GROUND LEASE

 

 

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

 

ARTICLE 2
TERM

 

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

 

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

 

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

 

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

 

ARTICLE 3
RENT

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE 4
TENANT’S CONDITIONS PRECEDENT

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 5
CONSTRUCTION

 

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

 

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

 

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

 

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

 

5.3            Approval of Plans and Specifications .

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 6
USE OF THE PROPERTY AND THE IMPROVEMENTS

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 7
UTILITIES, IMPOSITIONS AND OTHER CHARGES

 

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

 

7.2            Impositions .

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 8
OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS

 

8.1            Ownership During Term .

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 9

ASSIGNMENT, SUBLETTING, TRANSFER

 

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

 

9.2            Voluntary Transfer .

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)            Intentionally Omitted .

 

(f)             Corporations and Partnerships .  So long as any of Gerald B. Johnson, Geoffrey C. Beaumont, William L. Rameson or Ronald Rameson hold a general partnership Interest in Tenant or individually or in combination hold a general partnership or majority interest in an entity that is the managing general partner or controls the general partner of Tenant, then any sale or transfer of partnership interests in Tenant, whether voluntary, involuntary, or by operation of law and whether occurring at one time or over a period of time, shall not be deemed a Transfer of this Lease requiring Landlord’s written consent. If none of Gerald B. Johnson, Geoffrey C. Beaumont, William L. Rameson or Ronald Rameson hold a general partnership interest in Tenant or individually or in combination hold a managing general partner or majority interest in an entity that is the managing general partner or controls the managing general partner of Tenant, then any sale or transfer of any general partnership interests in Tenant, whether voluntary, involuntary, or by operation of law and whether occurring at one time or over a period of time, or the dissolution of the partnership shall be dee