covenants and agrees in the event any proceedings are brought
for the foreclosure of any Fee Mortgage,

 

13

 

to attorn, without
any deductions or offsets whatsoever, except for deductions or offsets, if any,
specifically permitted in this Lease, to the purchaser or any successors
thereto upon any such foreclosure sale or deed in lieu thereof and to recognize
such purchaser as the Lessor under this Lease, provided (1) said purchaser
agrees in writing to assume the duties and obligations of Landlord arising or
continuing after the date it acquires title to this Lease and (2) Tenant shall
not be disturbed so long as Tenant has not then committed or permitted an Event
of Default (which continues beyond any applicable cure periods). Tenant shall,
within fifteen (15) business days of request by Landlord, execute and deliver
to Landlord such further instruments or assurances as Landlord may reasonably
deem necessary to evidence or conform the subordination or superiority of this
Lease to any such Fee Mortgage together with Tenant’s agreement to attorn,
subject to Tenant’s obtaining from such Fee Mortgagee a Non-Disturbance
Agreement executed by the Fee Mortgagee and in form reasonably acceptable to
Tenant, providing, among other things, that as long as Tenant is not in an
Event of Default (which continues beyond any applicable cure period), this
Lease shall remain in full effect for the full term of the Lease;
notwithstanding any provision contained in such Fee Mortgage the rights and
obligations of Tenant shall be set forth and governed by this Lease.

 

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

 

11.1     Restrictions
on Assignment. Tenant may only assign this Lease or any interest herein,
subject to the prior written consent of Landlord. Landlord shall not
unreasonably withhold or delay its consent, and shall grant consent if the
proposed assignee is financially equal to or stronger than Tenant and has
sufficient business experience to perform all the agreements, undertakings, and
covenants of this Lease and all other agreements entered into by Tenant that
relate to the management, operation, maintenance, construction, and restoration
of the Buildings, Improvements and the Land. To assist Landlord in determining
whether or not the proposed assignee is so qualified, Tenant shall furnish to
Landlord at no expense to Landlord, prior to such assignment, detailed and
complete financial statements of the proposed assignee, audited by a certified
public accountant reasonably satisfactory to Landlord (if the proposed
transferee causes its statements to be so audited in its normal course of
business), together with detailed and complete information about the business
of the proposed assignee, including its business experience, the use to be made
of the Land, Buildings and Improvements by the proposed assignee, projections
by the proposed assignee of the sources of funds to be used to repay any
indebtedness of Tenant that the proposed assignee will assume or take subject
to, or agree to pay to Tenant, and other claims on and requirements for such
funds, together with such other information as Landlord may reasonably require
to assist Landlord in determining whether or not the proposed assignee is so
qualified. Landlord shall have 30 days after receipt of the information
described above to notify Tenant of whether it consents or does not consent to
the proposed assignment. Absent any such notification by Landlord during said
30-day period, Landlord shall be conclusively

 

14

 

deemed to have
consented to the assignment. A consent by Landlord to one assignment shall not
be deemed to be a consent to any subsequent assignment. Any assignment made
contrary to the terms of this subparagraph shall be null and void unless
permitted by subparagraph 11.2 below.

 

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

 

11.3     Delegation.
Tenant may at Tenant’s election delegate performance of any or all covenants to
any one or more approved assignees. Any delegation by Tenant shall not relieve
Tenant of any obligation under this Lease unless otherwise provided in this
Lease. In the event of any proposed assignment, Tenant shall provide sufficient
information to Landlord to enable Landlord to make a reasonable commercial
determination that the proposed assignee is of equivalent or greater financial
strength and the equivalent or greater ability to pay the Rent due hereunder as
does Tenant. Upon Landlord’s consent, which shall not be unreasonably withheld,
conditioned or delayed and will be deemed given if not received within
twenty-one (21) days of receipt of such request; if the financial condition and
ability to pay rent by the proposed assignee merits a commercially reasonable
determination that Landlord should release Tenant from further liability of
this Lease, upon such approval Landlord shall release Tenant. Any assignment
approved by Landlord shall so evidence the release of Tenant from further
liability under this Lease provided however, and in no event, shall Tenant be
relieved of any obligation for Hazardous Materials or environmental
contamination permitted or caused by any Tenant or any Tenant Party (as
provided in Section 20 of this Lease) during the term that the assigning Tenant
was the Tenant under this Lease. This provision shall not be considered to
permit or to broaden the right of assignment beyond the provisions of this
Lease relating to assignment.

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

13.2     Escrow.
If Tenant elects to purchase the Land as provided in this Paragraph, escrow for
the purchase and sale shall be opened jointly by the parties with an escrow
company mutually acceptable to the parties (“Escrow Holder”), within five (5)
days of Tenant’s notice to Landlord electing to purchase the Land. Each party
shall execute escrow instructions in a form appropriate to complete purchase
and sale of the Land and shall deposit same with Escrow Holder.

 

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

 

14.1     Fire and
Extended Coverage. Tenant, at Tenant’s sole cost and expense, shall provide
and maintain insurance covering the Buildings and the Improvements, including
without limitation, all buildings, structures, and improvements now situated or
which hereafter may be erected or placed on the Land, against loss or damage by
fire, vandalism, malicious mischief, windstorm, hall, smoke, explosion, riot,
civil commotion, vehicles, aircraft, flood or earthquake (if Landlord and
Tenant mutually agree in writing) including, without limitation, endorsements
for increased cost of construction due to changes in laws, agreed amount or
demolition. All such insurance shall be in a sum not less than 90 percent of
the replacement cost (the “Replacement Cost”) exclusive of

 

17

 

foundations and
below ground improvements and shall contain a “Replacement Cost Endorsement.”
Such insurance shall be in forms and with companies satisfactory to Landlord in
its reasonable discretion. If any dispute as to whether the amount or coverage
of insurance obtained by Tenant complies with the requirements of this
Paragraph cannot be resolved by agreement, Landlord may, not more often than
once every twenty four (24) months, request that the Replacement Cost be
determined, at Tenant’s option, by either (a) the carrier of the insurance then
in force, or (b) such other carrier of insurance as is reasonably acceptable to
Landlord, and the resulting determination shall be conclusive between the
parties for the purpose of this Paragraph.

 

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

 

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

 

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

 

14.5     Form of
Insurance. All insurance required by express provisions of this Lease shall
be carried only with responsible insurance companies reasonably acceptable to
Landlord and licensed to do business in the State of California. All such
policies shall be nonassessable and shall contain language to the effect that
(a) any loss shall be payable notwithstanding any act or negligence of Landlord
or Tenant that might otherwise result

 

18

 

in a forfeiture of
the insurance, (b) the insurer waives the right to subrogation against either
party hereto for the negligence of such party, (c) the policies are primary and
noncontributing with any insurance that may be carried by Landlord, and (d)
they cannot be canceled or materially changed except after thirty (30) days
prior written notice by the insurer to Landlord. Tenant shall furnish Landlord
with copies of all such policies certified by the insurer within the following
time limits:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)        Notice of
Intended Taking;

 

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

 

20

 

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

 

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

 

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

 

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

 

15.5     Total Taking.
On a Total Taking, this Lease shall terminate as of 12.01 a.m. on whichever of
the following first occurs: the date legal title becomes vested in the agency
or entity exercising the power of eminent domain, or the date actual physical
possession is taken by the agency or entity exercising the power of eminent domain.
Thereafter, both Landlord and Tenant shall be released from all obligations
under this Lease, except those specified in this Paragraph. On a Total Taking,
all sums, including, without limitation, damages and interest, awarded for the
fee or the leasehold or both or the Buildings and/or Improvements shall be
deposited promptly with Landlord and shall be distributed and disbursed in the
following order and priority:

 

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

 

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

 

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

 

Fourth, to Tenant, the then fair market value of
Tenant’s leasehold estate under this Lease, as well as any award that may be
made for the taking of or damage to

 

21

 

any Improvements
made by Tenant to the Land which Tenant would have had the right to remove, but
for the condemnation, on expiration or sooner termination of this Lease.

 

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

 

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

 

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

 

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

 

15.6     Partial
Taking.

 

15.6.1  Effect
on Rent; Term. On a Partial Taking, this Lease shall remain in full force
and effect, covering the remaining Land, Buildings and Improvements except that
the Rent hereunder shall be reduced in the same ratio as the fair market value
of the portion of the Land taken (excluding Buildings and/or Improvements then
in existence but deducting expenses of collection, including any attorneys’
fees of Landlord and Tenant and restoration costs) bears to the fair market
value of the total Land, provided however, in the event a portion of a Building
or Improvement is to be taken, and may be rebuilt, the Rent shall be reduced in
the same ratio as the fair market value of the portion of Land taken exclusive
of Buildings and/or Improvements; provided however, in no event shall the Rent
due to Landlord from Tenant be decreased below the average minimum rent
specified in paragraph 3.1.1 of this Lease.

 

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

 

First, to Landlord a sum equal to the fair market
value of the Land taken valued at its highest and best use as unimproved land
exclusive of

 

22

 

Buildings and/or
Improvements and unburdened by this Lease and all Subleases.

 

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

 

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

 

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

 

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

 

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

 

15.7     Temporary
Taking.

 

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

 

23

 

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

 

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

 

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

 

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

 

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

 

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

 

24

 

written notice
thereof, Tenant shall not be in default if Tenant has commenced and is
diligently pursuing such cure continuously and such cure has commenced within
thirty (30) days after written notice of such default from Landlord to Tenant.

 

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

 

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

 

16.1.6. Bankruptcy. An assignment by Tenant for
the benefit of creditors; or the voluntary filing by Tenant or the involuntary
filing against Tenant of a petition, other court action or suit under any law
for the purpose of (i) adjudicating Tenant a bankrupt, (ii) extending time for
payment, (iii) satisfaction of Tenant’s liabilities, or (iv) reorganization,
dissolution, or arrangement on account of, or to prevent, bankruptcy or
insolvency; provided, however, that in the case of a voluntary proceeding, if
all consequent orders, adjudications, custodies, and supervisions are
dismissed, vacated, or otherwise permanently stayed or terminated within one
hundred (100) days after the filing or other initial event, then Tenant shall
not be in default under this Paragraph 16.1.6.

 

16.2     Remedies of
Default.

 

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

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

required for the
reletting. In the event Landlord relets the premises, Tenant shall pay all Rent
due under and at the time specified in this Lease, less any amount or amounts
actually received by Landlord from the reletting.

 

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

 

16.2.5. Other Rights of Landlord. No act of
Landlord, including but not limited to Landlord’s entry on the Land, efforts to
relet the Land, or maintenance of the Land, shall be construed as an election
to terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction. Notwithstanding Landlord’s election to continue the Lease in full
force and effect after a default by Tenant and to relet the Land, Buildings or
Improvements Landlord may at any time after such reletting elect to terminate
this Lease for any such default.

 

16.3.    Landlord’s
Right to Cure. After expiration of the applicable time for curing a
particular default, or before the expiration of that time in the event of
emergency or other condition which if not remedied by the curing of the default
could materially and adversely affect Landlord’s right or security under this
Lease, Landlord may at Landlord’s election, but is not obligated to, make any
payment required of Tenant under this Lease, or perform or comply with any
covenant imposed on Tenant under this Lease, and the amount so paid plus the
reasonable cost of any such performance or compliance, including, without
limitation, attorneys’ fees and disbursements, plus interest on this sum at the
then maximum interest rate permitted by law from the date of payment,
performance, or compliance (herein called “act”), shall be deemed to be
additional Rent

 

27

 

payable by Tenant
with the next succeeding installment of Rent. No such act shall constitute a
waiver of default or of any remedy for default or render Landlord liable for
any loss or damage resulting from any such act.

 

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

 

16.5.    Rights
of Leasehold Mortgagee.

 

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

 

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

 

28

 

sixty (60) or
seventy-five (75) day Termination Notice period any such Leasehold Mortgagee
shall:

 

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

 

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

 

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

 

16.5.3. Procedure on Default.

 

(i)         If Landlord
shall elect to terminate this Lease by reason of any default of Tenant, and
Leasehold Mortgagee shall have proceeded in the manner provided for by
subparagraph 16.5.2, the specified date for the termination of this Lease as
fixed by Landlord in its Termination Notice shall be extended for a period of
six (6) months, provided that such Leasehold Mortgagee shall, during this
six-month period: (A) Pay or cause to be paid, the rent, additional rent, and
other monetary obligations of Tenant under this Lease that have become due and
as the same become due, and continue its good faith efforts to perform all of
Tenant’s other obligations under this Lease, excepting (1) obligations of
Tenant to satisfy or otherwise discharge any lien, charge, or encumbrance
against Tenant’s interest in this Lease or the Land, Buildings and/or
Improvements junior in priority to the lien of the mortgage held by Leasehold
Mortgagee and (2) past nonmonetary obligations then in default and not
reasonably expected to be cured by Leasehold Mortgagee; and (B) Take steps to
acquire or sell Tenant’s interest in this Lease by foreclosure of the Leasehold
Mortgage or other appropriate means and prosecute the same to completion with
due diligence.

 

29

 

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

 

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

 

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

 

30

 

should the
Leasehold Mortgagee or its designee choose not to fully reconstruct the
Building and/or Improvements to the extent required by this Lease, such failure
shall constitute an event of default under this Lease that shall give Landlord
the right to terminate this Lease after thirty (30) days prior written notice
to Leasehold Mortgagee or Purchaser.

 

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

 

(vi)      Notwithstanding
any other provisions of this Lease, any sale of this Lease and the leasehold
estate hereby created in any proceedings for the Foreclosure of the Leasehold
Mortgage, or the assignment or transfer of this Lease and of the leasehold
estate hereby created in lieu of the Foreclosure of the Leasehold Mortgage
shall be deemed to be a permitted sale, transfer, or assignment of this Lease
and of the leasehold estate hereby created, subject to all of the provisions of
this Lease which limit the use of Tenant’s intellectual property, including
without limitation, Tenant’s trademarks, servicemarks, trade names and other
proprietary information.

 

16.5.4. New Lease. In the event of the termination
of this Lease as a result of Tenant’s default, Landlord shall, in addition to
providing the notices of default and termination as required by subparagraph
16.5.2, provide Leasehold Mortgagee with prompt written notice that the Lease
has been terminated, together with a statement of all sums that would at that
time be due under this Lease but for such termination, and of all other
defaults, if any, then known to Landlord. Landlord agrees to enter into a new
lease (“New Lease”) of the Land with Leasehold Mortgagee or Purchaser for the
remainder of the term of this Lease, effective as of the date of termination,
at the Rent and Additional Rent, and on the terms, covenants, and conditions
(but excluding requirements that are no

 

31

 

longer applicable
or that have already been fulfilled) of this Lease, but subject to all of the
provisions of this Lease which limit the use of Tenant’s intellectual property,
including without limitation, Tenant’s trademarks, servicemarks, trade names
and other proprietary information, provided:

 

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

 

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

 

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

 

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

 

16.5.5. Leasehold Mortgagee Need Not Cure Specified
Defaults. Nothing herein contained shall require Leasehold Mortgagee or
Purchaser as a condition to its exercise of any right hereunder to cure any
default of Tenant not reasonably

 

32

 

susceptible of
being cured by Leasehold Mortgagee or Purchaser, including, without limitation,
the default referred to in Paragraph 16.1.6 of this Lease relating to
bankruptcy and insolvency and any other paragraphs of the Lease that may impose
conditions of default not susceptible to being cured by Leasehold Mortgagee or
Purchaser, in order to comply with the provisions of Paragraph 16.5.2 or
16.5.3, or as a condition of entering into the New Lease provided for Paragraph
16.5.4.

 

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

 

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

 

16.5.8. Two or More Leasehold Mortgagees. In
the event two or more Leasehold Mortgagees each exercise their rights under
this Lease and there is a conflict that renders it impossible to comply with
all requests of the Leasehold Mortgagees, then the Leasehold Mortgagee whose
Leasehold Mortgage would have senior priority in the event of a foreclosure
shall prevail. If any Leasehold Mortgagee pays any rent or other sums due under
this Lease relating to a period or periods other than its actual ownership of
the leasehold estate, the Leasehold Mortgagee shall be surrogated to any and
all rights that may be asserted against Landlord with respect to that period or
periods of time.

 

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

 

16.5.8.2.          Assignment
by Leasehold Mortgagee. The term “Leasehold Mortgagee” as used in this
Lease shall mean not only the original lender that loaned money to Tenant and
is named as beneficiary,

 

33

 

mortgagee, or
security holder in the security instrument creating any Leasehold Mortgage, but
also all subsequent purchasers or assignees of such security instrument.

 

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

 

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

 

16.5.11.           Waiver.
No waiver of any default shall constitute a waiver of any other breach or
default, whether of the same or any other covenant or condition. No waiver,
benefit, privilege, or service voluntarily given or performed by either party
shall give the other any contractual right by custom, estoppel, or otherwise. The
subsequent acceptance of Rent pursuant to this Lease shall not constitute a
waiver of any preceding default by Tenant other than default in the payment of
the particular rental payment so accepted, regardless of Landlord’s knowledge
of the preceding breach at the time of accepting the Rent, nor shall acceptance
of Rent or any other payment after termination constitute a reinstatement,
extension, or renewal of the Lease or revocation of any notice or other act by
Landlord.

 

17.       SURRENDER OF LAND AND
BUILDINGS. At the expiration or earlier termination of this Lease, Tenant
shall surrender to Landlord the possession of the Land, Buildings and
Improvements and deliver to Landlord a good and sufficient grant deed, in form
acceptable for recordation conveying all of its right, title, and interest
therein to Landlord. Tenant shall leave the surrendered Land, Buildings and
Improvements broom-clean condition, except as otherwise expressly provided in
this Lease. All property that Tenant is required to surrender shall become
Landlord’s property on the expiration of or earlier termination of the Lease.
All Improvements that Tenant does not remove under Paragraph 8.2 shall, at
Landlord’s

 

34

 

election, be
deemed abandoned and became Landlord’s property; provided, however, upon
written notice given to Tenant by Landlord at least thirty (30) days prior to
the expiration of the term or sooner termination of this Lease, Landlord can
require Tenant to remove all such Buildings and/or Improvements and restore the
Land to a “buildable” condition as reasonably determined by Landlord; provided
however, Tenant shall have a period of ninety (90) days following the
termination of the term of this Lease to commence such work, to remove all such
buildings and/or improvements and restore the Land to a buildable condition and
shall diligently pursue such work to completion, subject only to Landlord
delays, any intervening act of God or governmental action or other matters
beyond the control of Tenant (excluding matters in the control of any Subtenant
or non-approved assignees) which preclude timely completion of such work.

 

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

 

18.       ESTOPPEL CERTIFICATES.
At any time and from time to time, within twenty-one (21) days after notice of
request by either party, the other party shall execute, acknowledge, and
deliver to the requesting party, or to such other recipient as the notice shall
direct, a statement certifying that this Lease is unmodified and in full force
and effect, or, if there have been modifications, that it is in full force and
effect as modified in the manner specified in the statement. The statement
shall also state the dates to which the Rent has been paid in advance. Tenant
further agrees at any time and from to time upon not less than twenty-one (21)
days notice by Landlord to execute, acknowledge and deliver to Landlord, or any
Fee Mortgagee, a statement in writing certifying (i) that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating the
modifications), (ii) whether or not there are then existing any offsets or
defenses against the enforcement of any of the terms, covenants, or conditions
hereof on the part of Tenant to be performed (and if so, specifying the same);
(iii) the dates to which the Percentage Rent and other Rent and other charges
have been paid; (iv) such other matters as may reasonably be requested, it
being intended that any such statement delivered pursuant to this section may
be relied upon by Landlord, Tenant and their representative lenders, any
mortgage, any prospective purchaser of the fee or leasehold estate or proposed
lender on the security of the fee or leasehold estate of the Land comprising
the premises; (v) Tenant will upon receipt of the Non-Disturbance and
Attornment Agreement provided in paragraph 10.1 of this Lease, attorn to the
Fee Mortgagee; (vi) upon Tenant’s receipt of the Non-Disturbance and Attornment
Agreement provided by paragraph 10.1 of this Lease, and thereafter on written
demand specifying that a default under the Fee Mortgage has occurred, Tenant
shall pay rent to the Fee Mortgagee; (vii) Tenant will not enter into an
amendment which materially adversely impacts the Fee Mortgagee’s interest;
(viii) if requested, upon receipt of the Non-Disturbance and Attornment
Agreement provided by

 

35

 

paragraph 10.1 of
this Lease, Tenant will sign a commercially reasonable and customary
subordination agreement in the form routinely required by the Fee Mortgagee
subordinating the Lease to the Fee Mortgage; (ix) Tenant will not look to the
Fee Mortgagee for the return of any deposit unless Fee Mortgagee actually
receives the deposit.

 

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

 

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

 

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

 

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

 

	
  TENANT:

  	
   

  	
  Festival Fun Parks, LLC

  
	
   

  	
   

  	
  33208 Paseo Cerveza, Suite “C”

  
	
   

  	
   

  	
  San Juan Capistrano, CA 92675-4898

  
	
   

  	
   

  	
   

  
	
  LANDLORD:

  	
   

  	
  c/o John Huish

  
	
   

  	
   

  	
  17868 Joyas Court

  
	
   

  	
   

  	
  Poway, CA 92064-1005

  
	
   

  	
   

  	
   

  
	
  COPY TO:

  	
   

  	
  Randall L. Mason, Esquire

  
	
   

  	
   

  	
  Lewis, D’Amato, Brisbois & Bisgaard LLP

  
	
   

  	
   

  	
  550 West “C” Street, 8th Floor

  
	
   

  	
   

  	
  San Diego, California 92101

  

 

19.1.4 Change of Recipient or Address. Either
party may, by notice given at any time or from time to time, require subsequent
notices to be given to another party or an officer or representative, or to a
different address, or both. Notices

 

36

 

given before
actual receipt of notice of change shall not be invalidated by the change.

 

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

 

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

 

19.3     Right of
Entry. Landlord reserves the right at all reasonable times and upon not
less than forty-eight (48) hours prior written notice to Tenant (except in the
case of an emergency) to enter the Land: (i) to inspect them; (ii) show the
Land, Buildings and Improvements to prospective purchasers, or mortgagees;
(iii) show the Land, Buildings or Improvements to prospective tenants during
the last eighteen (18) months of the term of this Lease; (iv) post notices of
Non-Responsibility; (v) perform services required of Landlord; and (vi) perform
any covenants of Tenant which Tenant fails to perform (subject to any notice
and/or grace periods contained in this Lease). Landlord may make such entries
without the abatement of Rent and may take such reasonable steps as required to
accomplish the stated services; provided, however, each such entry shall be
made in reasonable manner which, to the maximum extent reasonably possible,
does not interfere with Tenant’s business operations or security systems.
Further, Tenant shall have the right to accompany Landlord during any such
entry (except in the case of an emergency). Nothing herein contained shall
imply any duty on the part of Landlord to do any such work which under any
provision of this Lease Tenant may be required to do; nor shall it constitute a
waiver of Tenant’s default in filing to do the same.

 

19.4.    No
Merger. If both Landlord’s and Tenant’s estates in the Land or the
Improvements or both become vested in the same owner, this Lease shall
nevertheless not

 

37

 

be destroyed by
application of the doctrine of merger except at the express election of the
owner and with the written consent of all Leasehold Mortgagees.

 

19.5.    Definitions.

 

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

 

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

 

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

 

19.6.4 “Landlord” means the person(s) who is/are the
owner(s) of the Land at the time in question, whether singular or plural in
number and whether named in this Lease as Landlord or having become the
successor in interest of the named Landlord, or the successor of a successor, whether
by assignment, foreclosure, or other transfer and whether intentional or
inadvertent or by operation of law; provided, however, whenever Landlord
hereunder consists of plural persons or entities, then any action or election
by such Landlord under this Lease shall require the written approval of greater
than fifty percent (50%) of the persons or entities which then comprise
Landlord.

 

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

 

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

 

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

 

38

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19.12.  Binding
on Heirs. Subject to the provisions of this Lease on assignment and
subletting, each and all of the conditions of this Lease shall be binding on
and shall

 

39

 

inure to the
benefit of the heirs, successors, executors, administrators, assigns, and
personal representatives of the respective parties.

 

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

 

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

 

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

 

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

 

20.       Hazardous Materials.

 

20.1     Use, Storage,
Handling and Disposal of Hazardous Materials. Except for petroleum
products, cleaning products and chlorine used as part of Tenant’s business and
any other Hazardous Materials which are in use at the commencement of this
Lease, and except as provided herein, neither Tenant nor any Tenant Party (as
defined below) shall cause or permit any hazardous materials (as herein
defined) to be used, generated, stored, released, transported, handled or
disposed in or about the premises at any time following the execution of this
Lease and during the term hereof (such activities are hereinafter referred to
as “Environmental Activities”) except to the extent any such uses (i) are
ordinary and necessary in the operation of Tenant’s business and (ii) used in
compliance with all Hazardous Materials Laws (as herein defined).
Notwithstanding the foregoing, and subject to Tenant’s covenants to strictly
comply with all “hazardous materials laws” (as defined herein) and all the
terms and conditions of this provision, Tenant and all persons by or through
Tenant including, but not limited to, assignees, consignees, licensees,
subtenants, concessionaires (collectively, the “Tenant Parties”), may bring
upon, keep and use in or about the premises (a) general office, kitchen and
kitchen supplies typically used in such areas in the ordinary course of
business, such as copier toner, liquid paper, glue, ink and cleaning solvents
for use in the manner for which they were designed, in such amounts as may be
normal for business operations conducted by Tenant on the Land including such
chemicals and hazardous materials as are utilized for maintaining the bumper
boat pond and other running waters on the premises,

 

40

 

(b) petroleum
products, cleaning products and chlorine used as part of Tenant’s business and
any other Hazardous Materials which are in use at the commencement of this
Lease, and (c) those additional Hazardous Materials consented to by Landlord in
writing, which consent shall be in Landlord’s sole discretion. In connection
with seeking any such consent, Tenant shall deliver to Landlord a description
of handling, storage, use and disposal procedures. Notwithstanding the
foregoing, except for all current tanks and the tanks contemplated by the
Purchase and Sale Agreement between Tenant as Buyer, and Huish Family Fun
Centers, Inc., executed concurrently herewith, Tenant shall not install,
operate or maintain any above or below grade tank, sump, pit, pond, lagoon or
other storage or treatment vessel or device on the Land except those devices
that currently exist and/or are currently contemplated and agreed to pursuant
to that certain Purchase and Sale Agreement executed between Tenant and Huish
Family Fun Centers, Inc., concurrently with this Lease, or as required by
health laws and except those devices that are in existence on the date of
execution of this Lease unless Landlord shall subsequently give its consent in
writing after full disclosure and reasonable investigation by Landlord.

 

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

 

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

 

41

 

20.4     Inspection of
Land. In the event that Landlord reasonably believes that Tenant is in
violation of any of Tenant’s duties or obligations under this section, Landlord
may require that Tenant retain at Landlord’s sole cost and expense (except as
noted below), a registered environmental consultant (the “Consultant”)
reasonably acceptable to Landlord to conduct an investigation of the Land,
Buildings and Improvements (“Environmental Assessment”) (i) for Hazardous
Materials contamination in, about or beneath the Land, Buildings and
Improvements; and (ii) to assess all Environmental Activities on the Land,
Buildings and Improvements for compliance with all applicable laws, ordinances
and regulations and for the use of procedures intended to reasonably reduce the
risk of a release of Hazardous Materials. The Environmental Assessment shall be
performed in a manner reasonably calculated to discover the presence of
Hazardous Materials contamination and shall be of a scope and intensity
reflective of the general standards of professional environmental consultants
who regularly provide environmental assessment services in connection with the
transfer or leasing of real property. Initially, the Environmental Assessment
shall take into full consideration the past and present uses of the Land,
Buildings and Improvements by Tenant or by any of the Tenant Parties and other
factors unique to the Land, Buildings and Improvements. The cost of the
Environmental Assessment shall be paid by Landlord. However, Tenant may retain
its own consultant at its own expense to confirm the conclusion of all findings
of Landlord’s consultant. As between Tenant and Landlord, in the event that the
assessment performed by Landlord’s consultant (and confirmed by Tenant’s
consultant) disclose that Tenant or any Tenant Party has breached its
obligations contained in Sections 20.1 and 20.2 such that a release of
Hazardous Materials in violation of Hazardous Materials Laws has been caused by
Tenant or any Tenant Party, Tenant shall comply, at its sole cost and expense,
with any remediation and/or monitoring required by governmental agencies in
order to remedy Tenant’s or such Tenant Party’s breach. In no event shall
Tenant be responsible to Landlord for any remediation of pre-existing Hazardous
Materials or any release caused by Landlord or any of Landlord’s agents,
employees, or contractors. In the event of a disagreement between Tenant’s
consultant and Landlord’s consultant, they shall meet and confer as to any
additions or conditions requiring correction. Any remaining disputed or issue
shall be resolved by arbitration as specified further herein. Tenant covenants
to reasonably cooperate with the consultant and to allow entry and reasonable
access to all portions of the Land, Buildings and Improvements for the purpose
of consultant’s investigation. If Tenant’s consultant and Landlord’s consultant
reasonably determines that Tenant violated a duty or obligation set forth in
this section in which event the entire cost thereof shall be paid by Tenant as
Additional Rent.

 

20.5     Indemnification
of Landlord. Tenant shall indemnify, defend (with counsel satisfactory to
Landlord) and hold Landlord, its directors, officers, employees, agents,
assigns and any successors in Landlord’s interests under the Lease, harmless
from and against any and all loss, costs, damage, expense (including reasonable
attorneys’ fees and experts’ fees), claims, cause of action, judgment, penalty,
fine or liability directly or indirectly relating to or arising from any breach
of Tenant’s obligations described in this

 

42

 

Section 20.
Notwithstanding the foregoing, Tenant shall not be required to indemnify
Landlord with respect to Hazardous Materials which were not used, generated,
stored, transported, handled or disposed of in or about the Land, Buildings and
Improvements by Tenant or any of the Tenant Parties or agents, such as
Hazardous Materials which might migrate onto or under the Land, Buildings and
Improvements from another source or which, existed as of the date of execution
of this Lease or resulted from the negligence of Landlord or Landlord’s agents,
contractors, or employees. Landlord shall have the right, but not the
obligation, to join or participate in any legal proceedings or actions
initiated in connection with Tenant’s Environmental Activities. If Tenant fails
to remediate or accept tender of the obligation to cure or defend, Landlord may
also negotiate, defend, approve and appeal any action taken or issued by any
applicable governmental authority with regard to contamination of the Land,
Buildings and Improvements by any Hazardous Materials. Any costs or expenses
incurred by Landlord for which Tenant or any of the Tenant Parties is or are
responsible under this section or for which Tenant has indemnified Landlord
shall be reimbursed by Tenant to Landlord on demand as Additional Rent.

 

20.6     Remediation.
If any Environmental Activities undertaken by Tenant or any of the Tenant
Parties in violation of Hazardous Materials Laws and the provisions of this
Lease result in contamination of the Land, Buildings and Improvements, or any
portion of the soil, ground or water thereunder, Tenant shall take all actions
at its sole expense and without abatement of rent, as are necessary to return
the affected portion of the Land, Buildings and Improvements, and the soil and
ground water to the condition required by any governmental agencies having
jurisdiction. Landlord shall also have the right to approve any and all
contractors hired by Tenant to perform such remedial work which approval shall
not be unreasonably withheld or delayed. All such remedial work shall be
performed in compliance with all applicable laws and ordinances and regulations
and in such a manner as to minimize any interference with the use and enjoyment
of the Land. Appearance of Hazardous Materials in or about the Land shall not
be deemed an occurrence of damage or destruction subject to the terms of this
Lease respecting damage or destruction caused by act of God, force of nature,
fire, flood, earthquake or other casualty, unless the remediation of such Land
causes a shut-down of 50% or more of the Land.

 

20.7     Definition of
Hazardous Materials. Hazardous Materials shall mean asbestos, any petroleum
fuel and any hazardous or toxic substance, material or waste which is, or
during the term of this Lease, becomes regulated by any local governmental
authority, State of California or the United States government, including but
not limited to, any material or substance defined as a “Hazardous Waste”,
“Extremely Hazardous Waste”, “Restricted Hazardous Waste”, “Hazardous
Substance”, “Hazardous Material” or “Toxic Pollutant” under the California
Health and Safety Code and/or under the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. § 9601 et seq. The term “Hazardous
Materials” will not include cleaning products,

 

43

 

landscape
fertilizers or other products in ordinary quantities that are customarily used
in the ordinary course of business of operating and maintaining commercial
properties (but which will nevertheless be used in compliance with applicable
Hazardous Material Laws).

 

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

 

21.       COMPLIANCE WITH AMERICAN
DISABILITIES ACT AND SIMILAR PROVISIONS. Tenant shall be required
throughout the duration of this Lease to insure the Land, Buildings and
Improvements are in compliance with the American Disabilities Act and any
similar provisions pertaining to the Buildings and/or Improvements erected on
the Land or in the operations of Tenant’s business on the Land during the
duration of this Lease. Tenant shall indemnify and hold harmless Landlord and
shall defend Landlord (with counsel reasonably acceptable to Landlord), at Tenant’s
sole expense, as against any and all enforcement proceedings, investigations or
other actions arising from any violation of this provision. Additionally,
Tenant shall, at Tenant’s sole cost and expense during the duration of the term
of this Lease, make any modifications and corrections to the Buildings and/or
Improvements as required to comply with the American Disabilities Act, or
provisions similar thereto pertaining to the Buildings and/or Improvements now
erected or subsequently erected on the Land or maintained on the Land during
the duration of this Lease as part of Tenant’s business.

 

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

 

44

 

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

 

	
  TENANT:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
  FESTIVAL FUN PARKS, LLC

  a Delaware limited liability company

  	
   

  	
  CAROLYN B. HUISH
  PROPERTIES

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  John M. Huish, General Partner

  	
   

  
	
  By:

  	
  /s/
  Mark C. Monaco

  	
   

  	
   

  	
   

  	
  John
  M. Huish, General Partner

  
	
   

  	
  FEC HOLDING COMPANY,
  INC.

  a Delaware Corporation,

  Its Sole Member

  	
   

  	
  

  THE HUISH LAND TRUST

  dated May 24, 1984

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark C. Monaco

  	
   

  	
   

  	
  By:

  	
  /s/
  John M. Huish, Trustee

  	
   

  
	
   

  	
   

  	
  Name:   Mark
  C. Monaco

  	
   

  	
   

  	
  John
  M. Huish, Trustee

  
	
   

  	
  Its:

  	
  Vice
  President

  	
   

  	
   

  	
   

  	
   

  
											

 

45Exhibit 10.18

 

IRVINE RECREATION PARK
GROUND LEASE

 

This Ground Lease (“Lease”) is made on December 3,
1993, between Irvine Recreation Park, a California limited partnership
(hereinafter called “Lessor”), and Camelot Park Family Entertainment Center of
Irvine, L.P., a California limited partnership, doing business as Palace Park
Family Entertainment Center (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 seven (7) acres
of commercial land, known as a portion of Parcel Nos. 1 and 4, in the City of
Irvine, County of Orange, State of California, as shown on a Parcel Map filed
in Book 113, Pages 8-10, inclusive, of Parcel Maps, Records of said County
(“Premises”). 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 December 3,
1993, and expire at midnight on June 30, 2027 (34.5 years later), unless
extended or sooner terminated as provided for in this Lease.

 

In the event that all Irvine Company consents and
governmental permits necessary to commence construction of all improvements,
whether to be issued by a local, state or federal governmental entity, have not
been obtained by Lessee, and construction has not started by June 30,
1994, for any reason whatsoever, Lessor shall have the right; but not the
obligation, to terminate this Lease by written notice to Lessee (“First
Termination Option”). The First Termination Option shall lapse if not exercised
by the date construction commences.

 

In the event that Lessee fails to complete
construction of the improvements described in Exhibit “B” and to begin
operation of the business on the Premises within one (1) year of the date
of issuance of all necessary governmental permits and Irvine Company consents,
Lessor shall have the right, but not the obligation, to terminate this Lease by
written notice to Lessee (“Second Termination Option”). The Second Termination
Option shall lapse if not exercised before completion of improvements and
beginning of business operations.

 

 

Section 1.3.                                   Funding of
Partnership.

 

This Lease is contingent upon Camelot Park Family
Entertainment Center, Inc., a California corporation (“Camelot”), funding
a limited partnership to develop and operate a family-oriented amusement park.
In the event that Camelot is unable to fully fund its limited partnership, this
Lease shall automatically terminate, and Lessee shall not be liable to Lessor
for any of the obligations set forth in this Lease, or otherwise. Lessor/Lessee
shall verify the funding of the limited partnership on or before January 31,
1994, at 5:00 p.m. If the funding is not completed by January 31,
1994, and written verification received by Lessor on or prior to that date,
Lessor may terminate this Lease.

 

Section 1.4.                                   Possession.

 

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

 

Section 1.5.                                   Delay in
Commencement.

 

Lessor shall not be liable to Lessee if Lessor does
not deliver possession of the Premises to Lessee on the scheduled commencement
date. Lessor’s nondelivery of the Premises to Lessee on that date shall not
affect this Lease or the obligations of Lessee under this Lease except that the
commencement date shall be delayed until Lessor delivers possession of the
Premises to Lessee, and the Lease term shall be extended for a period equal to
the delay in delivery of possession of the Premises to Lessee, plus the number
of days necessary to end the Lease term on the last day of a month. If delivery
of possession of the Premises to Lessee is delayed, Lessor and Lessee shall,
upon such delivery, execute an amendment to this Lease setting forth the actual
commencement date and expiration date of the Lease. Failure to execute such
amendment shall not affect the actual commencement date and expiration date of
the Lease.

 

Section 1.6.                                   Early Occupancy.

 

If Lessee occupies the Premises prior to the scheduled
commencement date, Lessee’s occupancy of the Premises shall be subject to all
of the provisions of this Lease. Early occupancy of the Premises shall not
advance the expiration date of this Lease.

 

ARTICLE II

 

RENT

 

Section 2.1.                                   Rent.

 

Commencing on the fifteenth day of the month following
the

 

2

 

opening of the improvements to the public for business, and thereafter
for each month during the term hereof on the fifteenth day of the next
succeeding month, Lessee shall pay to Lessor the following sums as rent for the
Premises:

 

A.                      Seventeen
and one-half percent (17.5%) of the Gross Revenues derived from the operation
of the Premises during the month (until the gross amusement revenues from the
Premises equals the sum of $3,500,000 for the current calendar year), exclusive
only of the following: (1) food and beverage operations, and (2) any
kind of sales tax, gross receipts tax, admissions tax, recreation tax, or
similar tax, measured upon the Gross Revenues of the amusement park operations
(the foregoing is hereby defined as the “Gross Amusement Revenues”);

 

B.                        After
the Gross Amusement Revenues from the Premises equals the sum of $3,500,000 for
the current calendar year, then twenty percent (20%) (rather than seventeen and
one-half percent [17 1⁄2%]) of the monthly Gross Amusement Revenues shall be paid
as rent for the balance of such calendar year.

 

C.                        In
addition thereto, Lessee shall pay to Lessor thirty-five percent (35%) See LTR
to /\ to 40%—Amendment #1 of the net profit derived during the
month from food and beverage operations on the Premises.

 

When calculating net profit derived during the month
from food and beverage operations, gross income from such operations shall not
be reduced by any general management expenses but shall be reduced by (i) the
monthly pro rata share, based on square footage, devoted to the operations of
the costs of advertising, heat, light, air conditioning, janitorial services,
property taxes, insurance, (ii) all personnel costs allocable solely to
the food and beverage operations, (iii) royalties or similar charges of
any food and beverage franchisor, accounting services relating to the food and
beverage operations and (iv) all other costs attributable solely to the
food and beverage operations.

 

Lessee agrees to furnish or cause to be furnished to
Lessor a statement of Gross Revenues of Lessee within fifteen (15) days after
the close of each calendar month, and an annual statement, including a monthly
breakdown of Gross Revenues, within forty-five (45) days after the close of
each calendar year. Such statements shall include, among other appropriate
items, Lessee’s Gross Income from Food and Beverages, and Lessee’s Gross
Revenues (as the term “Gross Revenues” is defined in Article 2.5), and all
deductions or exclusions therefrom used to calculate Lessee’s Gross Amusement
Revenues, and Lessee’s Net Profit from Food and Beverages. Such statements
shall be signed by a responsible officer of Lessee, if Lessee is a corporation,
or by an authorized representative of Lessee’s General Partner, if Lessee is a
limited partnership. Lessee shall keep (1) full and accurate books of
account and records in accordance with Generally Accepted Accounting Principles

 

3

 

consistently applied, including, without limitation, a sales journal,
general ledger, and all bank account statements showing deposits of Gross
Revenue, (2) all such cash register receipts or copies of computerized
cash receipt data with regard to the Gross Revenues, credits, refunds and other
pertinent transactions made from or upon the Premises (including the Gross
Revenues of any subtenant, licensee, or concessionaire), and (3) detailed
original records of any exclusions or deductions from Gross Revenues (including
any exclusions or deductions from gross sales of any subtenant, licensee or
concessionaire). Such books, receipts and records shall be kept for a period of
two (2) years after the close of each calendar year and shall be available
for inspection and audit by Lessor and its representatives at the Premises or
at the office of Lessee’s C.P.A. at all times during regular business hours. In
addition, upon request of Lessor, Lessee agrees to furnish to Lessor a copy of
Lessee’s State and Local Sales and Use Tax Returns, if required, in the state
where the Premises are situated. The receipt by Lessor of any statement or any
payment of Rent for any period shall not bind it as to the correctness of the
statement or the payment. Lessor shall, within two (2) years after the
receipt of any such statement, be entitled to an audit of such Gross Revenues
(including the gross revenues of any subtenant, licensee, or concessionaire).
Such audit shall be conducted either by Lessor or by a certified public
accountant to be designated by Lessor during normal business hours at the
principal place of business of Lessee. If it shall be determined as a result of
such audit that there has been a deficiency in the payment of Rent, then such
deficiency shall become immediately due and payable with interest at the
maximum lawful rate from the date when said payment should have been made. In
addition, if Lessee’s statement shall be found to have understated net sales by
more than two percent (2%) and if Lessor is entitled to any additional Rent as
a result of said understatement, or if such audit shows that Lessee has failed
to maintain the books of account and records required by this Section so
that Lessor is unable to verify the accuracy of Lessee’s statement, then Lessee
shall pay to Lessor all reasonable costs and expenses (including reasonable
auditor and attorneys’ fees) which may be incurred by Lessor in conducting
such audit and collecting such underpayment, if any. Any information gained
from such statements or inspection shall be confidential and shall not be
disclosed other than to carry out the purpose hereof; provided, however, Lessor
shall be permitted to divulge the contents of any such statements in connection
with any financing arrangements or assignments of Lessor’s interest in the
Premises or in connection with any administrative or judicial proceedings in
which Lessor is involved where Lessor may be required to divulge such
information.

 

If Lessee shall fail to pay, when the same is due and
payable, any amounts due as Rent under this Lease, such unpaid amounts shall
bear interest at the maximum lawful rate from the date due to the date of
payment. In addition to such interest, Lessee acknowledges that the late
payment by Lessee of any monthly installment of Rent

 

4

 

will cause Lessor to incur certain costs and expenses not contemplated under
this Lease, the exact amount of which costs being extremely difficult or
impractical to fix. Such costs and expenses will include, without limitation,
administrative and collection costs, and processing and accounting expenses.
Therefore, if any such installment is not received by Lessor from Lessee when
due, Lessee shall immediately pay to Lessor a late charge equal to two and
one-half (2.5%) of such installment. Lessor and Lessee agree that this late
charge represents a reasonable estimate of such costs and expenses and is fair
compensation to Lessor for its loss suffered by such non-payment by Lessee.
Acceptance of this late charge shall not constitute a waiver of Lessee’s
default with respect to such nonpayment by Lessee nor prevent Lessor from exercising
all other rights and remedies available to Lessor under this Lease.

 

Section 2.2.                                   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 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 reassessment as a result of a change of ownership of the
Lessor’s interest in 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 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 2.2 shall be prorated on the basis of a 365-day year to

 

5

 

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 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 2.3.                                   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.

 

6

 

Section 2.4                                      Utilities.

 

Lessee shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities and services supplied to
the Premises. However, if any services or utilities are jointly metered with
other property, Lessor shall make a reasonable determination of Lessee’s
proportionate share of the cost of such utilities and services, and Lessee
shall pay such share to Lessor within fifteen (15) days after receipt of Lessor’s
written statement.

 

Section 2.5.                                   Gross Revenues.

 

The term “Gross Revenues” of Lessee, as used in this
Lease, is defined to be all fees for use of any of Lessee’s facilities located
on the Premises; plus all fees for services provided by Lessee on the Premises;
plus the gross selling price of all merchandise, including food and beverages,
on or from the Premises by Lessee, its subtenants, licensees and
concessionaires, except as otherwise provided in Section 2.6 below,
whether for cash or on credit and whether made by store personnel or by
approved vending, video, pinball, or gaming machines and shall include, without
limitation, the income from any rebates, display or advertising allowances and
ticket sales. It shall also include only the gross mark up, if any, from sales
of lottery tickets, money orders, and income from telephones, photocopy
machines, fees on credit cards, postage stamps. “Gross Revenues” and “Gross
Amusement Revenues” of Lessee shall not include:

 

A.                      The
selling price of all merchandise returned by customers and accepted for full
credit or the amount of discounts and allowances made thereon;

 

B.                        Goods
returned to sources, or transferred to another store or warehouse owned by or
affiliated with Lessee;

 

C.                        The
price allowed on all merchandise traded in by customers for credit or the
amount of credit for discounts and allowances made in lieu of acceptance
thereof;

 

D.                       Cash
refunds made to customers in the ordinary course of business, but this
exclusion shall not include any amount paid or payable for what are commonly
referred to as trading stamps;

 

E.                         Interest,
service or sales carrying charges or other charges, however denominated, paid
by customers for extension of credit on sales and where not included in the
merchandise sales price;

 

F.                         Sales
taxes, so-called luxury taxes, consumers’ excise

 

7

 

taxes, gross receipts taxes and other similar taxes now or hereafter
imposed upon the sale of merchandise or services;

 

G.                        The
transactions in which premium merchandise is exchanged for Premium Tickets won
by players of amusement games, but the revenues received from the games or the
sale of playing tokens or debit cards shall be included in Gross Revenues;

 

H.                       Sales
of fixtures, equipment or property which are not stock in trade;

 

I.                            Gift
certificates, or like vouchers, until such time as the same shall have been
converted into a sale by redemption (excluding the conversion of “Premium
Tickets” described in paragraph G. above).

 

All sales originating at the Premises shall be
considered as made and completed therein, even though bookkeeping and payment
of the account may be transferred to another place for collection and even
though actual filing of the sale or service order and actual delivery of the
merchandise may be made from a place other than the Premises. Each sale
upon installments or credit shall be treated as a sale for the full cash price
at the time of sale.

 

Except as herein expressly provided to the contrary,
this Lease is intended to be, and shall be construed as, an absolute net lease,
whereby under all circumstances and conditions (whether now or hereafter
existing or within the contemplation of the parties) the Rent shall be, except
as otherwise set forth herein, absolutely net to Lessor.

 

Section 2.6.                                   Revenues from
Concessionaires and Sublessees.

 

Lessee may, without Lessor’s consent, contract with
one or more Concessionaires and/or subtenants to perform activities
complimentary to Lessee’s activities which would not ordinarily be conducted by
Lessee, including, but not limited to, activities such as face painting,
caricature artists, Santa booths, computer training, pony or haywagon rides,
etc. So long as the aggregate space utilized does not exceed ten percent (10%)
of either the enclosed or the unenclosed demised premises. These activities are
defined as the “Permitted Concessions”. Notwithstanding the preceding,
Permitted Concessions do not include food and beverage service. The Gross
Revenues of Lessee shall include only the revenues received by Lessee from the
Permitted Concessions and not the Gross Revenues of the Permitted Concessions.
If either Lessor or Lessee believes that the percentage of Gross Revenues
provided as rent under this Lease or to either the Permitted Concessionaire’s
or other Concessionaires or sublessee’s is uneconomic or unjust to either
Lessor or Lessee, the same will be submitted to binding arbitration as provided
in Section 8.6 below.

 

8

 

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 shall not be unreasonably withheld. 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.

 

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, 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.

 

9

 

Section 3.4.                                   Exclusive Use.

 

Lessor agrees that it shall not enter into any other
leases within a thirty (30) mile radius (as measured from the air) for a family
oriented amusement park. This restriction shall not prohibit Lessor from
operating bowling alleys, racquetball courts, family fitness centers or any
other type of athletic center.

 

Section 3.5.                                   Approval by The
Irvine Company.

 

Lessor’s and Lessee’s obligations under this Lease are
expressly contingent upon approval by The Irvine Company of this Lease and the
permitted uses and improvements which are contemplated in this Lease.

 

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 of
Major Construction.

 

A.                      Before
any major (i.e. of a value of $50,000 or greater) 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, Lessee shall comply with all the
following conditions or procure Lessor’s written waiver of the

 

10

 

condition or conditions 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 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

 

11

 

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 Lessee’s own
capital funding.

 

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.

 

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

 

12

 

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, 4.2 and 4.3, 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 amendment thereof or any law of similar import
that may hereafter be enacted.

 

Except as provided below, 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 if the cost of the
work of improvement so required does not exceed that percentage of the
replacement value of all improvements that would cause the repair or replacement
work under then applicable governmental rules and regulations to comply
with new and different standards or to cause the loss of any right to continue
an existing non-conforming use so as to make the repair or replacement of the
improvements prohibited or of so great an uninsured cost as to render the
replacement of such improvements economically unfeasible of generating a fair
return (defined as Ten Percent (10%) R.O.I.) to the Lessee. Such decree of
destruction shall be referred to as the “New Codes Standards”. If the cost does
so exceed the New Codes Standards, Lessee may nevertheless repair, restore
and replace as above or may by notice elect instead to raise the
improvements damaged or destroyed. If the damage or destruction to the
improvements exceeds the New Codes Standards of the replacement value of all
the improvements, and Lessee elects not to repair, restore and replace, the
Lease shall terminate, and Lessor shall be entitled to all insurance proceeds
from the insurance coverage described in Section 6.2 attributable to the
Main Arcade Building, excluding trade fixtures, signs and trade facia features
(herein collectively referred to as “Trade Fixtures”).

 

The completed work of maintenance, compliance, repair,

 

13

 

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 or 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, join in Lessee’s contest.

 

Section 4.6.                                   Major and Minor
Distinguished.

 

A.                      Damage
or Destruction During Beginning Years of Term. Lessor’s approval is not
required for Lessee’s minor repairs, alterations or additions. “Minor” means a
construction cost not exceeding $50,000. Construction 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.

 

“Major” repairs, alterations or additions are those
not

 

14

 

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.

 

B.                        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;

 

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;

 

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.

 

8.                           Relinquishes
any right to insurance proceeds from the insurance coverage described in Section 6.2
attributable to the Main Arcade Building, excluding Trade Fixtures attached
thereto, and assigns such right to Lessor.

 

15

 

Section 4.7.                                   Ownership of
Improvements.

 

Excluding the Main Arcade Building, but including all
Trade Fixtures attached in whatever manner to the Main Arcade Building, 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, at which
time, upon the expiration or termination thereof, Lessee shall have the right
to remove any or all fixtures or improvements or both, provided all resultant
injuries to the Premises and remaining improvements are completely remedied and
Lessee complies with Lessor’s reasonable requirements respecting the resultant
appearance.

 

Section 4.8.                                   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.

 

Section 4.9.                                   Participation in
Appreciation.

 

The parties hereto agree that the Premises subject to
this Lease have a present fair market value of Fifteen Dollars ($15.00) per
square foot of land which value shall be defined herein as the “Base Value” of
the Premises. In consideration for Lessee entering into this Lease and waiving
any requirement for a purchase option, the parties hereto agree that upon
termination of the full term of the Lease, if the parties have not agreed to a
sale of the fee interest in the Premises prior to the termination of the Lease,
there shall be an appraisal of the fair market value of the Premises subject to
this Lease, including the fee interest therein, and, after payment to each
party of the then amortized and

 

16

 

undepreciated balance of any capital improvements installed at that
party’s cost, there shall be paid to Lessee a sum equal to Fifty percent (50%)
of any appreciation in the value of the Premises, including the fee interest
over the Fifteen Dollars ($15.00) per square foot Base Value set forth above.

 

In the event Lessor desires to sell its fee interest
in the Premises before the termination of the full term of the Lease, Lessee
shall be granted a 60-day right of first refusal to acquire Lessor’s interest
in which event Lessee shall be entitled to a credit equal to the participation
in appreciation payment that would occur if a sale were to occur under this Section 4.9.
If Lessee does not exercise its right of first refusal, the Lessor’s interest
shall be sold subject to the terms and conditions of this Lease, including the
terms and conditions set forth herein (as to participation in appreciation).
All Lessee’s rights under this Section 4.9 terminate in the event this
Lease is terminated by reason of Lessee’s default.

 

ARTICLE V

 

ASSIGNMENT, SUBLETTING,
ENCUMBRANCE AND RIGHT OF FIRST REFUSAL

 

Section 5.1                                      Assignment.

 

Lessee shall not voluntarily or by operation of law,
assign, transfer, sublet or otherwise transfer all or any portion of Lessee’s
interest in this Lease or in the Premises without Lessor’s prior written
consent. Lessor shall not unreasonably withhold consent, but it shall be deemed
reasonable for Lessor to condition any consent on the requirement that

 

(i)                         all
potential assignees, subtenants or transferees agree to comply with the terms
and conditions of this Lease, including, without limitation, the obligation of
the assignee, subtenant, or transferee to pay rent directly to Lessor in the
percentage amount set forth in Section 2.1 of this Lease so that Lessor
receives the same economic benefit from the business operations on the Premises
as would occur if Lessee operated all businesses on the Premises, except as
provided in Section 2.6 above;

 

(ii)                      There
is no existing default on the part of Lessee in performance or observance
of any of the provisions hereof;

 

(iii)                   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 out and
performed as a direct obligation of Lessor;

 

17

 

(iv)                  An
executed original of such assignment is delivered to Lessor; and

 

(v)                     The
assignee is of equal or greater financial strength to Lessee at the time of the
assignment.

 

Any attempted assignment, transfer or subletting
without such express written consent shall be void and shall constitute a
breach of this Lease.

 

Lessee and any subsequent assignor shall be entitled
to be released from future liability under this Lease from and after the
effective date of the assignment in question, but not as to any liability
accrued to the date of such assignment whether asserted or not asserted at the
time by Lessor so long as assignee is of equal or greater financial strength
than assignor at the time of assignment; provided that the assignment is in
strict accordance with the provisions of this Section 5.1.

 

Section 5.2.                                   Subletting.

 

Lessee shall have the right at any time and from time
to time during the term, with the written consent of the Lessor which consent
will not be unreasonably withheld, to sublet all or any part or parts of
the improvements on the Premises. If Landlord fails to give his written consent
or to give his reasonable ground for denial of consent within Ten (10) days
after written request therefore, consent will be deemed granted. 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.

 

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 5.3.                                   Encumbrance of
Lessee’s Interest.

 

A.                      Right
to Encumber Leasehold Interest. Lessee shall have

 

18

 

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.

 

B.                        Possible
Amendments to Lease. Lessor and Lessee shall reasonably cooperate in
including in this Lease by suitable amendment from time to time any provision
which may reasonably be requested by any proposed leasehold mortgagee for
the purpose of implementing the leasehold encumbrance provisions contained in
this Lease and allowing such mortgagee reasonable means to protect or preserve
the lien of the leasehold mortgage on the occurrence of a default under the
terms of this Lease; provided, however, no such amendment shall change the
term, rent, assignment and default provisions of this Lease in any manner
whatsoever, or increase the time such leasehold mortgagee has in this Lease to
the detriment of Lessor. Lessor and Lessee each agree to execute and deliver
(and to acknowledge, if necessary, for recording purposes) any agreement
necessary to effect any such amendment.

 

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

 

19

 

now or hereafter included in an extended coverage endorsement in common
use for commercial structures, including vandalism and malicious mischief. The
amount of 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 possible
recovery.

 

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 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 three million dollars ($3,000,000) for bodily
injury or death to any one person, at least three million dollars ($3,000,000)
for any one accident or occurrence and at least five hundred thousand dollars
($500,000) for property damage.

 

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, 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.

 

20

 

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 canceled or materially
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

 

21

 

shall terminate as of the date the condemning authority takes
possession of the Premises. No abatement of the Rent owed under this Lease
shall occur as a result of condemnation or threatened condemnation of any
portion of the Premises.

 

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

 

22

 

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.                        Lessee’s
abandonment or surrender of the Premises or the leasehold estate; or

 

D.                       After
completion of initial construction, Lessee’s failure to operate a
family-oriented amusement park on the Premises for a period of three (3) consecutive
months.

 

E.                         If
default should be made in any other terms, covenants, or conditions on Lessee’s
part herein contained, and shall not be cured within ten (10) days
after written notice by Lessor, provided, however, if the default is on 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

 

23

 

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) 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'

 

24

 

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

 

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

 

25

 

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.                                   New Lease.

 

On termination of this Lease on Lessee’s default,
Lessor shall offer for a period of thirty (30) days, to enter into a new lease
of the Premises with the leasehold mortgagee under the then existing mortgage
of first priority, subject to the same terms and conditions provided herein.

 

Section 8.6.                                   Arbitration.

 

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 County of Orange, California.

 

Section 8.7.                                   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 finder’s fee payable to John Veytia pursuant to a
signed written agreement. 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.

 

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

 

26

 

of exhibiting the Premises to prospective purchasers or lessees
thereof.

 

Section 9.2.                                   Hazardous
Materials.

 

Lessor and Lessee agree as follows with respect to the
existence or use of “Hazardous Material” (as defined in Section 9.2.D) on
the Premises:

 

A.                      Lessor
hereby makes the following representations to Lessee, each of which is made
only to the best of Lessor’s knowledge as of the date first written above:

 

1.                           Any
handling, transportation, storage, treatment or use of Hazardous Material that
has occurred on the Premises prior to the date first written above has been in
compliance with all Laws regulating Hazardous Material.

 

2.                           The
Premises are, as of the date first written above, in compliance with all Laws
regulating the handling, transportation, storage, treatment, use and
disposition of Hazardous Material.

 

3.                           The
soil and ground water on or under the Premises are free of Hazardous Material.

 

B.                        The
provisions of this Section 9.2.B shall apply if:

 

(i)                         It
is determined at any time that the representations of Lessor contained in Section 9.2.A
are not correct and that Lessor had actual knowledge of such incorrectness as
of the date first written above; or

 

(ii)                      Lessor,
its agents, employees, contractors or predecessors-in-interest violated any Law
regulating the handling, transportation, storage, treatment, use or disposition
of Hazardous Material with respect to the Premises. If this Section 9.2.B
applies as of an occurrence described in the immediately preceding sentence,
then the following shall apply:

 

(a)                      Lessor
shall be responsible for all costs incurred in complying with all Laws which
relate to Hazardous Material and the occurrence in question; and

 

(b)                     Lessor
shall indemnify, defend and hold Lessee harmless from and against any and all
claims, judgments, damages, penalties, fines, costs, liabilities or losses
(including without limitation, sums paid and settlement of claims, attorneys’
fees, consultant fees and expert fees) which arise during or after the term of
the Lease from or in connection with the Hazardous Material and the occurrence
in question.

 

27

 

C.                        Lessee
shall not cause, permit or suffer any Hazardous Material to be brought upon,
treated, kept, stored, disposed of, discharged, released, produced,
manufactured, generated, refined or used upon, about or beneath the Premises or
any portion thereof by Lessee, its agents, employees, contractors, invitees or
subtenants, or any other person except in compliance with Laws of the United
States government, the State of California, and any local or municipal
governmental entity. Lessee shall be responsible for and hereby agrees to
indemnify and hold harmless Lessor from and against any loss, expense or damage
suffered by Lessor by reason of the protection, storage or disposal of any
Hazardous Material on or in the Premises which may first occur during the
period that Lessee is leasing the Premises from Lessor pursuant to this Lease.
If Lessee should assign this Lease, Lessee shall not be liable for any
Hazardous Material that may be introduced in, on or under the Premises
after such assignment, but Lessee shall remain liable for Hazardous Material on
or in the Premises which may be attributable to Lessee’s conduct during
the period that Lessee is leasing the Premises from Lessor pursuant to this
Lease. Lessor acknowledges and agrees that Lessee will use and store gasoline
and other petroleum-based products, as well as other materials that may be
classified as Hazardous Materials, on the Premises as a permitted and necessary
part of Lessee’s business activities.

 

D.                       As
used in this Section 9.2, “Hazardous Material” shall include all petroleum
substances and all hazardous materials, hazardous waste and hazardous or toxic
substances as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (42 USC §9601 et seq.), the Resource
Conversation and Recovery Act, as amended (42 USC §6901 et seq.), the Toxic
Substances Control Act, as amended (15 USC §2601 et seq.) and California Health
and Safety Code Section 25316, including such hazardous or toxic
substances as are identified, defined or listed elsewhere where such
identifications, definitions or lists are incorporated in such acts or section by
reference, as well as all such products containing such hazardous substances.

 

Section 9.3.                                   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 9.4.                                   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

 

28

 

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 9.5.                                   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 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 9.6.                                   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 9.7.                                   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.

 

29

 

Section 9.8.                                   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.

 

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 (if any) and
the captions of the various articles and sections are for convenience

 

30

 

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.                        The
Exhibits, attached hereto and to which reference is made in this Lease, are
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.

 

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 Lessor 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.

 

K.                       Lessor
shall not become or be deemed a partner or a joint venturer with Lessee by
reason of the provisions of this Lease.

 

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

 

31

 

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.

 

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.

 

(REST OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES ON FOLLOWING
PAGE.)

 

32

 

Executed on the date first set forth hereinabove.

 

	
   

  	
  Lessor:

  
	
   

  	
   

  
	
   

  	
  IRVINE
  RECREATION PARK,

  
	
   

  	
  a
  California Limited 

  Partnership

  
	
   

  	
  By:

  	
  /s/ G.
  Barton Heuler

  	
  John T. Okada

  
	
   

  	
  Its:

  	
  General
  Partner

  	
  General
  Partner

  

 

	
   

  	
  Lessee:

  
	
   

  	
   

  
	
   

  	
  CAMELOT
  PARK FAMILY

  
	
   

  	
  ENTERTAINMENT
  CENTER OF 

  IRVINE, L.P., doing business 

  as Palace Park Family 

  Entertainment Center

  
	
   

  	
   

  
	
   

  	
  CAMELOT
  PARK OF IRVINE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  GEOFFREY C. BEAUMONT

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  (General Partner of CAMELOT PARK OF 

  IRVINE, L.P.)- General Partner

  

 

33

 

EXHIBIT A

 

Legal Description

 

 

EXHIBIT B

 

Improvements

 

 

EXHIBIT C

 

ATTACH: COPY OF LANDLORD’S CONSENT

 

 

EXHIBIT D

 

ATTACH: COPY OF LANDLORD’S ESTOPPEL CERTIFICATE

 

 

SECOND AMENDMENT TO

IRVINE RECREATION PARK
GROUND LEASE

 

THIS SECOND AMENDMENT TO IRVINE RECREATION PARK GROUND
LEASE (this “Second Amendment”) is made and entered into on this 4th
day of July, 1995, (the “Effective Date”), by and between Irvine Recreation
Park, a California limited partnership (“Lessor”) and Camelot Park Family
Entertainment Center of Irvine, L.P., a California limited partnership, doing
business as Palace Park Family Entertainment Center (“Lessee”).

 

RECITALS

 

A.                       Lessor
and Lessee entered into that certain Irvine Recreation Park Ground Lease (the “Lease”)
dated as of December 3, 1993, pursuant to the terms of which Lessee took
possession of approximately seven acres of commercial land in the city of
Irvine, California, for the purpose of developing and operating a
family-oriented amusement park.

 

B.                         The
Lease was amended by letter dated January 25, 1994 and approved February 2,
1994 with respect to sublease rentals from McDonald’s Corporation and/or its
designated owner/operator.

 

C.                         Lessee
now desires to possess additional space on the ground floor of Lessor’s bowling
center for the purpose of adding family-oriented game attractions.

 

D.                        The
parties hereto desire to amend the Lease a second time in order to grant Lessee
possession of such additional space, and to clarify certain issues arising
under the Lease, all pursuant to the terms and conditions set forth herein.

 

 

AGREEMENT

 

1.         Section 1.1
of the Lease is hereby amended in its entirety to provide as follows:

 

“Section 1.1       Premises.

 

The premises consists of approximately seven (7) acres
of commercial land, known as a portion of Parcel Nos. 1 and 4, in the City of
Irvine, County of Orange, State of California, as shown on a Parcel Map filed
in Book 113, Pages 8-10, inclusive, of Parcel Maps, Records of said
County, plus approximately 4,000 square feet on the westerly side of the
Existing Bowling Center (“Premises”). The Premises are more particularly
described and set forth on Exhibit ”A” attached hereto and incorporated
herein by this reference. The Premises include any appurtenances and
improvements.”

 

2.                           Section 1.4
of the Lease is hereby amended in its entirety to provide as follows:

 

“Section 1.4       Possession.

 

Possession of the Premises shall be delivered to
Lessee at the beginning of the term, except that possession of the 4,000 square
feet of the westerly side of the Existing Bowling Center shall be delivered to
Lessee on the Effective Date of the Second Amendment.”

 

2

 

3.                           Section 3.
Rental income attributable to the additional space possessed by Lessee by
reason of this Second Amendment shall be determined by employing the
revenue-sharing provisions of Article II of the Lease.

 

4.                           The
definition of permitted uses of the Premises contained in Section 3.1 of
the Lease shall be expanded to include “laser tag games,” as such laser tag
games are intended as one of the uses of the additional space possessed by
Lessee by reason of this Second Amendment.

 

5.                           Section 4.10
of the Lease shall be added in its entirety to provide as follows:

 

“Section 4.10.                                 Construction of
Game Area.

 

Notwithstanding anything to the contrary contained
herein, as of Effective Date, Lessee shall diligently proceed to obtain all
government approvals necessary to construct a suitable game area in the 4,000
square feet of the westerly side of the Existing Bowling Center, and shall
diligently proceed with such construction until its completion, as determined
in the sole discretion of Lessee. Lessee’s construction of such game area
within the Existing Bowling Center shall be defined as “major” as that term is
defined in Section 4.6 of the Lease, and Lessee shall comply with all the
conditions of major construction as set forth in Section 4.3 of the Lease.”

 

6.                           Section 4.11
of the Lease shall be added in its entirety to provide as follows:

 

3

 

“Section 4.11.                                 Cost-sharing
Provisions.

 

During the course of constructing the game area
improvements within the Existing Bowling Center, it is anticipated that certain
costs will be incurred that cannot be justly allocated to the game area
improvement. Accordingly, Lessor agrees to bear one-half of the cost of replacing
two five-ton air conditioning units within the Existing Bowling Center, such
total costs estimated to be Ten Thousand Dollars ($10,000.00) [Five Thousand
Dollars ($5,000.00) to be paid by each of Lessor and Lessee]. Lessee’s portion
shall be paid by Lessee remitting a check to Lessor in the amount of
approximately Five Thousand Dollars ($5,000.00) upon notification of the
installation of the units. Lessee shall be responsible for all additional and
future maintenance, repairs, alterations and reconstruction of the air
conditioning units within Lessee’s possession of space in the Existing Bowling
Center, all in accordance with Section 4.4 of the Lease.”

 

7.                           Lessee
shall pay all expenses for air conditioning and utilities that are directly
attributable to Lessee’s possession of space within the Existing Bowling
Center, or can be fairly allocated to Lessee’s possession of space within the
Existing Bowling Center based upon square footage. Lessee will provide, at
Lessee’s expense, supplemental equipment (i.e., submeter) to meter and
calculate both kilowatt hours and peak demands. Submeter or other equipment
will be read on a monthly basis to determine Lessee’s proportion of electrical
usage. Payment for Lessee’s proportionate share of the costs will be made in accordance
with Section 2.4 of the Lease.

 

4

 

8.                           Lessee
shall bear the cost of constructing one wall for the benefit of a day care
center operated by Lessor.

 

9.                           Except
as hereby amended, the Lease remains in full force and effect according to its
original terms and any amendments thereto.

 

IN WITNESS WHEREAS, the parties hereto have executed
this Second Amendment as of the day and year first above written.

 

	
   

  	
  “Lessor”:

  
	
   

  	
   

  
	
   

  	
  IRVINE
  RECREATION PARK, a

  
	
   

  	
  California
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ G.
  Barton Heuler

  
	
   

  	
  Its:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ john t. okada

  
	
   

  	
  Its:

  	
  General Partner

  

 

 

	
   

  	
  “Lessee”:

  
	
   

  	
   

  
	
   

  	
  CAMELOT
  PARK FAMILY ENTERTAINMENT 

  
	
   

  	
  CENTER
  OF IRVINE, L.P., a California 

  limited partnership, doing business 

  as Palace Park Family Entertainment 

  Center

  
	
   

  	
   

  
	
   

  	
  By
  Camelot Park of Irvine, L.P., a 

  
	
   

  	
  California
  limited partnership, 

  
	
   

  	
  its
  general partner

  
	
   

  	
   

  
	
   

  	
  By
  Camelot Park of Irvine, Inc., 

  
	
   

  	
  a California
  corporation, 

  
	
   

  	
  its
  general partner

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Geoffrey C. Beaumont

  
	
   

  	
   

  	
  Geoffrey
  C. Beaumont

  
	
   

  	
  Its:

  	
  President

  

 

5

 

EXHIBIT “A”

 

6

 

THIRD AMENDMENT TO IRVINE
RECREATION PARK GROUND LEASE

 

THIS THIRD AMENDMENT TO IRVINE RECREATION PARK GROUND
LEASE (this “Third Amendment”) is dated as of June 29,1998, and is entered
into by and between IRVINE RECREATION PARK, a California limited partnership (“Lessor”),
and CAMELOT PARK FAMILY ENTERTAINMENT CENTER OF IRVINE, L.P., a California
limited partnership doing business as Palace Park Family Entertainment Center (“Lessee”).

 

R  E
C  I  T  A  L  S

 

A.                      Lessor
and Lessee entered into that certain Irvine Recreation Park Ground Lease dated
as of December 3,1993, as amended by that certain letter dated as of January 25,1994
and approved February 2,1994, as further amended by the Second Amendment
To Irvine Recreation Park Ground Lease dated as of July 4,1995 (as so
amended the “Original Lease”) for the lease of approximately seven acres of
commercial land in the City of Irvine, County of Orange, State of California,
as described more particularly in Exhibit “A” attached hereto and
made a part hereof (the “Demised Premises”). The Original Lease as amended
by this Third Amendment shall be referred to hereinafter 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 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 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 Third 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 (including, without limitation, Section 5.3(a) thereof) Lessee
may, without Lessor’s consent, 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

 

 

e.                           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, and if the Leasehold
Mortgagee or its nominee or designee becomes the Lessee under the Lease, all of
the obligations and liabilities of the Leasehold Mortgagee or its nominee or
designee shall cease and terminate upon assignment of the Lease or abandonment
of the Demised Premises.

 

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 Third
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 to:
(x) another creditworthy operator, or (y) any other party in accordance with
the terms of the assignment provisions of the then lease (which shall be the
same as those contained in the present Lease, except for the transfers
permitted without consent pursuant to clauses (x) and (y) above, and except
that all obligations and liabilities of the Leasehold Mortgagee or its nominee
or designee under such lease shall cease and terminate upon such assignment).

 

5.                          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 as of the date of set forth on
that certain Assignment and Assumption of Lease executed by Lessee and FFP, an
executed copy of which shall be promptly delivered to Lessor by Lessee.

 

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

 

3

 

7.                          SUCCESSORS
AND ASSIGNS. This Third 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).

 

8.                          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 Third Amendment, the terms of this Third Amendment shall
govern and prevail. The Original Lease, as amended by this Third Amendment, is
hereby reaffirmed.

 

9.                          COUNTERPARTS.
This Third 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 WHEREOF, Lessor and Lessee have executed
this Third Amendment as of the day and year first written above.

 

	
  LESSEE:
  

  	
  LESSOR:
  

  
	
   

  	
   

  
	
  CAMELOT
  PARK FAMILY

  ENTERTAINMENT CENTER OF

  IRVINE, L.P.,

  a California limited partnership

  	
  IRVINE
  RECREATION PARK,

  a California limited partnership

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Camelot
  Park of Irvine, L.P.,

  	
  By:

  	
  /s/
  G. Barton Heuler

  	
   

  	
   

  
	
   

  	
  a
  California limited partnership,

  	
   

  	
  G.
  BARTON HEULER

  	
  ,

  	
   

  
	
   

  	
  General
  Partner

  	
   

  	
  General
  Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  Camelot
  Park of Irvine, Inc., a

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  California
  corporation,

  	
   

  	
  By:

  	
  /s/ John
  T. Okada

  	
   

  	
   

  
	
   

  	
  General
  Partner

  	
   

  	
  Name:

  	
  JOHN
  T. OKADA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  GENERAL
  PARTNER

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gerald B. Johnson

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gerald
  B. Johnson

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  ,

  	
   

  
	
   

  	
   

  	
   

  	
  General
  Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
   

  
												

 

4

 

EXHIBIT A

 

DESCRIPTION
OF DEMISED PREMISES

 

5

 

EXHIBIT “A”

 

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

 

PARCELS 1 AND 4, IN THE CITY OF IRVINE, COUNTY OF ORANGE, STATE OF
CALIFORNIA, AS SHOWN ON A PARCEL MAP FILED IN BOOK 113 PAGES 8 AND 9 AND
10 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

EXCEPT ANY AND ALL OIL, OIL RIGHTS, MINERAL, MINERAL RIGHTS, NATURAL
GAS RIGHTS AND OTHER HYDROCARBONS, BY WHATSOEVER NAME KNOWN, GEOTHERMAL STEAM
AND ALL PRODUCTS DERIVED FROM ANY OF THE FOREGOING, THAT MAY BE WITHIN OR
UNDER THE LAND TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING, MINING, EXPLORING
AND OPERATING THEREFOR AND STORING IN AND REMOVING THE SAME FROM THE LAND OR
ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL AND
MINE FROM LANDS OTHER THAN THOSE CONVEYED HEREBY, OIL ORGAS WELLS, TUNNELS AND
SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF THE LAND, AND TO BOTTOM SUCH
WHIPSTOCKED OR DIRECTIONALLY DRILLED, WELLS, TUNNELS AND SHAFTS UNDER AND
BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL, EQUIP,
MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES WITHOUT, HOWEVER,
THE RIGHT TO DRILL, MINE STORE, EXPLORE, AND OPERATE THROUGH THE SURFACE OR THE
UPPER 500 FEET OF THE SUBSURFACE OF THE LAND.

 

Irvine

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