Document:

Exhibit 10.25

 

COMMERCIAL GROUND LEASE

 

 

 

July 20,
1999

 

 

 

 

LANDLORD:

 

NEWPORT EXCHANGE PROPERTIES, LLC,

a Delaware limited liability company

 

 

 

 

TENANT:

 

MALIBU CENTERS, INC.,

a Delaware
corporation

 

 

 

PREMISES LOCATION:

 

MALIBU SPEEDZONE

17871 CASTLETON STREET

CITY OF INDUSTRY, CALIFORNIA
90278

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
   

  	
  1

  	
   

  
	
   

  	
  1.1

  	
  Lease Year

  	
   

  	
  1

  	
   

  
	
   

  	
  1.2

  	
  Hazardous Material

  	
   

  	
  1

  	
   

  
	
   

  	
  1.3

  	
  Environmental
  Law

  	
   

  	
  2

  	
   

  
	
  2.

  	
  PREMISES

  	
   

  	
  2

  	
   

  
	
   

  	
  2.1

  	
  Ownership of Improvements

  	
   

  	
  2

  	
   

  
	
   

  	
  2.2

  	
  Title and Condition

  	
   

  	
  2

  	
   

  
	
  3.

  	
  TERM OF LEASE

  	
   

  	
  3

  	
   

  
	
  4.

  	
  MONTHLY BASE RENT

  	
   

  	
  3

  	
   

  
	
   

  	
  4.1

  	
  Net-Net-Net Lease; Non-Terminability

  	
   

  	
  3

  	
   

  
	
   

  	
  4.2

  	
  Monthly Base Rent

  	
   

  	
  4

  	
   

  
	
  5.

  	
  INCREASES IN MONTHLY RENT

  	
   

  	
  5

  	
   

  
	
   

  	
  5.1

  	
  Monthly Base Rent Adjustments

  	
   

  	
  5

  	
   

  
	
  6.

  	
  SUBSTITUTE RENT AND INCREASES

  	
   

  	
  5

  	
   

  
	
  7.

  	
  SECURITY DEPOSIT

  	
   

  	
  6

  	
   

  
	
  8.

  	
  USE OF THE PREMISES

  	
   

  	
  6

  	
   

  
	
  9.

  	
  PROPERTY TAXES, ASSESSMENTS AND UTILITIES

  	
   

  	
  6

  	
   

  
	
   

  	
  9.1

  	
  Tenant’s Required Payments

  	
   

  	
  6

  	
   

  
	
   

  	
  9.2

  	
  Payments Not Required by Tenant

  	
   

  	
  7

  	
   

  
	
   

  	
  9.3

  	
  Assessments

  	
   

  	
  7

  	
   

  
	
   

  	
  9.4

  	
  Utility Payments

  	
   

  	
  7

  	
   

  
	
   

  	
  9.5

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

  	
   

  	
  7

  	
   

  
	
   

  	
  9.6

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

  	
   

  	
  8

  	
   

  
	
  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

  	
   

  	
  9

  	
   

  
	
   

  	
  10.5

  	
  Waiver of Landlord’s Lien

  	
   

  	
  9

  	
   

  
	
  11.

  	
  MAINTENANCE OF THE PREMISES

  	
   

  	
  10

  	
   

  

 

i

 

	
   

  	
   

  	
   

  	
   

  	
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  11.1

  	
  Obligation to Maintain the Premises

  	
   

  	
  10

  	
   

  
	
   

  	
  11.2

  	
  Obligation to Keep the Premises Clean

  	
   

  	
  10

  	
   

  
	
   

  	
  11.3

  	
  Compliance with Law

  	
   

  	
  10

  	
   

  
	
  12.

  	
  REPAIRS AND ALTERATIONS

  	
   

  	
  11

  	
   

  
	
   

  	
  12.1

  	
  Right to Make Alterations

  	
   

  	
  11

  	
   

  
	
   

  	
  12.2

  	
  Tenant Shall Not Render Premises Liable For Any Lien

  	
   

  	
  11

  	
   

  
	
  13.

  	
  INDEMNITY AND INSURANCE

  	
   

  	
  12

  	
   

  
	
   

  	
  13.1

  	
  Indemnification

  	
   

  	
  12

  	
   

  
	
   

  	
  13.2

  	
  Exculpation of Landlord

  	
   

  	
  13

  	
   

  
	
   

  	
  13.3

  	
  Insurance Company Requirement

  	
   

  	
  13

  	
   

  
	
   

  	
  13.4

  	
  Insurance Certificate Requirements

  	
   

  	
  13

  	
   

  
	
   

  	
  13.5

  	
  Minimum Acceptable Insurance Coverage Requirements

  	
   

  	
  13

  	
   

  
	
   

  	
  13.6

  	
  Additional Insureds

  	
   

  	
  14

  	
   

  
	
   

  	
  13.7

  	
  Mortgage Endorsement

  	
   

  	
  15

  	
   

  
	
   

  	
  13.8

  	
  Renewals, Lapses or Deficiencies

  	
   

  	
  15

  	
   

  
	
   

  	
  13.9

  	
  Adjustment of Claims

  	
   

  	
  15

  	
   

  
	
   

  	
  13.10

  	
  Separate Insurance

  	
   

  	
  16

  	
   

  
	
   

  	
  13.11

  	
  Waiver of Subrogation

  	
   

  	
  16

  	
   

  
	
  14.

  	
  PARTIAL AND TOTAL DESTRUCTION OF THE PREMISES

  	
   

  	
  16

  	
   

  
	
   

  	
  14.1

  	
  Obligation to Repair and Restore

  	
   

  	
  16

  	
   

  
	
   

  	
  14.2

  	
  Termination of Lease If Repair or Restoration Not Feasible

  	
   

  	
  16

  	
   

  
	
   

  	
  14.3

  	
  Damage or Destruction During Last Five Years of Lease Term

  	
   

  	
  17

  	
   

  
	
  15.

  	
  CONDEMNATION

  	
   

  	
  18

  	
   

  
	
   

  	
  15.1

  	
  Condemnation Damages

  	
   

  	
  18

  	
   

  
	
   

  	
  15.2

  	
  Termination of Lease Due to Condemnation

  	
   

  	
  19

  	
   

  
	
  16.

  	
  ASSIGNMENT AND SUBLETTING

  	
   

  	
  20

  	
   

  
	
   

  	
  16.1

  	
  Tenant’s Right of Assignment and Subletting

  	
   

  	
  20

  	
   

  
	
   

  	
  16.2

  	
  Landlord’s Option to Preserve Subtenancies

  	
   

  	
  20

  	
   

  
	
   

  	
  16.3

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

  	
   

  	
  20

  	
   

  
	
   

  	
  16.4

  	
  Continuing Obligation of Tenant

  	
   

  	
  21

  	
   

  
	
   

  	
  16.5

  	
  Fees and Costs with Regard to Proposed Assignment or Sublease

  	
   

  	
  21

  	
   

  

 

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  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.6

  	
  Landlord’s Right of Assignment

  	
   

  	
  21

  	
   

  
	
  17.

  	
  DEFAULT

  	
   

  	
  22

  	
   

  
	
   

  	
  17.1

  	
  Default

  	
   

  	
  22

  	
   

  
	
   

  	
  17.2

  	
  Remedies

  	
   

  	
  23

  	
   

  
	
   

  	
  17.3

  	
  Landlord’s Self-Help

  	
   

  	
  24

  	
   

  
	
   

  	
  17.4

  	
  Intentionally Omitted

  	
   

  	
  24

  	
   

  
	
   

  	
  17.5

  	
  No Waiver

  	
   

  	
  24

  	
   

  
	
   

  	
  17.6

  	
  Late Charge

  	
   

  	
  24

  	
   

  
	
   

  	
  17.7

  	
  Multiple Remedies, No Waiver

  	
   

  	
  25

  	
   

  
	
   

  	
  17.8

  	
  Tenant Waiver

  	
   

  	
  25

  	
   

  
	
   

  	
  17.9

  	
  Default by Landlord

  	
   

  	
  25

  	
   

  
	
  18.

  	
  RIGHT OF INSPECTION

  	
   

  	
  26

  	
   

  
	
  19.

  	
  WAIVER OF BREACH

  	
   

  	
  26

  	
   

  
	
  20.

  	
  NOTICES

  	
   

  	
  26

  	
   

  
	
   

  	
  20.1

  	
  Notice Requirements

  	
   

  	
  26

  	
   

  
	
   

  	
  20.2

  	
  Payments Under Lease

  	
   

  	
  27

  	
   

  
	
  21.

  	
  RELATIONSHIP OF THE PARTIES

  	
   

  	
  27

  	
   

  
	
  22.

  	
  SUBORDINATION, ATTORNMENT AND ESTOPPEL

  	
   

  	
  28

  	
   

  
	
   

  	
  22.1

  	
  Subordination and Non-Disturbance

  	
   

  	
  28

  	
   

  
	
   

  	
  22.2

  	
  Attornment

  	
   

  	
  28

  	
   

  
	
   

  	
  22.3

  	
  Estoppel Certificate

  	
   

  	
  28

  	
   

  
	
   

  	
  22.4

  	
  Protection of Landlord’s Mortgagee

  	
   

  	
  29

  	
   

  
	
  23.

  	
  TENANT’S FINANCIAL STATEMENTS

  	
   

  	
  29

  	
   

  
	
  24.

  	
  ATTORNEYS’ FEES

  	
   

  	
  30

  	
   

  
	
   

  	
  24.1

  	
  Recovery of Attorneys’ Fees and Costs of Suit

  	
   

  	
  30

  	
   

  
	
   

  	
  24.2

  	
  Party to Litigation

  	
   

  	
  30

  	
   

  
	
   

  	
  24.3

  	
  Landlord’s Consent

  	
   

  	
  30

  	
   

  
	
  25.

  	
  LEASEHOLD MORTGAGE

  	
   

  	
  30

  	
   

  
	
   

  	
  25.1

  	
  Tenant’s Right to Encumber

  	
   

  	
  30

  	
   

  
	
   

  	
  25.2

  	
  Rights of Tenant’s Mortgagee

  	
   

  	
  31

  	
   

  
	
  26.

  	
  AUTHORITY TO MAKE LEASE; COVENANT OF QUIET ENJOYMENT

  	
   

  	
  33

  	
   

  

 

iii

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  26.1

  	
  Full Power and Authority to Enter Lease

  	
   

  	
  33

  	
   

  
	
   

  	
  26.2

  	
  Quiet Enjoyment

  	
   

  	
  33

  	
   

  
	
   

  	
  26.3

  	
  No Violation of Covenants and Restrictions

  	
   

  	
  33

  	
   

  
	
  27.

  	
  HAZARDOUS MATERIAL

  	
   

  	
  33

  	
   

  
	
   

  	
  27.1

  	
  Environmental Compliance

  	
   

  	
  33

  	
   

  
	
   

  	
  27.2

  	
  Tenant’s Responsibility for Hazardous Materials

  	
   

  	
  34

  	
   

  
	
   

  	
  27.3

  	
  Survival

  	
   

  	
  34

  	
   

  
	
   

  	
  27.4

  	
  Reporting and Inspections

  	
   

  	
  34

  	
   

  
	
  28.

  	
  GENERAL PROVISIONS

  	
   

  	
  37

  	
   

  
	
   

  	
  28.1

  	
  Gender; Number

  	
   

  	
  37

  	
   

  
	
   

  	
  28.2

  	
  Captions

  	
   

  	
  37

  	
   

  
	
   

  	
  28.3

  	
  Exhibits

  	
   

  	
  38

  	
   

  
	
   

  	
  28.4

  	
  Entire Agreement

  	
   

  	
  38

  	
   

  
	
   

  	
  28.5

  	
  Drafting

  	
   

  	
  38

  	
   

  
	
   

  	
  28.6

  	
  Modification

  	
   

  	
  38

  	
   

  
	
   

  	
  28.7

  	
  Joint and Several Liability

  	
   

  	
  38

  	
   

  
	
   

  	
  28.8

  	
  Governing Law

  	
   

  	
  38

  	
   

  
	
   

  	
  28.9

  	
  Attorneys’ Fees

  	
   

  	
  38

  	
   

  
	
   

  	
  28.10

  	
  Time of Essence

  	
   

  	
  39

  	
   

  
	
   

  	
  28.11

  	
  Severability

  	
   

  	
  39

  	
   

  
	
   

  	
  28.12

  	
  Successors and Assigns

  	
   

  	
  39

  	
   

  
	
   

  	
  28.13

  	
  Independent Covenants

  	
   

  	
  39

  	
   

  
	
   

  	
  28.14

  	
  Right of First Offer

  	
   

  	
  39

  	
   

  
	
   

  	
  28.15

  	
  Procedure Upon Purchase

  	
   

  	
  40

  	
   

  
	
   

  	
  28.16

  	
  Information Provided

  	
   

  	
  41

  	
   

  
	
   

  	
  28.17

  	
  No Lease Until Accepted

  	
   

  	
  41

  	
   

  
	
   

  	
  28.18

  	
  Counterparts

  	
   

  	
  41

  	
   

  
	
   

  	
  28.19

  	
  Limitation on Landlord’s Liability

  	
   

  	
  41

  	
   

  
	
   

  	
  28.20

  	
  Consents

  	
   

  	
  42

  	
   

  
	
   

  	
  28.21

  	
  Reservations of Landlord

  	
   

  	
  42

  	
   

  
	
   

  	
  28.22

  	
  Construction of Lease

  	
   

  	
  42

  	
   

  

 

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  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  28.23

  	
  Conflict Between Terms of Lease and Loan Documents of Landlord’s
  Lender

  	
   

  	
  43

  	
   

  
	
  EXHIBIT “A”

  	
  LEGAL DESCRIPTION OF REAL PROPERTY

  	
   

  	
  1

  	
   

  
	
  EXHIBIT “B”

  	
  GUARANTY

  	
   

  	
  1

  	
   

  
	
  EXHIBIT “C”

  	
  MEMORANDUM OF LEASE

  	
   

  	
  1

  	
   

  
	
  EXHIBIT “D”

  	
  SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT

  	
   

  	
  1

  	
   

  
							

 

v

 

COMMERCIAL
GROUND LEASE

 

This Commercial Ground Lease (the “Lease”) is
dated for reference purposes only as of July 20, 1999, is made by and between NEWPORT
EXCHANGE PROPERTIES, LLC, a Delaware limited liability company
(“Landlord”), and MALIBU CENTERS, INC., a
Delaware corporation (“Tenant”),
with reference to the recitals set forth below. All obligations hereunder of Tenant are guaranteed by MALIBU ENTERTAINMENT WORLDWIDE, INC., a
Georgia corporation (“Guarantor”).

 

RECITALS

 

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

 

Malibu SpeedZone

17871 Castleton Street

City of Industry, California
90278

 

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

 

C.             This Lease shall not be effective unless and
until Tenant shall deliver a guaranty executed
by Guarantor in the form attached hereto as Exhibit “B”.

 

1.

 

DEFINITIONS

 

The following terms, when used in this Lease,
shall have the meaning set forth in this Section 1.

 

1.1           Lease Year

 

The term “Lease Year” shall mean the first
twelve (12) full calendar months after the Commencement Date (as defined in
Section 3) 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 law, statute, regulation, order, or rule now or hereafter promulgated by any governmental entity, whether local, state,
or federal, (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 or any other law, statute,
regulation, order, or rule now or hereafter promulgated by any governmental entity, whether local, state, or
federal.

 

1.3           Environmental
Law

 

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

 

2.

 

PREMISES

 

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

 

2.1           Ownership of Improvements

 

During the term of this Lease, the buildings and other improvements
which are permanently affixed to the Premises (the
“Improvements”; it being provided that the Premises shall include the Improvements unless the context clearly indicates
otherwise) shall be and remain the property of Tenant; upon the
expiration or earlier termination of this Lease, the Improvements shall
automatically become the property of Landlord without any compensation therefor and Tenant shall execute and deliver all
such deeds and instruments of conveyance as may be required to confirm such title in Landlord. All obligations of
Tenant hereunder with respect to the Premises shall also be obligations
with respect to the Improvements and Landlord shall
have no obligations or otherwise (except as expressly set forth herein) with
respect to the Improvements (including, without limitation, as to the
payment of any Taxes, costs or expenses relating to the same and Tenant shall
be solely responsible therefore).

 

2.2            Title
and Condition

 

The Premises
are demised and let subject to (a) the existing state of the title thereof as
of the commencement of the term of this
Lease, (b) any state of facts which an accurate survey or physical
inspection thereof might show, and (c) all zoning regulations, restrictions,
rules and ordinances, building restrictions
and other laws and regulations now in effect or hereafter adopted by a governmental authority having
jurisdiction. Tenant developed the Premises and sold the Premises to
Landlord; Tenant acknowledges that Tenant has inspected the Premises and Tenant accepts the Premises in its existing
condition, “AS IS” and subject to all defects and

 

2

 

conditions, whether patent or
latent, and subject further to all legal requirements such as taxes, assessments, zoning, use permit requirements and
building codes, based solely on Tenant’s own inspection, analysis and
evaluation and not in reliance on any representations, warranties or information provided by or on behalf of Landlord.
Landlord makes no representation or warranty
with respect to the condition of the Premises or its fitness or availability
for any particular use or any related
matter.

 

3.

 

TERM OF LEASE

 

The effective date (the “Commencement Date”) of this Lease shall be the
date of the recording of the deed transferring ownership of the
Premises from Tenant to Landlord. Concurrently
with recording the deed, the Memorandum of Lease, a copy of which is attached hereto and incorporated herein as Exhibit “C”
shall be recorded. The expiration date of the term shall be last day of
the month twenty-four (24) years thereafter (“Term”); the foregoing period of approximately twenty-four years is referred to
herein as the “Initial Term”. The Term of Lease may be extended for two
(2) additional periods of five (5) years each (“Extension(s)”), commencing at midnight on the date on which the
Initial Term or any preceding Extension expires. Each Extension shall be automatic and the parties shall be
bound by this Lease for such Extension
unless Tenant gives Landlord notice, at least fifteen (15) months prior to the expiration of the Initial Term or preceding
Extension, that Tenant does not intend any further Extension to occur, in which case the Initial Term
or the Extension shall expire at the end of the Initial Term or the current Extension. 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.

 

4.

 

MONTHLY BASE RENT

 

4.1           Net-Net-Net
Lease; Non-Terminability

 

(a)           This is a completely ABSOLUTE NET LEASE. All costs and expenses arising out of the use and occupancy of the Premises and
the Improvements, including, but not limited to, ad valorem taxes,
maintenance, and insurance, as set forth below, are payable by Tenant. It is the intention of Landlord and Tenant that the
Monthly Base Rent (as defined below) and other sums and charges provided
herein shall be absolutely net to Landlord. Tenant shall pay all costs, charges, obligations, assessments, and expenses of
every kind and nature against or relating to the operation and/or use of the Premises and the Improvements, which may
arise, accrue or become due during the
Term hereof, or which may pertain to this transaction, 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.

 

(b)                  Except
as otherwise expressly provided herein, this Lease shall not terminate, nor
shall Tenant have any right to terminate this Lease nor shall Tenant be
entitled to any abatement or reduction of
rent hereunder, nor shall the obligations of Tenant under this Lease be
affected,

 

3

 

by reason of (i) any damage to
or the destruction of all or any part of the Premises from whatever cause, (ii) the taking of the Premises or any
portion thereof by condemnation, requisition or otherwise for any reason (iii) the prohibition, limitation or
restriction of Tenant’s use of all or any
part of the Premises, or any interference with such use, (iv) Tenant’s
acquisition or ownership of all or any
part of the Premises otherwise than pursuant to an express provision of this
Lease, or (v) any other cause whether similar or dissimilar to the foregoing,
any present or future law to the contrary
notwithstanding. It is the intention of the parties hereto that the obligations of Tenant hereunder shall be separate
and independent covenants and agreements, that the Monthly Base Rent,
the additional rent and all other sums payable by Tenant hereunder shall continue to be payable in all events and
that the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same
shall have been terminated pursuant to an express provision of this
Lease.

 

(c)           So long as Landlord is not in default beyond
expiration of all applicable cure periods, Tenant agrees that it will
remain obligated under this Lease in accordance with its terms, and that it will not take any action to terminate,
rescind or avoid this Lease, notwithstanding (i) the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidations, dissolution, winding-up or other proceeding
affecting Landlord or any assignee of Landlord in any such proceeding and (ii)
any action with respect to this Lease which may be taken by any trustee
or receiver of Landlord or of any assignee of Landlord in any such proceeding
or by any court in any such proceeding.

 

Except as otherwise expressly provided herein, and except to the extent
such waiver is invalid under applicable law, Tenant waives all
rights which may now or hereafter be conferred by law (i) to quit, terminate or
surrender this Lease or the Premises or any part thereof, of (ii) to any abatement, suspension, deferment or
reduction of the Monthly Base Rent, additional rent or any other sums
payable under this Lease.

 

4.2           Monthly
Base Rent

 

Tenant shall pay to Landlord as monthly rent the sum of Sixty Nine
Thousand Four Hundred Seventy Nine and No/100 Dollars U.S.
($69,479.00) (the “Monthly Base Rent”) per month. Monthly Base Rent shall be
payable by Tenant to Landlord in advance in equal monthly installments on the
first day of each calendar month, without prior notice, invoice, demand, deduction, or offset whatsoever, except as
expressly set forth herein. 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 Base Rent
for any partial month shall be prorated based
upon a thirty (30) day month. In the event that Tenant receives a written notice
from Landlord’s Lender (as defined in Section 13.7) instructing Tenant
to pay Monthly Base Rent and all other sums due or payable under this Lease
directly to Landlord’s Lender, Tenant shall make such payments to Landlord’s
Lender and Tenant is hereby released from liability to Landlord on account of
any such payments made by Tenant to Landlord’s Lender.

 

4

 

5.

 

INCREASES IN MONTHLY RENT

 

5.1           Monthly
Base Rent Adjustments

 

The capitalized terms used in this Section 5.1 are defined below.
Effective on each Adjustment Date, Monthly Base Rent shall be
increased by the increases in the CPI with the percentage increase to be determined by multiplying the Monthly Base
Rent then in effect by a fraction, the numerator of which shall be the Variable
Index and the denominator of which shall be the Base Index. The product thus obtained shall be payable in advance
in consecutive monthly installments
on the first day of each month until the next Adjustment Date, or the expiration of the Term, as the case may be.
Notwithstanding anything contained herein to the contrary, in no event shall the Monthly Base Rent in effect prior to an
Adjustment Date be reduced if the
change in the percentage change in the CPI is negative. 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 Base Rent
adjustments, the following terms shall have
the following meanings:

 

5.1.1        “Adjustment Date” shall mean, as the case may require, every fifth
anniversary of the Commencement Date
during the Initial Term (and every fifth anniversary of the Commencement Date thereafter during the Term in
the event Tenant exercises its option(s) for the Extension(s));
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 every fifth anniversary of the Commencement
Date.

 

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

 

5.1.3        “CPI”
shall mean the Consumer Price Index for All Urban Consumers, All Items Index Base Year 1982 - 1984 = 100, as published by
the Bureau of Labor Statistics, United States Department of Labor (U.S.
City Average), or, if such index is discontinued, the most nearly comparable index published by the Bureau of Labor Statistics
or other official agency of the United States Government.

 

5.1.4        “Initial
Monthly Base Rent” shall mean the Monthly Base 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

 

5

 

7.

 

SECURITY DEPOSIT

 

This Section was deleted Intentionally

 

8.

 

USE OF THE PREMISES

 

Tenant shall
use the Premises for a multi-purpose, interactive entertainment facility and,
with the prior written consent of Landlord which shall not be unreasonably
withheld, such other uses as permitted by
applicable zoning and use regulations and covenants, conditions and restrictions. Tenant has satisfied itself, and
represents to Landlord, that such use is lawful and conforms to all applicable zoning and other use
regulations, including without limitation all covenants, conditions and restrictions, 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 applicable requirements to the extent set forth in the
Americans with Disabilities Act). In the event that the Premises shall
cease to be operated primarily for a multi-purpose,
interactive entertainment facility, other than a temporary interruption of
operation for the purpose of remodeling, or reconstruction following
damage by casualty, Landlord shall have the
right to elect to terminate this Lease by written notice given at anytime
thereafter, and upon such termination
Tenant’s obligations under this Lease shall cease to accrue, provided Landlord’s right to terminate shall expire six (6)
months following Landlord’s receipt from Tenant of written notice of Tenant’s cessation of operation of a
multi-purpose, interactive entertainment
facility.

 

9.

 

PROPERTY TAXES, ASSESSMENTS AND UTILITIES

 

9.1           Tenant’s
Required Payments

 

As additional
rent, Tenant shall directly pay not later than forty-five (45) days prior to
delinquency, all ad valorem taxes, assessments, license fees, costs incurred
pursuant to covenants and restrictions
affecting both Landlord’s and Tenant’s interest in the Premises, and other charges
(collectively referred to as “Taxes”) levied or assessed against all
merchandise, personal property, real property, buildings and improvements, and
any other obligations which are or may become
a lien or levied against the Premises. Tenant shall provide Landlord with
evidence of payment of Taxes promptly upon request. If at any time during
the Term, the state in which the Premises are located or any political
subdivision of the state, including any county, city, county and city, public corporation, district, or any
other political entity or public corporation of that state, levies or
assesses against Landlord a tax, fee, or excise on (i) rents, including, if
applicable,

 

6

 

property taxes, insurance,
maintenance, and other costs incurred by Tenant by which Landlord may benefit;
(ii) on the square footage of the Premises; (iii) on the act of entering into
this Lease; or (iv) on the occupancy of Tenant, or levies or assesses against
Landlord any other tax, fee, or excise, however described, including, without
limitation, a so-called value added tax, as a direct substitution in whole or in part for, or in addition to, any real
property taxes, Tenant shall directly pay before delinquency that tax,
fee, or excise. It is the intention of Tenant and Landlord that all new and
increased ad valorem assessments, taxes, fees, levies, and charges, and all
similar assessments, taxes, fees, levies, and charges be included within the
definition of taxes for the purpose of this Lease.

 

9.2           Payments
Not Required by Tenant

 

Notwithstanding the foregoing, Tenant shall not be required to pay any
municipal, county, state, or federal income or franchise taxes of
Landlord, or any inheritance, or transfer taxes
of Landlord, except to the extent levied in substitution for Taxes payable
under Section 9.1 hereinabove.

 

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. If Tenant
shall elect to pay the assessment on the installment basis, then Tenant shall
pay only those installments, which
shall become due and payable or which shall accrue during the Term of this
Lease.

 

9.4           Utility Payments

 

As additional rent, 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 services, whether such payment is to be made to
Landlord or directly to the particular utility provider.

 

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

 

Tenant, at its sole cost, 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. 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. Tenant may use any means allowed by statute to
protest property tax assessments 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, during the protest period, any
Lease defaults occur and the protested taxes or assessments have not been paid,
then 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

 

7

 

Premises harmless from any
damage arising out of the proceeding or contest and shall insure the payment of
any judgment that may be rendered.

 

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 or incur any liability.
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.

 

10.

 

BUILDING AND IMPROVEMENTS; TRADE FIXTURES

 

10.1         Building
and Improvements

 

During the
Term of this Lease provided Tenant is not in default, Tenant shall have the
right to sell, transfer, convey or mortgage any or all of Tenant’s Property
without Landlord’s consent. Tenant shall not
demolish or remove the Improvements or any additions, alterations,
modifications and replacements thereto unless Tenant immediately thereafter
replaces the same with other Landlord
approved (if approval is required pursuant to Section 12.1 hereof) improvements of at least equal value and prior to
such demolition or removal provides Landlord with reasonably adequate
assurance of its timely replacement of the Improvements to be demolished or
removed. All right, title, and interest of Tenant in the Improvements and all
additions, alterations, modifications, and replacements thereto and thereof
shall cease, expire, and vest exclusively in
Landlord effective as of the expiration or any termination of this Lease.

 

10.2          Depreciation
and Investment Tax Credit

 

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

 

10.3         Trade Fixtures

 

Notwithstanding anything contained herein to the contrary, Landlord
acknowledges and agrees that the furniture, trade fixtures,
equipment, machinery, furnishings, signs, and other articles of personal property (collectively, “Trade Fixtures”) now
located or hereafter placed or installed in, on, or about the Premises shall be
and remain the property of Tenant (except as hereinafter otherwise provided), 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

 

8

 

replaced by
Tenant at any time or times prior to the expiration or earlier termination of
this Lease, provided Tenant is not in default under this Lease
and as further set forth in Section 10.4 following.
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, at its election, may remove
(i) Tenant’s movable Trade Fixtures and other personal property not permanently affixed to the Premises;
and (ii) Tenant’s signs (collectively, “Tenant’s Property”). All leasehold improvements, alterations and additions to the
Premises, HVAC equipment, permanently
attached 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 the expiration, or any termination of
this Lease. Any of Tenant’s Property not removed within sixty (60) days following the expiration or earlier
termination of this Lease shall be
deemed abandoned by Tenant and, at Landlord’s option, shall become the property
of Landlord as owner of the real
property to which they are affixed. Tenant, at its sole cost and expense, immediately shall repair any damage
occasioned to the Premises by the removal of Tenant’s Property. Upon the
expiration or earlier termination of this Lease, Tenant shall leave the Premises in a neat and clean condition, free
of debris, normal wear and tear excepted.

 

10.5         Waiver
of Landlord’s Lien

 

From time to
time, some or all of Tenant’s Property may be financed or owned by someone
other than Tenant. To the extent that any of Tenant’s Property is financed or
owned by someone other than Tenant, Landlord agrees that such Tenant’s Property
is not Landlord’s property no matter how the
same is affixed to the Premises or used by Tenant and agrees to recognize the rights of the lender, owner or
secured creditor or lessor (“Secured Party”) of Tenant’s Property. Landlord hereby waives any claim arising by way of any
Landlord’s lien (whether created by
statute or by contract but excluding any judgment lien) or otherwise with respect to Tenant’s Property and agrees, if
confirmation of said waiver is requested by Tenant, or Secured Party, to promptly sign and deliver to any
such Secured Party a waiver of any lien Landlord may have on Tenant’s Property (“Landlord’s Lien Waiver”). If
said confirmation is requested by Tenant or Secured Party, Landlord
agrees to execute and deliver Landlord’s Lien Waiver
within fifteen (15) days from Tenant’s or Secured Party’s request therefore or
Landlord shall have conclusively
deemed to have granted confirmation of Landlord’s Lien Waiver thereafter and Landlord agrees that tenant and
any Secured Party may thereafter rely thereon and Landlord shall be estopped from raising any claim
of lien on Tenant’s Property. Landlord also agrees that all of Tenant’s
Property that is not subject to an interest from Secured Party shall be the property and remain the property of Tenant or
Tenant’s assignee or transferee.

 

9

 

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 at least equal to the condition at the
Commencement Date, 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. The Premises shall be returned to Landlord at the termination or
expiration of this Lease in good condition at least equal to the
condition at the Commencement Date, ordinary wear excepted. In the event of destruction of the Premises by fire or casualty,
the condition of Premises upon termination of this Lease shall be governed by Section 14 or Section
15, respectively.

 

11.2         Obligation to Keep the Premises Clean

 

Tenant shall
keep the Premises, including sidewalks adjacent to the Premises and loading area
allocated for the use of Tenant, reasonably clean and free from rubbish and debris
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.

 

11.3         Compliance with Law

 

Tenant shall,
at its sole expense, fully, diligently and in a timely manner comply with and shall cause the Premises to comply with all
applicable laws, building codes, regulations, ordinances, rules, directives, covenants, or restrictions of record, the
requirements of any applicable
insurance underwriter or rating bureau, which relate in any manner to the
Premises or any part thereof,
including without limitation all conditions imposed upon the development of the Premises (collectively, “Applicable
Requirements”), without regard to whether such Applicable Requirements are now in effect or
become effective hereafter, including those which require the making of any
structural, unforeseen or extraordinary changes, whether or not any of the
same, involve a change in applicable law or requirements. Tenant shall, within
10 days after receipt of Landlord’s written request (which request shall be
made not more often than annually, other than in connection with a sale or
refinancing by Landlord as to the Premises in which case such request may be made at any time), provide
Landlord with copies of all permits and other documents, and other information evidencing Tenant’s compliance with any
Applicable Requirements specified by
Landlord, and shall immediately upon receipt, notify Landlord in writing (with copies of any documents involved) of
any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the
failure of Tenant or the Premises to comply with any Applicable
Requirements.

 

10

 

12.

 

REPAIRS AND ALTERATIONS

 

12.1         Right
to Make Alterations

 

(a)           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 Premises, including the redevelopment
of the Premises for a new or related use, as permitted by Section 8. In the event that Tenant shall perform
construction, erection, modification, repair, or alteration of the Premises (“Work”), Tenant shall comply with the
provisions of this Section 12. Except as specified in Sections 10.1 and 10.4, any Improvements and any
alterations, additions, or replacements thereto which may be made or
installed by Tenant shall remain upon the Premises and, at the termination or
expiration of this Lease, shall be surrendered with the Premises to Landlord. It shall be a condition of the
performance of any Work that: (i) the market value of the Premises shall
not thereby be lessened, and (ii) all Work shall be done in a workmanlike
manner with only high quality building
materials and shall comply with all applicable building codes and other applicable laws, ordinances, regulations and
orders of all federal, state, county and local governmental agencies having jurisdiction over the Premises and the
requirements of any insurance policy
required to be maintained by Tenant hereunder and with the orders, rules and regulations of the National Fire Protection
Association or any other body exercising similar functions. The Work and all additions, alterations, substitutions and
replacements of a value in excess of
two hundred thousand dollars ($200,000.00) will be done under the supervision
of a certified architect or engineer
and shall be performed only by competent and qualified contractors duly licensed under the laws of the
State of California pursuant to written contracts with such contractors.
In the event that Work costing in excess of five hundred thousand dollars ($500,000.00) is to be performed, Landlord may
require that Tenant’s contractor furnish performance and lien payment bonds
issued by a licensed corporate surety on terms and conditions and in amounts satisfactory to
Landlord.

 

12.2         Tenant
Shall Not Render Premises Liable For Any Lien

 

(a)           Tenant shall have no right, authority, or power to
bind Landlord, or any interest of Landlord in the Premises, 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. At all times
during the Term, Tenant shall keep the
Premises and all Improvements now or hereafter located on the Premises
free and clear of all liens and claims of liens for labor, services, materials,
supplies, or equipment performed on or furnished to 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 or beyond 30 days after
service on Tenant of written request from Landlord to remove such lien
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 collection.

 

11

 

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. Should Tenant fail to pay and discharge or cause the Premises
to be released from any such lien or claim of
lien within 30 days after service on Tenant of written request from Landlord to
do so, Landlord may pay, adjust,
compromise and discharge any such lien or claim of lien on such terms
and manner as Landlord may deem appropriate. In such event, Tenant shall, on or
before the first day of the next calendar
month following any such payment by Landlord, reimburse Landlord for the
full amount paid by Landlord in paying, adjusting, comprising, and discharging
such lien or claim of lien, including any attorneys’ fees and other costs
expended by Landlord, together with interest as provided herein from the date
of payment by Landlord to the date of repayment by Tenant.

 

(b)           Landlord
shall, at any and all times during the Term, have the right to post and maintain on the Premises and to record as required
by law any notice or notices of nonresponsibility
provided for by the mechanics’ lien laws of the State of California. Tenant shall give Landlord written notice not less than
15 days’ prior to the time Landlord must file and post such notice of
non-responsibility for its full force and effect under the law. In the event
that Tenant shall perform the Work
utilizing only its direct employees, which employees are not hired specially for the performance of the Work,
and the value of materials used in performance of the Work, to the extent the
same are not fully paid for in advance of delivery to the Premises, is less than twenty-five thousand dollars
($25,000.00), then Tenant need not give Landlord notice as required in this subsection (b).

 

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 to the extent caused by 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, or licensees of Tenant or
any such person, in, on, or about the Premises, either prior to or during the 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, from
the 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

 

12

 

persons by reason of injury to
persons or damage to property occasioned by any use, occupancy, condition, occurrence, happening, act, omission,
or negligence referred to in the preceding sentence. The provisions of
this Section shall survive the expiration or sooner termination of this Lease
with respect to any claims or liability occurring prior to such expiration or
termination, and shall not be limited by reason of any insurance carried by
Landlord and Tenant.

 

13.2         Exculpation
of Landlord

 

Landlord shall
not be liable to Tenant for any damage to Tenant or Tenant’s property for any
cause, except for any damage to Tenant or Tenant’s property resulting from the
willful acts and negligence of Landlord or its authorized representatives.
Tenant waives all claims against Landlord for damage to person or property arising,
or asserted to have arisen, for any reason, except that Landlord shall be
liable to Tenant for any damage to Tenant resulting from the willful acts and
negligence of Landlord and its authorized agents, provided that under no
circumstances shall Landlord be liable for any injury to Tenant’s business or
for any loss of income or profit. Subject to the foregoing provisions, Landlord
agrees to, and does hereby indemnify and hold Tenant and its officers,
directors, employees, agents and affiliates and their respective assets free
and harmless against and from any and all liabilities, claims, losses, damages,
and expenses (including attorneys’ fees and court costs) resulting from or
arising out of Landlord’s failure to perform any of Landlord’s obligations
under this Lease when and as required by the terms hereof.

 

13.3         Insurance Company Requirement

 

Insurance
required by this Lease shall be issued by companies holding a general
policyholder’s rating of at least A VII 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.

 

13.4         Insurance Certificate Requirements

 

13.4.1                        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.

 

13.4.2                  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. A stipulated value or agreed amount
endorsement deleting the co-insurance provision
to the building policy shall be procured.

 

13.5         Minimum Acceptable Insurance Coverage Requirements

 

13.5.1                        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

 

13

 

its appurtenant areas. The insurance shall be in an amount not less
than Three Million and No/100 Dollars
($3,000,000.00) per occurrence. The policy shall provide blanket contractual liability coverage. In addition,
Tenant shall, at Tenant’s expense, obtain and keep in full force during the Term of this Lease an umbrella liability
policy in an amount not less than
Ten Million and No/100 Dollars ($10,000,000.00) in excess of primary insurance. The insurance required to be carried by
Tenant hereunder shall be primary and
not contributory to any other insurance maintained by Landlord.

 

13.5.2      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 (“All Risks,” as such term is
used in the insurance industry). The policy shall include a code upgrade endorsement. 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 earthquake and/or flood, subject to reasonable and customary limits and provisions for Southern
California.

 

13.5.3        Tenant shall also obtain and keep in force during
the Term of this Lease a policy of Business Interruption insurance covering
loss of income against all perils listed in Section 13.5.2, on an actual
loss sustained basis for a period of recovery required (or that would have been required, subject to a
maximum of twelve (12) months) to resume  normal operations.

 

13.5.4      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 Five Hundred
Thousand and No/100 Dollars
($500,000.00).

 

13.6         Additional
Insureds

 

Tenant shall name as additional Insureds on all insurance, Landlord,
Landlord’s successor(s), assignee(s), nominee(s), nominator(s),
and agents with an insurable interest as follows:

 

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

 

14

 

13.7          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 Premises (excluding the Improvements) (“Landlord’s Lender”)
with loss payable to such holder or holders as their interests may appear.

 

13.8         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 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 pay to Landlord, as additional rent, an amount equal to the total
cost of premiums and expense of such insurance placement. Tenant shall not do
or permit to be done anything, which shall invalidate the insurance policies.
If Tenant does or permits to be done anything which shall increase the cost of
the insurance policies, then upon Landlord’s demand Tenant shall immediately
pay to Landlord, as additional rent, an amount equal to the additional premiums
attributable to any acts or omissions or operations of Tenant causing the
increase in the cost of insurance.

 

13.9         Adjustment
of Claims

 

Insurance
claims by reason of damage to or destruction of any portion of the Premises shall
be adjusted by Tenant, but Landlord and Landlord’s Lender shall have the right
to join with Tenant in adjusting any such loss, and Tenant shall provide them
both with ample notice and opportunity to do so. If the entire amount of any
proceeds paid pursuant to any such claim shall not exceed $100,000 then such
proceeds paid pursuant to any such claim shall be paid to Tenant by the
recipient thereof but only upon certificates of Tenant, delivered to Landlord
from time to time as the work of rebuilding, replacing and repairing the damage
or destruction to the Premises required hereunder progresses, each such
certificate describing such work for which Tenant is requesting payment, the
cost incurred by or payment sought from Tenant in connection therewith and
stating that Tenant has not theretofore received payment for such work. If the
entire amount of any proceeds paid pursuant to any such claim shall exceed
$100,000 then such proceeds paid pursuant to any such claim shall be held in a
trust fund or construction disbursement escrow designated by Landlord, which
may be administered by Landlord’s Lender or established at a place and with a
trustee or administrator of Landlord Lender’s choosing, and disbursed to Tenant
in a commercially reasonable manner that assures the lien free completion of
the rebuilding, replacements and repairs; provided, however, that any insurance
proceeds remaining after the repair, restoration, reconstruction and/or
replacement of the damaged or destroyed buildings or improvements has been
completed to the satisfaction of Landlord (the “Remaining Insurance Proceeds”)
shall be allocated between Tenant and Landlord as follows: (i) that percentage
of the Remaining Insurance Proceeds which equals the percentage of the
unexpired portion of the Initial Term, at the time the repair, restoration,
reconstruction and/or replacement of the damaged or destroyed buildings has
been completed, shall belong to and be the sole property of Tenant;

 

15

 

and that percentage of the
Remaining Insurance Proceeds which equals the percentage of the expired portion of the Initial Term, at the time
the repair, restoration, reconstruction and/or replacement of the
damaged or destroyed buildings has been completed, shall belong to and be the sole property of Landlord. No payment of any
proceeds shall be made to Tenant pursuant to this Section if any default shall have happened and be continuing under
this Lease unless and until such
default shall have been cured or removed; during the pendency of such default
if this Lease has not been terminated, Landlord shall either hold such proceeds
in an escrow or similar account for application subject to the provisions
hereof or apply the same to the restoration of the Improvements or if the Lease
has been terminated Landlord shall retain all such proceeds.

 

13.10       Separate Insurance

 

Tenant shall
not obtain or carry separate insurance concurrent in form or contributing in
the event of loss with that required in this Section 13 to be furnished by
Tenant unless Landlord is included therein
as a named insured, with loss payable as in this Lease provided. Tenant shall immediately
notify Landlord whenever any such separate insurance is obtained and shall
deliver to Landlord the policies or
certificates evidencing the same.

 

13.11       Waiver of Subrogation

 

Without affecting any other rights or remedies, Landlord and Tenant
each hereby release and relieve the other, and waive their right
to recover damages against the other, for loss of damage to its respective property arising out of or incident to the
perils required to be insured against herein and actually so insured.
The effect of such release and waivers is not limited by the amount of insurance carried or required, or
by any deductibles applicable thereto. Landlord and Tenant agree to have their
respective property damage insurance carriers waive any right to subrogation
that such companies may have against Landlord or Tenant, as the case may be, so
long as the insurance is not invalidated
thereby.

 

14.

 

PARTIAL AND TOTAL DESTRUCTION OF THE PREMISES

 

14.1         Obligation to Repair and Restore

 

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 substantially repair and restore the
Premises to its original condition, including buildings and all other
improvements on the Premises, as soon as circumstances permit. Tenant shall hold Landlord free and harmless from any and
all liability of any nature whatsoever resulting
from such damage or destruction, and such repairs and restoration. Tenant, and
not Landlord, shall be responsible for paying for any cost of repairs and
restoration in excess of the proceeds available from insurance policies
procured by Tenant.

 

14.2         Termination of Lease If Repair or Restoration Not
Feasible

 

Notwithstanding
the provisions of Section 14.1, in the event any substantial portion or all of the Premises shall at any time during the Term
of this Lease be damaged or destroyed,

 

16

 

regardless of cause, and the
Premises cannot be legally repaired or restored to substantially the same condition and use in existence prior to such
damage or destruction (Tenant hereby agrees that it shall use its best
efforts to so repair or restore the Premises, including, without limitation,
applying for and prosecuting all necessary governmental approvals), Tenant
shall have the right to terminate this Lease
by giving Landlord sixty (60) days written notice of its intention to terminate the Lease, provided that (i) Tenant has
maintained all insurance required by this Lease, (ii) the loan by Landlord’s Lender is paid in full prior to such
termination and (iii) all insurance proceeds relating to the Premises
(including the Improvements), including any excess coverage maintained by Tenant, shall be first applied to
the payment in full of the loan by Landlord’s Lender, including, if necessary, the continuation of the debt service
payments under said loan until a
defeasance is permitted under said loan, and thereafter Tenant shall be
entitled to and receive a portion of
the remaining insurance proceeds in an amount equal to the product of (a) the remaining insurance proceeds after the loan
by the Landlord’s Lender has been paid in full multiplied by (b) the percentage
of the unexpired portion of the Initial Term at the time of such damage or destruction and Landlord shall be
entitled to and receive a portion of the remaining insurance proceeds in an amount equal to the product of (c) the
remaining insurance proceeds after the
loan by the Landlord’s Lender has been paid in full multiplied by (d) the percentage equal to the expired portion of the
Initial Term at the time of such damage or destruction. In the event of such damage or destruction and the Premises
cannot be repaired or restored to
substantially the same condition and use in existence prior to such damage or destruction and Tenant elects not to terminate
this Lease as provided above, all insurance proceeds relating to the Premises (including the Improvements),
including any excess coverage maintained by Tenant, shall be allocated
between Tenant and Landlord as follows: Tenant shall be entitled to and receive a portion of the insurance proceeds for such
damage or destruction in an amount
equal to the product of (w) the insurance proceeds for such damage or
destruction multiplied by (x) the percentage of the unexpired portion of
the Initial Term at the time of such damage
or destruction and Landlord shall be entitled to and receive a portion of the
insurance proceeds for such damage or
destruction in an amount equal to the product of (y) the insurance proceeds for such damage or destruction multiplied
by (z) the percentage equal to the expired portion of the Initial Term at the time of such damage or destruction and
Tenant shall not be entitled to any
rent abatement.

 

14.3         Damage
or Destruction During Last Five Years of Lease Term

 

Notwithstanding
the provisions of Sections 14.1 and 14.2, in the event that any part or all of
the Premises shall be damaged or destroyed, regardless of cause, during the
last five (5) years of the Term, then Tenant may terminate this Lease and shall
not be obligated to restore the Premises, provided that (i) Tenant has
maintained at least all insurance required by this Lease, (ii) all insurance proceeds relating to the
Improvements, including any excess coverage maintained by Tenant, shall be paid to Landlord prior to such termination
and shall be retained by Landlord and (iii) the loan by Landlord’s
Lender (defined in Section 13.7) is paid in full prior to such termination.
Tenant is not otherwise entitled to any rent abatement during or resulting from
any disturbance on or partial or total destruction of the Premises.

 

17

 

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
independently in seeking damages before the condemning body, each party
shall be entitled to the amount awarded respectively to each, except that Landlord and Tenant further agree as
follows.

 

15.1.1            Notwithstanding
anything herein to the contrary, the compensation or damages awarded or payable for the taking of the Premises (including,
without limitation, the Improvements) shall first be applied to the
payment in full of the loan by Landlord’s Lender,
including, if necessary, the continuation of the debt service payments under
said loan until a defeasance is permitted under said loan;

 

15.1.2            That
percentage of the compensation or damages awarded or payable for the taking of improvements which equals the
percentage of the expired portion of the Initial Term at the time of the taking shall belong to and be the sole
property of Landlord and the
percentage equal to the unexpired portion of the Initial Term at the time of
the taking shall belong to and be the
sole property of Tenant.

 

15.1.3            Any
portion of the award attributable to Tenant’s furniture, fixtures, and equipment installed in the Premises in accordance
with this Lease which are to remain in the Premises as a result of such taking
shall belong to Tenant.

 

15.1.4            All
compensation or damages awarded or payable for the taking by eminent domain of any land that is part of the
Premises shall be paid to and be the sole property of Landlord free and clear of any claim of Tenant or any
person claiming rights to the
Premises through or under Tenant.

 

15.1.5      For purposes of this Section any compensation or
damages awarded or payable because of
the taking by eminent domain of all or any portion of the Premises shall be
allocated between the land and any improvements so taken in accordance with any allocation made by the court in any eminent
domain proceeding. If the court does not make any such allocation, or if
Landlord should voluntarily convey title to all or a portion of the Premises pursuant to section 15.1.6
below, then that portion of any compensation
or damages awarded which is equal to the then fair market value of any land
within the Premises that is taken by eminent domain (the “Land Value”) shall be
deemed compensation or damages
awarded for the taking of such land, and the remainder of any compensation or damages awarded shall be
deemed to be compensation or damages
awarded for the taking of any improvements constructed or located on the Premises taken by eminent domain. The Land Value
shall be determined as though the Premises were not subject to this Lease or
any other lease or encumbrance and shall be established as follows:

 

18

 

(i)                 Landlord and Tenant shall attempt in good faith to
agree on the Land Value. If Landlord
and Tenant do not agree on the Land Value within ten business days after
such taking, the Land Value shall be determined by appraisal in accordance with paragraphs (ii) through (iv)
below.

 

(ii)                                  Within ten business days after any taking, each
party hereto shall deliver to the
other a written notice appointing as such party’s appraiser a disinterested person with at least 10 years’ experience as a
real estate appraiser, who shall be a member
of a recognized society of real estate appraisers and shall have had experience in appraising industrial properties in
Los Angeles, California and its environs.

 

(iii)                               Within
ten business days after the appointment of the second of the two appraisers,
the two appraisers shall jointly appoint a third appraiser whose qualifications meet the standards set forth above.

 

(iv)                              Within 30 days after the appointment of the second
appraiser, the first two appraisers shall make their respective determinations
of the Land Value and shall submit their appraisal reports to Landlord and
Tenant.

 

The Land Value shall be
conclusively deemed to be the arithmetic average of the two fair market values
shown in the appraisal reports submitted by the first two appraisers; provided, however, that if within 30
days after the appointment of the second appraiser only one appraisal report
shall have been submitted, the Land Value shall be conclusively deemed to the fair market value shown
in such appraisal report; and provided
further that if two appraisal reports are submitted within 30 days after the appointment of the second appraiser and if the
difference between the two appraised values
is greater than 10% of the higher appraised value, then upon the written
request of either Landlord or Tenant made within five business days
after the submission of the second appraisal
report, the third appraiser shall be instructed to select as the Land Value one
of the appraised values determined by the first two appraisers. The value so
selected shall be conclusively deemed to be the Land Value.

 

15.1.6                                                                  Landlord reserves the right in its sole
discretion to voluntarily convey title to all or a portion of the
Premises to a public or quasi-public agency or entity in lieu of and under threat by such agency or entity to take
the same by eminent domain proceedings,
provided that Landlord shall give Tenant prior notice of intent or willingness to voluntarily convey title. Such
voluntary conveyance by Landlord of title to all or a portion of the
Premises to a public or quasi-public agency or entity in lieu of and under threat by such agency or entity to take
the same by eminent domain proceedings shall be considered a taking of
title to all or such portion of the Premises under
the power of eminent domain subject to the provisions of this Section 15.

 

15.2                           Termination of Lease Due to Condemnation

 

In the event that the Condemnation materially
adversely affects the use, operation or economic viability of the Premises, Tenant may terminate the Lease by
giving Landlord sixty

 

19

 

(60) days’ written notice of its intention to terminate the Lease after
receiving notice of the Condemnation
from the condemning authority, provided the loan by Landlord’s Lender is paid
in full prior to such termination.
The effective date of the termination shall be the actual date of such taking. In the event of termination, the rent
for the last month of Tenant’s occupancy shall be prorated and Landlord shall refund to Tenant any rent paid in
advance and Tenant shall thereupon be
released from its obligation to pay rent.

 

16.

 

ASSIGNMENT AND SUBLETTING

 

16.1                           Tenant’s Right of Assignment and Subletting

 

Except as otherwise provided in this Section 16.1, Tenant shall not
voluntarily or by operation of law assign
its interest in this Lease or in the Premises, or sublease all or any substantial
part of the Premises, or allow any other person or entity to occupy all or use
any substantial part of the Premises, without
first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld.
Subject to Section 16.4, Tenant, without the consent of Landlord, shall be permitted to assign its
interest in this Lease or sublease all or any substantial part of the Premises to an affiliate of Tenant or to any
other entity who acquires all or substantially
all of Tenant’s assets. Any assignment or sublease of all or any substantial
part of the Premises without Landlord’s consent (if so required) 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.  It shall be a condition of
any transfer of Tenant’s interest under this Lease that Tenant provide Landlord
with the written consent of all
guarantors of Tenant’s obligations under this Lease (collectively, the “Guarantors”) to such transfer and the Guarantors’
written acknowledgement of their continuing liability under the guarantees and Lease.  In connection with any permitted transfer
hereunder, Tenant may provide
Landlord with additional direct Guarantor(s) affiliated with such proposed
transferee, provided that neither Tenant nor any Guarantor shall be released of
their respective obligations under
this Lease as the result of any such transfer.

 

16.2                               Landlord’s Option to Preserve Subtenancies

 

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

 

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

 

Intentionally Omitted.

 

20

 

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, nor shall any transfer release any Guarantor or
change any Guarantor’s liability to pay rent or perform any other obligation of
Tenant under this Lease.  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 and without relieving Tenant’s
liability under this Lease.  No
assignment or sublease made as permitted by this Section 16 shall affect or
reduce any of the obligations of Tenant hereunder, and all such obligations
shall continue in full effect as obligations of a principal and not as
obligations of a guarantor or surety, to the same extent as though no
assignment or subletting had been made. 
No sublease or assignment made as permitted by this Section 16 shall
impose any obligations on Landlord or otherwise affect any of the rights of
Landlord under this Lease.  Tenant shall,
within 10 days after the execution and delivery of any such assignment, deliver
a conformed copy thereof to Landlord, and within 10 days after the execution
and delivery of any such sublease, Tenant shall give notice to Landlord of the
existence and term thereof, and of the name and address of the sublessee
thereunder.

 

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

 

21

 

17.

 

DEFAULT

 

17.1                           Default

 

Any of the following occurrences or acts shall constitute an event of
default (“Event of Default”) under this Lease: (i) if Tenant, at any time
during the continuance of this Lease (and regardless of the pendency of any
bankruptcy, reorganization, receivership, insolvency or other proceedings, in
law, in equity, or before any administrative tribunal, which have or might have
the effect of preventing Tenant from complying with the terms of this Lease),
shall (a) fail to make any payment of Monthly Base Rent, additional rent or
other sum herein required to be paid by Tenant when due, and Tenant shall fail
to make any such payment within ten (10) days of written notice to Tenant of
such default, provided, however, that after Tenant has failed to timely make
such payment on three (3) occasions during the preceding five (5) year period
during the term of this Lease, said ten (10) day period shall be reduced to
five (5) days for any monetary default thereafter occurring after such payment
has become due; or (b) fail to observe or perform any other provision hereof
for thirty (30) days after Landlord shall have delivered to Tenant notice of
such failure (provided that Landlord shall in no event be required to deliver a
notice to Tenant in connection with Tenant’s failure to provide a notice to
Landlord as required under this Lease), (further provided that in the case of
any default referred to in this clause (b) which cannot with diligence be cured
within such thirty (30) day period, if Tenant shall proceed promptly to cure
the same and thereafter shall prosecute the curing of such default with
diligence, then the time within which such failure may be cured shall be
extended for such period not to exceed an additional sixty (60) days as may be
necessary to complete the curing of the same with diligence; provided, however,
that Tenant shall not be entitled to cure such breach or default that is not susceptible
to cure or that is non-curable according to the terms hereof); or (ii) the
abandonment or vacation of the Premises by Tenant; or (iii) any voluntary or involuntary
assignment, transfer, encumbrance or subletting of this Lease in violation of
the provisions hereof; or (iv) if Tenant shall file a petition in bankruptcy or
for reorganization or for an arrangement pursuant to any present or future
federal or state bankruptcy law or under any similar federal or state law, or
shall be adjudicated a bankrupt or insolvent or shall make an assignment for
the benefit of its creditors or shall admit in writing its inability to pay its
debts generally as they become due, or if a petition or answer proposing the
adjudication of Tenant as a bankrupt or its reorganization under any present or
future federal or state bankruptcy law or any similar federal or state law
shall be filed in any court and such petition or answer shall not be discharged
or denied within 90 days after the filing thereof; or (v) if a receiver,
trustee or liquidator of Tenant of all or substantially all of the assets of
Tenant or of the Premises shall be appointed in any proceeding brought by
Tenant, or if any such receiver, trustee or liquidator shall be appointed in
any proceeding brought against Tenant and shall not be discharged within 90
days after such appointment, or if Tenant shall consent to or acquiesce in such
appointment.

 

17.2                           Remedies

 

Upon the occurrence of any Event of Default, and
without the giving of any additional notice not otherwise required
hereunder or by law, Landlord may exercise the following rights

 

22

 

and remedies in addition to all other rights and remedies provided by law
or equity, either cumulatively or in
the alternative:

 

(a)                                  Terminate
Tenant’s right to possession of the Premises by any lawful means, in which case
this Lease shall terminate and Tenant shall immediately surrender possession of
the Premises to Landlord.  In such event
Landlord shall be entitled to recover from Tenant: (i) the unpaid Rent that had
been earned at the time of termination; plus (ii) the worth at the time of
award of the amount by which the unpaid Rent that would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus (iii) the worth at the
time of award of the amount by which the unpaid Rent for the balance of the
Term after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus (iv) any other amounts necessary to
compensate Landlord for all the detriment proximately caused by Tenant’s failure
to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys’ fees, and that
portion of any leasing commission paid by Landlord in connection with this
Lease applicable to the unexpired Term. The worth at the time of award of the
amount referred to in clause (iii) of the immediately preceding sentence shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).  If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Landlord shall have the
right to recover in such proceeding any unpaid Monthly Base Rent, Rent and
damages as are recoverable therein, or Landlord may reserve the right to
recover all or any part thereof in a separate suit. If any notice required
under Section 17.1 was not previously given, a notice to pay rent or quit, or
to perform or quit given to Tenant under the unlawful detainer statute shall
also be deemed to constitute the notice required by Section 17.1. In such case,
any applicable grace period required by Section 17.1 and the unlawful detainer
statute shall run concurrently, and the failure of Tenant to cure the event of
default within the greater of the two such grace periods shall constitute both
an unlawful detainer and an event of default entitling Landlord to the remedies
provided for in this Lease and/or by said statute.

 

(b)                                 Maintain
this Lease and Tenant’s right to possession of the Premises in effect and
continue to enforce all of Landlord’s rights and remedies hereunder, including
the remedy described in California Civil Code Section 1951.4 (granting the
Landlord the right to continue a lease in effect after a tenant’s breach and
abandonment and to recover all rent as it becomes due if the tenant has the
right to sublet or assign, subject only to reasonable limitations).  Acts of maintenance or preservation or
efforts to relet the Premises or the appointment of a receiver upon initiative
of Landlord to protect Landlord’s interest under this Lease shall not
constitute a termination of this Lease or Tenant’s right to possession unless
written notice of termination is given by Landlord to Tenant.

 

(c)                                  Pursue any other remedy now or hereafter available
under the laws or judicial decisions
of the State of California. The expiration or termination of this Lease and/or

 

23

 

the termination of Tenant’s right to possession
shall not relieve Tenant from liability under any indemnity provisions of this Lease as to matters occurring or
accruing during the Term or by reason of Tenant’s occupancy of the Premises.

 

17.3                           Landlord’s Self-Help

 

If Tenant fails to perform any affirmative duty
or obligation under this Lease within ten (10) business days after written notice (or in case of an emergency,
without notice), the Landlord may,
at its option, perform such duty or obligation on Tenant’s behalf, including
the obtaining of reasonably required
bonds, insurance policies, or governmental permits, licenses and approvals. The costs and expenses of any such performance by
Landlord shall be due and payable by Tenant as additional rent upon
Landlord’s written demand. If any check given to Landlord by Tenant shall not
be honored by the bank upon which it is drawn, Landlord, at its option, may require that all future payments by Tenant to
Landlord be made by bank cashier’s check or wire transfer of immediately available funds.

 

17.4                               Intentionally Omitted

 

17.5                               No Waiver

 

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

 

17.6                               Late Charge

 

If Tenant fails to pay within five (5) days of the
due date of any payment of rent or other charges which Tenant is obligated to pay to Landlord under this Lease,
there shall be a late charge,
immediately payable by Tenant as additional rent, in the amount of one percent
(1%) of each such obligation. Landlord and Tenant agree that this sum is
reasonable to compensate Landlord for
accounting and administrative expenses incurred by Landlord. 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, said interest to
be payable by Tenant as additional rent. Landlord and Tenant agree that this sum is reasonable to compensate
Landlord for the loss of the use of
funds.

 

17.7                               Multiple Remedies. No Waiver

 

No right or remedy herein conferred upon or
reserved to Landlord is intended to be exclusive
of any other right or remedy, and each and every right and remedy shall be
cumulative

 

24

 

and in addition to any other right or remedy given hereunder or now or
hereafter existing at law or in
equity or by statute or elsewhere provided in this Lease. The failure of
Landlord to insist at any time upon the strict performance of any
covenant or agreement or to exercise any option, right, power or remedy contained in this Lease shall not be construed as
a waiver or relinquishment thereof
for the future. A receipt by Landlord of any Monthly Base Rent, any additional rent or any other sum payable hereunder
with knowledge of the breach of any covenant
or agreement contained in this Lease shall not be deemed a waiver of such
breach, and no waiver by Landlord of
any provision of this Lease shall be deemed to have been made unless expressed in writing and signed by Landlord. In
addition to other remedies provided in this Lease, except as expressly otherwise provided, Landlord shall be
entitled, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the
covenants, agreements, conditions or provision of this Lease, or to a decree compelling performance of any of the
covenants, agreements, conditions or provisions of this Lease, or to any other
remedy allowed to Landlord at law or in equity.

 

17.8                               Tenant Waiver

 

Tenant hereby waives and surrenders for itself and
all those claiming under it, including creditors of all kinds, (i) any
right and privilege which it or any of them may have under any present or future constitution, statute or rule of
law to redeem the Premises or to have a continuance of this Lease for the term hereby demised after termination
of Tenant’s right or occupancy by order or judgment of any court or by any
legal process or writ, or under the terms of this Lease, or after the
termination of the term of this Lease as herein provided, and (ii) the benefits of any present or future constitution,
statute or rule of law which exempts property from liability for debt or for
distress for rent.

 

17.9                               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 17.9 shall specify the alleged breach
and the applicable Lease provisions. If Landlord shall at any time default beyond the applicable notice and cure period,
Tenant shall have the right to cure
such default on Landlord’s behalf. Any sums expended by Tenant in doing so, and
all reasonably necessary incidental costs and expenses incurred in connection
therewith, shall be payable by Landlord to Tenant within thirty (30) days
following demand therefor by Tenant, provided,
however, that Tenant shall not be entitled to any deduction or offset against
any rent otherwise payable to Landlord under this Lease.

 

18.

 

RIGHT OF
INSPECTION

 

Landlord and Landlord’s authorized representatives
shall have the right after written notice
to Tenant, to enter upon the Premises at all reasonable hours for the purpose
of inspecting

 

25

 

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 (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.

 

26

 

	
  If to Landlord:

  	
  With a copy to:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Krausz Companies, Inc.

  	
  Orrick, Herrington & Sutcliffe LLP

  
	
  Attn: F. Ron Krausz

  	
  Attn: Richard C. Mendelson, Esq.

  
	
  2212 Madrona Ave.

  	
  777 S. Figueroa Street, Suite 3200

  
	
  St. Helena, California 94574

  	
  Los Angeles,
  California 90017

  
	
  Phone: (707) 963-7516

  	
  Phone: (213) 612-2480

  
	
  Fax: (707) 963-7596

  	
  Fax: (213) 612-2499

  
	
   

  	
   

  
	
  and

  	
   

  
	
   

  	
   

  
	
  Krausz Companies, Inc.

  	
   

  
	
  Attn: Mr. Amos Z. Krausz

  	
   

  
	
  651 Gateway Boulevard, Suite 1010

  	
   

  
	
  South San Francisco, California 94080

  	
   

  
	
  Fax: (650) 871-4063

  	
   

  
	
   

  	
   

  
	
  If to Tenant:

  	
  With a copy to:

  
	
   

  	
   

  
	
  Malibu Centers, Inc.

  	
  Munsch Hardt Kopf & Harr, P.C.

  
	
  Attn: R. Scott Wheeler, CFO

  	
  Attn: Michael A.
  Krywucki, Esq.

  
	
  717 North Harwood, Suite 1650

  	
  1445 Ross Avenue, Suite 4000

  
	
  Dallas, Texas 75201

  	
  Dallas, Texas 75202

  
	
  Phone Number:
  (214) 210-8760

  	
  Phone Number: (214) 855-7522

  
	
  Fax Number: (214) 210-8702

  	
  Fax Number:
  (214) 855-7584

  

 

 

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.

 

27

 

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 or any renewal, extension, or
replacement thereof, unless and until Landlord provides Tenant with an
agreement (“Non-Disturbance Agreement”), signed and acknowledged by each holder
of any such interest setting forth that so long as Tenant is not in default
hereunder, Landlord’s and Tenant’s rights and obligations hereunder shall
remain in force and Tenant’s right to possession shall be upheld.  The Non-Disturbance Agreement may contain
additional provisions as are customarily requested by secured lenders with
liens encumbering real property security similar to the Premises. 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.  Without limiting Tenant’s obligations
hereunder, Tenant acknowledges that the Subordination and Non-Disturbance
Agreement attached hereto as Exhibit “D” is in compliance with the requirements
of this Section and Tenant agrees to execute a Subordination and
Non-Disturbance Agreement in such form.

 

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 any applicable 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
or Landlord, as the case may be, shall execute and deliver to the other party, within thirty (30) days after receipt of request
therefor, any estoppel certificate or other statement to be furnished to any prospective purchaser of or
any lender against the Premises. Such

 

28

 

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 such party has no notice of any prior
assignment, hypothecation, or pledge
of rents or the Lease. Such estoppel certificate shall also set forth any other matter pertaining to this Lease which a party
may reasonably require the other to certify. Without limiting the foregoing, 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.

 

22.4                           Protection of Landlord’s Mortgagee

 

If Landlord encumbers its interest in the Premises by mortgage, Landlord
or its Mortgagee(s) may give Tenant written notice of that fact, which
notice shall state the name and address of
the mortgagee. If Tenant shall be so notified in writing of such encumbrance
and of the name and address of the Mortgagee named therein, then so long
as such encumbrance shall continue in force, notice of the default in the
performance of any of the covenants contained in this Lease, of the same kind and in the same manner and for the same
length of time as is required to be
given to the Landlord, shall also be given to such Mortgagee, extended as set
forth herein, before Tenant may
terminate this Lease or otherwise, as against such Mortgagee, take advantage of any default by Landlord.  Upon elapse of the time permitted Landlord to
cure without Landlord effecting a
cure, Tenant shall give Landlord’s Mortgagee(s) a second written notice stating such fact.  Such Mortgagee shall have the right to cure
any such default within forty-five
(45) days after such second notice if the same can be cured by the payment of
money, or as to other defaults, to undertake in writing to perform and
thereafter pursue in good faith the performance
of all the covenants of this Lease capable of performance by the Mortgagee or
its assigns, and in such event
Landlord shall have no right to terminate this Lease by reason of such default.
In the event of such cure or undertaking, the Mortgagee shall be subrogated to
the rights of Tenant against Landlord
with respect to such default.

 

23.

 

TENANT’S FINANCIAL STATEMENTS

 

During
the Term of the Lease, Tenant shall provide Landlord (a) within forty-five (45)
days after the end of each fiscal
quarter of Tenant’s parent company, quarterly operating statements detailing property specific operating
results as to the Premises for such period and (b) current financial statements within one hundred
twenty (120) days of the end of each fiscal year,

 

29

 

which shall include Tenant’s and
each Guarantor’s profit and loss statement, balance sheet, statement of changes in financial positions and
notes to the financial statements, and property specific operating results as
to the Premises. All such financial statements and information shall be
certified by Tenant’s Chief Financial Officer or each Guarantor’s Chief
Financial Officer, respectively, as
applicable.

 

24. 

 

ATTORNEYS’ FEES

 

24.1                           Recovery of Attorneys’ Fees and Costs of Suit

 

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

 

24.2                           Party to Litigation

 

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

 

24.3                           Landlord’s
Consent

 

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

 

30

 

25.

 

LEASEHOLD MORTGAGE

 

25.1                           Tenant’s
Right to Encumber

 

Tenant may, at any time and from time to time
during the Term, with the written consent of Landlord’s Lender, which consent shall not be unreasonably withheld,
mortgage, collaterally assign or
otherwise encumber any interest that Tenant has in this Lease or in the
improvements located on the Premises (the “Leasehold Estate”) to any
nationally recognized bank, insurance company or other institutional lender or
such other lender as may be approved by Landlord (such approval not to be unreasonably withheld), herein
called “Tenant’s Mortgagee,” by deed of trust or mortgage or other security instrument (as
applicable, the “Security Instrument” or “Mortgage”) as security for an indebtedness (“Debt”), on the
further condition, with respect to all permitted financings, that:

 

(a)                                  The Security Instrument and all rights acquired
under it shall, by its express terms,
be subject to each and all of the covenants, conditions and restrictions stated
in this Lease and to all rights and interests of Landlord;

 

(b)                                 Tenant shall deliver to Landlord (i) a complete
and correct copy of the Security Instrument
and all related promissory notes, loan agreements, security agreements,
indemnity agreements, guarantees,
financing statements and other loan documents executed by Tenant or for Tenant’s benefit in connection therewith (the
“Loan Documents”), each as fully executed and delivered, within ten (10) business days after the
execution thereof, and (ii) a complete and correct of the recorded
Security Instrument, conformed by the recorder to show the date or recordation and other recording information, within
five business days after the date of recordation;

 

(c)                                  The Security Instrument shall expressly provide
that any proceeds from fire or extended
coverage insurance shall be used to repair or rebuild the damaged or destroyed improvements on the Premises or as otherwise
expressly provided herein;

 

(d)                                 The Security Instrument shall contain a provision
that all notices of default under the Loan Documents must be sent to
Landlord and Tenant and that Landlord shall have fifteen (15) business days in which to cure any default
after the time for Tenant to cure it has expired (provided that if
Landlord requires possession of the Premises in order to cure the default, then
Landlord shall have, in addition to such 15
day period, such further time as is needed to terminate Tenant’s right to possession of the Premises), and neither
Landlord’s right to cure any default nor any exercise of such right shall
constitute an assumption of liability under any Loan Document;

 

(e)                                  Tenant shall immediately reimburse Landlord for
the cost of any default cured by Landlord with interest thereon as provided in Section
17;

 

(f)                                    No
encumbrance incurred by Tenant pursuant to this Section or otherwise shall, and Tenant shall not have power to incur any
encumbrance that will, constitute in any way a lien or encumbrance on Landlord’s fee title to the
Premises or on any other interest of Landlord in the

 

31

 

Premises.  Landlord and Tenant hereby agree that no
merger of estates shall occur if Tenant subsequently acquires Landlord’s fee interest in the Premises; and

 

(g)                                 The Security Instrument shall provide that (i)
upon a foreclosure of the Security Instrument, Tenant’s Mortgagee shall
not remove the Improvements on the Premises from the Premises and (ii)
following a foreclosure Tenant’s Mortgagee shall operate the Premises in accordance with the terms of this Lease.

 

25.2                           Rights of Tenant’s Mortgagee

 

25.2.1                  If Tenant enters into a Mortgage in accordance with
the provisions of Section 25.1 and
Tenant’s Mortgagee notifies Landlord of the execution of a Mortgage and names the place for service of notice upon
Mortgagee, then:

 

25.2.2                  Landlord shall make such changes or modifications
to this Lease, with the exception of
those provisions of this Lease concerning rent, length of term or other economic matters, as are reasonably requested by
any potential Tenant’s Mortgagee.

 

25.2.3                  Landlord
will give to any Tenant’s Mortgagee, simultaneously with service on Tenant,
notices of all demands made by Landlord on Tenant and no such notice to Tenant
shall be effective unless a copy is so served upon Tenant’s Mortgagee.

 

25.2.4                  Tenant’s
Mortgagee shall have the privilege, in accordance with the provisions hereof,
of performing any of Tenant’s covenants, curing any defaults by Tenant, and
exercising any election, option or privilege conferred upon Tenant by the terms
of this Lease.

 

25.2.5                  Landlord shall not terminate this Lease or Tenant’s
right of possession for any default
of Tenant if, within a period of thirty (30) days after the expiration of the period of time within which Tenant might cure such
default, such default is cured or caused to be cured by Tenant’s
Mortgagee or, if within a period of thirty (30) days after the expiration of the period of time within which
Tenant might commence to eliminate the
cause of such default, Tenant’s Mortgagee diligently commences to eliminate the
cause of such default and within
sixty (60) days thereafter cures such default.

 

25.2.6                  No liability for the payment of Rent or the
performance of any of Tenant’s covenants and obligations of this Lease
shall attach to or be imposed upon any Tenant’s Mortgagee, while not in possession of the Premises, all such liability
being hereby expressly waived by
Landlord.

 

25.2.7                  No provision of this Lease which restricts the use
of the Premises to less than for any
lawful purpose, requires the Premises to be used for a particular purpose, or requires or implies specified times of business
operation shall be binding upon a Tenant’s Mortgagee in possession or its successors in interest; provided however
that in all events there shall be no
derogation or diminishment of Landlord’s right to terminate this lease upon a cessation of use or change in use from a
multi-purpose, interactive entertainment facility, as set forth in
Section 8 of this Lease, further provided that upon Tenant’s Mortgagee’s written request, the time for
Landlord’s election to terminate shall be tolled,

 

32

 

and
Landlord shall not by reason of such cessation of use terminate this Lease,
during such period of time during which Tenant’s Mortgagee diligently
and in good faith seeks to sublease or
assign Tenant’s leasehold interest to a transferee who will operate the Premises as a multi-purpose, interactive
entertainment facility.

 

25.2.8                  No amendments or modifications of this Lease shall
occur without the prior written
consent of Tenant’s Mortgagee, not to be unreasonably withheld or delayed.

 

25.2.9                  Tenant’s Mortgagee shall have the right to
participate in casualty and condemnation
settlements as Tenant’s successor-in-interest.

 

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. Each party shall, within 15 days after request, deliver to the
other party satisfactory evidence of such authority.

 

26.2                               Quiet Enjoyment

 

Landlord covenants and warrants that Tenant, so
long as Tenant performs all of its obligations
hereunder, shall have and enjoy full, quiet, and peaceful possession of the
Premises, its appurtenances and all rights and privileges incidental thereto
during the Term, 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 used in or about the Premises in violation of applicable
Environmental Laws by Tenant, its agents, employees, contractors, or invitees, without the prior written consent of Landlord
(which consent shall not be required
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.) Notwithstanding the foregoing, Landlord acknowledges that Tenant’s
use of racing and entertainment equipment

 

33

 

requires the use and storage of petroleum and other automotive related
products on the Premises, which will not be
in violation of this Section so long as Tenant’s use complies with applicable Environmental Laws.  Tenant acknowledges that Landlord acquired
the Premises in a purchase from Tenant and that at no time has Landlord
been in occupancy of the Premises; Tenant agrees that Tenant and not Landlord shall be responsible for any contamination
of the Premises in violation of applicable Environmental Laws to the extent
that Landlord did not cause such contamination.  If Tenant breaches the obligations stated
herein or if there is contamination of the
Premises in violation of applicable Environmental Laws and Landlord did not
cause such 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 Landlord results in any
contamination of the Premises in violation
of applicable Environmental Laws, Tenant shall promptly take all actions at its
sole expense as are recommended by
environmental engineers hired by Tenant and are necessary to return the
Premises to a condition in compliance with applicable Environmental Laws;
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 effect on the
value of 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 the responsibility of Landlord or the responsibility of Tenant including
the following: (i) Hazardous Material present in the soil or ground water on
the Premises prior to 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, except to the extent caused by
Landlord. 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.

 

34

 

27.3         Survival

 

Provisions of this
Section 27 shall survive termination of this Lease.

 

27.4         Reporting and Inspections

 

(a)            Handle,” “Handled” or “Handling” shall mean any
installation, handling, generation, storing,
treatment, use, disposal, discharge, release, manufacture, refinement, emission, abatement, removal, transportation,
presence or migration of any Hazardous Materials brought on the Premises by Tenant or Tenant’s Representatives, or any
other activity or any type in connection with or involving Hazardous Materials.
“Tenant’s Representatives” shall mean all Tenant’s officers, employees, contractors, representatives, assignees,
sublessees, agents, invitees, and any trespassers on the Premises.

 

(b)            Tenant shall deliver to Landlord prior to delivery
to, or promptly after receipt from, any governmental authority or other person
or entity copies of all permits, manifests, closure or remedial action
plans, notices, investigations, inquiries, claims, citations, summons, complaints, writs, orders and all other
communications or documents relating to (i) the Handling of Hazardous Materials
at or about the Premises, (ii) the actual, alleged or threatened violation of Environmental Law or (iii) the liability of Tenant
for environmental losses. Any communications,
written or oral, regarding any release, discharge, emission or any other occurrence
posing an imminent threat of damage or contamination to the Premises or the environment shall be delivered or, if oral,
communicated, to Landlord within 24 hours after receipt. All other
communications shall be delivered to Landlord within 10 days after receipt. Landlord shall have no obligation to review or
evaluate any such communication and shall not be deemed to have approved, consented to or participated in any act or
omission described or required by
such communication.

 

(c)        Tenant shall
maintain, at its own expense, a written program to ensure and monitor Tenant’s
continued compliance with this Section 27 and all Environmental Requirements. At Landlord’s request, Tenant shall
provide Landlord with a copy of such program,
including monitoring results; provided, however, that Tenant acknowledges that
such program will be supplied to Landlord solely for informational purposes,
and that Landlord shall have no obligation to review the information provided,
shall not be deemed to have approved or consented to any matter set forth
therein, and shall have no liability for any deficiencies therein. Landlord agrees not to disclose to any third
parties the contents of any such written program provided by Tenant, unless Tenant consents to such disclosure; provided,
however, Landlord may disclose such
information on a confidential basis to its attorneys, property managers or its
other agents, or as required in connection with the procurement of insurance or
financing, or as required pursuant to any contract pertaining to Landlord, or
as required by law. Tenant shall, at its sole expense, prior to the expiration
or termination of this Lease, promptly remove from the Premises, using the then
best available technology, all Hazardous Materials Handled by Tenant or Tenant’s
Representatives during the Term (collectively, “Lease Closure”),
notwithstanding any lesser standard
of removal or remediation which might be allowable under applicable law or governmental policies, and perform or cause to be
performed all actions necessary, as determined by Landlord in its
reasonable business judgment, to ensure that Lease Closure has been completed, including inspection, testing and
post-Lease Closure monitoring. Tenant, at its

 

35

 

sole expense, shall
repair any damage caused by such work and unless otherwise requested by
Landlord, shall close, at the completion of all testing and monitoring, in accordance
with applicable law, any and all monitoring and extraction wells and boreholes
installed as a result of or in connection with Tenant’s occupancy of the
Premises or otherwise installed by Tenant, or at Tenant’s direction. All
consultants or contractors performing work on behalf of Tenant pursuant to this
Section 27 shall be qualified and licensed to undertake the applicable work and
shall be selected by Tenant; provided that Landlord shall be notified of the
selected consultant(s) at least 10 business days prior to the commencement of
any work by such consultant(s) (except in an emergency, in which case Landlord
shall be notified within one business day after the selection of the
consultant(s)) and Landlord shall have the right to disapprove the use of such
consultant(s) in the exercise of Landlord’s reasonable business judgment. All
work required to be performed under this Section 27, and Tenant’s and Tenant’s
Representatives’ Handling of all Hazardous Materials, shall be performed in a
good, safe and workmanlike manner and in a manner that will not interfere with
the use, operation, leasing or sale of the Premises.

 

(d)           Tenant shall deliver to Landlord copies of all
permits, authorizations, plans and reports,
and supporting documentation therefor, including any Hazardous Materials
management plan, which are required by law or by any governmental authority
with respect to Tenant’s use or proposed
use of the Land and the Work, including any Handling of Hazardous Materials.
The provisions of this Section 27
shall apply to all Hazardous Materials, whether or not Landlord has given Tenant its consent to Handle such Hazardous
Materials. Tenant’s and Tenant’s Representatives’
Handling of all Hazardous Materials shall comply at all times with all Environmental Laws and Tenant shall, at its own
expense, promptly take all actions required by any governmental authority in connection with Tenant’s or Tenant’s
Representatives Handling of Hazardous Materials at or about the Premises.
Tenant shall keep Landlord fully and promptly informed of all Handling of
Hazardous Materials on the Premises, including notifying Landlord as soon as
possible after any spill, release, discharge or emission.

 

(e)           Landlord, Landlord’s Lender, and either of their
representatives and consultants shall have the right, but not the
obligation, to enter the Premises at any reasonable time upon 24 hours’ prior
notice (except in the case of an emergency) not more than once each calendar
year or at any time in connection with a sale or refinancing of the Premises or
if Landlord has reason to believe that a violation of applicable requirements
or a contamination exists (i) to inspect the condition of the Premises and
review all permits, reports, plans and other documents regarding the Handling of Hazardous Materials (and Tenant
shall, at its option, have the right to have its own representative present
during any onsite inspections), (ii) to confirm Tenant’s compliance with the provisions of this Section 27,
including the right to physically investigate the condition of the Land
and the Work and review all permits, reports, plans, and other documents
regarding the Handling of Hazardous Materials, (iii) to perform Tenant’s
obligations under this Section 27 if Tenant
has failed to timely do so. Tenant shall pay the costs of Landlord’s
consultants’ fees and all other costs incurred by Landlord pursuant to
clauses (i) and (ii) above if such investigation is undertaken because Tenant
has failed to provide full and complete information regarding any release, discharge
or other Handling of Hazardous Materials and shall pay, in any case, all such costs incurred pursuant to clause
(iii) above and shall pay all reasonable costs of Landlord incurred with respect to the above in the
event a violation of applicable requirements or a contamination is found to
exist or be imminent, so long as such inspection is reasonably related

 

36

 

to the violation or contamination, or the inspection is requested or
ordered by a governmental authority.

 

(f)            Landlord shall have the right, but not the
obligation, to require, annually during the Term and again within five
(5) business days after the termination or expiration of the Term, that a detailed review (“Environmental Audit”)
be undertaken to determine whether the Premises and Tenant’s Handling of
all Hazardous Materials comply with this Section 27. Tenant shall pay all costs incurred in connection with any
Environmental Audit required by Landlord, including without limitation, the costs and expenses of all
consultants and sampling and analysis, in the event that (i) as a result
of the Environmental Audit, it is determined
that the Premises or Tenant’s
Handling of all Hazardous Materials do not comply with this Paragraph 27, or (ii) the Environmental Audit is undertaken at the
termination or expiration of the Term. In all other cases, Landlord shall pay the costs of any
Environmental Audit it requires pursuant to this Section 27. The Environmental Audit shall be conducted by independent, qualified,
licensed environmental consultants
selected by Tenant and reasonably acceptable to Landlord. If the consultants
chosen by Tenant are unacceptable to Landlord, Landlord shall be entitled to
engage its own consultants to conduct the
Environmental Audit, and Tenant shall pay Landlord’s consultants’ fees
and all costs incurred by Landlord in performing the Environmental Audit. The
Environmental Audit shall include an inspection of the Premises, interviews
with the occupants of the Premises and any
other matters which the consultants believe, in the exercise of their professional judgment, are necessary to ascertain
whether the Premises are in compliance with this Section 27, including the installation of monitoring wells,
and soils and water testing. Tenant
shall fully cooperate with the consultants and comply with all information
requests. After the completion of the
Environmental Audit, a written report shall be prepared and copies shall
be distributed to both Landlord and Tenant. In connection with any
Environmental Audits, Landlord shall use commercially reasonable efforts not to
interfere with Tenant’s use or operations of the Premises.

 

(g)           In the event of any release, discharge or other
event caused or contributed to by the
acts or omissions of Tenant or Tenant’s Representatives which poses a threat of
damage or contamination to the
Premises or the environment, whether discovered by Landlord or Tenant, Tenant
shall fully document the facts relating to the event, including the
circumstances existing prior to and
after the occurrence of the event, the precise nature of the release, discharge
or event, including specific compounds and quantities involved, and all
actions Tenant has taken and will take to
remediate the release, discharge or event. Tenant shall provide such documentation
to Landlord promptly after the occurrence in question. Tenant shall pay the reasonable costs and fees charged by Landlord’s
environmental consultants to review such documentation and provide peer review confirming the adequacy of the
measures, past and future, taken by
Tenant to remediate the problem.

 

(h)           Landlord and Tenant agree that the statute of
limitations shall be tolled from the date
of this Lease through the expiration or termination of this Lease (including any
Extension Periods) for any and all
claims Landlord may have against Tenant arising out of any leak, release or discharge of Hazardous Materials or in
connection with any remediation of any such leak, release or discharge.

 

37

 

28.

 

GENERAL
PROVISIONS

 

28.1         Gender: Number

 

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

 

28.2         Captions

 

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

 

28.3         Exhibits

 

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

 

28.4         Entire
Agreement

 

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

 

28.5         Drafting

 

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

 

28.6         Modification

 

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

 

28.7         Joint and Several Liability

 

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

 

28.8         Governing Law

 

Any action brought by Landlord against Tenant in
connection with this Lease or any matter
that in any way relates to the transactions contemplated by this Lease may be
brought by Landlord in any court of competent jurisdiction, wherever
located, having personal jurisdiction

 

38

 

over Tenant. The
judgment in any such action may be enforced by any court of competent jurisdiction wherever located. Any action brought
by Tenant against Landlord in connection with this Lease or any matter that in any way relates to the
transactions contemplated by this Lease
shall be brought by Tenant in any court of competent jurisdiction in the State
of California. Regardless of who
initiates an action or the jurisdiction and/or venue in which such action is brought, the Lease and all matters that
in any way relate to the transactions contemplated
by this Lease shall be governed by the laws of the state in which the Premises
are located (without regards to questions as to conflicts of law).

 

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 both outside counsel and 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.

 

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 all or any portion of the Premises (of
whose address tenant has theretofore been

 

39

 

notified) and an
opportunity is granted to Landlord and such holder to correct such violation as
provided above.

 

28.14       Right of First Offer

 

At such time and from time to time, should Landlord desire to sell
Landlord’s Interest in the Premises, or any
larger tract of land of which the Premises may be a part (“Landlord’s Interest”) to a third party unaffiliated with
Landlord, Landlord shall give Tenant written notice of such desire. Within thirty (30) days of Tenant’s
receipt of such notice, Tenant, if Tenant desires to purchase Landlord’s Interest, shall give
Landlord notice of its intention to purchase Landlord’s Interest and the price and other material economic
terms and conditions on which it offers to make such purchase. In the event Tenant does not provide Landlord with
such offer within said thirty (30)
day period, Landlord may thereafter sell Landlord’s Interest to such persons or
entities and on such terms as Landlord may choose in its sole and
absolute discretion and after any such sale
such right of first offer shall not apply to any subsequent sales. In the event
that Tenant timely provides to
Landlord its offer to purchase Landlord’s Interest, Landlord will have an option to either sell Landlord’s Interest to Tenant
on the terms and conditions set forth in Tenant’s notice (such option to
be exercised by notice to Tenant within one year after the giving of Tenant’s notice) or to sell the Premises to a
third party for a price not less than 95% of the price (taking into account such other material economic terms and
conditions and Tenant’s obligations to pay the Tenant Closing Costs), or
to not sell Landlord’s Interest until such time as Landlord again gives notice to Tenant under this subsection 28.14. If
Landlord shall notify Tenant within such one year period that it has
sold the Premises at a price which is not less than 95% of the price set forth
in Landlord’s offering notice (but no such sale shall be made at a price less than 95% of the same price offered by Tenant
without first sending Tenant a new notice as to the changed price and any such changed terms and conditions, in which
event Tenant shall have a further period in which to elect to purchase
at the new price or on the changed terms and conditions,
as aforesaid, said further period to be thirty (30) days), all rights of Tenant
under this subsection 28.14 shall be deemed void and of no further force
and effect. In addition, if a sale to a third
party is not effected by Landlord within the aforesaid one year period, and
Tenant does not at such time elect
to purchase the Premises at the price and other material economic terms on which
Tenant made its original offer, the rights of Tenant under this subsection
28.14 shall also be deemed void and of no
further force and effect. Notwithstanding anything in this subsection 28.14 to the contrary, this subsection 28.14
shall not apply to a transfer of Landlord’s Interest: (i) to any entity or person which is related to,
affiliated with, or under common or shared control with Landlord or any
person or entity which owns or controls any portion of Landlord’s Interest in the Premises, or with any constituent partner
or member of either of the foregoing, or (ii) to or from an intermediary in connection with Landlord’s
effectuation of an exchange involving the Premises pursuant to and including,
without limitation, applicable case law or Section 1031 of the Internal Revenue Code, as amended, or (iii)
made pursuant to a mortgage or deed of trust covering the Premises which
does not involve a transfer, sale or other conveyance of fee title to the Premises. Notwithstanding anything to the
contrary contained herein, Tenant’s rights under this Section 28.14 are and shall remain unconditionally subordinate and
junior to any deed of trust or
security instrument encumbering Landlord’s interest in the Premises by Landlord
in favor of Landlord’s Lender (defined
in Section 13.7) and any transfer or sale of Landlord’s interest in the Premises to Tenant shall be
subject to the terms of the Lender’s Documents

 

40

 

(defined in Section 28.23) pertaining to any such transfer or sale of
the Landlord’s interest in the Premises.

 

28.15       Procedure Upon Purchase

 

(a)        In the event of the purchase of the Premises or
any part thereof by Tenant pursuant to any provision of this Lease, Landlord
need not transfer and convey to Tenant or its designee
any better title thereof than existed on the date of the commencement of this
Lease (as such title may have been
altered in accordance with the provisions hereof), and Tenant shall accept such title, subject, however, to all liens,
encumbrances, charges, exceptions and restrictions on, against or
relating to the Premises and to all applicable laws, regulations and ordinances, but free of the lien of Landlord’s
Mortgage (if not assumed) and free of liens, encumbrances, charges,
exceptions and restrictions which have been created by or resulted from acts
of Landlord after the commencement of this Lease, to the extent the same are
not permitted hereunder.

 

(b)           Upon the date fixed for any such purchase of the
Premises pursuant to any provision of this Lease, Tenant shall pay to
Landlord at its address set forth above, or at any other place designated by Landlord, the purchase price therefor
specified herein, and Landlord shall
deliver to Tenant (i) a grant deed which describes the Premises or portion
thereof then being sold to Tenant and conveys and transfers the title
thereto which is described in paragraph 18(a),
together with (ii) such other instruments as shall be necessary to transfer to
Tenant or its designee any other
property then required to be sold by Landlord pursuant to this Lease. Tenant shall pay all charges incident, to such
conveyance and transfer, including its own counsel fees, one-half of the escrow fees and recording fees,
the entire amount of title insurance premiums and all applicable federal, state
and local taxes (other than any income or franchise taxes levied upon or assessed against Landlord) which may be
incurred or imposed by reason of such conveyance and transfer and by reason of the delivery of said deed and other
instruments (the “Tenant Closing
Costs”).

 

28.16       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.

 

28.17       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.

 

41

 

28.18       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.

 

28.19       Limitation on Landlord’s Liability

 

The obligations of Landlord under this Lease shall
not constitute personal obligations of Landlord or its individual directors,
officers, employees or affiliates, and Tenant shall look to the Premises, and
not to any other assets of Landlord, for the satisfaction of any liability of
Landlord with respect to this Lease,
and shall not seek recourse against Landlord or its individual directors, officers, employees or affiliates, or
any of their personal assets for such satisfaction.

 

28.20       Consents

 

Whenever
the consent, approval, judgment or determination of Landlord is required or permitted under any provision of this Lease,
Landlord may exercise its good faith business judgment in granting or withholding such consent or approval or in making
such judgment or determination
without reference to any extrinsic standard of reasonableness, unless the
provision for such consent, approval,
judgment or determination specifies that Landlord’s consent or approval is not to be unreasonably withheld, or
that such judgment or determination is to be reasonable, or otherwise specifies the standards under which Landlord may withhold its consent. If it is determined that Landlord failed to give
its consent where it was required to do so under this Lease, Tenant shall be entitled to specific performance but not to
monetary damages for such failure.
Landlord’s actual reasonable costs and expenses (including architects’,
attorneys’, engineers’ and other consultants’ fees) incurred in the
consideration of, or response to, a request by
Tenant for any Landlord consent, including consents to an assignment, a
subletting or the presence or use of
a Hazardous Materials, shall be paid by Tenant upon receipt of an invoice and
supporting documentation therefor. Landlord’s consent to any act, assignment or
subletting shall not constitute an
acknowledgment that no Event of Default by Tenant of this Lease exists, nor shall such consent be deemed a waiver of any then
existing Event of Default, except as may be otherwise specifically stated in
writing by Landlord at the time of such consent. The failure to specify herein
any particular condition to Landlord’s consent shall not preclude the
imposition by Landlord at the time of
any future consent of such further or other conditions as are then reasonable
with reference to the particular matter for which consent is being given. In
the event that either party disagrees with
any determination made by the other hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail within 10 business days after such
request. The review or approval by
Landlord of any item to be reviewed or approved by Landlord under the terms of this Lease shall not impose upon Landlord any
liability for accuracy or sufficiency of any such item or the quality or
suitability of such item for its intended use. Any such review or approval is
for the sole purpose of protecting Landlord’s interest in the Premises or under
this Lease, and no third parties, including
Tenant or the representatives and visitors or Tenant or any person or entity claiming by, through or under Tenant,
shall have any rights hereunder.

 

42

 

28.21       Reservations of Landlord

 

Landlord reserves to itself the right, from time
to time and without the consent or joinder of Tenant, to grant such easements,
rights and dedications as Landlord may deem necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not
unreasonably interfere with the use, operation or economic viability of the Premises by Tenant.
Tenant agrees to sign any documents reasonably requested by Landlord to effectuate any such easement rights,
dedication, map or restrictions.

 

28.22       Construction of Lease

 

This Lease shall be construed fairly as to all
parties and not in favor of or against any party, regardless of which
party prepared this Lease. Whenever the context requires, all words used in the singular will be construed to have been
used in the plural, and vice versa, and each gender will include any
other gender. The captions of the sections and paragraphs of this Lease are for convenience only and do not define or
limit any terms or provisions. Unless otherwise specifically provided, references in this Lease to sections, paragraphs
and exhibits shall be to sections, paragraphs and exhibits of or to this
Lease. All exhibits hereto are incorporated herein by the references thereto in this Lease. The use in this Lease of the
word “include” or any derivative
thereof shall be construed as providing examples or illustration only and shall
not limited the generality of any
provision in which it is used. As used in this Lease, the term “business
day” means any day on which commercial banks are open for business in the State
of California, and the term “day” means a calendar day when not expressly
stated to be a business day. If any period or deadline specified in this Lease
ends or falls on a day that is not a business day,
such period or deadline shall be extended to end or fall on the next succeeding
business day. Wherever used in this Lease, the symbol “$” refers to
dollars in currency of the United States of America.

 

28.23       Conflict Between Terms
of Lease and Loan Documents of Landlord’s Lender

 

In the event of a conflict or inconsistency
between the terms and provisions of this Lease and the terms and provisions of
the loan documents evidencing a loan by Landlord’s Lender (the “Lender’s
Documents”), Tenant agrees that such conflicting or inconsistent terms and
provisions of the Lender’s Documents shall govern and control; provided,
however, that such conflicting or inconsistent
terms and-provisions of the Lender’s Documents shall be reasonably acceptable
to Tenant. Notwithstanding the foregoing, Tenant acknowledges and agrees that
the terms and provisions of the Lender’s Documents of Northland/Marquette
Capital Group, Inc., the initial Landlord’s Lender, are reasonable and shall
govern and control in the event of any conflict or inconsistency with
the terms and provisions of this Lease. Landlord agrees to use reasonable
efforts to cause the requirements of any future Lender’s Documents not to be in
conflict or inconsistent with the
requirements contained in this Lease.

 

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43

 

IN WITNESS
WHEREOF, the parties have
executed this Lease as of the dates set forth in their respective
acknowledgments.

 

	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
  MALIBU CENTERS, INC,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. SCOTT WHEELER

  
	
   

  	
  Name:

  	
  R.
  SCOTT WHEELER

  
	
   

  	
  Title:

  	
  VICE PRESIDENT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  NEWPORT EXCHANGE PROPERTIES,

  LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  The First American Financial

  Corporation, a California corporation,

  its Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
							

 

44

 

IN
WITNESS WHEREOF, the parties have executed this Lease as of
the dates set forth in their respective acknowledgments.

 

	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
  MALIBU CENTERS, INC.,

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  NEWPORT EXCHANGE PROPERTIES,

  LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  The First American Financial

  Corporation, a California corporation,

  its Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Antony Alosi

  
	
   

  	
   

  	
  Name:

  	
  Antony Alosi

  
	
   

  	
   

  	
  Title:

  	
  Attorney-in-Fact
  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Holly J. Feagins

  
	
   

  	
   

  	
  Name:

  	
  Holly J. Feagins

  
	
   

  	
   

  	
  Title:

  	
  Attorney-in-Fact

  
								

 

45Exhibit 10.26

 

CHICAGO TITLE INSURANCE CO.

 

Recording Requested By,

 

When Recorded Return To:

Machtinger LLP Greenberg
Glusker Fields Claman &,

1900 Avenue of the Stars,
Suite 2100

Los Angeles, California 90067-4590

Attn: Henry Finkelstein, Esq.

 

 

PUENTE HELLS EAST - CITY OF
INDUSTRY

RECIPROCAL EASEMENT AGREEMENT

 

THE TRUSTEES UNDER THE WILL AND
ESTATE OF

JAMES CAMPBELL, DECEASED

 

And

 

COSTCO WHOLESALE CORPORATION

 

 

	
  EXHIBITS

  
	
  A

  	
   

  	
  Estate Tract Legal

  
	
  B

  	
   

  	
  Existing Site Plan

  
	
  C

  	
   

  	
  New Site Plan

  
	
  D

  	
   

  	
  Costco Tract Legal

  
	
  E

  	
   

  	
  New Castleton Right of Way
  and Planned Street Abandonment

  
	
  F

  	
   

  	
  Possible Annexation Area
  Legal and Plan

  
	
  G

  	
   

  	
  Commercial Center Legal

  
	
  H

  	
   

  	
  Commercial Center Plan

  
	
  I

  	
   

  	
  List of Existing Leases

  
	
  J

  	
   

  	
  Costco Elevations

  
	
  K

  	
   

  	
  Construction Phasing Plan
  Drawing

  
	
  L

  	
   

  	
  Construction Phasing Plan
  Narrative Requirements

  
	
  M

  	
   

  	
  Preliminary Version of the
  Common Area Plans for Costco’s Initial Work

  
	
  N

  	
   

  	
  Certain Exclusives -
  Existing Tenants

  
	
  O

  	
   

  	
  Sign Program

  

 

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I.

  	
  2

  
	
  ARTICLE II.

  	
  10

  
	
  2.1 Common Area Easements

  	
  10

  
	
  2.2 Restriction

  	
  13

  
	
  2.3 Gasoline Sales Area

  	
  14

  
	
  2.4 Initial Reconstruction of Common Area and Castleton Street

  	
  14

  
	
  ARTICLE
  III.

  	
   

  	
  14

  
	
  3.1 Castleton Street Relocation

  	
  14

  
	
  3.2 Costco’s Initial Work

  	
  15

  
	
  3.3 Costco Completion Schedule

  	
  15

  
	
  3.4 Construction Phasing and Practices Plan

  	
  16

  
	
  3.5 Additional Mitigation Measures

  	
  16

  
	
  3.6 Costco Indemnification for Costco’s Initial Work

  	
  16

  
	
  3.7 Opening of Costco Store

  	
  17

  
	
  3.8 Plans for Future Construction

  	
  17

  
	
  3.9 Common Area Plans and Standards

  	
  18

  
	
  3.10 General Requirements

  	
  18

  
	
  ARTICLE
  IV.

  	
  20

  
	
  4.1 Parking Requirements

  	
  20

  
	
  4.2 Certain Site Plan Changes

  	
  22

  
	
  4.3 Building Improvements

  	
  22

  
	
  4.4 Interim Operation Under Existing Site Plan

  	
  24

  
	
  ARTICLE
  V.

  	
   

  	
  24

  
	
  5.1 Utilities

  	
  24

  
	
  5.2 Maintenance of Common Area

  	
  25

  
	
  5.3 Maintenance of Building Improvements/Seasonal Outside Sales
  Area(s)

  	
  32

  
	
  5.4 Commercial Center Common Facilities

  	
  33

  
	
  5.5 Maintenance Under Certain Existing Leases.

  	
  34

  
	
  ARTICLE
  VI.

  	
   

  	
  34

  
	
  6.1 Uses

  	
  34

  
	
  6.2 Lighting

  	
  37

  
	
  6.3 Signs

  	
  38

  
	
  6.4 Insurance

  	
  39

  
	
  6.5 Right to Self-Insure.

  	
  41

  
	
  6.6 Taxes and Assessments

  	
  42

  
	
  6.7 Liens

  	
  42

  

 

 

	
  ARTICLE
  VII.

  	
   

  	
   

  	
  42

  
	
  7.1 Annexation of Additional Property

  	
  42

  
	
  7.2 Separate Configuration

  	
  43

  
	
  7.3 Interim Operation.

  	
  43

  
	
  ARTICLE
  VIII.

  	
   

  	
  43

  
	
  8.1 Term of this REA

  	
  43

  
	
  ARTICLE
  IX.

  	
   

  	
  44

  
	
  9.1 Transfer of Entire Interest

  	
  44

  
	
  9.2 Multiple Ownership

  	
  44

  
	
  9.3 Limitation on Transfer

  	
  45

  
	
  9.4 Fractional Interests

  	
  46

  
	
  ARTICLE
  X.

  	
   

  	
  46

  
	
  10.1 Default

  	
  46

  
	
  10.2 Interest

  	
  48

  
	
  10.3 Estoppel Certificate

  	
  48

  
	
  10.4 Notices

  	
  48

  
	
  10.5 Approval Rights

  	
  49

  
	
  10.6 Condemnation

  	
  50

  
	
  10.7 Binding Effect

  	
  51

  
	
  10.8 Singular and Plural

  	
  51

  
	
  10.9 Counterparts and Signature Pages

  	
  51

  
	
  10.10 Negation of Partnership

  	
  51

  
	
  10.11 Not a Public Dedication

  	
  51

  
	
  10.12 Force Majeure Event.

  	
  51

  
	
  10.13 Severability

  	
  51

  
	
  10.14 Amendments

  	
  51

  
	
  10.15 Captions and Capitalized Terms

  	
  52

  
	
  10.16 Mitigation of Damages

  	
  52

  
	
  10.17 REA Shall Continue Notwithstanding Breach

  	
  52

  
	
  10.18 Time

  	
  52

  
	
  10.19 Nonwaiver

  	
  52

  
	
  10.20 Right of Contest

  	
  52

  
	
  10.21 Governing Law

  	
  52

  
	
  10.22 Indemnity and Release

  	
  52

  
	
  10.23 Joint Preparation

  	
  53

  
	
  10.24 Effect of Other Agreements

  	
  53

  
	
  10.25 Lenders

  	
  54

  

 

 

PUENTE HILLS EAST — CITY OF INDUSTRY

 

RECIPROCAL EASEMENT AGREEMENT

 

THIS
RECIPROCAL EASEMENT AGREEMENT (“REA”) is made and entered into as of December      ,
2000, by and between COSTCO WHOLESALE CORPORATION, a  Washington corporation (“Costco”), and THE
TRUSTEES UNDER THE WILL AND OF THE ESTATE OF JAMES CAMPBELL, DECEASED, acting
in their fiduciary and not in their individual capacities (the “Estate”).

 

R E C I T A L S

 

A.             The Estate is the fee owner of that certain
tract of land and all improvements located thereon in Los Angeles County,
California, which is legally described in Exhibit “A” attached hereto and
identified as the “the Estate Tract” (the “Estate Tract”) on the site plan of
the “Shopping Center” as it is presently configured, which is attached hereto
as Exhibit “B”(the “Existing Site Plan”), and on the site plan of the Shopping
Center as it is contemplated to be reconfigured to incorporate the “Costco
Store,” which is attached hereto as Exhibit “C” (the “New Site Plan”).

 

B.             Costco is the fee owner of that certain tract
of land and all improvements located thereon in Los Angeles County, California,
which is legally described in Exhibit “D” attached hereto and identified as the
“Costco Tract” (the “Costco Tract”) on the Existing Site Plan.

 

C.             The Costco Tract presently includes certain
land which is subject to an Irrevocable Offer to Dedicate in favor of the City
of Industry for the contemplated relocation of Castleton Street (as designated “New
Castleton Right of Way” on Exhibit “E”) and does not presently include certain
land which is expected to become the property of Costco upon the completion of
the vacation or abandonment of the superseded portion of Castleton Street (as designated
“Planned Street Abandonment” on Exhibit “E”). Upon the City of Industry’s acceptance
of the dedication of such New Castleton Right of Way, the relocated portion of Castleton
Street shall no longer be deemed apart of the “Costco Tract,” Upon the completion
of the vacation or abandonment of such superseded portion of Castleton Street,
such vacated or abandoned portion of Castleton Street shall be included within
the term “Costco Tract” except for a small portion of such former right-of-way
near “The Chilis Building Area” which is intended to be conveyed to the Estate
and to become a part of the Estate Tract.

 

D.             The Costco Tract and the Estate Tract are
contiguous and adjacent as shown on the Existing Site Plan and the New Site
Plan. The Estate Tract and Costco Tract are hereinafter referred to as the “Shopping
Center.”

 

1

 

E.             The parties contemplate that the area bounded
by Almahurst Street, Hanover Road, Colima Road and Albatros Road, which area is
legally described on Exhibit “F” attached hereto and is designated “Possible
Annexation Area” on the New Site Plan (the “Possible Annexation Area”) may be
annexed to this REA pursuant to Article VII below. In the event of such
annexation, the term “Shopping Center” shall thereafter refer to the land
described on Exhibit “A” and the Costco Tract together with the Possible
Annexation Area, and the term “Estate Tract” shall thereafter refer to the land
described on Exhibit “A” hereto together with the possible Annexation Area.

 

F.             The Estate Tract, the Costco Tract and the “Possible
Annexation Area” are a part of cluster of commercial areas to the south of the
Pomona Freeway which are, as a whole, commonly known as the “Puente Hills East
Commercial Center” (collectively, the “Commercial Center”). The entire
Commercial Center is subject to the Master CC&Rs. The Commercial Center is
legally described on Exhibit “G” hereto and is depicted on the drawing attached
as Exhibit “H” hereto.

 

G.            The Parties hereto intend to operate their
respective Tracts as integral parts of a retail shopping complex and desire to
enter into certain covenants and agreements as a part of a uniform general plan
for the common use and operation thereof, and further desire to grant to each
other certain reciprocal easements, in, to, over and across their respective
Tracts.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the
promises, covenants and agreements hereinafter set forth, other good and
valuable consideration, the receipt and sufficiency of, which are hereby
acknowledged, and in furtherance of the Parties understandings, it is agreed as
follows:

 

ARTICLE I.

 

DEFINITIONS

 

As used in this REA, references to “Recitals,”
“Articles,” “Sections” and “Exhibits” are references to corresponding portions
of this REA. Listed below are definitions for certain terms that are used in
this REA with particular meanings. Unless otherwise noted, a defined terra
shall include, where appropriate to the context, the noun (singular and
plural), verb and adjective forms of the term.

 

1.1           Administration Fee. “Administration Fee” is defined in Section
5.2(e).

 

1.2           Annexation Site Plan. “Annexation Site Plan” means the revised “New
Site Plan” including the Possible Annexation Area pursuant to Article VII
below.

 

1.3           Approving Party. “Approving Party” shall mean the Party
designated from time to time to make certain decisions and/or give certain
approvals pursuant to the terms of this REA. There shall be one Approving Party
representing the Estate Tract and one Approving Party representing the Costco
Tract. Subject to Article IX below, the holder of the Approving

 

2

 

Party
position shall have the right to assign such position to any Person who becomes
a Party hereto.

 

1.4           Approval. “Approval” is defined in Section 10.5 below.

 

Such assignment with respect to each of the Estate
Tract and the Costco Tract may only be made to one Person. If either of the
Estate Tract or the Costco Tract is subdivided and portions of such Tract are
transferred to different parties and an assignment of the Approving Party
position is not made to one of such transferee Parties, then subject to the
terms of Article IX below, such Approving Party position shall automatically be
deemed assigned to the Party acquiring the largest land area out of the Costco
Tract or Estate Tract, respectively. If two persons hold an equal amount of
land area within the Costco Tract or Estate Tract, respectively, then such
Approving Party’s position shall be deemed to have been assigned to the Party
acquiring the last in time of such equally size land areas within the Costco
Tract or the Estate Tract, respectively. The Estate shall be the initial
Approving Party for the Estate Tract and Costco shall be the initial Approving
Party for the Costco Tract.

 

1.5           Automobile Parking Area. “Automobile Parking Area” is that portion
of the Common Area available for the passage and parking of motor vehicles,
together with all improvements, including access roads, curbs, directional
signs, driveways, incidental and interior roadways, landscaping, light
standards, pedestrian sidewalks and stairways, and walkways, in and adjacent to
areas used for parking of motor vehicles, but excluding the Gasoline Sales
Area, truck docks, truck parking, turn-around and loading/delivery areas or the
depressed portions of truck ramps serving any Store.

 

1.6           Benefitted Tract. “Benefitted Tract” is any Tract benefitted
by an easement, covenant, condition or restriction made or suffered by a
Grantor regarding the use and/or operation of the Grantor’s Burdened Tract,
which benefit shall run with the land in favor of all such successive Occupants
and their Permittees of said Benefitted Tract, or any part thereof.

 

1.7           Budget. “Budget” is defined in Section 5.2(f).

 

1.8           Building Area(s). “Building Area(s)” are the limited areas of
the Shopping Center as designated on the New Site Plan by building limit lines
within which buildings (and the Gasoline Sales Area), any appurtenant canopies,
supports, loading docks, truck docks, turn-around and loading delivery areas or
the depressed portions of truck ramps serving any Store, and other outward
extensions, sidewalks adjacent to any Store, as well as attached trash compactors
and other utility transformers, may be constructed, placed or located. As to
the Gasoline Sales Area, the same may be replaced by a building provided (a)
such building is within the building limit lines in such location, (b) the area
surrounding such replacement building is improved as Automobile Parking Area as
depicted on the New Site Plan detail for such replacement building and (c) the
parking ratio requirements with respect to such replacement building are
satisfied on the Costco Tract including such replacement building.

 

1.9           Burdened Tract. “Burdened Tract” is any Tract subject to
and burdened by an easement, covenant, condition or restriction made or
suffered by a Grantor regarding the use and/or operation of its Burdened Tract,
which burden shall run with the land and bind all

 

3

 

successive
Occupants and their Permittees of said Burdened Tract, or the whole estate of
the Grantor or any part thereof.

 

1.10         Callender’s Building Area. “Callender’s Building Area” shall mean the
area designated the Callender’s Building Area on the New Site Plan, and which
includes Building E as the existing location of the Marie Callender’s
Restaurant.

 

1.11         Chili’s Building Area. “Chili’s Building Area” shall mean the area
designated as the Chili’s/Estate Tract on the New Site Plan, and which includes
Building H as the proposed location of the New Chili’s Restaurant.

 

1.12         Commercial Center. “Commercial Center” is defined in Recital F
to this REA.

 

1.13         Commercial Center Allocable Share. “Commercial Center Allocable Share” shall mean
the percentage calculated by dividing the area of the land in a Tract by the
total land area of the Commercial Center.

 

1.14         Commercial Center Common Services. Commercial Center Common Services means
those items of operation, maintenance, repair and replacement relating to the
Signage identifying the entire Commercial Center (e.g. “Puente Hills East” or a
successor name approved by the Approving Parties). To the extent that any sign
structure also identifies a business within the Commercial Center, that
percentage of the costs associated with such sign structure corresponding to
the percentage of the Parcel Area identifying the Commercial Center shall be treated
as a cost of Commercial Center Common Services and the percentage of such sign
costs corresponding to the Panel Area identifying businesses shall be treated
as a separate expense not included in the costs of Commercial Center Common
Services. To the extent that any of the responsibilities with respect to the
Common Area under Section 5.2 of this REA also comprise Commercial Center
Common Services, then the cost of such work shall be either (a) separately determined
with respect to the Shopping Center only and treated as a cost of Common Area Maintenance
to be shared in the Common Area Allocable Shares, or (b) shall be determined on
a Commercial Center-wide basis and shall be treated as a cost of Commercial
Center Common Services to be shared in the Commercial Center Allocable Shares.
In no event shall any cost be “double-billed” as both a cost of Commercial
Center Common Services and a cost of Common Area Maintenance.

 

1.15         Common Area. “Common Area” is all land, improvements and personal property necessary
to the operation of such improvements located within the boundaries of the Shopping
Center and available for the general use, convenience and benefit of all
Permittees, exclusive of any Building Area. Common Area shall include, but
shall not be limited to, Automobile Parking Area, curbs, perimeter sidewalks,
other sidewalks not within building limit lines, all Shopping Center and
Occupant identification signs, and personal property (such as maintenance equipment)
necessary for the operation of such improvements and facilities. While the same
are so used, the Gasoline Sales Area and the Seasonal Outside Sales Area(s)
shall not be included within “Common Area” and shall be maintained pursuant to
Section 5.3 below. Under Section 5.2(b), certain Common Area elements are
treated, however, as being the maintenance responsibility of the respective
Tract Owner.

 

4

 

1.16         Common Area Allocable Share. “Common Area Allocable Share” shall mean
the percentage calculated by dividing the area of land in a Tract by the total
land area of the Shopping Center.

 

1.17         Common Area Maintenance Costs. “Common Area Maintenance Costs” refers to and
means the total of all moneys paid out during an applicable or pertinent period
for reasonably necessary costs and expenses directly related to the operation,
maintenance, repair, replacement and reconstruction of the Common Area in
accordance with the requirements of Section 5.2(a) and the other provisions of
this Agreement, excepting therefrom those matters expressly excluded from “Common
Area Maintenance Costs” under Section 5.2(d) and any other provisions of this
Agreement.

 

1.18         Common Area Plans. Common Area Plans is defined in Section
3.8(d) below.

 

1.19         Construction Phasing and Practices Plan. “Construction Phasing and Practices Plan is
defined in Section 3.4 below.

 

1.20         Costco Permissible Expansion Area. “Costco Permissible Expansion Area” is that
portion of the Costco Tract, with an area of thirty thousand (30,000) square
feet, so identified on Exhibit “C”.

 

1.21         Costco’s Initial Work. “Costco’s Initial Work” is defined in
Section 3.2 below.

 

1.22         Costco Initial Work Plans. “Costco Initial Work Plans” shall mean (a)
those elevations for construction of the Costco Store that are listed on
Exhibit “J” and (b) those Common Area Plans for Costco’s Initial Work which are
approved pursuant to Section 3.8(d) below based on the preliminary plans
referenced in such Section 3.8(d) and attached hereto as Exhibit “M”.

 

1.23         Costco Store. The enclosed building, Seasonal Outside
Sales Area, Gasoline Sales Area and related facilities, all as may be
constructed on the Costco Tract.

 

1.24         CPI or Consumer Price Index. “CPI” means the Consumer Price Index (all
wage earners) for Los Angeles, Orange, and Riverside Counties, or a reasonably
selected successor index.

 

1.25         Cure. At such time as a Party is in Default, such Party shall be permitted
that period of time within which to render remedial performance sufficient to
correct said Default, which process shall be referred to herein as “Cure.” At
its election, the Party serving a notice of Default may also serve a demand for
Cure either concurrently with or subsequent to service of the notice of
Default. The time for effecting Cure, unless otherwise specified in this REA,
shall be forty-five (45) days. Except as provided elsewhere in this REA to the
contrary, whenever a Default is not capable of Cure within the specified
period, a Defaulting Party shall be deemed to have Cured the Default if it
shall have commenced Cure within the specified time period and shall have prosecuted the Cure continuously
and diligently thereafter to completion.

 

1.26         Default. “Default” is a Party’s breach of any of its covenants or obligations
set forth in this REA, which breach shall be deemed to have commenced upon the
date of such

 

5

 

breach
and which shall be alleged in another Party’s service of written notice thereof
on the alleged Defaulting Party. A notice of Default may be accompanied or
followed by service of a demand to Cure the Default.

 

1.27         Defaulting Party. “Defaulting Party” is defined in Section
10. l(a).

 

1.28         Existing Lease(s). “Existing Lease(s)” means those certain
leases listed on Exhibit “I” hereto so long as the same have not expired or
otherwise been terminated. The premises under the existing leases are presently
occupied by Jer-Shaw Investments (multiple office subtenants), Levitz
(furniture store), Bally’s (health club), Marie Callender’s (restaurant), Hometown
Buffet (restaurant) and Chili’s (existing restaurant to be demolished and moved
to New Chili’s Restaurant).

 

1.29         Floor Area. “Floor Area” shall mean the actual number of square feet of space contained
on each floor within a Store, including any mezzanine or basement space used
either for retail sales or service purposes or for the storage of merchandise,
as measured from the exterior faces of the exterior walls or Store front and/or
the center line of any common walls; provided, however, that the following
areas shall not be included in such calculations: multi-level racking, the Gasoline
Sales Area (except for any retail sales buildings included without it or in
replacement for it), emergency exit corridors, supporting mezzanine office or
utility space, any space used for building utilities or mechanical equipment,
any Seasonal Outside Sales Areas and Common Area storage areas; provided,
however, that if any Seasonal Outside Sales Area is utilized for more than
forty-five (45) days in any calendar year, then such Seasonal Sales Area shall
be included within the definition of “Floor Area.” Within thirty (30) days of
opening a Store on its Tract for business, or upon the request of any Party, a
Party shall certify in writing to all other Parties the amount of Floor Area
applicable to each Store on its Tract. If any Party causes an as-built survey
to be prepared with respect to any portion of the Shopping Center, such Party
shall furnish a copy of the survey to the other Parties for informational
purposes only.

 

During the period of rebuilding, repairing,
replacement or reconstruction of a Store, the Floor Area of that Store shall be
deemed to be the same as existed immediately prior to that event. Upon
completion of any such rebuilding, repairing, replacement or reconstruction of
a Store, the Floor Area shall be no greater-than that specified in Section 4.3
for the Tract in question and as may otherwise be accommodated on such Tract in
compliance with the applicable parking ratio and other requirements of this
REA. Within thirty (30) days of completion of such rebuilding, repairing, replacement
or reconstruction, the Party upon whose Tract such Store is located, shall
cause a new determination of Floor Area for such Store to be made in the manner
described above, and such determination shall be sent to the Estate, Costco and
to any other Party requesting the same.

 

1.30         Gasoline Sales Area. “Gasoline Sales Area” is the gasoline pump
island and related area located on the Costco Tract in the location identified
on the New Site Plan.

 

1.31         Grantee. “Grantee” is the Owner (and its Permittees) of a Benefitted Tract in whose
favor a Grantor has reserved or granted any easement, covenant, condition or
restriction herein.

 

6

 

1.32         Grantor. “Grantor” is the Owner of a Burdened Tract that is subject to any easement,
covenant, condition or restriction reserved or granted herein.

 

1.33         Hometown Building Area. “Hometown Building Area” shall mean the
area designated Hometown Building on the New Site Plan, and which includes
Building E as the existing location of the Hometown Buffet Restaurant.

 

1.34         Large Anchor. “Large Anchor” means a business comprising
an aggregate of 100,000 square feet operated under a single trade name or under
multiple trade names which have a common ownership and which utilize a separate
trade name. In addition, businesses which are not under common ownership with
the primary store shall be treated as being a part of such a “Large Anchor” if
they are accessible by a principal customer access from the interior of a primary
store comprising at least 100,000 square feet.

 

1.35         Laws. “Laws” is defined in Section 10.20.

 

1.36         Liens. “Liens” is defined in Section 10.20.

 

1.37         Losses. “Losses” is defined in Section 10.22(a).

 

1.38         Master CC&Rs. “Master CC&Rs” means that certain
Declaration of Covenants, Conditions and Restrictions for Puente Hills East
Commercial Center dated as of January 1, 1978 and recorded on April 13, 1978 in
the Official Records of Los Angeles County (“Official Records”) as Document No.
78-390435: (a) as amended and modified by (i) that certain First Amendment to
Declaration of Covenants, Conditions and Restrictions for Puente Hills East Commercial
Center dated as of June 28, 1979 and recorded on July 10, 1979 as Instrument
No. 79-749965 in the Official Records, and (ii) that certain Modification of
Declaration of Covenants, Conditions and Restrictions for Puente Hills
Commercial Center dated as of November 30, 1992 and recorded in the Official
Records on December 3, 1992 as Instrument No. 92-2257839, and (b) as supplemented
with respect to the Shopping Center by that certain “Supplemental Agreement and
Second Amendment to Declaration of Covenants, Conditions and Restrictions”
between Costco and the Estate, dated and recorded concurrently herewith.

 

1.39          Mortgage; Mortgagee. “Mortgage” is any first mortgage, indenture
of first mortgage, or first deed of trust of the interest, whether fee or
leasehold, of an Owner in a Tract and, to the extent applicable, a “sale and
leaseback” or “assignment and subleaseback” transaction. “Mortgagee” is a
mortgagee or trustee and beneficiary under a Mortgage, and to the extent
applicable, a fee owner, lessor or sublessor of any Tract which is the subject
of a lease under which any Owner becomes a lessee in a “sale and leaseback” or “assignment
and subleaseback” transaction.

 

1.40          Non-Defaulting Party. “Non-Defaulting Party” is defined in
Section 10.1(a).

 

1.41          Notice. “Notice” is defined in Section 10.4(a).

 

1.42          Occupant. “Occupant” shall mean the Estate or Costco and any Person from time to
time entitled to the use and occupancy of any portion of a Store in the
Shopping Center or of a

 

7

 

Tract
under an ownership right or any lease, sublease, license, concession, or other
similar agreement, but shall not include invitees.

 

1.43         Owner. “Owner” shall mean the fee owner of a Tract.

 

1.44         Party. “Party” shall mean each signatory hereto and its respective successor
or assign pursuant to the terms and provisions of Article IX herein.

 

1.45         Party’s Agents. “Party’s Agents” is defined in Section
10.22.

 

1.46         Percentage Share “Percentage Share” shall mean the percentage
calculated by dividing the area of the land in a Tract by the total land area
of the Shopping Center.

 

1.47         Permittee. “Permittee” shall mean all Occupants and the officers, directors, employees,
agents, contractors, customers, vendors, suppliers, visitors, invitees and
licensees thereof insofar as their activities relate to the proper use of the
Shopping Center as described in this REA. Among others, Persons engaged in any
of the following activities on the Shopping Center (unless such Persons are
permitted by obligatory law to engage therein) will not be considered to be
Permittees unless such activities are conducted pursuant to a right of a tenant
under an Existing Lease or are directly related to the commercial purposes of
the Shopping Center and have been approved by the Approving Parties:

 

(a)           Exhibiting any placard, sign, or notice;

 

(b)           Distributing any circular, handbill, placard,
or booklet;

 

(c)           Soliciting memberships or contributions
(other than memberships in or to an Occupant which are sold inside a Store or
directly in front of such Store’s entrance); and

 

(d)           Parading, picketing, or demonstrating;

 

1.48         Person. “Person” shall mean any individual, partnership, firm, association,
corporation, trust, or any other form of business or government entity.

 

1.49         Redevelopment View Corridor Line. “Redevelopment View Corridor Line” shall mean
the line identified on the New Site Plan as the Redevelopment View Corridor
Line.

 

1.50         Released Party. “Released Party” is defined in Section
10.22(b).

 

1.51         Releasing Party. “Releasing Party” is defined in Section
10.22(b).

 

1.52         Requesting Party. “Requesting Party” is defined in Section
6.2(b).

 

1.53         Restaurant. “Restaurant” shall mean any operation or business which requires a governmental
permit, license and/or authorization to prepare and/or serve food for either on
or off-site consumption. Notwithstanding the foregoing, incidental uses
described in Section 4.1(c) below shall not be deemed to be “Restaurants”.

 

8

 

1.54         Seasonal Outside Sales Areas. Subject to Section 6.1(d) below, “Seasonal Outside
Sales Areas” shall mean (a) an area on the Costco Tract comprising up to 15,000
square feet, which is identified on the New Site Plan as such and which is used
for sales purposes exclusively by an Occupant of the Costco Tract which
operates at least 50,000 square feet of Floor Area and (b) an area on the Estate
Tract comprising up to 15,000 square feet, which is located within the Southern
Estate Envelope Area and which is used for sales purposes exclusively by an
Occupant of the Estate Tract which operates at least 50,000 square feet of Floor
Area. The Approving Party as to each of the Estate Tract and Costco Tract
shall, from time to time upon the request of any Party, designate the Occupant
who is entitled to use its respective Seasonal Outside Sales Area. The number
of square feet contained within the Seasonal Outside Sales Area shall not
exceed 15,000 square feet or such lesser area as is provided under Section 6.1(d)
below. During the period an Occupant is not using its Seasonal Outside Sales
Area as such, it shall, at its sole cost, remove any fence or other security
barrier and restore the Seasonal Outside Sales Area as Common Area. The
Seasonal Outside Sales Area on the Costco Tract shall not be operated for more
than forty-five (45) days in any calendar year, but the foregoing shall not
limit the use of the allowable Building Areas on the Costco Tract for outdoor
sales. Each Party’s Seasonal Outside Sales Area may only be utilized as an
integrated part of the business operations of an Occupant who operates 50,000
square feet or more of Floor Area.

 

1.55         Separate Utility Line. “Separate Utility Line” is any utility
facility that exclusively serves a particular Store or Tract, including,
without limitation, any of the following: any system for storm drain, sanitary
sewer, domestic water, natural gas, electrical power, fire protection water,
telephone, fibre optics, cable television, heating, ventilating and/or air conditioning.

 

1.56         Shopping Center. “Shopping Center” is defined in Recital D
to this REA.

 

1.57         Site Plans. “Site Plans” means the Existing Site Plan, New Site Plan and the Annexation
Site Plan.

 

1.58         Southern Estate Envelope Area. “Southern Estate Envelope Area” shall mean
that portion of the Shopping Center within the building limit lines with
respect to the Estate Tract as designated on the New Site Plan except for the
Chili’s Building Area, the Hometown Building Area and the Callender’s Building
Area. If the Possible Annexation Area shall be annexed to the Shopping Center,
the Southern Estate Envelope Area shall also include the portion of the Possible
Annexation Area provided for under Section 7.2 below.

 

1.59         Store. “Store” shall mean all portions of the buildings and improvements (including
alterations or restorations) that exist or are constructed from time to time on
a Party’s Tract, excluding Common Area.

 

1.60         Substantially Completed. “Substantially Completed” or “Substantial
Completion” (whether or not such term is capitalized when used) means that the
subject work of improvement has been fully completed in accordance with the
requirements of this Agreement except for (a) items which do not have a
substantial adverse impact on the usefulness of the subject work or the business
operations of any Occupant and (b) items which do not prevent the legal opening
or

 

9

 

continuing operation of any business. Upon the request of any Approving
Party, a party who is required to complete any work of improvement hereunder
shall meet and confer with the Approving Parties to identify a so-called “punch-list”
of incomplete or improperly constructed items with respect to any such “substantially
completed” work and the constructing party shall diligently pursue the
completion of such punch-list.

 

1.61         Term. “Term” is defined in Article VIII.

 

1.62         Tract. “Tract” is all of the Estate Tract or the Costco Tract or any other
legally subdivided lot or parcel subject to this REA including, without
limitation, any Common Area thereon. In the event of multiple ownership of a
Tract, the provisions of Article IX hereof regarding Transfer of Interest shall
apply.

 

1.63         Utility Line(s). “Utility Line(s)” is defined in Section
2.1(b)(i).

 

1.64         Work. “Work” is defined in Section 2.1(b)(v).

 

ARTICLE II.

 

EASEMENTS

 

2.1           Common Area Easements. The Common Area on each Tract shall be made
available for the following purposes related to the business activities
conducted in the Shopping Center:

 

(a)           Ingress, Egress and Parking. Each Party hereby grants and conveys to
each other Party for its use and for the use of its Permittees a non-exclusive
easement for the passage and parking of vehicles and for the passage and
accommodation of pedestrians over and across the Automobile Parking Areas and
sidewalks of the Grantor’s Tract as the same may from time to time be
constructed and maintained for such use. Such easement rights shall be subject
to the following reservations as well as other provisions contained in this
REA:

 

(i)            Except for situations specifically provided
for in the following subparagraphs, no fence or other barrier shall be erected
or permitted within or across the easement areas; provided, however, that the
foregoing provision shall not prohibit the installation of convenience
facilities (such as mailboxes, public telephones, benches or public
transportation shelters and cart corrals), landscaping, berms or planters,
limited curbing and similar items within the Common Areas to the extent such
areas are not shown as parking spaces or as otherwise approved by the Approving
Parties. Notwithstanding the foregoing, so long as the Existing Lease to the
Hometown Buffet remains in effect, the following shall apply to the portions of
the Costco Parcel within the “Hometown Protected Parking Area” designated on
the Site Plan unless the Estate shall have approved an exception to the same:
(a) cart corrals may only be located as depicted on the New Site Plan within
such area and (b) none of the other “convenience facilities” referenced in the
preceding sentence may be located in such area;

 

(ii)           In connection with any construction, reconstruction,
repair or maintenance on its Tract, each Party reserves the right to create a
temporary staging and/or storage area in the Common Area on its Tract at such
location designated “Costco Future Staging

 

10

 

Area”
(as to Costco) and “Estate Future Staging Area” (as to any other Party) on the
New Site Plan; provided, however, that the Party operating such temporary
staging or storage area promptly repairs all damage caused by, or resulting
from, such construction activities, including, without limitation, to any
improvements on the Automobile Parking Area or any other Tract; and provided
further, however, that the Construction Phasing and Practices Plan shall govern
staging with respect to the Costco’s Initial Work;

 

(iii)          No Party shall make changes to the improved
Common Area as contemplated by the New Site Plan on its Tract without the prior
written approval of the Approving Parties pursuant to Section 3.8 below, which
approval will not be unreasonably withheld. Notwithstanding anything to the
contrary in this Subsection (iii), no such changes shall be permitted, and an
Approving Party may disapprove such proposed changes in its sole and absolute
discretion unless:

 

A.            the accessibility, utility and efficiency of
such Common Area for all intended uses and purposes is not unreasonably
restricted or hindered;

 

B.            there shall be maintained at all times within
such Common Area on each Tract, a sufficient number of vehicular parking spaces
to meet the parking requirements set forth in Section 4.1, and all parking
stalls and rows and vehicular traffic lanes shall remain generally as shown on
the New Site Plan;

 

C.            no governmental rule, ordinance or regulation
shall be violated as a result of such action, and such action shall not result
in any other Party being in violation of any governmental rule, ordinance or
regulation;

 

D.            no lease on the Estate Tract in effect as of
the date of this REA shall be violated as a result of such change;

 

E.             no change shall be made in the Critical
Access Points serving the Shopping Center, as the same are depicted on the New
Site Plan; and

 

F.             at least thirty (30) days prior to making any
such change, modification or alteration, the Party desiring to do such work
shall deliver to each other Party copies of the plans therefor.

 

(iv)          Each Party reserves the right to close off
the Common Area on its Tract for such reasonable period of time as may be
legally necessary, in the opinion of such Party’s counsel, to prevent the
acquisition of prescriptive rights by anyone. Notwithstanding anything in this
Subsection (iv) to the contrary, prior to closing off any portion of the Common
Area as herein provided, a Party shall give written notice to each other Party
of its intention to do so, and shall coordinate such closing with each other
Party so that no unreasonable interference in the passage of pedestrians or
vehicles or in the use and occupancy of the Shopping Center shall occur; and

 

(v)           Each Party reserves the right at any time and
from time to time to exclude and restrain from using its Tract any Person who
is not a Permittee.

 

11

 

(vi)          The applicable Parties reserve the right to
conduct the activities described in Section 6.1(d) below.

 

(b)            Utilities.

 

(i)            Each Party hereby grants and conveys to each
other Party non-exclusive perpetual easements in, to, over, under, along and
across those portions of the Common Area (exclusive of any portion located
within a Building Area) located on the Grantor’s Tract as may be necessary for
the installation, operation, flow, passage, use, maintenance, connection,
repair, relocation, and removal of Separate Utility Lines (Separate Utility
Lines are sometimes hereinafter referred to collectively as “Utility Line(s)”).
Except with respect to then usual and customary ground mounted appurtenances
such as electrical transformers, electrical vaults, manholes, meters, sprinkler
facilities, valves and hydrants, and except for temporary utilities during any
period of construction or reconstruction, all utilities shall be underground
unless required to be above ground by the utility providing such service or by
any governmental entity. Prior to exercising the right granted herein, the
Grantee shall first obtain any Approvals required under subsection “(ii)” below
and provide the Grantor with a written statement describing the need for such
easement, shall identify the proposed location of the utility easement, and
shall furnish a certificate of insurance showing that its contractor has
obtained the minimum insurance coverage required by Section 6.4 hereof. In
addition, the Grantee shall provide, upon the request of any Grantor which is a
Party as to a Tract which is subject to an Existing Lease, such additional
documentation and information as may be required under such Existing Lease in
connection with such proposed easement in order for the applicable Party to
make the corresponding proposal to the Tenant under such Existing Lease. Any
Party installing Utility Lines pursuant to the provisions of this subparagraph
shall pay all costs and expenses with respect thereto and shall cause all work
in connection therewith (including general clean-up and proper surface and/or
subsurface restoration) to be completed in a diligent manner and so as to
minimize interference with the use of the Common Area. If the Parties elect to
jointly install Separate Utility Lines, all costs and expenses thereof may be
set forth in a separate agreement between those cooperating Parties.

 

(ii)           The initial location or relocation and width
of any Utility Line shall be
subject to the prior written Approval of the Party whose Common Area is to be
burdened thereby. In addition, any relocation of existing Utility Lines within
the Costco Common Areas as part of Costco’s Initial Work which may impact the
improvements on the Estate Tract shall require the approval of the Estate as
part of the Common Area Plans for Costco’s Initial Work. Any subsequent
reconfiguration of any Utility Line shall be subject to the prior written
Approval of the Party whose Common Area is to be burdened thereby. With regard
to a public utility easement, the easement area shall be no larger than is
necessary to reasonably satisfy the utility company. With regard to a private
easement, the easement area shall be no larger than five feet (5’) on each side
of the centerline. The Grantee of a private Utility Line shall, upon request,
provide to the Grantor thereof a copy of an as-built survey showing the
location of such Utility Line. The Grantor shall have the right at any time to
relocate a Utility Line upon thirty (30) days’ prior written notice, provided
that such relocation shall:

 

A.            not materially interfere with or diminish the
utility services to the Grantee;

 

12

 

B.            not reduce or unreasonably impair the
usefulness or function of such Utility Line;

 

C.            be performed without cost or expense to
Grantee;

 

D.            be completed using materials and design
standards which equal or exceed those originally used;

 

E.             have been approved by the appropriate utility
company and any appropriate governmental or quasi-governmental agencies having
jurisdiction thereover; and

 

F.             not unreasonably interfere with the conduct
or operation of the Occupants of the Grantee’s Tract.

 

Grantee
shall have the right to require an as-built survey of such relocated Utility
Line be delivered to it at Grantor’s expense as soon as is practicable after
the completion of such relocation.

 

(iii)          Each Party hereby grants and conveys to each
Party owning an adjacent Tract the perpetual right and easement to discharge
surface storm drainage and/or runoff from the Grantee’s Tract over, upon and
across the Common Area of the Grantor’s Tract. No Party shall alter or permit
to be altered the surface of the Common Area or the drainage/retention system
constructed on its Tract in accordance with the Common Area Plans. The surface
water collection, retention and distribution facilities shall be deemed a
Utility Line and shall be entitled to those easement rights et forth in Section
2.1(b)(i) above.

 

(iv)          The Parties shall each, to the extent
necessary and to the extent the same shall not result in the loss of
compensation otherwise obtainable from condemnation, join in the execution of
such instruments as may be required in order to effectuate the installation
(subject to the restrictions contained in this REA), for the sole benefit of
the Shopping Center or the Parties’ Tracts, of public utilities and similar
easements under and across portions of their respective Tracts.

 

(v)           Notwithstanding anything in this Section 2.1
to the contrary, absent emergency, no construction, reconstruction, repair,
maintenance or modification other than “Costco’s Initial Work” (collectively “Work”)
shall be performed to the Common Area on any Tract between November 15th and
the following January 1st without the consent of the Approving Parties.
Notwithstanding the foregoing sentence, the Estate shall be permitted to
conduct Work during such period on those portions of the Common Area within the
“Southern Estate Envelope Area” so as to permit an uninterrupted construction
of the same, provided the usable Automobile Parking Area on the Estate Tract is
at least equal to four (4) parking spaces for each 1,000 square feet of Floor
Area on the Estate Tract which is open for business during such work.

 

2.2           Restriction. No Party shall grant or otherwise convey any easements for the
benefit of any property not within the Shopping Center except as described in
Article VII, without the prior written approval of the Approving Parties;
provided, however, the foregoing

 

13

 

shall not prohibit the grant or dedication of utility easements to
governmental or quasi-governmental authorities or to public utilities.

 

2.3           Gasoline Sales Area. If at any time the Gasoline Sales Area
ceases to be so operated for a period in excess of 180 days plus periods of
Force Majeure Events or diligently pursued reconstruction or remediation, then
within 180 days following the end of such period either, (a) all fixtures,
improvements and equipment therein shall be removed and the Gasoline Sales Area
shall be improved in the same manner as the other Automobile Parking Area and
it shall thereafter be maintained as Common Area or (b) the Owner of the Costco
Tract shall develop the same with other allowable Building Area. The Gasoline
Sales Area shall only be operated in accordance with one of the following: (i)
such facility shall use the trade name of, and be operated by, a Large Anchor
Store on the Costco Tract which has at least fifty (50) stores or which has
both at least ten (10) stores and a net worth of at least $250,000,000; or (ii)
such facility shall use the trade name of a major regional or national oil retailer
pursuant to a co-branding arrangement with the Large Anchor Store on the Costco
Tract and such gas facility operator shall have a net worth of at least
$250,000,000. A co-branding arrangement shall satisfy clause (ii) above only if
such Large Anchor Store sells gasoline in connection with at least 10 of its
Stores

 

2.4           Initial Reconstruction of Common Area and
Castleton Street. The
performance of “Costco’s Work” in accordance with the Construction Phasing and
Practices Plan and the other requirements of Article III below, and the impacts
on ingress, egress and parking contemplated thereby, shall not constitute a
breach or default under Section 2.1 or any other provision of this Agreement.

 

ARTICLE III.

 

CONSTRUCTION

 

3.1           Castleton Street Relocation.

 

(a)           Immediately prior to the recordation of this
REA, Costco granted an Irrevocable Offer to Dedicate with respect to the
relocated portion of Castleton Street as depicted on the New Site Plan and
further designated as New Castleton Right of Way on Exhibit “E” hereto.

 

(b)           Pursuant to that certain Owner Participation
Agreement (“OPA”) between the Industry Urban-Development Agency (the “Agency”),
dated August 1, 2000, and Costco, the Agency has agreed to cause the City of
Industry (“City”) to vacate the portion of Castleton Street as depicted on the
Existing Site Plan which is not within the realigned Castleton Street as depicted
in the New Site Plan (the “Vacated Castleton Street Area”) and further
designated as Planned Street Abandonment described on Exhibit “E” hereto.

 

(c)           Pursuant to the OPA, the Agency has agreed to
cause Castleton Street to be reconstructed in the realigned location depicted
on the New Site Plan.

 

14

 

(d)           Costco agrees to use diligent efforts to
enforce the obligation of the City and the Agency to complete such realigned
Castleton Street and to complete the vacation proceedings with respect to the
Vacated Castleton Street Area.

 

(e)           Upon completion of the applicable vacation
proceedings, the Vacated Castleton Street Area shall be owned in fee by Costco
and shall be a part of the Costco Tract.

 

(f)            Without limitation upon Section 3.2 below,
Costco shall not commence the demolition of any portion of the original
alignment of Castleton Street until the new alignment of Castleton Street has
been substantially completed and opened to the public.

 

3.2           Costco’s Initial Work. The activities constituting “Costco’s
Initial Work” and to be performed by Costco pursuant hereto are set forth below
in this Section. Costco agrees to cause “Costco’s Initial Work” to be
constructed, completed and provided substantially in accordance with the
Construction Phasing and Practices Plan, the New Site Plan and the “Costco
Initial Work Plans” and the Common Area Plans for Costco’s Initial Work
approved pursuant to Section 3.8 below. Costco’s Initial Work comprises the
following:

 

(a)           Common Area. The paving, striping, lighting, landscaping, bumpers, curbs, gutters,
sewers, storm drains, other on-site drainage lines or systems, parking spaces, driveways,
walkways and utility installations contemplated by the New Site Plan on the
Costco Parcel, the parcel that the Hometown Building Area is located, and the
parcel that the Chili’s Building Area is located, and substantially in
accordance with the approved Common Area Plans for Costco’s Initial Work Plans
(“Costco’s Common Area Work”).

 

(b)           Temporary Parking Lot. The grading and temporary paving of a
parking lot to be used by Chili’s Restaurant from the opening of the new Chili’s
restaurant (“New Chili’s Restaurant”) until the completion of the Common Areas
within the former location of Castleton Street (the “Temporary Lot”) be in
accordance with Costco’s agreement (the “Costco/Chili’s Agreement”) with
Brinker Restaurants Corporation (“Chili’s”).

 

(c)           New Restaurant Utilities. Separate utility lines to serve the New
Chili’s Restaurant, stubbed within five (5) feet of the new restaurant
footprint (the “New Restaurant Utilities”) in accordance with Costco/Chili’s
Agreement.

 

(d)           New Costco Store. The building initially constructed on the
Costco Tract shall have exterior elevations substantially as shown on the
drawings attached as Exhibit “J” (full
size copies of which shall be maintained in the possession of the Approving
Parties).

 

(e)           New Chili’s Store. Absent the bankruptcy or material default
of the proposed operator thereof, the New Chili’s Restaurant contemplated by
the New Site Plan.

 

(f)            Darden Restaurants. Absent the default of the City of Industry
or its redevelopment agency in relocating Castleton Street, the “Site Work”
under the agreement between Costco and Darden Restaurants, Inc. (the “Costco/Darden
Agreement”).

 

3.3           Costco Completion Schedule. Subject to “Force Majeure Events,” (a)
Costco shall cause the Temporary Lot and the New Restaurant Utilities to be
substantially completed as

 

15

 

required
under the Costco/Chili’s Agreement; (b) Costco shall cause Costco’s Common Area
Work to be substantially completed on or before June 1, 2002; (c) Costco shall
cause the New Costco Store to be substantially completed on or before December
31, 2002; and (d) Costco shall timely fund the cost of the New Chili’s
Restaurant in accordance with the Costco/Chili’s Agreement and shall use
reasonable efforts to cause Chili’s to timely complete the same in accordance
with the Costco/Chili’s Agreement.

 

3.4           Construction Phasing and Practices Plan. Except to the extent otherwise approved by
the Estate, Costco shall cause Costco’s Work to be accomplished in conformity
with the phasing drawing(s) attached hereto as Exhibit “K” and in conformity
with the narrative requirements attached hereto as Exhibit “L” (collectively,
the “Construction Phasing and Practices Plan”). During Costco’s Initial Work,
Costco shall have the right to create temporary staging and/or storage areas in
the areas designated “Primary Staging Area” and “Secondary Staging Area” on Exhibit “K.”

 

3.5           Additional Mitigation Measures. In addition to the Construction Phasing and
Practices Plan, Costco shall adopt such additional measures to mitigate the
impact of Costco’s Initial Work on the occupants of the Commercial Center as
the Estate may reasonably request; provided, however, that Costco shall not be
obligated to adopt any such measures which would, in Costco’s business
judgment, (a) result in any cost or expense to Costco (net of any savings that
may actually be realized by such alternative means of performing Costco’s
Initial Work) unless the Estate agrees to pay any such increased costs on a
current basis; or (b) cause any delay in Costco’s Work unless the Estate agrees
to pay any increased costs on a current basis of feasible measures which Costco
is able to implement to prevent such delay from occurring. The parties acknowledge
that Costco hopes to complete Costco’s Initial Work substantially in advance of
the dates set forth in Section 3.3 above captioned “Schedule” and that “any
delay” as used in this Section 3.3 refers to any delay from the schedule that
Costco would have been able to achieve absent the Estate’s request, rather than
any delay from the dates under Section 3.3 above. Costco and Estate shall
promptly meet and confer with Costco’s contractor(s) to review and reasonably
agree upon the cost of any additional mitigation measures requested by the Estate.

 

3.6           Costco Indemnification for Costco’s Initial
Work. Costco shall
indemnify, defend and hold Estate, its trustees and its and their respective
successors, assigns, officers, directors, employees, agents, partners,
transferees, beneficiaries and representatives (“Estate Parties”) harmless from
and against any and all claims, demands, liabilities, actions, suits, orders,
and causes of actions (including claims of loss of income, loss of profits,
costs, including attorneys’ fees and costs of suit, and any other damages of
whatever kind or nature) (“Claims”) asserted by existing or prospective Owners,
or occupants or invitees on or of the Commercial Center to the extent the same
arise from, (a) a breach or default by Costco in the performance of Costco’s construction
obligations in accordance with the Construction Phasing and Practices Plan and
the provisions of Section 3.2 above or (b) a breach or default by Costco in the
performance of the construction of the Common Areas pursuant to Section 3.2
above so that they substantially conform to the New Site Plan. Nothing
contained in the foregoing, however, shall be deemed to imply that Costco shall
incur any liability for any claim that the performance of Costco’s Initial Work
in accordance with the Construction Phasing and Practices Plan and said
schedule or that the relocation of Castleton Street by the City in accordance
with the OPA is in violation of any

 

16

 

person or entity’s rights under any law or agreement. In addition,
Costco shall indemnify,  defend
and hold harmless the Estate Parties from and against any and all Claims made
by Chili’s or GMRI, Inc. or its Olive Garden and Red Lobster subsidiaries to
the extent the same arises out of Costco’s breach or default in the performance
of Costco’s obligations under the Costco/Chili’s Agreement or the Costco Darden
Agreement. Nothing contained in the foregoing shall limit or impair the Estate’s
right to avail itself of the “self-help” remedy under Section 10.1(a) below if
Costco fails to complete the Initial Work or to conform to the Construction
Phasing and Practices Plan or to meet the schedule requirements under Section
3.3 above.

 

3.7           Opening of Costco Store.

 

(a)           Subject to Force Majeure Events, Costco shall
cause the Costco Store as described in the Costco Initial Work Plans to be
substantially completed and to open for business to the public as a Costco
Store, with substantially the same goods and services as are offered in a majority
of other Costco stores in Southern California, for at least one day on or
before December 31, 2002.

 

(b)           Nothing contained in this Section 3.7 or
elsewhere in this REA shall be deemed an operating covenant obligating Costco
to operate or remain open for business continuously on the Tract or any other
form of so-called “covenant of continuous operation.”

 

3.8           Plans for Future Construction.

 

(a)           Plans for Stores. The Parties intend that the stores within
the Shopping Center shall be designed and constructed in harmony and shall be
compatible with the general architectural concept of the Shopping Center. The
elevations for the Costco Store attached hereto as Exhibit “J”
have been approved for initial construction of the Costco Store and shall provide
the standard for the review by the other Approving Party of any renovation or
expansion of Costco Store.

 

(b)           Costco Building and Costco Gas Station. The Approving Parties have heretofore
approved the elevations for the Costco Store and Gasoline Sales Area attached
hereto as Exhibit “J.” Any substantial deviation
from said Exhibit “J” in the construction of the Costco
Store and Gasoline Sales Area shall require the prior written approval by the
Estate, which approval shall not be unreasonably withheld.

 

(c)           Future Buildings and Renovations. Prior to commencing any construction of new
buildings or other structures not addressed in the preceding subsection, or any
substantial renovation to the exterior of any existing buildings or structures,
the constructing Owner shall obtain the prior written Approval of the Approving
Parties of the elevations for the same pursuant to this Section. Such Approval
shall not be unreasonably withheld and the reviewing Approving Parties’
discretion shall be limited to whether or not the proposed improvements are reasonably
harmonious with the general architectural concept referenced in Section 3.8(a)
above and are of a quality of materials and finishes equal to other similar
projects in Los Angeles County, California. No Party may require that the
proposed improvements of another Party have a higher degree of harmony with
such architectural concept, or be of a higher quality, than the improvements
located on the Tract of the reviewing Approving Party.

 

17

 

(d)           Common Area Plans and Specifications. Prior to commencing construction,
reconstruction or substantial changes to any portion of the Common Area, each such
Owner shall deliver to the Approving Parties working drawings and specifications
for such work (“Common Area Plans”). Within fifteen (15) days following
delivery of the proposed Common Area Plans, the Approving Party shall approve
the proposed Common Area Plans or request reasonable revisions; provided,
however, that it is agreed that it shall be reasonable to disapprove any Common
Area Plans which fail to conform to Section 2.1(a)(iii) above or any other
provision of this Agreement. The constructing Owner shall give reasons for any
request for revision of the proposed Common Area Plans. The Approving Parties
shall act in good faith and use reasonable efforts to agree on the final form
of the Common Area Plans incorporating any revisions requested by the Approving
Parties. On reaching agreement on such plans, the Approving Parties shall sign
such plans as approved and the Approving Parties shall promptly submit such
plans for approval by the City. The Estate acknowledges that it has reviewed a preliminary
version of the Common Area Plans attached hereto as Exhibit “M,”
and Estate will not unreasonably withhold its approval of the final version of
such Common Area Plans.

 

(e)           Certain Existing Lease Matters. Notwithstanding Section 3.8(c) above, Costco
agrees not to withhold its Approval of the architecture of future buildings or alterations
thereto proposed to be constructed by tenants pursuant to Existing Leases or to
withhold its Approval of Common Area Plans for work within the ground leased
premises of such Existing Tenants which fail to meet the aesthetic or quality
requirements of Section 3.8(d) above and such non-compliance will not
constitute a default by Party who is the landlord under such Existing Lease(s),
if (i) the Party has diligently pursued such compliance with such requirements,
(ii) the Party has offered to pay any additional costs of meeting such
requirements to the extent the tenant’s objection is based on cost, (iii) the
Party has advised the other Parties that the Party does not have the legal
right to impose such Sections 3.8(c) and (d) requirements under the applicable Existing
Lease and (iv) the proposed buildings, alterations or Common Area work are
consistent with the site plan controls, use limitations, parking ratio
requirements, Building Area and Floor Area limitations, and other provisions of
this Agreement relating to matters other than aesthetics or construction
quality.

 

3.9           Common Area Plans and Standards. The design and quality of construction or reconstruction
of the Common Areas shall be in accordance with the approved “Common Area Plans”
for the applicable work. The design standards reflected in the Common Area
Plans for Costco’s Initial Work including, without limitation, lighting,
landscaping, grading, paving and utilities shall serve as the benchmark for the
review and approval of future Common Area Plans in connection with any future
construction or reconstruction of Common Areas in the Shopping Center. From the
date hereof, the Estate Tract may be developed or altered in accordance with the
New Site Plan.

 

3.10         General Requirements.

 

(a)           Each Party agrees that all construction
activities performed by it within the Shopping Center shall be performed in
compliance with all applicable laws, rules, regulations, orders, and ordinances
of the city, county, state, and federal governments, or any department or
agency thereof and in accordance with the Improvement Plans. No construction
activity other

 

18

 

than Costco’s Initial Work which may affect the Common Area shall
commence until at least thirty (30) days’ prior notice has been given to all
other Parties.

 

(b)           Each Party further agrees that its
construction activities shall not:

 

(i)            cause any unreasonable increase in the costs
of construction of improvements upon another Party’s Tract;

 

(ii)           unreasonably interfere with construction work
being performed on any other part of the Shopping Center;

 

(iii)          unreasonably interfere with the use,
occupancy or enjoyment of any part of the remainder of the Shopping Center by
any other Party or its Permittees, it being agreed, however, that Costco’s
Initial Work performed in compliance with Sections 3.2 through 3.6 above shall
not be considered to unreasonably interfere with any of the foregoing; and

 

(iv)          cause any other Party to be in violation of
any applicable law, rule, regulation, order or ordinance of the city, county,
state, federal government, or any department or agency thereof.

 

(c)           Each Party agrees to defend, indemnify,
protect and hold harmless each other Party from all liability, loss, claims,
actions, proceedings, liens and costs incurred in connection therewith
(including reasonable attorneys’ fees and costs of suit), arising out of or resulting
from any accident, injury or loss or damage occurring to any Person or to the
property of any Person during the performance of any construction activities
performed or authorized by such indemnifying Party. Notwithstanding the
foregoing sentence, no Party shall be obligated to indemnify any other Party
for the negligence or willful misconduct of such other Party, its agents,
employees, contractors or licensees.

 

(d)           Except for Costco’s Initial Work which shall
be governed by Sections 3.2 through 3.6 above (and to which the following shall
not be applicable), (i) all storage of materials and the parking of construction
vehicles, including vehicles of workers, shall occur only on the constructing
Party’s Tract; (ii) all laborers, suppliers’, contractors and others connected
with such construction activities shall only use the access points from public
streets located upon the constructing Party’s Tract; (iii) if substantial work
is to be performed, such constructing Party shall, at the request of any other
Party, utilize and place a fence around the staging and storage areas shown on
the New Site Plan as “Costco Future Staging Area” (as to Costco) and “Estate Future
Staging Area” (as to any other Party) to the extent such constructing Party
requires a staging area; (iv) upon completion of such work, the constructing
Party shall restore the affected Common Area to a condition at least equal to
that existing prior to commencement of such work; and (v) during construction,
the constructing Party shall maintain its site in a neat and safe condition and
shall keep the Common Area free of all dirt and debris and shall reimburse the Estate
upon demand for any costs incurred by the Estate in removing any such dirt and
debris if the constructing Party fails to do so.

 

(e)           Each Party hereby grants and conveys to each
other Party and to its respective contractors, materialmen and laborers a
temporary license for access and passage over

 

19

 

and
across the Common Area of its Tract as shall be reasonably necessary to
construct and/or maintain improvements installed pursuant to this REA,
including without limitation performing Costco’s Initial Work pursuant to
Sections 3.2 through 3.6 above; provided, however, that such license shall be
in effect only during periods when actual construction and/or maintenance is
being performed, and provided further that the use of such license shall not be
exercised so as to unreasonably interfere with the use and operation of the
Common Area by others. The performance of Costco’s Initial Work in conformance
with the Construction Phasing and Practices Plan and the schedule under Section
3.3 above shall be deemed to be reasonable. The duration of the license granted
by this Section shall be coterminous with the term of this REA. Except with
respect to Costco’s Initial Work, prior to exercising the rights granted
herein, a Party shall first provide the Grantor with a written statement
describing the need for such license, and shall furnish a certificate of
insurance showing that its contractor has obtained the minimum insurance
coverage required by Section 6.4 hereof. Any Party availing itself of the
temporary license granted by this Section shall promptly pay all costs and
expenses associated with such work, shall diligently complete such work, and
shall promptly clean the affected area and restore the affected portion of the
Common Area to a condition which is equal to or better than the condition which
existed prior to the commencement of such work (the provisions of the
Construction Phasing and Practices Plan being applicable to such requirements
as to Costco’s Initial Work). Notwithstanding the foregoing, in the event a
dispute exists among the contractors, laborers and/or others connected with
construction activities, so that such dispute, in a Grantor’s reasonable
estimation, materially disrupts the use of such Grantor’s Tract, Grantor shall
have the right to prohibit the contractors, laborers and/or others working for
another Party from using the Common Area on its Tract until such dispute is
settled.

 

ARTICLE IV.

 

SITE PLAN CONTROLS

 

4.1           Parking Requirements.

 

(a)           The Automobile Parking Area on each Tract
shall contain sufficient ground level automobile parking spaces in order to
comply with the following minimum requirements or those of the City of
Industry, whichever are greater:

 

(i)            Restaurants: Except with respect to the existing Restaurants or replacements
therefor described in Section 4.1(b) below and incidental restaurant operations
described in Section 4.l(c) below, not less than ten (10) parking spaces for
each one thousand (1,000) square feet of Floor Area located on each Tract.

 

(ii)           Retail and Other Uses: 4:1000

 

(b)           Notwithstanding the preceding subsection, if
and to the extent any of the buildings within:

 

(i)            the Hometown Building Area and/or the
Callender’s Building Area is demolished, and another Restaurant is constructed
on the Estate Tract in such location, the parking required for the new
Restaurant in such location shall be not less than 4:1000, provided,

 

20

 

however, in no event shall the number of parking spaces in such
building areas be reduced below what is currently shown on the New Site Plan.

 

(ii)           the Chili’s Building Area is demolished, and
another Restaurant is constructed on the Estate Tract in such location, the
parking required for the new Restaurant in such location shall be not less than
that required under the applicable building codes, less the 64 spaces described
in Section 4.1(d) below, provided, however, in no event shall the number of
parking spaces in the Chili’s Building Area be reduced below what is currently
shown on the New Site Plan.

 

(c)           If an Occupant operates a Restaurant
incidental to its primary business purpose, then so long as such incidental
operation continues, the portion of the Floor Area occupied by such Restaurant
shall be excluded from the application of the specific parking ratio requirements
of subsection 4.1(a)(i) which are otherwise applicable to Restaurants, provided
that any additional code-required parking for such incidental use is provided
on the Tract for which such incidental use is operated. For the purpose of this
subsection (c), a Restaurant shall be an “incidental operation” if it occupies
less than five percent (5%) of the Occupant’s Floor Area and does not have a
separate customer entry/exit door to the outside of the building for such incidental
operation. For purposes of this REA, the snack bar, and food service and
seating for a store operated under the “Costco Wholesale” trade name (or
successor name) and any other Large Anchor Store and its bakery, meat and other
food preparation areas shall be deemed to be “incidental operations” without
regard to such five percent (5%) standard.

 

(d)           There shall be maintained on the Costco Tract
sixty-four (64) parking spaces to satisfy the Code requirements with respect to
the legal lot on which the Chili’s Building Area is situated so long as such
lot is used for restaurant purposes.

 

(e)           If the Possible Annexation Area is annexed to
this REA pursuant to Article VII below, then the requirements of Section 7.2
below with respect to parking shall be satisfied.

 

(f)            Each Party shall use its best efforts to
cause the employees of the Occupants of its Tract to park their vehicles only
on such Tract. Costco shall use its best efforts to cause the employees of the
Costco Tract to park in the areas designated on the New Site Plan as “Costco
Employee Parking” on the Costco Tract.

 

(g)           If a portion of the Automobile Parking Area
shall be taken in eminent domain so that after such taking the number of
parking spaces on a Tract shall be reduced to less than eighty percent (80%) of
the number of parking spaces required to satisfy the parking ratio provided for
in this Section 4.1 hereof, the Party whose Tract is so affected shall use its reasonable,
good faith efforts (including using proceeds from the condemnation award or settlement)
to restore and/or substitute parking spaces in order to comply with the parking
requirements set forth above subject to the approval of the Approving Parties.
If such compliance is not possible, such Party shall not be deemed in Default
hereunder, but shall not be permitted to expand the amount of Floor Area
located upon its Tract after such taking. If such Floor Area is thereafter
reduced, then it may not be subsequently increased unless the parking requirements
of this REA are satisfied.

 

21

 

 

(h)           The ratio of “compact” parking spaces within
the Automobile Parking Area on the respective lots on which the Chili’s
Building Area and the Hometown Building Area are situated shall not be more
than 25% or such greater percentage as may then exist on the Costco Tract
unless otherwise required by law.

 

4.2           Certain Site Plan Changes. Without limitation upon the other
provisions of the REA, including, but not limited to, Article II hereof:

 

(a)           There shall be no reconfiguration or
modification of the Common Area which would affect the Critical Access Points
as shown on the New Site Plan except pursuant to the Construction Phasing and
Practices Plan.

 

(b)           No Party shall alter the grading and drainage
as it presently exists, as modified by the Costco Initial Work Plan as shown on
the Improvement Plans without prior written approval of the Approving Parties.

 

4.3           Building Improvements.

 

(a)           With the exception of the Costco Seasonal
Outside Sales Area, (i) no Owner shall suffer or permit any buildings,
structures or outdoor sales or food service seating areas to be built or
maintained other than in the “Building Area” on their respective Tracts as designated
on the New Site Plan (without limitation upon the foregoing, all appurtenant canopies,
above-ground supports, loading docks, truck ramps and other outward extensions
of buildings shall be built or maintained only in such Building Area), and (ii)
no such building, structure or outdoor sales area shall exceed the maximum
Floor Area designation (if any) for any Building Area as shown on the New Site
Plan or as provided narratively in the REA.

 

(b)           (i)            In no event may the Floor Area within (a) the
Hometown Building Area and the Callender’s Building Area exceed 19,300 feet in
the aggregate, (b) the Hometown Building Area exceed 12,300 feet, or (c) within
the Chili’s Building Area exceed 5,812 feet (plus the patio areas as shown on
Exhibit “A” or as further adjusted to reconcile with the square footage of the
Chili’s Building Area, including the patio area, as shown on the permitted set
of the initial building plans approved by the City of Industry) if used as a
Restaurant or 10,000 square feet if used for retail purposes.

 

(ii)           In no event may the Floor Area for the Costco
Tract exceed 185,000 square feet
(i.e., 150,000 square feet plus an addition of not more than 30,000 square feet
in the portion of the Common Area identified as the “Costco Permissible Expansion
Area” on the New Site Plan, plus a building within the designated Building Area
on the New Site Plan detail of such alternative use in replacement for the
Costco Gas Station). Any addition to the Costco Store shall be of at least
equal design and quality of construction as the initial Costco Store as
described in Exhibit “J”.

 

(c)           If a portion of any Building Area is paved
and used as Common Area, such portion may subsequently be used for building
purposes provided that all parking requirements and other provisions relating
to such Tract are complied with. A Store may be razed, and if not intended to
be promptly replaced, the area occupying the former Building Area shall
thereafter be deemed part of the Common Area and shall be improved to the same
standards

 

22

 

as the other Common Area,
either as Automobile Parking Area and drive area or as landscaped area, at the
election of the Tract Owner. The election of a Party to demolish a Store on its
Tract shall not relieve such Party of its obligation to pay its share of Common
Area Maintenance Costs as provided in Section 5.2 hereof. If a Store on a Tract
is demolished but not converted to Common Area, such area may be reconverted to
Building Area at the election of the Party upon whose Tract such area is
located provided the parking requirements and all other requirements relating
to such Tract are satisfied.

 

(d)           No Store or other structure (exclusive of any
free standing sign referred to in Section 6.3 hereof) shall exceed the
following height restrictions:

 

(i)            On Lots on which the Hometown Building Area,
the Chili’s Building Area, and the Callender’s Building Area are situated -
thirty-five feet (35’); and

 

(ii)           On the Costco Tract - thirty-five feet (35’);
provided, however, if the building initially constructed on the Costco Tract is
demolished and is replaced with another building which does not initially
include a single business occupying at least 100,000 square feet of Floor Area,
then the maximum building height of any such replacement building shall not
exceed twenty-five feet (25’) as to that portion of such building(s) which is
located east of the “Redevelopment View Corridor Line”. The replacement
building(s) or portion thereof which is located west of the Redevelopment View
Corridor Line shall not exceed thirty-five feet (35’). In designing any such
replacement building(s) the Owner of the Costco Tract, shall endeavor to place
the portions thereof which exceed thirty-five feet in height as far west as is
practical if the replacement building(s) do not occupy substantially all of the
allowable Building Area on the Costco Tract west of such Redevelopment View
Corridor Line.

 

(iii)          The height of any structure shall be measured
perpendicular from the finished grade of the Building Area to the top of the
highest single portion of the structure, including any screening parapet,
penthouse, mechanical equipment or similar appurtenance located on the roof of
such Store or any architectural element which collectively occupies an area
greater than three percent (3%) of the aggregate footprint area of the
building(s) on the Tract upon which any such parapet, penthouse, architectural
element or other appurtenance is located.

 

(e)           Any Party shall have the right under this REA
to install, maintain, repair, replace and remove “Communications Equipment” on
the top of the building on its Tract which may extend above the height limits
established above, provided, however, such Communications Equipment shall be
screened and set back from the front of the building so as to be hidden, to the
extent practicable, from public view from adjacent public streets and highways,
except for visibility from street level with or higher than the roof of the
building(s) on which the Communications Equipment is located. As used herein,
the phrase “Communications Equipment” means such things as satellite and
microwave dishes, antennas and laser heads, together with associated equipment
and cable.

 

(f)            No Building shall be constructed on the
Estate Tract which is within sixty feet (60’) of the Building Area on the
Costco Tract, including, without limitation, the area designated as the
“Hometown 60’ No Build Zone” on the New Site Plan. In connection with the
foregoing limitation, the Estate acknowledges that Costco proposes to construct
on the Costco

 

23

 

Tract its typical facility
which is classified as an “unlimited area” Building under certain applicable
building codes (i.e., a building of the type designed II-N or V-N under the
Uniform Building Code). If required by any governmental authority, the Estate
shall join in a recordable declaration which confirms the existence of a sixty
foot (60’) clear area around the Costco Building.

 

(g)           No buildings shall be constructed on the
Estate Tract if the same would violate the requirements under Section 7.2
(captioned “Separate Configuration”).

 

4.4           Interim Operation Under Existing Site Plan. Notwithstanding anything herein to the
contrary, until Costco commences Costco’s Initial Work, the Costco Tract shall
be configured, operated and maintained as depicted on the Existing Site Plan
and during Construction of Costco’s Initial Work will be so governed by the
Construction Phasing and Practices Plan. At all times, Estate may construct,
configure, operate and maintain its Tract in accordance with the New Site Plan.
If the annexation of the Possible Annexation Area pursuant to Section 7.2
occurs, prior to the completion of Costco’s Initial Work, then the parties
shall agree upon a variation of the Existing Site Plan to govern the Possible
Annexation Area until Costco’s Initial Work is completed and the new Site Plan
as agreed upon pursuant to Section 7.2 (which will cover the entire Shopping
Center including the Possible Annexation Area) becomes applicable. Until the
commencement of construction of the realigned Castleton Street, the Estate and
its tenants and their invitees to the north of the existing alignment of
Castleton Street shall have an irrevocable license to utilize those portions of
the Shopping Center located north of the existing alignment of Castleton Street
for pedestrian and vehicular access to Castleton Street and for the continuing
use of existing utilities.

 

ARTICLE V.

 

MAINTENANCE AND REPAIR

 

5.1           Utilities.

 

(a)           Except as set forth in Subsection (b) below,
each Party shall repair and maintain in a first-class condition all Separate
Utility Lines located on its Tract unless the same are dedicated to and
accepted by a public or quasi-public utility or authority which is obligated to
maintain and replace the same.

 

(b)           The Grantee of an easement for a Separate
Utility Line shall maintain and repair at its cost any facilities installed
pursuant to such grant unless the same are granted or dedicated to and accepted
by a utility or a governmental agency which is obligated to maintain and
replace the same. If such utility or government agency ceases to perform such
maintenance, the responsibility therefor shall revert to the Grantee. Any
maintenance and repair of nondedicated Separate Utility Lines located on
another Party’s Tract shall be performed only after two (2) weeks prior written
notice to the Grantor (except in an emergency the work may be initiated with
reasonable notice under the circumstances) such maintenance or repair shall be done
after normal business hours whenever possible and shall otherwise be performed
in such a manner as to cause as little disturbance in the use of the Grantor’s
Tract as is practicable under the circumstances. Any Party performing or
causing to be performed maintenance or repair

 

24

 

work on a Separate Utility
Line agrees to promptly pay all costs and expenses associated therewith, to
diligently complete such work as quickly as possible, to indemnify and defend
the Party upon whose Tract such work is being performed against any costs,
claims or damages occasioned by such work, and to promptly clean the area and
restore the affected portion of the Common Area to a condition equal to or
better than the condition which existed prior to the commencement of such work.

 

5.2           Maintenance of Common Area.

 

(a)           The activities described in this paragraph
5.2(a) shall be deemed “Common Area Maintenance”. The minimum standard of maintenance
for the Common Area shall be comparable to the standard of maintenance followed
in other comparable first-class retail developments of comparable size located
in the Los Angeles, California, area and shall further be, at all times, in
compliance with all applicable governmental laws, rules, regulations orders and
ordinances, and the provisions of this REA. All Common Area improvements shall
be repaired or replaced with materials at least equal to the quality of the
materials being repaired or replaced (as new or equal to the quality of the
original work) so as to maintain the architectural and aesthetic harmony and
integration of the Shopping Center as a whole. The maintenance and repair
obligation for the Common Area shall include, but shall not be limited to, the
following:

 

(i)            Automobile Parking Areas. Maintaining all
paved surfaces and curbs in a smooth and evenly covered condition including
cleaning, sweeping, restriping, repairing, resealing and resurfacing, excluding
the Gasoline Sales Area, the maintenance of which shall be the obligation of
Costco.

 

(ii)           Debris and Refuse. Cleaning, sweeping and
removal of all paper, debris, filth, refuse, leaves, ice and snow to the extent
necessary to keep the Common Area in a clean and orderly condition. All
cleaning shall be done at appropriate intervals during times that do not
materially interfere with the conduct of business or use of the Common Area by
Permittees or Occupants of the Shopping Center.

 

(iii)          Signs and Markers. Placing, cleaning, keeping
in repair, replacing and repainting any appropriate directional signs or
markers, including any handicapped parking signs.

 

(iv)          Common Area Lighting. Operating, keeping in
repair, cleaning and replacing such Common Area lighting facilities, including
all lighting necessary or appropriate for Common Area security.

 

(v)           Landscaped Areas. Cleaning and maintaining
all landscaped areas, including landscaping and planters adjacent to exterior
walls of buildings; repairing automatic sprinkler systems in the Common Area;
irrigating, weeding, pruning, fertilizing and replacing shrubs and other
landscaping as necessary; provided, however, that if any Occupant requires or
installs “special” landscaping (i.e., beyond the standard landscaping
requirements for the remainder of the Shopping Center), the maintenance and
cost of such special landscaping shall

 

25

 

be borne solely by such
Occupant without cost or expense to the other Parties and shall not be included
in Common Area Maintenance Costs.

 

(vi)          Obstructions. Keeping the Common Area free
from any obstructions, unless such obstruction is otherwise permitted under the
provisions of this REA. 

 

(vii)         Sidewalks. Cleaning (including periodic
washing and/or steam cleaning), maintenance and repair of all sidewalks,
including those adjacent and contiguous to buildings located within the
Shopping Center. Sidewalks shall be cleaned at appropriate intervals and during
such time so as not to materially interfere with the conduct of business or use
of the Common Area by Permittees or Occupants, of the Shopping Center.

 

(viii)        Personnel. Providing personnel, as required,
to supervise the Common Area.

 

(ix)           Traffic. Supervision of traffic at entrances
and exits to the Shopping Center
and within the Shopping Center, as conditions reasonably require, in order to
maintain an orderly and proper traffic flow. If, however, an Occupant conducts
special events at its Store or which result in significant additional traffic
in the Common Area, the applicable Party shall provide traffic direction and
control services to minimize the impact of such extraordinary traffic on other
Occupants or Permitees of the Shopping Center pursuant to a traffic Control
Plan previously approved by the Approving Parties.

 

(x)            Compliance with Law. Taking such other
actions as may be required to cause the condition and use of the Common Area to
comply with applicable law, except that each Owner shall make any such capital
improvements or modifications and all other improvements or modifications which
may be required due to the particular uses conducted on its Tract to those
portions of the Common Area on its Tract as may be so required and in
compliance with the requirements of this REA. If a Party does not make such improvements
or modifications and such failure continues for more than sixty (60) days
following notice from the Estate or another Party (as such longer period as
reasonably may be required provided that within such sixty (60)-day period the
breaching Party commences and thereafter diligently continues to correct such
failure), then the noticing Party and its agents and contractors may come on to
the Common Area on the defaulting Party’s Tract and take such actions as shall
reasonably be required to correct such failure and the defaulting Party shall
reimburse the correcting Party for the costs reasonably incurred in connection
therewith within thirty (30) days following demand by the correcting Party.

 

(b)           Notwithstanding anything herein to the
contrary, each Party shall maintain, repair and replace, at its sole cost in a
clean, sightly and safe condition, any exterior shipping/receiving truck dock
area, any truck ramp or truck parking area, any refuse, compactor or dumpster
area on its Tract, and any Separate Utility Lines or any lateral utility lines
extending to and from common trunk lines benefiting such Party’s Tract.

 

(c)           From and after the date upon which the Common
Areas within Costco’s Initial Work is substantially completed, the Estate shall
operate and maintain the entire Common Area or cause the same to be operated
and maintained, in good order, condition and repair. Prior

 

26

 

to the substantial
completion of the Common Areas within Costco’s Initial Work, Costco shall
maintain those areas impacted by Costco’s Initial Work under the Construction
Phasing and Practices Plan, from time to time, other than the Common Areas on
the Costco Tract and the Estate shall maintain the remainder of the Common
Areas. Notwithstanding anything to the contrary contained in this REA, Costco
shall not be allocated any Common Area Maintenance Costs attributable to the
Common Area within Costco’s Initial Work prior to the substantial completion of
the Common Areas within Costco’s Initial Work. To the extent there are utility
charges that cannot be separately metered and billed, the parties agree to
equitably allocate the same. The Estate shall have the right, from tune to time
to delegate to another Person or Persons some or all of its responsibilities to
maintain the Common Area, but the Estate shall remain responsible for such
delegated responsibilities as between the Estate and the other Owners and such
delegated Person(s) shall have no contractual relationship with the other
Owners.

 

(d)           The Estate shall expend only such funds as
are reasonably necessary for Common Area Maintenance Costs in accordance with
the standards and requirements hereof and shall promptly pay such costs when
due. For the purpose of this REA, “Common Area Maintenance Costs” shall not
include:

 

(i)            any late charges or fees, unless such charges
or fees are due to Costco’s late payment of Common Area Maintenance Costs;

 

(ii)           any charge for utilities other than the
utilities serving the Common Areas;

 

(iii)          any costs to clean up or repair the Common
Area resulting from promotional activities or from construction, maintenance or
replacement of buildings which are the responsibility of each Party;

 

(iv)          profit, administrative and overhead costs,
(such as rent, legal, supplies, utilities and wages or salaries paid to such
management or supervisory personnel), it being further agreed that if a Person
is involved with other than Common Area operational and maintenance matters at
the Shopping Center, then the Estate shall allocate that Person’s time to
properly reflect those varied duties;

 

(v)           entertainment related transportation, meals
and lodging;

 

(vi)          losses incurred by the Estate as a result of
its negligence or as a result of its obligations to indemnify and defend any
Party hereunder;

 

(vii)         any costs of advertising, marketing,
promotions, or any merchant’s association;

 

(viii)        real property taxes and assessments on any
Buildings or Common Area;

 

(ix)           the costs of any repairs or restoration
following a casualty in excess of deductibles;

 

27

 

(x)            the cost of maintaining any Outdoor Sales
Area or Gasoline Sales Area (the cost of which shall be borne solely by the
applicable user of such Area);

 

(xi)           any costs associated with any Buildings;

 

(xii)          capital improvements during the first five
(5) years from the opening of the Costco Store, including, without limitations,
resurfacing of the parking lots, updating and/or replacing parking lot light
standards, and major landscaping enhancements; provided, however, that
replacements of capital improvements which were part of Costco’s Initial Work
may be included during such five (5) year period if their replacement is
necessitated by wear, defect or damage not covered by applicable contractor
warranties, and provided further that Capital Improvements shall be included
during such five (5) year period to the extent the need therefor was triggered
by alterations or additions to Costco’s Initial Work which Costco may make
during such five (5) year period; and

 

(xiii)         management or other fees charged by any Person
to whom the Estate has delegated some or all of its duties hereunder.

 

(e)           In lieu of profit, administrative and
overhead costs, the Estate shall be permitted to charge the Parties an
Administration Fee computed by multiplying the Common Area Maintenance Costs
(exclusive of insurance premiums and real property and other taxes) by ten
percent (10%) (“Administration Fee”). If any of the Estate’s personnel at the
Shopping Center perform services, functions or tasks in addition to services
included in the Common Area Maintenance Costs, then the cost of such personnel
shall be equitably allocated between services included in Common Area
Maintenance Costs and such other services according to time spent performing
each of them. The Administration Fee may be charged to the Parties on a monthly
or quarterly basis, as the Estate deems necessary and shall be paid within
fifteen (15) days from a Party’s receipt of a bill for the same.

 

(f)            The Estate shall, at least ninety (90) days
prior to the beginning of each calendar year, submit to the Parties an
estimated budget (“Budget”) for the projected Common Area Maintenance Costs and
the Administration Fee for operating and maintaining the Common Area of the
Shopping Center for the ensuing calendar year. The Budget shall be in a form
and content reasonably acceptable to the Parties and shall identify separate
cost estimates for any items which would be of a capital nature under generally
accepted accounting principles, plus:

 

(i)            sweeping and cleaning of the Automobile Parking
Area and sidewalk areas;

 

(ii)           repair and maintenance of lighting standards
and replacement of bulbs, ballasts and lens;

 

(iii)          repair and maintenance of sidewalks;

 

(iv)          repair and maintenance of Automobile Parking
Areas;

 

(v)           repair and maintenance of landscaping;

 

28

 

(vi)          trash and litter removal;

 

(vii)         premiums and/or reserves for commercial
general liability and casualty insurance (which may include earthquake coverage
for the Common Area Improvements) for the Common Area;

 

(viii)        supervision of Common Areas and traffic
regulation personnel, if any;

 

(ix)           rental or purchase of equipment and supplies;

 

(x)            utilities, including water, electricity,
sewer and gas utilized in the operation of the Common Areas;

 

(xi)           depreciation or trade-in allowance applicable
to items purchased for Common Area purposes;

 

(xii)          Administration Fee;

 

(xiii)         pest control;

 

(xiv)        capital improvements allowable under clause
(d)(xii) above;

 

(xv)         the Shopping Center’s Allocable Share of
costs incurred by Estate for services provided to the entire Commercial Center
under unitary service contracts which would constitute Commercial Center Common
Services Costs or Common Area Maintenance Costs, provided such costs are not also
included in the billings to the Tracts within the Shopping Center under Section
5.4 below; and

 

(xvi)        costs associated with any matter which is
excluded from Common Area Maintenance Costs (so that the Parties may review the
allocation of such costs).

 

(g)           Nothing in this REA shall be interpreted to
entitle the Estate to charge the Parties for any promotional or marketing fees
incurred on behalf of the Shopping Center whether as Common Area Maintenance
Costs, as Commercial Center Common Services Costs, or otherwise.

 

(h)           Within thirty (30) days after receipt of the
Budget, each Party shall either approve or disapprove of the same. If a Party
disapproves the Budget, it shall set forth in reasonable detail its grounds for
disapproval, and thereupon the Parties and the Estate shall consult with each
other to establish a final approved Budget. If a Budget is not approved by
December 1st, the Estate shall continue to maintain and operate the Common Area
for the next calendar year in accordance with the prior year’s Budget and the
Parties shall continue to meet and confer with the Estate in order to establish
the Budget. The Estate shall use its good faith reasonable efforts to operate
and maintain the Common Area of the Shopping Center in accordance with the Budget;
provided, however, the Estate shall have the right to make emergency repairs to
the Common Area to prevent injury or damage to Person or property, it being
understood that the Estate shall nevertheless advise the Parties of such
emergency

 

29

 

condition as soon as
reasonably possible including the action taken and the cost thereof. If the
cost of the emergency action exceeds $10,000.00, which amount shall be
increased every five years by the percentage increase in the CPI, then the
Estate may submit a supplemental billing to the Parties, including therewith
evidence supporting such payment, and the Parties shall each pay their
Allocable Share thereof within thirty (30) days. If the cost limitation set forth
above is not exceeded then such costs shall be included as part of the Common
Area Maintenance Costs for the year incurred.

 

(i)            Common Area Maintenance Costs and the
Administration Fee shall be allocated to each Tract from time to time existing
in the Shopping Center on the basis of its Common Area Allocable Share. The
Parties shall pay to the Estate in equal monthly payments, in advance, their
respective Common Area Allocable Shares of the Common Area Maintenance Costs
and Administration Fee based either upon the amount set forth in the approved
Budget, or if a Budget is not approved, then the lesser of the amount set forth
in the unapproved Budget or the monthly payment established for the prior year,
which amount shall be increased by the percentage increase in the CPI until a
Budget is approved. The Estate shall reasonably estimate the first calendar
year’s expenses and the Parties shall each make their first payment in the
month following the Estate’s undertaking of such maintenance and repair of the
entire Common Area under Section 5.2(c) (i.e., upon the substantial completion
of the Common Areas within Costco’s Initial Work). Within forty-five (45) days
after the end of each calendar year, the Estate shall provide the Parties with
a certified statement setting forth the actual Common Area Maintenance Costs
incurred for the operation and maintenance of such Common Area, the
Administration Fee, and the Parties respective Common Area Allocable Share of
the aggregate thereof, together with supporting invoices and other reasonable
supporting documentation. If the amount paid by any Party for such calendar
year shall exceed its Common Area Allocable Share, the Estate shall credit the
excess to such Party’s payment of its Common Area Allocable Share of Common Area
Maintenance Costs next due. If the amount paid by any Party for such calendar
year shall be less than its Common Area Allocable Share, such Party shall pay
the balance of its Common Area Allocable Share to the Estate within thirty (30)
days after receipt of such certified statement.

 

(j)            Within two (2) years after receipt of any
such certified statement, any Party shall have the right to audit the Estate’s
books and records pertaining to the operation and maintenance of the Common
Area for the calendar year covered by such certified statement. Each Party
shall be entitled to one (1) such audit for each two (2) year period. A Party
wishing to conduct an audit shall notify the Estate of its intent to audit at
least thirty (30) days prior to the designated audit date. In the event such
audit discloses any error in the determination of any Party’s Common Area
Allocable Share or the Administration Fee, an appropriate adjustment shall be
made by the Estate forthwith. The cost of any audit shall be assumed by the
auditing Party unless such Party shall be entitled to a refund from the Estate
which is in excess of three percent (3%) of the amount calculated by the Estate
as such Party’s Allocable Share for the calendar year, in which case the Estate
shall pay the cost of such audit.

 

(k)           Each Party agrees to defend, indemnify,
protect and hold each other Party harmless from and against any mechanic’s,
materialmen’s and/or laborers’ liens, and all costs, expenses and liabilities
in connection therewith, including reasonable attorneys’ fees and court costs,
arising out of the maintenance by such Party of its Tract or Common Area on its
Tract.

 

30

 

Provided the other Parties
have paid when due their Common Area Allocable Shares of Common Area
Maintenance Costs, Estate shall defend, indemnify, protect and hold the Parties
harmless from and against any mechanic’s, materialmen’s and/or laborers, liens
and all costs, expenses and liabilities in connection therewith, including reasonable
attorneys’ fees and court costs, arising out of the maintenance by the Estate
of the Common Area. In the event that any Party’s Tract shall become subject to
any such lien because of the Estate’s services hereunder, the Estate shall,
provided the other Party has paid its Common Area Allocable Share of Common
Area Maintenance Costs, promptly cause such lien to be released and discharged
of record, either by paying the indebtedness which gave rise to such lien or by
posting such bond or other security as shall be required by law to obtain such
release and discharge.

 

(1)           In the event any of the Common Area is
damaged or destroyed during the term of this REA by any cause whatsoever,
whether insured or uninsured, other than damage caused by ordinary use or wear
and tear, the Party upon whose Tract such Common Area is located shall repair
or restore such Common Area at its sole cost and expense with all due diligence.
A Party may require another Party to do such restoration work if the Party so
requiring has agreed in writing to pay the costs in excess of such sum. Except
to the extent otherwise limited by Section 10.22(b) hereof, in the event such
damage or destruction of Common Area is caused, in whole or in part by another
Party or Person, the Party obligated to make such repair or restoration
reserves and retains the right to proceed against such other Party or Person
for indemnity, contribution or damages.

 

(m)          If the Estate no longer desires to maintain
the Common Area on the entire Shopping Center, the Parties shall cooperate to
retain a qualified third-party management company, reasonably satisfactory to
the Approving Parties, to perform the operation and maintenance of the Common
Area over the entire Shopping Center on behalf of all of the Parties in
accordance with the standards under this REA and under a management contract
with all of the Parties.

 

In
such event, each Party will be obligated to bear its Common Area Allocable
Share of the Common Area Maintenance Costs and the Parties shall cooperate to
execute such further written agreement as are reasonably necessary to implement
such third-party management program.

 

(n)           In the event of any series of three or more
defaults by Estate in any twelve (12)-month period relating to the performance
of its duties as the Estate hereunder which Estate fails to cure or diligently
commence to cure within thirty (30) days following written notice from Costco,
Costco shall have the right, upon giving not less than sixty (60) days’ written
notice to the Estate, to take over and assume the maintenance of the Common
Area upon the Costco Tract. Following the effective date of such assumption,
Costco shall maintain the Common Area on its Tract, and shall pay all costs and
expenses incurred in connection therewith; provided, however, the Estate shall
continue to maintain the Common Utility Lines of the Shopping Center regardless
of location and to process (and prorate the costs thereof on an equitable
basis) the electric and water charges for lighting and landscape irrigation
which are not separately metered. Upon such assumption Costco shall be released
from the obligation to contribute towards the Estate’s maintenance and
operation of the balance of the Common Area (except for such

 

31

 

Common Utility Lines and
utility charges). The Estate shall continue to maintain the balance of the
Common Area in accordance with the standards set forth herein.

 

(o)           In the event of any series of three or more
defaults by Estate in any twelve (12)-month period relating to the performance
of its duties hereunder with respect to the Common Area which Estate fails to
cure or diligently commence to cure within thirty (30) days, following written
notice from Costco, in addition to its rights set forth herein above as to its
Tract, Costco may also elect to replace Estate with another qualified
third-party management company to maintain the Common Area over the entire
Shopping Center on behalf of both the Estate and Costco pursuant to an agreement
which is reasonably acceptable to the Parties. In such event, the fees to such
successor management company shall not exceed the fees which would be properly
payable to Estate for such responsibilities and the Parties shall have the same
duties to each other (including, without limitation, the payment of their
Common Area Allocable Share of Common Area Maintenance Costs and the
Administration Fee as if the Estate were performing such duties).

 

(p)           (i)            Costco shall have the right to cause the
Estate to resume the operation and maintenance of the Common Area over the
entire Shopping Center upon at least sixty (60) days’ prior notice; provided,
however, that the date for such re-assumption shall always be the first day of
a calendar quarter.

 

(ii)           Concurrently with the designated date, Estate
shall resume full operation and maintenance of the Common Areas over the entire
Shopping Center and Costco shall be responsible for its share of the costs and
expenses of Estate’s performance as set forth in 5.2 above.

 

(q)           In the event of any series of three or more
defaults by Costco in any twelve (12)-month period relating to the performance
of Costco’s duties in the maintenance of the Costco Tract after Costco has
taken over such responsibility under Section 5.2(n) above, which Costco fails
to cure or diligently commence to cure within thirty (30) days following
written notice from the Estate, the Estate shall have the right, upon giving
not less than sixty (60) days’ written notice to Costco, to designate a
qualified third party management company, reasonably satisfactory to Costco, to
assume the operation and maintenance of the Common Area over the entire
Shopping Center (including the Costco Tract) under delegation from the Estate;
provided, however, that the date for such re-assumption shall always be the
first day of a calendar quarter. Concurrently with the designated date, such
third party manager shall assume full operation and maintenance of the Common
Areas over the entire Shopping Center and Costco shall be responsible for its
share of Common Area Maintenance Costs as set forth in 5.2 above.

 

5.3           Maintenance of Building Improvements/Seasonal
Outside Sales Area(s).

 

(a)           Each Party covenants and agrees to maintain
and keep the building improvements, Gasoline Sales Area and Seasonal Outside
Sales Area located on its Tract, if any, in a condition and state of repair
equal to the level of first class retail shopping centers in the Los

 

32

 

Angeles, California, area,
in compliance with all governmental laws, rules, regulations, orders, and
ordinances exercising jurisdiction thereover, and in compliance with the
provisions of this REA. Each Party further agrees to store all trash and
garbage in adequate containers, to locate such containers so that they are
screened and not visible to the general public, and to arrange for regular
removal of such trash or garbage. The standards for such maintenance of
Gasoline Sales Area and Seasonal Outside Sales Area shall be the same as are
set forth for the Common Area under Section 5.2(a) above. At such time as a
Seasonal Outside Sales Area is not being so used, the Party on whose Tract the
same is located shall restore the former Seasonal Outside Sales Area to Common
Area at such Party’s sole cost and expense.

 

(b)           Notwithstanding anything to the contrary
herein, in the event any of the building improvements on a Tract are damaged by
fire or other casualty (whether insured or not), the Party upon whose Tract
such building improvements are located shall immediately remove the debris
resulting from such event and provide a sightly barrier and within a reasonable
time thereafter shall, at its election, either (i) repair or restore, in a
diligent and continuous manner, the building improvements so damaged, such
repair or restoration to be performed in accordance with all provisions of this
REA, or (ii) erect, in a diligent and continuous manner, other building
improvements in such location, provided all provisions of this REA are complied
with, or (iii) subject to all other provisions of this REA, demolish, in a
diligent and continuous manner, the damaged portion, and at such Party’s
election, all or part of the remainder of such building improvements and
restore the area to an attractive condition as reasonably approved by the other
Parties in which event the area shall be Common Area until a replacement
building is erected. Such Party shall have the option, in its sole discretion,
to choose which of the foregoing alternatives to perform, but such Party shall
be obligated to perform one of such alternatives. Such Party shall give written
notice to each other Party within one hundred twenty (120) days from the date
of such casualty of which alternative it elects. If no notice is given (or is
not timely given), then the Party on whose Tract the damage or destruction
occurred shall be deemed to have elected and shall immediately proceed with the
alternative described in clause (iii).

 

5.4           Commercial Center Common Facilities.

 

(a)           In addition to Common Area Maintenance Costs
and the Administration Fee, each Party shall pay to the “Developer” under the
Master CC&Rs or its successor as the manager of the common areas of the
remainder of the Commercial Center, each Party’s Commercial Center Allocable
Share of the Commercial Center Common Services Costs. The term “Commercial
Center Common Services” is defined in Article I above.

 

(b)           The phrases “Commercial Center Common
Services Costs” as herein used, shall mean all sums expended by the “Developer”
under the Master CC&Rs concerning the “Commercial Center Common Services”
defined in Article I plus an allowance to the “Developer” under the Master
CC&Rs for the “Developer” under the Master CC&R’s supervision,
maintenance and operation of the Commercial Center Common Services calculated in
the same manner as the corresponding Administration Fee for the maintenance of
the Common Areas of the Shopping Center (e.g., based on corresponding costs of
the Commercial Center Common Services).

 

33

 

(c)           Each Party shall pay to the Developer under
the Master CC&Rs, within ten (10) days following Estate’s demand, such
Party’s Commercial Center Allocable Share of Commercial Center Common Services
Costs. The Estate, or its designated successor as Developer under the Master
CC&R’s, is the intended beneficiary of the provisions of this Section 5.4,
whether or not it is an Owner within the Shopping Center.

 

5.5           Maintenance Under Certain Existing Leases.

 

If
the tenant under an Existing Lease refuses to permit the Party who is the owner
of the building or ground leased premises to comply with a requirement of
Sections 5.1, 5.2 or 5.3 above such non-compliance will not constitute a
default by Party who is the landlord under such Existing Lease(s), if (i) the
Party has diligently pursued such compliance with such requirements and (ii)
the Party has advised the other Parties that the Party does not have the legal
right to perform, or cause the performance of, such Sections 5.1, 5.2 or 5.3 requirements
without violating the applicable Existing Lease.

 

ARTICLE VI.

 

OPERATION OF THE SHOPPING CENTER

 

6.1           Uses.

 

(a)           No part of the Shopping Center shall be used
for other than retail sales or services, offices, restaurants, information
centers, or other commercial purposes. For purposes of this REA, the Parties
agree that the use of a Large Anchor Store on the Costco Tract for wholesale
sales shall be deemed to be for “retail sales” so long as any wholesale sales
from such Large Anchor Store on the Costco Tract occurs only to the degree that
the Large Anchor Store therein engage(s) in such wholesale sales at a
majority of its other stores in Southern California. Notwithstanding the
foregoing, if any replacement building on the Gasoline Sales Area is not operated
as part of the business operations of a Large Anchor Store on the Costco Tract,
such replacement out-building shall not be used for wholesale sales.

 

(b)           No use shall be permitted in the Shopping
Center which is inconsistent with the operation of comparable shopping centers
in the Los Angeles, California area; provided, however, that (i) the uses
currently existing on the Estate Tract as of the date hereof shall be deemed to
be in compliance with this Section 6.1. Without limiting the generality of the foregoing,
the following uses or any use resulting in the following shall not be
permitted:

 

(i)            any public or private nuisance;

 

(ii)           any noise or sound that is objectionable due
to intermittence, beat, frequency, shrillness or loudness;

 

(iii)          any obnoxious odor;

 

(iv)          any excessive quantity of dust, dirt, or fly
ash; provided however, this prohibition shall not preclude the sale of soils,
fertilizers, or other garden materials or

 

34

 

building materials in
containers if incident to the operation of a home improvement or general
merchandise store;

 

(v)           any fire, explosion or other damaging or
dangerous hazard (but the foregoing shall not prohibit gasoline sales),
including the storage, display or sale of explosives or fireworks;

 

(vi)          any industrial, distillation, refining,
smelting, agriculture or mining operations;

 

(vii)         any trailer or mobile home court, labor camp,
junk yard, stock yard or animal raising. Notwithstanding the foregoing, pet
shops shall be permitted within the Shopping Center;

 

(viii)        any drilling for and/or removal of subsurface
substances;

 

(ix)           any dumping of garbage or refuse, other than
in enclosed receptacles intended for such purpose;

 

(x)            any cemetery, veterinary hospital (except in
connection with a pet store having an aggregate of at least 15,000 square feet
of Floor Area), mortuary or similar service establishment;

 

(xi)           any car washing establishment;

 

(xii)          any automobile body and fender repair work;

 

(xiii)         any automobile, truck, trailer, or
recreational vehicle sales, leasing or display which is not entirely conducted
inside of a Building; provided the foregoing shall not prohibit the display of
up to five (5) vehicles (one of which may be a recreational vehicle) for sale
by Costco in the Common Areas on the Costco Tract;

 

(xiv)        any church, synagogue, temple mosque or other
place of worship;

 

(xv)         except within the Southern Estate Envelope
Area and up to twenty-five percent (25%) of the Costco Tract, any office use
other than an office incidental to a retail or wholesale operation and
so-called retail offices (such as bank branches, retail brokerage offices and
medical offices) so long as such retail offices do not exceed an aggregate of ten
percent (10%) of the Floor Area of the Shopping Center;

 

(xvi)        any fire sale, flea market, bankruptcy sale
(unless pursuant to a court order) or auction operation;

 

(xvii)       any apartment, home or other residential use
or any hotel, motel or other lodging facilities;

 

(xviii)      any theater, playhouse, cinema or movie
theater;

 

35

 

(xix)         any bar or dance floor area exceeding 1,000
square feet on the lots on which the Hometown Building Area, Callender’s
Building Area and Chili’s Building Area are situated, unless the same is
permitted under an existing lease of such lots and the Estate does not have the
ability to prevent the same without violating such lease(s).

 

(xx)           except within the Possible Annexation Area,
any school, training, educational or day care facility (other than a day care
facility which serves only employees working within the Shopping Center), and
other than a child nursery facility on the parcel identified in Section 2 of
Exhibit “N”, including but not limited to: beauty schools, barber colleges,
nursery schools, diet centers, reading rooms, places of instruction or other
operations catering primarily to students or trainees rather than to customers;
provided however, this prohibition shall not be applicable to on-site employee
training by an occupant incidental to the conduct of its business at the
Shopping Center (the foregoing are collectively referred to as “Schools”); or

 

(xxi)         the uses set forth in Exhibit “N” as to those
portions of the Shopping Center
identified on said Exhibit so long as the leases referred to in such Exhibit
are in effect. The Estate or its designated successor under this REA shall from
time to time execute such further instruments as may reasonably be requested by
the other Parties to delete the restrictions set forth in Exhibit “N” upon the
expiration or earlier termination of the existing tenant leases referred to in
such Exhibit and upon recording in the Los Angeles County Official Records a
notice of termination of any or all of them;

 

(xxii)        Except on the Costco Tract: (i) any general merchandise
membership warehouse club comprising over 75,000 square feet of Floor Area
including those operated under the trade names “SAM’s and B.J.’s”; and (ii) any
Walmart Store. This provision shall lapse if the Costco Tract is not utilized
for a membership warehouse club comprising over 75,000 square feet of Floor
Area for a period of two (2) years.

 

(c)           The name “Costco” shall not be used to
identify the Shopping Center or any business or trade conducted on the Estate
Tract. No Owner shall be liable to Costco for a failure of any of its tenants
to observe this restriction, but each Owner shall cooperate with Costco at no
out-of-pocket cost in enforcing this restriction.

 

(d)           No merchandise, equipment or services shall
be displayed, offered for sale or lease, or stored within the Common Area;
provided, however, that the foregoing prohibition shall not be applicable to
(i) the storage of shopping carts for the respective buildings on the Common
Area located on each Tract, (ii) the seasonal display and sale of bedding
plants on the sidewalk in front of the respective buildings located on each
Tract, (iii) food service and bulk sales on the sidewalks in front of the
Costco Store, (iv) the use by Costco and an Occupant of the Estate of the
Seasonal Outdoor Sales Area(s) defined above within the Common Area on their respective
Tracts, (v) the display for sale by Costco within the Common Area on the Costco
Tract of up to five (5) cars for sale (provided, such display shall not occur
less than four hundred (400) feet east of the centerline of Albatross Road),
(vi) the Gasoline Sales Area, or (vii) certain temporary Shopping Center
promotions except that no promotional activities will be allowed without the
prior written approval of the Approving Parties, which approval may be withheld
in their sole and absolute discretion. In addition, if a recycling center or
equipment is required by

 

36

 

law to be located in the
Shopping Center, the location shall be subject to the approval of the Approving
Parties. In no event, however, may the aggregate of the Floor Area of
improvements constructed in (i) the Costco Permissible Expansion Area plus (ii)
the Seasonal Outdoor Sales Area on the Costco Tract, exceed 30,000 square feet.
Notwithstanding anything to the contrary contained in this Section 6.1(d), in
no event shall any Party display or offer for sale or lease any merchandise,
equipment or services within the Common Area in violation of Article II hereof.

 

(e)           No Permittee shall be charged for the right
to use the Common Area, other than as may be required pursuant to the rules to
be adopted by the Estate respecting constitutional rights of access to the
Shopping Center (e.g., security deposit to insure clean up of debris due to
handouts or placards), and unless required by law.

 

(f)            Persons engaging in the following activities
shall not be permitted on the Shopping Center (unless such Persons are
permitted by obligatory law to engage therein and then only pursuant to
reasonable rules and regulations approved by the Approving Parties regulating the
time, place and manner of such activities, but which do not materially
interfere with a Party’s use of its Tract or the Common Area thereon):

 

(i)            exhibiting any placard, sign or notice;

 

(ii)           distributing any circular, handbill, placard
or booklet;

 

(iii)          soliciting memberships or contributions other
than memberships in or to an Occupant sold inside a Store or directly in front
of such Store’s entrance;

 

(iv)          parading, picketing or demonstrating; and

 

(v)           failing to follow regulations relating to the
use of the Shopping Center.

 

(g)           Except as may be set forth in any separate
agreement between any of the Parties, this REA is not intended to, and does not,
create or impose any obligation on a Party to operate, continuously operate, or
cause to be operated a business or any particular business at the Shopping
Center or on its respective Tract.

 

6.2           Lighting.

 

(a)           After substantial completion of Costco’s Initial
Work, the Estate shall keep the Shopping Center fully illuminated each day from
dusk to at least 11:00 p.m. and keep at least twenty-five percent (25%) of the
exterior Automobile Parking Area lights in the Shopping Center on from dusk
until dawn.

 

(b)           It is recognized that business establishments
within the Shopping Center may be open for business at different hours, and
that the Party upon whose Tract a business establishment is open later may wish
to have the Common Area lights on its Tract as another Party’s Tract continue
to burn beyond the required period. Accordingly, the Party of such Tract (“Requesting
Part”) shall have the right, at any time to require the Estate to keep the
required lights on until a later hour. The Requesting Party agrees to pay one
hundred ten percent (110%)

 

37

 

of the cost of such extra
after-hours lighting expense and the same shall not be included as a Common
Area Maintenance Cost.

 

6.3           Signs. No exterior identification signs shall be allowed within the Shopping
Center except as set forth hereinafter.

 

(a)           No pylon, monument or other freestanding
sign(s) shall be permitted within the Shopping Center unless constructed in
those areas designated on the New Site Plan as “Proposed Shopping Center Pylon
Sign” or “Proposed Shopping Center Monument Sign(s)” and such other signs as
may be approved by the Approving Parties. The area(s) designated on the New
Site Plan as the “Proposed Shopping Center Pylon” and “Proposed Shopping Center
Monument Sign” may be used to identify the Shopping Center name and/or the
Occupants of the Estate Tract and any other Occupant to whom the Estate may
elect in its sole and absolute discretion to grant such right; provided,
however, that the Estate shall cause the sign designated “Proposed Shopping
Center Pylon Sign” on the Costco Tract to be designed, permitted and constructed
so that a panel area on each side thereof (at least equal in size to the
largest panel on any freestanding sign in the Commercial Center) shall be
reserved for, and made available by the Estate to Costco, to identify the
Occupant(s) of the Costco Tract at such time as the Owner at the Costco Tract
may request. Such panels for the Costco Tract shall be located in the highest position
which has not been committed to, or is not occupied by other Occupants. If the
Owner of the Costco Tract makes such election, the Owner of the Costco Tract
shall pay the costs of its panels and shall reimburse the Estate for the
reasonable costs of installing the same. The Estate shall be responsible for
the operation and maintenance on a first-class basis of the above-referenced
pylon signs except that if Costco elects to have panel(s) thereon, Costco shall
pay its pro rata share of such operation, maintenance and replacement costs
based on the relative size of its panel area. The sign panels shall be designed
in accordance with the Sign Guidelines attached hereto as Exhibit “O”. The
Approving Parties shall have the right to approve the design, size and location
of all additional freestanding shopping center pylon and monuments signs not shown
on the New Site Plan and the location, size and design or all directional and
informational signs. The Sign Guidelines, attached hereto as Exhibit “O”, as it
may be amended from time to time by the Approving Parties, shall govern the
design and specifications of all exterior signs that are visible from the
common areas of the Shopping Center, including but not limited to exterior building
signs, freestanding pylon and monument signs, and temporary signs, except that
the design, specification and location of the initial or replacement exterior
building signs for the Costco Store and any expansion or renovation thereof may
deviate from the Sign Guidelines provided they are consistent with the design,
specifications and location of the signs shown on the approved Costco
Elevations, attached hereto as Exhibit “J”. In addition, the tenants under the
Existing Leases may install such signs on the premises demised under such leases
as may be permitted under such Existing Leases. The Costco Tract may also
deviate from the Signs Guidelines to the extent such Existing Tenant makes a
corresponding deviation which deviation was permitted under its Existing Lease.

 

(b)           Notwithstanding anything in this Section 6.3
to the contrary, each Party shall be permitted to place within the Common Area
located on its Tract, the temporary display of leasing information and the
temporary erection of one sign identifying each general contractor working on a
construction job.

 

38

 

(c)           All signs in the Shopping Center shall comply
with the provisions of the Sign Guidelines. Subject to the other provisions of
this Section 6.3, the Party with respect to the Costco Tract shall be entitled
to place up to ten (10) departmental signs on the exterior of the Costco Store.
Three (3) of these signs may identify specific sublessees or concessionaires, provided
new openings on the exterior of the Costco Store have been approved by the
Approving Parties and created for such users. The remainder of these signs
shall only be “generic” in nature (e.g. “garden shop”, “pharmacy”) and may not
identify the specific business names or trade names of concessionaires or
sublessees. These departmental signs shall remain subject to the Sign Criteria
and the approval of all applicable governmental authorities.

 

(d)           Each Owner shall pay a portion of the other
costs of operating and maintaining such Pylon Sign(s) equal to the relative portion
of the panel areas thereon which it elects to utilize. Each Party shall pay the
cost of repairing or replacing its own panel. The cost of constructing,
operating and maintaining the Pylon Signs and other signs shall not be included
in Common Area Maintenance Costs or Commercial Center Common Services Costs and
shall be allocated in the same manner as the cost of initial construction of
the Shared Sign(s).

 

6.4           Insurance.

 

(a)           Each Party shall maintain or cause to be
maintained in full force and effect Comprehensive/Commercial General Liability
Insurance covering its Tract with a combined single limit of liability of not
less than $5,000,000 for bodily or personal injury or death, and for property
damage, arising out of any one occurrence. Such insurance shall:

 

(i)            provide that the policy may not be canceled
or materially reduced in amount or coverage without at least thirty (30) days
prior written notice by the insurer to each Party identified as an additional
insured;

 

(ii)           name the other Parties as additional
insureds; 

 

(iii)          provide for severability of interests;

 

(iv)          provide that an act or omission of one of the
insureds or additional insureds which would void or otherwise reduce coverage,
shall not reduce or void the coverage as to the other named or additional
insureds; and

 

(v)           provide for contractual liability coverage
with respect to the indemnity obligations set forth in this Agreement.

 

(b)           Prior to commencing any construction
activities within the Shopping Center, the Party causing such construction
shall obtain and thereafter maintain so long as such construction activity is
occurring, at least the minimum insurance coverages set forth below:

 

(i)            Workers’ Compensation - California statutory
limits;

 

(ii)           Employers’ Liability - $500,000; and

 

(iii)          Commercial General and Auto Liability as
follows:

 

39

 

(A)          Bodily Injury and Property Damage -
$5,000,000 per occurrence, combined single limit coverage;

 

(B)           Independent Contractors Liability or Owner’s
Protective Liability; same limits as set forth in (A) above;

 

(C)           Products/Completed Operations Coverage which
shall be kept in effect for two (2) years after completion of work;

 

(D)          “XCU” Hazard Endorsement, if applicable;

 

(E)           “Broad Form” Property Damage Endorsement;

 

(F)           “Personal Injury” Endorsements; and

 

(G)           “Blanket Contractual Liability” Endorsement.

 

(c)           If the construction activity involves the use
of another Party’s Tract, then such other Party shall be named as an additional
insureds and such insurance shall provide that the same shall not be canceled
or materially reduced in amount or coverage without at least thirty (30) days
prior written notice to the named and additional insureds. If such insurance is
canceled, expires, or is materially reduced, the constructing Party shall
immediately stop all work on or use of another Party’s Tract until either the
required insurance is reinstated or replacement insurance is obtained.

 

(d)           Effective upon the commencement of
construction of any improvements, the constructing Party shall maintain “all
risk” property damage insurance with a financially responsible insurance
company or companies, in an amount at least equal to eighty percent (80%) of
the replacement cost (exclusive of the cost of excavation, foundations, and
footings) of the buildings and improvements, such coverage extending at least
to the following perils; loss or damage by fire, windstorm, cyclone, tornado,
hail, explosion, riot, riot attending a strike, civil commotion, malicious mischief,
vandalism, aircraft, vehicle, smoke damage, and sprinkler leakage.

 

(e)           Costco shall obtain pollution liability
insurance in a form reasonably acceptable to the Estate with minimum limits of
$5,000,000.

 

(f)            The limits of all insurance required under
this Section 6.4 shall be increased upon every fifth anniversary of the date
hereof by the percentage increase in the Consumer Price Index from the date of
this REA to the fifth anniversary in question.

 

(g)           All insurance required by Section 6.4 shall
be issued by companies licensed in the State of California and shall be rated
by Best’s Insurance Reports not less than A/X or other equivalent rating. The
insurance may be carried under (i) an individual policy covering this location,
(ii) a blanket policy or policies which includes other liabilities, properties and
locations of such Party, so long as coverage is not reduced or adversely
affected, or (iii) a combination of any of the foregoing insurance programs. To
the extent any deductible is permitted or allowed as a part of any insurance
policy carried by a Party, such Party shall be

 

40

 

deemed to be covering the
amount thereof under an informal plan of self insurance; provided, however,
that in no event shall any deductible exceed $250,000 as increased as of every
fifth anniversary at the date of this REA by the percentage increase in the
CPI. Each Party agrees to furnish to any other Party requesting the same, a
certificate(s) of insurance evidencing that the insurance required to be
carried by such requested Party is in full force and effect.

 

6.5           Right to Self-Insure.

 

(a)           Any Owner shall have the right to satisfy
such Owner’s obligations under this REA to the extent applicable to the
policies of insurance required by such provisions of insurance required by such
provisions (sometimes referred to as “liability insurance” or “property loss
insurance”, as applicable), and the liability, restoration, environmental remediation
and clean-up, and other obligations covered by such insurance, by means of a
formal company wide self-insurance and risk retention program, if such Owner
satisfies the following self-insurance conditions: (i) such Owner shall give
each other Owner prior written notice of such Owner’s intention to self-insure
one or more types or kinds of liability insurance or property loss insurance
required by this REA, (ii) upon request, from time to time, such Owner shall
provide to each other Owner reasonably detailed documentation outlining the
scope and procedures utilized by such Owner in managing its self-insurance and
risk retention program, and (iii) such Owner has continuously during the entire
period of such self-insurance a tangible net worth determined in accordance
with generally accepted accounting principles consistently applied, of at least
One Billion Dollars ($ 1,000,000,000) (adjusted annually by the changes to CPI),
as certified by an independent certified public accountant. Such Owner’s rights
to self-insure its liability, restoration, environmental remediation and
clean-up, and other obligations intended to be covered by the liability
insurance and property loss insurance required by this Agreement shall continue
only so long as such Owner complies with the terms of this Section 6.5, and the
terms of the instruments or agreements referred to herein, and if it fails to
comply with such requirements, such Owner shall immediately procure the
insurance coverage required by this REA, and shall provide each other Owner
with the appropriate certificates of insurance in compliance with the terms of
this REA.

 

(b)           Notwithstanding any other provision of this
REA that may be to the contrary, if such Owner self-insures any of its
obligations under this REA, then such Owner agrees that it shall be deemed to
have relinquished its right to assert a claim for property loss against each
other Owner and any person claiming by, through or under each other Owner, to
the same extent that such Owner’s insurer’s rights against each other Owner and
any person claiming by, through or under each other Owner would have been
relinquished if insurance coverage encompassing the self-insured property risks
were being maintained by such Owner for the benefit of all Owners and such
policies contained release and waiver of subrogation provisions.

 

(c)           Notwithstanding any other provision in this
Agreement to the contrary, such Owner agrees that in the event of loss, damage,
injury, death, or other occurrence which would have been insured under the
terms of a policy or policies of liability insurance required to be carried
under this REA, such Owner shall be liable to any person claiming by, through
or under the other Owners to the same extent that an insurance carrier would
have been liable under

 

41

 

the liability policies that
would have been carried in accordance with the terms of this REA but for such
Owner’s right to self-insure.

 

6.6           Taxes and Assessments.

 

(a)           Each Party shall pay, or cause to be paid
prior to delinquency, all taxes and assessments with respect to its Tract, the
buildings, and improvements located thereon and any personal property owned or
leased by such Party in the Shopping Center, provided that if the taxes or
assessments or any part thereof may be paid in installments, the Party may pay
each such installment as and when the same become due and payable.

 

(b)           Any Party may contest, at its sole cost and
expense, any such taxes and assessments with respect to its Tract in any manner
such Party elects, so long as such contest is maintained with reasonable
diligence and in good faith. Notwithstanding the foregoing, no Party contesting
any tax or assessment shall permit a lien for delinquent taxes to be filed
encumbering its Tract or if such lien is filed, shall promptly remove such
lien. At the time such contest is concluded (allowing for appeal to the highest
appellate court having jurisdiction), the contesting Party shall promptly pay
all such taxes and assessments determined to be owing, together with all interest,
penalties and costs thereon.

 

6.7           Liens. In the event any lien is filed against a Tract of one Party as a
result of services performed or materials furnished for the use of another
Party or nonpayment of taxes or as assessments by a Party, the Party permitting
or causing such lien to be so filed agrees to cause such lien to be discharged
prior to entry of final judgment (after all appeals) for the foreclosure of
such lien and further agrees to indemnify, defend, protect and hold harmless
the other Parties and their Tracts against liability, loss, damage, costs or
expenses (including reasonable attorneys’ fees and costs of suit) on account of
such claim of lien. Upon request of the Party whose Tract is subject to such
lien, the Party permitting or causing such lien to be filed agrees to promptly
cause such lien to be released and discharged of record, either by paying the
indebtedness which gave rise to such lien or by posting a bond or other
security as shall be required by law to obtain such release and discharge.
Nothing herein shall prevent a Party permitting or causing such lien from contesting
the validity thereof in any manner such Party chooses so long as such contest
is pursued with reasonable diligence. In the event such contest is determined adversely
(allowing for appeal to the highest appellate court having jurisdiction), such
Party shall promptly pay in full the required amount, together with any
interest, penalties, costs, or other charges necessary to release such lien.

 

ARTICLE VII.

 

POSSIBLE FUTURE ANNEXATION

 

7.1           Annexation of Additional Property.

 

(a)           If Almahurst Street lying between Hanover and
Albatross (as identified on the New Site Plan as the “Possible Street
Abandonment”) is abandoned by the City of Industry, the Estate, as the Owner of
the Estate Tract, shall have the right, at its sole option, to:

 

42

 

(i)            unilaterally amend this Agreement by a
Declaration of record which modifies the boundaries of the Common Area to
incorporate into the Common Area property that is adjacent to the Common Area;
all or any contiguous portion of the land legally described on Exhibit “F”
hereto and identified as the “Possible Annexation Area” on the New Site Plan;
and

 

(ii)           subject to the parking ratio and other
requirements of this Agreement,
improve any portion of the Possible Annexation Area as Common Area or Building
Area and Common Area.

 

(b)           Upon any such amendment of this REA, there
shall also be amended the New Site Plan (Exhibit “C”) the description of the
Estate Tract (Exhibit “A”), the Common Area Allocable Shares and the Commercial
Center Allocable Shares.

 

7.2           Separate Configuration. Notwithstanding any other provision of this
Agreement to the contrary if Almahurst Street is abandoned as a public street
and the improvements to the former location at Almahurst Street are
substantially altered, the buildings and uses on the Possible Annexation Area
and on the adjacent portions of the original Estate Tract shall not be reconfigured
in a manner which permits the Occupants of the Possible Annexation Area to conveniently
utilize the Automobile Parking Areas on the remainder of the Shopping Center without
the prior written approval of the Owner of the Costco Tract of a revised New
Site Plan for the original Shopping Center and Possible Annexation Area. Such
approval shall not be unreasonably withheld if (a) such revised New Site Plan
satisfies Section 2.1(a)(iii) and the other provisions of this Agreement,
or (b) such buildings and uses are configured such that the Occupants and
customers of the Estate Tract will not tend to put a greater burden on the
parking areas most convenient to the Occupants and customers of the Costco
Tract than the burden on such areas under the New Site Plan.

 

7.3           Interim Operation. If the annexation of the Possible
Annexation Area occurs prior to the completion of Costco’s Initial Work,
Section 4.4 above shall be applicable to the period prior to the completion of
such work.

 

ARTICLE VIII. 

 

TERM

 

8.1           Term of this REA. This REA shall be effective as of the date
first above written and, absent earlier termination as provided herein, shall
continue in full force and effect until 11:59 p.m. on November 1, 2051, plus up
to five (5) automatic renewal periods of ten (10) years each upon the election
of either of the Approving Parties; provided, however, that the easements
referred to in Article II hereof which are specified as being perpetual or as
continuing beyond the term of this REA shall continue in full force and effect
as provided therein. Upon termination of this REA, all rights and privileges
derived from and all duties and obligations created and imposed by the
provisions of this REA, except as relates to the easements mentioned above,
shall terminate and have no further force or effect; provided, however, that
the termination of this REA shall not limit or affect any remedy at law or in
equity that a Party may have against any

 

43

 

other Party with respect to
any liability or obligation arising or to be performed under this REA prior to
the date of such termination.

 

ARTICLE IX.

 

TRANSFER OF INTEREST

 

9.1           Transfer of Entire Interest.

 

(a)           Each Party shall be liable for the
performance of all of its respective covenants, obligations and undertakings
herein set forth which accrue during the period of its ownership interest in
its Tract, and such liability shall continue with respect to any portion
transferred until the notice requirement set forth below is complied with, at
which time the transferring Party’s personal liability for future obligations
shall terminate. The transferee Party shall automatically become liable for all
obligations, performance requirements and amounts which arise subsequent to
compliance with the notice requirement and the transfer of the interest in the
transferring Party’s Tract. A Party transferring all or any portion of its
interest in its Tract shall give notice to the other Parties of such transfer
and shall include therein at least the following information:

 

(i)            the name and address of the transferee;

 

(ii)           a copy of the legal description of the Tract
or portion thereof transferred;

 

(iii)          the designated Person who will represent the
Tract or portion thereof transferred, if the leasehold or ownership interest is
in more than one Person; and

 

(iv)          a copy of the deed or other conveyance
instrument evidencing the transfer.

 

Nothing
contained herein to the contrary shall affect the existence, priority, validity
or enforceability of this REA, any mortgage, deed of trust or similar
instrument which is placed upon the transferred portion of the Shopping Center.

 

(b)           The provisions of this Section 9.1 shall not
apply to an assignment of Estate’s rights under Section 5.2(c), the Estate’s
right to cause a termination of use restrictions under Section 6.1(b)(xxi)
which rights shall be assignable separately or collectively at any time and
from time to time by the Estate to any Owner of the Tract benefitted by such
restrictions, together with or separate and distinct from any of the Estate’s
other rights and interests under this REA. Any such assignment shall be
effective upon recordation of an assignment agreement or memorandum thereof,
and thereafter, any references in Section 5.2(c), Section 6.1(b)(xxi) to the
Estate shall be deemed to include the Estate’s assignee.

 

9.2           Multiple Ownership.

 

(a)           Designation. In the event that a Party transfers or conveys its interest in a
portion of its Tract, then the Persons owning all of such interest in such
Tract shall be jointly

 

44

 

considered a single Party
and such Persons shall designate one of their number to act on behalf of all
such Persons in the performance of the provisions of this REA. Any such
designation shall be in writing, duly executed, verified and acknowledged by
each such Person, and shall be served upon the other Parties in accordance with
the notice provisions of this REA.

 

(b)           Effect of Designation. In the absence of such written designation,
the acts of the Party whose interest is divided shall be binding upon all of
the Persons owning any interest in such Tract, until such time as the written
designation is properly served as provided by this Section 9.2, and whether or
not such Party retains any interest in the Tract in question. The exercise or
performance of any rights, powers or obligations of a Party under this REA by
the Person designated to represent such Party shall be binding upon all Persons
having an interest in such Tract. The other Parties shall have the right to
deal exclusively with and rely solely upon the acts or omissions of such
designated Person in the performance or provisions of this REA.

 

(c)           Removal of Designated Person. Any Person designated hereunder may be removed
by the Persons so designating, in accordance with any procedure agreed to
between them, provided that written notice of such removal and designation of a
new Person to act as the Party on behalf of all such Persons under this REA is
given and made in the manner specified in this Section 9.2. In the absence of
any written notice and designation, the previous designation shall continue in
effect and the acts of the Person previously designated with respect to the performance
of the provisions of this REA shall be binding upon all such Persons.

 

(d)           Status of Designated Person. Any Person designated pursuant to the provisions
of this Section 9.2 shall be the agent of each of its principals, and the
Person upon whom service of any process, writ, summons, order or other mandate
of any nature of any court in any action, suit or proceeding arising out of
this REA may be made, and service upon such designated Person shall constitute
due and proper service of any such matter upon each of its principals, provided
a copy of such matter is also mailed to such principals at the principals last addresses,
which addresses shall be provided by the principals to the Parties.

 

(e)           Obligation of Other Persons Comprising Party. The designation of a Person to act on
behalf of Persons as a Party under this Section 9.2 shall not relieve any such Persons
from the obligations or liabilities of such Persons created by or arising from
this REA, which obligations shall then be joint and several.

 

(f)            Transfer of Rights of Approving Party. The transfer of the rights of a Party as an
Approving Party shall only be made pursuant to the provisions of the definition
of “Approving Party” above.

 

9.3           Limitation on Transfer. In no event shall the rights, powers and
obligations conferred upon a Party pursuant to this REA be at any time
transferred or assigned by any such Party except through a transfer of its
interest in its Tract, and then only to the extent and in the manner herein
provided. The exceptions to a successor becoming a Party by reason of any
transfer or conveyance of the whole or any part of the interest of any Party in
and to such Party’s Tract are as follows:

 

45

 

(a)           while and so long as the transferring Party
retains the entire possessory interest in the Tract or portions thereof so
conveyed by the terms of a mortgage or deed of trust, in which event the Party
retaining such possessory interest shall have the status of a Party;

 

(b)           when a transfer or conveyance is followed
immediately by a leaseback of the same Tract or portion thereof by such Party,
or an affiliate thereof, in which event only the lessee thereof shall have the
status of Party, so long as the lease in question has not expired or been
terminated;

 

(c)           when a successor acquires by such transfer or
conveyance: 

 

(i)            less than all of the Party’s Tract; or

 

(ii)           an undivided interest, such as that of joint
tenant, or tenant in common, in such Party’s Tract; or

 

(iii)          an undivided interest, legal or equitable, in
the assets of any Party other than an individual, which interest is not also an
interest in the Party’s Tract. In any of which three cases the Persons holding
all of the interests in such Tract are to be jointly considered a single Party
and the Party as to such Tract hereunder.

 

9.4           Fractional Interests. In the event any of the Parties shall
transfer its present interest in a Tract or a portion of such interest in such
manner as to vest its present interest in such Tract in more than one person
other than by creation of a separate legal lot (e.g., by the creation of a
tenancy-in-common, joint tenancy or the like), then not less than a fifty-one
percent (51%) interest of such transferees shall designate one of their number
to act on behalf of all of such transferees in the exercise of the powers
granted to such Party under this Agreement. So long as such designation remains
in effect, such designee shall be a Party hereunder and shall have the power to
bind such Tract and such transferees, and such transferees shall not be deemed
to be Parties. Any such designation must be in writing and served upon the
other Parties hereto by registered or certified mail, and must be recorded in
the recorder’s office. In the absence of such written designation, the acts of
the Party whose interest is so divided with respect to the exercise of the
powers vested by this instrument shall be binding upon all persons having an
interest in such Tract until such time as written notice of such designation is
given and recorded in the recorder’s office

 

ARTICLE X.

 

MISCELLANEOUS

 

10.1         Default.

 

(a)           If any Party is in Default hereunder
(“Defaulting Party”), then any other Party (“Non-Defaulting Party”) may, upon
forty-five (45) days’ prior written notice to the Defaulting Party, proceed to
Cure the Default (and shall have a license to do so) by the payment of money or
performance of some other action for the account of the Defaulting Party. The
foregoing shall only include the right to enter upon any portion of the Common
Area owned by the Defaulting Owner and to do the following (but in no event to
enter any building owned by

 

46

 

the Defaulting Party) (a)
summarily abate, remove or otherwise remedy any improvement, thing or condition
which violates the terms of this Agreement, including, without limitation, any
failure to maintain or repair the Common Area in accordance with the Agreement
including, without limitation, the Common Areas within Costco’s Initial work;
or (b) complete the construction or reconstruction of any Common Area in
accordance with this agreement; and (c) enter upon any portion of the Common
Area owned by the Defaulting Owner and perform any obligation of the Defaulting
Owner to be performed thereon. The foregoing right to Cure shall not be
exercised if within the forty-five (45) day notice period the (i) Defaulting
Party Cures the Default, or (ii) Default is subject to Cure, but cannot
reasonably be Cured within that time period, the Defaulting Party begins to
Cure such Default within such time period and diligently pursues such action to
completion. The forty-five (45) day notice period shall not be required if,
using reasonable judgment, the Non-Defaulting Party deems that an emergency
exists which requires immediate attention. In the event of such an emergency,
the Non-Defaulting Party shall give whatever notice to the Defaulting Party as
is reasonable under the circumstances.

 

(b)           Within ten (10) days of written demand
(including providing copies of invoices reflecting costs) the Defaulting Party
shall reimburse the Non-Defaulting Party for any sum reasonably expended by the
Non-Defaulting Party to Cure the Default, together with interest thereon at the
rate provided in Section 10.2.

 

(c)           In the event any Party shall institute any
action or proceeding against another Party relating to the provisions of this
REA, or any Default hereunder, or to collect any amounts owing hereunder, or if
an arbitration proceeding is commenced by agreement of the Parties to any
dispute, the unsuccessful litigant in such action or proceeding shall reimburse
the successful litigant therein for reasonable costs and expenses incurred by
the successful litigant in connection with such action or proceeding and any
appeals therefrom, including attorneys’ fees and court costs.

 

(d)           All remedies are cumulative and shall be
deemed additional to any and all other remedies to which any Party may be
entitled in law or in equity. Each Party shall also have the right to restrain
by injunction any violation or threatened violation by any other Party of any of
the terms, covenants, or conditions of this REA, or to obtain a decree to
compel performance of any such terms, covenants, or conditions, it being agreed
that the remedy at law for a breach of any such term, covenant, or condition
(except those, if any, requiring the payment of a liquidated sum) is not
adequate.

 

(e)           Notwithstanding anything in this Section 10.1
to the contrary, if a Party exercises its right of self help hereunder with
respect to any premises demised under an Existing Lease, such Party shall
indemnify, hold harmless and defend the Party or Existing Owner who is the
landlord under such Lease for any claim made by the Tenant under such Existing
Lease that such acts constituted a breach or default under such Lease.

 

(f)            Any Party entering onto the Tract of another
Party or Owner shall indemnify, hold harmless and defend the Owner or Party
whose Tract is entered, from any and all liabilities, damages and costs,
including attorneys’ fees and costs of suit arising out of the acts of the
entering Party on such other Owner’s or Party’s Tract. Nothing contained in the

 

47

 

foregoing, however, release
any Party or Owner from liability for its own breach or default hereunder which
occasioned such exercise of a right to entry.

 

10.2         Interest. Wherever and as often as one Party shall not have paid any sum
payable hereunder to another Party within five (5) days of the due date, such
delinquent Party shall pay interest on such amount from the due date to and
including the date such payment is received by the Party entitled thereto, at
the lesser of:

 

(a)           The highest rate permitted by law to be paid
on such type of obligation by the Party obligated to make such payment or the
Party to whom such payment is due, whichever is less; or

 

*(b)         Three percent (3%) per annum in excess of the
prime rate from time to time publicly announced by Bank of America or its
successor.

 

10.3         Estoppel Certificate. Each Party agrees that upon written request
(which shall not be more frequent than three (3) times during any calendar
year) of any other Party, it will issue to a prospective mortgagee or successor
of such other Party or to such other Party, an estoppel certificate stating to
the best of the issuer’s knowledge that as of such date:

 

(a)           whether the Party to whom the request has
been directed knows of any Default by any Party under this REA, and if there
are known Defaults, specifying the nature thereof;

 

(b)           whether this REA has been assigned, modified
or amended in any way (and if it has, then stating the nature thereof); and

 

(c)           whether this REA is in full force and effect.

 

Such statement shall act as a waiver of any
claim by the Party furnishing it to the extent such claim is based upon facts
contrary to those asserted in the statement and to the extent the claim is
asserted against a bona fide encumbrancer or purchaser for value without
knowledge of facts to the contrary of those contained in the statement and who
has acted in reasonable reliance upon the statement. Such statement shall in no
event, however, subject the Party furnishing it to any liability whatsoever,
notwithstanding the negligent or otherwise inadvertent failure of such Party to
disclose correct and/or relevant information.

 

10.4         Notices.

 

(a)           All notices, demands, statements, and
requests (collectively, the “Notice”) required or permitted to be given under
this REA must be in writing and shall be deemed to have been properly given or
served as of the date hereinafter specified: (i) on the date of personal
service upon the Person to whom the Notice is addressed or if such Person is
not available the date Notice is left at the address of the Person to whom it
is directed, (ii) on the date of receipt, or attempted delivery shown on the return
receipt; if the Notice is postmarked by the United States Post Office, provided
it is sent prepaid, registered or certified mail, return receipt requested and
(iii) on the date the Notice is delivered by a courier service to the address
of the

 

48

 

Person to whom it is
directed, provided it is sent prepaid, return receipt requested. The address of
the respective signatories to this REA are set forth below.

 

	
   

  	
  The Estate:

  	
  Estate of James Campbell

  
	
   

  	
   

  	
  425 California Street,
  Suite 1000

  
	
   

  	
   

  	
  San Francisco, CA 94104

  
	
   

  	
   

  	
  Attention: Director,

  
	
   

  	
   

  	
  Mainland Properties

  
	
   

  	
   

  	
   

  
	
   

  	
  Costco:

  	
  Costco Wholesale Corporation

  
	
   

  	
   

  	
  999 Lake Drive

  
	
   

  	
   

  	
  Issaquah, Washington 98037

  
	
   

  	
   

  	
  Attn: Property

  
	
   

  	
   

  	
  Management/Real Estate Dept.

  

 

Each Party shall have the right from time to
time and at any time, upon at least ten (10) days’ prior written notice in
accordance with the provisions hereof, to change its respective address and to
specify any other address within the United States of America; provided,
however, notwithstanding anything herein to the contrary, in order for the
Notice of address change to be effective it must actually be delivered. Each
Party shall designate a specific individual as its representative with
responsibility for day-to-day operations on such Party’s Tract. Refusal to
accept delivery of a Notice or the inability to deliver a Notice because of an
address change which was not properly communicated shall not defeat or delay
the giving of a Notice.

 

(b)           Notice from a Party’s Mortgagee to the other
Parties pursuant to this REA that such Mortgagee should be included in all
further notices to the Party upon whose Tract the Mortgagee’s interest has
attached shall obligate such other Parties to include such Mortgagee in any
further notices to such Party at the address stated in the notice from such
Mortgagee, such notice to such Mortgagee to be given and effective as provided
in this Section 10.4. The Mortgagee may change its notice address by notice
given as provided in this Section 10.4. Failure by the other Parties to include
such Mortgagee in any such notice shall render such notice ineffective to the
other Party but shall not, however, waive any other rights of the noticing
Party hereunder, including its right to enforce this REA to the extent not
dependent on such notice.

 

10.5         Approval Rights. Unless otherwise herein provided, whenever
approval, satisfaction or consent (collectively, an “Approval” or “Approval”)
is required, Approval shall not be unreasonably withheld or delayed. Unless
provision is made for a specific time period, Approval shall be given or
withheld within twenty (20) days of the receipt of the written request for
Approval in accordance with Section 10.4 above. If approval or disapproval is
not given within such twenty (20) day period, the requesting Party shall,
within ten (10) days of the expiration of the aforementioned twenty (20) day
period, deliver a second notice in accordance with Section 10.4 above to the
Approving Party, which second notice shall state that, absent notice to the
contrary, the Approving Party shall be deemed to have given its approval, if

 

49

 

approval or disapproval is
not given within ten (10) days of such second request, the Approving Party shall
be deemed to have given its Approval. If an Approving Party shall disapprove,
the reasons therefor shall be stated in reasonable detail. Except with respect
to an Approval given by lapse of time, all Approvals and Disapprovals shall be
in writing. It shall be deemed reasonable for Estate or its successor as a
Party or Owner to delay or withhold Approval of a matter subject to Approval
hereunder if the matter would require the consent or approval of a tenant under
an Existing Lease and such consent or approval has been delayed or is
ultimately not obtained following the diligent pursuit of the corresponding
consent or approval from such tenant (and timely notice of the progress of such
diligent pursuit to the other Parties) under such Existing Lease by Estate or
such successor with respect to the premises under such Existing Lease.
Accordingly, a delay or failure to grant an Approval in the foregoing
circumstance shall not constitute a default by Estate or its successors if it
has been unable to obtain a corresponding approval required under an Existing
Lease.

 

10.6         Condemnation. In the event any portion of the Shopping
Center shall be taken by eminent domain or any other similar authority of law,
the award for the value of the land and the improvements so taken shall be paid
to the fee owner of the Tract whose property was so taken and its occupants, as
their interest may appear, or as such fee owner and Occupant have agreed to in
their respective leases, except that (i) if the taking includes improvements
belonging to more than one Party, such as utility lines or signs, the portion
of the award allocable thereto shall be used to the extent necessary and
appropriate to relocate, replace or restore such jointly owned improvements to
a useful condition, and (ii) if the taking includes easement rights which are
intended to extend beyond the term of the REA, the portion of the award
allocable to each such easement right shall be paid to the respective grantee
thereof. In addition to the foregoing, if a separate claim can be filed for the
taking of any other property interest existing pursuant to this REA which does
not reduce or diminish the amount paid to the Party owning the land or the
improvement taken, then the Owner of such other property interest shall have
the right to seek an award for the taking thereof. In the event a portion and
not the whole of a Tract is so taken, the Owner whose Tract was so condemned
shall promptly repair and restore in accordance with this REA the remaining
portion of its Tract as nearly as practicable to the condition existing just
prior to such condemnation without contribution from the other Parties;
provided, however, that if (a) such portion of the Building Area on an Owner’s
Tract (which for purpose of this Paragraph shall include loading docks, trash
storage areas, ramps and canopies) or (b) such portion of the Automobile
Parking Areas which, in an Owner’s judgment, reasonably exercised, materially
impairs such Tract Owner’s or its Occupants’ operations, is taken by condemnation,
then the Owner whose operations are so materially impaired may elect, within
sixty (60) days of the date of the vesting of title in the condemning
authority, by written notice to the other Parties, to terminate this REA as to
the Owner’s Tract so materially impaired; provided, further, however, that in
the event such taking substantially and materially impairs the successful
operation of the entire Shopping Center, this REA shall automatically terminate
in its entirety. In the event the Floor Area on a Party’s Tract is taken by
Condemnation and, whether or not such Party shall terminate this REA as to the
Tract so impaired, then the Parties remaining subject to this REA shall have
their Allocable Shares adjusted and, thereafter, each remaining Party’s Allocable
Share shall be a fraction, the numerator of which shall be the maximum
buildable Floor Area of its Tract as-set forth herein and the denominator of
which shall be the maximum buildable Floor Area of all Tracts in the Shopping
Center governed by this REA, as set forth herein.

 

50

 

 

10.7         Binding
Effect. The terms of this REA and all easements granted hereunder shall
constitute covenants running with the land and shall inure to the benefit of
and be binding upon the signatories
hereto and their respective successors and assigns who become Parties
hereunder. This REA is not intended to supersede, modify, amend or otherwise
change the provisions of any prior instrument affecting the land burdened
hereby.

 

10.8         Singular and Plural. Whenever required by the context of this
REA, the singular shall include the Plural, and vice versa, and the masculine
shall include the feminine and neuter genders, and vice versa.

 

10.9         Counterparts and Signature Pages. This REA may be executed in several counterparts,
each of which shall be deemed an original. The signatures to this REA may be executed
and notarized on separate pages, and when attached to this REA shall constitute
one complete document.

 

10.10       Negation of Partnership. None of the terms or provisions of this REA
shall be deemed to create a partnership between or among the Parties in their
respective businesses or otherwise, nor shall it cause them to be considered
joint venturers or members of any joint enterprise. Each Party shall be
considered a separate entity, and no Party shall have the right to act as an
agent for another Party, unless expressly authorized to do so herein or by
separate written instrument signed by the Party to be charged.

 

10.11       Not a Public Dedication. Nothing herein contained shall be deemed to
be a gift or dedication of any portion of the Shopping Center or of any Tract
or portion thereof to the general public, or for any public use or purpose
whatsoever. Except as herein specifically provided, no rights, privileges or
immunities of any Party hereto shall inure to the benefit of any Person, nor shall
any Person be deemed to be a beneficiary of any of the provisions contained
herein.

 

10.12       Force Majeure Event. Whenever performance is required of any
Party hereunder, such Party shall use all reasonable due diligence to perform
and take all necessary measures in good faith to perform; provided, however,
that if performance shall be delayed at any time by reason of acts of God, war,
civil commotion, governmental delays, moratorium, challenges or appeals to
governmental approvals or disapprovals, riots, strikes, picketing, or other
labor disputes, unavailability of labor or materials, damage to work in
progress by reason of fire or other casualty, pending or threatened litigation
by occupants of the Commercial Center, or other causes beyond the reasonable
control of the Party whose performance is required (other than the payment of
money) (“Force Majeure” or a “Force Majeure Event”), then the time for performance
as herein required shall be extended by the number of days of delay caused by
such Force Majeure Event. The Party asserting a delay caused by a Force Majeure
Event shall take reasonable steps to protect any work already completed and use
reasonable efforts to remediate the effect of such delay and keep the other
Party informed of the nature of the Force Majeure Event, the estimated time
period of the delay, the steps being taken to resolve the events causing the
delay, and the revised schedule of performance as a result of such Force
Majeure Event.

 

10.13       Severability. Invalidation of any of the provisions
contained in this REA, or of the application thereof to any Person by judgment
or court order shall in no way affect any of the other provisions hereof or the
application thereof to any other Person and the same shall remain in full force
and effect.

 

10.14       Amendments. This REA may be amended by, and only by, a written agreement signed
by all of the then current Parties and shall be effective only when recorded in
the County of Los Angeles and State of California. No consent to the amendment
of this REA shall ever be

 

51

 

required from any Occupant or Person other than the Parties, nor shall
any Occupant or Person other than the Parties have any right to enforce any of
the provisions hereof.

 

10.15       Captions and Capitalized Terms. The captions preceding the text of each
article and section are included only for convenience of reference. Captions
shall be disregarded in the construction and interpretation of this REA.
Initial capitalized terms are also selected only for convenience of reference
and do not necessarily have any connection to the meaning that might otherwise
be attached to such term in a context outside of this REA.

 

10.16       Mitigation of Damages. In all situations arising out of this REA,
all Parties shall attempt to avoid and minimize the damages resulting from the
conduct of any other Party or Person. Each Party hereto shall take all
reasonable measures to effectuate the provisions of this REA.

 

10.17       REA Shall Continue Notwithstanding Breach It is expressly agreed that no breach of
this REA shall (i) entitle any Party to cancel, rescind or, otherwise terminate
this REA, or (ii) defeat or render invalid the lien of any mortgage or deed of
trust made in good faith and for value as to any part of the Shopping Center or
any interest therein. However, such limitation shall not affect in any manner
any other rights or remedies which a Party may have hereunder by reason of any
such breach.

 

10.18       Time. Time is of the essence in this REA.

 

10.19       Nonwaiver. The failure of any Party to insist upon strict performance of any of the
terms, covenants or conditions hereof shall not be deemed a waiver of any
rights or remedies which that Party may have hereunder or at law or equity and
shall not be deemed a waiver of any subsequent breach or Default in any of such
terms, covenants or conditions.

 

10.20       Right of Contest. Wherever under the terms of this REA a
Party has agreed to (i) comply with all laws, rules, regulations, orders or
ordinances of applicable governmental departments or agencies (collectively “Laws”),
or (ii) keep its or another Party’s Tract free and clear from liens or
encumbrances (including mechanics’ liens) (collectively “Liens”), it shall not be
considered a Default under this REA if a Party elects to contest such Laws or
Liens in any manner permitted by law to the fullest extent permissible. A
Default shall have occurred only when such Party has pursued its right of
contest to its completion and such Law or Lien is upheld and thereafter, the
contesting Party fails to comply with such Law or satisfy such Lien.

 

10.21       Governing Law. This REA shall be construed in accordance
with the laws of the State of California.

 

10.22       Indemnity and Release.

 

(a)           Each Party covenants to defend, indemnify,
protect and hold harmless the other Parties and their heirs, partners,
trustees, parent or subsidiary corporations, directors, officers, agents,
representatives and employees from and against all losses, liabilities,
damages, claims, judgments, orders, penalties, fines, costs or expenses,
including reasonable legal, accounting and other expenses, including, without
limitation, loss of or damage to property or death or injury to Persons
(collectively, the “Losses”) caused by an act or omission by such

 

52

 

indemnifying Party, its agents, employees, contractors, licensees,
officers or directors (“Party’s Agents”) involving (i) the performance by such
Party or such Party’s Agents of its duties or obligations with respect to the
maintenance or operation of its Tract or the Common Area on its Tract (ii)
construction and works of improvement performed by or for such Party or such
Party’s Agents or (iii) the business and other activities conducted by such
Party or such Party’s Agents or, if such indemnifying Party is the Estate, the
maintenance of the Common Area. Notwithstanding anything in the preceding sentence
to the contrary, the indemnification obligation outlined in this paragraph
shall not apply to claims to the extent caused by or arising out of the
negligence or willful act or omission of another Party or such other Party’s
Agents or be deemed to expand Costco’s liability under Section 3.6 above with
respect to the Costco Initial Work or the relocation of Castleton Street.

 

(b)           To the extent permitted by law, each Party (“Releasing
Party”) hereby releases and waives, for itself and on behalf of its insurer,
any other Party (“Released Party”) from any liability for any loss or damage to
all property of such Releasing Party located upon any portion of the Shopping
Center, which loss or damage is of the type generally covered by “all risk”
property damage insurance. This release and waiver shall apply irrespective of
any negligence on the part of the Released Party which may have contributed to
or caused such loss, or of the amount of such insurance required or actually
carried. Each Party agrees to use its best efforts to obtain, if needed,
appropriate endorsements to its policies of insurance with respect to the
foregoing release; provided, however, that failure to obtain such endorsements
shall not affect the release hereinabove given. Notwithstanding anything to the
contrary, in the event any Party is by law, statute or governmental regulation
unable to obtain a waiver of the right of subrogation for the benefit of each
other Party, then, during any period of time when such waiver is unobtainable,
said Party shall not have been deemed to have released any subrogated claim of
its insurance carrier against the other Parties, and during the same period of
time each such other Party shall be deemed not to have released the other Party
who has been unable to obtain or fails to obtain such waiver from any claims it
or its insurance carrier may assert which otherwise would have been released
pursuant to this Section. Any lease, license, concession or other agreement
entered into between any Party and an Occupant of its Tract shall contain a
provision releasing and waiving rights of recovery against the Parties to the
same extent as the release and waiver contained in this Section and, if such
waiver and release is contained in any such agreement with an Occupant, then
the waiver and release by each Party under this Section shall extend to and
benefit such Occupant.

 

10.23       Joint Preparation. This REA shall be deemed to have been
prepared jointly by the Parties. Any uncertainty or ambiguity regarding the
provisions of this REA shall not be interpreted against any Party as the
draftsman of the document, but shall be resolved by application of all other
principles of law regarding interpretation of contracts.

 

10.24       Effect of Other Agreements. The Estate and Costco recognize that there
are or may be other instruments or agreements affecting the Costco Tract,
Shopping Center or Commercial Center, or portions thereof, which may also
address some or all of the subject matter of this REA. The Estate and Costco
agree that as between the Estate, as Owner of the remainder of the Commercial
Center, and Costco, as Owner of the Costco Tract, and the successor and

 

53

 

assigns as Owners of such
real property, that this REA shall be controlling and shall govern the rights
and obligations of each of them with respect to the Shopping Center.

 

10.25       Lenders.
No violation of this REA shall defeat or invalidate the lien of any Mortgage
upon any Tract. No Mortgagee under a Mortgage which is a lien upon any Tract or
the leasehold estate under an Existing Lease prior to the filing for record of
this REA shall be subject to this REA and no other Mortgagee shall have any
liabilities under this REA except any which may accrue during any period that such
Mortgagee is an Owner.

 

IN WITNESS WHEREOF, the Parties have caused
this REA to be executed effective as of the day and year first above written.

 

	
  ESTATE:

  	
  THE TRUSTEES UNDER THE
  WILL AND OF

  THE ESTATE OF JAMES CAMPBELL,

  DECEASED, acting in their fiduciary and not their

  individual capacities

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ D.A. Heenan

  
	
   

  	
  Name:

  	
  D.A. Heenan

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. R. Churchill

  
	
   

  	
  Name:

  	
  C. R. Churchill

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard W. Gushman II

  
	
   

  	
  Name:

  	
  Richard W. Gushman II

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald J. Zlatoper 

  
	
   

  	
  Name:

  	
  Ronald J. Zlatoper 

  
	
   

  	
  Title:

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  COSTCO:

  	
  COSTCO WHOLESALE
  CORPORATION,

  a Washington corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RICHARD J. OLIN

  
	
   

  	
  Name:

  	
  RICHARD J. OLIN

  
	
   

  	
  Title:

  	
  Vice
  President/Assistant Secretary

  

 

54

 

	
  STATE OF HAWAII

  	
  )

  
	
   

  	
  ) ss.

  
	
  CITY AND COUNTY OF
  HONOLULU

  	
  )

  

 

On December 15, 2000, before me, Lydia L.
Hannemann, a Notary Public in and for said state personally appeared D. A.
Heenan, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the persons, or the entity upon
behalf of which the person acted, executed the instrument.

 

WITNESS
my hand and official seal.

 

 

	
   

  	
  /s/ Lydia L. Hannemann

  
	
   

  	
  Notary Public in and for
  said State

  Lydia L. Hannemann

  My Commission expires: Feb. 11,

  2004

  

 

 

	
  STATE OF HAWAII

  	
  )

  
	
   

  	
  ) ss.

  
	
  CITY AND COUNTY OF
  HONOLULU

  	
  )

  

 

On
December 15, 2000, before me, Lydia L. Hannemann, a Notary Public in and for
said state personally appeared C. R. Churchill, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the persons, or the entity upon behalf of which the person acted,
executed the instrument.

 

WITNESS
my hand and official seal.

 

 

	
   

  	
  /s/ Lydia L. Hannemann

  
	
   

  	
  Notary Public in and for
  said State

  Lydia L. Hannemann

  My Commission expires: Feb. 11,

  2004

  

 

55

 

	
  STATE OF HAWAII

  	
  )

  
	
   

  	
  )  ss.

  
	
  CITY AND COUNTY OF
  HONOLULU

  	
  )

  

 

On
December 15, 2000, before me, Lydia L. Hannemann, a Notary Public in and for
said state personally appeared Richard W. Gushman, II, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his authorized capacity, and that by his signature on the
instrument the persons, or the entity upon behalf of which the person acted,
executed the instrument.

 

WITNESS
my hand and official seal.

 

 

	
   

  	
  /s/ Lydia L. Hannemann

  
	
   

  	
  Notary Public in and for
  said State

  Lydia L. Hannemann

  My Commission expires: Feb. 11,

  2004

  

 

 

	
  STATE OF HAWAH

  	
  )

  
	
   

  	
  )  ss.

  
	
  CITY AND COUNTY OF
  HONOLULU

  	
  )

  

 

 

On December 15, 2000, before me, Lydia L.
Hannemann, a Notary Public in and for said state personally appeared Ronald J.
Zlatoper, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the persons, or the entity upon
behalf of which the person acted, executed the instrument.

 

WITNESS my hand and official seal.

 

	
   

  	
  /s/ Lydia L. Hannemann

  
	
   

  	
  Notary Public in and for
  said State

  Lydia L. Hannemann

  My Commission expires: Feb. 11,

  2004

  

 

56

 

ACKNOWLEDGMENT

 

	
  STATE OF WASHINGTON

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF KING

  	
  )

  

 

On this 19 day of Dec, 2000, before me
personally appeared RICHARD J. OLIN, known to me to be the
Vice-President/Assistant Secretary of COSTCO WHOLESALE CORPORATION, the
corporation that executed the within and foregoing instrument, and acknowledged
the said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that he was authorized to execute said instrument and that the seal affixed
thereto (if any) is the corporate seal of said corporation.

 

IN WITNESS WHEREOF, I have hereunto set my
hand and affixed my Official Seal the day and year first above

 

	
   

  	
  /s/ Susan L Kansky

  	
   

  
	
   

  	
  [ILLEGIBLE]

  
	
  

  	
   

  
	
   

  
	
   

  
	
  [ILLEGIBLE]

  
	
  My commission expires:[ILLEGIBLE]

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

 

REA

EXHIBIT A

ESTATE TRACT

 

PARCEL A

 

THAT PORTION OF PARCEL 1 OF PARCEL MAP NO. 156, IN CITY OF INDUSTRY,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA PER MAP FILED IN BOOK 121 PAGE 100
OF PARCEL MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY AND THAT
PORTION OF CASTLETON STREET DESCRIBED AS FOLLOWS:

 

BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF SAID PARCEL 1, DISTANT THEREON
NORTH 30°58’22” EAST 234.94 FEET FROM THE SOUTHWESTERLY TERMINUS OF THAT
CERTAIN COURSE SHOWN AS “NORTH 30°58’22” EAST 340.32 FEET” ON SAID PARCEL MAP;
THENCE NORTH 59°01’38” WEST 275.40 FEET; THENCE NORTH 56°20’37” EAST 179.56
FEET TO A POINT ON A NON-TANGENT CURVE, CONCAVE NORTHEASTERLY, HAVING A RADIUS
OF 520.00 FEET, A RADIAL LINE TO SAID POINT BEARS SOUTH 50°51’59” WEST; THENCE
SOUTHEASTERLY 145.67 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 16°03’02”
TO A POINT OF NON-TANGENCY ON THE NORTHEASTERLY LINE OF SAID PARCEL 1, A RADIAL
LINE TO SAID POINT BEARS SOUTH 34°48’57” WEST; THENCE ALONG SAID NORTHEASTERLY
LINE SOUTH 59°01’38” EAST 29.37 FEET TO THE BEGINNING OF A CURVE, CONCAVE
WESTERLY, HAVING A RADIUS OF 27.00 FEET; THENCE SOUTHEASTERLY AND SOUTHWESTERLY
ALONG SAID CURVE 42.41 FEET, THROUGH A CENTRAL ANGLE OF 90°00’00”; THENCE SOUTH
30°58’22” WEST 105.38 FEET TO THE POINT OF BEGINNING.

 

CONTAINING 33,984 SQUARE FEET OR 0.780 ACRES MORE OR LESS.

 

1

 

PARCEL B

 

PARCELS 4 AND 5 OF PARCEL MAP NO. 156, IN THE CITY OF INDUSTRY, COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, PER PARCEL MAP FILED IN BOOK 121 PAGE 100
OF PARCEL MAPS, PARCEL 1 OF PARCEL MAP NO. 192, PER PARCEL MAP FILED IN BOOK
146, PAGE 16 OF PARCEL MAPS, PARCELS 1 AND 2 OF PARCEL MAP NO. 199, PER PARCEL
MAP FILED IN BOOK 154 PAGE 66 OF PARCEL MAPS, THAT PORTION OF PARCEL 1 OF
PARCEL MAP NO. 207, PER PARCEL MAP FILED IN BOOK 160 PAGE 65 OF PARCEL MAPS,
AND A PORTION OF PARCELS 1, 2 AND 3 OF PARCEL MAP NO. 312, PER MAP FILED IN
BOOK 297 PAGES 63 THROUGH 64 INCLUSIVE OF PARCEL MAPS, AND A PORTION OF
CASTLETON STREET, ALL IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY,
DESCRIBED AS A WHOLE AS FOLLOWS:

 

BEGINNING AT THE SOUTHEAST CORNER OF PARCEL 1 OF SAID PARCEL MAP NO.
207; THENCE ALONG THE WESTERLY LINE OF PARCELS 1 AND 2 OF SAID PARCEL MAP NO.
156 SOUTH 05°58’22” WEST 271.98 FEET, NORTH 84°01’38” WEST 15.00 FEET AND SOUTH
05°58’22” WEST 107.54 FEET TO THE WESTERLY PROLONGATION OF THE NORTHERLY LINE
OF PARCEL 1 OF SAID PARCEL MAP NO. 312; THENCE ALONG SAID PROLONGATION AND SAID
NORTHERLY LINE SOUTH 84°01’38” EAST 237.29 FEET; THENCE NORTH 05°58’22” EAST
274.54 FEET; THENCE SOUTH 69°59’28” EAST 61.85 FEET; THENCE SOUTH 78°19’00”
EAST 50.25 FEET; THENCE SOUTH 84°01’38” EAST 41.61 FEET; THENCE SOUTH 05°58’22”
WEST 6.04 FEET TO THE WESTERLY TERMINUS OF THAT CERTAIN COURSE IN THE NORTHERLY
BOUNDARY OF PARCEL 3 OF SAID PARCEL MAP NO. 312 HAVING A BEARING AND DISTANCE
OF “NORTH 84°01’38” WEST 107.30 FEET”; THENCE ALONG SAID NORTHERLY LINE SOUTH
84°01’38” EAST 107.30 FEET; THENCE NORTH 05°58’22” EAST 6.14 FEET; THENCE SOUTH
86°40’38” EAST 29.44 FEET TO THE BEGINNING OF A CURVE CONCAVE SOUTHERLY, HAVING
A RADIUS OF 72.00 FEET; THENCE EASTERLY 34.75 FEET ALONG SAID CURVE THROUGH A
CENTRAL ANGLE OF 27°39’00”; THENCE SOUTH 59°01’38” EAST 64.14 FEET TO A POINT
ON THE NORTHWESTERLY LINE OF HANOVER ROAD AS SHOWN ON SAID PARCEL MAP NO. 312;
THENCE ALONG THE EASTERLY AND SOUTHERLY LINES OF PARCELS 1 AND 2 OF SAID PARCEL
MAP NO. 312 SOUTH 30°58’22” WEST 11.80 FEET TO THE

 

2

 

BEGINNING OF A CURVE CONCAVE EASTERLY HAVING A RADIUS OF 840.00 FEET;
THENCE SOUTHERLY 366.52 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF
25°00’00” TO A POINT OF REVERSE CURVE CONCAVE NORTHWESTERLY, HAVING A RADIUS OF
29.00 FEET, A RADIAL LINE THE SAID POINT BEARS NORTH 84°01’38” WEST; THENCE
SOUTHERLY AND WESTERLY 45.55 FEET, THROUGH A CENTRAL ANGLE OF 90°00’00”; THENCE
NORTH 84°01’38” WEST” 504.81 FEET TO THE SOUTHEAST CORNER OF PARCEL 4 OF SAID
PARCEL MAP NO. 156; THENCE CONTINUING ALONG THE SOUTHERLY AND WESTERLY BOUNDARY
OF SAID PARCEL MAP NO. 156 NORTH 84°01’38” WEST 341.64 FEET TO THE BEGINNING OF
A CURVE CONCAVE NORTHEASTERLY, HAVING A RADIUS OF 29.00 FEET; THENCE WESTERLY
AND NORTHERLY 45.55 FEET, THROUGH A CENTRAL ANGLE OF 90°00’00” TO A POINT ON
THE EASTERLY LINE OF ALBATROSS ROAD; THENCE ALONG SAID EASTERLY LINE NORTH
05°58’22” EAST 818.98 FEET; THENCE LEAVING SAID EASTERLY LINE SOUTH 84°01’38”
EAST 140.00 FEET; THENCE SOUTH 05°58’22” WEST 50.00 FEET; THENCE SOUTH
84°01’38” EAST 95.00 FEET; THENCE SOUTH 05°58’22” WEST 85.60 FEET; THENCE SOUTH
84°01’38” EAST 150.64 FEET TO A POINT ON THE EASTERLY LINE OF PARCEL 1 OF SAID
PARCEL MAP NO. 207; THENCE ALONG SAID EASTERLY LINE SOUTH 05°58’22” WEST 160.40
FEET TO THE POINT OF BEGINNING.

 

 

CONTAINING 476,665 SQUARE FEET, 10.943 ACRES MORE OR LESS. 

 

DATED THIS  14th DAY
OF November 2000.

 

	
   

  	
  

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  /s/ JERRY L. USELTON

  	
   

  
	
  JERRY L. USELTON, L.S. 5347, EXP. 12/31/03

  
	
   

  
	
   

  
	
   

  
	
   

  
			

 

3

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