Document:

Exhibit 10.7

 

GROUND LEASE

 

BETWEEN

 

BIG KAHUNA, INC.

 

AND

 

FESTIVAL FUN PARKS,
L.L.C.

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  FUNDAMENTAL LEASE
  PROVISIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  TERM AND RENT

  	
  2

  
	
   

  	
   

  
	
  2.1

  	
   

  	
  Term

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.2

  	
   

  	
  Quarterly Rent

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.3

  	
   

  	
  Impositions

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  2.4

  	
   

  	
  Late Charge

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  2.5

  	
   

  	
  Interest on Overdue
  Amounts

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  2.6

  	
   

  	
  Net Lease

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  2.7

  	
   

  	
  Right of Offset

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  2.8

  	
   

  	
  Early Termination

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 3

  	
  USE OF THE PREMISES

  	
  4

  
	
   

  	
   

  
	
  3.1

  	
   

  	
  Use

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Condition of Premises

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Compliance With Law

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.4

  	
   

  	
  Environmental Compliance

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  3.5

  	
   

  	
  Tenant’s Responsibility
  for Hazardous Materials

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  3.7

  	
   

  	
  Permits and Licenses

  	
  6

  
	
   

  	
   

  
	
  ARTICLE 4

  	
  TAXES AND UTILITIES

  	
  6

  
	
   

  	
   

  
	
  4.1

  	
   

  	
  Payment of Taxes

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Definition of “Taxes”

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Tenant’s Right to Contest
  Taxes

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  4.4

  	
   

  	
  Payment of Utilities

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  4.5

  	
   

  	
  Interruption in Utility
  Service

  	
  8

  
	
   

  	
   

  
	
  ARTICLE 5

  	
  INSURANCE AND
  INDEMNIFICATION

  	
  8

  
	
   

  	
   

  
	
  5.1

  	
   

  	
  Tenant’s Insurance

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  5.2

  	
   

  	
  Policy Form

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.3

  	
   

  	
  Subrogation Waiver

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.4

  	
   

  	
  Payment of Insurance

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.5

  	
   

  	
  Insurance Use Restrictions

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.6

  	
   

  	
  Indemnification

  	
  10

  
					

 

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  ARTICLE 6

  	
  MAINTENANCE AND REPAIRS

  	
  10

  
	
   

  	
   

  
	
  6.1

  	
   

  	
  Tenant’s Obligations

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Landlord’s Obligations

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  6.3

  	
   

  	
  Landlord’s Rights

  	
  11

  
	
   

  	
   

  
	
  ARTICLE 7

  	
  ALTERATIONS

  	
  11

  
	
   

  	
   

  
	
  7.1

  	
   

  	
  Consent to Alterations

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Removal of Alterations

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Alterations Required by
  Law

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  7.4

  	
   

  	
  General Conditions
  Relating to Alterations

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  7.5

  	
   

  	
  Liens

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 8

  	
  DAMAGE, DESTRUCTION,
  OBLIGATION TO REBUILD

  	
  12

  
	
   

  	
   

  
	
  8.1

  	
   

  	
  Obligation to Rebuild

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  8.2

  	
   

  	
  No Abatement of Rent

  	
  13

  
	
   

  	
   

  
	
  ARTICLE 9

  	
  EMINENT DOMAIN

  	
  13

  
	
   

  	
   

  
	
  9.1

  	
   

  	
  Total Taking

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  9.2

  	
   

  	
  Partial Taking

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Distribution of Award

  	
  13

  
	
   

  	
   

  
	
  ARTICLE 10

  	
  ASSIGNMENT AND SUBLETTING

  	
  13

  
	
   

  	
   

  
	
  10.1

  	
   

  	
  Landlord’s Consent
  Required

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  10.2

  	
   

  	
  No Release of Tenant

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 11

  	
  DEFAULT; REMEDIES

  	
  14

  
	
   

  	
   

  
	
  11.1

  	
   

  	
  Default

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  11.2

  	
   

  	
  Remedies

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  11.3

  	
   

  	
  Cumulative Remedies

  	
  15

  
	
   

  	
   

  
	
  ARTICLE 12

  	
  REPRESENTATIONS AND
  WARRANTIES; FINANCIAL REPORTING

  	
  15

  
	
   

  	
   

  
	
  12.1

  	
   

  	
  Representations and
  Warranties

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  12.2

  	
   

  	
  Financial Statements

  	
  16

  
	
   

  	
   

  
	
  ARTICLE 13

  	
  BUILDING AND IMPROVEMENTS;
  TRADE FIXTURES

  	
  16

  
	
   

  	
   

  
	
  13.1

  	
   

  	
  Building and Improvements

  	
  16

  
					

 

ii

 

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  13.2

  	
   

  	
  Depreciation and
  Investment Tax Credit

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  13.3

  	
   

  	
  Trade Fixtures

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  13.4

  	
   

  	
  Removal of Trade Fixtures

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  13.5

  	
   

  	
  Financing of Tenant’s
  Property

  	
  17

  
	
   

  	
   

  
	
  ARTICLE 14

  	
  BANKRUPTCY OR INSOLVENCY

  	
  17

  
	
   

  	
   

  
	
  14.1

  	
   

  	
  Liquidation

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  14.2

  	
   

  	
  Reorganization

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  14.3

  	
   

  	
  Conditions to Assumption

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  14.4

  	
   

  	
  Conditions to Assignment

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  14.5

  	
   

  	
  Reasonable Charges

  	
  19

  
	
   

  	
   

  
	
  ARTICLE 15

  	
  RIGHT OF FIRST OFFER

  	
  19

  
	
   

  	
   

  
	
  15.1

  	
   

  	
  Right of First Offer

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  15.2

  	
   

  	
  Closing

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  15.3

  	
   

  	
  Termination of Right

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  15.5

  	
   

  	
  Personal Right

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  15.6

  	
   

  	
  Subordination

  	
  20

  
	
   

  	
   

  
	
  ARTICLE 16

  	
  UNDERGROUND STORAGE TANKS

  	
  20

  
	
   

  	
   

  
	
  16.1

  	
   

  	
  Underground Storage Tanks

  	
  20

  
	
   

  	
   

  
	
  ARTICLE 17

  	
  LEASEHOLD MORTGAGE
  FINANCING

  	
  20

  
	
   

  	
   

  
	
  ARTICLE 18

  	
  GENERAL PROVISIONS

  	
  21

  
	
   

  	
   

  
	
  18.1

  	
   

  	
  Quiet Enjoyment

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  18.2

  	
   

  	
  Definition of Rent

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  18.3

  	
   

  	
  Subordination

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  18.4

  	
   

  	
  Surrender of Premises

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  18.5

  	
   

  	
  Estoppel Certificates

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  18.6

  	
   

  	
  Severability

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.7

  	
   

  	
  Entire Agreement

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.8

  	
   

  	
  Notices

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.9

  	
   

  	
  Waivers

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.1

  	
  0

  	
  Recording

  	
  22

  
					

 

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  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  18.11

  	
   

  	
  Holding Over

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.12

  	
   

  	
  Choice of Law

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.13

  	
   

  	
  Attorneys’ Fees

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.14

  	
   

  	
  Liability of Landlord

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  18.15

  	
   

  	
  No Merger

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.16

  	
   

  	
  Interpretation

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.17

  	
   

  	
  Relationship of the
  Parties

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.18

  	
   

  	
  Successors

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.19

  	
   

  	
  Modifications

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.20

  	
   

  	
  Brokerage Fees

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.21

  	
   

  	
  Waiver of Redemption

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.22

  	
   

  	
  Not Binding Until Executed

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.23

  	
   

  	
  Counterparts

  	
  23

  
	
   

  	
   

  
	
  EXHIBIT A DESCRIPTION OF
  PREMISES

  	
  A-l

  
	
   

  	
   

  
	
  EXHIBIT B FORM OF
  MEMORANDUM OF GROUND LEASE

  	
  B-l

  
	
   

  	
   

  
	
  EXHIBIT C FORM OF DEED

  	
  C-l

  

 

iv

 

 

GROUND LEASE

 

In consideration of the rents and covenants
set forth below, Landlord (as hereinafter defined) hereby leases to Tenant (as
hereinafter defined), and Tenant hereby leases from Landlord, the Premises (as
hereinafter defined), upon the following terms and conditions:

 

ARTICLE I

FUNDAMENTAL LEASE PROVISIONS

 

The provisions in this Article shall be
referred to in this Lease as the “Fundamental Lease Provisions.” Unless
otherwise defined herein, capitalized terms used in this Lease shall have the
meanings listed in the Fundamental Lease Provisions.

 

	
  Commencement Date:

  	
  May 4, 2000

  
	
   

  	
   

  
	
  Landlord:

  	
  Big Kahuna, Inc.

  
	
   

  	
  1007 Highway 98 East

  
	
   

  	
  Destin, Florida 32540

  
	
   

  	
  FAX: (850) 837-9268

  
	
   

  	
   

  
	
  Tenant:

  	
  Festival Fun Parks, LLC, dba Palace Entertainment

  
	
   

  	
  18300 Van Karman Ave., Suite 900

  
	
   

  	
  Irvine, California 92612

  
	
   

  	
  FAX: (949) 261-1414

  
	
   

  	
   

  
	
  Premises:

  	
  That certain real property
  commonly known as the Big Kahuna’s Lost Paradise located at 1007 Highway 98
  East, Destin, Florida, consisting of approximately 25 acres of real property
  located in the County of Oakloosa, State of Florida, together with all rights,
  appurtenances, interests, easements and privileges belonging or appertaining
  thereto (the “Property”) more particularly described in Exhibit “A” attached
  hereto.

  
	
   

  	
   

  
	
  Building:

  	
  All surface improvements
  and/or buildings located on the Premises.

  
	
   

  	
   

  
	
  Initial Term:

  	
  Twenty Five (25) years,
  commencing on the Commencement Date.

  
	
   

  	
   

  
	
  Renewal Terms:

  	
  Consecutive terms of five
  (5) years and four and one-half (4.5) years.

  
	
   

  	
   

  
	
  Rent:

  	
  Except for Lease Year 1,
  Tenant shall pay to Landlord, as quarterly rent (the “Quarterly Rent”) the
  following amounts for Lease Years 1-10:

  
	
   

  	
   

  
	
  Memorandum of Lease:

  	
  Landlord and Tenant shall
  execute a Memorandum of Lease, a form of which is attached hereto as Exhibit
  “B” to be recorded in the Official Records of Okaloosa County, Florida

  

 

	
  LEASE YEAR

  	
   

  	
  INCREASE OVER PRIOR

  LEASE YEAR

  	
   

  	
  ANNUAL RENT

  	
   

  
	
  YEAR 1

  	
   

  	
   

  	
   

  	
  $

  	
  600,000.00

  	
   

  
	
  YEAR 2

  	
   

  	
  5.0

  	
  %

  	
  $

  	
  630,000.00

  	
   

  
	
  YEAR 3

  	
   

  	
  5.0

  	
  %

  	
  $

  	
  661,500.00

  	
   

  
	
  YEAR 4

  	
   

  	
  5.0

  	
  %

  	
  $

  	
  694,575.00

  	
   

  
	
  YEAR 5

  	
   

  	
  5.0

  	
  %

  	
  $

  	
  729,303.75

  	
   

  
	
  YEAR 6

  	
   

  	
  2.5

  	
  %

  	
  $

  	
  747,536.34

  	
   

  
	
  YEAR 7

  	
   

  	
  2.5

  	
  %

  	
  $

  	
  766,224.75

  	
   

  
	
  YEAR 8

  	
   

  	
  2.5

  	
  %

  	
  $

  	
  785,380.37

  	
   

  
	
  YEAR 9

  	
   

  	
  2.5

  	
  %

  	
  $

  	
  805,014.88

  	
   

  
	
  YEAR 10

  	
   

  	
  2.5

  	
  %

  	
  $

  	
  825,140.25

  	
   

  

 

1

 

	
   

  	
  Quarterly Rent for Lease Years 11-25 shall be
  adjusted as provided for in Section 2.2.

  
	
   

  	
   

  
	
  Increase Date:

  	
  First anniversary of the Commencement Date, and
  every one (I) year thereafter.

  
	
   

  	
   

  
	
  Increase Percentage:

  	
  See Section 2.2 below.

  
	
   

  	
   

  
	
  Permitted Use:

  	
  A family entertainment and amusement center and such
  incidental uses which are consistent therewith. Tenant shall be permitted to
  sell beer and wine pursuant to its beer and wine license.

  

 

ARTICLE 2

TERM AND RENT

 

2.1                                 Term. The Initial Term of this Lease shall be as set forth in the
Fundamental Lease Provisions. Provided Tenant is not then in default under this
Lease, Tenant shall have the option to extend the Initial Term by the number of
successive Renewal Terms described in the Fundamental Lease Provisions by
giving Landlord written notice of its election to extend the term of this Lease
by the succeeding Renewal Term not less than one (1) year prior to expiration
of the Initial Term or the then current Renewal Term, as the case may be.
Excepting the amount of the Minimum Quarterly Rent, the terms and conditions of
this Lease shall apply during each Renewal Term. The Initial Term, as it may be extended by one or more Renewal
Terms shall be hereinafter referred to as the “Lease Term.”

 

2.2                                 Quarterly Rent.

 

2.2.1                           For
the use and occupancy of the Premises, Tenant shall pay Landlord one-half (1/2)
of Lease Year I Rent on July 15, 2000 and the remaining one-half (1/2) of Lease
Year 1 Rent on September 15, 2000. Thereafter, Tenant shall pay Landlord
Quarterly Rent commencing on January 1, 2001 and continuing on the first day of
each April, July and October of each calendar thereafter during the Lease Term,
without any offset or deduction except as provided in section 2.7 herein.
Should the Lease Term commence on a day other than the first day of a calendar
month, then the rental for such first fractional month shall be computed on a
daily basis for the period from the Commencement Date to the end of such
calendar month at an amount equal to 1/30th of the monthly Rent for each day. Should
the Lease Term end on a day other than the last day of a calendar month, then
the rental for such fractional month shall be computed on a daily basis at an
amount equal to 1/30th of the monthly Rent for each day.  Tenant shall pay Landlord the Quarterly Rent
in lawful money of the United States at the address for Landlord set forth in
the Fundamental Lease Provisions, or to such other persons or at such other
places as Landlord may designate in writing to Tenant.

 

2.2.2                           The
Increase Percentage shall be determined as follows:

 

(a)                                  Quarterly
Rent for Lease Years 1-10.  Except for
payment of Lease Year 1 payments, the Quarterly Rent for Lease Years 1-10 shall
be as set forth in the Fundamental Lease Provisions.

 

(b)                                 Quarterly
Rent for Lease Years 11-20.  Commencing
on the first day of the first month of the eleventh (11th) Lease Year (“First
Adjustment Date”) Annual Rent shall be based upon a ten percent (10%) annual return or the value of the
Premises as determined by an
Appraisal (as defined in Section 2.2.3) of the Premises; provided, however, the
Annual Rent for Lease Year 11 shall be (i) at a minimum of ten percent (10%)
greater and

 

2

 

 

(ii) at a maximum of twenty-five percent (25%) greater
than the Annual Rent for Lease Year 10 (“Lease Year 11 Rent”). Tenant shall pay
to Landlord Quarterly Rent in twelve (12) equal installments of the Lease Year
11 Rent. For each of Lease Years 12-20 the Quarterly Rent shall be adjusted by
increasing the Quarterly Rent by two and one-half percent (2.5%) over the immediately
prior Lease Year Quarterly Rent. The Appraisal shall be dated no earlier than
thirty (30) days prior to the First Adjustment Date.

 

(c)                                  Quarterly
Rent for Lease Years 21-25. Commencing on the first day of the first month of
the twenty-first (21st) Lease Year (“Second Adjustment Date”) Annual Rent shall
be based upon a ten percent (10%) annual return on the value of the Premises as
determined by an Appraisal of the Premises; provided, however, the Annual Rent
for Lease Year 21 shall be (i) at a minimum of ten percent (10%) and (ii) at a
maximum of twenty-five percent (25%) greater than the Annual Rent for Lease
Year 20 (“Lease Year 21 Rent”). Tenant shall pay to Landlord Quarterly Rent as
twelve (12) equal installments of the Lease Year 21 Rent. For each of Lease
Years 22-25 the Quarterly Rent shall be adjusted by increasing the Quarterly
Rent by two and one-half percent (2.5%) over the immediately prior Lease Year
Quarterly Rent. The Appraisal (as defined in Section 4.5) shall be dated no earlier than thirty
(30) days prior to the Second Adjustment Date.

 

2.2.3                            Appraisal.
Any appraisal required by this Lease shall be performed by an MAI certified
Appraiser, which Appraiser is
acceptable to Landlord and Tenant, each in its reasonable discretion, and is paid
equally by Tenant and Landlord (“Appraisal”). In the event Landlord and Tenant
are unable to agree on fair market rent for purposes of computing the value of
the Premises as set forth herein, the parties shall apply the Baseball
Arbitration method as set forth in Section 2.2.4 herein below to determine such
value of the Premises

 

2.2.4                            Baseball
Arbitration. For purposes of this Lease, Baseball Arbitration shall follow the
following procedures:

 

(a)                                Within
twenty (20) days after Landlord and Tenant disagree on the value of the
Premises, Tenant and Landlord shall each select an arbitrator (“Tenant’s
Arbitrator” and “Landlord’s Arbitrator”, respectively) who shall be a qualified
and impartial person licensed in the State of Florida as a MAI appraiser (“Appraiser”)
with at least five (5) years of experience in appraising the type of matters
for which they are called on to appraise hereunder in the area where the
Premises are located

 

(b)                               Landlord’s
Arbitrator and Tenant’s Arbitrator shall name a third arbitrator, similarly
qualified, within ten (10) days after the appointment of Landlord’s Arbitrator
and Tenant’s Arbitrator.

 

(c)                                Said
third arbitrator shall, after due consideration of the factors to be taken into
account the prevailing market rate for base rent for tenants of comparable
quality for lease extensions in property of comparable size, age, use, location
and quality in the area where the Premises are located, taking into
consideration the extent of the availability of such property as large as the
Premises in the marketplace and all other economic terms then customarily
prevailing in such similar ground leases in said marketplace, and hearing
whatever evidence the arbitrator deems appropriate from the Appraiser,
Landlord, Tenant, Landlord’s Arbitrator and Tenant’s Arbitrator and others and
obtaining any other information the arbitrator deems necessary, in good faith,
make its own determination of the fair market rental and/or value, as
applicable for the Premises as of the commencement of the applicable Renewal
Term(s) and within (30) days after the appointment of the third arbitrator,
determine the fair market rent and/or value, as applicable for the Premises. The
third arbitrator’s determination shall be in writing and counterparts thereof
shall be delivered to Landlord and Tenant within said thirty (30) day period.
The arbitrator shall have no right or ability to determine the fair market rent
and/or value in any other manner. The third arbitrator’s determination shall be
binding upon the parties hereto.

 

(d)                            The costs and fees of the third arbitrator
shall be paid equally by both Landlord and Tenant.

 

3

 

 

2.3                                 Impositions.
In addition to the Minimum Quarterly Rent, as increased, Tenant shall pay to
the parties respectively entitled thereto all impositions, insurance premiums,
Taxes (as defined in Article 4), operating charges, maintenance charges,
construction costs, accounting and legal fees, and any other charges, costs and
expenses which arise or may be contemplated under any provision of this Lease
during the Lease Term (collectively, the “Impositions”). Tenant shall
furnish to Landlord, promptly after payment of any Taxes or insurance premiums,
and, with respect to any other Impositions, promptly upon request of Landlord,
official receipts or other satisfactory proof evidencing payment of such
Impositions. Upon Tenant’s failure to pay such Impositions or failure to
provide such proof, Landlord shall have the option to require Tenant to deposit
with Landlord (i) funds sufficient for the payment of the current Impositions
required to be paid by Tenant hereunder, and (ii) one-twelfth of the current
annual or annualized Impositions, as the case may be (or those of the preceding
years if the current amounts thereof have not been fixed), in advance and on
the same day upon which the Minimum Quarterly Rent is due.

 

2.4                                 Late
Charge.  If any installment of the
Quarterly Minimum Rent, any Imposition or any other payment provided for under
this Lease which is payable by Tenant is not received by Landlord within five
days of the date when due, Tenant shall immediately pay Landlord an amount
equal to 5% of the overdue amount as a late charge (the “Late Charge”).  Landlord and Tenant agree that the Late
Charge represents a fair and reasonable estimate of the costs that Landlord
will incur by reason of any such late payment by Tenant. Acceptance of the Late
Charge by Landlord shall not constitute a waiver of Tenant’s default with
respect to the overdue amount, nor prevent Landlord from exercising any other
rights and remedies available to Landlord under this Lease.

 

2.5                                 Interest
on Overdue Amounts.  The Minimum
Quarterly Rent, the Impositions and all other amounts due Landlord under this
Lease which are not paid when due shall bear interest at a per annum rate equal
to the “prime rate” (or substantial equivalent) announced from time to time (as
adjusted quarterly) by Bank of America, plus 2%, from the date due until paid;
provided, however, that if such rate shall exceed the lawful rate of interest
which Landlord is entitled to charge under applicable law, then the per annum
rate of interest on any such overdue amounts shall be the maximum rate
permitted by applicable law.

 

2.6                                 Net
Lease. This Lease is what is commonly called a “triple net lease,” it being
understood that Landlord shall receive the Minimum Quarterly Rent free and
clear of any and all Taxes, other Impositions, liens, charges, or expenses of
any nature whatsoever incurred in connection with the ownership and operation
of the Premises.

 

2.7                                 Right
of Offset. Tenant shall have the right to collect sums due from Landlord
for “Damages” as defined in that certain Agreement for Purchase and Sale of
Assets and Related Ground Lease dated as of April 28, 2000, executed by and
between Landlord and Tenant (“Purchase Agreement”) by offsets from time to time
against the Quarterly Rent due and payable by Tenant to Landlord, which offsets
shall not exceed twenty-five percent (25%)
of the Rent payable during any calendar year, as limited in the Purchase
Agreement.  Upon determination of the
offset amount between Tenant and Landlord as contemplated in the Purchase
Agreement, Tenant, upon thirty (30) days written notice to Landlord, shall have
the right to offset such amount from the next Quarterly Rent due Landlord.
Tenant shall not be deemed to be in Default under this Lease as a result of the
exercise of its offset rights and Landlord shall not have the right to
terminate this Lease pursuant thereto.

 

2.8                                 Early
Termination. In the event Tenant exercises its Recission Election (as such
term is defined in Section 7.4 of the Purchase Agreement), pursuant to the
terms and conditions pertaining to Tenant’s recission rights under the Purchase
Agreement, including but not limited to Tenant’s right to elect to remove any
and all capital improvements made by Tenant on the Premises and Landlord’s
payment of all sums to Tenant as required under the Purchase Agreement, Tenant
shall assign and delegate its interest in this Lease to Landlord and all of
Tenant’s obligations under this Lease shall terminate.

 

ARTICLE 3

USE OF THE
PREMISES

 

3.1                                 Use.
Tenant shall use the Premises solely for the Permitted Use. Tenant may not use
the Premises for any other purpose without obtaining the prior written consent
of Landlord, which consent shall not be unreasonably withheld. Tenant has
satisfied itself, and represents to Landlord, that such use is lawful and
conforms to all applicable zoning
and other use restrictions and regulations applicable to the Premises.

 

4

 

3.2                                    Condition
of Premises.  Tenant accepts the
Premises in its “as is” condition. Tenant acknowledges that Landlord makes no
warranty of any kind with respect to the Premises except as set forth in the Purchase
Agreement.

 

3.3                                    Compliance
With Law.

 

3.3.1                        Tenant
shall, at Tenant’s sole expense, comply in all respects with all applicable
laws, ordinances, orders, rules, regulations, of any governmental authorities
and with any directive of any public officer which shall impose any violation,
order or duty upon Landlord or Tenant with respect to the Premises or the use
or occupation thereof or signage thereon, including, without limitation, any
governmental law or statute, rule, regulation, ordinance, code, policy or rule
of common law now or hereafter in effect relating to the environment, health or
safety.

 

3.3.2                            Tenant
shall not use or permit the Premises to be used in any manner which will result
in waste or the creation of a nuisance, and Tenant shall maintain the Premises
reasonably free of any objectionable noises, odors, or disturbances.

 

3.4                                    Environmental
Compliance.

 

3.4.1                        Tenant
shall not cause or permit any Hazardous Material to be brought upon, or used in
or about the Premises by Tenant, its agents, employees, contractors, or
invitees, without the prior written consent of Landlord (which consent Landlord
shall not unreasonably withhold as long as Tenant demonstrates to Landlord’s
reasonable satisfaction that such Hazardous Material is necessary or useful to
Tenant’s business and will be used, kept, and stored in a manner that complies
with all laws relating to such Hazardous Material.) Except as otherwise
provided in Section 3.5, if Tenant breaches the obligations stated in the
preceding sentence, and if the presence of Hazardous Material on the Premises
caused or permitted by Tenant results in contamination of the Premises, and
Landlord has not caused the contamination, then Tenant shall indemnify, defend,
and hold Landlord harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities, or losses (including, without limitation,
diminution in value of the Premises, damages for the loss or restriction on use
of rentable or usable space or of any amenity of the Premises, damages arising
from any adverse impact on marketing of space of the Premises, and sums paid in
settlement of claims, attorneys’ fees, consultation fees, and expert fees)
which arise during or after the term of this Lease as a result of such
contamination.  This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in connection
with any investigation or site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state, or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Premises. Without limiting the foregoing, if the
presence of any Hazardous Material on the Premises not caused by Landlord
results in any contamination of the Premises, Tenant shall promptly take all
actions at its sole expense as are recommended by environmental engineers hired
by Tenant or Landlord and are necessary to return the Premises to the condition
existing prior to the introduction of any such Hazardous Material to the
Premises; provided that Landlord’s approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld, delayed or
conditioned so long as such actions would not potentially have any material adverse
long-term or short-term effect on the Premises.

 

3.4.2                        The
provisions of this Section shall survive for a period of five (5) years
following the expiration or termination of the Lease Term.

 

Capitalized terms used in
this Section and not otherwise defined herein shall have the following
meanings:

 

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

 

5

 

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

 

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

Survial

 

3.6                                 Survival.
Provisions of this Section 3 shall survive for a period of five (5) years
following the expiration or termination of the Lease Term.

 

3.7                                 Permits
and Licenses.  Tenant shall be solely
responsible to apply for and secure any building permit or permission of any
duly constituted authority for the purpose of doing any of the things which
Tenant is required or permitted to do under the provisions of this Lease.

 

ARTICLE 4

TAXES AND
UTILITIES

 

4.1                                Payment
of Taxes. Tenant shall pay the Taxes (as defined in the following Section)
applicable to the Premises during the Lease Term. Landlord shall provide Tenant
with copies of any tax bills applicable to the Premises promptly after receipt
of such bills. All such payments shall be made at least 15 days prior to the
delinquency date of such payment. Tenant shall promptly furnish Landlord with
satisfactory evidence that such Taxes have been paid. If any such Taxes paid by
Tenant shall cover any period of time after the expiration of the Lease Term,
Landlord shall reimburse Tenant to the extent required within thirty (30) days
after receiving notice from Tenant and a copy of the paid Tax bill provided
Tenant is not otherwise in default. If Tenant shall fail to pay any such Taxes,
Landlord shall have the right (but not the obligation) to pay the same, in
which case Tenant shall repay such amount plus any penalties and interest
resulting therefrom to Landlord within 5 days after receipt of a bill therefor.

 

4.2                                Definition
of “Taxes”. As used herein, the term “Taxes” shall include:

 

4.2.1                        any
form of real estate tax or assessment, ad
valorem tax or gross receipts tax, imposed by any authority having
the direct or indirect power to tax, including any city, county, state, or
federal government, or any school, agricultural, sanitary, fire, street,
drainage, or other improvement district thereof, on, against or with respect to
the Premises, this Lease, any legal or equitable interest of Landlord or any
superior landlord in the Premises or in the real property of which the Premises
are a part, Landlord’s right to rent or other income therefrom, and Landlord’s
business of leasing the Premises;

 

6

 

4.2.2                        any
tax, fee, levy, assessment, penalty, interest or other charge (i) in
substitution of, partially or totally, any tax, fee, levy, assessment, or
charge hereinabove included within this definition of Taxes, or (ii) any tax or
increase in any tax which is imposed as a result of a transfer, either partial
or total, of Landlord’s interest in the Premises to Tenant, or (iii) which is
imposed by reason of this transaction, any modifications or changes hereto, or
any transfers hereof; and

 

4.2.3                        all
inspection fees, taxes, bonds, permits, certificates, assessments and sales,
use, property or other taxes, fees or tolls of any nature whatsoever (together
with any related interest or penalties) now or hereafter imposed against
Landlord or Tenant by any federal, state, county or local governmental
authority upon or with respect to the Premises or the use thereof or upon the
possession, leasing, use, operation or other disposition thereof or upon the
rents, receipts or earnings arising therefrom or upon or with respect to this
Lease; and

 

4.2.4                        all
taxes assessed against and levied upon trade fixtures, furnishings, equipment,
and all other personal property of Tenant contained in the Premises or
elsewhere, which Tenant shall cause to be separately assessed and billed
directly to Tenant

 

Tenant shall pay when due or reimburse and indemnify
and hold Landlord harmless from and against any Taxes. Notwithstanding the
foregoing, the term “Taxes” shall not include any general income taxes,
inheritance taxes, and estate taxes imposed upon Landlord.

 

4.3                                 Tenant’s
Right to Contest Taxes.

 

4.3.1                        Tenant
shall have the right, at its sole cost and expense, to contest the amount or
validity, in whole or in part, of any Taxes by appropriate proceedings
diligently conducted in good faith, but no such contest shall be carried on or
maintained by Tenant after the time limit for the payment of any Taxes unless
Tenant shall (i) pay the amount involved under protest; (ii) procure and
maintain a stay of all proceedings to enforce any collection of any Taxes,
together with all penalties, interest, costs and expenses, by a deposit of a
sufficient sum of money, or by such undertaking, as may be required or
permitted by law to accomplish such stay; or (iii) deposit with Landlord, as
security for the performance by Tenant of its obligations hereunder with
respect to such Taxes, 125% of such contested amount or such other reasonable
security as may be demanded by Landlord to insure payment of such contested
Taxes and all penalties, interest, costs and expenses which may accrue during
the period of the contest. Upon the termination of any such proceedings, Tenant
shall pay the amount of such Taxes or part thereof, as finally determined in
such proceedings, together with any costs, fees (including all reasonable
attorneys’ fees and expenses), penalties or other liabilities in connection
therewith; provided, however, that if Tenant has deposited cash or cash
equivalents with Landlord as security under clause (iii) above, then, so long
as no default exists under this Lease, Landlord shall arrange to pay such Taxes
(or part thereof) together with the applicable costs, fees and liabilities as
described above out of such cash or cash equivalents and return any unused
balance, if any, to Tenant. Otherwise, Landlord shall return to Tenant all
amounts, if any, held by or on behalf of Landlord which were deposited by
Tenant in accordance with such clause (iii).

 

4.3.2                        Tenant
shall have the right, so long as Tenant is not in default hereunder and it
provides advance written notice to Landlord, at its cost and expense, to seek a
reduction in the valuation of the Premises as assessed for tax purposes and to
prosecute any action or proceeding in connection therewith. Provided Tenant is not
in default hereunder, Tenant shall be authorized to retain any tax refund of
any tax paid by Tenant.

 

4.3.3                        Landlord
agrees that whenever Landlord’s cooperation is required in any proceeding
brought by Tenant to contest any tax, Landlord shall reasonably cooperate
therein, provided same shall not entail any cost, liability or expense to
Landlord. Tenant shall pay, indemnify and save Landlord harmless of and from,
any and all liabilities, losses, judgments, decrees, costs and expenses
(including all reasonable attorneys’ fees and expenses) in connection with any
such contest and shall, promptly after the final settlement, fully pay and
discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith, and Tenant shall
perform and observe all acts and obligations, the performance of which shall be
ordered or decreed as a result thereof. No such contest shall subject Landlord
to the risk of any civil liability or the risk of any criminal liability, and
Tenant shall give such reasonable indemnity or security to Landlord as may
reasonably be demanded by Landlord to insure compliance with the foregoing provisions
of this Section.

 

7

 

4.3.4                        Upon
the occurrence of a Default hereunder, or if required by Landlord’s lender,
Tenant agrees that upon Landlord’s election, Tenant shall establish such
escrows for the payment of taxes as Landlord or Landlord’s lender may require.
If established, Tenant shall pay all the aforesaid taxes and assessments in
monthly installments on or before the first day of each calendar month in
advance in an amount estimated by Landlord. Landlord reserves the right to bill
monthly, quarterly, semi-annually or annually. In the event Landlord is
required under any mortgage covering the Premises to escrow real estate taxes,
Landlord may, but shall not be obligated to, use the amount required to be so
escrowed, as a basis for its estimate of the monthly installments due from
Tenant hereunder. Upon receipt of all tax bills and assessments attributable to
any calendar year during the term hereof, Landlord shall furnish Tenant with a
written statement of the actual amount of the taxes and assessments for such
year. In the event no tax bill is available, Tenant will compute the amount of
such tax. If the total amount paid by Tenant under this section for any
calendar year during the term of this Lease shall be less than the actual
amount due from Tenant for such year, as shown on such statement, Tenant shall
pay to Landlord the difference between the amount paid by Tenant and the actual
amount due, such deficiency to be paid within seven (7) days after demand
therefor by Landlord; and if the total amount paid by Tenant hereunder for any
such calendar year shall exceed such actual amount due from Tenant for such
calendar year, such excess shall be credited against the next installment of
taxes and assessments due from Tenant to Landlord hereunder. All amounts due
hereunder shall be payable to Landlord at the place where the fixed minimum
annual rental is payable. Tenant’s obligations under this section shall survive
the expiration of the term of this Lease.

 

4.4                                   Payment
of Utilities.  Tenant shall pay to
the utility companies or other parties entitled to payment the cost of all
water, heat, air conditioning, gas, electricity, telephone, and other utilities
and services provided to or for the Premises, including, without limitation,
connection fees and taxes thereon.  In
the case of any utilities or services which are not separately metered and
billed directly to Tenant, but are metered jointly with other premises, Tenant
shall pay to the parties entitled thereto, a pro
rata share based on Tenant’s usage of such utilities and services. Tenant,
at Tenant’s sole cost and expense, shall have the right at any time, to seek a
reduction in the utility charges that are to be paid by the Tenant.

 

4.5                                   Interruption
in Utility Service.  Landlord shall
not be liable in damages or otherwise for any failure or interruption of any
utility or other service being furnished to the Premises, and no such failure
or interruption shall entitle Tenant to any abatement of, set off or reduction
in the amounts payable to Landlord hereunder or otherwise entitle Tenant to
terminate this Lease.

 

ARTICLE 5

INSURANCE AND
INDEMNIFICATION

 

5.1                                 Tenant’s
Insurance.  From and after March 20,
2000, Tenant shall carry and maintain, at its sole cost and expense, the
following types and amounts of insurance:

 

	
  Insurance Type

  	
   

  	
  Amount of Coverage

  	
   

  	
  Risks Covered

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Commercial General Liability

  	
   

  	
  $5,000,000 per occurrence and

  $25,000,000 in the aggregate

  	
   

  	
  bodily injury, property damage, contractual liability,
  products and completed operations

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property Damage

  	
   

  	
  full replacement value less slab,

  	
   

  	
  “all risk”, including sprinkler damage

  
	
   

  	
   

  	
  foundation, supports and other customarily excluded
  Improvements

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Business Interruption

  	
   

  	
  not less than 4 installments of

  	
   

  	
  loss of earnings by at least the perils of

  
	
   

  	
   

  	
  Minimum Quarterly Rent

  	
   

  	
  fire and lightning, extended coverage,

  
	
   

  	
   

  	
   

  	
   

  	
  vandalism, malicious mischief and sprinkler leakage

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Worker’s compensation

  	
   

  	
  as required by law

  	
   

  	
   

  

 

8

 

5.2                                 Policy
Form.

 

5.2.1                        Tenant
shall obtain all policies of insurance required by Section 5.1 from insurance
companies having an A.M. Best rating of A- or better which are qualified to do
business in the jurisdiction where the Premises are situated. All such policies
shall be issued in the names of Landlord, Maxwell Joseph Bruner, George Brown
and Tenant, and if requested by Landlord, any mortgagee or beneficiary of
Landlord, as additional insureds.  In
addition, all such policies providing coverage for physical damage include loss
payee and mortgagee endorsement in favor of Landlord and Landlord’s mortgagee
or beneficiary, respectively and as applicable. 
The Tenant shall cause copies of such policies of insurance or originally
executed certificates thereof to be delivered to Landlord prior to Landlord’s
execution of this Lease, and not less than 30 days prior to any renewal
thereof. As often as any such policy shall expire or terminate, Tenant shall
procure and maintain renewal or additional policies with like terms. None of
such policies shall contain any co-insurance requirements and all such policies
shall provide for written notice to Landlord and any mortgagee or beneficiary
of Landlord not less than 10 days prior to any modification, cancellation,
lapse, or reduction in the amounts of insurance, and shall further provide that
any loss otherwise payable thereunder shall be payable notwithstanding any act
or negligence of Landlord or Tenant which might, absent such provision, result
in a forfeiture of all or part of the payment of such loss. All general
liability, property damage, and other casualty policies shall be written on an
occurrence basis as primary policies, not contributing with or in excess of
coverage which Landlord may carry.

 

5.2.2                        Tenant’s
obligations to carry the insurance provided for above may be brought within the
coverage of an “umbrella” policy or policies of insurance carried and
maintained by Tenant; provided, however, that such policy or policies shall (i)
have limits of not less than $25,000,000, (ii) name Landlord and any mortgagee
or beneficiary of Landlord as additional insureds as their interests may
appear, and (iii) provide that the coverage afforded Landlord will not be
reduced or diminished by reason of the use of such blanket policies. Tenant
agrees to permit Landlord at all reasonable times to inspect any policies of
insurance of Tenant which Tenant has not delivered to Landlord.

 

5.2.3                        Landlord
and Tenant agree that the insurance coverage required herein above are
satisfactory at the inception of this Lease. Landlord and Tenant understand that
the insurance requirements may reasonably change periodically during the Lease
Term and, in the event of such changes, the minimum requirements of types of
insurance, amounts of insurance and risks covered shall change. If at any time
the Landlord and Tenant do not agree on such reasonably changed insurance
requirements, then such dispute shall be referred to a mutually agreeable
independent insurance consultant for a final decision.  If the parties cannot mutually agree on an
independent insurance consultant, an independent insurance consultant shall be
selected by lot with the Landlord suggesting one independent consultant and the
Tenant selecting the other independent consultant. The decision of the
independent insurance consultant so selected shall be final.

 

5.3                                 Subrogation
Waiver.  Landlord (for itself and its
insurer) hereby waives any rights, including rights of subrogation, and Tenant
(for itself and its insurer) hereby waives any rights, including rights of
subrogation, each may have against the other on account of any loss or damage
occasioned to Landlord or Tenant, as the case may be, to their respective
property, the Premises or its contents that are caused by or result from risks
insured against under any insurance policies carried by the parties hereto and
in force at the time of any such damage. The foregoing waivers of subrogation
shall be operative only so long as available in the jurisdiction where the
Premises are located and so long as no policy of insurance is invalidated
thereby.

 

5.4                                 Payment
of Insurance.  In the event that
Tenant shall fail to obtain the insurance policies required hereunder or to pay
the premiums due for the insurance policies required hereby, Landlord shall
have the right, but not the obligation, to pay the same in which case Tenant
shall repay such amount plus any penalties or additional amounts resulting
therefrom to Landlord within ten (10) days after receipt of a bill therefor
plus interest at the rate of 10% per annum.

 

5.5                                 Insurance
Use Restrictions.  Tenant shall not carry
any stock or goods or do anything in, on, or about the Premises which will
substantially increase the rates of the insurance currently placed upon the
building of

 

9

 

which the Premises are a part, as long as Landlord
shall not be responsible for such increased rates, and such increase will
terminate upon termination of this Lease.

 

5.6                                 Indemnification.  Tenant shall indemnify Landlord for, defend
Landlord against, and save Landlord harmless from, any liability, loss, cost,
injury, damage or other expense or risk whatsoever that may occur or be claimed
by or with respect to any person(s) or property on or about the Premises and
resulting directly or indirectly from

 

(a)                                    the
use, misuse, occupancy, possession or disuse of the Premises by Tenant or other
persons claiming through or under Tenant, or their respective agents,
employees, licensees, invitees, guests or other such persons;

 

(b)                                   the
condition of the Premises;

 

(c)                                    any
work or thing done in respect of construction of, in or to the Premises or any
part of the improvements now or hereafter constructed on the Premises (other
than work by Landlord);

 

(d)                                   any
use, possession, occupation, operation, maintenance or management of the
Premises or any part hereof caused by person’s other than Landlord;

 

(e)                                    any
failure to, or to properly, use, possess, occupy, operate, maintain or manage
the Premises or any part thereof caused by person’s other than Landlord;

 

(f)                                      the
condition, including environmental conditions, of the Premises or any part
thereof caused by person’s other than Landlord;

 

(g)                                   any
negligence on the part of Tenant or any of its agents, contractors, servants, employees,
licensees or invitees;

 

(h)                                 any
accident, injury or damage to any person or property occurring in, on or about
the Premises or any part thereof including any sidewalk adjacent thereto; or

 

(i)                                     any
failure on the part of Tenant to perform or comply with any of the covenants,
agreements, terms or conditions contained in this Lease on its part to be
performed or complied with.

 

Landlord shall indemnify Tenant for, defend Tenant against, and save
Tenant harmless from, any liability, loss, cost, injury or other expense or
risk whatsoever that may occur or be claimed by or with respect to any
person(s) or property on or about the Premises and resulting directly from the
gross negligence or willful misconduct of Landlord.

 

ARTICLE 6

MAINTENANCE AND
REPAIRS

 

6.1                                 Tenant’s
Obligations. Tenant shall, at its sole cost and expense, maintain in good
repair, order, and serviceable condition the Premises and every part thereof,
including, without limitation, all buildings and improvements, and all
equipment and systems servicing the Premises. Tenant shall at all times keep
the parking lot, parking lot lighting, exterior walls, glass, partitions,
doors, fixtures, equipment and appurtenances thereof in a reasonably
satisfactory condition of cleanliness. Tenant shall not make any claim or
demand upon or bring any action against Landlord for any loss, cost, injury,
damage or other expense caused by any failure or defect, structural or
non-structural, of the Premises or any part thereof, including the improvements
and buildings thereon, unless such loss or defect is caused directly from the
gross negligence or willful misconduct of Landlord occurring after the date
hereof.

 

10

 

6.2                                   Landlord’s
Obligations.  Landlord have no
obligation to repair and maintain the Premises, nor any improvements or
equipment thereon, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary.  Tenant
expressly waives the benefit of any statute or law now or hereafter in effect
which would otherwise afford Tenant the right to terminate this Lease because
of Landlord’s failure to keep the Premises in good order, condition, and
repair, or the right to repair and offset the cost related thereto against rent.

 

6.3                                   Landlord’s
Rights. If Tenant refuses or neglects to make repairs or maintain the
Premises, or any part thereof, in a manner reasonably satisfactory to Landlord,
without prejudice to any other remedy Landlord may have hereunder, upon giving
Tenant 20 days prior written notice, Landlord shall have the right to enter the
Premises and perform such maintenance or make such repairs on behalf of and for
the account of Tenant.  In the event
Landlord so elects, Tenant shall pay the cost of such repairs, maintenance, or
replacements within 5 days following receipt of a bill therefor. Tenant agrees
to permit Landlord or its agent to enter the Premises, upon reasonable notice
by Landlord, during normal business hours for the purpose of inspecting the
Premises.

 

ARTICLE 7

ALTERATIONS

 

7.1                                 Consent
to Alterations. Tenant may, at its sole cost and expense, make alterations,
replacements, additions, changes, and improvements (collectively referred to in
this Article as “Alterations”) to the Building as it may find necessary
or convenient for its purposes. Upon completion of any substantial work, Tenant
shall provide to Landlord “as-built” plans, building permits, governmental
inspection reports and all other required governmental approvals, and proof of
payment of all labor and materials. Subject to
Section 7.5, Tenant shall pay when due all claims for such labor and materials
and shall give Landlord at least ten (10) days’ prior written notice of the
commencement of any such work. Landlord may enter upon the Premises, in such
case, for the purpose of posting appropriate notices, including, but not
limited to, notices of non-responsibility.

 

7.2                                 Removal
of Alterations.  All Alterations made
on the Premises shall become the property of Landlord at the expiration or
termination of the Lease Term and
shall be surrendered with the Premises free and clear of all liens and
otherwise in full compliance with all applicable laws, rules and regulations
applicable thereto, provided, however, Landlord shall have the right at any time
prior to the termination of this Lease to require Tenant to remove all
Buildings and/or other improvements and/or alterations on the Premises at its
sole cost and expense and otherwise in compliance with all applicable laws,
rules, regulations and ordinances. The obligations of Tenant pursuant to this
Section 7.2 shall survive the expiration or termination of this Lease.

 

7.3                                 Alterations
Required by Law.  Tenant shall, at
its sole cost and expense, make any Alteration, structural or otherwise, to or
on the Premises, or any part thereof, which may be necessary or required by
reason of any law, rule, regulation, or order promulgated by competent
government authority.

 

7.4                                 General
Conditions Relating to Alterations. 
Any Alteration shall be subject to the following conditions:

 

7.4.1                      No
Alteration shall be undertaken until Tenant shall have procured and paid for all
required permits and authorizations of all municipal departments and
governmental subdivisions having jurisdiction.

 

7.4.2                      Any
Alteration involving an estimated cost of more than $50,000 shall be conducted
under the supervision of a licensed architect or engineer selected by Tenant
and satisfactory to Landlord, and shall be made in accordance with detailed
plans and specifications and cost estimates prepared by such architect or
engineer and approved in writing in advance by Landlord.

 

7.4.3                      Any
Alteration shall be made promptly and in a good workmanlike manner, by properly
qualified and licensed personnel, and in compliance with all applicable permits
and authorizations and building and zoning laws and all laws, and in accordance
with the orders, rules and regulations of the Board of Fire Insurance

 

11

 

Underwriters and any other body hereafter exercising
similar functions having or asserting jurisdiction over the Premises.

 

7.4.4                        No
Alteration shall tie-in or connect the Premises or any improvements thereon
with any property outside the Premises without the prior written consent of
Landlord.

 

7.4.5                        No
Alteration shall reduce the value of the Premises or impair the structural
integrity of any building comprising a part of the Premises.

 

7.4.6                        In
connection with any Alteration involving an estimated cost in excess of
$50,000, Landlord may require Tenant to post a bond or other security
reasonably satisfactory to Landlord to insure the completion of such
Alteration.

 

7.5                                 Liens.
 In connection with Alterations or
otherwise, Tenant shall do all things reasonably necessary to prevent the
filing of any liens or encumbrances against the Premises, or any part thereof,
or upon any interest of Landlord or any mortgagee or beneficiary under a deed
of trust or any ground or underlying lessor in any portion of the Premises, by
reason of labor, services or materials supplied or claimed to have been
supplied to Tenant, or anyone holding the Premises, or any part thereof,
through or under Tenant. If any such lien or encumbrance shall at any time be
filed against all or any portion of the Premises, Tenant shall either cause same
to be discharged of record within 30 days after the date of filing of same or,
if Tenant in good faith determines that such lien should be contested, Tenant
shall either (i) bond over such lien in accordance with applicable law, or (ii)
furnish such security as Landlord shall reasonably determine to be necessary
and/or required to prevent any foreclosure proceedings against all or any
portion of the Premises during the pendency of such contest. If Tenant shall
fail to discharge or bond over such lien or encumbrance or fail to furnish such
security within such period, then, in addition to any other right or remedy of
Landlord resulting from said default of Tenant, Landlord may, but shall not be
obligated to, discharge the same either by paying the amount claimed to be due
or by procuring the discharge of such lien by giving security or in such other
manner as is, or may be, prescribed by law, and Tenant agrees to reimburse
Landlord within 10 days after demand for all costs, expenses, and other sums of
money spent in connection therewith.

 

ARTICLE 8

DAMAGE, DESTRUCTION, OBLIGATION TO REBUILD

 

8.1                                 Obligation
to Rebuild.  If any portion of the
Building is substantially damaged or destroyed by fire or other casualty,
Tenant shall forthwith give notice thereof to Landlord. Tenant shall either

 

8.1.1                        Obtain
an estimate from a licensed architect or contractor of the cost to complete
such repair, restoration, rebuilding or replacement, and Tenant shall, at its
sole cost and expense, promptly repair, restore, rebuild or replace the damaged
or destroyed Building, improvements, fixtures or equipment, and complete the
same as soon as reasonably possible, to the condition they were in prior to
such damage or destruction, except for such changes in design or materials as may
then be required by law, or

 

8.1.2                        Demolish
and clear the Building improvements damaged so that the Premises is in a safe
and clean condition, in compliance with any and all applicable rules and
regulations of any governmental agency having jurisdiction over the Premises, including,
but not limited to, capping all utilities.

 

In either event, Landlord shall, to the extent and at
the times the proceeds of the insurance are made available to Landlord, and
only so long as Tenant shall not be in default under this Lease, reimburse
Tenant for the costs of making such repairs, restoration, rebuilding,
replacements or demolition as they are completed, but not more often than once
each month, upon receipt of a written request therefor, which request shall be
accompanied by a certification from Tenant’s architect certifying as to
completion of the work for which reimbursement is being requested. To the
extent, if any, that the proceeds of insurance made available by Landlord are
insufficient to pay the entire cost of making such repairs, restoration,
rebuilding, replacements or demolition, Tenant shall pay the

 

12

 

Remainder. Any surplus of
insurance proceeds over the cost of restoration or demolition, net of all reasonable
expenses incurred by Landlord in connection with the administration thereof,
shall be promptly paid over to Tenant.

 

8.2                                 No
Abatement of Rent. Notwithstanding the partial or total destruction of the
Premises and any part thereof, there shall be no abatement of rent or of any
other obligation of Tenant hereunder by reason of such damage or destruction.

 

ARTICLE 9

EMINENT DOMAIN

 

9.1                                 Total
Taking.  If the entire Premises are
taken under the power of eminent domain by any public or quasi-public authority,
this Lease shall terminate and expire as of the date of such taking, and upon
Tenant’s payment to Landlord of all rents accruing through such date, Landlord
and Tenant shall each thereafter be released from any further liability accrued
under this Lease. In the event that Tenant shall have paid any rent for any
period beyond the date of such taking, Landlord shall reimburse same, pro rata.

 

9.2                                 Partial
Taking.  In the event that (i) more
than 25% of the Premises, or of the parking area serving the Premises and owned
by the Landlord, is taken under the power of eminent domain by any public or
quasi-public authority, (ii) by reason of any appropriation or taking,
regardless of the amount so taken, the remainder of the Premises is not one
undivided parcel of property, or (iii) as a result of any taking, regardless of
the amount so taken, the remainder of the Premises is rendered unsuitable for
the continued operation of Tenant’s business, either Landlord or Tenant shall
have the right to terminate this Lease as of the date Tenant is required to
vacate a portion of the Premises, by giving the other notice of such election
within 30 days after receipt by Tenant from Landlord of written notice that the
Premises have been so appropriated or taken. The taking which affects fifty
(50%) percent or more of the Building and improvements on the Premises shall be
considered, as Tenant’s option, a substantial taking as would render the use of
the Premises not suitable for Tenant’s use. Landlord agrees immediately after
learning of any appropriation or taking to give to Tenant notice in writing
thereof. In the event of such termination, upon Tenant’s payment to Landlord of
all rents accruing through such date, both Landlord and Tenant shall thereupon
be released from any future liability thereafter accruing hereunder. If both
parties elect not to terminate this Lease, Tenant shall remain in that portion
of the Premises not so taken and Tenant, at Tenant’s sole cost and expense,
shall restore the remaining portion of the Premises as soon as possible to a
complete unit of like quality and character as existed prior to such taking. So
long as this Lease is not terminated in the manner provided above, there shall
be an equitable adjustment of the rent payable by Tenant hereunder by reason of
such partial taking. Tenant hereby waives any statutory rights of termination
which may arise by reason of any partial taking of the Premises under the power
of eminent domain.

 

9.3                                 Distribution
of Award. The entire award or compensation in such eminent domain
proceeding, whether for a total or partial taking or for diminution in the
value of the fee (and not the improvements installed thereon by Tenant or
Tenant’s interest in this Lease) shall be distributed to Landlord. Tenant may
apply for award of the value of Tenant’s building and the improvements,
personal property, loss of income, relocation costs, improvements and the value
of the leasehold interest created hereby, according to the law in effect in the
jurisdiction where the Premises are located, so long as such award does not
diminish the value of Landlord’s award.

 

ARTICLE 10

ASSIGNMENT AND SUBLETTING

 

10.1                           Landlord’s
Consent Required.

 

10.1.1                  Tenant
shall not assign this Lease or Tenant’s interest in and to the Premises without
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any attempted assignment without such consent
shall be void, and shall constitute a default by Tenant under this Lease.

 

13

 

For purposes of this Article, the terms “assign” and “assignment”
shall include any (i) act attempting to, or document purporting to, assign,
transfer, sublet, enter into license or concession agreements for, change
ownership of, mortgage or hypothecate this Lease or Tenant’s interest in and to
the Premises or any part thereof, (ii) change in the majority ownership or
power to control Tenant. Notwithstanding the foregoing, provided Tenant is
not in default hereunder, Landlord’s consent shall not be required for a
transfer, sale, assignment or sublease of all or any portion of the Lease or
the Premises by Tenant to an Affiliate (defined below), provided however, that
in each instance, Tenant shall provide Landlord with thirty (30) days prior
written notice of such transfer, sale, assignment and/or sublease.

 

For purposes of this Lease, an “Affiliate” of Tenant shall be defined
as any person or entity which directly controls or is controlled by, or is
under common control with Tenant. For purposes of this definition the term “control”
shall mean the power to direct management and policies of Tenant through the
ownership of voting securities or equity interests. Such transfers shall not be
binding upon Landlord until and unless Landlord is in receipt of a written
acknowledgement by such affiliate specifically assuming the obligations of
Tenant arising hereunder and setting forth such other information as Landlord
may reasonably require.

 

10.1.2                  Any
assignee, transferee, licensee, concessionaire, or mortgagee shall agree for the
benefit of Landlord to be bound by, assume, and perform all of the terms,
covenants, and conditions of this Lease.

 

10.1.3                  Notwithstanding
anything contained herein to the contrary, Tenant shall not sublet, assign or
enter to a management arrangement for the Premises on any basis such that the
rent or other amounts to be paid by any subtenant, assignee or manager
thereunder would be based, in whole or in part, on the income or profits
derived from the business activities of such subtenant, assignee or manager on
the Premises.

 

10.2                           No
Release of Tenant.  No assignment
shall release Tenant of Tenant’s obligation or alter the primary liability of
Tenant to pay the rent and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of rent by Landlord from any other person
shall not be deemed to be a waiver by Landlord of any provision hereof.  In the event of default by any assignee of
Tenant or any successor Tenant, in the performance of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against such assignee. Landlord may consent to subsequent
assignments of this Lease or amendments or modifications to this Lease with
assignees of Tenant, upon notice to Tenant, or any successor of Tenant, and
after obtaining Tenant’s or such successor’s consent thereto, and such action
shall not relieve Tenant of liability under this Lease.

 

ARTICLE 11

DEFAULT; REMEDIES

 

11.1                           Default.  The occurrence of any one or more of the
following events shall constitute a default by Tenant under this Lease:

 

11.1.1                  The
failure of Tenant to operate the Premises with the Permitted Use for more than
30 consecutive days during the period between Memorial Day and Labor Day.

 

11.1.2                  The
failure by Tenant to make any payment of Minimum Quarterly Rent, Impositions or
any other payment required to be made by Tenant hereunder, where such failure
shall continue for a period of 10 days.

 

11.1.3                  Except
as otherwise provided in this Lease, the failure by Tenant to observe or perform
any of the non-monetary covenants, conditions, or provisions of this Lease to
be observed or performed by Tenant, where such failure shall continue for a
period of 30 days after written notice thereof from Landlord to Tenant;
provided, however, that if the nature of Tenant’s noncompliance is such that
more than 30 days are reasonably required for its cure, then Tenant shall not
be deemed to be in default if Tenant commences such cure within said 30-day period
and thereafter diligently prosecutes such cure to completion and the final
determination thereof.

 

14

 

11.1.4                  The
admission by Tenant of its inability to pay debts as they mature.

 

11.1.5                  Institution
by or against Tenant of any bankruptcy, insolvency, reorganization,
receivership or other similar proceeding involving the creditors of Tenant,
which, if instituted against Tenant is not dismissed within 60 days after the
commencement thereof;

 

11.1.6                  The
issuance or filing of any judgment, attachment, levy, garnishment or the
commencement of any related proceeding or the commencement of any other
judicial process upon or with respect to Tenant, all or substantially all of
the assets of Tenant or the Premises.

 

11.1.7                  Sale
or other disposition by Tenant of any substantial portion of its assets or Tenant’s
Property used in connection with the operation of its business on the Premises.

 

11.1.8                  Dissolution,
merger, consolidation, termination of existence, insolvency, business failure
or assignment for the benefit of creditors of or by Tenant.

 

11.1.9                  Any
statement, representation or Information made or furnished by or on behalf of Tenant
to Landlord in connection with or to induce Landlord to enter into this Lease shall
prove to be materially false or misleading when made or furnished.

 

11.2                           Remedies.  Upon the occurrence of a default by Tenant
pursuant to the foregoing Section or otherwise in under this Lease, Landlord
may at any time thereafter, with or without notice or demand and without
limiting Landlord in the exercise of any right or remedy which Landlord may
have by reason of such default:

 

11.2.1                  Terminate
Tenant’s right to possession of the Premises by any lawful means, in which case
this Lease and the term hereof shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event, Landlord shall be entitled to
recover from Tenant all damages incurred by Landlord by reason of Tenant’s
default following written notice of such failure from Landlord to Tenant.

 

11.2.2                  Maintain
Tenant’s right to possession of the Premises by any lawful means, in which case
this Lease and the term hereof shall continue in effect whether or not Tenant
shall have vacated or abandoned the Premises. In such event, Landlord shall be
entitled to enforce all of Landlord’s rights and remedies under the Lease, including
the right to recover the rent as it becomes due hereunder.

 

11.2.3                  Pursue
any other remedy now or hereafter available to Landlord under the laws or
judicial decisions of the jurisdiction where the Premises are located.

 

11.3                           Cumulative
Remedies.  No remedy or election
hereunder shall be deemed exclusive but shall, wherever possible, be cumulative
with all other remedies provided in this Section or otherwise available at law
or in equity.

 

ARTICLE 12

REPRESENTATIONS AND WARRANTIES; FINANCIAL REPORTING

 

12.1                           Representations
and Warranties. To induce Landlord to enter into this Lease, Tenant
represents and warrants to Landlord as follows:

 

12.1.1                  This
Lease is an enforceable obligation of Tenant.

 

12.1.2                  Tenant
is not a foreign corporation, foreign partnership, foreign trust or foreign
estate (as such terms are defined in the Internal Revenue Code of 1986, as
amended) and the regulations promulgated thereunder).

 

15

 

12.1.3                  The
financial statements of Tenant provided to Landlord delivered to Landlord are
true and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles, and fairly present the
respective financial conditions of the subjects thereof as of the respective
dates thereof. No materially adverse change has occurred in the financial
conditions reflected therein since the respective dates thereof.

 

12.1.4                  There
are no actions, suits or proceedings pending, or to the best of Tenant’s
knowledge, threatened, against or affecting it or the Premises which, if
adversely determined, would materially impair the ability of Tenant to satisfy
their obligations under or relating to this Lease.

 

12.1.5                  Tenant
is not in default under any obligation for the payment of borrowed money, for
the deferred purchase price of Tenant’s property hereunder or for the payment
of any rent under this Lease, which, either individually or in the aggregate,
would adversely affect the financial condition of Tenant, or the ability of
Tenant to perform its obligations hereunder, or comply with the terms of this
Lease.

 

12.1.6                  Tenant
has obtained all required certificates of occupancy, building permits,
certificates of environmental impact, approval, all zoning, building, housing,
safety, fire and health approvals and all permits and licenses required by any
governmental authority and necessary or advisable to operate, occupy or use the
Premises for the Permitted Use, all or which are unexpired, permanent and
unconditional, and, without cost or risk to Landlord, are hereby assigned, to
the extent assignable, to Landlord.

 

12.2                           Financial
Statements. Tenant has furnished certain financial statements to Lender,
which statements completely and accurately present the financial condition of
Tenant on the dates thereof. There has been no material adverse change in
business, property or condition of Tenant since the date of such financial
statements. Tenant is not insolvent within the meaning of Section 548(a)(2)(B)
of the United States Bankruptcy Code or any other federal or state law using or
defining such term, and will not be rendered insolvent by the transactions
contemplated by this Lease. Tenant hereby covenants and agrees to deliver to
Landlord or cause to be delivered to Landlord within the time periods stated:

 

12.2.1               management
prepared and certified quarterly financial statements for Tenant, within ninety
(90) days after the end of each fiscal quarter of Tenant;

 

12.2.2                  annual
financial statements for Tenant which shall either be audited, or if Tenant
does not then obtain audited financial statements, reviewed by a firm of
independent certified public accountants, within one hundred twenty (120) days
after the end of each fiscal year of Tenant;

 

Such financial statements shall be true and correct in
all respects, shall be prepared in accordance with generally accepted
accounting principles, and shall fairly represent the respective financial
conditions of the subjects thereof as of the respective dates thereof. At the
request of Landlord, Tenant shall obtain the consent of borrower’s
accountant(s) to the inclusion of borrower’s most recent financial statement in
any regulatory filing or report to be filed by Landlord.

 

ARTICLE 13

BUILDING AND IMPROVEMENTS; TRADE FIXTURES

 

13.1                           Building
and Improvements. The Building and any improvements in, on, or about the
Premises and all additions, alterations, modifications, and replacements
thereto and thereof at all times during the term of this Lease any extension
term thereof shall be the property of Tenant. All right, title, and interest of
Tenant therein shall cease, expire, and vest exclusively in Landlord on the
expiration or any termination of this Lease. Within ten (10) business days
after the expiration or termination of this Lease, Tenant shall execute and
deliver to Landlord all reasonably necessary documents terminating the
Memorandum of Lease and Tenant’s interest in the Premises and the Building and
improvements thereon including a deed in recordable form to building and
fixtures substantially in the form of Exhibit “C” attached hereto (the “Deed”)
conveying to Landlord all of the building and fixtures located on the Premises,
free and clear from all liens and encumbrances except taxes for the then
current year and any other

 

16

 

liens or encumbrances
approved or caused by Landlord. Landlord shall cause to be recorded the
executed Deed and shall pay the cost of documentary stamps and recording fees
associated with the recording of the Deed. 
If upon expiration of the Lease Term and upon the expiration of said ten
(10) day period Tenant does not deliver to Landlord an executed Deed, Landlord
shall be irrevocably designated as Tenant’s attorney-in-fact for the purpose of
executing, delivering and recording the Deed on behalf of Tenant.

 

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

 

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

 

13.4                           Removal
of Trade Fixtures. At the expiration or earlier termination of this Lease,
provided Tenant is not in default, Tenant may remove (i) Tenant’s movable Trade
Fixtures and other personal property not permanently affixed to the Premises;
and (ii) the alterations and additions and signs made by Tenant to the Premises
(collectively, “Tenant’s Property”). All leasehold improvements, alterations
and additions to the Premises, HVAC equipment, non-removable lighting fixtures,
electric switch boxes, plumbing, restroom fixtures, floor coverings, and other
like items which are permanently affixed to the Premises, more commonly defined
as fixtures, shall become the property of the Landlord immediately following an
uncured default, the expiration, or any termination of this Lease. Any of
Tenant’s Property not removed within ten (10) days following the expiration or
earlier termination of this Lease shall be deemed abandoned by Tenant and, at
Landlord’s option, shall become the property of Landlord as owner of the real
property to which they are affixed. Tenant, at its sole cost and expense,
immediately shall repair any damage occasioned to the Premises by the removal
of Tenant’s Property. In the event Tenant shall fail to pay the cost of any
such repair, Landlord may do so and Tenant shall reimburse Landlord for the
amount thereof within 5 days after receipt of a bill therefor. Upon the
expiration or earlier termination of this Lease, Tenant shall leave the
Premises in broom clean condition, free of debris, normal wear and tear
expected in the condition required herein and otherwise in compliance with all
applicable laws.

 

13.5                           Financing
of Tenant’s Property.  For the
purposes of Tenant’s financing or leasing of Tenant’s Property, landlord
covenants and agrees that to the extent that such property is leased or
financed, then any interest of Landlord in the same shall be subject, subordinate, and inferior to any
lien(s) (and all renewals, extensions, or replacements thereof) now or
hereafter imposed by Tenant upon Tenant’s Property. Landlord agrees to execute such
reasonable and necessary documents to confirm Landlord’s foregoing covenant in
favor of Tenant’s lienholders or mortgagees. Notwithstanding anything contained
in this Article 13 to the contrary, in no event shall Landlord be deemed to
have subordinated its fee interest in and to the Premises to the interest of
Tenant or Tenant’s financing or shall Landlord be deemed to have subordinated
any residual interest in and to the insurance and/or condemnation proceeds
payable to Landlord pursuant to this Lease.

 

ARTICLE 14

BANKRUPTCY OR INSOLVENCY

 

14.1                           Liquidation.  In the event that Tenant shall become a
debtor under Chapter 7 of the Bankruptcy Reform Act of 1978, as amended (the “Bankruptcy
Code”), and Tenant’s trustee or Tenant shall elect to assume this Lease for
the purpose of assigning the same or otherwise, such election and assignment
may be made only if the

 

17

 

provisions of this Section are satisfied. If Tenant or
Tenant’s trustee shall fail to assume this Lease within 60 days after the entry
of an order for relief, this Lease shall be deemed to have been rejected. Immediately
thereupon, Landlord shall be entitled to possession of the Premises without
further obligation to Tenant or Tenant’s trustee and this Lease, upon the
election of Landlord, shall terminate, but Landlord’s right to be compensated
for damages shall survive, whether or not this Lease shall be terminated.

 

14.2                           Reorganization.  In the event that a voluntary petition for
reorganization is filed by Tenant, or an involuntary petition is filed against
Tenant under Chapter 11 of the Bankruptcy Code, or in the event of the entry of
an order for relief under Chapter 7 in a case which is then transferred to
Chapter 11, Tenant’s trustee or Tenant, as debtor-in-possession, must elect to
assume this Lease within 60 days from the date of the filing of the petition
under Chapter 11 or the transfer thereto, or Tenant’s trustee or the
debtor-in-possession shall be deemed to have rejected this Lease. Immediately
thereupon, Landlord shall be entitled to possession of the Premises without further
obligation to Tenant or Tenant’s trustee, and this Lease, upon the election of
Landlord, shall terminate. Landlord’s right to be compensated for damages,
shall survive, whether or not this Lease shall be terminated.

 

14.3                           Conditions
to Assumption.  No election by Tenant’s
trustee or the debtor-in-possession to assume this Lease, whether under Chapter
7 or Chapter 11, shall be effective unless each of the following conditions has
been satisfied:

 

14.3.1                  Tenant’s
trustee or the debtor-in-possession has cured all defaults under this Lease, or
has provided Landlord with evidence satisfactory to Landlord that it will cure
all defaults capable of being cured by the payment of money within 10 days from
the date of such assumption and that it will cure all other defaults under this
Lease which are capable of being cured by the performance of any act within 30
days after the date of such assumption.

 

14.3.2                  Tenant’s
trustee or the debtor-in-possession has compensated, or has provided Landlord
with evidence satisfactory to Landlord that, within 10 days from the date of
such assumption, that it will compensate Landlord for any actual pecuniary loss
incurred by Landlord arising from the default of Tenant, Tenant’s trustee, or
the debtor-in-possession as indicated in any statement of actual pecuniary loss
sent by Landlord to Tenant’s trustee or the debtor-in-possession.

 

14.3.3                  Such
assumption will not breach or cause a default under any provision of any other
lease, mortgage, financing agreement or other agreement by which Landlord is
bound, relating to the Premises.

 

14.3.4                  Tenant’s
trustee or the debtor-in-possession shall (i) provide Landlord with “Assurance”,
as defined below, of the future performance of each of the obligations under
this Lease of Tenant, Tenant’s trustee or the debtor-in-possession, and (ii) in
addition to any other security deposits held by Landlord, deposit with
Landlord, as security for the timely payment of Minimum Quarterly Rent and for
the performance of all other obligations of Tenant under this Lease, an amount
equal to 1 quarterly installment of Minimum Quarterly Rent (in the amount then
payable), and (iii) pay in advance to Landlord on the date each installment of
Minimum Quarterly Rent is due and payable, one-twelfth of Tenant’s annual
obligations for Impositions to be made by Tenant pursuant to this Lease. The
obligations imposed upon Tenant’s trustee or the debtor-in-possession by this
subsection shall continue with respect to Tenant or any assignee of this Lease,
after the conclusion of proceedings under the Bankruptcy Code.

 

For purposes of the
foregoing subsection, the term “Assurance” shall mean no less than:

 

(1)                                  Tenant’s
trustee or the debtor-in-possession has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that sufficient funds will be
available to fulfill the obligations of Tenant under this Lease; and

 

(2)                                  To
secure to Landlord the obligations of Tenant, Tenant’s trustee or the
debtor-in-possession and to assure the ability of Tenant, Tenant’s trustee or
the debtor-in-possession to cure the defaults under this Lease, monetary and/or
nonmonetary, there shall have been (A) sufficient cash deposited with Landlord,
or (B) the bankruptcy court shall have entered an order segregating sufficient
cash payable to Landlord, and/or

 

18

 

(C) Tenant’s trustee or the debtor-in-possession shall
have granted to Landlord a valid and perfected first lien and security interest
and/or mortgage in property of Tenant, Tenant’s trustee or the
debtor-in-possession, acceptable as to value and kind to Landlord.

 

14.4                           Conditions
to Assignment.  If Tenant’s trustee
or the debtor-in-possession has assumed this Lease pursuant to the terms and
provisions of this Section for the purpose of assigning (or elects to assign)
this Lease, this Lease may be so assigned only if the proposed assignee has
provided adequate assurance of future performance of all of the terms,
covenants and conditions of this Lease to be performed by Tenant. As used in
this subsection “adequate assurance of future performance” shall mean at least
that clauses (2)(B) and (2)(C) of the above definition of “Assurance”, and each
of the following conditions, has been satisfied:

 

14.4.1                  the
proposed assignee has furnished Landlord with a current financial statement
audited by a certified public accountant determined in accordance with
generally accepted accounting principles consistently applied indicating a
credit rating, net worth and working capital in amounts which Landlord reasonably
determines to be sufficient to assure the future performance of such assignee
of Tenant’s obligations under this Lease, but in no event indicating a net
worth less than the net worth of Tenant and any guarantors of this Lease, on
the date of execution hereof;

 

14.4.2                  such
assignment will not breach or cause a default under any provision of any other lease,
mortgage, financing agreement or other agreement by which Landlord is bound,
relating to the Premises; and

 

14.4.3                  the
proposed assignment will not release or impair any guaranty of all or any
portion of this Lease.

 

14.5                           Reasonable
Charges. When, pursuant to the Bankruptcy Code, Tenant’s trustee or the
debtor-in-possession shall be obligated to pay reasonable use and occupancy
charges for the use of the Premises, such charges shall not be less than the
Minimum Quarterly Rent and all additional amounts payable by Tenant under this
Lease and shall be paid at the times and when due as though such charges were
Minimum Quarterly Rent and such additional payments.

 

ARTICLE 15

RIGHT OF FIRST OFFER

 

15.1                          Right
of First Offer.  Except for a
potential sale of the Premises to Steve Alford, Landlord hereby agrees that, if
Landlord intends to market the Premises, it shall give Tenant written notice of
an election by Landlord to sell the Premises. Tenant shall have ten (10) days
from receipt of such notice to provide Landlord with a written offer to
purchase the Premises (the “Right of First Offer”).

 

15.2                          Closing.  If accepted by Landlord, Landlord and Tenant
shall close on the purchase of the Premises within 60 days after the date of
its notice of exercise of the Right of First Offer. At the closing, Tenant
shall pay Landlord the purchase price agreed to by Landlord and Tenant in
immediately available funds.  Upon receipt
of such payment, Landlord shall deliver a deed to Tenant conveying marketable
fee simple title to the Premises to Tenant, free and clear of all financing
encumbrances created by Landlord. Tenant shall pay all costs associated with
the closing, including, without limitation, title insurance premiums,
recordation and transfer taxes, transfer fees, appraisal fees and attorneys’
fees and expenses.

 

15.3                          Termination
of Right.  Tenant shall have no right
to exercise the Right of First Offer if (a) this Lease has expired or been
terminated, (b) Tenant is in Default under this Lease as of the date Tenant
attempts to exercise such Right of First Offer, (c) Tenant has been more than
15 days delinquent in the payment of Minimum Quarterly Rent on 3 or more occasions
during any calendar year of the Lease Term, or (d) this Lease shall be assigned
by Tenant.

 

15.4                          Third
Party Offers.  Landlord shall not be
required to provide notice of, and the Right of First Offer shall not be
effective in the case of, third party offers to purchase presented to Landlord.

 

19

 

15.5                           Personal
Right.  The Right of First Offer is
personal to the Tenant executing this Lease, and may not be assigned, is not
granted to any successor or assignee of Tenant’s interest in the Lease except
an assignment to Tenant’s Affiliate.

 

15.6                           Subordination.  The Right of First Offer shall be subordinate
in financing Landlord places on the Premises, without the need to
execute any further documentation.

 

ARTICLE 16

UNDERGROUND STORAGE TANKS

 

16.1                           Underground
Storage Tanks.  Installation of
underground storage tanks without the permission of Landlord is not a permitted
use of the Premises.

 

ARTICLE 17

LEASEHOLD MORTGAGE FINANCING

 

17.1                           Notwithstanding
any provisions to the contrary contained in this Lease, Tenant may enter into
certain financing arrangements with various lenders (the “Lenders”), and, in
connection therewith, is required to secure all obligations, indebtedness and
liabilities under such financing arrangements by granting a mortgage, deed of
trust, collateral assignment of the Lease, or any other documentation
reasonably required in connection with such financing (each a “Leasehold
Mortgage” and collectively, “Leasehold Mortgages”) with respect to its interest
in this Lease and in the Premises.

 

17.2                           Tenant
is given the right by Landlord to enter into any recordable Leasehold Mortgage
to the extent the same is solely limited to the leasehold interest of Tenant
and does not increase the rights of the Lenders beyond the leasehold interest
of Tenant in the Premises. Notwithstanding the foregoing, except as otherwise provided
by this consent: (a) it is expressly understood that such consent to the
execution and recordation of a Leasehold Mortgage by Tenant does not constitute
approval by Landlord of any of the provisions of the Leasehold Mortgage; and
(b) if there is a conflict between a Leasehold Mortgage and this Lease, the terms
of this Lease shall control.

 

17.3                           If
Tenant mortgages or grants to Lender a security interest in Tenant’s interest
in this Lease and the Premises, and if Lender sends to Landlord a true copy of
the Leasehold Mortgage executed in connection therewith, together with a
written notice specifying the name and address of Agent, so long as such
Leasehold Mortgage shall remain unsatisfied of record or until written notice
of satisfaction is given by the holder to Landlord, the following provisions
shall apply:

 

17.3.1                  There
shall be no cancellation, surrender, acceptance of surrender, amendment, or
modification of this Lease by joint action of Landlord and Tenant, or by Tenant
alone, without in each case, written notice to Lender. Nor shall any merger
result from the acquisition by, or devolution upon, any one entity of the fee
and the leasehold estates of the Premises.

 

17.3.2                  Landlord
shall, upon serving Tenant with any notice or other communication, whether of
default or any other matter, simultaneously serve a copy of such notice upon
Lender. However, Landlord’s failure to deliver such notice to Lender shall not
constitute a default or breach by Landlord under this Lease. Nevertheless,
Landlord may not undertake any action to enforce any of its rights under this
Lease in connection with the notice given to Tenant unless and until a copy of
the same is served upon Lender.

 

17.3.3                  In
the event of any default by Tenant under the Lease, Lender shall have, after
service of notice of such default, the same period to remedy or cause to be
remedied the default complained of as Tenant has under this Lease, and Landlord
shall accept such performance by or at the instigation of Lender as if the same
had been rendered by Tenant. Each notice of default given by Landlord shall
state the amounts of rent and whatever other payments are being claimed to be in
default.

 

20

 

17.3.4                  Landlord
agrees that (i) Lender shall have the right, but not the obligation, to remedy
any default by Tenant under this Lease by performing any applicable term,
covenant, condition or agreement of this Lease, and (ii) Landlord shall accept
such performance by Lender with the same force and effect as if furnished by
Tenant, subject to and in accordance with the provisions of this Lease.

 

17.3.5                  No
more often than two times during any twelve month period, Landlord, within ten
(10) business days after a request in writing by Tenant or Lender, shall
furnish a written statement, duly acknowledged, that this Lease is in full
force and effect and that there are no defaults thereunder by Tenant, or if
there are any defaults, such statement shall specify the defaults Landlord
claims to exist.

 

17.3.6                  Landlord
hereby consents to: (i)Lender’s foreclosure of any Leasehold Mortgage, (ii) any
sale of Tenant’s interest in this Lease and the Premises in connection with
such foreclosure, whether by judicial proceedings or by virtue of any power of
sale contained in that Leasehold Mortgage, (iii) any conveyance of Tenant’s
interest in this Lease and the Premises from Tenant to Lender, or its nominee
or designee, by virtue of or in lieu of foreclosure or other appropriate
proceedings, and (iv) if Lender, or its nominee or designee, becomes the holder
of Tenant’s interest in this Lease and the Premises, (A) the conveyance of such
interest by Lender, or its nominee or designee, to another creditworthy
amusement park operator that meets Landlord’s approval, which approval shall
not be unreasonably delayed or denied, and will be based upon Landlord’s
customary review and evaluation of the prospective tenant, or (B) any other
conveyance in accordance with the terms of the assignment provisions of the
lease then in effect between Landlord and such tenant with respect to the
Premises (which shall be the same as those contained in this Lease, except that
all obligations and liabilities of Lender, or its nominee or designee, under
such lease shall cease and terminate upon such assignment).

 

ARTICLE 18

GENERAL PROVISIONS

 

18.1                           Quiet
Enjoyment.  Subject to the terms and
conditions of this Lease and all matters of record existing on the date hereof,
Tenant shall have the quiet and peaceful possession of the Premises.

 

18.2                           Definition
of Rent.  All monetary obligations of
Tenant to Landlord under the terms of this Lease, including, without
limitation, the Taxes, insurance premiums and other Impositions payable
hereunder shall be deemed to be “rent”.

 

18.3                           Subordination.
This Lease shall be subordinate to any superior lease, mortgage, deed of trust,
or any other hypothecation or security now existing or hereafter placed upon the
Premises and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements, and extensions thereof and
Tenant hereby agrees, upon reasonable request by Landlord, to execute and
deliver to Landlord and its lender(s) a subordination, non-disturbance and attornment
agreement in the form prescribed by such lender(s) with respect to any such
superior lease, mortgage, deed of trust, hypothecation, or security.

 

18.4                           Surrender
of Premises.  Except for changes
resulting from eminent domain proceedings, at the expiration or sooner
termination of the Lease Term, Tenant shall surrender the Premises, including
all buildings and improvements, in the same condition as the Premises were in
upon delivery of possession thereto under this Lease, reasonable wear and tear
excepted, and shall surrender all keys for the Premises to Landlord at the
place then fixed for the payment of rent and shall inform Landlord of all
combinations on locks, safes and vaults, if any, in the Premises. Tenant shall
at such time remove all of Tenant’s personal property and trade fixtures as set
forth in Section 13.4 above.  If Tenant
shall so surrender the Premises, Tenant shall indemnify Landlord against loss
or liability resulting from the delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding occupant
founded on such delay. Tenant’s obligation to observe or perform this covenant shall
survive the expiration or other termination of the Lease Term.

 

18.5                           Estoppel
Certificates. Each party (each a “Responding Party”) shall at any
time upon not less than 20 business days’ prior written notice from the other
party (each a “Requesting Party”) execute, acknowledge, and

 

21

 

deliver to the Requesting Party a statement in a form
prescribed by Landlord certifying and acknowledging the following: (i) that
this Lease represents the entire agreement between Landlord and Tenant, and is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect) and the date to which the Minimum Quarterly Rent and other
charges are paid in advance, if any; and (ii) that there are not, to the
Responding Party’s knowledge, any uncured defaults on the part of the
Requesting Party, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or encumbrancer
of the Premises or of the business of the Requesting Party.

 

18.6                           Severability.  The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction shall in no way affect the
validity of any other provision hereof.

 

18.7                           Entire
Agreement.  This Lease constitutes
the entire agreement between Landlord and Tenant and supersedes all prior
agreements between them with respect to the Premises, whether written or oral.

 

18.8                           Notices.  Any notice required or permitted to be given
hereunder shall be in writing and may be given by facsimile, personal delivery,
certified mail, return receipt requested or by nationally recognized overnight courier
service delivered to Tenant or to Landlord, as the case may be, at the fax
numbers or addresses for each set forth in the Fundamental Lease Provisions.
Either party may by notice to the other specify a different fax number or address
for notice purposes. A copy of all notices required or permitted to be given to
Landlord hereunder shall be concurrently transmitted to such party or parties
at such addresses as Landlord may from time to time hereafter designate by
notice to Tenant.

 

18.9                           Waivers.  No waiver by Landlord of any provision hereof
shall be deemed a waiver of any other provision hereof or of any subsequent
default by Tenant of the same of any other provision. Landlord’s consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
Landlord’s consent to or approval of any subsequent act by Tenant. The
acceptance of rent hereunder by Landlord shall not be a waiver of any preceding
default by Tenant hereunder, other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord’s knowledge of such
preceding default at the time of acceptance of such rent.

 

18.10                     Recording.  Either Landlord or Tenant shall, upon request
of the other, execute, acknowledge, and deliver to the other a “short form”
memorandum of this Lease for recording purposes. Such memorandum shall be in
the form prescribed by Landlord.  In
addition, any termination agreement shall be similarly recorded, which agreement
shall survive the termination of this Lease.

 

18.11                     Holding
Over.  If Tenant remains in
possession of the Premises or any part thereof after the expiration or
termination of the Lease Term, such occupancy shall be a tenancy from
month-to-month upon all the provisions of this Lease pertaining to the
obligations of Tenant and Tenant shall thereby waive its rights of notice to quit,
but Tenant’s right as to any Renewal Term shall terminate. The quarterly rent
due during such hold-over period shall be equal to 150% of the Minimum
Quarterly Rent then in effect, and Tenant shall continue to be obligated
to pay all Impositions and other amounts required to be paid by the terms of
this Lease.

 

18.12                     Choice
of Law.  The laws of the State of
Florida shall govern the validity, performance, and enforcement of this Lease.

 

18.13                     Attorneys’
Fees.  Should either party institute
any action or proceeding to enforce any provision hereof or for a declaration
of such party’s rights or obligations hereunder, the prevailing party shall be
entitled to receive from the losing party such amounts as the court may adjudge
to be reasonable attorneys’ fees and expenses for services rendered to the
party prevailing in any such action or proceeding, and such fees shall be
deemed to have accrued upon the commencement of such action or proceeding and
shall be enforceable whether or not such action or proceeding is prosecuted to
judgment.

 

18.14                     Liability
of Landlord.  In the event of any
sale or other transfer of Landlord’s interest in the Premises, Landlord shall
be relieved of all liabilities and obligations of Landlord hereunder arising
after the date of such transfer. Notwithstanding anything contained herein to
the contrary, Landlord shall have no personal liability

 

22

 

in respect of any of the terms, covenants, conditions
or provisions of this Lease, and in the event of a breach or default by
Landlord of any of its obligations under this Lease, Tenant and any persons
claiming by, through or under Tenant shall look solely to the equity of the
Landlord in the Premises for the satisfaction of Tenant’s and/or such persons’
remedies and claims for damages.

 

18.15                     No
Merger.  There shall be no merger of
this Lease, or the leasehold estate created by this Lease, with any other
estate or interest in the Premises, or any part thereof, by reason of the fact
that the same person, firm, corporation or other entity may acquire or own or
hold, directly or indirectly, (i) this Lease or the leasehold estate created by
this Lease, or any interest in this Lease or in any such leasehold estate, and
(ii) any such other estate or interest in the Premises or any part thereof; and
no such merger shall occur unless and until all persons, corporations, firms
and other entities having an interest (including a security interest) in (1)
this Lease or the leasehold estate created by this Lease; and (2) any such
other estate or interest in the Premises, or any part thereof, shall join in a written
instrument effecting such merger and shall duly record the same.

 

18.16                     Interpretation.  The captions by which the Articles and
Sections of this Lease are identified are for convenience only and shall have
no effect upon the interpretation of this Lease. Whenever the context so
requires, singular numbers shall include the plural, the plural shall refer to
the singular, the neuter gender shall include the masculine and feminine genders,
and the terms “Landlord” and “Tenant” and “person” shall include corporations, limited
liability companies, partnerships, associations, other legal entities, and
individuals.

 

18.17                     Relationship
of the Parties.  Nothing in this
Lease shall create a partnership, joint venture, employment relationship,
borrower and lender relationship, or any other relationship between Landlord
and Tenant, other than the relationship of landlord and tenant.

 

18.18                     Successors.  This Lease shall be binding upon and inure to
the benefit of the parties hereto and their respective personal and legal
representatives, heirs, successors, and assigns.

 

18.19                     Modifications.  This Lease may not be altered, amended,
changed, waived, terminated, or modified in any manner except by a written
instrument executed by Landlord and Tenant.

 

18.20                     Brokerage
Fees.  Landlord and Tenant each
represent and warrant that they have not employed a broker in connection with the
execution of this Lease. Landlord and Tenant shall each indemnify and hold the
other harmless from and against any claim or claims for brokerage or other
commissions arising from such party having employed a broker contrary to its
representation in this Section.

 

18.21                     Waiver
of Redemption.  To the extent
permitted by law, Tenant hereby waives any and all rights of redemption with
respect to this Lease. Tenant hereby waives any rights it may have to any
notice to cure or vacate or to quit provided by any current or future law;
provided that the foregoing shall not be deemed to waive any notice expressly
provided in this Lease.

 

18.22                     Not
Binding Until Executed. This Lease does not constitute an “offer” and is
not binding until fully executed and delivered by Landlord and Tenant.

 

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

 

[SIGNATURE PAGE
FOLLOWS]

 

23

 

IN WITNESS WHEREOF, Landlord and Tenant have executed
this Ground Lease as of the date first set forth above.

 

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  BIG KAHUNA INC.,

  	
   

  	
  FESTIVAL FUN PARKS, LLC

  
	
  a Florida corporation

  	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/ [ILLEGIBLE]

  	
   

  	
   

  	
  By

  	
  /s/ Douglas E. Haney

  	
   

  
	
  Name:

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
  Name:

  	
  Douglas E. Haney

  	
   

  
	
  Its

  	
  President

  	
   

  	
   

  	
  Its

  	
  CFO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signed, sealed and delivered

  This 28th day of April 2000

  In the presence of

  	
   

  	
  Signed, sealed and delivered

  This 28th day of April 2000

  in the presence of

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ [ILLEGIBLE]

  	
   

  	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
  Witness

  	
   

  	
  Witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ [ILLEGIBLE]

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Witness

  	
   

  	
  Witness

  
								

 

24

 

EXHIBIT “A”

Legal Description

 

PARCEL 1:

 

A PARCEL OF LAND LYING IN TOWNSHIP 2 SOUTH, RANGE 22
WEST, AND LYING NORTH OF U.S. HIGHWAY 98 AS FOLLOWS: COMMENCE AT A POINT ON THE
SOUTH BOUNDARY LINE OF THE RIGHT-OF-WAY OF U.S. HIGHWAY NO. 98 (ALSO KNOWN AS
STATE HIGHWAY NO. 30, FORMERLY STATE HIGHWAY NO. 115), AT A POINT 2500 FEET
EAST (MEASURED DUE EAST AND WEST) FROM THE EAST BOUNDARY LINE OF THE “SECOND
EAST PASS ADDITION TO DESTIN, FLORIDA,” (ACCORDING TO OFFICIAL MAP OF
SUBDIVISION NOW ON RECORD); THENCE NORTHERLY AT RIGHT ANGLES TO SAID SOUTH
BOUNDARY LINE OF U.S. HIGHWAY 98 TO AN INTERSECTION OF NORTH BOUNDARY LINE OF
SAID U.S. HIGHWAY, SAID INTERSECTION BEING THE POINT OF BEGINNING; THENCE FROM
POINT OF BEGINNING WESTERLY ALONG THE NORTH BOUNDARY LINE OF SAID HIGHWAY, 103
FEET TO A POINT ON SAID NORTH BOUNDARY LINE; THENCE NORTHERLY AT RIGHT ANGLES
TO SAID U.S. HIGHWAY 98, 1303 FEET TO A POINT; THENCE AT RIGHT ANGLES EASTERLY
103 FEET TO A POINT; THENCE AT RIGHT ANGLES SOUTHERLY 1303 FEET TO POINT OF
BEGINNING, LESS AND EXCEPT THE NORTH 100 FEET THEREOF, ALL LYING AND BEING IN
OKALOOSA COUNTY, FLORIDA.

 

AND LESS AND EXCEPT THAT
PORTION OF RIGHT-OF-WAY OF U.S. HIGHWAY 98 AS CONTAINED IN INSTRUMENT RECORDED
IN O.R. BOOK 299, PAGE 743 OF THE OFFICIAL RECORDS OF OKALOOSA COUNTY, FLORIDA.

 

AND MORE PARTICULARLY
DESCRIBED AS COMMENCING AT A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF U.S.
HIGHWAY 98, AT A POINT 2500 FEET EAST (MEASURED DUE EAST AND WEST) FROM THE
EAST BOUNDARY LINE OF THE “SECOND EAST PASS ADDITION TO DESTIN, FLORIDA”,
(ACCORDING TO OFFICIAL MAP OF SUBDIVISION NOW ON RECORD); THENCE NORTHERLY AT
RIGHT ANGLES TO SAID SOUTH BOUNDARY LINE OF SAID U.S. HIGHWAY 98 TO A PONT ON
THE NORTH RIGHT-OF-WAY LIKE, SAID U.S. HIGHWAY 98, SAID POINT BEING ON A LINE
100 FEET NORTH OF THE SURVEY LINE OF SAID HIGHWAY, BEING A 150 FOOT
RIGHT-OF-WAY WIDTH, SAID POINT ALSO BEING THE POINT OF BEGINNING; THENCE NORTH
76° 11’ 00” WEST ALONG SAID NORTH LINE, A DISTANCE OF 103.00 FEET; THENCE
DEPARTING SAID NORTH LINE, NORTH 13° 49’ 00” EAST, 1153.98 FEET;

 

 

THENCE SOUTH 76° 11’ 53” EAST, 103.00 FEET; THENCE
SOUTH 13° 49’ 00” WEST, 1154.00 FEET TO THE POINT OF BEGINNING.

 

PARCEL 2:

 

A PARCEL OF LAND LYING IN
TOWNSHIP 2 SOUTH, RANGE 22 WEST, AND LYING NORTH OF U.S. HIGHWAY 98 AS FOLLOWS:
COMMENCE AT A POINT ON THE SOUTH BOUNDARY LINE OF THE RIGHT-OF-WAY OF U.S.
HIGHWAY 98 (ALSO KNOWN AS STATE HIGHWAY NO. 30, FORMERLY STATE HIGHWAY NO.
115), AT A POINT 2600 FEET EAST (MEASURED DUE EAST AND WEST) FROM THE EAST
BOUNDARY LINE OF THE “SECOND EAST PASS ADDITION TO DESTIN, FLORIDA” (ACCORDING
TO OFFICIAL MAP OF SUBDIVISION NOW ON RECORD); THENCE NORTHERLY AT RIGHT ANGLES
TO SAID SOUTH BOUNDARY LINE OF U.S. HIGHWAY 98 TO AN INTERSECTION OF NORTH
BOUNDARY LINE OF SAID U.S. HIGHWAY, SAID INTERSECTION BEING THE POINT OF
BEGINNING; THENCE FROM POINT OF BEGINNING WESTERLY ALONG THE NORTH BOUNDARY LINE
OF SAID HIGHWAY, 102.9 FEET TO A POINT ON THE NORTH BOUNDARY LINE; THENCE
NORTHERLY AT RIGHT ANGLES TO SAID U.S. HIGHWAY NO. 98, 1303 FEET TO A
POINT; THENCE AT RIGHT ANGLES EASTERLY 102.9 FEET TO A POINT; THENCE AT RIGHT
ANGLES SOUTHERLY 1303 FEET TO POINT OF BEGINNING, LESS AND EXCEPT THE NORTH 100
FEET THEREOF. ALL LYING AND BEING IN OKALOOSA COUNTY, FLORIDA.

 

AND LESS AND EXCEPT THAT
PORTION OF RIGHT-OF-WAY OF U.S. HIGHWAY 98 AS CONTAINED IN INSTRUMENT RECORDED
IN O.R. BOOK 299, PAGE 745, OF THE OFFICIAL RECORDS OF OKALOOSA COUNTY,
FLORIDA.

 

AND MORE PARTICULARLY
DESCRIBED AS COMMENCING AT A POINT ON THE SOUTH RIGHT-OF-WAY LINE OF U.S.
HIGHWAY 98, AT A POINT 2600 FEET EAST (MEASURED DUE EAST AND WEST) FROM THE
EAST BOUNDARY LINE OF THE “SECOND EAST PASS ADDITION TO DESTIN, FLORIDA”,
(ACCORDING TO OFFICIAL MAP OF SUBDIVISION NOW ON RECORD); THENCE NORTHERLY AT
RIGHT ANGLES TO SAID SOUTH BOUNDARY LINE OF SAID U.S. HIGHWAY 98 TO A POINT ON
THE NORTH RIGHT-OF-WAY LINE OF SAID U.S. HIGHWAY 98, SAID POINT BEING ON A LINE
100 FEET NORTH OF THE SURVEY LINE OF SAID HIGHWAY, BEING A 150 FOOT
RIGHT-OF-WAY

 

 

WIDTH, SAID POINT ALSO BEING
THE POINT OF BEGINNING; THENCE NORTH 76° 11’ 00” WEST ALONG SAID NORTH LINE, A
DISTANCE OF 102.90 FEET; THENCE DEPARTING SAID NORTH LINE, NORTH 13° 49’ 00”
EAST, 1154.00 FEET; THENCE SOUTH 76° 11’ 53” EAST, 102.90 FEET; THENCE SOUTH
13° 45’ 00” WEST, 1154.03 FEET TO THE POINT OF BEGINNING.

 

PARCEL 3:

 

COMMENCE AT THE SOUTHEAST
CORNER OF LOT 6, BLOCK J, OF THE REVISED SECOND EAST PASS ADDITION TO DESTIN,
FLORIDA, AS RECORDED IN PLAT BOOK 1, AT PAGE 19A, OF THE PUBLIC RECORDS OF
OKALOOSA COUNTY, FLORIDA; THENCE GO SOUTH 76 DEGREES 11 MINUTES 00 SECONDS EAST
ALONG THE NORTHERLY RIGHT-OF-WAY LINE OF U.S. HIGHWAY 98 (S.R. #30, 100’ R/W),
A DISTANCE OF 500.00 FEET; THENCE GO NORTH 13 DEGREES 49 MINUTES 00 SECONDS
EAST ALONG THE AFORESAID RIGHT-OF-WAY LINE, A DISTANCE OF 10.00 FEET; THENCE GO
SOUTH 76 DEGREES 11 MINUTES 00 SECONDS EAST ALONG THE AFORESAID NORTHERLY
RIGHT-OF-WAY LINE (NOW A 110’ R/W), A DISTANCE OF 132.77 FEET; THENCE GO NORTH
05 DEGREES 06 MINUTES 00 SECONDS WEST ALONG THE AFORESAID RIGHT-OF-WAY LINE, A DISTANCE
OF 15.85 FEET; THENCE GO SOUTH 76 DEGREES 11 MINUTES 00 SECONDS EAST ALONG THE
AFORESAID NORTHERLY RIGHT-OF-WAY LINE (NOW A 125.00’ R/W), A DISTANCE OF
2208.27 FEET TO THE POINT OF BEGINNING; THENCE GO NORTH 13 DEGREES 49 MINUTES
00 SECONDS EAST, A DISTANCE OF 1278.91 FEET TO POINT OF THE SOUTH LINE OF A 100
FOOT GULF POWER EASEMENT; THENCE GO SOUTH 76 DEGREES 11 MINUTES 53 SECONDS EAST
ALONG THE SOUTH LINE OF SAID GULF POWER EASEMENT, A DISTANCE OF 300.00 FEET;
THENCE GO SOUTH 13 DEGREES 49 MINUTES 00 SECONDS WEST, A DISTANCE OF 1276.98
FEET TO A POINT ON THE NORTH RIGHT-OF-WAY LINE OF STATE ROAD 30 (U.S. 98, 125’ R/W);
THENCE GO NORTH 76 DEGREES 11 MINUTES 00 SECONDS WEST ALONG THE NORTH
RIGHT-OF-WAY LINE OF SAID STATE ROAD 30, A DISTANCE OF 300.00 FEET TO THE POINT
OF BEGINNING.  ALL LYING AND BEING IN
OKALOOSA COUNTY, FLORIDA.

 

PARCEL 4:

 

 

COMMENCE AT THE SOUTHEAST
CORNER OF LOT 6, BLOCK “J”,
REVISED SECOND EAST PASS ADDITION TO DESTIN, FLORIDA, AS RECORDED IN PLAT BOOK
1, PAGE 19A, OF THE PUBLIC RECORDS OF OKALOOSA COUNTY, FLORIDA; THENCE PROCEED
SOUTH 76 DEGREES 11 MINUTES 00 SECONDS EAST, ALONG THE NORTHERLY RIGHT OF WAY
LINE OF STATE ROAD 30 (U.S. HIGHWAY 98), A DISTANCE OF 500 FEET; THENCE PROCEED
NORTH 13 DEGREES 49 MINUTES 00 SECONDS EAST, ALONG SAID RIGHT OF WAY LINE, A
DISTANCE OF 10.00 FEET; THENCE PROCEED SOUTH 76 DEGREES 11 MINUTES 00 SECONDS
EAST, ALONG SAID RIGHT OF WAY LINE, A DISTANCE OF 132.77 FEET; THENCE PROCEED
NORTH 05 DEGREES 06 MINUTES 00 SECONDS WEST, ALONG SAID RIGHT OF WAY LINE, A
DISTANCE OF 15.85 FEET; THENCE PROCEED SOUTH 76 DEGREES 11  MINUTES 00 SECONDS EAST, ALONG SAID RIGHT OF
WAY LINE, A DISTANCE OF 2073.27
FEET TO THE POINT OF BEGINNING; THENCE CONTINUE SOUTH 76 DEGREES 11 MINUTES 00
SECONDS EAST, ALONG SAID RIGHT OF WAY LINE A DISTANCE OF 75.00 FEET; THENCE,
DEPARTING SAID RIGHT OF WAY LINE PROCEED NORTH 13 DEGREES 49 MINUTES 00 SECONDS
EAST, A DISTANCE OF 1278.33 FEET TO A POINT ON THE SOUTHERLY LINE OF A 100 FOOT
WIDE GULF POWER EASEMENT; THENCE PROCEED NORTH 76 DEGREES 11 MINUTES 53 SECONDS
WEST, ALONG SAID SOUTHERLY LINE OF EASEMENT, A DISTANCE OF 75.00 FEET; THENCE
DEPARTING SAID SOUTHERLY LINE OF EASEMENT, PROCEED SOUTH 13 DEGREES 49 MINUTES
00 SECONDS WEST, A DISTANCE OF 1278.31 FEET TO THE POINT OF BEGINNING.

 

PARCEL 5:

 

COMMENCING AT A POINT ON THE
SOUTH BOUNDARY OF FORMER 66 FOOT RIGHT OF WAY OF U.S. HIGHWAY 98 AT A POINT 2600.00
FEET DUE EAST OF THE EAST BOUNDARY OF SECOND EAST PASS ADDITION, PLAT BOOK 1,
PAGE 19, OKALOOSA COUNTY,
FLORIDA, PROCEED NORTH AT RIGHT ANGLES TO SAID SOUTH BOUNDARY A DISTANCE OF 108.00 FEET; THENCE WEST 505.90
FEET ALONG RIGHT OF WAY TO POINT OF BEGINNING BEING ON NORTH BOUNDARY OF 125.00
FOOT RIGHT OF WAY AND SOUTH LINE OF PARCEL QUIT CLAIMED IN OFFICIAL RECORDS
BOOK 1159, PAGE 989, THENCE CONTINUE WEST 60.00 FEET THENCE ANGLE RIGHT 90° 00’
00”

 

 

AND PROCEED NORTH 1278.00
FEET, THENCE RIGHT 90° 00’ 00” AND PROCEED EAST 60.00 FEET, THENCE
RIGHT 90° 00’ 00” AND PROCEED SOUTH 1278.00 FEET TO
POINT OF BEGINNING.

 

PARCEL 6:

 

COMMENCE AT THE SOUTHEAST
CORNER OF LOT 6, BLOCK “J”, REVISED SECOND EAST PASS ADDITION TO DESTIN,
FLORIDA, AS RECORDED IN PLAT BOOK 1, PAGE 19A, OF THE PUBLIC RECORDS OF
OKALOOSA COUNTY, FLORIDA; THENCE PROCEED SOUTH 76 DEGREES 11 MINUTES 00 SECONDS
EAST ALONG THE NORTHERLY RIGHT-OF-WAY LINE OF STATE ROAD 30 (U.S. HIGHWAY 98),
A DISTANCE OF 500.00 FEET; THENCE PROCEED NORTH 13 DEGREES 49 MINUTES 00
SECONDS EAST, ALONG SAID RIGHT-OF-WAY LINE, A DISTANCE OF 10.00 FEET; THENCE
PROCEED SOUTH 76 DEGREES 11 MINUTES 00 SECONDS EAST, ALONG SAID RIGHT-OF-WAY
LINE, A DISTANCE OF 132.77 FEET; THENCE PROCEED NORTH 05 DEGREES 06 MINUTES 00
SECONDS WEST, ALONG SAID RIGHT-OF-WAY LINE, A DISTANCE OF 15.85 FEET; THENCE
PROCEED SOUTH 76 DEGREES 11 MINUTES 00 SECONDS EAST, ALONG SAID RIGHT-OF-WAY
LINE, A DISTANCE OF 2714.27 FEET; THENCE DEPARTING SAID RIGHT-OF-WAY LINE,
PROCEED NORTH 13 DEGREES 49 MINUTES 00 SECONDS EAST, A DISTANCE OF 275.00 FEET
TO THE POINT OF BEGINNING; THENCE CONTINUE NORTH 13 DEGREES 49 MINUTES 00
SECONDS EAST, A DISTANCE OF 1004.03 FEET TO A POINT ON THE SOUTHERLY LINE OF A
100 FOOT WIDE GULF POWER EASEMENT; THENCE PROCEED SOUTH 76 DEGREES 11 MINUTES
53 SECONDS EAST, ALONG SAID SOUTHERLY LINE OF EASEMENT, A DISTANCE OF 200.00
FEET; THENCE, DEPARTING SAID SOUTHERLY LINE OF EASEMENT, PROCEED SOUTH 13
DEGREES 49 MINUTES 00 SECONDS WEST, A DISTANCE OF 1004.08 FEET; THENCE NORTH 76
DEGREES 11 MINUTES 00 SECONDS WEST, A DISTANCE OF 200.00 FEET TO POINT OF
BEGINNING.

 

 

PARCEL
7: The following real
property or any portion of it, to the extent of Lessor’s interest therein now
existing or acquired in the future, if any, and without any warranties being
made by Lessor as to its interest:

 

ALL OF THE LAND LYING TO THE
SOUTH OF PARCELS 1 AND 2 ABOVE AS CONVEYED TO THE STATE OF FLORIDA IN RIGHT OF
WAY DEEDS RECORDED IN O.R. BOOK 299, PAGE 743 AND O.R. BOOK 299, PAGE 745,
OFFICIAL RECORDS OF OKALOOSA COUNTY, FLORIDA.

 

 

EXHIBIT B

FORM OF MEMORANDUM OF GROUND LEASE

 

B-1

 

Recording requested by, and

after recording return to:

 

Paul, Hastings, Janofsky
& Walker LLP

Attn: Lisa L. Kim, Esq.

555 S. Flower Street, 23rd Floor

Los Angeles, California 90071

 

MEMORANDUM OF LEASE

 

This
Memorandum of Lease is made and entered into as of
May      , 2000 by and between Big Kahuna’s,
Inc., a Florida corporation (“Landlord”), and Festival Fun Parks, LLC, a Delaware
limited liability company (“Tenant”) who agree as follows:

 

1.             Terms and Premises. Landlord
hereby leases to Tenant and Tenant hereby leases from Landlord that certain
real property, together with all the improvements thereon and appurtenances
thereunto belonging located in the City of Destin, the County of Oakloosa,
State of Florida (the “Premises”), which legal description is attached hereto
and incorporated herein as Exhibit “A” for an initial term of
twenty-five (25) years, commencing on the date this Memorandum is
recorded.  Tenant has two options to
extend the Term of the Lease, the first such extension for a sixty (60) month
period and the second such extension far a fifty-four (54) month period. The
maximum Term of the Lease with Tenant’s exercise of the second extension period
is thirty-four and one-half (341⁄2) years.

 

2.             Purpose of Memorandum of Lease.
This Memorandum of Lease is prepared for the purpose of recordation and does
not modify the provisions of the Ground Lease dated
May      , 2000 and entered into by and between
Landlord and Tenant (the “Lease”). The Lease is incorporated herein by
reference.  If there are any conflicts
between the Lease and this Memorandum of Lease, the provisions of the Lease shall
prevail.

 

B-2

 

	
  STATE OF CALIFORNIA

  	
  )

  
	
   

  	
  )ss.

  
	
  COUNTY OF ORANGE

  	
  )

  

 

 

The
foregoing                                                                                                       was
sworn to and acknowledged before me on                                 ,
2000, by Douglas E. Honey, as CFO/VP Acquisitions, of Festival Fun Parks, LLC
dba Palace Entertainment, a Delaware limited liability company, on behalf of
the limited liability company.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
   

  
	
  My Commission Expires:

  	
   

  	
   

  
				

 

 

	
  STATE OF FLORIDA

  	
  )

  
	
   

  	
  ) ss.:

  
	
  COUNTY OF OKALOOSA

  	
  )

  

 

 

The
foregoing                                                                                                       was
sworn to and acknowledged before me on
        , 2000,
by                                          as
                                             of
Big Kahuna, Inc. a Florida corporation, on behalf of the corporation.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
   

  	
   

  
	
  My Commission Expires:

  	
   

  	
   

  
				

 

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  Big Kahuna’s, Inc.,

  	
   

  	
  Festival Fun Parks, LLC

  
	
  a Florida corporation

  	
   

  	
  a Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signed, sealed, and
  delivered

  	
   

  	
  Signed, sealed, and
  delivered

  
	
  This          day
  of         

  	
   

  	
  This          day
  of         

  
	
  in the presence of:

  	
   

  	
  in the presence of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
  Witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
  Witness

  
	
   

  	
   

  	
   

  
											

 

B-3

 

EXHIBIT C

FORM OF DEED

 

 

EXHIBIT C

 

	
  This Document Prepared By:

  A. ALAN MANNING

  Clark, Partington, Hart, Larry,

  Bond, Stackhouse & Stone

  Post Office Box 13010

  Pensacola, Florida 32591-3010

  	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

DEED TO BUILDINGS
AND FIXTURES

 

This Deed, Made
this           day of
              ,        ,
between                  ,
a
               ,
and
                    ,
whose post office address is
                                                                         ,
(collectively, “Grantor”), and                       ,
a
                               ,
whose post office address is                                                                                                       ,
(“Grantee”).

 

WITNESSETH, That said Grantor, for and in consideration
of the sum of Ten and 00/100 ($10.00) Dollars, and other good and valuable
considerations to said Grantor in hand paid by said Grantee, the receipt
whereof is hereby acknowledged, has granted, bargained and sold to said
Grantee, and Grantee’s heirs and assigns forever, all buildings and fixtures
described on Exhibit “A” attached hereto, located on the land lying and being
in Destin, Okaloosa County, Florida, as described on Exhibit “B” attached
hereto and made a part hereof, which land was
not conveyed to Grantor.

 

“Grantor” and “Grantee” are
used for singular or plural, as context requires.

 

IN WITNESS WHEREOF,
Grantor,
                     ,
has caused this document to be signed in its corporate name by its duly elected
President and its corporate seal to be affixed hereto, and
Grantor,            ,
has hereunto set his hand and seal this
             day of
                ,
               .

 

	
  Signed, sealed and
  delivered

  	
   

  	
  ,

  
	
  in our presence:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  	
   

  
	
  [Type/print name of
  witness]

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (CORPORATE
  SEAL)

  
	
  [Type/print name of
  witness]

  	
   

  
						

 

 

EXHIBIT “A”

 

Description of Buildings and Fixtures

 

 

STATE
OF                 

COUNTY OF                            

 

The foregoing instrument was acknowledged before me this
                                 
day of
                                     ,
by                        ,
individually and
as               ,
of                        ,
a
                                ,
on behalf of the corporation, and who (    ) is personally
known to me or (   ) has produced a driver license as identification.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Print/Type Name)

  NOTARY PUBLIC

  
	
  (NOTARIAL SEAL)

  	
  Commission number:

  	
   

  	
   

  
	
   

  	
  My Commission expires:

  	
   

  	
   

  
	
   

  	
   

  
	
  CPHH FILE NO. 00-0435jw

  	
   

  

 

 

EXHIBIT “B”

 

Legal
Description of LandExhibit 10.8

 

COMMERCIAL GROUND LEASE

 

JULY 3 2002

 

LANDLORD:

 

REALTY INCOME CORPORATION,

A MARYLAND CORPORATION

 

TENANT:

 

FESTIVAL FUN PARKS, LLC,

A DELAWARE LIMITED LIABILITY COMPANY

DBA PALACE ENTERTAINMENT

 

 

COMMERCIAL GROUND LEASE

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
  1.1

  	
  Lease Year

  	
  1

  
	
   

  	
  1.2

  	
  Hazardous Material

  	
  1

  
	
   

  	
  1.3

  	
  Environmental Law

  	
  1

  
	
  2.

  	
  PREMISES

  	
  2

  
	
  3.

  	
  TERM

  	
  2

  
	
   

  	
  3.1

  	
  Term

  	
  2

  
	
   

  	
  3.2

  	
  First Option to Extend

  	
  2

  
	
   

  	
  3.3

  	
  Second Option to Extend

  	
  2

  
	
   

  	
  3.4

  	
  Third Option to Extend

  	
  2

  
	
   

  	
  3.5

  	
  Fourth Option to Extend

  	
  3

  
	
   

  	
  3.6

  	
  Fifth Option to Extend

  	
  3

  
	
  4.

  	
  MONTHLY RENT

  	
  3

  
	
   

  	
  4.1

  	
  Net-Net-Net Lease

  	
  3

  
	
   

  	
  4.2

  	
  Monthly Rent

  	
  3

  
	
   

  	
  4.3

  	
  Monthly Rent During the Extension Periods

  	
  4

  
	
  5.

  	
  ADDITIONAL RENT

  	
  4

  
	
   

  	
  5.1

  	
  Consumer Price Index Rental Increase

  	
  4

  
	
  6.

  	
  SUBSTITUTE RENT AND INCREASES

  	
  5

  
	
  7.

  	
  SECURITY DEPOSIT

  	
  5

  
	
  8.

  	
  USE OF THE PREMISES

  	
  5

  
	
  9.

  	
  PROPERTY TAXES, ASSESSMENTS AND UTILITIES

  	
  5

  
	
   

  	
  9.1

  	
  Tenant’s Required Payments

  	
  5

  
	
   

  	
  9.2

  	
  Payments Not Required by Tenant

  	
  6

  
	
   

  	
  9.3

  	
  Assessments

  	
  6

  
	
   

  	
  9.4

  	
  Utility Payments

  	
  7

  
	
   

  	
  9.5

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

  	
  7

  
	
   

  	
  9.6

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

  	
  7

  
	
   

  	
  9.7

  	
  Tax Period and Adjustment of Taxes

  	
  7

  
	
  10.

  	
  BUILDING AND IMPROVEMENTS; TRADE FIXTURES

  	
  8

  
	
   

  	
  10.1

  	
  Building and Improvements

  	
  8

  
	
   

  	
  10.2

  	
  Depreciation and Investment Tax Credit

  	
  8

  
	
   

  	
  10.3

  	
  Trade Fixtures

  	
  8

  
	
   

  	
  10.4

  	
  Removal of Trade Fixtures

  	
  8

  
	
   

  	
  10.5

  	
  Financing of Tenant’s Property

  	
  9

  
	
  11.

  	
  MAINTENANCE OF THE PREMISES

  	
  9

  
	
   

  	
  11.1

  	
  Obligation to Maintain the Premises

  	
  9

  
	
   

  	
  11.2

  	
  Obligation to Keep the Premises Clear

  	
  9

  
	
  12.

  	
  REPAIRS AND ALTERATIONS

  	
  9

  

 

i

 

	
   

  	
  12.1

  	
  Right to Make Alterations

  	
  9

  
	
   

  	
  12.2

  	
  Tenant Shall Not Render Premises Liable For Any Lien

  	
  10

  
	
  13.

  	
  INDEMNITY AND INSURANCE

  	
  10

  
	
   

  	
  13.1

  	
  Indemnification

  	
  10

  
	
   

  	
  13.2

  	
  Insurance Company Requirement

  	
  11

  
	
   

  	
  13.3

  	
  Insurance Certificate Requirements

  	
  11

  
	
   

  	
  13.4

  	
  Minimum Acceptable Insurance Coverage Requirements

  	
  11

  
	
   

  	
  13.5

  	
  Additional Insureds

  	
  12

  
	
   

  	
  13.6

  	
  Mortgage Endorsement

  	
  12

  
	
   

  	
  13.7

  	
  Renewals, Lapses or Deficiencies

  	
  13

  
	
  14.

  	
  PARTIAL AND TOTAL DESTRUCTION OF THE PREMISES

  	
  13

  
	
  15.

  	
  CONDEMNATION

  	
  13

  
	
   

  	
  15.1

  	
  Condemnation Damages

  	
  13

  
	
   

  	
  15.2

  	
  Termination of Lease Due to Condemnation

  	
  14

  
	
  16.

  	
  ASSIGNMENT AND SUBLETTING

  	
  14

  
	
   

  	
  16.1

  	
  Tenant’s Right of Assignment and Subletting

  	
  14

  
	
   

  	
  16.2

  	
  Landlord’s Option to Preserve Subtenancies

  	
  14

  
	
   

  	
  16.3

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

  	
  15

  
	
   

  	
  16.4

  	
  Continuing Obligation of Tenant

  	
  15

  
	
   

  	
  16.5

  	
  Fees and Costs with Regard to Proposed Assignment or Sublease

  	
  15

  
	
   

  	
  16.6

  	
  Landlord’s Right of Assignment

  	
  15

  
	
  17.

  	
  DEFAULT AND TERMINATION

  	
  15

  
	
   

  	
  17.1

  	
  Events of Default

  	
  15

  
	
   

  	
  17.2

  	
  Landlord’s Remedies

  	
  16

  
	
   

  	
  17.3

  	
  Late Charge

  	
  19

  
	
   

  	
  17.4

  	
  Right of Landlord to Re-Enter

  	
  19

  
	
   

  	
  17.5

  	
  Surrender of Premises

  	
  19

  
	
   

  	
  17.6

  	
  Interest Charges

  	
  20

  
	
   

  	
  17.7

  	
  Tenant’s Default

  	
  20

  
	
   

  	
  17.8

  	
  Default by Landlord

  	
  20

  
	
  18.

  	
  RIGHT OF INSPECTION

  	
  20

  
	
  19.

  	
  WAIVER OF BREACH

  	
  21

  
	
  20.

  	
  NOTICES

  	
  21

  
	
   

  	
  20.1

  	
  Notice Requirements

  	
  21

  
	
   

  	
  20.2

  	
  Payments Under Lease

  	
  22

  
	
  21.

  	
  RELATIONSHIP OF THE PARTIES

  	
  22

  
	
  22.

  	
  SUBORDINATION, ATTORNMENT AND ESTOPPEL

  	
  22

  
	
   

  	
  22.1

  	
  Subordination and Non-Disturbance

  	
  22

  
	
   

  	
  22.2

  	
  Attornment

  	
  23

  
	
   

  	
  22.3

  	
  Estoppel Certificate

  	
  23

  
	
   

  	
  22.4

  	
  Leasehold Mortgage

  	
  23

  
	
  23.

  	
  TENANT’S FINANCIAL STATEMENTS

  	
  28

  
	
  24.

  	
  ATTORNEYS’ FEES

  	
  28

  
	
   

  	
  24.1

  	
  Recovery of Attorneys’ Fees and Costs of Suit

  	
  28

  
	
   

  	
  24.2

  	
  Party to Litigation

  	
  28

  

 

ii

 

	
   

  	
  24.3

  	
  Landlord’s Consent

  	
  28

  
	
  25.

  	
  CONSENT

  	
  29

  
	
  26.

  	
  AUTHORITY TO MAKE LEASE; COVENANT OF QUIET ENJOYMENT

  	
  29

  
	
   

  	
  26.1

  	
  Full Power and Authority to Enter Lease

  	
  29

  
	
   

  	
  26.2

  	
  Quiet Enjoyment

  	
  29

  
	
   

  	
  26.3

  	
  No Violation of Covenants and Restrictions

  	
  29

  
	
  27.

  	
  HAZARDOUS MATERIAL

  	
  29

  
	
   

  	
  27.1

  	
  Environmental Compliance

  	
  29

  
	
   

  	
  27.2

  	
  Tenant’s Responsibility for Hazardous Materials

  	
  30

  
	
   

  	
  27.3

  	
  Survival:

  	
  30

  
	
  28.

  	
  GENERAL PROVISIONS

  	
  30

  
	
   

  	
  28.1

  	
  Gender; Number

  	
  30

  
	
   

  	
  28.2

  	
  Captions

  	
  30

  
	
   

  	
  28.3

  	
  Exhibits

  	
  30

  
	
   

  	
  28.4

  	
  Entire Agreement

  	
  31

  
	
   

  	
  28.5

  	
  Drafting

  	
  31

  
	
   

  	
  28.6

  	
  Modification

  	
  31

  
	
   

  	
  28.7

  	
  Joint and Several Liability

  	
  31

  
	
   

  	
  28.8

  	
  Governing Law

  	
  31

  
	
   

  	
  28.9

  	
  Attorneys’ Fees

  	
  31

  
	
   

  	
  28.10

  	
  Time of Essence

  	
  31

  
	
   

  	
  28.11

  	
  Severability

  	
  31

  
	
   

  	
  28.12

  	
  Successors and Assigns

  	
  31

  
	
   

  	
  28.13

  	
  Independent Covenants

  	
  32

  
	
   

  	
  28.14

  	
  Information Provided

  	
  32

  
	
   

  	
  28.15

  	
  Limitation of Landlord’s Liability

  	
  32

  
	
   

  	
  28.16

  	
  No Lease Until Accepted

  	
  32

  
	
   

  	
  28.17

  	
  Counterparts

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit “A” – Property List

  	
   

  

 

iii

 

COMMERCIAL GROUND LEASE

 

This Commercial Ground Lease (the “Lease”) is
as of July 3, 2002, between REALTY INCOME CORPORATION, a Maryland corporation (“Landlord”),
and FESTIVAL FUN PARKS, LLC, a Delaware limited liability company dba PALACE
ENTERTAINMENT (“Tenant”), with reference to the recitals set forth below.

 

RECITALS

 

A.            Landlord is the owner of two (2) certain real
properties (the “Real Properties”), which real properties are identified on the
“Property List,” attached hereto and incorporated herein as Exhibit “A.” The
term “Premises” as used in this Lease shall mean certain or all (as the context
may require) of the Real Properties identified on the Property List.

 

B.            Landlord and Tenant acknowledge and agree that
this Lease is a master lease for both of the Real Properties, and further
acknowledge and agree that the economic terms of the transaction would have
been materially different had there been separate lease agreements for each of
the Real Properties.

 

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

 

1. DEFINITIONS

 

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

 

1.1           Lease Year

 

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

 

1.2           Hazardous Material

 

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

 

1.3           Environmental Law

 

The term “Environmental Law” shall mean any
law, statute, regulation, order, or rule now or hereafter promulgated by any
governmental entity, whether local, state, or federal,

 

1

 

relating to air pollution, water pollution, noise control, and/or
transporting, storing, handling, discharge of or disposal of Hazardous
Material, including, without limitation, the following: the Clean Air Act; the
Resource Conservation and Recovery Act, as amended by the Hazardous Waste and
Solid Waste Amendments of 1984; the Comprehensive Environmental Response
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Toxic Substances Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act, as amended; the Safe Drinking Water
Act; OSHA; the Hazardous Liquid Pipeline Safety Act; the Hazardous Materials
Transportation Act; and the National Environmental Policy Act, as the same may
be amended from time to time.

 

2. PREMISES

 

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

 

3. TERM

 

3.1           Term

 

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

 

3.2           First Option to Extend

 

On or before one hundred twenty (120) days
prior to the expiration of the term, and providing Tenant is not in default of
this Lease, Tenant may extend the term of this Lease for an additional one
hundred and twenty (120) months by notifying Landlord of such intention in
writing (the “First Extension Period”). The maximum term of the Lease with the
First Extension is forty-four and one-half (441/2) years.

 

3.3           Second Option to Extend

 

On or before one hundred twenty (120) days
prior to the expiration of the First Extension Period, and providing Tenant is
not in default of this Lease, Tenant may extend the term of this Lease for an
additional one hundred and twenty (120) months by notifying Landlord of such
intention in writing (the “Second Extension Period”), The maximum term of the
Lease with the Second Extension is fifty-four and one-half (541/2) years.

 

3.4           Third Option to Extend

 

On or before one hundred twenty (120) days
prior to the expiration of the Second Extension Period, and providing Tenant is
not in default of this Lease, Tenant may extend the term of this Lease for an
additional one hundred and twenty (120) months by notifying Landlord

 

2

 

of such intention in writing (the “Third Extension Period”). The maximum
term of the Lease with the Third Extension is sixty-four and one-half (641/2) years.

 

3.5           Fourth Option to Extend

 

On or before one hundred twenty (120) days
prior to the expiration of the Third Extension Period, and providing Tenant is
not in default of this Lease, Tenant may extend the term of this Lease for an
additional one hundred and twenty (120) months by notifying Landlord of such
intention in writing (the “Fourth Extension Period”). The maximum term of the
Lease with the Fourth Extension is seventy-four and one-half (741/2)
years.

 

3.6           Fifth Option to Extend

 

On or before one hundred twenty (120) days
prior to the expiration of the Fourth Extension Period, and providing Tenant is
not in default of this Lease, Tenant may extend the term of this Lease for an
additional one hundred and twenty (120) months by notifying Landlord of such
intention in writing (the “Fifth Extension Period”). The maximum term of the
Lease with the Fifth Extension is eighty-four and one-half (841/2)
years.

 

4. MONTHLY RENT

 

4.1           Net-Net-Net Lease

 

This is a net-net-net lease. It is the
intention of Landlord and Tenant that the Monthly Rent (as defined below) and
other sums and charges provided herein shall be absolutely net to Landlord.
Except as otherwise specifically set forth in this Lease, Tenant shall pay all
costs, charges, obligations, assessments, and expenses of every kind and nature
against or relating to the Premises or the use, occupancy, area, possession,
leasing, operation, management, maintenance, or repair thereof, which may arise
or become due during the term hereof, or which may pertain to this transaction
which concerns the Premises, whether or not now customary or within the
contemplation of the parties hereto, and which, except for the execution and delivery
of this Lease, would have been payable by Landlord.

 

4.2           Monthly Rent

 

Tenant shall pay to Landlord as monthly rent
(the “Monthly Rent”) the sum of ONE HUNDRED EIGHT THOUSAND ONE HUNDRED
SIXTY-SIX AND 67/100 DOLLARS ($108,166.67). Monthly Rent allocated to each of
the Premises (the “Individual Store Rents”) is listed on Exhibit “A.” The
parties acknowledge and agree that the Individual Store Rents are included in
Exhibit “A” solely for the convenience and use of the parties in making certain
calculations as may be necessary from time to time pursuant to the provisions
hereof. By way of example only, in the event: (i) this Lease is terminated
pursuant to the terms hereof as to certain (but not all) of the Premises; or
(ii) of a conveyance by Landlord of Landlord’s interest in the Lease as to one
of more of the Premises prior to expiration or termination hereof; or (iii) of
an assignment by Tenant of Tenant’s interest in this Lease as to one or more of
the Premises pursuant to the terms hereof, Monthly Rent payable hereunder
following said event shall be adjusted by the respective Individual Store
Rents.

 

Monthly Rent shall be payable by Tenant to
Landlord in advance in equal monthly installments commencing upon the
Commencement Date and on the first day of each calendar

 

3

 

month thereafter, without prior notice, invoice, demand, deduction, or
offset whatsoever. Landlord
shall have the right to accept all rent and other payments, whether full or
partial, and to negotiate checks and payments thereof without any waiver of
rights, irrespective of any conditions to the contrary sought to be imposed by
Tenant. All rent shall be paid to Landlord at the address to which notices to
Landlord are given. The Monthly Rent for any partial calendar month shall be
prorated based upon a thirty (30) day month.

 

4.3           Monthly Rent During the
Extension Periods

 

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

 

5. ADDITIONAL RENT

 

5.1           Consumer Price Index
Rental Increase

 

The capitalized terms used herein are defined
below. Effective on each Adjustment Date, Monthly Rent shall be increased by
three (3) times the increases in the CPI, with the increases to be calculated
as follows: (i) subtract one point zero (1.0) from a fraction, the numerator of
which shall be the Variable Index, and the denominator of which shall be the
Base Index; and (ii) multiply the result obtained in (i) above by three (3);
then (iii) multiply the result obtained in (ii) above by the Initial Monthly
Rent. Notwithstanding the foregoing, in no event shall the increase in Monthly
Rent exceed twelve percent (12%), nor shall the new Monthly Rent be less than
the previous Monthly Rent. The product thus obtained shall be payable in
advance in consecutive monthly installments on the first day of each month
until the next Adjustment Date, or the expiration of the term, as the case may
be. Landlord’s delay or the failure of Landlord, beyond commencement of any
Adjustment Date, in computing or billing for these adjustments will not impair
the continuing obligation of Tenant to pay the rent adjustments. In applying
the foregoing formula for Monthly Rent adjustments, the following terms shall
have the following meanings:

 

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

 

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

 

4

 

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

 

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

 

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

 

6. SUBSTITUTE RENT AND INCREASES

 

This Section was deleted
intentionally.

 

7. SECURITY DEPOSIT

 

This Section was deleted
intentionally.

 

8. USE OF THE PREMISES

 

Tenant shall use the Premises only for a
family entertainment and amusement center or water park, as the case may be,
and uses consistent therewith and no other uses without the prior written
consent of Landlord which consent shall not be unreasonably withheld or
delayed. Tenant has satisfied itself, and represents to Landlord, that such use
is lawful and conforms to all applicable zoning and other use restrictions and regulations
applicable to the Premises. Tenant shall, at Tenant’s expense, comply promptly
with all applicable statutes, ordinances, rules, regulations, orders, covenants
and restrictions of record, and requirements in effect during the term or any
part of the term hereof, regulating the use by Tenant of the Premises,
including, without limitation, the obligation at Tenant’s cost, to alter,
maintain, or restore the Premises in compliance and conformity with all laws
relating to the condition, use, or occupancy of the Premises during the term
(including any and all requirements as set forth in the Americans with
Disabilities Act) and regardless of (i) whether such laws require structural or
non-structural improvements, (ii) whether the improvements were foreseen or
unforeseen, and (iii) the period of time remaining in the term. Tenant shall
not perform any acts or carry on any practices which may injure the Premises.

 

9. PROPERTY TAXES, ASSESSMENTS
AND UTILITIES

 

9.1           Tenant’s Required
Payments

 

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

 

5

 

“Taxes.” Tenant shall provide Landlord with proof of payment of Taxes
as soon as reasonably possible.

 

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

 

9.1.2                “Other Taxes” shall mean all taxes,
assessments, excises, levies, fees, and charges (including, without limitation,
charges relating to the cost of providing facilities or services, and charges
relating to documents or instruments of record effecting or encumbering the
Premises), whether or not now customary or within the contemplation of Landlord
and Tenant, that are levied, assessed, charged, confirmed, or imposed upon, or
measured by, or reasonably attributable to (a) the Premises; (b) the cost or
value of Tenant’s furniture, fixtures, equipment, or personal property located
in the Premises or the cost or value of any leasehold improvements made in or
to the Premises by or for Tenant, regardless of whether title to such
improvements is vested in Tenant or Landlord; (c) rents payable under the
Lease, including, if applicable, Property Taxes, Other Taxes, insurance,
maintenance, and other costs incurred by Tenant; (d) the possession, leasing,
operation, management, maintenance, alteration, repair, use, or occupancy by
Tenant of the Premises; and (e) this transaction or any document to which
Tenant is a party creating or transferring an interest or an estate in the
Premises.

 

9.2           Payments Not Required
by Tenant

 

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

 

9.3           Assessments

 

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

 

6

 

9.4           Utility Payments

 

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

 

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

 

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

 

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

 

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

 

9.7           Tax Period and Adjustment
of Taxes

 

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

 

7

 

Lease Year even though the same may relate in part to both such Lease
Year and the succeeding Lease Year.] The parties hereby understand that,
notwithstanding the foregoing, Taxes payable by Tenant in accordance with the
terms of this Lease shall be appropriately adjusted for any partial Lease Year.

 

10. BUILDING AND IMPROVEMENTS;
TRADE FIXTURES

 

10.1         Building and Improvements

 

The building and any improvements in, on, or
about the Premises and all additions, alterations, modifications, and
replacements thereto and thereof at all times during the term of this Lease
shall be the property of Tenant. During the term of this Lease and any
extension term thereof, provided Tenant is not in default, Tenant shall have
the right to sell, transfer and convey any or all of Tenant’s Property (as
defined in Section 10.4 below) without Landlord’s consent. Subject to Section
10.3 below, right, title, and interest of Tenant in and to Tenant’s Property
shall cease, expire, and vest exclusively in Landlord on the expiration or any
termination of this Lease.

 

10.2         Depreciation and
Investment Tax Credit

 

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

 

10.3         Trade Fixtures

 

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

 

10.4         Removal of Trade Fixtures

 

At the expiration or earlier termination of
this Lease, provided Tenant is not in default, Tenant may remove (i) Tenant’s
Trade Fixtures and other personal property; and (ii) the alterations and
additions and signs made by Tenant to the Premises in accordance with Section
10.3 (collectively, “Tenant’s Property”). All leasehold improvements, alterations
and additions to the Premises, HVAC equipment, non-removable lighting fixtures,
electric switch boxes, plumbing, restroom fixtures, floor coverings, and other
like items which are permanently affixed to the Premises, more commonly defined
as fixtures and which are not Tenant’s Property pursuant to this Section 10.4,
shall become the property of the Landlord immediately following an uncured
default, the expiration, or any termination of this Lease. Any of Tenant’s
Property not removed within ten (10) days following the expiration or earlier
termination of this Lease shall be deemed abandoned by Tenant and, at Landlord’s
option, shall become the property of

 

8

 

Landlord as owner of the real property to which they are affixed.
Tenant, at its sole cost and expense, immediately shall repair any damage
occasioned to the Premises by the removal of Tenant’s Property. Upon the
expiration or earlier termination of this Lease, Tenant shall leave the
Premises in a neat and clean condition, free of debris, normal wear and tear
excepted.

 

10.5         Financing of Tenant’s
Property

 

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

 

11. MAINTENANCE OF THE PREMISES

 

11.1         Obligation to Maintain
the Premises

 

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

 

11.2         Obligation to Keep the
Premises Clear

 

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

 

12. REPAIRS AND ALTERATIONS

 

12.1         Right to Make Alterations

 

At all times during the term of this Lease,
except as provided in Section 17, Tenant shall have the right to make alterations,
additions, and improvements to the interior or exterior of the building.
Subject to Section 10, any alterations, additions, and improvements which may
be made or installed by Tenant, to the extent it is in existence at the
termination or expiration of the Lease, shall remain upon the Premises and, at
the termination or expiration of this Lease, shall be surrendered with the
Premises to Landlord. Any alteration, addition, or improvement shall be
accomplished by Tenant in a good workmanlike manner, in conformity with
applicable laws and regulations. Upon completion of any such work, Tenant shall
provide to Landlord “as-built” plans, building permits, governmental inspection
reports and all other required governmental

 

9

 

approvals, and proof of payment of all labor and materials. Subject to
Section 12.2, Tenant shall pay when due all claims for such labor and materials
and shall give Landlord at least ten (10) days’ prior written notice of the
commencement of any such work. Landlord may enter upon the Premises, in such
case, for the purpose of posting appropriate notices, including, but not
limited to, notices of non-responsibility.

 

12.2         Tenant Shall Not Render
Premises Liable For Any Lien

 

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

 

13. INDEMNITY AND INSURANCE

 

13.1         Indemnification

 

Tenant shall indemnify, defend, and protect
Landlord, and hold Landlord harmless from any and all loss, cost, damage,
expense, liability (including, without limitation, court costs and reasonable
attorneys’ fees) incurred in connection with or arising at any time and from
any cause whatsoever in or about the Premises, other than damages proximately caused
by reason of the negligence or willful misconduct of Landlord or its agents and
employees, including, without limiting the generality of the foregoing: (i) any
default by Tenant in the observance or performance of any of the terms,
covenants, or conditions of this Lease on Tenant’s part to be observed or
performed; (ii) the use or occupancy of the Premises by Tenant or any person
claiming by, through, or under Tenant; (iii) the condition of the Premises or
any occurrence or happening on the Premises from any cause whatsoever, or (iv)
any acts, omissions, or negligence of Tenant or any person claiming by,
through, or under Tenant, or of the contractors, agents, servants, employees,
visitors, or licensees of Tenant or any such person, in, on, or about the
Premises, either prior to or during the Lease term (including, without
limitation, any holdovers in connection therewith), including, without
limitation, any acts, omissions, or negligence in the making or performance of
any alterations. Tenant further agrees to indemnify and hold harmless Landlord,
Landlord’s agents, and the landlord or landlords under all ground or underlying
leases, from and against any and all loss, cost, liability, damage, and expense
(including, without limitation, reasonable attorneys’ fees) incurred in
connection with or arising from any claims by any persons by reason of injury
to persons or damage to property occasioned by any use, occupancy, condition,
occurrence, happening, act, omission, or negligence referred to in the

 

10

 

preceding sentence. The provisions of this Section shall survive the
expiration or sooner termination of this Lease with respect to any claims or
liability occurring prior to such expiration or termination, and shall not be
limited by reason of any insurance carried by Landlord and Tenant.

 

13.2         Insurance Company
Requirement

 

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

 

13.3         Insurance Certificate
Requirements

 

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

 

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

 

13.4         Minimum Acceptable
Insurance Coverage Requirements

 

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

 

11

 

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

 

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

 

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

 

13.5         Additional Insureds

 

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

 

REALTY
INCOME CORPORATION, ITS OFFICERS, DIRECTORS, AND ALL SUCCESSOR(S), ASSIGNEE(S),
SUBSIDIARIES, CORPORATIONS, PARTNERSHIPS, PROPRIETOR-SHIPS, JOINT VENTURES,
FIRMS, AND INDIVIDUALS AS HERETOFORE, NOW, OR HEREAFTER CONSTITUTED ON WHICH
THE NAMED INSURED HAS THE RESPONSIBILITY FOR PLACING INSURANCE AND FOR WHICH
SIMILAR COVERAGE IS NOT OTHERWISE MORE SPECIFICALLY PROVIDED.

 

13.6         Mortgage Endorsement

 

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

 

12

 

13.7         Renewals, Lapses or
Deficiencies

 

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

 

14. PARTIAL AND TOTAL DESTRUCTION
OF THE PREMISES

 

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

 

15. CONDEMNATION

 

15.1         Condemnation Damages

 

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

 

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

 

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

 

13

 

15.2         Termination of Lease Due
to Condemnation

 

In the event that the Condemnation materially
adversely affects the use of any one of the Premises as defined in Section 8 (“Condemned
Property”), as reasonably determined by Tenant and Landlord, Tenant may
terminate the Lease as to the Condemned Property by giving Landlord sixty (60)
days’ written notice of its intention to terminate the Lease after receiving
notice of the Condemnation from the condemning authority. The effective date of
the termination shall be the actual date of such taking, and Tenant shall be
released from further obligations or liabilities arising under the Lease
thereafter with respect to the Condemned Property. In the event of termination,
the rent for the last month of Tenant’s occupancy shall be prorated and
Landlord shall refund to Tenant any rent paid in advance and Tenant shall
thereupon be released from its obligation to pay rent. Notwithstanding any
termination of this Lease with respect to the Condemned Property, this Lease
shall continue in full force and effect with respect to the remaining
Properties; provided, however, Monthly Rent shall be adjusted by the Individual
Store Rent allocated to the Condemned Property.

 

16. ASSIGNMENT AND SUBLETTING

 

16.1         Tenant’s Right of
Assignment and Subletting

 

Tenant shall not voluntarily or by operation
of law assign or encumber its interest in this Lease or in the Premises, or
sublease all or any part of the Premises, or allow any other person or entity
to occupy or use any part of the Premises, without first obtaining the written
consent of Landlord, which consent shall not be unreasonably withheld or delayed,
except that the consent of Landlord shall not be required to transfer, sell,
assign or sublease (collectively “Transfer”) all or any portion of this Lease
or the Premises to an Affiliate of Tenant; provided, however, that in each
instance, Tenant shall notify Landlord of such Transfer and shall remain liable
under the terms of the Lease. An “Affiliate” shall mean any person or entity
which directly or indirectly, through one or more intermediaries controls or is
controlled by, or is under common control with Tenant. For purposes of this
definition, the term “control” with mean the possession, directly or
indirectly, or the power to direct management and policies of a person or
entity, whether through the ownership of voting securities or equity interests,
by contract, or otherwise. A sale of securities of Tenant to the public shall
not be deemed a Transfer requiring the consent of Landlord. Any assignment,
encumbrance, or sublease without Landlord’s consent shall be voidable and, at
Landlord’s election, shall constitute a default. It shall not be unreasonable
for Landlord to withhold its consent to any proposed assignment or subletting
if the proposed transferee does not meet certain criteria, including, but not
limited to, the transferee’s financial condition, the nature, quality, and
character of the transferee, the identity or business character of the
transferee, the nature of the use and occupancy and the transferee’s business
experience.

 

16.2         Landlord’s Option to
Preserve Subtenancies

 

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

 

14

 

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

 

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

 

16.4         Continuing Obligation of
Tenant

 

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

 

16.5         Fees and Costs with
Regard to Proposed Assignment or Sublease

 

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

 

16.6         Landlord’s Right of
Assignment

 

Landlord shall be free at all times, without
need of consent or approval by Tenant, to assign its interest in this Lease
and/or to convey fee title to the Premises. Notwithstanding the foregoing,
Landlord shall give Tenant written notice of any assignee. Each conveyance by
Landlord of Landlord’s interest in the Lease or the Premises prior to
expiration or termination hereof shall be subject to this Lease and shall
relieve the grantor of any further obligations or liability as Landlord arising
from and after the date of assignment (but Landlord shall not be relieved of
any liability arising prior to the date of assignment), and Tenant shall look
solely to Landlord’s successor in interest for all future obligations of
Landlord. Tenant hereby agrees to attorn to Landlord’s successors in interest,
whether such interest is acquired by sale, transfer, foreclosure, deed in lieu of
foreclosure, or otherwise. The term “Landlord” as used in this Lease, so far as
covenants and obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner at the time in question of the fee
title of the Premises. Without further agreement, the transferee of such title
shall be deemed to have assumed and agreed to observe and perform any and all
obligations of Landlord hereunder during its ownership of the Premises.
Landlord shall deliver to Tenant a copy of the assignment and assumption
agreement executed by the transferee.

 

17. DEFAULT AND TERMINATION

 

17.1         Events of Default

 

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

 

15

 

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

 

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

 

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

 

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

 

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

 

17.2         Landlord’s Remedies

 

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

 

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

 

16

 

being
liable for any damages, whether caused by negligence of Landlord or otherwise.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

17

 

including
brokers’ commissions, expenses of remodeling the Premises required by the
reletting, and like costs. Tenant shall pay to Landlord the rent due under this
Lease on the dates the rent is due, less the rent Landlord receives from any
reletting.

 

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

 

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

 

17.2.5              In all events, Tenant is liable for all
damages of whatever kind of nature, direct or indirect, suffered by Landlord as
a result of the occurrence of an Event of Default. If Tenant fails to pay
Landlord in a prompt manner for the damages suffered, Landlord may pursue a
monetary recovery from Tenant. Included among these damages are all expenses
incurred by Landlord in repossessing the Premises (including, but not limited
to, increased insurance premiums resulting from Tenant’s vacancy), all expenses
incurred by Landlord in reletting the Premises (including, but not limited to,
those incurred for advertisements, brokerage fees, repairs, remodeling, and
replacements), all concessions granted to a new tenant on a reletting, all
losses incurred by Landlord as a result of Tenant’s default (including, but not
limited to, any unamortized commissions paid in connection with this Lease), a
reasonable allowance for Landlord’s administrative costs

 

18

 

attributable
to Tenant’s default, and all attorneys’ fees incurred by Landlord in enforcing
any of Landlord’s rights or remedies against Tenant.

 

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

 

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

 

17.3         Late Charge

 

If Tenant fails to pay when due any payment
of rent or other charges which Tenant is obligated to pay to Landlord under
this Lease, there shall be a late charge in the amount of five percent (5%) of
each such obligation. This sum is intended to compensate Landlord for
accounting and administrative expenses incurred by Landlord, as well as the
loss of the use of funds. In addition to the late charge, any and all rent or
other charges which Tenant is obligated to pay to Landlord under this Lease
which are unpaid shall bear interest at the rate set forth in Section 17.6 from
the date said payment was due until paid.

 

17.4         Right of Landlord to
Re-Enter

 

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

 

17.5         Surrender of Premises

 

No act or thing done by Landlord or any agent
or employee of Landlord during the Lease term shall be deemed to constitute an
acceptance by Landlord or a surrender of Premises unless such intent is
specifically acknowledged in a writing signed by Landlord. The delivery of

 

19

 

keys
to the Premises to Landlord or any agent or employee of Landlord shall not
constitute a surrender of the Premises or effect a termination of this Lease,
whether or not the keys are thereafter retained by Landlord and,
notwithstanding such delivery, Tenant shall be entitled to the return of such
keys at any reasonable time upon request until this Lease shall have been
terminated properly. The voluntary or other surrender of this Lease by Tenant,
whether accepted by Landlord or not, or a mutual termination hereof, shall not
work a merger, and at the option of Landlord shall operate as an assignment to
Landlord of all subleases or subtenancies affecting the Premises.

 

17.6         Interest Charges

 

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

 

17.7         Tenant’s Default

 

If Tenant is in default of the Lease, then:

 

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

 

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

 

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

 

17.8         Default by Landlord

 

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

 

18. RIGHT OF INSPECTION

 

Landlord and Landlord’s authorized
representatives shall have the right after forty-eight (48) hours written
notice to Tenant, to enter upon the Premises at all reasonable hours for

 

20

 

the purpose of inspecting the Premises or of making repairs, additions,
or alterations in or upon the Premises; and, for the purpose of exhibiting the Premises
to prospective tenants, purchasers, or others. Provided Tenant is not in
default beyond any applicable cure period, Landlord shall not exhibit any “for
sale” signs during the term of the Lease.

 

19. WAIVER OF BREACH

 

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

 

20. NOTICES

 

20.1         Notice Requirements

 

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

 

If to Landlord:

 

REALTY
INCOME CORPORATION

Attn:
Legal Department

220
West Crest Street

Escondido,
CA 92025-1707

Phone
Number: (760) 741-2111

Fax
Number: (760) 741-8674

 

21

 

If to Tenant:

 

FESTIVAL
FUN PARKS, LLC

dba
Palace Entertainment

Attn:
Gary Fitzpatrick, Esq., General Counsel

18300
Von Karman, Suite 900

Irvine,
CA 92612

Phone
Number: (949) 261-0404

Fax
Number: (949) 261-1414

 

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

 

20.2         Payments Under Lease

 

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

 

21. RELATIONSHIP OF THE PARTIES

 

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

 

22. SUBORDINATION, ATTORNMENT AND
ESTOPPEL

 

22.1         Subordination and
Non-Disturbance

 

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

 

22

 

22.2         Attornment

 

In the event of foreclosure of any Mortgage,
whether superior or subordinate to this Lease, then (i) this Lease shall
continue in force; (ii) Tenant’s quiet possession shall not be disturbed if
Tenant is not in default beyond the applicable notice and cure period
hereunder; (iii) Tenant shall attorn to and recognize the mortgagee or
purchaser at foreclosure sale (“Successor Landlord”) as Tenant’s landlord for
the remaining term of this Lease; and (iv) the Successor Landlord shall not be
bound by (a) any payment of rent for more than one month in advance; (b) any
amendment, modification, or ending of this Lease without the Successor Landlord’s
consent after the Successor Landlord’s name is given to Tenant, unless the
amendment, modification, or ending is specifically authorized by the original
Lease and does not require Landlord’s prior agreement or consent; and (c) any
liability for any act or omission of a prior Landlord. At the request of the
Successor Landlord, Tenant shall execute a new lease for the Premises, setting
forth all of the provisions of this Lease except that the term of the new lease
shall be for the balance of the term of this Lease.

 

22.3         Estoppel Certificate

 

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

 

22.4         Leasehold Mortgage

 

Notwithstanding anything to the contrary in
this Lease, Tenant is hereby given the right by Landlord to mortgage its
interest in this Lease under one or more leasehold mortgages without obtaining
the consent of Landlord upon the condition that all rights acquired under such
mortgages shall be subject to each and all of the terms, covenants, conditions,
and restrictions set forth in this Lease, and to all rights and interests of
Landlord herein, none of which terms, covenants, conditions, or restrictions is
or shall be waived by Landlord by reason of the right given so to mortgage such
interest in this Lease, except as expressly provided herein. If Tenant shall
mortgage this leasehold, and if Tenant or the holder of such mortgage shall
send to

 

23

 

Landlord a true copy thereof together with written notice specifying
the name and address of the mortgagee
and the pertinent recording date with respect to such mortgage, Landlord agrees
that so long as any such leasehold mortgage shall remain unsatisfied of record
or until written notice of satisfaction is given by the holder to Landlord, the
following provisions shall apply:

 

22.4.1              There shall be no cancellation, surrender, or
material modification of this Lease by joint action of Landlord and Tenant
without the prior consent in writing of the leasehold mortgagee (which consent
shall not be unreasonably withheld, conditioned, or delayed); provided,
however, in no event shall this subsection be deemed to impair Landlord’s right
to unilaterally terminate the Lease following an uncured Event of Default.
Furthermore, at any and all times during which this Lease is encumbered by any
leasehold mortgage, the fee estate and the leasehold estate arising under this
Lease shall not merge.

 

22.4.2              Landlord shall, upon serving Tenant with any
notice of default, simultaneously mail a copy of such notice to the holder of
such mortgage. The leasehold mortgagee shall thereupon have the same period as
Tenant, plus an additional period of ten (10) business days, to remedy or cause
to be remedied the default(s) complained of in such notice, and Landlord shall
accept such performance by or at the instigation of such leasehold mortgagee as
if the same had been done by Tenant; provided, however, that if, prior to the
expiration of such ten (10)
business day period, the leasehold mortgagee shall have commenced or caused to
be commenced the work of curing such default(s) and is prosecuting or causing
the prosecution of the same to completion with reasonable diligence, then the
leasehold mortgagee shall be afforded such additional time as may be reasonably
required to cure such default(s); provided, further, notwithstanding anything
to the contrary set forth in this Lease, if any default of Tenant is personal
to Tenant and not susceptible of being cured by a leasehold mortgagee or a
party acquiring title to Tenant’s leasehold estate, such default shall be
deemed waived by Landlord upon completion of the foreclosure proceeding or
deed-in-lieu of foreclosure or acquisition of Tenant’s interest as a result of
such leasehold mortgagee’s exercise of its remedies, and Landlord will not
terminate this Lease or take any other action as a result of such default for
so long as such default is not susceptible of being cured.

 

22.4.3              Anything herein contained notwithstanding,
while such leasehold mortgage remains unsatisfied of record, or until written
notice of satisfaction is given by the holder of such mortgage to Landlord, if
any default shall occur which, pursuant to any provision of this Lease,
entitles Landlord to terminate this Lease, and if before the expiration of ten
(10) business days from the date of service of notice of termination upon such
leasehold mortgagee, such leasehold mortgagee shall have notified Landlord of
its desire to nullify such notice and shall have paid

 

24

 

to
Landlord all rent and other payments herein provided for, and then in default,
and shall have complied with all of the other requirements of this Lease or, if
immediate compliance is impossible, shall have commenced the work of complying
with all of the other requirements of this Lease, if any are then in default,
and shall prosecute the same to completion with reasonable diligence, then in
such event Landlord shall not be entitled to terminate this Lease and any
notice of termination theretofore given shall be void and of no effect.

 

22.4.4              Landlord agrees that the name of the
leasehold mortgagee may be added to the “Loss Payable Endorsement” of any and
all insurance policies required to be carried by Tenant hereunder.

 

22.4.5              The proceeds from any insurance policies or
arising from a condemnation are to be distributed pursuant to the provisions of
this Lease, but the leasehold mortgagee may reserve rights to apply to the mortgage
debt all, or any part, of Tenant’s share of such proceeds pursuant to such
mortgage.

 

22.4.6              The leasehold mortgagee shall be given notice
of any adjudicative proceedings by Landlord, and shall have the right to
intervene therein and be made party to such proceedings, and the parties hereto
do hereby consent to such intervention. In the event the leasehold mortgagee
desires to intervene, it shall do so by sending written notice to Landlord and
Tenant within ten (10) days of receipt of Landlord’s notice. In the event that
the leasehold mortgagee shall not elect to intervene or become a party to such
proceedings, the leasehold mortgagee shall be entitled to receive notice of,
and a copy of, any award or decision made in said adjudicative proceedings.

 

22.4.7              Landlord’s consent shall not be required for
the foreclosure of any leasehold mortgage. Landlord shall not unreasonably
withhold its consent to any sale of Tenant’s interest in this Lease and the
Premises by the leasehold mortgagee following any such foreclosure. It shall
not be unreasonable for Landlord to withhold its consent to any proposed sale
or conveyance of Tenant’s interest in the Lease if Landlord, utilizing its
customary review and evaluation process for prospective new tenants, does not
approve the proposed transferee.

 

22.4.8              Landlord shall, upon request, execute,
acknowledge, and deliver to each leasehold mortgagee, an agreement prepared at
the sole cost and expense of Tenant, in form reasonably satisfactory to
Landlord and such leasehold mortgagee, between Landlord, Tenant and leasehold mortgagee,
agreeing to all of the provisions of this Section. To the extent any conflicts
exist between the terms of the leasehold mortgage, the terms of the loan
agreement, or the terms of this Lease, the terms of this Lease shall govern.
Landlord’s consent to the execution and

 

25

 

recordation
of a leasehold mortgage by Tenant in no way constitutes approval of Landlord of
any of the provisions of the leasehold mortgage. The term “mortgage,” whenever
used herein, shall include whatever security instruments are used in the locale
of the Premises, such as, without limitation, deeds to secure debt, deeds of
trust and conditional deeds, as well as financing statements, security
agreements and other documentation required pursuant to the Uniform Commercial
Code.

 

22.4.9              Any and all leasehold mortgage(s) shall at all
times be subject, subordinate, and inferior to the lien and estate of any
liens, trust deeds, mortgages or encumbrances, and all renewals, extensions or replacements
thereof, now or hereafter imposed by Landlord upon Landlord’s fee simple
interest in the Premises; provided, however, that as a condition precedent to
the subordination of this Lease or any leasehold mortgage to any ground lease,
mortgage, deed of trust or any other hypothecation of security now or hereafter
placed upon the Premises, Landlord shall have provided to each leasehold
mortgagee and to Tenant, for the benefit of such parties, a recordable
non-disturbance agreement in a form reasonably acceptable to Tenant and such
leasehold mortgagee(s), executed by the beneficiary of such ground lease,
mortgage, deed of trust or other hypothecation to which this Lease and/or any
leasehold mortgage is to be subordinated pursuant to the terms and conditions
of this Section.

 

22.4.10            If the leasehold mortgagee or its nominee or
designee becomes the Tenant under this Lease, all of the rights, obligations
and liabilities of the leasehold mortgagee or its nominee or designee shall
cease and terminate upon assignment of this Lease in accordance with the terms hereof
by the leasehold mortgagee or its nominee or designee. Except where the
leasehold mortgagee has become the Tenant, no liability for the payment of rent
or the performance of any of Tenant’s covenants and agreements under this Lease
accruing after the date of such assignment shall attach to or be imposed upon
the leasehold mortgagee, all such liability being hereby expressly waived by
Landlord.

 

22.4.11            Any leasehold mortgagee shall have the right
to perform any of Tenant’s covenants, curing any defaults by Tenant and
exercising any election, option or privilege conferred upon Tenant by any terms
of this Lease.

 

22.4.12            Notwithstanding anything to the contrary set
forth in this Lease, Landlord and Tenant acknowledge and agree that the
acquisition by a leasehold mortgagee of the direct or indirect ownership of the
equity interests in Tenant (i) shall not constitute a prohibited transfer or Tenant
default under this Lease, (ii) shall not require the consent or

 

26

 

approval
of Landlord, and (iii) shall be fully effective notwithstanding any provision
to the contrary contained in this Lease.

 

22.4.13            Landlord and Tenant acknowledge and agree
that if and to the extent that Tenant has any right to approve or disapprove
Landlord’s rejection of this Lease in any bankruptcy proceeding, such right of
approval or disapproval shall be assigned to (and shall be exercised solely by)
Tenant’s leasehold mortgagee having the most senior leasehold mortgage during
such time as such leasehold mortgage encumbers Tenant’s interest in the
Premises.

 

22.4.14            Subject to the obligations of Tenant under
Section 14 of the Lease, Landlord and Tenant acknowledge and agree that during
such time as any leasehold mortgage encumbers Tenant’s leasehold interest in
the Premises, the proceeds from any insurance policies or arising from any condemnation
or casualty shall be paid to and held by the leasehold mortgagee of highest
priority and distributed pursuant to the provisions of the leasehold mortgage,
Landlord acknowledging that the leasehold mortgagee may have the right to,
among other things, apply to the mortgage debt all, or any part, of Tenant’s
share of the proceeds if and to the extent such application of proceeds is
consistent with the documents evidencing the leasehold mortgage.

 

22.4.15            In the event Tenant’s interest under this
Lease shall be sold, assigned or transferred pursuant to the exercise of any
remedy of any leasehold mortgagee, or pursuant to any judicial proceeding, at
such leasehold mortgagee’s option, Landlord shall execute and deliver to such leasehold
mortgagee a new lease (the “New Lease”) demising the Premises to such leasehold
mortgagee. The New Lease shall be for a term equal to the then remaining term
of this Lease before giving effect to such termination and shall contain the same
covenants, agreements, terms, provisions and limitations as this Lease. Upon
the execution and delivery of the New Lease, the leasehold mortgagee, in its
own name or in the name of Landlord, shall have the right, but not the
obligation, to take all appropriate steps as shall be necessary to remove the
previous lessee from the Premises and any improvements located thereon; provided,
however, that Landlord shall not be subject to any liability, including,
without limitation, reasonable attorney’s fees, costs or expenses, in
connection with such removal, and the leasehold mortgagee shall pay for all
costs and expenses, including, without limitation, reasonable attorney’s fees,
for such removal. The leasehold mortgagee shall be liable for the performance
of the obligations imposed on the ‘Tenant’ under this Lease only for and during
the period that such leasehold mortgagee is in possession and/or ownership of
the leasehold estate created by the New Lease.

 

27

 

23. TENANT’S FINANCIAL STATEMENTS

 

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

 

24. ATTORNEYS’ FEES

 

24.1         Recovery of Attorneys’
Fees and Costs of Suit

 

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

 

24.2         Party to Litigation

 

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

 

24.3         Landlord’s Consent

 

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

 

28

 

25. CONSENT

 

Landlord shall have no liability for damages
resulting from Landlord’s failure to give any consent, approval, or instruction
reserved to Landlord. Tenant’s sole remedy in any such event shall be an action
for injunctive relief.

 

26. AUTHORITY TO MAKE LEASE;
COVENANT OF QUIET ENJOYMENT

 

26.1         Full Power and Authority
to Enter Lease

 

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

 

26.2         Quiet Enjoyment

 

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

 

26.3         No Violation of Covenants
and Restrictions

 

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

 

27. HAZARDOUS MATERIAL

 

27.1         Environmental Compliance

 

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

 

29

 

Landlord results in any contamination of the Premises, Tenant shall
promptly take all actions at its sole expense as are recommended by
environmental engineers hired by Tenant or Landlord and are necessary to return
the Premises to the condition existing prior to the introduction of any such
Hazardous Material to the Premises; provided that Landlord’s approval of such
actions shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material
adverse long-term or short-term effect on the Premises.

 

27.2         Tenant’s Responsibility
for Hazardous Materials

 

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

 

27.3         Survival

 

Provisions of this Section 27 shall survive
termination of tenancy.

 

28. GENERAL PROVISIONS

 

28.1         Gender; Number

 

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

 

28.2         Captions

 

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

 

28.3         Exhibits

 

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

 

30

 

28.4         Entire Agreement

 

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

 

28.5         Drafting

 

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

 

28.6         Modification

 

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

 

28.7         Joint and Several
Liability

 

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

 

28.8         Governing Law

 

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

 

28.9         Attorneys’ Fees

 

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

 

28.10       Time of Essence

 

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

 

28.11       Severability

 

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

 

28.12       Successors and Assigns

 

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

 

31

 

28.13       Independent Covenants

 

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

 

28.14       Information Provided

 

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

 

28.15       Limitation of Landlord’s
Liability

 

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

 

28.16       No Lease Until Accepted

 

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

 

THE REMAINDER OF THIS
PAGE WAS LEFT BLANK INTENTIONALLY

 

32

 

28.17       Counterparts

 

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

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  REALTY INCOME CORPORATION,

  a Maryland corporation

  	
  FESTIVAL FUN PARKS, LLC,

  a Delaware limited liability company

  dba PALACE ENTERTAINMENT

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael R. Pfeiffer

  	
   

  	
  By:

  	
  /s/ Gary Fitzpatrick

  	
   

  
	
  Michael R. Pfeiffer

  	
   

  
	
  Executive Vice President,

  	
   

  
	
  General Counsel

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  June 20, 2002

  	
   

  	
  Date:

  	
  June 28, 2002

  	
   

  
								

 

33

 

COMMERCIAL GROUND LEASE

 

EXHIBIT “A”

 

PROPERTY LIST

 

	
  PREMISES

  	
   

  	
  INDIVIDUAL STORE RENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.             Wet
  ‘N Wild Emerald Pointe

  	
   

  	
  $

  	
  55,000.00

  	
   

  
	
  3910 South Holden Road

  	
   

  	
   

  	
   

  
	
  Greensboro, NC 27406

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.             Castle
  Park

  	
   

  	
  $

  	
  53,166.67

  	
   

  
	
  3500 Polk Street

  	
   

  	
   

  	
   

  
	
  Riverside, CA 92505

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  MONTHLY RENT:

  	
   

  	
  $

  	
  108,166.67

  	
   

  

 

 

ADDENDUM TO COMMERCIAL GROUND
LEASE

by
and between

REALTY INCOME CORPORATION, a Maryland corporation, as “Landlord”

and

FESTIVAL FUN PARKS, LLC, a Delaware limited liability company, as “Tenant”

 

This Addendum to Commercial Ground Lease
(this “Addendum”) is dated as of July 3, 2002 and shall serve to supplement and
amend (to the extent inconsistent therewith) that certain Commercial Ground
Lease dated July 3, 2002 (the “Lease”) by and between
REALTY INCOME CORPORATION, a Maryland corporation (“Landlord”), and FESTIVAL
FUN PARKS, LLC, a Delaware limited liability company dba PALACE ENTERTAINMENT (“Tenant”)
concerning those certain Real Properties identified on Exhibit “A” to the
Lease:

 

The following new paragraphs (collectively, “Compliance
Matters”) shall be deemed added to Section 8 of the Lease:

 

“On or about the Commencement Date, Tenant
delivered to Landlord a copy of that certain January 22, 1999 Physical
Inspection and Procedural Review Inspection Report prepared and issued by
International Theme Park Services, Inc. (the ‘Report’) with respect to the
Premises commonly known as Emerald Pointe, Greensboro, North Carolina (‘Emerald
Pointe’). As indicated by the Report (pp. 14-28), as of the date of the Report,
there were several outstanding physical repairs and safety issues in need of
attention. Further, the Report indicated that no Certificate of Occupancy was issued
with respect to the administration building at Emerald Pointe. Tenant hereby
acknowledges and agrees that (i) there may be outstanding physical repairs and
safety issues to be addressed by Tenant at Emerald Pointe as more specifically
set forth in the Report, and (ii) there may be outstanding construction and
other efforts to be made by Tenant in order to secure a Certificate of
Occupancy for the Emerald Pointe administration building. Tenant acknowledges
and agrees it is leasing the Premises ‘As Is, Where Is, With All Faults.’
Tenant further agrees that on or before March 31, 2003, Tenant shall, at Tenant’s
sole cost and expense: (a) correct all of the outstanding physical repair and
safety issues raised by the Report or provide evidence that such corrections
were made as of the Commencement Date; (b) take all necessary steps to secure a
Certificate of Occupancy for the Emerald Pointe administration building or
provide evidence that a Certificate of Occupancy had been issued therefor as of
the Commencement Date; and (c) deliver to Landlord evidence reasonably
satisfactory to Landlord indicating the items set forth in the immediately
foregoing clauses (a) and (b) above have been completed.

 

On or about the Commencement Date, Tenant indicated
to Landlord that, to Tenant’s actual knowledge (based on statements made by
third parties unrelated to Tenant and Landlord), certain work recently had been
completed in the parking lot(s) of Emerald Pointe, to wit, construction of
certain landscape islands as necessary to comply with requirements of the
municipality (or other appropriate governmental authority). On or before August
31, 2002, Tenant, shall, at Tenant’s sole cost and expense, deliver to Landlord
evidence reasonably satisfactory to Landlord indicating all required landscape islands
have been installed and completed in accordance with the requirements of the
municipality (or other appropriate governmental authority).

 

On or about the Commencement Date, Tenant
delivered to Landlord copies of those certain April 26, 2002 Phase I
Environmental Site Assessment Update and Compliance Audit Reports (‘Environmental
Updates’) with respect to the Real Properties. The Environmental Updates noted
several storage and compliance issues and recommended that the same should be

 

1

 

resolved promptly. Tenant hereby agrees that on or before December 31, 2002,
Tenant shall, at Tenant’s sole cost and expense: (a) take all necessary steps
to comply with the recommendations set forth in the Environmental Updates for
each of the Real Properties; and (b) deliver to Landlord evidence reasonably satisfactory to Landlord indicating
the items set forth in the immediately foregoing clause (a) have been
appropriately addressed and completed.

 

On or about the Commencement Date, Tenant
delivered to Landlord a copy of that certain June 6, 2002 ALTA/ACSM Land Title
Survey prepared by Smith Surveyors, Inc. (‘Survey’) in connection with Emerald
Pointe. The Survey: (I) depicted a certain 2.149 acre tract located about the
eastern portion of the Premises, and (II) indicated there was ‘no deed for this
tract in [the] title commitment [and that] this tract is occupied by the Park
for parking.’ Tenant agrees to use its diligent efforts to cause First American
Title Insurance Company to irrevocably commit, on or before July 31, 2002, to issue
a new owner’s policy in connection with Emerald Pointe, which owner’s policy
shall be in form and substance reasonably acceptable to Landlord with respect
to the 2.149 acre tract, and otherwise be, to the extent reasonably possible, in
form and substance consistent with that certain title objection letter dated
July 3, 2002; provided, however, notwithstanding anything contained herein to
the contrary, Tenant’s failure to secure the foregoing commitment and/or First
American Title Insurance Company’s failure to issue the foregoing policy shall
not constitute a breach of or default under the Lease (so long as Tenant uses its
diligent efforts consistent with this paragraph).

 

Tenant’s failure to timely complete one or
more or all of the Compliance Matters as
set forth above shall constitute an Event of Default under the Lease,
and Landlord shall have all of the rights and remedies available to Landlord
under the Lease, including, without limitation, those set forth in Section 17
of the Lease. If Tenant, notwithstanding Tenant’s diligent efforts to complete
the same during the applicable cure period specified above, is not able to
complete one or more of the Compliance Matters within the cure period specified
above for a reason or reasons beyond Tenant’s reasonable control (e.g., Inclement
weather, strikes, governmental delays, war, etc.), then Tenant shall not be in
default of this Lease if Tenant diligently pursued the completion of the
subject Compliance Matter during the specified cure period and then continues
after the expiration of the specified cure period to diligently and in good
faith pursue the completion of the same.”

 

Tenant shall indemnify, defend and protect
Landlord, and hold Landlord harmless from any and all loss, cost, damage,
expense and liability (including, without limitation, court costs and
reasonable attorneys’ fees) incurred in connection with the Compliance Matters.

 

All capitalized terms used herein to the
extent same are not defined herein, shall be given the same meaning as were
given in the Lease.

 

THE REMAINDER OF THIS
PAGE WAS LEFT BLANK INTENTIONALLY.

 

2

 

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

 

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  REALTY
  INCOME CORPORATION,

  	
  FESTIVAL
  FUN PARKS, LLC,

  
	
  a
  Maryland corporation

  	
  a
  Delaware limited liability

  
	
   

  	
  company

  
	
   

  	
  dba
  PALACE ENTERTAINMENT

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
  /s/ Gary Fitzpatrick

  	
   

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
  Gary Fitzpatrick

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
  VP Gen - Counsel

  	
   

  
										

 

3

 

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

 

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  REALTY
  INCOME CORPORATION,

  	
  FESTIVAL
  FUN PARKS, LLC,

  
	
  a
  Maryland corporation

  	
  a
  Delaware limited liability

  
	
   

  	
  company

  
	
   

  	
  dba
  PALACE ENTERTAINMENT

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Paul M. Meurer

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name Printed:

  	
  Paul M. Meurer

  	
   

  	
  Name Printed:

  	
   

  	
   

  
	
  Title:

  	
  EVP & CFO

  	
   

  	
  Title:

  	
   

  	
   

  
											

 

4

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