COMMERCIAL GROUND LEASE

 

 

COMMERCIAL GROUND LEASE

 

TABLE OF CONTENTS

 

RECITALS					1
1.		DEFINITIONS			1
		1.1		Lease Year	1
		1.2		Hazardous Material	1
		1.3		Environmental Law	2
2.		PREMISES			2
3.		TERM			2
		3.1		Term	2
		3.2		First Option to Extend	2
		3.3		Second Option to Extend	3
		3.4		Third Option to Extend	3
		3.5		Fourth Option to Extend	3
		3.6		Fifth Option to Extend	3
4.		MONTHLY RENT			3
		4.1		Net-Net-Net Lease	3
		4.2		Monthly Rent	4
		4.3		Monthly Rent During the Extension Periods	4
5.		ADDITIONAL RENT			4
		5.1		Consumer Price Index Rental Increase	4
6.		SUBSTITUTE RENT AND INCREASES			5
7.		SECURITY DEPOSIT			5
8.		USE OF THE PREMISES			5
9.		PROPERTY TAXES, ASSESSMENTS AND UTILITIES			6
		9.1		Tenant’s Required Payments	6
		9.2		Payments Not Required by Tenant	7
		9 . 3		Assessments	7
		9.4		Utility Payments	7
		9.5		Tenant’s Right to Contest Utility Charges, Contest Taxes and Seek Reduction of Assessed Valuation of the Premises	7
		9.6		Landlord Not Required to Join in Proceedings or Contest Brought by Tenant	8
		9.7		Tax Period and Adjustment of Taxes	8
10.		BUILDING and IMPROVEMENTS; TRADE FIXTURES			9
		10.1		Building and Improvements	9
		10.2		Depreciation and Investment Tax Credit	9
		10.3		Trade Fixtures	9
		10.4		Removal of Trade Fixtures	9
		10.5		Financing of Tenant’s Property	10
11.		MAINTENANCE OF THE PREMISES			10
		11.1		Obligation to Maintain the Premises	10
		11.2		Obligation to Keep the Premises Clear	11
12.		REPAIRS AND ALTERATIONS			11
		12.1		Right to Make Alterations	11
		12.2		Tenant Shall Not Render Premises Liable for Any Lien	11
13.		INDEMNITY AND INSURANCE			12
		13.1		Indemnification	12
		13.2		Insurance Company Requirement	12
		13.3		Insurance Certificate Requirements	13

 

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		13.4		Minimum Acceptable Insurance Coverage Requirements	13
		13.5		Additional Insureds	14
		13.6		Mortgage  Endorsement	14
		13.7		Renewals, Lapses or Deficiencies	15
14.		PARTIAL AND TOTAL DESTRUCTION OF THE PREMISES			15
15.		CONDEMNATION			15
		15.l		Condemnation Damages	15
		15.2		Termination of Lease Due to Condemnation	16
16.		ASSIGNMENT AND SUBLETTING			16
		16.1		Tenant’ s Right of Assignment and Subletting	16
		16.2		Landlord’s Option to Preserve Subtenancies	17
		16.3		Tenant’s Assignment of All Rent from Subletting as Security for Tenant’s Obligations	17
		16.4		Continuing Obligation of Tenant	17
		16.5		Fees and Costs with Regard to Proposed Assignment or Sublease	17
		16.6		Landlord’s Right of Assignment	18
17.		DEFAULT AND TERMINATION			18
		17.1		Events of Default	18
		17.2		Landlord’s Remedies	19
		17.3		Late Charge	22
		17.4		Right of Landlord to Re-Enter	23
		17.5		Surrender of Premises	23
		17.6		Interest Charges	23
		17.7		Tenant’s Default	23
		17.8		Default by Landlord	24
18.		RIGHT OF INSPECTION			24
19.		WAIVER OF BREACH			24
20.		NOTICES			25
		20.1		Notice Requirements	25
		20.2		Payments Under Lease	25
21.		RELATIONSHIP OF THE PARTIES			26
22.		SUBORDINATION, ATTORNMENT AND ESTOPPEL			26
		22.1		Subordination and Non-Disturbance	26
		22.2		Attornment	26
		22.3		Estoppel Certificate	27
23.		TENANT’S FINANCIAL STATEMENTS			27
24.		ATTORNEYS’ FEES			28
		24.1		Recovery of Attorneys’ Fees and Costs of Suit	28
		24.2		Party to Litigation	28
		24.3		Landlord’ s Consent	28
25.		CONSENT			28
26.		AUTHORITY TO MAKE LEASE;  COVENANT OF QUIET ENJOYMENT			29
		26.1		Full Power and Authority to Enter Lease	29
		26.2		Quiet Enjoyment	29
		26.3		No Violation of Covenants and Restrictions	29
27.		HAZARDOUS MATERIAL			29
		27.1		Environmental Compliance	29
		27.2		Tenant’s Responsibility for Hazardous Materials	30
		27.3		Survival	30
28.		GENERAL PROVISIONS			31
		28.1		Gender; Number	31
		28.2		Captions	31

 

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		28.3		Exhibits	31
		28.4		Entire Agreement	31
		28.5		Drafting	31
		28.6		Modification	31
		28.7		Joint and Several Liability	31
		28.8		Governing Law	32
		28.9		Attorneys’ Fees	32
		28.10		Time of Essence	32
		28.11		Severability	32
		28.12		Successors and Assigns	32
		28.13		Independent Covenants	32
		28.14		Information Provided	33
		28.15		Limitation of Landlord’s Liability	33
		28.16		No Lease Until Accepted	33
		28.17		Counterparts	33

 

EXHIBIT A - LEGAL DESCRIPTION OF REAL PROPERTY
EXHIBIT B - MEMORANDUM OF LEASE

 

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COMMERCIAL GROUND LEASE

 

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

 

RECITALS

 

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

 

Family Fun Center
1525 Vista Way
Vista, CA 92083

 

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

 

1.                          DEFINITIONS

 

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

 

1.1                  Lease Year

 

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

 

1. 2               Hazardous Material

 

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

 

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1.3                  Environmental Law

 

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

 

2.                          PREMISES

 

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

 

3.                          TERM

 

3.1                  Term

 

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

 

3.2                  First Option to Extend

 

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

 

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3.3                  Second Option to Extend

 

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

 

3 4                  Third Option to Extend

 

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

 

3.5                  Fourth Option to Extend

 

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

 

3.6                  Fifth Option to Extend

 

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

 

4.                          MONTHLY RENT

 

4.1                  Net-Net-Net Lease

 

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

 

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

 

4.2                  Monthly Rent

 

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

 

4.3                  Monthly Rent During the Extension Periods

 

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

 

5.                          ADDITIONAL RENT

 

5.1                  Consumer Price Index Rental Increase

 

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

 

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

 

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

 

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

 

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

 

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

 

6.                          SUBSTITUTE RENT AND INCREASES

 

This Section was deleted intentionally.

 

7.                          SECURITY DEPOSIT

 

This Section was deleted intentionally.

 

8.                          USE OF THE PREMISES

 

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

 

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

 

9.                          PROPERTY TAXES, ASSESSMENTS AND UTILITIES

 

9.1                  Tenant’s Required Payments

 

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

 

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

 

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

 

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

 

9.2                  Payments Not Required by Tenant

 

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

 

9.3                  Assessments

 

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

 

9.4                  Utility Payments

 

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

 

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

 

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

 

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

 

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

 

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

 

9.7                  Tax Period and Adjustment of Taxes

 

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

 

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

 

10.                   BUILDING AND IMPROVEMENTS; TRADE FIXTURES

 

10.1            Building and Improvements

 

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

 

10.2            Depreciation and Investment Tax Credit

 

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

 

10.3            Trade Fixtures

 

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

 

10.4            Removal of Trade Fixtures

 

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

 

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

 

10.5            F inancing of Tenant’s Property

 

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

 

11.                   MAINTENANCE OF THE PREMISES

 

11.1            Obligation to Maintain the Premises

 

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

 

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11.2            Obligation to Keep the Premises Clear

 

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

 

12.                   REPAIRS AND ALTERATIONS

 

12.1            Right to Make Alterations

 

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

 

12.2            Tenant Shall Not Render Premises Liable for Any Lien

 

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

 

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

 

13.                   INDEMNITY AND INSURANCE

 

13.1            Indemnification

 

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

 

13.2            Insurance Company Requirement

 

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

 

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

 

13.3            Insurance Certificate Requirements

 

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

 

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

 

13.4            Minimum Acceptable Insurance Coverage Requirements

 

13.4.1     Tenant shall, at Tenant’s expense, obtain and keep in full force during the term of this Lease a policy of combined single limit bodily injury and property damage insurance on an occurrence basis insuring Tenant (with Landlord as an additional insured) against any liability arising out of the ownership, use, occupancy, or maintenance of the Premises and all of its appurtenant areas. The insurance shall be in an amount not less than Two Million Dollars ($2,000,000) per occurrence. Notwithstanding the foregoing Landlord may require Tenant to increase the min