LEASE AGREEMENT

 

 

NOW THEREFORE, for adequate consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree that the foregoing Recitals are true and correct and express their intention to be bound by them, and the Parties farther agree as follows:

 

1.                                              Definitions and Interpretation .  In this Lease, except as otherwise expressly provided or unless the context otherwise requires, (a) the words used herein shall have the meanings assigned to them in Exhibit C ; (b) all references to Articles, Sections, Exhibits or Schedules are deemed references to Articles, Sections, Exhibits or Schedules respectively of this Lease; (c) words importing the singular only also include the plural and vice versa where the context requires; (d) the headings are for convenience only and are not intended as a guide to interpretation of this Lease or any portion thereof; (e) the word “including”, when following any general statement or term, is not to be construed as limiting the general statement or term to the specific items or matters set forth or to similar items or matters, but rather as permitting the general statement or term to refer to all other items or matters that could reasonably fall within its broadest possible scope; and (f) words importing the masculine gender include the feminine or neuter, words in the singular include the plural, words importing a corporate entity include individuals, and vice versa.

 

2.                                              Leased Property .  Subject to and upon the terms and conditions of this Lease, Landlord does hereby lease to Tenant and Tenant does hereby rent from Landlord all of Landlord’s right, title, and interest in and to the Water Park Property. Included as part of the Base Rent and at no additional cost to Tenant, Tenant and its agents, employees and invitees are hereby granted a nonexclusive license to use the Shared Facilities upon the terms and conditions of the Shared Facilities License Agreement, a form of which is attached as Exhibit B hereto.

 

3.                                        Use of the Property .

 

3.1                                  Water Park . This Lease permits the use of the Water Park Property only for the operation of services and facilities customarily found at a water park facility and for no other purpose and does not include or permit the operation of any other services or businesses by Tenant beyond such use without the prior written approval of Landlord. Tenant shall not permit or cause to be conducted in or on the Water Park Property, any activity that constitutes a nuisance or unreasonably interferes with Landlord’s ownership and operation of the Overall Resort Property or any activity that subjects Landlord to any liability or responsibility for injury to any person or damage to any property. Landlord shall not permit or cause to be conducted in or on the Overall Resort Property, any activity that unreasonably interferes with Tenant’s operation of the Water Park Property or any activity that subjects Tenant to any liability or responsibility for injury to any person or damage to any property.

 

3.2                                  Landlord’s Right of Entrance . As long as Landlord does not unreasonably interfere with the exercise of the rights of Tenant under this Lease, provides reasonable notice and has received Tenant’s consent (which will not be unreasonably withheld), Landlord may enter upon and use the Water Park Property at any time (a) to inspect the operation of Tenant’s business, the maintenance of Tenant’s Property and Tenant’s compliance with the terms of this Lease; (b) to maintain Landlord’s property; (c) for any other purpose in connection with the operation of Landlord’s business; and (d) after consulting with Tenant with respect to any plans and giving consideration to any suggestions of Tenant, Landlord may permit third parties to use

 

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the Water Park Property for purposes associated with Landlord’s business from time to time, provided that such uses do not unreasonably interfere with the exercise of the rights of Tenant under this Lease.

 

3.3                                  Tenant’s Right of Entrance . If, from time to time, Tenant requires access to any of Landlord’s property that is adjoining the Water Park Property in connection with Tenant’s business of operating or maintaining the Water Park, Tenant shall provide Landlord with written notice stating the reason Tenant desires such access. If Landlord consents, such consent not to be unreasonably withheld, Tenant shall have reasonable access to such property; on the conditions that (a) Tenant holds harmless and indemnifies Landlord for any liabilities, losses or claims resulting from any activities on Landlord’s property and (b) such activities shall be at Tenant’s sole cost and expense.

 

4.                                        Term .

 

4.1                                  Term . The term of this Lease (“Term”) will commence at 12:01 a.m. on May 16, 2001 (the “Commencement Date”), and terminate at 12:00 midnight on September 30, 2030, and shall only run from April 1st to September 30th of each year; provided that in 2001, the Term shall run from the Commencement Date until September 30, 2001. Landlord retains the right to use the Water Park Property during the rest of the year; on the condition that with Landlord’s prior written consent, on a case-by-case basis, Tenant shall also have the right to enter the Water Park Property at other times during the year for activities in connection with the Water Park.

 

4.2                                  Tenant’s Right to Terminate After First Season of Operation . Tenant shall have the right to terminate this Lease, in Tenant’s sole and absolute discretion, by delivering written notice of its desire to terminate to Landlord on or before November 15, 2001. Any such termination of this Lease pursuant to this Section 4.2 shall be effective as of December 31, 2001. In the event of such termination, Landlord shall reimburse to Tenant within ninety (90) days after the effective date of such termination up to $500,000 of capital costs and mobilization expenses actually incurred by Tenant during the period prior to such termination.  Any such reimbursement shall be conditioned on Tenant providing evidence reasonably substantiating such costs and expenses; provided that Landlord shall have no obligation to reimburse any single expenditure in excess of $50,000 unless Landlord was given at least 48 hours prior notice and an opportunity to review, discuss with Tenant and approve such expenditure, such approval not to be unreasonably withheld.

 

4.3                                  Improvement Extension Term . If, during the last five years of the Term, Tenant (with Landlord’s prior written consent) makes Tenant Improvements to the Water Park Property in excess of $750,000, the Term automatically shall be extended for a period of (a) an additional five years from the date of the completion of such Tenant Improvements or (b) five years from the date of the expiration of the Term, whichever is shorter (the “Improvement Extension Term”). All provisions of this Lease shall continue to apply during the period of the Improvement Extension Term, including Rent, which shall continue to be payable in the same manner as Rent was required to be paid during years 2 through 30 of the Term.

 

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5.                                              Rent .                     Tenant covenants and agrees to pay to Landlord rent in an amount as determined in accordance with the following provisions (collectively, “Rent”):

 

5.1                                  Base Rent .  Tenant shall pay as base rent (“Base Rent”) for the Term, and to the extent applicable, the Improvement Extension Term, the following, payable annually on or before October 31st of each year in accordance with an officer’s certification from Tenant of Gross Revenues for such year; provided, however, that an estimated payment based upon Gross Revenues (also based upon an officer’s certification from Tenant) through the last full week of August of each year shall be due and payable on September 30th of such year. Notwithstanding the foregoing, however, the Base Rent for the 2001 season shall be due and payable on January 15, 2002, and shall be based on an officer’s certification of EBITDA from Tenant:

 

Year		Rate
Year 1		Fifty percent of the positive EBITDA for year ended December 31, 2001, due and payable by January 15, 2002. In the event EBITDA is negative, no rent shall be owed by Tenant to Landlord, and Landlord shall reimburse to Tenant no later than January 15, 2002, an amount equal to 50% of the negative EBITDA.
Years 2-30, and for each of the years comprising the Improvement Extension Term, if any.		3.5% of Gross Revenues up to $4,000,000; 4.75% of Gross Revenues from $4,000,001 to $6,000,000; 5.5% of Gross Revenues from $6,000,001 to $7,000,000; 7% of Gross Revenues from $7,000,001 to $8,000,000; 8% of Gross Revenues from $8,000,001 to $9,000,000; 9% of Gross Revenues from $9,000,001 to $10,000,000; and 10% of Gross Revenues above $10,000,000.

 

5.2                                  Additional Rent for Rent Under Kelley Lease . For each year during the Term (including the first year), on or before January 15th of such year (commencing on January 15, 2002), Tenant agrees to pay to Landlord as additional rent, fifty percent (50%) of all amounts actually paid by Landlord as Annual Rent (as such term is defined in the Kelley Lease), to the extent such payments of Annual Rent were attributable to the immediately preceding calendar year. Tenant acknowledges receipt of the Kelley Lease. In order to receive payment under this Section 5.2, Landlord shall provide adequate documentation reasonably substantiating the amount that Landlord actually paid in Annual Rent for which Landlord is seeking payment hereunder. In addition, Tenant also is required to reimburse Landlord for certain real property taxes paid by Landlord under the Kelley Lease pursuant to Section 14 hereof.  The parties expressly agree that Tenant’s obligation to pay 50% of the Annual Rent under the Kelley Lease shall be adjusted, in an equitable manner as may be reasonably agreed upon between the parties, if Landlord at any time engages in any profit making activities on any portion of the real property that is subject to the Kelley Lease in a different and inconsistent manner than Landlord is conducting activities on such property as of the date hereof.

 

5.3                                  Late Penalty . If any installment of any required payment (including Rent) is not paid by Tenant within ten (10) days after the date it is due, then interest shall accrue from

 

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the original due date on the unpaid installment at the then current prime rate of National Community Bank of New Jersey (or its successors) during the first 30 days from said due date and at such prime rate plus 3% thereafter.

 

5.4                                  Right to Audit . Landlord shall have the right to request a full audit of Tenant’s financial records as they relate to the determination of Gross Revenues (or EBITDA, if such audit includes the first lease year) relating to Tenant’s operation of the Water Park once every three years (which audit shall apply to the immediately preceding three seasons). The audit shall be conducted by an auditor of Landlord’s choosing and all fees and expenses associated with such audit shall be the responsibility of Landlord; provided, however, that if any such audit determines that Tenant underpaid its Base Rent by more than $50,000 in any one of the seasons subject to such audit, all of such audit fees and expenses shall instead be the sole the responsibility of Tenant. In the event the audit determines there has been any underpayment or overpayment for any of the years subject to the audit, Landlord or Tenant, as appropriate, shall promptly, but in no case more than thirty (30) days after such audit is finalized, make a cash payment to the other party in the amount of such underpayment or overpayment as determined by the audit, as the case may be.

 

6.                                              Landlord’s Deliveries . Landlord shall deliver the following items to Tenant on or before July 31, 2001, which items are intended to enable Tenant to make its decision whether or not to exercise its right to terminate the Lease on or before November 15, 2001 pursuant to Section 4.2.

 

6.1                                  Title Commitment and Title Policy . Landlord will furnish to Tenant, at Landlord’s expense, an ALTA Form commitment of title insurance (the “Title Commitment”), committing to insure the leasehold interest of Tenant granted herein subject to the encumbrances, covenants, conditions and restrictions set forth as exceptions to title in such Title Commitment. If, and only if, Tenant does not exercise its right to terminate the Lease on or before November 15, 2001, pursuant to Section 4.2, Landlord shall promptly thereafter deliver to Tenant, at Landlord’s expense, an ALTA title insurance policy (the “Title Policy”), in the form of the Title Commitment, in the amount of $1,500,000, insuring Tenant’s leasehold interest.

 

6.2                                  Survey . Landlord will furnish to Tenant a current “as built” survey (the “Survey”) covering the Real Property, certified by a Registered Land Surveyor reasonably acceptable to Tenant. Such Survey will be in a form sufficient to allow the company issuing the Title Commitment and the Title Policy (“Title Company”) to delete the standard printed survey exceptions in the Title Policy and will show the following: (a) the location of the improvements located on the Real Property and all streets and easements on or contiguous to the Real Property; (b) the points of access to all public streets and any limitations to such access; (c) any encroachments on any of the Real Property by adjoining property owners or any protrusions of the improvements located on the Real Property on adjoining property; and (d) any applicable building setback lines and a certificate by the surveyor that no portion(s) of the improvements located on the Real Property protrude beyond any building setback lines.

 

6.3                                  Phase I Environmental Assessment .  Landlord shall have prepared and furnish to Tenant a current Phase I environmental assessment of the Real Property, in a form

 

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which meets the Preliminary Assessment/Site Evaluation Requirements of the Technical Requirements for Site Remediation, NJAC 7:26E-1-1 et. seq.

 

6.4                                  Unrecorded Claims . Landlord shall deliver to Tenant an affidavit of Landlord in form reasonably satisfactory to Tenant and the Title Company, certifying that as of the date of the affidavit, to the extent true, there are no rights which could give rise to laborers’, mechanics’ or materialmen’s liens or other unrecorded claims against any portion of the Real Property.

 

7.                                        Landlord’s Representations and Warranties .  Landlord hereby represents and warrants to Tenant that as of the date hereof:

 

7.1                                  Existence . Landlord is a New Jersey corporation, duly organized, existing, in good standing and qualified to do business under the laws of the State of New Jersey, and Landlord has full power and authority to lease and improve the Water Park Property and to comply with the terms of this Lease.

 

7.2                                  Authority . The execution and delivery of this Lease by Landlord and the consummation by Landlord of the transaction contemplated herein are within Landlord’s capacity and all requisite action has been taken to make this Lease valid and binding on Landlord in accordance with its terms.

 

7.3                                  No Legal Bar .  The execution by Landlord of this Lease and the consummation by Landlord of the transactions contemplated herein does not and will not (a) result in a breach of any of the provisions of, or constitute a default or a condition which on giving of notice or lapse of time or both would ripen into a default under any indenture, agreement, instrument or obligation to which Landlord is a party or by which any portion of the Water Park Property is bound; or (b) constitute a violation of any order, rule or regulation applicable to Landlord or any portion of the Water Park Property or the Shared Facilities, of any court or any administrative agency or other governmental body having jurisdiction over Landlord or any portion of the Water Park Property or the Shared Facilities.

 

7.4                                  No Default .  Landlord is not in default under any indenture, mortgage, deed of trust, loan agreement, or other agreement that might materially and adversely affect any portion of the Water Park Property and which relate to or are secured by the Water Park Property or the Shared Facilities. Neither Landlord nor the Water Park Property (or the Shared Facilities) is subject to any agreement, restriction, requirement, regulation or any order or decree of any court or governmental agency which might materially and adversely affect operation of any portion of the Water Park Property.

 

7.5                                  Title . Landlord has good and marketable title to that portion of the Real Property that Landlord owns in fee simple, together with the Improvements, free and clear of all liens, encumbrances and restrictions of any kind, except those matters as may be set forth in the Title Commitment.

 

7.6                                  Leasehold Interest . Landlord is the lessee of a valid and enforceable lease concerning the property subject to the Kelley Lease and has an interest in the property sufficient

 

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to permit Landlord to sublease the property subject to the Kelley Lease to Tenant under the terms and conditions stated herein.

 

7.7                                  No Restrictions on Use . To Landlord’s knowledge (it being acknowledged by Tenant that Landlord is not aware of what the Title Commitment or Survey may disclose), there are no encroachments, easements or restrictions which would prohibit or limit the use of the Water Park Property as a water park facility or the Shared Facilities in the manner that they are currently being used by Landlord. Landlord agrees to reimburse and hold Tenant harmless from all damages and expenses which Tenant may suffer by reason of any encroachments, encumbrances, or defects in such title now in existence, except as shall be identified and disclosed to Tenant in the Title Commitment and the Survey. If Landlord fails or refuses to correct any such title defect which would render the Real Property or the Improvements unsuitable for Tenant’s intended use as a water park on or before November 1, 2001, Tenant shall have the right to terminate this Lease and receive payment as calculated in Section 4.2, as its sole and exclusive remedy hereunder.

 

7.8                                  Litigation .  There are no actions, suits, proceedings or investigations pending or, to the knowledge of Landlord, threatened against Landlord affecting any portion of the Water Park Property (or Shared Facilities), at law or in equity, that could reasonably be expected to have a material adverse effect on Tenant’s operation of the Water Park. Neither Landlord nor the Water Park Property (or Shared Facilities) is subject to any judgment, decree, injunction, rule or order of any court or governmental body that could reasonably be expected to have a material adverse effect on the operation of the Water Park.

 

7.9                                  Financial Information .  Landlord has delivered to Tenant financial information regarding the Water Park, which financial information is attached as Schedule 7.9 (“Financial Information”).  Such Financial Information and notes thereto fairly present the financial condition and the results of operations, changes in stockholder equity, and cash flow of the Water Park Property as of the respective dates of and for the periods referred to in such Financial Information, all in accordance with generally accepted accounting principles, and the Financial Information reflects the consistent application of such accounting principles throughout the periods involved. Landlord warrants that the Financial Information is true and accurate in all material respects, as of the date made and as of the date of this Lease.

 

7.10                            No Undisclosed Liabilities . There are no liabilities of the Water Park, or of Landlord related to the Water Park, of any kind whatsoever, other than liabilities disclosed or provided for in the Financial Information or incurred in the ordinary course of business since the date of the Financial Information.

 

7.11                            Absence of Certain Changes . Since the date of the Financial Information, there has not been any material adverse change in the business, operations, properties, assets or condition of the Water Park Property, and, to Landlord’s knowledge, no event has occurred or circumstance exists that may result in such a material adverse change.

 

7.12                            Compliance with the Law . To the extent necessary for the operation of the Water Park and all elements within the Water Park, Landlord and the Water Park each have all material authorizations, approvals, licenses and orders of and from all governmental and

 

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regulatory offices, including occupancy permits, necessary to carry on the business of operating the Water Park, to own or hold under lease the properties and assets they own or hold under lease and to perform all of their obligations under the agreements to which they are a party, in all cases to the extent related to the Water Park. To the extent necessary for the operation of the Water Park and all elements within the Water Park, Landlord and the Water Park are in compliance in all material respects with all applicable acts, laws, ordinances, regulations and rules, orders, codes and determinations of any federal, state or municipal government or of any subdivision of any thereof and Landlord has received no notice of any claimed failure to comply with any applicable building code, health or use regulation affecting the Water Park or any element within the Water Park.

 

7.13                            Environmental Laws . To Landlord’s knowledge (it being acknowledged by Tenant that Landlord is not aware of what the Phase I environmental assessment may disclose), Landlord and the Water Park (a) have obtained all permits, licenses, approvals and other authorizations which are required with respect to the business or property of the Water Park or the operation or ownership thereof under any Environmental Law; (b) are in compliance with all terms and conditions of the required permits, licenses, approvals and authorizations and with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any of the Environmental Laws as they relate to the Water Park; (c) have not received any notice from any governmental authority of any violation of or liability arising under any Environmental Laws or any permits, licenses, approvals or other authorizations which are required with respect to the business or properties of the Water Park or the operation or ownership thereof; (d) are aware of no civil, criminal, administrative action, suit, demand, claim, hearing, notice of violations, investigation, proceeding, notice or demand letter pending or threatened against Landlord ownership or operation of the Water Park relating in any way to any of the Environmental Laws; and (e) represent that there are no past or present events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance by the Water Park with the Environmental Laws, or which may give rise to any common law or legal liability of the Water Park, including without limitation, liability under any of the Environmental Laws, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, notice of violation, study or investigation of Landlord or the Water Park, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Materials.

 

7.14                            Taxes .  To Landlord’s knowledge, Landlord has filed all federal, state, local and foreign tax returns to the extent required to be filed by applicable law for taxable periods ending on or before the commencement of the Term and have paid all taxes shown to be payable on such Tax Returns (except to the extent being contested in good faith).

 

7.15                            Sufficiency of Assets . Landlord owns or otherwise has the right to use pursuant to a valid and enforceable lease, license or similar contractual arrangement, all of the assets (whether tangible or intangible) that are used or required for use in the operation of the Water Park.

 

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7.16                            Brokers and Finders .  Landlord has not employed any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated herein.

 

7.17                            Agreements Affecting the Water Park . Attached as Schedule 7.17 is a list of all contracts, agreements and understandings between Landlord and any party providing goods and services to the Water Park, or otherwise relating to the operation of the Water Park (the “Water Park Agreements”). Except as noted on Schedule 7.17, the Water Park Agreements are all legal, valid, binding, enforceable and in full force and effect in accordance with their terms and will continue to be so following the consummation of the transactions contemplated by this Lease.

 

7.18.                         Labor Relations . Landlord is not a party to any collective bargaining agreements with any labor union applicable to employees of Landlord. There are no representations or certification proceedings or petitions seeking a representation or certification proceeding pending or threatened to be brought of filed with the National Labor Relations Board or any other labor relations tribunal involving the employees of Landlord. There are no grievances, unfair labor practices, or employment discrimination charges, complaints, other than those described in Schedule 7.18.

 

7.19                         Insurance . As of the date hereof, Landlord (with respect to the Water Park) and the Water Park are covered by valid and currently effective insurance policies issued in favor of Landlord that are customary and adequate for companies of similar size in the industry and locale in which the Water Park operates. All policies are in full force and effect, all premiums due thereon have been paid and Landlord has complied in all material respects with the provisions of such policies.

 

8.                                        Tenant’s Representations and Warranties .

 

8.1                                  Existence .  Tenant is a corporation, duly organized, existing, in good standing and qualified to do business under the laws of the State of Delaware, and Tenant has full power and authority to lease the Water Park Property and to comply with the terms of this Lease.  Tenant is a direct, wholly-owned subsidiary of Alfa, which has been adequately capitalized and will continue to be adequately capitalized by Alfa in order to perform all of its obligations hereunder.

 

8.2                                  Authority . The execution and delivery of this Lease by Tenant and the consummation by Tenant of the transactions contemplated herein are within Tenant’s capacity and all requisite action has been taken to make this Lease valid and binding on Tenant in accordance with its terms.

 

8.3                                  No Legal Bar .  The execution by Tenant of this Lease and the consummation by Tenant of the transactions contemplated herein does not and will not (a) result in a material breach of any of the provisions of, or constitute a material default or a condition which on giving of notice or lapse of time or both would ripen into a material default under any indenture, agreement, instrument or obligation to which Tenant is a party; or (b) constitute a

 

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material violation of any order, rule or regulation applicable to Tenant of any court or any administrative Agency or other governmental body having jurisdiction over Tenant.

 

8.4                                  Litigation .  There are no actions, suits, proceedings or investigations pending or, to the knowledge of Tenant, threatened against Tenant materially affecting the ability of Tenant to perform its obligations hereunder, at law or in equity. Tenant is not subject to any judgment, decree, injunction, rule or order of any court or governmental body which could reasonably be expected to have a material adverse effect on Tenant’s operation of the Water Park or any part of the Overall Resort Property.

 

8.5                                  Tenant Financial Statements . Tenant has delivered to Landlord financial information regarding Alfa which financial statements are attached as Schedule 8.5 (“Tenant Financial Statements”).  Such Tenant Financial Statements and notes thereto fairly present the financial condition and the results of operations, changes in stockholder equity, and cash flow of Alfa as of the respective dates of and for the periods referred to in such Tenant Financial Statements, all in accordance with generally accepted accounting principles and the Tenant Financial Statements reflect the consistent application of such accounting principles throughout the periods involved. Tenant warrants that the Tenant Financial Statements are true and accurate in all material respects, as of the date made and as of the date of this Lease, and Tenant further warrants that Landlord may rely on the Tenant Financial Statements as fairly representing the financial condition of Alfa and also as fairly representing the financial capability of Tenant, as a wholly owned subsidiary of Alfa, to perform all of its obligations hereunder.

 

8.6                                  Brokers and Finders .  Tenant has not employed any broker, finder or investment banker or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees or finders’ fees in connection with the transactions contemplated herein.

 

9.                                        Landlord’s Covenants .

 

9.1. Payment of Negative EBIDTA . Should the first year of operations, ending on September 30, 2001, yield a negative EBITDA, Tenant shall deliver a statement, certified by Tenant’s chief financial officer, setting forth the amount of such negative EBITDA, together with documentation reasonably substantiating such amount and demonstrating to Landlord the manner in which Tenant calculated such negative EBITDA. After receipt of such certification and substantiating documentation, Landlord shall reimburse Tenant an amount equal to 50% of the negative EBITDA on or before January 15, 2002.

 

9.2                                  Quiet Enjoyment .  For so long as Tenant is not in default hereunder, Landlord covenants that Tenant shall peacefully and quietly have, hold and enjoy the Water Park Property for the Term, free and clear of interference by any person.

 

9.3                                  Kelley Lease .  Landlord agrees to provide Tenant with evidence of Landlord’s compliance with all of the terms and conditions of the Kelley Lease throughout the Term, for example, by delivering copies to Tenant of all rent checks from Landlord under the Kelley Lease as such rent is due and payable.

 

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9.4                                  Insurance . Throughout the Term, Landlord shall insure the Water Park Property in a manner that is customary and adequate for companies of similar size in the industry, which own leased water park facilities.

 

9.5                                  Reporting . After Landlord’s ski mountain operating season at Mountain Creek is completed each year, Landlord shall provide to Tenant the number of total skier visits at Mountain Creek for such year promptly after such figures are available to Landlord.

 

10.                                  Tenant’s Covenants .

 

10.1                            Waste or Nuisance .  Tenant shall not commit or suffer to be committed any waste upon the Water Park Property or Shared Facilities or any nuisance or other thing which may disturb the quiet enjoyment of Landlord or any other user of the Water Park Property or Shared Facilities provided that Landlord acknowledges that the ordinary and prudent operation of Tenant’s business on the Water Park Properly or Shared Facilities as permitted herein will not create a nuisance or disturb the quiet enjoyment of Landlord. Tenant shall also keep the Water Park Property or Shared Facilities and all other areas used by Tenant in a reasonably tidy and clean condition,

 

10.2                            Training .  Tenant shall develop and make available to all employees of Tenant training, operation and safety manuals with respect to the operation of Tenant’s business at the Water Park Property and ensure that its employees are provided with adequate training in respect of the maintenance and safe operation of Tenant’s Property so as to ensure that there is as little disruption or interference with the operation of Tenant’s business as possible.

 

10.3                            Compliance with Laws .  Tenant shall comply with and cause the Water Park Property to comply with and shall assume all obligations and liabilities from the date of this Lease with respect to (a) all laws, ordinances and regulations and other governmental rules, orders and determinations presently in effect or hereafter enacted, made or issued, whether or not presently contemplated (collectively, “Legal Requirements”), applicable to the Water Park Property and any Improvements or the ownership, operation, use or possession thereof and (b) all agreements, contracts, insurance policies (including, without limitation, to the extent necessary to prevent cancellation thereof and to insure full payment of any claims made under such policies), covenants, conditions and restrictions now or hereafter applicable to the Water Park or the ownership, operation, use or possession thereof.

 

10.4                            Tenant’s Assumption of the Water Park Agreements .  To the extent the Water Park Agreements described in Schedule 7.17 remain in place after the execution of this Lease, and to the extent the Water Park Agreements relate to the Water Park Property, Tenant agrees to assume and be responsible for certain obligations of Landlord contained in such Water Park Agreements as set forth on Schedule 7.17.

 

10.5                            Liens .  Tenant will remove and discharge any charge, lien, security interest or encumbrance upon the Water Park Property or upon any Rent or other sums payable hereunder which arises for any reason, including, without limitation, all liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of the Water Park Property or by reason of labor or materials furnished or claimed to have been furnished to Tenant or for the

 

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Water Park Property, but not including (a) this Lease and tiny assignment hereof or any sublease permitted hereunder and (b) any mortgage, charge, lien, security interest or encumbrance created or caused by Landlord or its agents, employees or representatives. Tenant may provide a bond or other security acceptable to Landlord to remove or pay all costs associated with the removal of any such lien. Nothing contained in this Lease shall be construed as constituting the consent or request of Landlord, express or implied, to or for the performance (on behalf of or for the benefit of Landlord) by any contractor, laborer, materialman or vendor, of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to the Water Park Property or any part thereof. Notice is hereby given that Landlord will not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to anyone holding an interest in the Water Park Property or any part thereof through or under Tenant, and that no mechanic’s or other liens for any such labor, services or materials shall attach to or affect the interest of Landlord in and to the Water Park Property.

 

10.6                            Operating Costs .  Tenant shall be responsible for all operating costs, including costs incurred in the maintenance, repair and management of the Water Park Property and all charges of utilities, communications and similar services exclusively serving the Water Park Property. Landlord and Tenant will use commercially reasonable efforts to have all utilities and similar services exclusively serving the Water Park Property transferred directly into Tenant’s name; provided, however, that in the event any of such services are billed to Landlord, Tenant agrees to pay its portion of any bills for such services within ten (10) days of receipt of any such bills from Landlord, or reimburse Landlord for Tenant’s share to the extent Landlord has paid such bills and provides evidence reasonably substantiating such payments and setting forth a reasonable calculation of Tenant’s share thereof.

 

10.7                            Insurance . Tenant shall during the Term take out and keep in full force and effect, at its own cost, comprehensive general liability insurance which is acceptable to Landlord, acting reasonably, against claims for personal injury, bodily injury, including death, and property damage or loss arising out of the use and occupation of the Water Park Property by Tenant and the business conducted by Tenant and any other persons from the Water Park Property in which the limit of liability shall not be less than $10,000,000 per person and $10,000,000 per occurrence.  The policies for such insurance shall (a) name Landlord as an additional insured under the policy; (b) prohibit the insurer from exercising any rights of subrogation against Landlord; (c) afford protection to Landlord in respect of cross liability between Landlord and Tenant under this Lease and provide that the coverage under the policy shall not be cancelled or any provisions changed or deleted, unless 30-days’ prior written notice is given to Landlord by the insurer, (d) provide to Landlord from time to time, upon request, proof that all premiums under the policy required to be maintained by Tenant under this Lease have been paid and that the policy is in full force and effect and contains the above terms; and (e) provide Landlord at least 30-days’ prior written notice of any change to or cancellation or termination of the policy. Tenant will provide to Landlord evidence acceptable to Landlord, acting reasonably, that Tenant has taken out such insurance as Tenant is required to take out under this section. Tenant will not be entitled to exercise any of its rights under this Lease until such time as it has provided such evidence to Landlord.

 

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10.8                            Environmental Compliance .  Tenant shall not cause or permit any Hazardous Materials to be placed, held, located, released, transported or disposed of on, under, at or from the Water Park Property except in accordance with Environmental Laws.

 

10.9                            Continued Operation .  Tenant will continue the operation of the Water Park at a level of quality at least consistent with past practices, and will meet the current operating requirements as stipulated by local authorities having jurisdiction over such operations; provided, however, Tenant shall not be under any obligation to expend any of its own financial resources other than for traditional and reasonable pre-opening costs (which shall be treated as operational expenses of the Water Park) to satisfy the requirements of this Section 10.9 in the event the Water Park Property, when delivered at the Commencement Date, is not already meeting the highest standards of efficiency and safety and is not already meeting or exceeding the operating requirements as stipulated by local authorities having jurisdiction over such operations.

 

10.10                      Services .  To ensure full coordination and integration into Landlord’s master marketing and sales plan, branding, and best practice requirements for both summer and winter operations on the Overall Resort Property, Tenant shall provide Landlord, with the principal elements of its annual marketing and sales plan, including any provisions relating to sales under and the general timing of any marketing plans, sponsorship agreements and general promotions to be undertaken. Prior to commencing the implementation of such plan, Tenant will deliver to Landlord for its review and approval written descriptions in respect of such services, which approval will not be unreasonably withheld or unduly delayed.  If Landlord fails to respond within fifteen (15) days after receipt of Tenant’s plan, Landlord shall be deemed to have approved such plan.

 

10.11                      Reporting .  During the operating season, Tenant shall provide Landlord weekly reports, beginning 30 days after the beginning of the Term, which list attendance figures and the revenues of the Water Park for the previous week. Any attendance figures provided to Landlord shall be kept strictly confidential in accordance with the provisions of Section 29.1.

 

11.                                  Net Lease .

 

11.1                            Net Lease . It is expressly understood and agreed by and between the Parties that except as otherwise expressly provided herein, this Lease is a net lease, and the Rent and all other sums payable hereunder to or on behalf of Landlord shall be paid without notice or demand and without setoff, counterclaim, abatement, suspension, deduction or defense.

 

11.2.                         No Abatement. Except as otherwise expressly provided in the Lease, this Lease shall not terminate, nor shall Tenant have any right to terminate this Lease or be entitled to the abatement of any Rent or any reduction thereof, nor shall the obligations hereunder of Tenant be otherwise affected, other than pursuant to an express provision of this Lease, it being the intention of the parties hereto that the Rent and all other charges payable hereunder to or on behalf of Landlord shall continue to be payable in all events and the obligations of Tenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall be terminated pursuant to an express provision of this Lease. Nothing contained in this Section 11.2

 

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shall be deemed a waiver by Tenant of any rights that it may have to bring a separate action with respect to any default by Landlord under this Lease or any other agreement.

 

11.3                         Bankruptcy . Tenant covenants and agrees that it will remain obligated under this Lease in accordance with its terms, and that Tenant will not take any action to terminate, rescind or avoid this Lease, notwithstanding the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution, winding-up or other proceeding affecting Landlord or any assignee of Landlord in any such proceeding and notwithstanding any action with respect to this Lease which may be taken by any trustee or receiver of Landlord or of any assignee of Landlord in any such proceeding or by any court in any such proceeding.

 

12.                                  Shared Assets and Liabilities .

 

12.1                            Leased Employees . Tenant intends to lease employees from Landlord. To the extent Landlord and Tenant agree to lease any such employees, Landlord and Tenant shall enter into an employee sharing agreement, a form of which is attached as Exhibit D .

 

12.2                            Shared Equipment. In addition to the Shared Facilities to be licensed to Tenant pursuant to the Shared Facilities License Agreement, the Patties intend to share certain equipment and personal property assisting in the operation of their respective businesses. Any such agreement to share equipment and personal property shall be subject to a separate written agreement between the Parties, which shall set forth the manner in which the Parties will share the costs associated with insurance, the maintenance and upkeep and, subject to each Party’s approval, the replacement of any shared equipment and personal property.  Each Party shall return the equipment and personal property to the other in the same working order as it was received, reasonable wear and tear excepted.  Except for costs associated with insurance, maintenance and upkeep and replacement, as may be agreed between the Parties, Mountain Creek shall receive no additional consideration for sharing any such personal property and equipment.

 

12.3                            Expenses .  Tenant hereby assumes responsibility for and agrees to pay certain expenses incurred by Landlord prior to the Commencement Date, which expenses are set forth in detail on Schedule 12.3 hereto. Tenant shall reimburse Landlord for all such expenses previously paid by Landlord, and shall promptly pay any of such expenses in accordance with their terms that are yet to become due, as set forth on Schedule 12.3.

 

13.                                  Maintenance and Repair; Improvements .

 

13.1                            Tenant Improvements .  In furtherance of operating the Water Park, Tenant shall be permitted, at its expense, to make any additional alterations, additions, improvements or other capital expansions on the Water Park Property (“Tenant Improvements”). Prior to commencing its construction of any Tenant Improvements, Tenant will deliver to Landlord for its review a package of Tenant Improvements detailing the design of all such improvements and including detailed drawings and written specifications in respect of the design, layout, and construction methods. Landlord’s determination or concerns regarding Tenant’s plans will be given within seven (7) days after receipt of Tenant’s plans. If Landlord has concerns about the

 

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Tenant Improvement plans, Landlord will provide to Tenant, within such 7-day time period, a written notice specifying in detail any reasonable changes requested. Tenant shall confer with Landlord within fifteen (15) days of receipt of Landlord’s notice of concerns in an effort to resolve (to Landlord’s reasonable satisfaction) Landlord’s concerns. In any event, prior to Tenant commencing its construction of any Tenant Improvements, Tenant shall have received Landlord’s written approval of such Tenant Improvements, such approval not to be unreasonably withheld.

 

13.2                            Maintenance and Repair . Tenant, at its own expense, will maintain and make all repairs necessary to keep the Water Park Property in good repair.

 

13.3                            Modifications . If all or any part of Tenant Improvements shall encroach upon any property, street or right-of-way adjoining or adjacent to the Water Park Property, or shall violate the agreements or conditions affecting the Water Park Property or any part thereof, or shall hinder, obstruct or impair any easement or right-of-way to which the Water Park Property is subject, then, promptly after written request of Landlord or of any person so affected, Tenant shall, at its expense, either (a) obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting therefrom or (b) if Landlord consents thereto, make such changes, including alteration or removal, to Tenant Improvements and take such other action as shall be necessary to remove or eliminate such encroachments, violations, hindrances, obstructions or impairments; provided however, that should Tenant make Tenant Improvements that have been reviewed by Landlord, with Landlord’s concerns resolved to Landlord’s reasonable satisfaction as described in Section 13.1, Landlord shall be deemed to have waived and settled any and all claims, liabilities and damages for any alleged encroachment of Landlord’s interests.

 

13.4                            Removal of Tenant Improvements . Within sixty (60) days following termination or expiration of this Lease for any reason, Tenant shall have the right to remove from the Water Park Property any Tenant Improvements or equipment that Tenant has placed or constructed on the Water Park Property. In the event of any such removal, Tenant shall restore the premises from which such equipment or Tenant Improvements were removed by reasonable grading and seeding. All Tenant Improvements or equipment not removed from the Water Park Property within a period of sixty (60) days from the termination or expiration of this Lease shall become the property of Landlord (without any obligation of Landlord to compensate Tenant therefore).

 

14.                                  Taxes; Utilities .

 

14.1                            Subject to Section 14.2 below, Landlord shall be responsible for the payment of all real property taxes applicable to the Overall Resort Property (“Real Estate Taxes”) and shall pay such Real Estate Taxes before delinquency.

 

14.2                            Commencing on April 1st of the first year following the Commencement Date, and for each year thereafter (including any partial year, if applicable), Tenant shall pay to Landlord, as additional Rent, it share of Real Estate Taxes and set forth on Schedule 14.2 hereto (“Tenant’s Proportionate Share”), in the manner described in Section 14.4 below. Schedule 14.2 may be amended, from time to time, upon the written agreement of Landlord and Tenant.

 

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14.3                            Landlord shall furnish Tenant with Landlord’s good faith written estimate of Real Estate Taxes and Tenant’s Proportionate Share of the Real Estate Taxes on or before the first day of each year or as soon thereafter as is reasonably practical. Thereafter, the last written estimate furnished by Landlord to Tenant shall apply until Landlord replaces it with a new written estimate.  Landlord may reestimate in good faith Real Estate Taxes and Tenant’s Proportionate Share of the Real Estate Taxes one (1) time during each year, and such reestimate shall take effect upon Tenant’s receipt of written notice thereof from Landlord.

 

14.4                            On the first day of each calendar month during each April 1st through September 30th period during the Term, Tenant shall pay to Landlord an amount equal to one-sixth of Tenant’s Proportionate Share based on Landlord’s last written estimate of the Real Estate Taxes (to be pro rated if the Term expires during such year). During the 2001 season, Tenant shall pay to Landlord an amount equal to Tenant’s Proportionate Share for the 2001 season in four equal monthly payments on June 1, July 1, August 1 and September 1, 2001. Notwithstanding the foregoing, if Landlord delivers to Tenant a written reestimate of Real Estate Taxes and Tenant’s Proportionate Share of the Real Estate Taxes for any year, the first monthly installment of Tenant’s Proportionate Share of the Real Estate Taxes due after Tenant’s receipt of such written reestimate shall be adjusted to account for any previous overpayment or underpayment of Tenant’s Proportionate Share of the Real Estate Taxes resulting from the inaccuracy of Landlord’s initial estimate of the Real Estate Taxes.

 

14.5                            Within 180 days after the end of each year, Landlord shall furnish to Tenant a written statement setting forth the actual amount of (a) Real Estate Taxes for that year, (b) Tenant’s Proportionate Share of the Real Estate Taxes for that year, and (c) the payments that Tenant made on account of Tenant’s Proportionate Share of the Real Estate Taxes pursuant to Section 14.4 above for that year. Landlord also shall provide to Tenant a tax bill issued by the taxing authority reflecting the Real Estate Tax assessment for that year. If the written statement indicates that Tenant underpaid Tenant’s Proportionate Share of the Real Estate Tax Increase for such year, Tenant shall pay the amount of the deficiency to Landlord on the first day of the calendar month following the month in which Tenant receives the statement from Landlord. If the written statement indicates that Tenant overpaid Tenant’s Proportionate Share of such increase, Landlord shall pay the amount of the overpayment to Tenant on the first day of the calendar month following the month Landlord received notice from the taxing authority as to the correct assessment.

 

15.                                  Indemnity .

 

15.1                            Tenant’s Indemnity . Tenant shall defend all actions against Landlord and any affiliate, partner, officer, director, member, employee or shareholder of Landlord (collectively, the “Landlord Indemnified Parties”), with respect to, and shall pay, protect, indemnify and save harmless the Landlord Indemnified Parties from and against, any and all liabilities, losses, damages, costs, expenses (including, without limitation, reasonable attorneys’ fees and expenses and including costs of enforcement of this indemnity), causes of action, suits, claims, demands or judgments of any nature arising from (a) injury to or death of any person, or damage to or loss of property, during the Term, in the Water Park Property or any adjoining sidewalks, streets or ways, or connected with the use, condition or occupancy of any thereof that is not due to the negligent or intentional misconduct of Landlord or from a breach by Landlord of

 

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this Lease or any related agreement; or (b) violation of this Lease by Tenant or (c) the operation of the Water Park following the Commencement Date.

 

15.2                            Landlord’s Indemnity . Landlord shall defend all actions against Tenant and any affiliate, partner, officer, director, member, employee or shareholder of Tenant (collectively, the Tenant Indemnified Parties”), with respect to, and shall pay, protect, indemnify and save harmless the Tenant Indemnified Parties from and against any and all liabilities, losses, damages, costs, expenses (including, without limitation, reasonable attorneys’ fees and expenses and including costs of enforcement of this indemnity), causes of action, suits, claims, demands or judgments of any nature arising from (a) injury to or death of any person, or damage to or loss of property, in the Water Park Property or any adjoining sidewalks, streets or ways, or connected with the use, condition or occupancy of any thereof that is due to the negligent or intentional misconduct of Landlord or from a breach by Landlord of this Lease or any related agreement; (b) violation of this Lease by Landlord; or (c) the operation of the Water Park Property prior to the Commencement Date.

 

16.                                  Laws, Regulations and Approvals . Tenant shall have the right, at its own expense, to make applications to appropriate agencies or boards of municipal, county, state and/or federal governments for permission to use the Water Park Property for the uses permitted herein, so long as any such approvals do not affect Landlord’s rights with respect to any other portions of the Overall Resort Property. Landlord agrees to reasonably cooperate with Tenant in connection with such applications and agrees to authorize any documents that may be required for such purpose. Nothing herein shall be construed to bar or impair the right of Tenant to appeal any decision of any governmental body and during the pendency of any such time for appeal and/or appeals, Tenant shall not be deemed to be in violation of the requirements of this Section 16.

 

17.                                  Equipment Financing . Tenant shall be permitted to apply for equipment financing for construction, improvements, alterations, and additions on the Real Property subject to the condition that without Landlord’s prior written consent, which may be withheld in Landlord’s sole and absolute discretion, any such financing may not be secured by this Lease or Tenant’s rights hereunder. Landlord agrees to join in the execution of all essential documents to carry out the purposes of this Section 17 and to execute Landlord’s waiver or mortgagee’s waiver of similar documents as may be reasonably required by an institutional lender, equipment lessor, or similar party in connection with Tenant’s acquisition of equipment financing pursuant to this Section 17. In any event, no encumbrance shall extend beyond the termination of this Lease or any renewal hereof.

 

18.                                  Eminent Domain . If all or any substantial part of the Water Park Property or Shared Facilities shall be taken under eminent domain or condemnation proceedings, this Lease may be terminated at the option of Landlord or Tenant and the Term shall end as of such date as shall be fixed by notice in writing and, notwithstanding any other provision of this Lease, no further payments shall be due any Party as a result of such termination. In the event of any taking or condemnation, nothing contained herein shall be deemed or construed to prevent Landlord or Tenant from enforcing and prosecuting a claim or claims for the value of its respective interest or rights in connection with such taking or condemnation proceedings, whether partial or complete.

 

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19.                                  Tenant’s Default and Landlord’s Remedies .

 

19.1                            Default .  Tenant shall be in default under this Lease if during the Term (a) any Rent or other sums are not paid by Tenant within five (5) days after receipt of written notice from Landlord; (b) Tenant breaches any of its covenants or obligations under this Lease or the Shared Facilities Agreement and does not remedy the breach within fourteen (14) days after receipt by Tenant of written notice of default from the Landlord (or, if any such breach reasonably requires a longer period to remedy, Tenant has not commenced to diligently remedy such breach within fourteen (14) days after receipt of such notice or thereafter fails to continuously and diligently proceed to remedy such breach); (c) if this Lease is seized or taken in execution or attachment by any creditor of Tenant, or if Tenant makes any assignment for the benefit of creditors or becomes bankrupt or insolvent or takes the benefit of any act for bankrupt or insolvent debtors, or if Tenant is wound up, or if a receiver or receiver-manager of Tenant’s affairs is appointed and not vacated within thirty (30) days; or (d) Tenant no longer is 100% owned by Alfa or Tenant assigns or sublets its interest herein to any entity that is not 100% owned by Alfa.

 

19.2                            Landlord Performing Tenant’s Duties .  If Tenant defaults in the performance of any of its covenants or agreements under this Lease, Landlord may perform or remedy the same for the account of Tenant and may enter upon the Water Park Property for that purpose. Tenant shall pay to the Landlord on demand all reasonable costs and expenses incurred by Landlord in remedying or attempting to remedy such default.

 

19.3                            All Amounts Payable as Rent . All amounts payable by Tenant under this Lease shall be deemed to be Rent and recoverable as Rent and Landlord shall have the rights and remedies against Tenant for default in payment of any such amount as Landlord has for default in payment of Rent.

 

19.4                            Landlord’s Remedies in the Event of Tenant’s Default .  If Tenant shall default under this Lease as set forth in Section 19.1 above, Landlord shall have the following rights and remedied, in addition to all other rights and remedies at law or equity, and none of the following, regardless of whether exercised by Landlord, shall preclude the exercise of any other right or remedy whether herein set forth or existing at law or equity:

 

(a)                                   Landlord shall have the right to terminate this Lease by giving Tenant written notice thereof. No act by or on behalf of Landlord, such as entry onto the Water Park Property by Landlord to perform maintenance and repairs and efforts to relet the Water Park Property, other than giving Tenant written notice of termination, shall terminate this Lease. If Landlord gives such notice of termination, this Lease and the Term hereof as well as the right, title and interest of Tenant under this Lease shall wholly cease and expire in the same manner and with the same force and effect (except as to Tenant’s liability for Rent) on the date specified in such notice as if such date were the expiration date of the Term without the necessity of re-entry or any other act on Landlord’s part. Upon any termination of this Lease, Tenant shall quit and surrender to Landlord the Water Park Property. If this Lease is terminated, Tenant shall remain liable to Landlord for Rent accruing thereafter and for damages in an amount equal to the total of:

 

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(i)                                      all costs, including, without limitation, reasonable attorneys’ fees and disbursements, incurred by Landlord to recover the Water Park Property and to enforce its other rights and remedies;

 

(ii)                                   all Rent accrued and unpaid as of the date of the termination, plus interest as provided in Section 5.3 above; and

 

(iii)                                any other sums that Landlord is entitled to collect under this Lease, at law or in equity for damages and losses actually suffered or incurred by Landlord as a result of Tenant’s default

 

(b)                                  Landlord may, without demand or notice, re-enter and take possession of the Water Park Property or any part thereof, expel Tenant and those claiming through or under Tenant, and remove the effects of any and all such persons without being deemed guilty of any manner of trespass, without prejudice to any remedies for arrears of rent or preceding breach of covenants and without terminating this Lease or otherwise relieving Tenant of any obligation hereunder.  Should Landlord elect to re-enter, or should Landlord take possession pursuant to legal proceedings or pursuant to any notice provided for by law, Landlord may, from time to time, without terminating this Lease, relet the Water Park Property or any part thereof for such term or terms and at such rental or rentals, and upon such other conditions as Landlord, acting reasonably, deems advisable, with the right to make alterations and repairs to the Water Park Property. No such re-entry, repossession or reletting of the Water Park Property by Landlord shall be construed as an election on Landlord’s part to terminate this Lease unless a written notice of termination is given to Tenant by Landlord. No such re-entry, repossession or reletting of the Water Park Property shall relieve Tenant of its liability and obligation under this Lease, all of which shall survive such re-entry, repossession or reletting. Upon the occurrence of such re-entry or repossession, Landlord shall be entitled to the amount of the Rent, which would be payable hereunder if such re-entry or repossession had not occurred, less the net proceeds, if any, of any reletting of the Water Park Property after deducting all of Landlord’s expenses in connection with such reletting, including, without limitation, all repossession costs, reasonable legal expenses, reasonable attorneys’ fees, expenses of employees, alteration costs and expenses of preparation for such reletting.  Tenant shall pay such amount to Landlord on the days on which the Rent due hereunder would have been payable hereunder if possession had not